In several African countries, including Ghana, Kenya, Gabon, Morocco, Senegal, Tunisia, and Malawi, bilateral agreements based on Article 6.2 of the Paris Agreement have been signed with industrialised countries such as Singapore, Australia, and Sweden. For instance, Ghana has designated the Ministry of Environment, Science, Technology, and Innovation (MEDTI) as the authority to authorise the use of International Transferred Mitigation Outcomes (ITMOs).
Nigeria is not an exception either, and a team of highly skilled individuals is currently developing a blueprint for carbon market activation. The goal of these agreements and blueprints is to encourage the use of carbon markets to help reduce greenhouse gas emissions and achieve national targets for sustainable development and climate change mitigation. These initiatives are important steps toward a global shift toward a low-carbon economy and the achievement of the Paris Agreement’s goal of limiting global warming to 1.5 degrees Celsius.
In an article published last month, I argued that: “Nigeria relies heavily on oil, which contributes to an uncertain political environment for implementing diverse environmental incentives conducive to voluntary carbon markets.
“The Nigerian economy is heavily dependent on oil and gas, which will discourage the development of a carbon market. One of the main reasons for this is the fact that the government is reliant on revenues from oil and gas for its budget. This reliance makes it difficult for the government to prioritise environmental protection and sustainable development, which are key components of a carbon market.”
This is just half the truth. There are two types of carbon market; one is the cap-and-trade carbon market which is a form of the compliance carbon market. The cap-and-trade carbon market is a system that regulates greenhouse gas emissions by setting a limit (or “cap”) on the total amount of emissions allowed and then allowing companies to trade “emissions credits” or “allowances” to meet the cap. Companies that reduce their emissions below the cap can sell their extra credits to other companies that need them to comply with the cap.
This system is designed to encourage companies to reduce their emissions by giving them a financial incentive to do so. It has been used to reduce sulphur dioxide emissions in the United States and carbon dioxide in Europe.
In my country Nigeria, this form of carbon market is most likely a fantasy because there is no politico-social, economic and legal incentive or will to move away from fossil fuel. Despite the inadequacies in our non-fossil fuel energy sector, there seem to be no promising efforts towards improving it, but we constantly hear the narrative that fossil fuel is the sustaining ingredient in Nigeria’s economy.
What if the Nigerian government gave the cap-and-trade system a try? That would mean that the government would set emission limits for companies (including oil companies} across the country with strong and independent regulatory bodies to ensure that they adhere to their emission limits. This has the potential to disrupt presently existing business models because it would affect for instance, oil production infrastructures responsible for gas flaring, oil and gas barrels produced. If they intend to maintain or increase production volumes which require exceeding their emission limit, then they will have to pay for carbon credits.
There are other forms of the compliance market strategy like the carbon taxing system in Canada. Carbon taxing may be unfriendly in Nigeria because it would affect fuel prices which would affect small businesses and the government has a track record for corruption and embezzlement of public funds which means the money accumulated from carbon taxing will not be reinvested in clean energy projects.
For the voluntary carbon market also known as over-the-counter carbon market (OTP), there are no legal or regulatory requirement to engage the carbon market; companies are free to purchase carbon credits at their own volition. Given that it is not mandatory, there is little possibility that this would work in Nigeria. Companies in Nigeria (including the government) have little regards for environmental consideration.
Just like Ghana and other African nations, Nigeria can choose to engage developed nations for carbon offsetting but the problem with this is that it can become an avenue for embezzlement and corruption; money generated from carbon offsetting can be used to enrich the pockets of political elites and we should worry about that.
By Greatson Odion
