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The climate change situation is complex, multifaceted and requires urgent action. Addressing climate change therefore requires coordinated efforts at local, national, and global levels, integrating climate action into policies, strategies, and everyday practices across sectors. For Africa it is also imperative that climate and development is seen as interconnected. Poverty is after all the chief driver of vulnerability. Climate and development must therefore be addressed simultaneously. The next decade is crucial for implementing ambitious climate mitigation and adaptation measures and transition to a more sustainable and resilient future.

Carbon pricing and carbon markets have evolved over the last two decades as a vehicle to incentivize carbon reduction. It has been suggested that carbon markets can be a mechanism to drive investment into emerging markets, spur innovative technologies to drive down greenhouse gas emissions, and also provide flexibility to entities seeking to offset their emissions. This market-based approach allows entities that can reduce emissions at a lower cost to do so, while giving those facing higher costs for emissions reductions an option to purchase carbon credits from others. By setting a market value for carbon emissions, the carbon market encourages the adoption of cleaner technologies and practices, ultimately helping to mitigate climate change and reduce the overall impact of greenhouse gases on the environment. On the contrary, others argue that carbon markets have failed and are a neo-colonial mechanism, that for more than two decades, has allowed polluters to take advantage of carbon markets in the name of bringing development to Africa.

On 26 – 27 March in Nairobi, the Government of Kenya hosted an invitation-only Carbon Markets Conference. In advance of this and to provide a platform for critical open discussions and debate around carbon markets, WRI Africa, Aspen Institute Africa, SDSN Kenya, CAP-A and Nairobi Climate Network NCN hosted a day-long Carbon Markets Clinic and Debate at Strathmore University. Present were representatives from civil society, local communities, indigenous peoples, academia, legal practitioners, researchers, media and private sector.

Topics covered in the Clinic included:

  1. An introduction to carbon markets, how carbon markets work and basic key concepts
  2. Contextualizing Kenya’s carbon markets policy and regulation
  3. Carbon markets in practice focused on based on local community experiences with carbon markets
  4. Unpacking the issues that underpin almost all criticisms of carbon markets in Africa
  5. Reflections on the challenges and opportunities raised over the course of the day

The clinic was followed by an Oxford-style Debate where two panels debated whether or not carbon markets present a greater opportunity than threat for sustainable development in Kenya.

Highlights of the Discussion

We are not cutting carbon emissions at the volume and speed needed to meet the 1.5 degrees goal – why?

  • Existing incentives and market structures may not sufficiently reward emission reductions or penalize high-emission activities
  • Transitioning to low-carbon technologies, decarbonizing supply chains, and reducing emissions from industrial processes can be technically complex and require specialized experts
  • Implementing emission reduction measures can involve significant upfront costs (infrastructure, technologies, and processes) until economies of scale are achieved and technology matures
  • Corporate greed

Many governments and regulatory bodies are implementing policies, standards, and regulations to reduce emissions and address climate change.

  • 89 jurisdictions have instruments to cut carbon emissions
  • Kenya has amended the Climate Change Act to incorporate carbon markets and is close to finalising regulations that provide clarity on implementation
  • Carbon markets are prioritised as a pivotal component of Kenya’s climate-positive growth and carbon credits are envisioned as the country’s next major export.
  • Kenya has been active in the carbon markets space for over two decades and is a leader in the continent, with around 23% market share of voluntary carbon credits issued.

If carbon markets are to be introduced they must have end-to-end integrity to ensure their credibility and effectiveness.

Benefits – communities shared mixed experiences with carbon markets. These benefits can be reinvested into the community to provide access to education and healthcare, as well as resilience building from preserving and upgrading landscapes, addressing flooding, and increasing food security (e.g., growing fruit trees, improved fish productivity.

Civil society and IPLC groups identified the following top concerns with carbon markets, which were unpacked at the Clinic

  • Community engagement and benefit sharing – how is the local community engaged, to what extent is carbon development respectful of indigenous practices, and to what extent are carbon revenues flow through to the community? To what extend are land tenure rights observed?
  • Incentives and outcomes – are carbon projects focussed narrowly on carbon, instead of looking more broadly at community, biodiversity and ecosystem?
  • Project integrity – do carbon projects achieve the climate outcomes they claim, do they at times leave community and environment worse off?
  • Corporate greenwashing – do buyers buy cheap low-quality credits as an “out” to avoid emissions reductions?
  • Transaction costs – does expensive carbon project development result in dilution of carbon revenue and making it hard for community-based / smaller scale projects to make it to market?
  • Off-shore intermediaries – to what extent are brokers and developers from the US and the EU dominating the carbon value chain and subsequently benefiting from African projects, at the expense of local players and local?

Key takeaways:

  • Strengthening nature-based carbon markets: It was acknowledged during the debate that there is a significant difference in experience between the energy sector, and nature-based and the land-use sector with respect to the application in the carbon markets. For clean cookstoves where emissions are easy to measure and the health benefits accrued to users are clear and profoud, the experience of carbon markets seem to be largely positive. On the other hand, the experience of carbon markets in the nature based and land-use sector has largely been mixed if not negative due to the issues outlined by IPLCs above
  • Contextualizing: The existing carbon market contracts must be redesigned to fit the African context – Carbon market best practices that are defined by Africans for Africans
  • Safeguarding communities:
    • Capacity building for communities to ensure the terms are understood and accepted by communities
    • Regulations to ensure a fair market that protects both buyers and sellers. They should particularly safeguard micro SMEs and community land right holders
    • Legal mechanisms particularly for community land rights and community knowledge per the Nagoya Protocol, and accessible pathways for redress
  • Tailoring support structures: Trading desks need to be established for different types of carbon credit transactions. Agricultural carbon credit transactions are different from carbon credits for building emissions or transportation emissions
  • Data: We need access to accredited buyers and pricing. This information cannot be the exclusive domain of project developers.
  • Thriving communities: Ensure that we are meaningfully uplifting livelihoods and well-being of communities and actually starting to generate wealth in those communities, not measly earnings

It was notable that those in support of carbon markets focused their arguments on technological solutions and opportunities whereas those against focused mainly on the challenges of nature-based solutions and current problematic realities of deploying carbon markets in communities.

The lack of trust and transparency, and the absence of policy/regulation for the carbon markets undermines the integrity of any credits. This deepens the division of the proponents and opponents.

It was agreed that the core group would convene to identify the next conservation to build on this discussion. Climate Finance has been proposed as the next topic.