Green growth through carbon trading

Rwanda is one of fastest growing economy in Africa and has had a stable rate of economic growth since 2010. The country has strong commitment to achieve sustainable economic growth through guided resources exploitation and environmental protection. To achieve sustainable development, Rwanda has developed a green growth strategy with reliance on harnessing renewable sources of energy. Its second Economic Development for Poverty Reduction Strategy (EDPRS II) pursues a ‘green economy’ approach to economic transformation, with a focus on green urbanisation and green innovation in public and private industry, including the promotion of affordable and green housing. Green growth is a sustainable development strategy, which reduces countries’ dependence on scarce non-renewable resources and helps them to fight global warming and adverse climatic changes. The United Nations Framework Convention on Climate Change (UNFCC) through international conventions, like Kyoto Protocol, tried to put a cap on carbon emission reduction among member countries. Though this cap is voluntary for developing countries as they are still low on carbon emission but through Clean Development Mechanism (CDM) they could use this as source of income-generation and sustainable growth. The Paris agreement on Climate Change and Kyoto Protocol share same goal. The Paris agreement was signed by 195 countries, including Rwanda, Kenya, Uganda and other African countries. African countries. However, many developing countries are in dilemma of choosing a path between high development with carbon emission or sustainable development with clean energy technology. The Kyoto Protocol offers carbon trading mechanism through the Clean Development Mechanism, where developed countries can purchase reductions generated by emission- reduction projects in developing countries. This is done through carbon trading. Globally, many countries are taking advantage by trading in carbon credits. In the US, there are two types of tradable carbon credits, Renewable Energy Certificates (RECs or “green tags”) and credits on the Chicago Climate Exchange (CCX). Firms earn these credits by reducing their carbon emissions beyond established goals. After the credits have been earned, they can be sold, either to firms that haven’t met their carbon reduction goals or to offset buyers. The European Union (EU) and China are leaders in terms of carbon trading. The EU’s carbon trading scheme is the biggest initiative to date. China has been running eight pilots, and is creating a national trading system, which is set to become the largest in the world. Globally, more than 40 countries and 25 sub-national governments have implemented a price on carbon. Presently, not only the public sector is investing carbon reduction initiatives, but even the private sector is actively participating and realising benefits of carbon reduction. Carbon trading in Africa Africa’s development priorities are to enhance people’s livelihood, ensure security and increase economic prosperity. And carbon trading in Africa is an approach to green growth, and means for addressing existing and emerging environmental challenges without locking into pathways that deplete the continent’s natural capital and leave economies and livelihoods more vulnerable to climate change. However, trading in carbon credit in African nations is still very low. Some of African countries are taking advantage of carbon credit and trade, including Kenya, where smallholder farmers are benefiting from carbon credits generated by improving farming techniques. These are the first credits worldwide issued under the sustainable agricultural land management (SALM) carbon accounting method. Kenya is, thus, an inspiring example of how agricultural practices improve the productivity and livelihoods of smallholder, subsistence farmers. Kenya’s geothermal expansion project is also generating carbon credits. Other African countries that have benefitted from carbon trading are Ethiopia, with development of Humbo Assisted Natural Regeneration project; Madagascar and its Ankeniheny biodiversity project; Morocco’s Municipal solid waste management programme; Nigeria’s earth care solid waste composting initiative; and South Africa’s Durban land fill gas-to-electricity project. Recommendations Rwanda has low levels of carbon emission, and its green growth strategy has a lot of prospects for many carbon credit eligible projects. There is need to devise a strategy of inviting both private and public sector players to invest in renewable energy projects like hydropower, solar energy, biomass, biogas and energy efficiency projects. Success of such projects also depends on educating people and raising awareness about environment conservation. In addition, there is need for proper institutional arrangement to develop strategies and infrastructure for carbon trading projects. The writer is a Kigali-based economist and consultant

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Green growth through carbon trading