Green To Cash - The Future of Nigeria's Voluntary Carbon Market
Updated: Mar 18, 2023
The call for Green energy can never be over-emphasized, hence the renewed efforts by concerned countries to ensure the end to greenhouse emissions. The COP27 summit held in Sharm el Sheikh, Egypt, may have come and gone, however, the giant agreements made in the summit will go a long way in ensuring the set targets for climate preservation are met.
The incentivization of removal of Carbon from the atmosphere through carbon credits took center stage at the summit as well as the push for the ‘loss and damage’ compensation from the largest polluters.
The major highlights of the giant strides achieved at the COP27 for Carbon market development are as follows:
African Carbon Markets Initiative: As far as Nigeria and Africa is concerned, this is by far the biggest piece of carbon market news announced at COP27. With the launch of the African Carbon Market Initiative, about 300 million carbon credits are expected to be created annually across the continent by 2030, and 1.5 billion credits annually by 2050. The goal of the initiative is to unlock more financing for Africa’s energy transition – specifically, US$6 billion by 2030 and US$120 billion by 2050, all the while supporting over 110 million jobs by 2050.
African nations, such as Kenya, Malawi, Gabon, Nigeria, and Togo, joined the launch event for ACMI, which is supported by financiers such as Exchange Trading Group, Nando’s, and Standard Chartered.
Loss and Damage Fund: At the 2022 COP, parties agreed to set up a Loss and Damage Fund to help vulnerable countries deal with the consequences of i. climate change. This is based on the notion that rich countries and their rapid industrial development over the past 200 years are highly responsible for the issues currently affecting the climate, and that the effects of climate change are most felt by countries that contribute very little to global warming.
Loss refers to the negative economic impacts of climate change in many countries. A typical example would include lost agricultural production due to extreme drought or rising sea levels flooding fields
Damage on the other hand means the destruction of homes, roads, bridges, and other infrastructures is easier to calculate.
According to a study, the funding needed to compensate for the loss and damage caused by climate change is worth up to $580 billion annually by 2030, increasing to $1.7 trillion by 2050.
Though it took the flooding in Pakistan in October 2022, which the World Bank estimated to incur economic losses worth $30 billion, to have the loss and damage fund included in the official agenda of the COP27, it is still a welcome development.
In order to achieve the estimated funds needed the discussion for Carbon pricing is expected to take center stage. According to IMF Managing Director Kristalina Georgieva;
“Unless we price carbon predictably on a trajectory that gets us at least to [a] $75 average price per ton of carbon in 2030, we simply don’t create the incentive for businesses and consumers to shift…”
First ITMO trade between Switzerland and Ghana: Paris Agreement signed during the COP21 entered into effect in 2020 established the global goal to keep our planet´s warming below 2 ° C. Among the other measures, the agreement allows for the development i. of cooperative approaches that involve the use of International Transfer Mitigation Outcomes (ITMO) to comply with the Nationally Determined Contributions (NDCs) of the countries participating in the agreement. In furtherance, it was announced in COP27 that Switzerland and Ghana have completed the first-ever voluntary sale of ITMOs under Article 6.2. With this transaction, sustainable rice farming in Ghana will help Switzerland lower its national emissions while giving Ghanaian farmers an extra revenue stream.
This trade shows that independent countries need to wait for COP negotiations to further the end to act collaboratively on climate.
These developments clearly bring exciting times in the bid to eradicate greenhouse emissions into the climate. Slowly it may seem, but Nigeria seems to be taking bold steps in the area of Climate Change as a couple of initiatives have taken place in recent times. In November 2021, The President signed into law the Climate Change Act of 2021. The provides a framework for national coordination on climate change issues.
The National Council on Climate Change was inaugurated in September 2022. The council will oversee actions that reduce emissions.
The Energy Transition Plan was also recently inaugurated by the Vice President with a detailed roadmap for Nigeria to achieve net zero emissions by 2060.
Carbon credit is an instrument given to companies whose activities benefit the climate either by removing CO2 from the air or preventing it from being emitted in the first place.
What are Carbon Credits
Carbon credit is an instrument given to companies whose activities benefit the climate either by removing CO2 from the air or preventing it from being emitted in the first place.
Carbon credits were devised as a mechanism to reduce GHG emissions by creating a market in which companies can trade in emissions permits. Under the system, companies get a set number of carbon credits and can sell any excess to another company.
There is the Voluntary Carbon Credit Market and the Compliance Carbon Credit Market, Voluntary carbon markets enable entities and individuals to offset their emissions outside a regulatory regime. They can purchase offsets that were created either through the voluntary or compliance markets. Trading and demand in the voluntary market are created only by voluntary buyers (corporations, institutions, and individuals) whereas, in a compliance market, demand is created by a regulatory mandate
Carbon Credit Certification in Nigeria
At COP27, the Africa Carbon Markets Initiative (ACMI) was launched. This is expected to lead the way in making carbon credits an effective tool to reduce emissions while financing green initiatives across Africa. The initiative is led by a 14-member steering committee of African leaders, CEOs, and carbon credit experts. Members include the Vice President of Nigeria, the former President of Colombia, the President of the African Development Bank, U.N. officials, USAID, the Gates Foundation, and other international private sector participants. The launching is in collaboration with several organizations namely
Global Energy Alliance for People and Planet,
Sustainable Energy for All,
UN Climate Change High-Level Champions, and
UN Economic Commission for Africa
The aim of the initiative amongst others is to:
Grow African credit retirements ~19-fold from 2020 to ~300 MtCO2e per annum by 2030 and up to 1.5-2.5 GtCO2e by 2050.
Create or support 30 million jobs by 2030 and more than 100 million jobs by 2050 through carbon project development, execution, certification, and monitoring;
Raise the quality and integrity of African credits to mobilize up to US$6 billion by 2030 and more than US$100 billion per annum by 2050;
Ensure equitable and transparent distribution of carbon credit revenue, with a significant portion of revenue going to local communities.
Nigeria is expected to key into the 10 key significant Carbon credit projects such as;
Forestry and land use (Afforestation/Reforestation, Revegetation, Improved Forest Management, Conservation, etc.)
Agriculture and soil sequestration
Blue Carbon
Renewable Energy (Biomass, Geothermal / Hydro / Solar / Wind, Energy efficiency, Waste heat recovery, Fossil fuel decommissioning, etc.)
Household Devices (Clean Cookstoves, Solar home systems)
Transport (EV Charging, Synthetic Fuels)
Livestock (Rotational Grazing)
Waste Management (Landfill Gas)
Industrial Gas
Engineered Carbon Monoxide Removal (Direct Air Capture, Bio-Energy with CCS)
In addition, Nigeria is a party to the United Nations Framework Convention on Climate Change (UNFCCC). Though this agreement has been in force since 1992, in recent times, Developed Countries have started showing interest in the provision of funds for green energy activities and also technology. Nigeria is expected to be a big beneficiary of these initiatives. The loss and damage fund launched at COP27 is a massive boost to this initiative. Also, the U.S. Climate Envoy John Kerry announced the Energy Transition Accelerator (ETA) – a public-private initiative to fund renewable energy projects through carbon offsets, with the purpose of accelerating the clean energy transition in developing countries.
The Kyoto Protocol operationalizes the UNFCCC. It is designed to assist countries in adapting to the adverse effects of climate change. It facilitates the development and deployment of technologies that can help increase resilience to the impacts of climate change.
The Adaptation Fund was established to finance adaptation projects and programs in developing countries that are Parties to the Kyoto Protocol. In the first commitment period, the Fund was financed mainly with a share of proceeds from CDM project activities.
In Doha, in 2012, it was decided that for the second commitment period, international emissions trading and joint implementation would also provide the Adaptation Fund with a 2 percent share of proceeds. Nigeria is said to be pioneering a billion-dollar worth of voluntary carbon market on the African continent. According to the Vice President, the establishment of the voluntary carbon market (VCM) is one of the efforts of Nigeria to help achieve the global net zero emissions target by 2060.
Nigeria Carbon Credit Potentials
Apart from being Parties to these international agreements, Nigeria has been taking steps to establish its Carbon Credit Market. ACMI estimated that Nigeria itself can generate as much as 30 million carbon credits every year by 2030. Using a price of $20 dollars per credit, the country’s VCM will be worth over half a billion dollars per year.
ACMI estimated that Nigeria itself can generate as much as 30 million carbon credits every year by 2030. Using a price of $20 dollars per credit, the country’s VCM will be worth over half a billion dollars per year.
Though Nigeria is yet to develop a compliance Market framework, certain gains have been achieved in the Voluntary Carbon Market, according to Bala Wunti, Group General Manager, of National Petroleum Investment Management Services (NAPIMS), Nigeria has earned over one million euros from the sale of carbon credits through its partnership with Total Energies.
Nigeria has earned over one million euros from the sale of carbon credits through its partnership with Total Energies.
In November 2021, The President signed into law the Climate Change Act of 2021. It provides a framework for national coordination on climate change issues. In line with the legal framework provided under the Climate Change Act 2021, Nigeria took its first major step to benefit from the over $175 billion global carbon trade by developing the country’s own Emission Trading Framework. According to Nigeria’s Minister for Environment, Nigeria is capable of generating upwards of 250 metric tons of CO2E annually amounting to an estimated value in excess of 3 billion USD.
Nigeria is capable of generating upwards of 250 metric tons of CO2E annually amounting to an estimated value in excess of 3 billion USD.
Under the draft 2022 Finance Bill, there is a provision to boost Government policy on Climate Change and Green Growth, there is a proposal for incentives for the natural gas sector and discouragement of gas flaring. It is expected that these incentives will facilitate investment in green energy in Nigeria.