Since the Kyoto Protocol entered into force in 2005, carbon offsets has gained currency as one source of finance to support activities that contribute to reduction of greenhouse gas emissions that cause climate change. Malawi has been a field for carbon offsets projects for around two decades now. In a series of articles, by CHARLES MPAKA, we shine the light on the evolution of carbon markets, carbon project development and implementation in Malawi, the role of the government in carbon markets and the evolving regulatory framework for carbon markets…
In 2015, Malawi suffered devastating flooding which exacted loss and damage estimated at $335 million, for which the country would need $494 million to recover.
In 2016, devastating drought drove about 8 million people –nearly half the population that time – into hunger. A post disaster needs assessment costed the damage at $365.9 million and put Malawi’s recovery budget at $500.2 million.
In 2019, Cyclone Idai caused $220.2 million worth of damage. It would take an estimated $370.5 million for Malawi to implement recovery and reconstruction, according to an assessment by the government.
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In March 2023, Cyclone Freddy made a landfall in Malawi and caused loss and damage pegged at $506.7 million. To recover and reconstruct from this disaster, Malawi needs an estimated $680.4 million.
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Like the rest of the world, worse so for poor countries, Malawi is reeling in the vortex of climate crisis.
Scientists have long established that human-induced greenhouse gas emissions are polluting the atmosphere, which is leading to the increased temperatures that cause these climatic shocks that are gripping humanity today.
And the scientists have further predicted that these weather extremes will only escalate in intensity and frequency, effectively underlining the need for intensification of efforts for the stabilization or reduction of greenhouse gas emissions to save the earth from apocalyptic consequences.
Yet, climate finance availability and access for poor countries like Malawi to tackle carbon emissions reduction and stave off or cushion themselves from climate impacts has been an outstanding issue.
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If public budget were to be the only source of finance, Malawi would struggle to fund climate crisis responses.
For example, a report prepared by the Ministry of Natural Resources and Climate Change post-Cyclone Idai shows that at the time the storm hit, public spending on environment and climate change management generally was an average $12.5 million or one percent of the GDP of the national budget then, leaving the country nearly entirely dependent on international financing for climate action.
Along comes carbon offsets – where corporate bodies or individuals can compensate for their emissions by purchasing carbon credits from entities that remove or reduce greenhouse gas emissions, say through preventing deforestation or implementation of landfill gas projects in developing countries like Malawi.
Like other lobbyists elsewhere, local climate scientists and campaigners see carbon trading as one initiative that could boost Malawi’s participation in efforts towards reduction of greenhouse gas emissions.
project developers
Julius Ng’oma, National Coordinator of Civil Society Network on Climate Change (Cisonecc), says carbon trading can, for example, “provide incentives for managing trees and forests and all other initiatives that enhance carbon sequestration and aiming at avoiding reducing greenhouse gases.”
Malawi has been in the field of carbon trading for much of the past two decades. In a sign of activity in the area, by 2012, the Department of Environmental Affairs in the Ministry of Natural Resources and Climate Change had under evaluation 15 projects with an estimated carbon reduction potential of 2,036,690 tonnes.
Malawi News is yet to establish whether all those projects materialised but, according to Ng’oma, and consistent with concerns around the world about carbon markets, carbon trading does not appear to have meaningfully and equitably benefited Malawi.
“Generally carbon trading has for some time happened without proper arrangements backed by adequate legislation and regulations. Therefore, Malawi has not benefitted much from such initiatives as money realized mostly benefited the international project developers involved,” he says.
Beyond structural and legislative weaknesses, Malawi may have been outdone by a global carbon market fraught by greenwashing and exaggeration of greenhouse gas emissions reductions, among others.
As Ng’oma puts it, concerns have been raised generally on the determination of prices for carbon and accounting systems.
“Very few people understand these arrangements, favouring mostly experts in the Global North,” he said.
In addition, concerns have been raised that the up-front costs required to develop a carbon projects make it almost impossible for actors from the Global South to benefit.
“It is a good initiative that only requires proper arrangements, legislation and guidelines and ensure real transparency and accountability measures are put in place and followed,” Ng’oma says.
That carbon credit can be a source of revenue generation for Malawi’s climate finance needs is not without basis, according to Maggie Munthali, a member of Malawi Carbon Markets Initiative (MCMI) which President Lazarus Chakwera launched in June last year.
Munthali says using the prevailing global market prices today, the potential value of Malawi’s credits for carbon sequestration from forests is estimated at 19,882,394.93 metric tons of carbon per annum and valued at $628,670,926 per annum.
However, this potential value of forest carbon revenue is at variance with what other experts share.
Manager of the USAID and UKaid co-funded Modern Cooking for Healthy Forests (MCHF) project, Ramzy Kanaan, provides a significantly lower number, calculated as gross annual revenue between $61 million and $85 million. This is more in line with the World Bank’s estimate for potential annual forest carbon revenue between $24.8 million and $74.3 million.
According to Kanaan, concerns on the overestimation of Malawi’s annual forest carbon potential have been noted since these numbers first appeared in the February 2023 State of the Nation Address by President Chakwera and then again in March 2023 during the 2023- 2024 Budget Presentation.
Kanaan says that these have subsequently been discussed with the Department of Forestry, the Ministry of Natural Resources and Climate Change, and the MCMI.
To Munthali, one of the most pressing challenges currently facing Malawi is how to realize the benefits of carbon markets and climate financing in the country.
Munthali says the sector has been saddled by transparency and issues of the integrity of benefit-sharing arrangements related to voluntary carbon market projects.
“Malawi has been implementing a number of projects under the voluntary market. However, the issue of transparency has been one of the challenges raised by local communities,” she says.
Currently, Malawi does not have legal and regulatory frameworks to competently regulate carbon trading in the country. The Ministry of Natural Resources and Climate change has commenced the process of putting together that framework but the process is slow, according to Munthali.
“Once these instruments have been developed, the issues of transparency and benefit-sharing mechanisms will be addressed,” she says.
MCMI has been established to put in place a robust carbon markets, financing and delivery system.
It will also carry forward the implementation of the existing policies, frameworks, action plans and ongoing programmes that support carbon markets and climate financing in the country.
“However, the operationalizing of MCMI has been hindered by delays in its registration and establishment of the secretariat,” says Munthali.
Given the enormous difference between government’s estimate of potential values of carbon revenue and those of government’s donor partners supporting work in the forestry sector, what then is Malawi’s real forest carbon potential? What is the performance of Malawi’s carbon projects in terms of impact and equity? What are Malawi’s institutional arrangements and challenges for carbon finance? These are some of the issues we will be exploring in our next articles.
