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Nigeria positions for $2.5 billion carbon market as UNDP sets 2030 target for Africa

UNDP Building

Story Highlights

  • The UNDP reports Africa needs $250 billion annually by 2030 to achieve climate objectives, yet only 10% of this amount is currently being met.
  • Nigeria aims to enter a $2.5 billion carbon market to reduce emissions, supported by President Bola Ahmed Tinubu and the Nigeria Energy Transition Plan.
  • The report highlights Africa’s significant investment opportunities in green sectors due to its natural resources, despite its vulnerability to climate change impacts.

The United Nations Development Programme(UNDP) says that Africa will need $250 billion annually to achieve climate objectives by 2030.

This is even as President Bola Ahmed Tinubu’s administration seeks to minimize Nigeria’s carbon emissions, thereby enhancing the country’s entry into the lucrative $2.5 billion carbon market.

The financial requirement for the continent was disclosed in UNDP’s new Africa Green Business and Financing Report published on its website on Tuesday, May 21, 2024.

The report states that there is a clear need to capitalize on the vast opportunities that are available across the African region.

It explains that African countries hold the key to global climate action due to their youthful workforce and vast renewable energy potential.

The report states,

“While the needs at individual country levels vary widely, research suggests that in aggregate Africa needs approximately US$250 billion annually to implement its Nationally Determined Contributions (NDCs) and achieve its climate objectives by 2030.

“Yet, the volume of capital flowing into climate finance is only 10 percent of that requirement, with private capital making up only a small portion.”

A unique business and investment opportunity

According to the report, while the economic and climate challenges faced by Africa are complex and interconnected, the continent’s rich abundance of natural resources makes it well-positioned to serve as a unique business and investment opportunity for relevant investors.

Besides, the report observes that many African economies are already taking steps to increase economic diversification and enhance participation in value-added manufacturing and services crucial to the green transition.

The report notes,

“Sustainable development practices, for instance, are taking place in mineral value chains in the Democratic Republic of the Congo and Zambia.

“There is also a promising shift underway towards increased regional economic cooperation, with initiatives such as the African Continental free Trade Area (AfCfTA) offering a new model for intra-African trade and development.

“This shift can facilitate innumerable opportunities for green businesses to exploit and enter new, regional markets.”

The report states that while the continent is emitting just four per cent of greenhouse gas emissions, it is extremely vulnerable to the impacts of climate change, resulting in huge financial losses to the tune of billions.

It says, however, that there is a $100 billion annual investment opportunity for investors owing to Africa’s vast mineral deposits.

It states,

“Extreme weather – including droughts, Cyclones and heatwaves – is increasing infrequency and intensity, alongside trends of urbanization, population growth and weak conservation enforcement.

“Ecosystem Damage and biodiversity loss is now having major negative impacts on livelihoods, causing $7-15 billion in yearly losses (projected to reach $40 billion by 2030) .

“Studies show that developing countries energy transition and shift to climate positive resilient infrastructure represents a $100 billion annual investment opportunity.”

UNDP recommendations for Africa

To maximize climate change, the report highlights the need to promote dedicated green investment banks, facilities and funds, with a specific mandate to support the development of green business in the region via green financing products.

It also calls for the establishment of “nature as an asset class” leveraging the lessons from carbon markets elsewhere and Africa’s nature-rich status to build robust carbon and biodiversity markets, thereby making Africa the hub for the issuance of instruments linking nature, biodiversity and carbon.

Opportunities

The report lists major growth opportunities and trends in green business sectors including renewable energy, access to clean water, waste management, a shift towards sustainable and smart alternative vehicles, telecommunications and digital infrastructures and agriculture.

More Insights

According to Maxwell Gomera, Resident Representative, UNDP South Africa and Director, Africa Sustainable Finance Hub, governments, businesses, and civil society in Africa can embrace a collective vision where the wealth of Africa is measured not just in Gross Domestic Product (GDP) but in the health and sustainability of its communities and ecosystems.

And Nigeria is at the forefront of the advocacy on climate change, including its associated economic opportunities.

For instance, the National Council on Climate Change, established in 2021 by the Nigeria Climate Change Act, works to mainstream climate change actions.

The Nigeria Energy Transition Plan outlined Nigeria’s commitment to carbon neutrality by 2060 in 5 key sectors: power, cooking, oil and gas, transport, and industry.

Nairametrics reported that the Federal Government recently paved the way for a substantial $2.5 billion carbon market by inaugurating the Intergovernmental Committee on Carbon Market Activation Plan.


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