Will the African carbon market be the key to accelerating economic growth in rural Africa?

As governments across Africa struggle to improve economic, social, and political stability in the region amidst the negative impacts of climate change exacerbating poverty, they are also grappling with financing to stabilize their economies. Many are positioning their countries to benefit from the carbon credit market. Will implementing carbon credits help close the gap in terms of economic and infrastructural development in rural Africa? While no one knows for sure how this will pan out, many professionals across the continent are of the opinion that it should not follow the same route as the Clean Development Mechanism (CDM), which saw most African countries at the bottom of the food chain during its era. The growth of the carbon market has been progressive since the Kyoto Protocol in 1997 and further emphasized by Article 6 of the Paris Agreement in 2015, as well as other legal frameworks established by the United Nations Framework Convention on Climate Change (UNFCCC).

Over the last decade, both the compliance and voluntary markets have grown side by side, with the voluntary market more dominant in Africa. However, the continent is still struggling to implement frameworks that will help most countries benefit from the carbon market within the framework of the UNFCCC, with nations implementing various offsetting mechanisms.

According to Bloomberg's 2024 global carbon market outlook, the gap between the voluntary and compliance markets will continue to narrow as many African governments put up regulations and tighten supply to include more sectors, especially as the carbon market tilts more towards the offset market, which is the voluntary market. It is projected that the average carbon price of emissions in 2024 will be $43 and is likely to rise to $93 by 2030.

The World Bank stated that revenues from carbon tax and emission trading systems reached a total of $95 billion in May 2023. In the past, only 7% of worldwide emissions fell under the purview of either a carbon tax or an Emission Trading System (ETS). However, according to the report, nearly a quarter of global greenhouse gas emissions (23%) are currently encompassed by 73 different mechanisms, most of which are in the Global North.

With the ETS dominant in the Global North, the question arises: How will the Global Carbon Market benefit Africa? Especially since the compliance market holds more value compared to the voluntary market, which is very visible.

Can Africa get it right concerning the carbon market? This is a question that continues to be asked.