Why Nigeria needs to actualise full potential of carbon market

The adoption of the Paris Agreement in 2015 set a worldwide objective of keeping the global average temperature below 2°C above pre-industrial period. Also, one of the key outcomes of the COP26 climate summit in Glasgow was the approval of Article 6- the Paris Agreement rulebook governing carbon markets. The summit pointed out that it […]

The adoption of the Paris Agreement in 2015 set a worldwide objective of keeping the global average temperature below 2°C above pre-industrial period. Also, one of the key outcomes of the COP26 climate summit in Glasgow was the approval of Article 6- the Paris Agreement rulebook governing carbon markets.

The summit pointed out that it is important for the policymakers to know that for carbon markets to be successful, there must be transparency in the institutional and financial infrastructure for transactions.

Negotiators at the Glasgow COP26 climate change summit in November 2021 agreed to create a global carbon credit offset trading market.

Also, there is the need for adequate social and environmental safeguards to militate against any adverse project impact.

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However, carbon credits, also known as carbon offsets, 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 in other greenhouse gases.

It simply means companies that pollute are awarded credits that allow them to continue to pollute up to a certain limit, which is reduced periodically. Meanwhile, the company may sell any unneeded credits to another company that needs them. Private companies are thus doubly incentivised to reduce greenhouse emissions. First, they must spend money on extra credits if their emissions exceed the cap. Second, they can make money by reducing their emissions and selling their excess allowances.

According to experts, carbon credits were devised as a mechanism to reduce greenhouse gas emissions and companies get a set number of credits, which decline over time, and they can sell any excess to another company.

While noting that carbon credits create a monetary incentive for companies to reduce their carbon emissions, they said those that cannot easily reduce emissions can still operate, at a higher financial cost.

The United Nation Environment Programme (UNEP)  said carbon markets are carbon pricing mechanisms enabling governments and non-state actors to trade greenhouse gas emission credits.

The aim is to achieve climate targets and implement climate actions cost effectively.

UNEP noted that parties that have successfully met their own emissions reduction targets can sell their extra reduction credits to finance enhanced climate action. “This can move investments to areas and sectors, where emissions reductions can be achieved as efficiently as possible.”

Nigeria moves to actualise carbon market

However, the federal government resolved to pay more attention to the actualisation of carbon markets, knowing fully well that inaction on the emissions of greenhouse gases will be counterproductive.

The markets would be where carbon credits are sold and bought to finance the transformation needed to address the carbon crisis.

Recently, the Ministry of Environment held a retreat meant to provide actionable strategies on key policies of President Bola Ahmed Tinubu’s administration on environment as well as scale up delivery of climate-based services.

The essence is to take a range of actions to deal with climate change and offer opportunities required to deliver on a wide range of climate policy objectives among other things.

In addition, the event was said to have built consensus on strategies and approaches to deliver key deliverables of the signed Presidential Performance e- bond.

Speaking at the Nigeria’s Carbon Market Framework: Article 6 Workshop and Implementation Design in Abuja, Minister of Environment, Balarabe Abbas Lawal, said the markets present a very important tool to reach global climate goals in short and medium terms and that they could help to mobilise resources and reduce costs to give countries and companies the space to smooth the low-carbon transition and be able to achieve the goals of net zero emissions in the most effective way possible.

He said: “Nigeria’s carbon market is an emerging market that is yet to actualise its full potential. The need to unlock its opportunities is pivotal to promoting sustainable growth, stimulating economic development and mitigating climate change.

 “The country’s carbon markets would serve as an attraction for climate finance and as means to curb greenhouse gas emissions.”

The minister said Nigeria has the potential to produce a million tons worth of carbon credits by 2030 through projects like Reforestation, Renewable Energy, Waste to Energy and Improved Cook Stove.

He said the goal of the workshop was to delve deeper into the intricacies of Article 6 with a focus on operationalisation and advancing of the development of Nigeria’s Article 6 Framework.

In the same vein, to resolve conflicts exacerbated by climate change, especially in the northern areas as well tackle poverty, climate risks, poor agricultural productivity and desertification, Lawal said  strategic stakeholders of the Agro-Climatic Resilience in Semi-Arid Landscapes (ACReSAL) Project would be engaged to proffer best strategies and practices in the Semi-Arid regions, which will enhance the development and growth of crops, livestock as well as the ability of “our ecosystem” to cope with water scarcity, temperature fluctuations and other environmental stressors.

He said ACReSAL is meant to adopt the integration of sustainable landscape management in targeted watershed areas, especially in the 19 northern states and the FCT as well as strengthen Nigeria’s long-term framework for sustainable climate resilient landscape management. 

“This further implies that places enduring conflict are less able to cope with climate change because their ability to adapt is weakened by conflict. Additionally, people living in conflict zones are therefore among the most vulnerable to the climate crisis and most neglected by climate action,” he said.