Climate change is hurting the world including Africa. The Intergovernmental Panel on Climate Change noted that Africa is the most vulnerable continent to climate change impacts, and it is weak on various angles including having less strong adaptation capacities, and high dependence on natural ecosystems for the livelihood of its populations.
As the world strives to set the greenhouse emissions to at least 1.5 centigrade –the United Nations Economic Commission for Africa (UNECA) argues that in all African regions, negative climate change impacts would progressively compound and lead to decreasing GDP per capita.
The warming scenarios entail losses by 2030 (as compared to a baseline GDP per capita scenario) that range from -0.6 per cent in Northern Africa in the low-warming scenario, to -3.6 per cent in Eastern African in the high-warming scenario.
However, in the current world where research and development as well as technological advancement simplifies life and enhances our chances of mitigating natural hazards and climate change stress—carbon markets could be the new way towards a low carbon economy in Africa.
According to the African Development Bank (AfDB), carbon markets are a diverse set of systems that are regulated in different jurisdictions for trading greenhouse gas pollution rights.
These rights —termed allowances or permits — are the commodity that is globally traded and give the bearer the right to emit an equivalent amount of CO2 emissions. Carbon credits are similar to permits, but are fundamentally different in that they are generated over time (i.e. once a project gets implemented the reductions are audited).
How the carbon pricing work
The World Bank argues that there are several paths governments can take to price carbon, all leading to the same result.
They begin to capture what is known as the external costs of carbon emissions — costs that the public pays for in other ways, such as damage to crops and health care costs from heat waves and droughts or property from flooding and sea-level rise — and tie them to their sources through a price on carbon.
A price on carbon helps shift the burden for the damage back to those who are responsible for it, and who can reduce it. Instead of dictating who should reduce emissions where and how, a carbon price gives an economic signal and polluters decide for themselves whether to discontinue their polluting activity, reduce emissions, or continue polluting and pay for it. In this way, the overall environmental goal is achieved in the most flexible and least-cost way to society. The carbon price also stimulates clean technology and market innovation, fueling new, low-carbon drivers of economic growth.
In many markets, these carbon credits can be used instead of allowances for compliance with targets that have been placed on industrial facilities or sovereign countries.
Governments have been working towards creating a robust environment to tax carbon and reduce emission. This approach could assist Africa in reducing greenhouse gases, and finance its climate change resilience schemes.
What has been done so far
Steps have been taken and the World Bank Group supports several projects in Africa that lower greenhouse gas emissions and earn carbon credits.
Many of these projects and programs are located in the least developed countries and have an important impact on poor communities, creating jobs and improving health and education through the use of carbon revenue for the benefit of communities.
In Egypt, a vehicle scrapping and recycling project was executed between 2013 and 2014. The program led to replacing over 40,000 old taxis in Cairo and has helped avoid the equivalent of 130,000 tons of carbon dioxide in that time.
In Ethiopia, a natural regeneration project restored 2,700 hectares of land in the country and became the model of other farmer-managed regeneration efforts executed in Niger, Chad and Burkina Faso.
A carbon tax project was launched in South Africa in 2015. It introduced a carbon tax at R120 ($11.20) per tonne of carbon dioxide in 2016, with annual increases of 10 per cent until 2019/20. The project helped in the design and implementation of the tax.
Also, in Rwanda, Electrogaz Compact Fluorescent Lightbulb Distribution project has distributed 800,000 compact fluorescent lamps in the last eight years, reducing the equivalent of 21,000 tons of carbon dioxide per year and has generated 130,000 carbon credits.
The carbon market landscape
Carbon and other greenhouse gas emissions concentrate in the atmosphere, with costly and lethal results. Africa only contributes 4 per cent of the global greenhouse emissions, hence—this calls for more robust approaches to curb the climate change phenomenon.
South Africa is the world’s 14th largest emitter of greenhouse gases (GHGs). Its CO2 emissions are principally due to a heavy reliance on coal. However, in 2019—the South African President signed a new carbon tax law.
The South African carbon tax law, a rare step for an emerging economy, has been levied from June 1, 2019, on greenhouse gases from fuel combustion and industrial processes and emissions. However, soon after the law was enacted, the South African treasury statement on the matter drew rather cautious praise from environmentalists.
However, according to United Nations Conference on Climate Change (UNFCCC) report on carbon pricing approaches in Eastern and Southern Africa, on Kenya, Rwanda, Ethiopia, Uganda, and Mauritius—found that to date there has been only limited use of carbon pricing on the African continent.
In view of that perspective, it is important for African governments to simply tax carbon, and redistribute collected revenues equally among citizens, according to the World Economic Forum (WEF).
Also, if a tax is too toxic, states and industries may construct carbon markets in which polluters agree to a cap below current use, and have the flexibility to earn and trade credits to those who go over. Some nations, like Canada, foster both.
These markets have gained traction on many scales, taking shape within provinces, cities, industries or even a single company. Some are old; others are newborn. Each yields lessons. For example, it is better to auction carbon pollution permits than to give them away.
Also, a thicker, more inclusive market is better than a thin, narrowly targeted one. Finally, stable prices are better than volatile ones.
WEF argues that optimal efficiencies would one day come through on global carbon market exchange, yielding a single planetary carbon price signal, much as there is for oil, coffee and corn.
In that context, that respective vision moved a step closer after the recent agreement in Paris at the Conference of Parties (COP) to the United Nations Framework Convention on Climate Change.
Continental discussion platforms such as the African Carbon Forum could dissect the matter better and set the pace for African nations to follow.
Further, by setting a global cap, the COP21 fueled political momentum, as ratified by 125 of 197 parties, and raised an economic question about whether multiple markets may converge one day soon.
During the WEF annual meeting in Davos in January, much was discussed pertaining to the future of the global economy, and the climate emergency dominated the meeting, as the future of the next 30 years depended on how we tackle climate change.
One of the most basic issues raised was how nations could utilize the price shape behaviour factor as an incentive towards attaining a low carbon economy in the world, and in this case for Africa.
WEF argues that one of the great strengths of market economies is how prices shape the behaviours of individuals and companies alike. We should use this strength to accelerate the transition to a low-carbon economy and to build up the ability of our communities and businesses to withstand the effects of climate change.
Additionally, WEF brought in the idea of insurance, as insurers have a long history of incentivizing good behaviour, including the development of better safety standards in factories and vehicles.
In light of such information, African stands a chance to turn the tables around and bring resilience and mitigate climate change impacts.
