The African Development Bank (AfDB) plans to introduce a new facility to advance carbon markets and unlock climate finance as the continent faces increasing climate-related disasters, senior bank officials announced on Thursday.
The proposed Africa Carbon Support Facility, currently in the design stage, will have two main components.
The first will assist governments in developing key policies and regulations for carbon trading, while the second will focus on stimulating both the supply and demand for carbon credits, as well as building the necessary market infrastructure to increase their usage.
“Through this, we envision a future where carbon credits can become tradable commodities on Africa’s stock exchanges,” said Anthony Nyong, AfDB’s Director for Climate Change and Green Growth, during a session of the bank’s annual meeting in Abidjan, which also saw the election of former Mauritanian Finance Minister Sidi Ould Tah as president.
Carbon credits are generated from projects such as tree planting or installing wind farms in developing countries.
One credit is issued for every metric ton of emissions reduced or removed from the atmosphere. Countries and companies can purchase these credits to help meet their climate targets.
Africa is home to vast farmlands and tropical forests suitable for carbon credit generation.
However, most credits from the continent are currently sold at low prices on voluntary carbon markets.
Nyong noted that integrating these credits into African stock exchanges could significantly raise their value.
Despite contributing less than 4% to global greenhouse gas emissions, Africa remains one of the regions most vulnerable to climate change.
In recent years, countries such as Mozambique, Madagascar, and Somalia have been hit hard by extreme weather events, including devastating tropical storms.
Government data shows that Africa receives less than 2% of global annual climate finance, prompting the need for alternative mechanisms like carbon credits.
“Developing carbon markets is an imperative for the continent,” said Kevin Kariuki, AfDB Vice President for Power, Energy, Climate Change, and Green Growth.
Aside from boosting earnings from carbon credits generated in Africa, the AfDB’s initiative aims to facilitate their trade on compliance offset markets, where prices can be up to 10 times higher than on voluntary markets, Nyong added.
However, the planned facility will build on the momentum of the Africa Carbon Markets Initiative (ACMI), launched at COP27 to unlock the potential of voluntary carbon markets in financing Africa’s energy, climate, and development goals.