Zim to become carbon credits market giant

Zimbabwe is angling to become Africa’s regional trading hub of voluntary carbon credits through the creation of a Pan African – focused register of carbon credits to be traded on the Victoria Falls Stock Exchange (VFEX), Business Weekly can reveal.

A high-level African Credits Market Forum meant to unpack business opportunities arising from the voluntary carbon market, is expected to be held in Victoria Falls, a designated International Financial Services Centre early next month.

It will run under the theme ‘Accelerating Africa into the Climate Economy. It is being organised by a local firm, Africa Voluntary Carbon Credits Market (AVCCM).

Voluntary carbon credits are not regulated by governments or international agencies, but are purchased voluntarily by individuals or firms seeking to offset their emissions.

The purchase of carbon credits is driven by a desire to reduce the carbon footprint of the emitters and mitigate the negative impact of greenhouse gases on the environment.

They are generated by projects or activities that reduce or capture carbon dioxide or other greenhouse gases from the atmosphere, such as renewable energy, afforestation or reforestation.

The credits are often traded on carbon markets or through brokers and can be used to support projects deemed climate-friendly.

Corporates and individuals can also use voluntary carbon credits to meet their own environmental commitments on sustainability to customers, stakeholders, or investors.

Opaque offset programmes

Zimbabwe is believed to be the world’s 12th largest producer of offsets, with 4,2 million credits generated from 30 registered projects last year. The country’s largest project, encompassing a 785-000-hectare stretch of forest in northern Kariba, is run in part by the South Pole, the world’s foremost seller of offset, according to reports.

However, the project promoters are being probed for allegedly making super profits by inflating the number of carbon credits and sidelining local communities.

The project spans four Zimbabwean provinces: Matabeleland North, Midlands, Mashonaland West and Central. It is community-based and consists of the implementation of activities in conjunction with locals and is administered by four Rural District Councils: Binga, Nyaminyami, Hurungwe and Mbire.

There is also suspicion that some players have been clandestinely profiteering in the brisk carbon entrepreneurship by claiming they are conserving forests even in areas under Forestry Commission and the Zimbabwe Parks and Wildlife Management Authority.

VEFX suitable platform

“Victoria Falls exchange is an offshore market and we would want all players from the continent to come and list,” AVCCM chairperson Kwanele Hlabangama told Business Weekly this week.

The VEFX is a U.S. dollar-denominated exchange created in a bid to lure foreign investors. “Victoria Falls is a designated Special Economic Zone and having VEFX as the trading platform for carbon credits, will help to stimulate the market,” said Hlabangama.

By trading voluntary carbon credits on the Victoria Falls Stock Exchange, it becomes possible for buyers and sellers to connect easily, according to the AVCCM.

This can lead to increased trading volumes, which can in turn make the market more efficient and transparent. The exchange can help to standardise the trading of carbon credits by implementing a set of rules and regulations that govern the market.

This can help to reduce transaction costs and improve market transparency. In addition, the stock exchange provides a platform for buyers and sellers to discover the true market price of voluntary carbon credits, while ensuring that carbon credits are priced accurately and reflect their true value, the AVCCM concept says.

Further, trading voluntary carbon credits on a stock exchange can help to increase the availability of capital for carbon reduction projects as well as drive the development of new projects and technologies that help reduce carbon emissions.

It can also enhance transparency by providing a standardised platform for trading and reporting while reducing the risk of fraud and increasing investor confidence.

“The proponents of the concept are quite optimistic that the VEFX will provide a better platform of price discovery and transparency of carbon credits on the continent,” Mangaliso Ndlovu, Minister of Environment, Climate, Tourism, and Hospitality Industry said.

Cannie Mushavi, an expert in the trading of carbon credits said: “With any market, there is usually reasonable demand for the product you want to trade. So, it’s perhaps not a matter of whether VFSE is a credible marketplace but whether there would be sufficient demand.”

In a previous interview with the foreign press, the VEFX chief executive officer, Justin Bgoni, stated that the stock exchange may begin trading in securities later this year.

Pan African register

According to the AVCCM concept note, the Pan African-focused register will be used as a platform to register and track carbon offset credits. A carbon offset credit is a certificate that represents the reduction, removal, or avoidance of one tonne of carbon dioxide or its equivalent in other greenhouse gases from the atmosphere.

These credits are traded on carbon markets and are used by organisations to offset their carbon emissions. The registration system allows project developers to register their carbon offset projects and to verify and certify their emissions reductions.

This ensures that the credits generated by these projects are legitimate and can be traded on carbon markets. The system tracks the ownership and retirement of carbon offset credits, ensuring that they are not double-counted or used more than once.

Carbon offset projects can include renewable energy installations, such as wind or solar farms, as well as reforestation, energy efficiency and waste reduction projects.

“The registration system helps to incentivise organisations to invest in these projects and to reduce their carbon footprint, ultimately contributing to the global effort to mitigate climate change,” according to the concept. The forum will attract stakeholders from the United Nations as well as global climate change exports.

The invitation has also been extended to President Mnangagwa.

Recently, the Government came up with a carbon credit framework that will see it collecting 50 percent of revenue from the sale of climate mitigation securities.

Incomes from the carbon credit will be deposited into the National Climate Fund and channeled toward funding climate-friendly projects. Revenue to local investors has been capped at 30 percent while foreign investors will be entitled to at least 20 percent.

The government nullified all running offset programs and gave producers of the securities two months to comply with new rules including handing the state half of their revenue.

The global market for carbon offsets is worth roughly US$2 billion and is projected to grow to as much as US$1 trillion in 15 years, according to some estimates.-ebusinessweekly