The initiative called the Africa Carbon Support Facility, is currently in the design phase and will feature two key components, according to the bank.
The first component will help governments develop policies and regulations governing carbon trading, while the second will focus on boosting the supply and demand for credits as well as the key market infrastructure needed to increase their use, Reuters reported.
“Through this, we envision a future where carbon credits can become a tradable commodity on Africa’s stock exchanges,” said Anthony Nyong, AfDB’s director for climate change and green growth.
Carbon credits have become a big industry, with wealthier nations offsetting their emissions by either financing clean and sustainable energy projects or compensating developing economies for conserving their natural environments.
These projects earn one credit for every metric ton of carbon emissions they either reduce or remove from the atmosphere. Countries and companies can purchase these credits to help meet their climate targets.
Africa has struggled to fully capitalize on the global carbon credit market, where prices on the continent remain significantly lower than in regions with stricter regulatory frameworks.
Tapping Africa’s underused climate assets
According to Anthony Nyong, most of Africa’s carbon credits, primarily derived from forestry, land use, and agriculture, are currently traded on voluntary markets. However, integrating them into stock exchanges could significantly boost their market value.
Despite contributing only a small fraction of global greenhouse gas emissions, Africa’s 54 countries remain among the hardest hit by climate change. Yet Africa receives just 1% of global annual climate finance, according to government officials across the region.
At the U.N. COP27 climate summit, an African Carbon Market Initiative (ACMI), comprised of several nations, including Kenya, Malawi, Gabon, Nigeria and Togo, was launched to increase the number of carbon credits generated on the continent to around 300 million credits by 2030 and 1.5 billion a year by 2050.
