Article 6 of the Paris Agreement creates a framework for investment into Africa, so why are developers hesitant?

The Paris Agreement, adopted in 2015, represents a landmark global effort to combat climate change. One of its key provisions, Article 6, outlines mechanisms for international cooperation to reduce greenhouse gas emissions, GHGs. While Article 6 holds great promise for nature-based solutions (NBS) carbon projects in Africa, it has also generated hesitancy among project developers due to a lack of transparency on policy declarations by many African nations on carbon credit sovereignty. This hesitancy has turned to concern in the case of Zimbabwe’s recent decision to upend the table on global carbon markets by invalidating all prior projects in the country and to claim 50% of all revenues of any carbon project moving forward.

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Nature-Based Solutions and Carbon Sequestration

Nature-based solutions refer to actions that harness the power of nature to address climate change. These solutions often involve activities like afforestation, reforestation, wetland restoration, and sustainable land management. They can play a significant role in sequestering carbon dioxide from the atmosphere, helping countries meet their emission reduction targets. We at Oko, for example, fall under the reforestation category of NBS in our project targeting the restoration of at least 14,000 hectares of native woodland in Sierra Leone, West Africa.

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Article 6 of the Paris Agreement

Article 6 of the Paris Agreement provides a framework for international cooperation on emissions reductions through two key mechanisms:

1. Article 6.2 - Internationally Transferred Mitigation Outcomes (ITMOs): This mechanism allows countries to cooperate on emissions reductions and trade carbon credits. In the context of NBS carbon projects, this means that a developed country can invest in such projects in a developing country and claim the resulting emissions reductions towards its own targets.
2. Article 6.4 - Sustainable Development Mechanism (SDM): This mechanism promotes sustainable development through emissions reduction projects in developing countries. These projects can generate carbon credits, which can then be sold to other countries or entities to offset their emissions.

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Opportunities and Challenges for NBS Carbon Projects in Africa

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Opportunities:

1. Funding: Article 6 provides a potential influx of funding for NBS carbon projects in Africa. Developed countries looking to meet their emissions targets can invest in projects that offer carbon credits, providing a financial incentive for conservation and restoration efforts.
2. Sustainable Development: Article 6.4 emphasizes sustainable development, which aligns with the broader goals of NBS projects. These projects can have positive social and economic impacts in addition to their carbon sequestration benefits.

To its core, these two aspects of Article 6 provide a key framework for Developed countries and private developers to invest in NBS projects in Africa that sequesters GHGs as well as supporting wider development goals. However:

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Challenges:

1. Complexity: The rules and guidelines for Article 6 are complex and subject to negotiation. This complexity can be a barrier for African countries with limited capacity to navigate the intricacies of international climate finance mechanisms.
2. Global Power Dynamics: It can be argued that African nations may feel marginalised in international climate negotiations, with less influence in shaping global climate policy     compared to major emitters. This can lead to a perception that they have little say in the rules and mechanisms, including Article 6, which impacts their willingness to engage and could lead some African nations to shift from Article 6 and develop their own policies.
3. Risk of Double Counting: One of the biggest hesitations among project developers is the risk of double counting. If the emissions reductions generated by an NBS project are claimed by both the host country and the investing country, it could undermine the integrity of the global carbon market. This was highlighted in the Zimbabwean case.
4. Lack of Clarity: The lack of clarity around the rules governing Article 6 has created uncertainty for project developers. They are unsure about how to structure their projects and whether they will be able to access the international carbon market if a project’s host nation’s carbon policy agenda unexpectedly changes. NBS projects are often decades long ventures and require high levels of certainty to ensure the confidence of investors.
5. Negotiation Delays: The Paris Agreement's rule book, including the guidelines for Article 6, has faced delays in negotiations. This uncertainty further hampers the ability of project developers to plan and execute NBS projects.

While Article 6 of the Paris Agreement holds great potential for nature-based solutions carbon projects in Africa, it also presents significant challenges and uncertainties. The hesitancy among project developers and investors is understandable given the complexity of the mechanism, the risk of double counting, the lack of clarity surrounding its implementation and an uncertainty in how some nations will respond and develop their own carbon policies. To unlock the full potential of NBS projects in Africa and leverage Article 6 effectively, it is crucial for international climate negotiators to address these concerns and provide clear guidelines and mechanisms for secure project implementation in a format inherently repeatable across nations.  Doing so would provide investors and developers the confidence to green light large scale NBS projects across the African continent and harness the power of nature to combat climate change and promote sustainable development while contributing to global emissions reductions.

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