Nigeria’s carbon credit market as an emerging sector in the country’s decarbonisation process has yet to actualise its full potential as an inclusive sector, say energy experts who brainstormed at the recent 92nd Power Dialogue in Abuja.
The dialogue – themed Green Growth: Navigating Nigeria’s Carbon Market – was convened by The Electricity Hub (TEH), a subsidiary of the Nextier public policy group.
Emeka Okpukpara, the Partner at Nextier Power, who leads a power team focused on solving the electricity challenges in Africa’s power sector, moderated the dialogue, while the panellists were Ruchi Soni, the Programme Manager of Africa Carbon Markets Initiative (ACMI) at Sustainable Energy for All (SEforALL); Tayo Ajayi, an Associate Vice President with the Nigeria Sovereign Investment Authority (NSIA), and Dr. Jubril Adeojo, the CEO of SMEFUNDS Capital Limited.
Ruchi Soni explained that the carbon market is a trading platform for exchange of carbon credit, which is as simple as trading one tonne of carbon dioxide. She explained that individuals, private sectors, entities, and governments can participate in the carbon market.
According to Soni, the Nigerian carbon market accommodates the three types of carbon markets, and these are the voluntary carbon market, which is part of what NSIA is doing, is for people who want to generate carbon credit for social impact. The second is the compliance market, which is more complex and has more stringent conditions because participants must adhere to the regulatory landscape and amendments that Nigeria will see in the future. Still, the market is well-established in Europe, Asia and America.
The third type is Article Six, part of the Paris Agreement that permits carbon trading between two nations and allows the emitting of NDC targets.
She noted that besides the social impact of the carbon market, there is an economic insight that enables revenue generation, which has made developers go into the carbon market. A firm that buys carbon credit tends to decarbonise by six per cent faster than businesses that do not buy carbon credit at three per cent.
Soni also explained the process for an organisation to go into carbon credit, stating that “the organisation must have a sense of responsibility for the work the organisation is doing. They must look into the data to establish a baseline and register a project”.
When registering a project under UNFCCC, participants need a third-party verifier, and that this is the bottleneck in Africa, including Nigeria, because these third-party verifiers are far from Africa, which adds to the cost and length of having the project cleared.
“Also, the project is verified in the registration stage and requires a few documents. Due diligence comes in here, which includes monitoring, reporting, and evaluation to ascertain if users have done what they claim to have done. Another essential element is the integrity pace to avoid greenwashing projects”, she added.
In his presentation, Tayo Ajayi said that an example of a project investing in carbon credit in Nigeria is Carbon Vista, a joint venture between NSIA and Vito designed to invest in high-integrity and impactful carbon mitigation and removal projects.
He highlighted that the firm is focused on contributing to the Nigeria National Determined Contribution (NDC) to reduce the country’s emissions and on socially impactful projects. Ajayi disclosed that NSIA has invested $20million in the Carbon Vista project, and Vesta has contributed $30 million to the project with a capital of $50 million, and that there are plans to grow the investment by inviting international and local companies to invest.
According to him, Carbon Vista operations involves identifying and investing in third-party projects with carbon credit models in clean cooking, primary agriculture and energy transition sectors.
He highlighted that NSIA invests in different sectors, including power, renewable energy, and agriculture, which are closely related to the carbon market and will help the nation reduce carbon emissions and generate high-integrity carbon credit, even as he added that a conducive environment for investors, providing tax breaks and basic infrastructure required by investors, is needed to attract investors.
Dr. Jubril Adeojo noted that as a country committed to reducing CO2 emissions, Nigeria should invest in renewable energy, reducing gas flaring, and developing climate-innovative agriculture practices.
He also said there is a need to incentivise the private sector with eighty per cent of the capital required to achieve those goals, while stating that global standards and protocols must be adopted to achieve high integrity at the project level and make the project eligible for the carbon credit certificate.
He noted that under Article 6, Nigeria can create the protocol by learning from Verra and Gold standards under UNFCCC; and provided an example of a green energy bio-fuel company that has enjoyed carbon credit for the last thirteen years by signing up with UNFCCC, working with Verra and Gold standard defining what the company does: biofuel for cooking.
According to him, they have defined what one litre will do because the cooking technology is offsetting kerosene and gas, while also using the blockchain which allows them to track their activities in the environment as a company.
Adeojo stated that projects need to be bankable, noting that the framework is essential to guide people in accumulating their receipts or certificates as commodities that they can sell, hold, and use as collateral.
Okpukpara noted the need for intensive education about the carbon market space, and the electricity hub offers knowledgeable material on carbon markets. He called for the synergy of the national aggregator for carbon credit, which is vital to attracting serious investors into the sector.
