Key Points
- Africa requires $213.4 billion in climate financing by 2030.
- Private sector funds remain limited in African climate projects.
- Carbon markets offer new revenue for African climate initiatives.
Climate Policy Initiative (CPI) highlights that Africa, including Nigeria, urgently needs $213.4 billion in climate finance by 2030, a goal which hinges on significant private sector involvement.
As reported by the nation, while the private sector accounted for 51 percent of global climate financing in 2022, African nations struggle to attract private investment due to underdeveloped financial markets and limited access to capital market instruments like green bonds.
Challenges and opportunities in carbon markets
According to CPI’s report, Africa’s Carbon Market: Paving the Way to a Sustainable Future, mature African economies like South Africa and Kenya have made strides with green bonds and asset-backed securities. However, other nations face obstacles in mobilizing private capital. The report stresses the need for innovative financing structures that can attract private investors and bridge the funding gap.
Moreover, Africa’s Voluntary Carbon Markets (VCMs) represent a key opportunity. As global corporations aim to meet net-zero targets, demand for carbon credits is set to rise, presenting an additional income stream for clean energy and climate action projects across Africa. This increased profitability helps to mitigate project risks and attract private financing, CPI notes.
Strengthening carbon credit standards
Africa currently generates only about 2 percent of its potential annual carbon credits, per Sustainable Energy for All, with Kenya, Zimbabwe, DRC, Ethiopia, and Uganda leading in issuance. CPI urges African governments to create supportive environments by standardizing carbon credit verification, which could enhance the credibility and marketability of African carbon credits.
The report concludes that carbon pricing mechanisms like Emissions Trading Systems and VCMs could transform Africa’s climate finance landscape by providing stable revenue for sustainable projects and incentivizing private investments, while also helping the continent to capitalize on the global shift toward net zero.
