Nigeria's plans to scale up its carbon markets are starting to take shape, with the government looking to introduce a carbon tax policy and increase participation in the voluntary space.
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Vice President Yemi Osinbajo on April 4 asked the Nigeria Sovereign Investment Authority to help the government to develop its national carbon strategy.
"The importance of an enabling environment is crucial for Nigeria to play a global role in voluntary carbon markets," Osinbajo said at an industry event. "This is why I would like NSIA to take the lead in developing the first Nigeria Carbon Market Activation plan and look forward to engagement on the plan."
This comes as the NSIA signed a deal on April 4 with Vitol, the world's biggest independent oil trader, to set up Carbon Vista, a joint venture that will invest in carbon avoidance and removal projects in the West African oil producing country. The two partners have made a commitment to invest $50 million in carbon credit projects in Nigeria.
Osinbajo called for more companies to participate in such projects and build a vibrant carbon market in Nigeria and in Africa.
"This is such an incredible opportunity, and we must not leave it to just be a $50 million fund," he said. "This sort of collaboration is only the beginning; we have to do a lot more and demonstrate that we are capable of being not just a victim in the climate change story, but an important catalyst and innovator for making our world greener and introducing to our own people a prosperous economy based on the green initiatives that we have."
NSIA is a state-run investment institution set up to manage funds in excess of budgeted hydrocarbon revenues. Vitol has been active in carbon markets for over a decade, and Vitol is also investing in clean energy projects, having earmarked over $1 billion for spending on renewable projects including wind, solar and renewable natural gas projects.
Carbon avoidance and offsetting is expected to play a key role in meeting the Paris Climate Agreement objectives and contribute to the UN Sustainable Development Goals.
National carbon policy
In February, Nigeria's National Council on Climate Change confirmed it was formulating plans for a national carbon tax policy.
Under the carbon tax system, the government will set a price for emitters to pay for each ton of emissions, and helping raise revenues and reduce emissions.
Carbon-pricing schemes, such as the EU's Emissions Trading System, are considered an effective and economic way to reduce greenhouse gas emissions.
There are currently 28 emissions trading systems in force, with 20 more under development globally, particularly in Latin America and Asia-Pacific.
But so far the number of countries or regions using such instruments remains relatively small.
Nigeria, Africa's largest oil producer, has committed to achieve net-zero carbon emissions by 2060 while underlining the importance of gas as a transition fuel.
The commitment is in line with fellow oil producer and OPEC member Saudi Arabia, which has also pledged to achieve carbon neutrality by 2060.
The government is also looking to develop a strategy for voluntary carbon markets.
This comes as many in the carbon and renewables industry are looking to Africa as a huge growth market.
The Africa Carbon Markets Initiative, which aims to support the growth of carbon credit production and create jobs in Africa, was formed in November.
The new partnership aims to harness Africa's largely untapped potential to contribute to the supply of carbon credits while unlocking billions in revenue.
Countries such as Kenya, Malawi, Gabon, Nigeria and Togo have already started collaborating with the ACMI to scale carbon credit production via voluntary carbon market activation plans.
The value of the voluntary carbon market quadrupled to around $2 billion in 2022 and is widely expected to grow by a factor of at least 15 by 2030, as governments and companies seek to use offsets to help achieve net-zero emissions targets.