Concept

Carbon offsets refers to the removal, reduction, or avoidance of carbon (or other greenhouse gases) that’s being emitted into the atmosphere. Carbon credits are offsets that are available to be, capable of being, and are verified/validated to be traded in a carbon market.

A carbon market is a market for the exchange and or trading of carbon credits between willing participants. There are two types of carbon markets - Compliance Carbon Market and Voluntary Carbon Market.

• Compliance Carbon Market (CCM): This is the regulatory market, participants here engage primarily to meet and comply with regulation. Also known as Mandatory Carbon Market.
• Voluntary Carbon Market (VCM): This is the market for willing participants. Participants here engage primarily to meet their in-house emissions reduction targets and goals.

The voluntary carbon market and the carbon offset space is where we see opportunities for startups on the continent.

Deep Dive

Though Africa contributes less than 4% of the world’s carbon emissions, there is an urgent global need to transition and achieve net-zero emissions, and no one is exempted from this. More than any other region, there is a need to harness carbon markets for Africa.

For the African region to achieve the goal of net-zero, there is an indisputable need for a developed carbon market and offset programs in the region. Whilst the global VCM has grown strongly over the past five years, Africa’s role in it has been incredibly minimal and the supply has been low, despite the increasing global demand.

Boosting the availability and supply of carbon credits, and having a liquid market to trade them will help achieve two goals. The first is emissions reduction. The second is enabling further sustainable investing into key climate sectors, including but not limited to renewable energy, clean cooking, agriculture, forestry, and mobility.

Additional Thoughts

Companies In This Space

• Global

• African

• Further Readings