Source: GIDE, March 2025

African carbon markets: potential and objectives

Africa currently generates only a small fraction of its maximum annual carbon credit potential, and accounts for only around 16% of the global carbon market.[3. The African Carbon Markets Initiative (ACMI), launched at COP27, aims to develop voluntary carbon markets in Africa, with a target of 300 million carbon credits per year by 2030 and 1.5 billion carbon credits by 2050.[4]. The initiative also aims to generate significant revenues, support millions of jobs and ensure equitable redistribution of revenues generated by carbon credits to local communities.

National legal frameworks – Addressing key issues

At national level, governments are increasingly recognizing the need to establish robust legal frameworks to regulate carbon markets and attract investment in projects to reduce or eliminate GHG emissions. These rules are designed to :

  • Establish a framework for the implementation of the Paris Agreement, including Article 6.4;
  • Ensure that projects are aligned with national GHG emission reduction targets;
  • Guarantee that the State benefits from projects developed on its territory;
  • Attracting investment.

For example, in 2023, the Kenyan government amended the 2016 Climate ChangeAct to include specific regulation of carbon markets. Climate Change(Carbon Markets) Regulations were then adopted in 2024. Togo adopted Decree no. 2023-034/PR on carbon mechanisms in March 2023. Decree no. 040/MERF of May 30, 24 defining the approval procedure for projects and programs eligible for carbon mechanisms was then published in September 2024.

The institutional framework generally includes a national authority responsible for checking project eligibility, approving and registering projects, and monitoring their implementation.

With regard to the regime applicable to carbon credits, we note that the recurring issues that are decisive for both governments and project developers are those typically raised in the context of privately-financed natural resource projects. These issues include the following:

  • Ownership of carbon credits – States have generally adopted one of two approaches:
  1. State ownership : The carbon credits generated by a project in a country are owned by the state (or any other public authority designated by the relevant legislation), which then grants ownership of a certain proportion of these credits to the project developer;
  2. Project developer ownership : The carbon credits generated by a project belong to the project developer, who may be obliged to transfer a certain proportion of these credits (or their corresponding value) to the State, a designated public authority and/or local communities.

Whatever approach is adopted, it is essential that the applicable legislation is precise on this point.

  • Sharing agreements – The applicable legislation may also stipulate that the benefits derived from the project are to be allocated through a sharing agreement. The sharing agreement determines the terms and conditions of this sharing between the stakeholders, which may include: the State, local communities and certain national authorities. Within this framework, the State can negotiate the terms according to the attractiveness of the project to investors.
  • Taxation and fees : Another way for governments to benefit from carbon markets is through taxation and/or fees. States may subject the sale and/or, more generally, any form of transfer of carbon credits to a specific tax and/or certain fees to be paid to the competent authority. Many countries have yet to adopt the implementing texts setting the basis for such a tax or the amount of such a fee. This is an essential point for investors and project developers, as these amounts have an impact on their revenues. Private stakeholders also need stability and visibility in this respect, whatever fees and taxes apply.

Although carbon markets are increasingly regulated in African jurisdictions, their development continues to face several challenges. Incomplete legal frameworks create uncertainty for investors and project developers. In many countries, new legislation has yet to be tested by the market. The evolving regulatory environment applicable to carbon credits can make it difficult for stakeholders to address. Finally, conflicts with other applicable texts (such as those relating to environmental and social impacts, land rights and public procurement) are also likely to affect project implementation.

By establishing stable, readable legal frameworks, governments will be in a better position to exploit the full potential of carbon markets as a tool for mitigating climate change.

In recent years, more and more sponsors have called on our expertise to develop natural carbon sink projects on the continent. We support them in securing the legal framework for their projects in the context of the regulations currently being drawn up.

 

Legal framework for voluntary carbon markets – Focus on Africa Gide