Regulation, country plans and the future of the VCM: Take-aways from our Carbon Finance Webinars

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This blog was published on 30 May 2024.

Carbon finance is generating much excitement in the distributed solar industry though the opportunity remains tantalisingly out of reach for most companies. In response to this interest, GOGLA has been hosting a six-part webinar series for our members with the aim of a) increasing our collective understanding of this potential revenue stream and b) exploring the requirements for the off-grid solar sector to create and sell high-integrity carbon offsets. 

During the fifth session of GOGLA’s member-exclusive Carbon Finance Webinar Series, experts shared their views on an increasing demand side and what is needed for OGS companies to take advantage of this expected growth. In the final session on the 28th of March, looking at the future of the VCM, we learned that unlocking Africa’s great potential requires four key actions: a) country regulations b) developments in integrity methodologies c) Article 6 advancements and d) increased awareness of the potential. Learn more about these actions here:  

1. Country regulations are crucial to increase climate finance flowing into Africa  

Despite recent challenges, countries all over the world are creating or reshaping their environmental regulations, advancing the support for frameworks in the carbon market, including the Voluntary Carbon Market. Further progress on government regulations however is needed to increase transparency and stimulate markets. Governments should benefit from the advisory services provided by different parties such as National Environment Management Authority (NEMA) in Kenya and African Carbon Market Initiative (ACMI) across Africa. Teleola Oyegoke shared how ACMI has already engaged with over 20 countries in Africa and is building on recent regulatory momentum in 10 countries through Carbon Market Activation Plans.  

2. Country regulations can play a great role in supporting local industries and communities 

National governments can contribute to supporting local markets and the climate finance that flows through it. Where governments are working on regulations, new capital streams can be unlocked for sectors where it is most needed, like OGS. Examples include the encouragement or defining of criteria for local engagement, such as in Indonesia where a new Carbon Policy will allow foreign parties to trade in carbon credits on the domestic market, creating opportunities for local players. Other countries, like Mexico, are working to create a centralized record of VCM data and a national carbon price index, helping smaller players to access data and get a ‘normal price’. Ghana has seen an increase in carbon project requests after opening a carbon market office. Ann Nyatachi of NEMA shared that Kenya amended its Climate Change Act in 2016 to include a focus on benefit-sharing for communities in future participation in the international carbon market. The steering of advising agencies like NEMA, and ACMI can help putting a larger focus on local (community) support for OGS as well, as the majority of project activities are operating in the last mile.  

3. Integrity of carbon and beyond carbon credit should be accurately reflected in methodologies and price  

Without aggregation, black carbon inclusion and Article 6 amendments, the actual mitigation outcomes of OGS projects remain relatively low. Though Torrey Sanseverino emphasizes the need for assessment on a project-to-project basis, the overall Be Zero Carbon rating of the energy sector is rather low. The greatest potential of the OGS sector therefore can be found within its so-called beyond carbon impacts. Fortunately, the demand for projects with SDG claims have been increasing over the years, and these types of projects also tend to fetch price premiums. Where SDG claims can be verified, the average weighted price in the energy sector shows to be 0.5 USD higher per carbon credit, whereas for household devices up to 2 dollars can be added to the price in case of claimed SDG benefits.  

However, SDG claims are not always accurately reflected in methodologies and the integrity and variety might be difficult to understand for buyers. Beyond carbon impacts ought to be incorporated into integrity metrics. Ratings agencies such as Be Zero Carbon help buyers grasp the variety of integrity of carbon and beyond carbon impacts of projects. On top of that, the first ever African carbon credit project list that is being developed by ACMI, and compiles over 100 projects across 25+ countries will also help increase the visibility of high integrity projects.  

4. Transparency and visibility are needed to put OGS on the radar 

To further unlock Africa’s and OGS potential, the potential and broad variety of African credit projects together with their benefits must be transparently highlighted to leverage the current uprise of buyers’ ambitious climate targets, that go beyond purely carbon impacts. Specific attention should be paid to increasing the transparency of the impacts behind SDG claims. As such, buyers are facilitated in their quest to matching projects where evidence for integrity of beyond carbon impacts is apparent. Action however is also required from the demand side, to put efforts in exploring and verifying the evidence of projects and attached SDG symbols. Pre-issuance assessment of carbon projects that are offered by rating agencies can boost investors’ confidence in the integrity of carbon and beyond carbon impacts. On top of that, initiatives like ACMI work hard to proactively shape the narrative of the potential for high integrity carbon markets in Africa to increase confidence and drive action. With greater visibility and transparency, the provision in the increasing demand into the African carbon market including OGS projects can be realized. 

We would like to thank our partners and speakers –Dr Ann Nyatichi Omambia, Deputy Director Programmes and Partnerships, National Environment Management Authority; Torrey Sanseverino, Research Manager, Be Zero Carbon; Teleola Oyegoke, Lead Country Carbon Market Activation, SEforAll – for their insightful contributions towards the sixth webinar in the series, as well as Catherine Allison, Director of Future Earth for moderating the six webinars and others who have contributed to the successful course of the series. 

The Carbon Finance webinar series has been funded byGET.invest, a European programme that mobilises investment in renewable energy, supported by the European Union, Germany, Norway, Sweden, the Netherlands, and Austria. 

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