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Writes Elvis Dumba
Harare – As the world continues to grapple with the effects of climate change-induced weather pattern challenges, Zimbabwe has joined the carbon trading sector as it gears up its efforts in mitigating the phenomenon.
Zimbabwe recently developed and adopted a national carbon credit framework that is expected to guide businesses, benefit communities, and protect investors who wish to establish carbon-trade businesses in the country.
The Southern African country has vast opportunities for carbon trading in the energy sector through investments in solar, wind, mini-hydro, and geothermal power generation.
The expansion of African economies in recent years has increased the demand for electricity to levels beyond the current power generation capacity.
Energy efficiency, cleaner technologies in the manufacturing sector, and the replacement of hydro-fluorocarbons present further opportunities for the country and Africa.
Carbon credits are built by allowing some producers to emit carbon dioxide, while others remove carbon dioxide from the atmosphere or slash their emissions. The trade involves requesting the emitters to be paying the sequesters, such as forest owners, or the investors in green energy and the like some of their costs.
“Looking at the ability of the carbon trade to address climate challenges, it is true that Africa is gifted with an abundance of natural resources in the form of forests, wildlife, water, good agricultural soils, and minerals. These resources play a vital role in carbon sequestration,” Ministry of Environment, Climate, Tourism, and Hospitality Industry, Chief Director for Environment, Climate and Meteorological Services Professor Prosper Matondi, said during the African Business Forum held earlier this year in Ethiopia.
Professor Matondi said the country’s energy sector has a ready market for carbon credits as the country is facing power challenges due to increased demand in all socioeconomic sectors.
“In addition, there are opportunities in the transport sector to reduce emissions through partnerships in mass bus transit systems and railway transport with an emphasis on renewable energy,” he said
“The rural areas have a lot of potential in relation to forest conservation and afforestation whilst the large urban areas generate a lot of waste and present opportunities for methane capture as well as waste-to-energy projects.”
“In the area of agriculture, Zimbabwe could benefit and treble the impact of a food response strategy through programs that reduce carbon. This can be achieved by unlocking businesses that promote conservation farming such as Pfumvudza/Intwasa,” he said.
A carbon tax is levied on the carbon emissions required to produce goods and services. Carbon taxes are intended to make visible the “hidden” social costs of carbon emissions, which are otherwise felt only in indirect ways like more severe weather events. In this way, they are designed to reduce greenhouse gas emissions by increasing the prices of the fossil fuels that emit them when burned.
This both decreases demand for goods and services that produce high emissions and incentivizes them, making them less carbon-intensive. In its simplest form, a carbon tax covers only CO2 emissions; however, it could also cover other greenhouse gases, such as methane or nitrous oxide, by taxing such emissions based on their CO2-equivalent global warming potential. When a hydrocarbon fuel such as coal, petroleum, or natural gas is burned, most or all of its carbon is converted to CO2.
Greenhouse gas emissions cause climate change, which damages the environment and human health. This negative externality can be reduced by taxing carbon content at any point in the product cycle. Carbon taxes are thus a type of Pigovian tax. Research shows that carbon taxes effectively reduce emissions. Many economists argue that carbon taxes are the most efficient (lowest cost) way to tackle climate change.
Seventy-seven countries and over 100 cities have committed to achieving net zero emissions by 2050.
There are carbon credits in this trade, which are also known as carbon offsets, which are permits that allow the owner to emit a certain amount of carbon dioxide or other greenhouse gases. One credit permits the emission of one ton of carbon dioxide or the equivalent of other greenhouse gases. The carbon credit is half of a so-called cap-and-trade program.
The carbon credit value is determined by the carbon credit market, which comprises companies and investors who buy and sell carbon credits. The price fluctuates depending on demand and supply but generally ranges from $40 to $80 per metric ton.
Depending on how one sequesters the carbon, earnings from the trade vary from 25 to 2 offsets per acre. For example, if your 1,000-acre wheat farm removes 1 tonne per acre, that is 1,000 carbon credits and $15,000 profit annually.
Carbon credits are a positive investment for those who want to lower their carbon footprint and help the environment. Carbon credits are financial instruments that allow companies to offset their emissions by buying carbon offsets.
Carbon credits are generated from projects around the world that pull greenhouse gases (GHGs) out of the atmosphere or keep emissions from being released. Each time a project verifies they have reduced, avoided, or destroyed one metric tonne of GHG, one carbon credit is created.
Companies and individuals can account for their unavoidable emissions by buying carbon credits from certified activities that support community development, protect ecosystems or install efficient technology to reduce or remove emissions from the atmosphere, and typically, when someone buys a carbon offset, the money goes to pay for a reduction in greenhouse gases that have already occurred. This purchase supports an existing project.
Carbon markets present a great opportunity for African countries to utilize their abundant natural resources to unlock economic growth.
South Korea is currently at the forefront of carbon credit investments and has set up a large scheme where 500 companies, accounting for over 60 percent of the total carbon emissions annually, will be up for emissions trading.
Currently, India and China are the biggest sellers of carbon credits, whereas countries in Europe are the biggest buyers. The concept of Carbon Credit Trading is set out in Article 17 of the Kyoto Protocol.
Under the International Emissions Trading (IET) program, countries can trade in the international carbon credit market to cover their shortfall in assigned amount units. Countries with surplus units can sell them to countries that are exceeding their emission targets under Annex B of the Kyoto Protocol.
Carbon trade is still a new investment in the country, with the Zimbabwean government coming up with initiatives that will accelerate carbon credits trade in the country