Tanzania’s downstream oil and gas industry is transforming, driven by a growing focus on sustainability and reducing greenhouse gas emissions. Carbon credits are playing an increasingly important role in this transformation as they provide a financial incentive for companies to invest in clean energy and energy efficiency technologies.
Carbon credits are a tradable commodity that represents a reduction in greenhouse gas emissions. They are typically created by projects that reduce emissions from deforestation, renewable energy generation, and energy efficiency improvements. Companies purchase carbon credits to offset their emissions or sell carbon credits that they have generated.
The Tanzanian government has introduced several policies to support the development of a carbon credit market. In 2019, the government launched the Tanzania National Carbon Credit Registry, which provides a platform for the registration and trading of carbon credits. The government has also set a target to reduce greenhouse gas emissions by 33% by 2030, and carbon credits are seen as a critical tool to achieve this target.
Downstream Oil and Gas
The combustion of petroleum products, such as gasoline, diesel, and kerosene, releases greenhouse gases into the atmosphere, including carbon dioxide, methane, and nitrous oxide. These gases trap heat in the atmosphere, which contributes to global warming and accelerates climate change. The downstream oil and gas industry is a significant source of greenhouse gas emissions in Tanzania, accounting for approximately 20% of total energy-related emissions.
However, the industry is also well-positioned to reduce emissions through investments in clean energy and energy efficiency technologies. For example, oil and gas companies can invest in renewable energy generation, energy-efficient equipment, and carbon capture and storage technologies.
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Carbon Credits and The Downstream Oil and Gas Industry
The downstream oil and gas industry is a significant emitter of greenhouse gases, both directly and indirectly. Direct emissions come from the refining of crude oil and the production of petrochemicals. Indirect emissions come from the combustion of oil and gas products by consumers and businesses. Carbon credits can play a role in helping the downstream oil and gas industry reduce its emissions. Companies can invest in projects that generate carbon credits, such as renewable energy projects or projects that improve energy efficiency. They can also purchase carbon credits from other companies that have caused them.
So, how can carbon credits help to reduce emissions in Tanzania? Using carbon credits to reduce emissions from the downstream oil and gas sector in Tanzania is still in its early stages. By establishing a market-based mechanism, carbon credits incentivize companies to adopt environmentally friendly practices and reduce their carbon footprint. This approach offers several benefits for Tanzania’s efforts to combat climate change and promote sustainable development.
- Incentivizing Emission Reductions: Carbon credits provide a financial incentive for companies to reduce their emissions. By assigning a monetary value to carbon emissions, companies are encouraged to invest in cleaner technologies and processes to lower their emissions and generate carbon credits. This market-based approach drives innovation and promotes adopting sustainable practices within the industry.
- Funding Emission Reduction Projects: The revenue generated from carbon credits can be used to fund projects that further reduce emissions or offset existing emissions. These projects can range from reforestation initiatives to investments in renewable energy sources. By channelling funds toward emission reduction projects, carbon credits contribute to Tanzania’s overall efforts to combat climate change.
- Compliance with Environmental Regulations: Carbon credits can help companies comply with environmental regulations and emissions targets the government sets. By purchasing carbon credits, companies can offset emissions and meet regulatory requirements. This ensures that companies are held accountable for their environmental impact and encourages them to adopt sustainable practices.
- Promoting Sustainable Development: Carbon credits contribute to sustainable development by encouraging the adoption of cleaner technologies and reducing the environmental impact of the downstream oil and gas industry. This aligns with Tanzania’s national development goals and contributes to a more sustainable future.
- Attracting Foreign Investment: Tanzania’s participation in the carbon credit market can attract foreign investment in emission reduction projects. This can bring much-needed capital and expertise to support Tanzania’s transition to a low-carbon economy.
Case Studies of Carbon Credits in Tanzania’s Downstream Oil and Gas Industry
- Taifa Gas is a Tanzanian company that produces and distributes natural gas. In 2022, Taifa Gas launched a project to capture and use methane emissions from its natural gas processing facility. The project is expected to reduce greenhouse gas emissions by over 100,000 tonnes of carbon dioxide equivalent annually. Taifa Gas can generate carbon credits from the project, which it can sell to other companies to offset their emissions.
- Oryx Petroleum is a Tanzanian company that operates a refinery in Dar es Salaam. In 2023, Oryx Petroleum launched a project to improve energy efficiency at its refinery. The project is expected to reduce greenhouse gas emissions by over 50,000 tonnes of carbon dioxide equivalent annually. Oryx Petroleum can generate carbon credits from the project, which it can sell to other companies to offset their emissions.
- Shell Tanzania is a subsidiary of the Royal Dutch Shell oil and gas company. In 2021, Shell Tanzania launched a project to plant trees in the Dodoma region of Tanzania. The project will remove over 100,000 tonnes of carbon dioxide from the atmosphere over the next 20 years. Shell Tanzania can generate carbon credits from the project, which it can sell to other companies to offset their emissions.
The Future of Carbon Credits in Tanzania’s Downstream Oil and Gas Industry
The future of carbon credits in Tanzania’s downstream oil and gas industry is bright. As the global effort to mitigate climate change accelerates, carbon credits are becoming increasingly important. Tanzania is well-positioned to benefit from the growing carbon credit market, as it has several downstream oil and gas companies that can implement projects to reduce emissions.
One of the key trends expected to drive the growth of the carbon credit market in Tanzania is the increasing demand for carbon credits from international companies. Many companies worldwide have set ambitious climate goals, and they are increasingly looking to purchase carbon credits to offset their emissions. This demand is expected to create new market opportunities for Tanzanian companies that can generate carbon credits.
Another trend expected to boost the carbon credit market in Tanzania is the development of new carbon credit projects. Several potential carbon credit projects could be developed in Tanzania, such as projects to improve energy efficiency, reduce methane emissions, and plant trees. The development of these projects would create new jobs and boost the Tanzanian economy.
The Tanzanian government also supports the development of the carbon credit market. In 2022, the government launched a new carbon credit registry, making it easier for companies to buy and sell carbon credits. The government is also working to develop new policies and regulations to support the growth of the carbon credit market.
Overall, the future of carbon credits in Tanzania’s downstream oil and gas industry is bright. The growing global demand for carbon credits, the development of new carbon credit projects, and the support of the Tanzanian government are all factors that are expected to drive the growth of the market.
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