Organisations in Africa developing carbon projects – which are designed to remove carbon from the atmosphere or avoid emissions in the first place – are used to navigating stormy conditions. The latest challenge for global carbon markets is the return of Donald Trump, a notorious climate change sceptic, as US president
The Trump effect is not necessarily obvious at first. As a voluntary market, the sale and purchase of carbon credits is not directly dependent on the United States or any other government.
The United States has, however, played an important though relatively low-profile role in kickstarting carbon projects in Africa – a role it looks certain to abandon under Trump. Washington’s hostile stance towards net zero also has the potential to affect demand for carbon credits, especially among US-based companies.
Progress in developing the carbon markets – which could be worth as much as $100bn a year for Africa by 2050, according to the African Carbon Markets Initiative – could now be in peril as Trump takes aim at previous US climate goals.
Funding cuts
One of the little-noticed impacts of Trump’s gutting of the US Agency for International Development is that many carbon projects are now having to look for alternative sources of funding.
Project developers typically receive revenues only after they start delivering verified carbon reductions. This means that many developers rely on philanthropic or grant funding to fund their initial activities, such as investing in planting trees or restoring degraded habitats.
USAID had been one of the major sources of grant funding for carbon projects in developing countries for well over a decade. Its Forest Carbon, Markets and Communities programme, which ran between 2011 and 2015, played an important role in catalysing rainforest conservation projects that serve as some of the earliest examples of carbon credit schemes in Africa.
But some 83% of USAID’s programmes are being cancelled, while the vast majority of the agency’s workforce has been laid off pending final decisions on a reorganisation of US development assistance around a narrow list of priorities. Carbon project developers are among those feeling the effects of the administration’s cutbacks.
An example of a project affected by the funding cut is West Africa Blue, a major scheme to fund mangrove conservation on the West African coastline. USAID allocated $1.5m to West Africa Blue to support projects that would generate carbon credits through mangrove restoration in Guinea in August 2024; to date, only around half of this funding has been dispersed.
“We are seeing real setbacks, especially in coffee projects and sustainable agriculture trainings, where USAID and other US agencies have been key funders,” says Anete Garoza, co-founder and CEO of carbon removal project developer 1MTN.
“A lot of these programs rely on grant funding or early-stage investment that’s now at risk. It’s not just about the money – it’s also about the technical support, market access, and credibility that comes with US-backed initiatives.”
A silver lining is that carbon projects generally rely on several funders, meaning the loss of USAID support may not be fatal for developers. West Africa Blue, for example, also receives funding from several major philanthropies and investment bodies.
Garoza believes the sudden cut of USAID funding will encourage developers to further diversify funding sources. “Instead of relying too heavily on US-based buyers or donors, developers in Africa are now exploring European, Middle Eastern, and even local private sector partnerships,” she says. “We’re already seeing more interest in bilateral agreements, private investors, and regional carbon markets as alternative paths forward.”
Ripple effects
f the Trump effect on start-up funding is survivable, his impact on demand for carbon credits could be more damaging.
While the market is voluntary, the trend in recent years has been for governments around the world to put pressure on companies to make plans to reach net zero. Many corporate leaders believe that reaching net zero will realistically involve offsetting some of their emissions through the purchase of carbon credits.
The return of Trump is therefore problematic for the carbon markets, for the simple reason that he appears to have no intention of maintaining pressure on companies to cut their emissions. Lower demand for credits will inevitably translate into lower prices for project developers.
Luke Leslie, CEO of carbon markets investor Key Carbon, tells African Business that carbon projects in Africa are already feeling the “ripple effects” of Trump’s policies around climate change.
“The result appears to be the loss of appetite from some US companies to finance carbon projects,” he says. “Anecdotally, some of our previous customers in North America have paused carbon credit purchasing and are undertaking wholesale reviews of their ESG function.”
Leslie does add, though, that there is no sign of a loss of demand for carbon credits in non-US markets.
Garoza agrees that demand for carbon credits is “shifting” among US corporates – but does see some upside for certain projects.
“Some are pulling back due to reputational concerns and market volatility, while others are focusing more on removals over avoidance credits,” she says.
“That means some projects – especially those based on reforestation, agroforestry, or verified removals – still have strong potential.”
A moment in time?
Other figures in the carbon markets space are more sanguine about Trump’s impact on demand.
Brennan Spellacy, CEO of Patch – a platform helping companies manage their carbon markets strategies – says business leaders are taking a longer-term view when it comes to the carbon markets.
“Trump,” he points out, “is honestly a moment in time on the scale of this problem.”
“The reality is that every business leader that I speak to at the [chief sustainability officer] level, at the CEO level, they plan on being there a lot longer than four years,” he says.
While Spellacy notes that tactics are changing – for example, businesses are withdrawing from climate standards that restricted their flexibility – he argues that “we have not seen any really material walking back of climate claims.”
In fact, Patch has seen an uptick recently in corporate appetite for carbon credits. Spellacy believes this is partly because companies that have made net zero commitments have already achieved many of the easy wins to reduce their carbon footprint, and now need to look at carbon credit purchases as part of their net zero strategies.
Another factor, he suggests, is that the idealistic approach that became popular during the years of what he calls “net zero fever”, is giving way to a more pragmatic realisation that carbon offsetting will need to be part of the solution.
Spellacy believes that Africa can be well-positioned to take advantage of a long-term growth in demand for carbon credits. He highlights biochar projects as an area where Africa has a competitive advantage. Biochar is a charcoal-like material produced through burning biomass in carefully controlled conditions, which can be mixed into soils, where it is stored for extended periods.
“Biochar globally is particularly attractive, and there’s a meaningful amount being produced in Africa,” he says. Biochar projects can store carbon for much longer than forest projects, but are much cheaper than direct air capture technology, through which carbon can be removed from the atmosphere and then mineralised.
