The United Arab Emirates Carbon Alliance has made a significant commitment to purchase $450 million worth of carbon credits from the African Carbon Markets Initiative (ACMI) by 2030. The deal was announced at the first Africa Climate Summit, where Sheikha Shamma bint Sultan, President and CEO of the UAE Independent Climate Change Accelerators (UICCA), signed a letter of intent with ACMI. This announcement has been highly anticipated at the three-day event currently taking place in Kenya this week, where country leaders and delegates are coming together to ramp up climate action on the continent.
The UICCA launched the UAE Carbon Alliance in June as part of the country’s Net Zero by 2050 Strategic Initiative. The alliance aims to help companies transition to a green economy and includes members such as Mubadala Investment Company, First Abu Dhabi Bank, Masdar, and AirCarbon Exchange. On the other hand, the ACMI, launched at COP27 last year, brings together African countries and large climate investors, including the Bezos Earth Fund and Rockefeller Foundation, with the goal of reducing emissions and bringing transparency to voluntary carbon markets in the region through trading carbon offsets.
ACMI, which is run by McKinsey & Company, aims to increase the stocks of African carbon credits to 300 million by 2030. To achieve this ambitious target, it needs the support of large buyers and supporters of carbon markets. African leaders particularly advocate for the use of market-driven financial mechanisms, such as carbon credits or offsets, which are created through projects that reduce emissions, such as reforestation and shifting to renewable or cleaner energy sources. Companies looking to compensate for their carbon emissions against their set targets can buy carbon credits, with each credit equal to preventing the release of one tonne of CO2.
The founders of ACMI believe that securing early commitments from investors is crucial to obtaining enough carbon credits to reach their goal. The UAE Carbon Alliance is currently their biggest backer, aiming to become a leading hub for high-quality carbon markets and bridge the gap between the high-integrity supply of African carbon credits and the high demand from the Middle East. Despite criticisms, the demand for carbon credits is expected to grow exponentially, with industry estimates projecting the carbon offsets market size to reach $250 billion by 2050.
The UAE’s latest climate plan emphasizes its focus on meeting climate targets through domestic reduction efforts but also reserves the right to tap into carbon offsets markets as specified in Article 6 of the Paris Agreement. Khalifa Al Nahyan, Chairperson of the UAE Carbon Alliance, highlighted the importance of carbon markets in their decarbonization journey and expressed hopes of fostering more integrated and efficient carbon market mechanisms between the UAE and Africa. The collaboration with ACMI provides buyers in the UAE and the wider region access to high-quality African carbon credits, unlocking the region’s carbon credit potential while supporting sustainable investment with long-term climate impact.
Paul Muthaura, CEO of ACMI, commended the UICCA’s $450 million pledge as a demonstration of the potential of international cooperation to tackle climate change. He emphasized their joint aim of creating a sustainable, transparent, and equitable carbon market ecosystem in Africa, which can drive significant positive impact for the region and the world.
It is worth noting that the UAE Carbon Alliance is not the only buyer with a keen interest in African carbon credits. Blue Carbon, a company created by a member of Dubai’s royal family, has also signed agreements with African nations to manage forests and produce carbon credits from conservation and protection activities. These offsets will be sold to countries looking to use carbon credits to meet their climate targets.
African nations view carbon credits and similar market-driven financial mechanisms as crucial tools to attract funding from wealthier countries. The ACMI’s Advance Market Signal aims to collect around $200 million for buying African carbon credits by 2030, with major signatories including Vertree, Standard Chartered, ETG, and Nando’s, among others. Nigeria alone has the potential to generate over 30 million tons of carbon credits each year by the end of the decade, amounting to over $500 million annually through the sales of carbon offsets.
The organizers of the Africa Climate Summit have a broader goal of repositioning the continent as a hub for climate-related funding and actions, shifting the narrative from being known for climate disasters like droughts and floods to becoming a center for climate investments.
In summary, the UAE Carbon Alliance’s monumental pledge of $450 million to purchase carbon credits from the ACMI represents a significant stride in the global fight against climate change. This commitment bridges nations and regions, fostering international cooperation to create a sustainable and efficient carbon market ecosystem.