The Global South is home to some of the most vulnerable communities and ecosystems affected by climate change. However, these regions also hold immense potential for mitigating climate change through sustainable practices and projects.
One such opportunity lies in the carbon credit market, where countries and communities can generate revenue by selling carbon credits. During an online meeting, the Centre for Natural Resource Governance (CNRG) explored the financial benefits of carbon credits for the Global South and how they can be harnessed to drive sustainable development.
The Global South can harness the potential of carbon credit schemes for climate change mitigation and adaptation, drive sustainable development, and poverty reduction.
Carbon credits are certificates issued to projects or activities that reduce greenhouse gas emissions, such as reforestation, renewable energy, or energy efficiency projects. Each credit represents one ton of carbon dioxide equivalent (tCO2e) reduced or removed from the atmosphere.
These credits can be sold on the international market to companies or countries seeking to offset their emissions. As such carbon credits can be used to finance sustainable projects, such as wind farms or reforestation efforts, which can attract investment and create jobs.
Darlington Mafa of Rima Africa said financial benefits for the Global South, are a boon to such low technology developing economies, that are reliant on agriculture and primary producers of raw materials.
Mafa contends that there should be clear benefit sharing structures to ensure that selling carbon credits creates a revenue stream for communities and countries, to fund development projects or support local economies.
Carbon credit projects, present low-hanging fruits for sustainable climate finance and can improve livelihoods by reducing poverty through employment opportunities and stimulating local economies.
“The carbon credit market offers a unique opportunity for countries and communities in the Global South to generate revenue while promoting sustainable development and mitigating climate change. By harnessing this potential, the Global South can unlock financial benefits, drive sustainable growth, and support climate resilience.
“As the global community continues to address the challenges of climate change, the importance of carbon credits will only grow, offering a beacon of hope for a more sustainable future.
“Zimbabwe has also formed agreements around carbon credits but we need to assess first what standard we are using to initiate and push for carbon credits locally with the available standards for us as Africa the one that applies for energy efficiency and land use projects that are tied around carbon credits.”
Contextually, for the Global South, carbon credits come in as a form of climate finance- a contested terrain that has been pushed for over a long period, which is a transfer of financial incentives from the developed to the developing countries to fund climate change adaption and mitigation.
Experts concur that predominantly subsistence agriculture-based economies, disproportionately impacted by climate change, can benefit better under a compliance credit market. These are regulated mandatory markets where corporations and countries are forced to meet capped emission thresholds through enforceable regulations.
“We haven’t seen many community benefits in Zimbabwe, because locally we are just seeing this coming up as a strategy. Incentives should be used to connect vulnerable communities using an asset-based approach to leverage the available resources to assist communities in adapting and mitigating climate change,” states Mafa.
He adds, “Social safety nets can be created for communities, utilizing finances to support livelihood projects that utilize clean and green energy.”
A legal practitioner, with the Zimbabwe Environmental Lawyers Association (ZELA) Hazel Chimbiro says Zimbabwe is a regulated mandatory market as it has enacted carbon credit trading guidelines.
The government through the Climate Change department under the Ministry of Environment promulgated Statutory Instrument (SI) 158 of 2023, Carbon Credit Trading general regulations, effective under the EMA Act.
The SI 158 is an amendment of previous regulations, and it provides for control and management of carbon credit trading projects. It is a framework for sustainable development designated national Authority- responsible for regulations, technical advice, and monitoring of projects.
While the previous framework provided a clear benefit-sharing model, where a quota of the distribution of proceeds would directly benefit communities, the current regulations are vague on community benefits.
Chimbiro says the amendments have sidelined communities, “Before the amendment the schedule for the share of proceeds in some way communities benefitted better before amendments came through.
“The communities would get a benefit, but the funds would be managed by the local authority, to come up with projects, and proactive identification of projects that would be beneficial to them.”
Under the predecessor SI 150, 70 percent of the proceeds of the project proponent and 30 percent to the environmental levy. Of the 70 percent of profits, a quarter of the investors’ share would be invested in the community through the local authority.
This raised concerns about investor interests, and the amendment of the regulations was to address this anomaly, to ensure that the project proponent gets more. As a result, there were changes in the distribution of proceeds from the carbon credit scheme, with the introduction of a schedule of distribution.
“This significantly impacts the direct benefits of the communities because before the amendment it was clear that the communities got a percentage, but this has been taken away in the new regulations,” states Chimbiro.
Now the current regulations under SI 158, do not specifically provide a quota for the communities, with the schedule of distribution showing that communities may benefit from the Loss and Damage Fund, says Chimbiro.
“The framework that is in place does not provide many benefits for the communities, specifically, the fact that investors can come and invest in their locality without their direct benefit is a major gap and loophole in the regulations.
“Amendment limited community benefits from the carbon credit schemes. As it stands there is no direct benefit for the community. It is important to advocate for the government to be intentional in giving the community that direct benefit.”
Tracy Mutowekuziva, programs manager at CNRG, says the legal loopholes and gaps in the management of carbon credit schemes are a footing for advocacy initiatives that call for the ringfencing of proceeds for communities.
She said while corporates can harness the various investment opportunities in Zimbabwe, that needed to be important for the regulations to reflect critical issues such as how communities can benefit from the carbon credit schemes.
“The community should have an opportunity to actively participate in the project, which is domiciled in the localities, and consulted before the commencement of the project.”
For Chimbiro a practical solution is learning from other jurisdictions like Kenya, which has a community development and benefit-sharing agreement, which is supposed to be signed by the investor and the community.
“Land tenure is very important in these conversations considering that in most African states land rights are vested in the states and communities only have use rights, conversations should also critique land tenure security.”