At the United Nations Framework Convention on Climate Change (UNFCCC) held in New York, in May 1992, the countries present committed to reduce atmospheric concentrations of greenhouse gasses with the goal of preventing human activities interference with the earth’s climate system. In 1997 at the Kyoto Protocol international carbon trading markets were established but as the climate crisis is now a major issue there has been the developing of strategies and new markets for carbon. One of the main mechanisms to be used are carbon credits.
Zimbabwe has recently furthered its endeavors to participate in the global carbon credit trading markets through the enactment of the Carbon Credits Trading (General) Regulations, 2023, made in terms of section 140 (2) (c) of the Environmental Management Act [Chapter 20:27]. These Regulations are an integral step in legitimizing carbon credit trading in Zimbabwe and also establishing a sound Voluntary Market for carbon credits which does not only establish environmental projects which further economic sustainability policies but also attracts regional and international investments into the country.
Carbon credits are permits that allow the owner to emit a certain amount of carbon dioxide or other greenhouse gases. A company that emits greenhouse gasses into the atmosphere above the permitted level can purchase these carbon credits therefore allowing them to cover for the excess instead of cutting their emissions. The term ‘carbon credits’ refers to tradeable permits or certificate which represent one metric ton of carbon dioxide (CO2) equivalent to that which is either removed from the atmosphere or prevented from being emitted through climate change mitigatory measures. Carbon credits therefore exist as tradeable commodities or negotiable instruments traded in either voluntary carbon markets or compliance markets.
Voluntary carbon markets are based on projects established to remove or reduce carbon dioxide emissions in the atmosphere. Therefore, a company which is unable to reach its greenhouse gas emission target or wants to claim carbon neutrality can buy carbon offset credits by investing in the environmental mitigation projects such as regenerative farming projects.
Compliance markets on the other hand are set up in such a manner that nations or organizations establish a limit to the amount of emissions companies are allowed to emit. What this means is that if a company exceeds such limit, it has to set off the excess by buying carbon credits and if it emits greenhouse gases way less than the established target, it can also sell the extra credit to another entity. Such a regime is what is known as “cap-and-trade” system. A good example of such is the Kyoto Protocol.
Statutory Instrument 150 of 2023 was enacted to provide a regulatory framework for carbon credit trading in Zimbabwe. While Carbon Credit trading was already an industry in Zimbabwe, there was dire need for a legal framework that not only legitimized the industry but also provide safeguards from abuse of carbon credits by some organizations.
Section 2 of the Regulations provides definitions of integral terms used in the Regulations. A carbon credit is defined as a tradable certificate representing one metric ton of carbon dioxide (CO2) equivalent that is either prevented from being emitted into the atmosphere or removed from the atmosphere as a result of climate change mitigation actions.
Carbon credit trading is defined as buying and selling of verified certified carbon credits in accordance with the recognized international carbon standards.
Section 5 establishes the Designated National Authority (DNA) which is imbued which such functions as to advise the Minister on carbon trading projects, prepare reports for the Minister in compliance with national and international reporting requirements, promote, build capacity and raise awareness on carbon credit trading, establish and maintain the Zimbabwe Carbon Credit Registry and link the registry to the Convention and regional registries, ensure that all carbon trading projects operating in Zimbabwe are registered, monitor project implementation and implementation of the Stakeholder and Public Participation Guidelines as set out in the First Schedule, ensure the environmental integrity of carbon credits generated in Zimbabwe using the guidelines set out in the Second Schedule, develop carbon credit standardized baselines and methodologies for Zimbabwe etc.
Section 6 and 7 empowers the Minister to establish a Carbon Credit Trading Committee consisting of experts in climate change, law, the environment and finance. The Carbon Credit Trading Committee would be responsible for providing advice to the Minister on issues which may arise in carbon credits market, provide expert policy and technical recommendations, advise on mitigation measures and/or areas of national strategic interest in which carbon credit trading shall not be conducted; and perform any other function assigned to them by the Minister.
In terms of section 8 of the Regulations, a person intending to participate in carbon credit trading (Project Proponent) submits a Letter of Intent to the Designated National Authority accompanied by a Project Idea Note in the prescribed form. Upon such submission, the person pays Carbon Credit Application Fee which is currently pegged at US$100.00 in terms of SI 152/23. The Project Proponent also attaches proof of prior engagements and consultations with any appropriate authority to ensure that the project is realized. On receipt of the Letter of Intent, the Authority issues a Letter of No Objection with 14 working days and copy the Minister.
Upon receipt of the Letter of No Objection from the Authority, the Project Proponent conducts feasibility studies including consulting the people likely to be affected by or interested in the project and also establish greenhouse gas emissions abatement potential. The Proponent then informs the Authority of the commencement of such studies within six months.
Within 24 months the Proponent submits to the Authority a Project Design Document accompanied by a Submission of Project Design Document Fee in the sum of US$5 000.00. On receiving the Project Design, the Authority assesses whether such project meets the requirements of sustainable development criteria, environmental integrity guidelines and all legal compliance obligation affecting the nature of the project. The Authority then gives recommendations to the Minister giving reasons thereof.
After consultation with the President, the Minister may approve the project by issuing a registration certificate which shall be valid for 10 years. The Proponent would be required to pay a Registration Certificate Fee in the sum of US$10 000.00. The project shall then be commenced within one year of approval.
In terms of the Carbon Credits Trading (General) (Amendment) Regulations, 2023 (No.1), for the first ten years after the commencement of the project, the Project Proponent is entitled to retain up to seventy percent of the proceeds from the project with the remaining thirty percent constituting an Environmental Levy deposited in the Environment Fund.
Carbon Credit Trading presents a number of investment opportunities to both local and international investors. This is so because the Zimbabwean economy is already based on industries which generate carbon credits. This presents a lot of opportunities for investment in projects which reduce carbon dioxide emissions in the atmosphere.
There exist potential investment opportunities that generate carbon credits with regards to the use of blended fuels in Zimbabwe. ZERA established the use of blended fuels where unleaded petrol is mixed with ethanol. Not only does this reduce the foreign currency obligations but blended fuels also emit less greenhouse gases. Because ethanol is extracted from sugarcane, an establishment of a carbon credit project around sugarcane farming with the aim of producing ethanol to be used as a cleaner alternative fuel can therefore yield carbon credits. This therefore becomes a topical pitch in sourcing investment for sugarcane farmers where income will not only be generated from the products of sugarcane but also from the selling of carbon credits in the production of ethanol as an alternative to fossil fuels.
As scientific studies have now established technologies to measure the amount of carbon dioxide absorbed by trees and quantify such, the farming of timber becomes an ideal project for carbon credit trading. Therefore, the Eastern Highlands with its vast hectares of plantations of timber becomes a fertile ground for carbon credit trading and provides good opportunities.
As recent studies have begun to show that there exists a co-relation between the emission of greenhouse gases and the extent of tillage in farming, the Pfumvudza concept becomes an opportunity to generate carbon credits because zero tillage of the soil reduces carbon emitted from the soil.
The setting up of solar power projects also reduces carbon emissions as it presents a cleaner source of energy that does not involve the burning of fossil fuels. Therefore, investing is solar power projects also creates investment opportunities for the generation of carbon credits.
Ranked as one of the largest forest preservation projects in the world, the Kariba REDD+ project is arguably the biggest opportunity for carbon credit trading and investment in Zimbabwe. The project is a joint venture Zimbabwe’s Carbon Green Africa and Switzerland’s South Pole and covers about 785 000 hectares. This together with the establishment of the Victoria Falls Stock Exchange presents various opportunities for carbon credit trading and investment.
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