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Oct 10, 20237 min read

Growing Money on Trees: Is The Carbon Credit Market A Solution For The Global South?



In the foothills of the Mashambanzou Hill in Mrehwa Disrict, in Zimbabwe, farms a grandmother, affectionately called Gogo Two, in reference to her having birthed four sets of twins. On a yearly basis, she gathers up manure from the kraal. This year due to the January disease, her livestock has diminished from twelve and she is left with two measly Bulls past their most virile years. That means there is less manure to heal and tend to the soil. She learned years ago not to rely on government fertilizer inputs which usually come a month after they are needed. Eighty kilometers away, her grandson who is an agricultural extension officer is sitting in a conference room full of men with suits, and white men who have flown in from Europe as they explain the potential and virtues of the Carbon Credit Market. “We envision that every farmer in Zimbabwe who practices organic farming can gain extra income from carbon credits! They finally are getting paid from farming the way they have for generations,” claims one of the white men. The extension officer immediately thinks of his grandmother who he hasn’t seen since April when he went to give her some groceries for her upkeep. “Carbon credits? How will I be able to explain this to her?”


What are carbon credits?


Before defining what carbon credits are, let us explain what has led them to increase in popularity. Climate change mainly caused by human activity has led to significant weather variations from average weather conditions leading to the weather being too hot, too wet, too dry, and or too cold. This has been caused by human industrial activities producing more carbon dioxide than the earth can utilize. These changes have taken decades to occur, but the earth is now reaching a tipping point where unless changes to the way we live are made, it will be increasingly difficult for several species to live on earth, particularly humans. Gogo Two who has lived in Mrehwa District for nearly fifty years has noticed that in general, the rainy season come later, does not last as long and when it rains, it rains so much in a short space of time, the conditions make it difficult for her maize to do well. As a result, her yields have on average reduced from one year to the next.


Carbon emitting companies such as fuel, construction, and fertilizer companies, can minimize the environmental damage of the carbon they produce by buying permits that effectively allow them to emit carbon up to a certain level. If they emit more carbon than their permits allow, they must pay for it and if they emit less than their permit allows, they can sell the difference to other companies. This creates a Carbon Credit Market in which companies can buy and sell carbon credits. The idea is that Carbon Credit Markets are an avenue of creating financial benefits and risks aligned to how much greenhouse gas emissions are produced. Ideally, the carbon credit market is not replacing other more ambitious climate-friendly practices but it is supposed to function as a transitional scheme that supports carbon-emitting companies to reach a form of carbon neutrality.


The Carbon Credit Market working apparatus which was established during the Kyoto Protocol[1] created a marketplace where the commodity is carbon and any asset that could effectively reduce carbon became very valuable to the extent that the current carbon trading market is currently worth USD$22 Billion and has potential to reach USD$145 Billion by 2030[2]. The two broad types of markets are compliance markets and voluntary markets. The compliance market which is large in the European Union is a market created by legal obligations following the Kyoto Protocol which mandates carbon-emitting companies to buy carbon credit to offset their emissions. The voluntary market as the name suggests has companies/organizations who do not have a legal obligation but trade carbon credits to give them a good standing in the climate debate.


What are these very valuable carbon assets? Carbon assets include generating renewable energy, and capturing methane, industrial gases, or waste energy. Tangible examples are large forests, solar energy parks, carbon sequestration on farms (As shown in Fig 1 Below), and manure collection programs. In theory, Gogo Two who uses organic fertilizer and no-till farming techniques is performing activities that reduce greenhouse gas emissions and she should be able to earn some money from the carbon credit market, but then that is in an ideal world.




Fig 1- from Carboncredits.com



Zimbabwe’s Growing Carbon Credit Market Position


The Carbon credit market has generated significant buzz in the environmental space in Zimbabwe and Africa at large. For less developed countries that (still) have a large amount of ‘carbon assets’ such as large forests, the carbon credit market is a potential avenue for companies, organizations, and governments to earn significant income from protecting their environment and practicing regenerative/conservation agriculture which are not foreign concepts in their political and social cultures. Currently, Zimbabwe is the 12th largest producer of offsets globally[3]. Benjamin Chimutengo, the Chief Executive Officer of the Africa Voluntary Carbon Credit Market notes that Zimbabwe’s carbon market currently stands at over USD $500 million per year. Most critically, through the Statutory Instrument 150 of 2023, Zimbabwe is the first nation in the Global South to provide legislation around the carbon credits market[4] establishing itself as one of the lead countries on the continent alongside South Africa and Kenya that will benefit greatly from the continental Africa Carbon Markets Initiative (ACMI).


The most notable Carbon Credit project is the Kariba REDD project which is one of the world’s largest forest protection projects. It is a joint venture between Carbon Green Africa (CGA), a Zimbabwean company and Switzerland’s South Pole. The initiative covers 785,000 hectares of forest and has sold 23 million carbon credits since 2011 and has generated over USD $100 million in the past five years[5]. Other notable carbon credit projects in Zimbabwe are C Quest Capital and Xylo Carbon. The potential for more is immense. National conservation programs such as the Intwasa/Pfumvudza program have the potential to be re-aligned with the intention of receiving significant return on investment from the carbon credit market. The proliferation of personal solar panels in urban cities such as Harare and Bulawayo can collectively be brought together and packaged as another carbon credit asset.


Credit Loopholes


The Carbon Credit market has come under severe criticism for several valid reasons. First of all, the carbon credit market has the potential of being the largest ‘green-washing’ projects in the world. Greenwashing is when a company/organization works more on marketing itself as being environmentally friendly rather than minimizing their carbon emissions impact. For example, the largest oil companies in the world such as Shell, BP, Eni, Total Energies and Chevron have all partnered with project developers to generate carbon offsets through forestry projects. Oil prices have been stubbornly high for the last two years that no matter how much carbon credit they need to buy to offset their greenhouse emissions, they are still able to make record profits which keeps them in business, providing insignificant pressure for the companies to disinvest from their core business of pumping oil out of the ground.


Moreover, The Carbon Credit Market is entrenched in a capitalist logic that tries to place nature onto the balance sheet of companies. As noted by Power Shift Africa in their September 2023 report on Carbon credits, “…carbon credits are a financialization of African nature and the climate crisis, dealing in an imaginary commodity of tonnes of carbon ‘saved’”. The Industrial Revolution business practices have caused irreparable environmental externalities where companies have not incurred the costs for the environmental damage they have caused. Carbon Credit Markets are an alternative that tries to counter but it fails mainly because it still does not account for all the externalities caused. The increase in oil production has a direct result of inclement agricultural weather which affects Gogo Two and the credits do very little to counter the adverse effects of greenhouse emissions.


The strongest rebuke of the carbon credit market system is that it is so difficult to verify how much carbon is being captured. The recent expose of Zimbabwe’s flagship Carbon Credit Market project, Kariba REDD highlights this problem. An expose on the project[6] shows how it is very difficult to verify the work Kariba REDD is doing is benefitting the planet in terms of the carbon captured and there has been very little community benefit from the project. The Verra Verification Procedures are currently one of the standard bearers regarding quality control but follow-up on projects scattered across the Global South has proven to be very difficult.


The Way Forward?


This issue boils down to two dire clashing points, how to protect the environment and how to finance climate change. On the latter, the Global North’s stubborn refusal to pay climate reparations to the Global South is reaching critical levels that are leaving some environmental practitioners with few options but to join the Carbon Credit Market to finance their work. The capitalist logic which is blanketed by greenwashing will mean that there is ample finance to grow the Carbon Credit Market for the medium term. Farmers like Gogo Two who practice regenerative agriculture will not benefit from this market because the structure of the Carbon Credit Market is to benefit connected middlemen. large corporations and governments who can claim ownership and control of large pieces of land. Gogo Two will continue taking care of her small piece of the earth as it rains less and less from year to year. It will continue to be a coin toss if she will be able to avert hunger and poverty.


Sources


Powershift Africa 2023, THE AFRICA CARBON MARKETS INITIATIVE: A WOLF IN SHEEP’S CLOTHING


Zimbabwe Environmental Law Association 2023, LEGAL ANALYSIS OF ZIMBABWE’S CARBON CREDITS TRADING REGULATIONS, STATUTORY INSTRUMENT 150/2023

[1] https://unfccc.int/process/the-kyoto-protocol/mechanisms/emissions-trading

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