Even as carbon markets face scrutiny relating to a lack of environmental integrity, low transparency, and unrealistic commitments, there are good reasons to be optimistic. Innovators in Africa are building on the continent’s natural resources, economic growth, and tech talent to create new types of carbon projects that are better integrated into communities and markets, delivering social, economic, and environmental benefits.
This supply of carbon credits cannot get to market fast enough. Both the Voluntary Carbon Market (VCM) and compliance markets more than doubled in value between 2020 and 2022 as an increasing number of corporations and governments in the Global North seek to execute voluntary or mandatory Net Zero commitments. In 2022, $2 billion of carbon credits were traded on the VCM, more than doubling since 2020. The volume of credits required globally is expected to increase at least 20x by 2035, with 30 to 40x needed for scenarios consistent with the Paris Agreement on climate change. To harness this opportunity, we need to establish African markets as attractive destinations for private sector investment, and support African innovators to navigate the carbon value chain.
Growing demand, coupled with the exhaustion of low-cost solutions, is fueling the need for new sources of carbon credits beyond the afforestation, reforestation, and restoration projects that currently dominate supply. According to BeZero, meeting carbon removal targets by nature-based removal alone would require the afforestation of land larger than the US.
That demand is forecast to drive the price of carbon credits on the VCM up to US$ 80-$150 per tonne by 2035, as compared to today’s price, which ranges from US $2 to US$ 25 per tonne. A two-tier market is developing - with projects perceived to demonstrate high quality and integrity fetching prices upwards of $20 per tonne while the rest of the market trends below $5.
“The controversial news around the quality of offsets is driving corporates to find that middle ground that can be transparently confirmed as not greenwashing, but that still includes a price per ton that the boards find reasonable.” - Eve Tamme, Inside Climate Policy
To meet this challenge, we need to diversify sources of carbon credit supply; improve market access for African projects; and harness new tools and approaches that enable scale, rigor, and speed by:
Africa is just starting to scrape the surface of its carbon project potential. Over the last ten years, just 13% of VCM credits retired originated in Africa, and just three countries - Kenya, Zambia, and Malawi - accounted for 50% of those credits. A total of 18 African countries did not produce a single carbon project.
Although the number of projects is currently low, Africa has all of the ingredients for building a stream of low-cost, high-quality carbon projects thanks to:
At the Catalyst Fund, we partner with founders to build a more resilient future by backing tech-enabled startups seeking to improve the resilience of underserved, climate-vulnerable communities in Africa. Although our focus is primarily on adaptation and resilience, we are finding that many models have mitigation benefits and that carbon finance can enable inclusive business models that were previously unviable, driving access and affordability.
Sand to Green transforms deserts into cultivable land by creating climate-smart regenerative farms, providing valuable sustainable livelihoods as well as fruit and vegetables that shore up food security.
More than 83% of countries in Africa are vulnerable to desertification, and 66% of land is arid or desert. In particular, Morocco is experiencing severe water scarcity, even as 85% of national water consumption is swallowed by intensive agriculture oriented to export produce, explaining high rates of degradation.
While pressure on water resources is high, adoption of sustainable land and water management practices is low, at only 8%, pointing to a need for scalable solutions. Sand to Green is meeting this need by restoring desertified land and transforming it into sustainably managed plantations. Their methodology quantifies carbon sequestered through above-ground biomass and improved soil carbon while providing valuable jobs as well as a nutritious food supply, unlike forestry efforts which are exclusively focused on carbon.
To date, almost all innovation in Direct Air Carbon (DAC) capture has been driven by companies in Europe and the USA. Octavia’s technology filters CO2 directly from the air, which can then be permanently stored underground or turned into climate-neutral carbon products, such as sustainable aviation fuels. Octavia is the Global South’s first DAC company, part of a growing cohort of African companies innovating in engineered removals.
Octavia’s aim is to make Kenya the world’s most cost-effective hub for building and deploying DAC, disrupting the current market leaders in the Global North. Octavia’s cost advantage is driven by Kenya’s abundant geothermal energy supply, which enables it to run its DAC machines on low-cost renewable energy, thereby minimizing lifecycle emissions. Octavia also manufactures its machines in Kenya, taking advantage of lower-cost talent on the continent while creating much-needed jobs.
In Africa, a huge portion of food is lost or wasted (one estimate puts it at 37% while others put that number as high as 50%). Food loss and wastage in developed markets skew in favor of wastage (after food has reached consumers), but on the continent, the proportion of food lost before reaching consumers is 95%.
This loss is tragic given that 140 million Africans regularly face catastrophic food insecurity and more than 20% of the population is undernourished. Tackling food loss is a critical strategy for addressing food security and for improving the incomes of vulnerable farmers, who see much of their harvest go to landfill.
Farm to Feed reduces food waste by selling imperfect produce directly to clients at about half the market price. Farmers earn more for their efforts, buyers access produce at lower prices, and carbon emissions are avoided because less food ends up rotting in landfills. Since food waste contributes about 10% of GHG (food waste/loss releases methane), Farm to Feed is reducing emissions in the food supply chain, while also increasing farmers’ income.
Carbon project development is complex and constantly evolving. At the Catalyst Fund we are working with founders to help provide access to the resources and expertise needed to navigate key challenges, including navigating carbon certification for novel project categories, carbon commercialization strategies, and helping to secure the investment needed to get to market. Meanwhile, CAP-A is working across the ecosystem to connect the dots between policy-makers, innovators, the private sector, and philanthropy to drive the growth of liquid, high-integrity carbon markets in Africa.
But more work is needed to kickstart Africa’s carbon value chain:
Working on a startup in Africa that harnesses carbon finance? At the Catalyst Fund, we are actively looking to invest in early-stage startups that are building climate resilience in Africa. Are you a carbon expert looking to support innovators? We’d love to hear from you - contact us here.
Read more from our team at Catalyst Fund