COP28: Rwanda unveils carbon policy framework for emissions trading, Article 6

Rwanda launched plans for a carbon market framework at the UN Climate Conference in Dubai Dec. 2, as the East African nation looks to build a cap-and-trade system at home while deepening its participation in the UN-backed Article 6 market.

Developing nations are increasingly signing carbon partnerships with developed countries like Switzerland, Singapore, and Japan, to attract foreign capital to their decarbonization and ecosystem conservation efforts.

Rwanda aims to reduce its emissions by 7.5 million mtCO2e by 2030 versus a business-as-usual scenario of 12.1 million mtCO2e emissions that year, with reductions comprising 3.15 million mtCO2e via domestically supported measures and policies, and 4.35 million tCO2e subject to the provision of international support, the government said in a statement.

The country plans to raise $11 billion ($5.7 billion for mitigation and $5.3 billion for adaptation measures) for implementation of its Nationally Determined Contributions (NDCs), the government committing to raise domestic finance of $4.1 billion while the remaining $6.9 billion would need to come from the international community, it said.

Key policies

The statement gives only a basic outline of Rwanda's cap-and-trade system.

"Carbon trading works by setting a limit on the total amount of greenhouse gas emissions a country can produce. Industries are then allocated emissions allowances, and those with excess allowances can sell them to those exceeding their own limits. This creates a financial incentive for businesses to reduce their carbon footprint," the government said.

No guidance was forthcoming on participating industries, emission accounting, monitoring, reporting or verification measures.

Meanwhile the country's carbon framework "will ensure that every credit bought in Rwanda will be done in a way that is transparent, verified and meets the requirements of the international carbon market," Juliet Kabera, Director General, Rwanda Environment Management Authority, said.

In year of integrity challenges for the voluntary market, Rwanda underlined that it would offer high-quality carbon credits providing climate benefits, empower communities and protect or restore biodiversity.

Article 6 deals

Earlier this year, dominant VCM registry Gold Standard announced issuance of its first-ever carbon credits aligned with Article 6, the credits generated from clean cooking projects in Rwanda.

Now the country's plan includes establishment of its own national carbon market registry.

In the meantime Rwanda has already signed cooperation agreements with Singapore and Kuwait towards Article 6 implementation.

Carbon markets and taxes provide much-needed revenue for governments to fund climate policies. The largest such market, the EU Emissions Trading System, was valued at $750 billion in 2022. The global voluntary carbon market is currently valued at around $2 billion, and projected to grow to $40 billion by 2030.

Platts, part of S&P Global Commodity Insights, assessed EU Allowances for December 2023 at Eur72.49/mtCO2e ($78.89/mtCO2e) Dec. 1. This compared with China's compliance emissions price, which was valued at Yuan 71.84/mtCO2e ($10.10/mtCO2e) on Nov. 24, according to the Shanghai Environment and Energy Exchange.