Integrity is key as world's largest carbon market auction is held in Nairobi
Carbon markets are increasingly dominating conversations about climate change interventions, especially in Africa. The world's largest carbon market auction was held last June in Nairobi, where more than 2.2 million tonnes of carbon credits sold. Raphael Obonyo spoke to Riham ElGizy, CEO of Regional Voluntary Carbon Market Company (RVCMC) who hosted the event on what it means for Africa.
Here are the excerpts:
Riham ElGizy What is the current situation with carbon credits and market?
The voluntary carbon trading sector has been growing exponentially, hitting $2 billion in 2022. In recent months, we have seen carbon markets mature rapidly.
Policy frameworks are being drawn up and trading infrastructure is becoming more sophisticated. These developments create a real opportunity for us, particularly in the lead up to the launch of our exchange. We recognise that for the market to reach its potential and play a meaningful role in decarbonization, we must be strict on issues of integrity.
That is why we only trade in high quality carbon credits that have undergone significant due diligence and meet the highest international standards. But to mature further, the market also needs innovation in the form of new ways of channeling climate finance to projects and regions that need it most, such as those in the Global South.
Having held two of our largest carbon credit auctions, we are committed to creating a thriving market for carbon offsets that play a role in tackling climate change while improving livelihoods across the Global South.
Can you tell us in a nutshell about the work of Regional Voluntary Carbon Market?
We are creating a credible voluntary carbon market at speed and at scale - one that has integrity at its core, channels finance towards climate action, and seeks to improve livelihoods across the Global South.
Our aim is to create a robust and successful market for both the generation and use of voluntary carbon credits in the Middle East and North Africa (MENA) region and play a meaningful role in assisting the transition to a low carbon global economy.
All about carbon markets
- What are carbon markets?
Carbon markets are trading systems in which carbon credits are sold and bought. Companies or individuals can use carbon markets to compensate for their greenhouse gas emissions by purchasing carbon credits from entities that remove or reduce greenhouse gas emissions.
One tradable carbon credit equals one tonne of carbon dioxide, or the equivalent amount of a different greenhouse gas reduced, sequestered or avoided.
When a credit is used to reduce, sequester, or avoid emissions, it becomes an offset and is no longer tradable.
- Why are carbon markets important?
The bad news: Greenhouse gas (GHG) emissions are still rising across all major sectors globally, albeit at a slower pace. The good news: renewables are now cheaper often than coal, oil, and gas.
Despite some progress, the world faces a formidable challenge. Scientists warn 2°C of warming will be exceeded during the 21st century unless we achieve deep reductions in GHG emissions now.
Effective action will require concerted and sufficient investment, knowing also that the costs of inaction will be far higher.
- So how do we drive - and finance - the transformation needed to address the climate crisis?
Many countries are looking to carbon markets as part of the answer.
- How many types of carbon markets are there?
There are broadly two types of carbon markets: compliance and voluntary.
Compliance markets are created as a result of any national, regional and/or international policy or regulatory requirement.
Voluntary carbon markets - national and international - refer to the issuance, buying and selling of carbon credits, on a voluntary basis.
Why are we hearing more about carbon markets?
Carbon finance will be key for the implementation of the NDCs, and the Paris Agreement enables the use of such market mechanisms through Article 6.
- What are the challenges?
Progress has been made towards agreeing on the processes and methodologies that countries need to follow to access the carbon markets.
However, there are also serious concerns including issues related to double-counting of GHG emission reductions, human rights abuses, and greenwashing (in which companies falsely market their green credentials, for example, misrepresentations of climate-neutral products or services).
UNDP
What was the voluntary carbon credit auction in Nairobi all about and could you share some of the highlights and outcomes?
In June 2023, we hosted a carbon market auction in Nairobi, Kenya, selling over 2.2 million tonnes of carbon credits, and becoming the world's largest auction. The auction basket contained high quality CORSIA-eligible and Verra-registered carbon credits, with three quarters of the credits originating from countries across MENA, which is the region we have been targeting for growth.
The projects related to the Nairobi auction were a mix of CO2 avoidance and removal, the majority of which are originated in Africa. This includes the supply of improved clean cookstoves to communities in Kenya and Rwanda, and renewable energy projects in Egypt and South Africa.
Sixteen Saudi regional and international companies took part in the auction, with Aramco, Saudi Electricity Company (SEC) and ENOWA, purchasing the largest number of carbon credits.
The auction was a demonstration of Saudi Arabia's commitment to tackling climate change in line with the Saudi Green Initiative and Vision 2030.
What efforts are you engaged in to drive funds needed to deliver climate action and improve livelihoods across the Global South?
At RVCMC we believe that voluntary carbon markets will be key to driving both livelihoods and climate action. And these go hand in hand.
Today MENA accounts for only 2% of demand for carbon credits, mostly delivered by the RVCMC. From our base in Saudi Arabia, RVCMC is well-positioned to shape this market going forward and is committed to investing in carbon mitigation projects across the Global South including Africa.
The world's 50 poorest nations contributed only 1% of emissions but suffer 99% of climate related deaths. We want to make a difference.
There are concerns that the carbon markets risks becoming a failing model especially if there is lack of environmental transparency. What is your view?
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We need to tackle climate change using every tool at our disposal. We know that carbon offsets are an important instrument to help accelerate companies' net-zero strategies. This is a new and fast-growing space, and as with any developing industry, there will be issues and challenges, in this case, questions around varying standards and protocol.
Going forward, developing robust verification methods will be crucial to supporting the efficiency of carbon trading as the industry evolves.
RVCMC is already committed to exclusively facilitating the trading of high-quality carbon credits. Our recent auction only offered CORSI-eligible and Verra-registered credits. The company also works with two separate, independent expert teams to vet projects that contribute credits for sale.
We support efforts to increase transparency and are confident that our track record shows we can continue to build a credible voluntary carbon market at speed and at scale, with integrity at its core.
How can Africa benefit from partnerships in terms of carbon credits economy?
RVCMC is committed to improving livelihoods in the Global South, and Africa is an important market for us, being the source of significant nature and technology-based carbon project opportunities.
We recently committed to developing a relationship with stakeholders in Africa by signing two MoUs: one with Eveready East Africa Plc and another with Carbon Vista Nigeria LP.
We will keep building on these relationships, focusing on securing buyer and seller relationships that will ultimately drive growth across the continent.
