Hundreds of millions of dollars pledged for African carbon credits at climate summit

NAIROBI, Sept 4 (Reuters) – An initiative to increase Africa’s carbon credit output 19-fold by 2030 drew hundreds of millions of dollars in pledges on Monday, as Kenyan President William Ruto opened the country’s first climate summit. continent.

In one of the most anticipated deals, investors from the United Arab Emirates (UAE) pledged to buy $450 million in carbon credits from the African Carbon Markets Initiative (ACMI), which was launched at the COP27 summit. from Egypt last year.

“We must see in green growth not only a climate imperative but also a source of multi-billion dollar economic opportunities that Africa and the world are prepared to capitalize on,” Ruto told delegates.

African leaders are pushing for market-based financial instruments, such as carbon credits or offsets, that can be generated by projects that reduce emissions, usually in developing countries, such as planting trees or switching to cleaner fuels. (See EXPLAINER for more details)

Companies can then purchase carbon credits to offset the emissions they are unable to reduce from their own operations to help meet climate goals. One credit is equivalent to saving or avoiding a ton of carbon dioxide.

Organizers of the three-day summit in Nairobi say their aim is to show that Africa is a destination for climate investment rather than a destination flood victimdrought and famine.

African governments view carbon credits and other market-based financial instruments as critical to mobilizing funds that have been slow to come from rich-world donors.

The offset market was worth about $2 billion in 2021 and Shell and Boston Consulting Group jointly forecast in January that it could reach $10 billion to $40 billion by 2030.

Several speakers at the summit said they had seen little progress toward accelerating climate finance because investors still viewed the continent as too risky.

Africa has received only about 12% of the money it needs to deal with climate impacts, according to a last year report by the non-profit organization Climate Policy Initiative.

“There has been no success for an African country in attracting climate finance,” said Bogolo Kenewendo, a United Nations climate adviser and a former trade minister in Botswana.

Kevin Kariuki, vice president of the African Development Bank, told Reuters that the deals announced on Monday were “very welcome” but not enough.

He said African states would push at the COP28 UN climate summit in Dubai in late November for the expansion of special drawing rights at the International Monetary Fund, which could unlock $500 billion in climate finance, that could be leveraged up to five times.

“The private sector really remains an untapped opportunity that we must now seize,” said Patricia Scotland, Secretary General of the 56-nation Commonwealth.

“If you look at what we have in thermal, solar, wind and hydro, this is power waiting to be unleashed,” he told Reuters.

More than 20 presidents and heads of government are expected to attend the summit starting Tuesday. They plan to issue a statement outlining Africa’s position ahead of a UN climate conference later this month and COP28.

INVESTMENTS

The oil-producing United Arab Emirates has been positioning itself as a leader in climate finance in Africa.

The $450 million commitment from the UAE Carbon Alliance, a coalition of private sector actors, was announced by Hassaan Ghazali, investment manager at the UAE Independent Climate Change Accelerators (UICCA).

Climate Asset Management, a joint venture of HSBC Asset Management and Pollination, a firm specializing in climate change advisory and investment, also announced a $200 million investment in projects that will produce ACMI credits.

Britain said UK-backed projects worth 49 million pounds ($62 million) would be announced during the summit, while Germany announced a 60 million-euro ($65 million) debt swap with Kenya. to free up money for green projects.

Many African activists have opposed the summit’s focus on climate finance, and some 500 people marched in central Nairobi on Monday to protest.

They say that carbon credits are a pretext for the richest countries and corporations to continue polluting, who should instead pay their “climate debt” through direct compensation and debt relief.

Sultan Al Jaber, president of COP28, said carbon markets were an important tool, but “the lack of commonly agreed standards was undermining their integrity and diminishing their value.”

A working paper published by the Green and Inclusive Recovery Debt Relief Project found that countries in sub-Saharan Africa face annual debt service costs that are almost the same as their climate finance needs.

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