Rwanda to Join Global Fray in Carbon Trading

Broadly speaking, there are two types of carbon markets: compliance and voluntary. Experts believe that the dice is loaded against Africa since industrial carbon credit from developed countries is sold at over USD 40 per tonne, whereas forest and water ecosystems carbon credit, which abound in Africa, is priced as low as USD 5 per tonne.

In 2022, global carbon trading was estimated to be about USD 865 million in Compliance Markets and USD 2 billion in Voluntary Markets. However, only 11% of all #CarbonCredits transacted in Voluntary Markets from 2011 to 2016 were from Africa.

Following consultations and studies, Rwandan Minister of Environment Jeanne d’Arc Mujawamariya announce that Rwanda plans to launch its own Carbon Market in 2Q23 once the regulatory framework is in place. The government or authorized agency will specify the carbon credit trading scheme and issue tradable certificates for registered entities. The main objective of the creation of the carbon market is to reduce the emissions of carbon dioxide and other greenhouse gases in order to mitigate global warming and combat #ClimateChange.

“We are developing Rwanda’s Carbon Emissions Trading and readiness frameworks under Article 6 of the Paris Agreement. By April, the results of the consultations will be ready,” 

Rwanda Minister of Environment Jeanne d’Arc Mujawamariya

As part of the development of the Carbon Market, Rwanda will roll out a National Carbon Registry with centralized accounting and reporting. Stakeholders will be invited to participate in capacity building workshops in order to prepare them to take full advantage of the program.

By December 2020, more than 2.25 million carbon credits have been issued to Rwanda from the Clean Development Mechanism (CDM) under the Kyoto Protocol and Voluntary Markets. By purchasing carbon credits, businesses invest in projects that help reduce the carbon footprint. The Rwanda Minister of Finance and Economic Planning Uzziel Ndagijimana estimates that if nothing is done to mitigate Climate Change in the next decade, the GDP of Rwanda will be negatively impacted by five to seven percent.

Recently, Rwanda became the first African country to secure a USD 318 million loan under the Resilience and Sustainability Trust (RST) of the IMF which provides long-term financing at low-cost to enact climate-friendly reforms. As with many other African countries, the key sectors set to benefit from #CarbonCredits are energy and forestry.

Carbon markets could potentially unleash USD 80 billion annually in #GreenFinancing. According to McKinsey, the demand for Carbon Credits is poised to explode by a factor 15 times by 2030. Africa will need more than USD 400 billion in climate adaptation financing. In addition, it is estimated that some 170 million green jobs will be created in the fight for sustainability.