“A wolf in sheep’s clothing”: New report by Power Shift Africa on the Africa Carbon Markets Initiative

“Carbon credits are, essentially, pollution permits – an imaginary commodity created to benefit the wealthy, not the climate”

The Africa Carbon Markets Initiative was launched in November 2022, during COP27 in Sharm El-Sheikh. The ACMI claims that its aim is to develop a “high-value export commodity”.

But as Power Shift Africa points out in a new report,

[T]he two biggest winners from carbon markets are the fossil fuel companies, as it allows companies across the world to continue to burn their polluting product with impunity, and the financial brokers who buy and sell the credits with huge mark ups.

Power Shift Africa’s report is titled, “The Africa Carbon Markets Initiative: A wolf in sheep’s clothing”. Mohamed Adow, the founder and director of Power Shift Africa has also written an article for Climate Home News based on the report.

“We can’t afford to lock ourselves into the constraints of illusory and non-functioning carbon markets,” Adow writes.

ACMI is a “dangerous distraction for Africa”, Power Shift Africa’s report argues.

Carbon markets “benefit the polluters, the fossil fuel companies and the market brokers”, the report states.

The neo-colonial carbon market defines carbon project objectives. The aim is to shift the reduction in carbon emissions to the Global South, rather than making the reductions the rich North, which bears the vast majority of responsibility for the climate crisis.

And the development and resilience needs of African communities, such as food security, economic development, or decent work are put to one side.

The report notes that,

Carbon markets assume that western companies will continue to emit huge quantities of greenhouse gases (GHG) in the coming decades, purchasing carbon credits to ‘offset’ these emissions. But there is no room for the illusion of offsets in a world that has vastly exceeded safe levels of climate pollution and where polluting companies ought to be aiming for real zero emissions, not net zero, as fast as possible.

The report calls on the countries involved in the African Climate Summit “to withdraw from and take no further interest in the ACMI and all carbon market mechanisms”. Unfortunately, the United Arab Emirates wasn’t listening, and the UAE Carbon Alliance signed a letter of intent with ACMI to buy US$450 million worth of carbon credits.

Power Shift Africa’s report highlights 13 failures of carbon markets:

Failure 1: Carbon credits are in reality Pollution permits – an imaginary commodity created to benefit the wealthy, not the climate.

The creation of this imaginary commodity within a technocratic system shifts power away from people and local governments and communities, and towards a global elite that are the principal cause of the climate crisis, and the main beneficiaries of the pollution permits (‘carbon credits’). The projects in Africa enable the wealthy to continue polluting, while giving an illusion of commensurate carbon neutralisation through questionable accounting methodologies.

Failure 2: ‘Carbon markets’ (Pollution permit markets’) will increase global emission which is devastating for African nations.

Carbon markets/pollution permit markets undermine the achievement of the Paris Agreement objective of keeping global temperature rise below 1.5°C, which requires real-world reduction in greenhouse gas emissions everywhere, particularly in rich countries. The carbon credit producing projects - renewable energy, avoided emissions or nature projects - do not nullify the emissions of the polluting companies that buy them. In practice, the net impact is to increase the climate crisis devastating African nations.

Failure 3: The ACMI builds on double counting of emissions.

The ACMI Roadmap presents carbon credits as helping African countries progress towards achieving their national climate goals; and at the same time helping the offsetting company reach their net zero target and the country where the company emissions happens. This is double counting of each tonne of carbon – a kind of accounting fraud that would be illegal elsewhere.

Failure 4: Carbon credits falsely assume emissions from burning [safely stored] fossil carbon is interchangeable with carbon temporarily stored in biological systems.

There is a wrongful assumption that fossil and biological carbon are equivalent and interchangeable, when the two have very different life cycles. Credits from “nature-based solutions” are used to justify digging up more fossil carbon. Yet projects such as avoided deforestation or afforestation are not permanent, the carbon stored is released when trees burn or land degrades, or if there is a change of land-use under new land management or government in a country. Climate change itself is a threat to tropical forests. Once emitted, fossil carbon compounds to the overall problem.

Failure 5: Creative new methodologies hide the failure to neutralise emission of the ‘offsetting’ company.

New methodologies being adopted under the ACMI – such as ‘diesel to clean’ and ‘coal to clean’ methodologies - do not overcome creative accounting failures. At best they add no new emissions to the atmosphere, but they do not remove any carbon to neutralise the pollution by the purchasing credit company.

Failure 6: Carbon markets will not benefit Africa’s sustainable development and jobs.

The ACMI uses a simplistic multiplier to calculate the projected number of jobs assumed to be created, based on both assumptions of high carbon credit costs and seemingly inflated relations between number of jobs and the volumes of carbon credits generated. The jobs calculation by ACMI includes not only direct job creation but also assumption of jobs ‘supported’ through additional incomes.

Failure 7: The myopic focus on tonnes of carbon undermines development objectives.

A myopic focus on carbon creates perverse incentives that undermine development objectives, and often incentivise maladaptation, with detrimental social and environmental outcomes. Ultimately, they bias the projects towards maximisation of tonnes of carbon over and above producing food or meeting other development needs of the people. The hype around carbon markets in Africa is creating fertile ground for a new type of entrepreneur whose sole corporate purpose is to manufacture carbon credits, with no experience of running energy or nature projects.

Failure 8: It risks undermining land rights, farming, food security and has multiple undesirable consequences for local communities.

Planting new forests for carbon credits requires land, as does flooding valleys for new hydro-power projects. And those already living and using that land fear that scaled-up “land-grabs” will put the security of their livelihoods and cultures at risk. Concerns about land-grabbing and human rights impacts have plagued carbon markets, and ACMI will be no exception.

Failure 9: It allows use of fossil fuels to produce carbon credits in the guise of cooking stoves projects.

ACMI paradoxically proposes the replacement of highly health damaging charcoal stoves with highly climate damaging coal and liquified Petroleum Gas (LPG) stoves. Instead, urgent provision of clean cooking requires locally appropriate and affordable, near zero carbon solutions designed with and for the target communities, including electric cooking, ultra-low emission biomass stoves and locally produced biogas.

Failure 10: It promotes direct air capture, a non-starter for African development.

The Kenyan government, ACMI and related private organisations are pushing for the use of direct air capture (DAC) technologies. In theory, these would remove CO₂ directly from the air. However, there are fundamental issues with DAC that make them unviable, including extremely high costs and energy intensity, toxic pollution, fundamental problems with storage, and diversion of renewable energy resources away from delivering low-emissions universal energy access to African communities.

Failure 11: Carbon Markets exploit African countries while lining the pockets of the middlemen.

African countries will be sorely disappointed that the actual flows of funds are far below the stated market value. The claimed global market valuation of $2 billion represents the price of transactions in the market, but the price paid to the clean energy or nature-based projects delivering the credits is far lower due to multiple actors taking their ‘cut’. A market worth $100 could be due to a single $10 credit representing one tonne of carbon dioxide being traded 10 times, and the price paid to projects in Africa may be less than a third of the price paid for the credit by the Western company.

Failure 12: Multiple players with vested and conflicted interest.

The project developer, the standard-setter and the verifier, each have incentives to overstate offset claims. The project developers can increase its profits if it has more offsets to sell, and the verifier is hired and paid by project developers, plus the standard setter’s fee depends on the amount of offsets certified. The same credit can then be traded between brokers an ‘infinite’ number of times before it is sold to its final end-user. Conflicts of interests are inherent to carbon markets, due to the imaginary nature of the commodity – “avoided carbon”.

Failure 13: Fossil fuel companies are the ultimate winners.

Fossil fuel companies are active in diverse roles throughout the carbon market, including as project developers and intermediaries, often through subsidiaries. Fossil fuel companies are also brokering credits, so winning twice as they sell their fossil fuels to companies who then buy their credits to offset the emissions. A win-win for fossil fuel companies only strengthens the main architects of the crisis.

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