Let Africa Into the Carbon Market

The G8 summit earlier this year focused on Africa and climate change because the two issues are linked: Africa is particularly vulnerable to the effects of climate change and therefore must be supported to adapt to it.

Adaptation to climate change is critical worldwide, but nowhere as much as in Africa, where exposure to natural disasters is higher than in most other regions. Aside from adaptation, Africa can also play a role in mitigating climate change through more sustainable forest and land management. Rural populations from Africa have the capacity to compete and export greenhouse-gas emission-reduction credits generated by forestry and agriculture activities that improve their livelihoods, ameliorate local environmental problems, and increase communities’ ability to cope with climate change.

However, in order to fulfill that promise, the industrialized world must give Africa a chance through the emerging international carbon market. The best approach would be for Europe, Japan, and Canada to buy certificates of biological carbon sequestration from Africa as part of their efforts to meet their obligations under the Kyoto Protocol.

Under the Clean Development Mechanism (CDM) of the Kyoto Protocol, industrialized countries (so-called “Annex I countries”) have the right to purchase certificates of carbon sequestration from reforestation projects undertaken in developing countries and use them to offset up to 1% of their 1990 greenhouse-gas emissions from industry, transport and housing. Although this represents a small fraction of the effort needed from industrialized countries to fulfill the Kyoto Protocol’s goals by 2012, it would help significantly in improving forest and land use in Africa.

Europe, in particular, can demonstrate its commitment to mitigating climate change and promoting economic development in Africa by filling its 1% quota of credits from reforestation projects. This requires modifying some of the rules governing its own internal carbon market, the EU Emission Trading Scheme (EU ETS).

Under current EU ETS rules, carbon credits generated by forestry projects undertaken in the CDM currently have no value, despite their obvious climate, environmental, and social benefits. This is because the so-called “linking directive” – the regulation authorizing EU firms to import Certified Emission Reductions from CDM projects – bans credits from any forestry project. Unsurprisingly, no European firm is currently interested in purchasing such credits. Even European governments, which are not tied by the EU ETS ban, purchase very few.

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The EU ETS’s exclusion of carbon credits from forestry projects will remain in force at least until 2008, with the question of whether to include them subsequently set to be revisited next year. The European Commission will submit a report for consideration by the European Parliament and the Council of Ministers by June 30, 2006.

Preserving the European bias against credits from forest projects is not justified, as positive experience emerging from the first land-use projects will show. In the Doha trade negotiations, industrialized nations accepted the need to liberalize their agricultural markets by reducing subsidies to domestic producers and tariff barriers on agricultural imports. So why not liberalize the carbon market as well – a move that would help, not hurt, domestic producers?

It would also help if all the parties to the Kyoto Protocol amended the post-2012 CDM rules. In particular, three changes are necessary: the relaxation of the 1% rule, the expansion of eligibility criteria to include more than just reforestation, and the removal of the 60-year replacement rule (which mandates the replacement of temporary with permanent credits after 60 years, regardless of the state of the underlying forests).

The first change would enable Annex I countries to satisfy a greater share of their increasing climate responsibilities using credits from land-use projects implemented in non-Annex I countries. The second change would allow forestry and land-use projects that are eligible to issue carbon credits to include such activities as re-vegetation, forest restoration, and improved agricultural management. The third change would eliminate a perverse rule, by which parties to CDM contracts can liquidate forests to buy replacement credits.

The responsibility for reforming the emerging carbon market does not lie solely with the North. All parties to the Kyoto Protocol, including African nations, have a unique opportunity to influence the post-2012 debate and defend the inclusion of land-use projects in the emerging carbon market.