Carbon Credit: A Lesson from Kenya

As the year begins, reports from Kenya point at a $118 million Carbon Credit Fund which is promising to change lives in the East African country.

By definition, a carbon credit is a generic term for any tradable certificate or permit representing the right to emit one tonne of carbon dioxide or the mass of another greenhouse gas with a carbon dioxide equivalent (tCO2e) equivalent to one tonne of carbon dioxide.

In basic terms, this means the planting of trees or maintenance of forests to offset emission of toxic gases to the atmosphere, especially through industrial activities in line with the United Nations’ Sustainable Development Goals (SDGs).

Locally, the need to reduce carbon emissions is still foreign and equally the climate change phenomenon is still mythical to many.

This is despite the fact that the quest for energy in individual households and from farmers, especially tobacco farmers, continues to put a strain on the country’s forests which are deteriorating without an afforestation plan in place.

For companies currently making an effort to develop forests for sell as carbon credits, the conundrum is double-edged as the market for selling them is low despite the rising appetite for the use of woodlots.

However, carbon credits have also been slow to sell internationally, because most big carbon emitters face few legal requirements to buy them, and because the buying is voluntary, which makes the market slim.

What this means for a country like Zimbabwe where most industry in downtrodden is that there is not much income from such projects, giving other people an impression that there is no need for pursuing it.

According to Carbon Green Africa (CGA), a Mashonaland West-based company established to facilitate the generation of carbon credits through validating Redd (reduced emissions from deforestation and degradation) projects, these are most affected by deforestation.

And this is because it appears more beneficiary to cut down a tree than to plant one.

However, there are lessons to be learned from Kenya’s coasts where villagers are planting mangroves for carbon credits with the help of a foreign organisation.

Through the help of the Livelihoods Carbon Fund, a newly launched impact investment fund, this ties global sustainable economic development to emissions reduction from Danone, SAP, Schneider Electric and five other corporations.

Launched last year just before the International Climate Summit in Paris — the fund aims to reach an $118 million investment in ecosystem restoration, agroforestry and renewable energy projects next year in Africa, Asia and Latin America, which will avoid or sequester up to 25 million tonnes of CO2 over 20 years.

“The Livelihoods Carbon Fund creates a link between these worlds,” said Bernard Giraud, co-founder of the Livelihood and Danone’s former senior sustainability advisor, in an online article.

“Companies invest in the fund, which finances projects that improve the lives of rural communities while mitigating climate change.”

According to him, there is $65 million already in investment from Credit Agricole, Danone, perfume and flavour company Firmenich, Hermès, Michelin, SAP, Schneider Electric and travel agency Voyageurs du Monde, among others.

What’s unique about this mutual fund (which divides risk among several investors) is that dividends are paid out in carbon credits, not cash.

Using the principle of additionality — where an investment allows a new sustainability effort to exist — companies can voluntarily offset their greenhouse gas emissions along with their own carbon-reduction efforts while providing resources to vulnerable communities around the world.

On the one hand, the fund is built on an innovative business model where investors mutualise investment risks to finance large-scale projects with tangible social and environmental benefits.

As businesses attempt to revamp in the new government era, such funds could help in poverty reduction and natural resources preservation while helping corporations hit their sustainability mandates.

We only need to support our local communities already generating internationally certified carbon credits that will offset our carbon emissions as a nation.

With a national target to reduce about 33% of emissions by 2020, it sure is wise to start talking positive actions now towards afforestation.

Ultimately, business can acquire those carbon credits being generated by our local communities, with participating businesses effectively offseting local and global carbon emissions.

Although not compulsory at the moment globally, after doing this Zimbabwe’s businesses could also create international goodwill and recognition for directly contributing to the fight against global warming.

There should be a way of incentivising the projects for businesses to follow and partner them while government creates the enabling environment.