Tanzania is one of the countries most affected by climate change, with extreme weather conditions and climate events such as increased seasonal variation in rainfall and temperature, drought, and floods. These impacts significantly affect the country’s socio-economic and development sectors, including agriculture, tourism, energy, water, marine and coastal resources, public health, and livestock-keeping. Drought and floods have caused significant economic costs, reduced long-term growth, and disrupted the livelihoods of both rural and urban communities in mainland Tanzania and Zanzibar.
In response to this situation, the government has been undertaking various efforts towards addressing climate change. Such efforts include revising policies and formulating regulations, strategies, and guidelines to address climate change challenges.
Tanzania implements carbon trading projects in various sectors, including energy, transport, waste management, forestry, agriculture, industrial processes, product use, and other land uses. These projects are expected to help reduce greenhouse gas emissions and vulnerability to climate change while ensuring environmental integrity and sustainable socio-economic development.
Carbon trading is a market-based approach to reducing greenhouse gas emissions, allowing companies and countries to buy and sell carbon credits. A carbon credit represents one metric ton of CO2 or its equivalent reduced or removed from the atmosphere. According to the National Carbon Trade guideline, it means buying and selling carbon credits under a recognized international carbon standard.
Carbon credits mean tradable permits or certificates that give the right to emit one tonne of carbon dioxide or an equivalent of another greenhouse gas. Examples of the credits include Certified Emission Reductions (CERs), Verified Emission Reductions (VERs), and Verified Carbon Units (VCUs), internationally Transferred Mitigation Outcomes (ITMOs).
How Does Carbon Trading Work?
There are two main types of carbon markets: compliance markets and voluntary markets. Governments or regulatory bodies create compliance markets, requiring companies in specific sectors to emit below a certain level of CO2 or other greenhouse gases. If a company talks more than its allotted amount, it must purchase carbon credits from other companies that have cast less than their allotment.
Governments do not regulate voluntary carbon markets; they allow companies and individuals to purchase carbon credits to offset their emissions voluntarily. Voluntary carbon credits are often generated from projects that reduce emissions in developing countries, such as renewable energy projects and reforestation projects.
How are Carbon Credits Generated?
Carbon credits are generated from projects that reduce greenhouse gas emissions. These projects can be located anywhere in the world, but they must meet specific criteria to be eligible to generate carbon credits. For example, the projects must be accurate, additional, measurable, and verifiable. Once a project has been approved, it begins to generate carbon credits. The number of credits generated is based on the amount of greenhouse gas emissions the project reduces.
How are Carbon Credits Traded?
According to Investopedia, governments limit how much pollution companies can produce through carbon trading. Each company is given a certain number of credits, representing the pollution it can create. If a company pays more pollution than it is allowed, it must buy credits from other companies that have made less pollution than they are entitled to. This system incentivizes companies to reduce their pollution because they either have to spend money on extra credits or they can make money by selling their excess credits.
Case studies of successful carbon trading projects in East African countries
Kenya is among the East African countries with successful carbon projects. For example, the The Kasigau Corridor REDD project is Kenya’s community-based forest conservation project. The project aims to reduce deforestation and protect the Kasigau Corridor, a critical wildlife corridor that connects Tsavo East and Tsavo West National Parks.
The project generates carbon credits by selling the right to emit carbon dioxide that is saved by protecting the forest. The carbon credits are developed through a Verified Emissions Reductions (VER) program, a voluntary carbon credit market. In 2022, the project generated over $1 million in carbon credit revenue, which was used to support community development projects such as schools, clinics, and water projects.
In Uganda, through The Lake Victoria Emission Reduction Project (LVERT), the methane captured and utilization the project captures methane gas from the Nakasongola Landfill and uses it to generate electricity. The electricity is then sold to the national grid.
The LVERT project generates carbon credits by selling the right to emit carbon dioxide that is saved by using methane to generate electricity. The carbon credits are developed through a Verified Carbon Standard (VCS) program, a voluntary carbon credit market. The LVERT project has been successful in reducing methane emissions and generating electricity. The project has also created jobs and economic benefits for the local community. In 2022, the project generated over $2 million in carbon credit revenue, which was used to support community development projects such as schools, clinics, and water projects.
The Carbon Trading Initiative in Tanzania
The Tanzanian government is committed to supporting the Carbon Trading Initiative. The government has established several policies and regulations to support the initiative, including the National Carbon Trading Guidelines and the Environmental Management (Control and Management of Carbon Trading) Regulations.
Also, the government is working to develop a carbon registry, which will be used to track the generation and transfer of carbon credits. The Carbon Trading Initiative in Tanzania is still in its early stages of development. Still, it can potentially play a significant role in reducing greenhouse gas emissions and promoting sustainable development.
According to the Minister of State in the Vice President’s Office (Union and Environment), Dr Selemani Jafo, since the regulations and guidelines on carbon trading were implemented, it attracted more than $1 billion (Sh2.3 trillion), which will be mobilized annually through carbon trading across the nation.
Why is Carbon Trading Potential in Tanzania?
Tanzania has significant potential for carbon trading due to its extensive forest cover, abundant renewable energy resources, and a growing economy. The country’s forests absorb millions of tons of carbon dioxide from the atmosphere each year, and its renewable energy resources, such as solar and wind power, can help reduce greenhouse gas emissions from the power sector.
In addition, Tanzania’s economy is increasing, and the energy demand is expected to increase significantly in the coming years. This creates an opportunity for the country to invest in low-carbon development and to generate carbon credits that can be sold to international buyers.
Overview of Economy and Environment
Carbon trading can benefit Tanzania in several ways. First, it can help the country meet its climate change commitments. Tanzania has pledged to reduce its greenhouse gas emissions by 30% by 2030, and carbon trading can help the country achieve this goal.
Second, carbon trading can generate government and private sector revenue. Carbon credits can be sold to international buyers for a profit, and this revenue can be used to invest in low-carbon development projects, such as renewable energy and energy efficiency.
Third, carbon trading can create jobs and boost the economy. Low-carbon development projects, such as renewable energy and energy efficiency, can create construction, manufacturing, and maintenance jobs. In addition, the sale of carbon credits can generate foreign currency earnings.
The Tanzanian government has recognized the potential of carbon trading and has taken steps to facilitate its development. In 2022, the government enacted the Environmental Management (Control and Management of Carbon Trading) Regulations.
Also read Carbon Trading Symphony: Tanzania and UAE Dance Towards Green Prosperity.
