The complexity of the global carbon markets and the involvement of multiple intermediaries often obscure the flow of funds, making it difficult for local stakeholders to understand how much they should rightfully receive, according to an overview of Carbon Markets In African published by the Indian Center for Science and Environment (CSE).
Carbon markets‘ intricacy and lack of transparency
The intricacy of the carbon market that is compounded by the lack of transparency in the activities conducted, deals signed, and transactions occurring within these projects, the issue has led to concerns about fair compensation and benefit-sharing, according to the publication.
For example, there is a lack of transparency in how Blue Carbon LLC has secured large tracts of land in African countries and how are activities being done, measurements made on the activities and other important details.
Another important aspect is the environmental integrity of the projects, especially the difficulty of accurately establishing baselines in forestry and land-use projects. Determining accurate baselines can be difficult due to limited historical data and uncertainties in future projections.
There’s also the risk of baseline manipulation, where developers set artificially low baselines to inflate reported carbon savings.
One of the largest carbon credit projects registered in Africa was the Kariba REDD+ project in Zimbabwe, reported to have encompassed an area of 747,801 ha. By early 2023, the project, which was registered in 2011, had sold 28.8 million credits to companies like Gucci, Volkswagen, Porsche, Nestlé, Delta Air Lines, and others.
In March 2023, Bloomberg investigated the project and found that while the project fetched over €100 million, most of the money had gone to the project developers – South Pole and its partner Carbon Green Investments – rather than to the community undertaking efforts to prevent deforestation.
Moreover, the project was found to have vastly overestimated gains and consequently over-issued credits. Verra, the registry where the project was registered, launched an investigation in October 2023, putting the project on hold.
South Pole, the Swiss developer, pulled out of the project soon after, and the project was finally withdrawn in mid-2024.14 But the case is far from unique and vast irregularities have been uncovered in FOLU projects in Africa and elsewhere – the reported issues are more severe for REDD+ projects that also generally cover vast swathes of land, involving communities, administration and national and international organisations.
In some cases, carbon credit projects have led to the displacement of communities, either through direct eviction or by restricting access to lands they traditionally use.
Another issue is the inequitable distribution of benefits. Despite being the custodians of the land, communities often receive either a small portion or nothing out of the financial benefits generated by carbon credit projects.
Forestry and land use carbon credit projects are designed to sequester carbon dioxide (CO2) from the atmosphere through changes in land management practices.
Forestry and land:
use based projects make up about one-fifth of all projects in the voluntary carbon market. About 40 per cent of the carbon credits issued have gone to these projects.
Afforestation/reforestation:
These involve planting trees on land that was not previously forested (afforestation) or replanting trees in deforested areas (reforestation).
Avoided deforestation:
These projects aim to prevent deforestation or degradation of existing forests. By protecting forests from being cut down, the project avoids the release of carbon stored in the trees.
Sustainable forest management (SFM):
This involves managing forest resources in a way that maintains their biodiversity, productivity, and ecological processes while still allowing for timber and other resource extraction. Proper management helps maintain the forest’s carbon storage capacity.
Agroforestry:
Integrates trees and shrubs into agricultural landscapes, combining forestry and farming.
Wetland restoration:
Wetlands store large amounts of carbon in their soil and vegetation. 6. Grassland management: Such projects enhance carbon sequestration by improving grazing practices, restoring degraded lands, and managing soil health.
REDD+: Reducing emissions from deforestation and forest degradation, enhancing forest carbon stock through a variety of interventions. According to the World Bank, the average over-the-counter (OTC) price for forestry and land use carbon credits for both emissionavoidance and emission removal projects was US $10.84 in 2022.
In 2023, this average price dropped by 10 per cent.12 FORESTRY AND LAND USE PROJECTS IN AFRICA There are 175 forestry and land use-based projects across Africa in four voluntary carbon market registries—Verified Carbon Standard (VCS), Gold Standard, Architecture for REDD+ Transactions’ The REDD+ Environmental Excellence Standard (ART TREES), and American Carbon Registry (ACR)—as of August 2024, of which 55 have issued a total of 144 million carbon credits; 133 million credits from these 144 have been issued by REDD+ projects – mostly in Democratic Republic of Congo, Kenya, Zimbabwe, Zambia and Ethiopia.
A high-integrity carbon market is vital for reducing global greenhouse gas emissions. However, it’s essential to go beyond carbon mitigation alone when purchasing high-quality carbon credits. Benefits-sharing and social safeguards are crucial for ensuring the durability and longevity of emissions reductions while promoting market integrity, effective environmental management, and empowering vulnerable communities affected by climate change.
Unfortunately, the economic value of benefits-sharing is often neglected, as seen in the latest draft guidance on fair and equitable trading of voluntary carbon credits from the Commodity Futures Trading Commission (CFTC).