Top 3 takeaways from Africa Climate Week

What should the future for carbon and nature markets look like for Africa? That was the question posed to the speaker panel at this week’s UNFCCC Africa Climate Week event in Libreville, Gabon. Deceptively simple of course, it prompted a range of answers centred around the continent’s massive untapped potential to attract large-scale climate finance, with pretty much all roads leading back to the question of quality.

As Robert Pirsig's Phaedrus knew, quality is a difficult subject to pin down. In the case of carbon it revolves around two main axes. The first is our ability to measure carbon stocks and flows. Broadly speaking, the higher the accuracy of measurement, the greater the cost of achieving it. This provides a challenge to carbon project finance but there is hope that improvements in remote sensing will ultimately reduce this overhead. As technology improves, compliance costs should reduce to make more projects economically viable, thereby helping accelerate positive climate action.

Then there are the risks associated with the delivery of each tonne of carbon benefit. These are far more subjective in nature – more nuanced – and underpin BeZero’s ratings. Issues such as additionality, permanence and leakage need to be independently assessed using project, regional and sectoral information sources, ultimately arriving at a view on the likelihood that a tonne claimed actually represents a tonne avoided, sequestered or stored for the long term.

Things get much more complicated when trying to assess co-benefits (or “core benefits”, as one speaker framed them), which include things like biodiversity and improvements to human communities, health and economic wellbeing. Lack of fungibility is one issue, as is the quantitative framework necessary, yet there is a widely held belief that these local benefits play a significant role in how investors discriminate between projects, and in pricing premiums.

We already know that historically there has been no statistical relationship between a project’s carbon rating and the price it commands per tonne, although this price-quality paradox is by no means unique to the carbon market. Some other signal probably explains the variance – could it be non-carbon benefits?

Without an appropriate framework to quantify measures such as biodiversity impacts, investors will continue to be in the dark about exactly what they are buying. Much hope appears to rest on the UN’s Sustainable Development Goals (SDGs) initiative in providing a methodology that could capture metrics across a wide variety of targets.

The successor to the Millennium Development Goals (which weren’t achieved), the SDGs are envisaged as a “shared blueprint for peace and prosperity for people and the planet, now and into the future”. Each of the 17 Goals is subdivided into a series of targets, some of which are harder to quantify than others, especially at the level of an individual carbon project. Few are currently on track, and the initiative seems doomed to its predecessor’s fate.

Are SDGs the best way to measure non-carbon benefits? Aside from the obscurity of some of the sub-goals and the fact that they are supposed to be delivered by 2030, far outside the crediting horizon of most VCM projects, they also don’t necessarily reflect what they might at first seem to. For example, to the casual observer, SDG14 (Life Below Water) and SDG15 (Life on Land) might appear to offer a measure of progress against conserving biodiversity. That’s true insofar as the extent to which that biodiversity is edible, or useful for construction materials, but not as a means of arresting the collapse in wildlife populations more generally.

The most telling question from the audience came towards the end of the session. Simple, and not deceptive at all, the ask was “why are you calling these things co-benefits?”. The second barrel was rhetorical but even more cutting: “surely the ecosystem is the carbon?”. Maybe this reflects the profound dilemma that Africa, and indeed much of the rest of the world, finds itself in. We face two existential crises: climate change and ecological breakdown. Yet the carbon response seems to be the only game in town.

The challenge is perhaps to find solutions that tap into the existing carbon market, which will scale more rapidly than those outside it, such as the creation of biodiversity credits. This will require cooperation on the demand side too in accepting the concept of stacked benefits within a single credit, whose main focus is on carbon mitigation.

So what does the future hold for carbon and nature markets in Africa? There is undoubtedly huge potential for projects that deliver multiple benefits that will be both locally and globally enjoyed. Quality is essential for maintaining trust between demand and supply sides, requiring better, more cost effective monitoring, reporting and verification systems. There are interdependencies too: for example, a lack of local stakeholder buy-in for a project can lead to increased non-permanence risks.

To capture those benefits beyond carbon there needs to be an approach that deals with many different aspects, which might be moving in different directions. The ecosystem is indeed the carbon, but the carbon is just a single element in a complex whole.