Africa Told to Weigh Own Needs Before Exporting Carbon Credits

(Bloomberg) — African countries should weigh the cost of meeting their own climate targets before selling carbon credits abroad, or risk being left with the most expensive emissions-cutting projects, a United Nations official said.

“Buyers go for the cheapest projects, the ones that cut a ton of emissions for the least money,” said Perumal Arumugam, a manager at the UN climate secretariat who works on rules for the UN-regulated Article 6 carbon market and helps countries put them into practice.

Sellers need to strike a balance, Arumugam said in an interview at the Carbon Markets Africa Summit in Kigali, or they could be stuck paying for pricier projects at home to meet their own “unconditional” targets, commitments they’ve pledged to meet using their own resources.

“Don’t sell all your low-hanging fruit and export outside,” Arumugam said in an interview at the Carbon Markets Africa Summit in Kigali, Rwanda’s capital. “The market always wants to go where it gets a lower price and can maximize profit.”

Article 6 of the Paris Agreement lets countries trade emission reductions to help meet their climate targets. Its rules were finalized at the COP29 summit in Baku in 2024, and trading under them has so far been limited. When a country authorizes the sale of a credit for another country to count toward its target, it can’t count the reduction itself.

Carbon credits, each representing one ton of carbon dioxide or its equivalent reduced or removed from the atmosphere, can be sold to emitting industries or, under Article 6.2, to countries for use toward their climate goals.

Many African countries are keen to export credits to raise money, sometimes to finance domestic climate action. They have to balance that against their own pledges, Arumugam said. African credits tend to deliver more emission cuts per dollar than those in richer countries, according to BloombergNEF data.

Japan, Singapore and Switzerland have been among the most active buyers. Some countries are buying credits beyond their own commitments, while others are using them to cover a shortfall in meeting their targets.

Cheap Projects

Early bilateral deals have focused on clean or improved cookstoves, which are inexpensive to develop and leave “considerable profit” for suppliers and developers, Arumugam said. He called this a “race to the bottom,” in which lower-cost projects are done first and pricier ones are put off.

Roughly 87% of Rwanda’s issued carbon credits come from cookstove projects, according to Bernadette Arakwiye, the environment minister.

Governments should set sector priorities and negotiate a mix, said Arumugam, exporting cookstove credits while still pushing for projects in costlier sectors such as waste management. Which sectors are cheap or costly varies by country, making this a “national choice,” he said.

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