THE government is to offer fiscal incentives to companies trading in carbon credits, as authorities target climate financing in domestic resource mobilisation strategy.
Statutory Instrument 150 of 2023 - Carbon Credits Trading (General) Regulations, provides for the control and management of carbon credit trading projects.
Under this law, a designated national authority will be established within Treasury’s Climate Change Management Department to promote the use of carbon credits in the market. However, to participate in the voluntary carbon market, one must write a letter of intent to the Designated National Authority (DNA) to develop a carbon credit project accompanied by a project idea note.
Carbon credits are tradeable certificates that constitute an offset of one tonne of carbon dioxide or carbon dioxide equivalent from the atmosphere. Presenting a paper proposing how to unlock climate financing at the recent four-day Zimbabwe Economic Development Conference, Tinashe Mashavave, chief economist at the Ministry of Finance, said carbon trading and green bonds were the two climate financing strategies being explored at Treasury.
“Issuance of green bonds and effective regulation of carbon trading in Zimbabwe can provide a mechanism to attract financial resources and promote sustainable development while mitigating the effects of climate change,” Mashavave said.
“The government may consider fiscal incentives for investors and cover the cost of third-party verification for issuers to expedite the green bond market.
“Given that the legal framework for carbon trading has been promulgated in Zimbabwe, there is a need to promote, build capacity and raise awareness on carbon credit trading.”
He said Treasury would also consider developing local capacities of stakeholders to handle the technical complexities involved in the design, verification, certification and reporting standards for green projects.
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“Zimbabwe can utilise carbon credits to access the necessary funds to implement climate change adaptation and mitigation projects (like) building resilience and achieving sustainable infrastructure,” Mashavave said.
“Close regulation of carbon trading is critical to prevent greenwashing and ensure that the benefits of carbon credits flow to local communities.”
The push to promote carbon credits comes as global carbon credit (compliance and voluntary) market was valued at US$978,56 billion in 2022, according to research by Treasury. Currently, the carbon credit market is projected to reach US$1,16 trillion by year end. It is also expected to reach US$2,68 trillion by 2028. Carbon credit trading is predicted to grow at a compounded annual growth rate of 18,23% from 2023 to 2028.
“Carbon pricing can fluctuate greatly with demand. In 2021, carbon trading prices plummeted to just US$12,70 per metric tonne, and in 2023, the cost has escalated,” Mashavave said.
“Africa accounts for 2% of trading on the global carbon market. Moreover, high-quality carbon credits are scarce because accounting and verification methodologies vary and pricing data remains limited.”
