African Nations Set to Capitalize on Promising Funding for Carbon Credits at the Nairobi Climate Summit

NAIROBI, Kenya – A group of global investors has pledged to invest in the African carbon credit market, according to the ongoing Africa Climate Summit in Nairobi.

This investment aims to increase Africa’s carbon credit production by 19 times by 2030. The United Arab Emirates (UAE) has committed to purchasing $450 million worth of carbon credits from the Africa Carbon Markets Initiative [ACMI].

Speaking to heads of states and dignitaries, President William Ruto emphasized the economic opportunities that can arise from green growth, not just as a climate imperative.

African leaders are advocating for market-based financing tools like carbon credits or offsets that can be generated through emissions reduction projects in developing countries, such as reforestation or the adoption of clean energy sources.

Companies can then buy these carbon credits to compensate for emissions they are unable to reduce within their own operations, helping them meet climate targets. Each credit represents a saving of one ton of carbon dioxide.

The African Union and the Kenyan government are hosting the three-day summit in Nairobi to showcase Africa as an investment destination for climate-related initiatives, rather than solely a victim of climate-related disasters.

African governments view carbon credits and other market-based financing tools as crucial for mobilizing funds that have been slow to arrive from wealthy donors.

In 2021, the offset market was valued at approximately $2 billion. A joint forecast by Shell and Boston Consulting Group predicts that the market could reach between $10 billion and $40 billion by 2030.

Despite these projections, many speakers at the summit expressed concerns about the limited progress in accelerating climate financing due to investors perceiving Africa as a high-risk region.

Africa has received only about 12% of the required funds to address climate impacts, according to a report by the non-profit organization Climate Policy Initiative.

“No African country has successfully attracted climate finance,” said Bogolo Kenewendo, a former trade minister in Botswana and a United Nations climate adviser.

While the announced deals are considered a positive step, Kevin Kariuki, a vice president at the African Development Bank, stressed that they are insufficient. African states will advocate for the expansion of special drawing rights at the International Monetary Fund during the COP28 U.N. climate summit, potentially unlocking $500 billion in climate finance.

“The private sector remains an untapped opportunity that needs to be seized,” stated Patricia Scotland, secretary-general of the Commonwealth, emphasizing Africa’s immense potential in thermal, solar, wind, and hydro energy.

Over 20 presidents and heads of government are expected to attend the summit, where they plan to issue a declaration outlining Africa’s position for the upcoming U.N. climate conference and COP28.

The UAE, an oil-producing country, aims to position itself as a leader in climate financing in Africa. The UAE Carbon Alliance, a coalition of private sector players, has committed $450 million, as announced by Hassaan Ghazali from the UAE Independent Climate Change Accelerators (UICCA).

Climate Asset Management, a joint venture between HSBC Asset Management and Pollination, has also pledged to invest $200 million in projects that will generate ACMI credits.

The UK has announced the backing of projects worth $62 million during the summit, while Germany has agreed to a $65 million debt swap with Kenya to allocate funds to green projects.

Although the summit has drawn opposition from many African activists who believe carbon credits enable continued pollution, about 500 people marched in Nairobi to protest, demanding direct compensation and debt relief as a form of “climate debt” repayment by wealthier countries and corporations.

Sultan Al Jaber, president of COP28, acknowledged the importance of carbon markets as a tool but highlighted the need for commonly agreed standards to maintain their integrity and value.