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How Africa is weathering the global carbon market storm

Emissions trading on the continent was badly shaken up in the past year. Will things settle down now?

Hello -- carbon market leaders met for a summit in Nairobi this week to mull the state of one of the biggest – and least understood – parts of the green economy.

For sure, it has been a tumultuous year for carbonistas. Allegations of cheating zinged around the international press, many focused on Africa. 

Some corporate credit buyers got spooked. Others drove a harder than usual price bargain (hello Middle East!). 

How did the continent get through this? Some of the criticism may have been unfair. But clearly some fundamental issues need addressing. 

Today’s reading time: 4 mins

LOGISTICS UPDATE | Thursday 20 June


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1.🚁 Heli view: African carbon markets suffered less than their global competitors

Demand for carbon credits worldwide crashed last year. How did Africa perform?  

  • The executive summary: The continent did less badly than others. 

  • According to a data-heavy report from the nonprofit Ecosystem Marketplace.

By Volume: The number of transactions in Africa only fell by 7% last year. Competitors among developing regions, Asia and Latin America, went down 78% and 72%.

By value: Down 25% in Africa, while Asia and Latin America plummeted 83% and 72%. 

  • Africa underperformed Europe on value change – and North America on volume change (the only region to grow volume last year). 

Zoom out: Carbon markets are more than 25 years old and widely – but far from universally – accepted as a key to global climate action. 

Annus horribilis: Last year, severe criticism marred the voluntary carbon markets, where companies and individuals purchase credits to mitigate the impact of emissions. 

  • The resulting tumble led some insiders to question the markets’ future. 

  • The total value of credits globally was down by more than half last year.

And now: The dust is settling, and it’s clear that third-party verified international carbon offsets remain a widely traded commodity, so says BCG, the global consultancy. 

  • Demand in Africa is expected to increase. The compound annual growth rate is projected at 31% over the next five years. Demand is set to outstrip supply by 2030. 

  • The voluntary markets, currently worth about $2 billion globally, are expected to grow fivefold by the end of the decade.

Continental share: Africa supplies 20% of all voluntary credits, making it the second largest supplier after Asia. 

  • DR Congo produces about two-fifths of the African total, and Kenya one-fifth, while other African suppliers have less than a tenth each. 

  • DRC credits are almost exclusively based on its vast forests, while Kenya also benefits from hosting low or no-carbon cookstove makers.

The customers: Buyers of African credits are a who’s who of global business: BP, Shell, Apple, Netflix, Nespresso, Air France KLM. 

  • They are motivated by pressure from consumers, stakeholders and investors as well as their own commitments to offset emissions. 

Quality is king: Since buyers act out of brand concern, getting “the best” carbon credits matters more than ever. Buyers increasingly want to know:

  • Is carbon removed permanently? 

  • How solid is the measurement?

  • What other green benefits exist? 

Key vulnerability: Buyers have become more sensitive to doubts about credit quality. And there have been lots, scaring buyers off in droves. Some carbon projects were accused of:

  • Inflating climate benefits or being altogether bogus

  • Undermining indigenous people and local communities

  • Damaging ecosystems more than helping them

Going forward: Two topics are front of mind for insiders. 

  • Everyone is watching prices. They are the clearest signal of market health. For now, prices are going up – but at lower than hoped for volumes, suggesting a flight to quality.

  • Lots of attention is on new regulations & taxes both in Africa and at the EU but affecting Africa. New Kenyan rules may signal where government minds are trending.

Main conclusion: The carbon juggernaut keeps going regardless of bumps in the road. But it’s unclear if price signals alone can iron out market flaws, and if regulation will be a boost. 

  • Pricing was volatile last year. Africa saw a 19% decrease — less bad than Asia and North America, but behind Latin America and Europe.

  • Recent trading is setting a new trend. Quality above all. But how far has the threat of reputational damage from crooked credits receded?

The latest: One of the world’s biggest carbon-offset projects was withdrawn from a key standards body last month. 

  • Carbon Green Investments removed the Kariba forestry project in Zimbabwe from Verra’s registry over quality concerns.

2. Cheat sheet: Eight kinds of carbon credits 

(i) Forestry & land use: Africa supplies a quarter of all credits here ($1.1 billion p.a. in total)

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