Rwanda and Sweden, on October 3, signed an agreement to mobilise climate finance through the carbon market.

The agreement, signed between the Ministry of Environment and the Swedish Energy Agency, aims to strengthen bilateral cooperation on climate change mitigation, focusing on trading carbon credits to help both nations achieve their emission reduction targets.

The carbon market is a market where countries or companies which are still polluting the climate with greenhouse gases finance green projects in countries that reduce carbon emissions.

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The reduced carbon emissions in some countries help to neutralize the emissions that are still being released by climate polluters in other countries.

The countries like Rwanda will be selling reduced emissions in terms of carbon credits [one carbon credit is equivalent to one tonne of reduced emissions.

The carbon market is part of implementing Article 6 of the Paris Agreement.

Paris Agreement was adopted by 196 Parties at the UN Climate Change Conference (COP21) in Paris, France, in December 2015 to keep global warming to 1.5-degree Celcius.

Article 6 of the Agreement allows countries to voluntarily cooperate through carbon trading, promoting emission reductions while ensuring environmental integrity.

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The mechanism encourages participation from public and private entities, allowing countries like Rwanda and Sweden to meet their climate pledges by leveraging international resources.

By exchanging carbon credits, countries can achieve higher reductions in greenhouse gases than they would by working alone, thus contributing to global climate goals.

For Rwanda to achieve goals of Paris Agreement, it seeks $11 billion up to 2030 under climate action plan actions known as Nationally Determined Contributions (NDCs) set under the Paris Agreement.

Rwanda seeks to reduce 38 per cent of greenhouse gas emissions by 2030. Carbon market is one of the strategies to mobilise such money to achieve this goal.

Rwanda expects to sell 7.5 million tonnes of carbon dioxide equivalent (MtCO2e) – carbon credits – estimating that they could generate $337 million (approx. Rwf420 billion).

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Given that the minimum price is $30, Rwanda will expect to get $45 per carbon credit (one tonne of carbon dioxide equivalent), hence $337 million from 7.5 million tonnes of carbon dioxide equivalent.

Financing emissions reduction projects

The agreement paves the way for Rwanda and Sweden to develop a bilateral cooperation agreement, under which Sweden will finance various emission reduction projects in Rwanda.

These projects will support Rwanda’s green initiatives while also helping Sweden meet its international climate obligations.

This partnership sets the foundation for deeper climate-related collaboration, enabling both countries to leverage technical expertise, capacity-building efforts, and joint work plans.

It will further Rwanda and Sweden’s efforts to meet their Nationally Determined Contributions (NDCs) under the Paris Agreement.

The Paris Agreement allows countries to voluntarily cooperate to meet their mitigation goals by trading carbon credits, thus fostering more effective global emission reductions.

This cooperative approach ensures that both countries can achieve greater success in lowering their carbon footprints than they would individually, by combining their efforts and resources.

Through this agreement, both nations will participate in dialogue, organize stakeholder meetings, and promote sustainable practices that align with their respective climate goals.

Minister of Environment, Valentine Uwamariya said: "This partnership with the Swedish Energy Agency reinforces Rwanda’s commitment to implementing Article 6 of the Paris Agreement and advancing our Nationally Determined Contributions. Rwanda is eager to leverage this partnership to not only meet our climate targets but also foster sustainable development that benefits both our environment and our people.”

Martina Fors Mohlin, Chargé d’affaires at the Embassy of Sweden in Kigali, echoed this sentiment, highlighting Rwanda&039;s role as a global example of sustainable development.

"Rwanda has shown that it is possible to combine economic growth with ambitious climate goals. Through its initiatives for a long-term green transition, Rwanda is an inspiration for other countries. Sweden is committed to financing high-quality Greenhouse Gas mitigation activities in Rwanda that provide substantial contributions to the energy transition in the country," she said.