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Unlocking the untapped potential of Malawi’s carbon market

Last year, President Lazarus Chakwera touted carbon credits as one of Malawi’s potential game changers, a pathway for Malawi to generate much-needed forex and simultaneously restore Malawi’s degraded forests.

He said Malawi can leverage its forest reserves and other land resources to generate an estimated 19.9 metric tonnes of carbon dioxide valued at over $600 million or about K1.05 trillion, which it can then sell in international carbon markets through carbon offset programmes.

Carbon offset programmes or carbon financing are financial mechanisms and incentives designed to support projects that reduce greenhouse gases (carbon dioxide and methane) or remove carbon dioxide from the atmosphere.

Malawi Carbon Markets Initiative member Steve Makungwa says aside from the carbon forest President Chakwera announced, Malawi can also secure carbon financing through the use of renewable energy technologies and more efficient fuel systems.

Ramzy Kanaan, a former chief of party at the Modern Cooking for Healthy Forests, a project co-funded by the United States Agency for International Development and Britain’s Department for International Development, projects that Malawi at $61-85 million per year from its carbon forests alone.

The World Bank estimates present a more modest figure at $25- 74 million per year from its forest carbon.

Despite the vast potential of these carbon forests and other offset programmes, environmental analysts and climate change experts believe that Malawi has not “equitably” benefitted from the initiative that was borne out of the United Nations Framework Convention on Climate Change.

Kanaan, who has spent more than nine years working on climate mitigation and adaptation primarily in the forestry sector and cooking energy sub-sector, said only one forest carbon project, the Kulera Redd+ project, has generated revenue for the government.

In an e-mailed response, he said: “And for the most part, carbon projects have not generated any finance for the Malawian people reducing carbon emissions, for example, improved cookstove users.”

Malawi University of Business and Applied Sciences (Mubas) deputy vice-chancellor Ishmael Kosamu, said Malawi has failed to tap into this vast resource of financing and revenue because the country has been disorganised.

The vice-chancellor, also a professor in environmental management said Malawi did not have a robust and comprehensive legal framework that would guide the development and implementation of carbon markets in Malawi.

Speaking separately, Steve Makungwa, a senior lecturer and researcher in environmental management and forestry at the Lilongwe University of Agriculture and Natural Resources (Luanar), said a lack of expertise in carbon financing further undermines its capacity to generate resources from carbon markets.

Makungwa, also a member of the Malawi Carbon Market Initiative, an agency created to oversee the marketing and trading of carbon trading, further observed that the complexities in the processes that surround the approval and certification of carbon financing projects stymied Malawi’s potential.

He said: “There are specific steps that have to be undertaken before you can have your carbon credit approved. First, the project has to be one that can only be financed through carbon financing. If the project can be financed through other means, then it will not qualify as a carbon project.”

“It is also very data-driven. Developers need extensive skill in data archiving and use available information to establish a baseline that can inform where the country is starting from and determine the result after implementing the carbon project.”

The process has to be validated by an independent valuator and assess its feasibility to sequester the amount of carbon that was indicated in the baseline study.

Makungwa says Malawi loses out on the potential market because it has to engage experts who can navigate the complex process of carbon markets, a development which gives them an advantage during negotiation and leads to the loss of about 70 percent of the earnings from carbon markets.

Fadhel Kaboub, a senior advisor with Power Shift Africa and the President of the Global Institute for Sustainable Prosperity, believes that the configuration and power dynamics between developers and developing countries leave the latter exposed to exploitation.

He said: “And through the dominant market power of the corporations that buy these pollution permits, they pass the cost of the carbon credits on to their customers, many of whom are actually in the Global South, so we end up paying for it indirectly.”

Kosamu says Malawi should prioritise developing a robust and comprehensive regulatory framework that can guide the development of the carbon markets in Malawi, especially prescribing who will be responsible for implementing carbon markets and handling grievances.

He said: “We also need to amend the Environment Act of 2017 to protect the country from exploitation by unprincipled developers. The government can limit the jurisdiction of the developer to the forestry above the ground and exempt mineral resources that may be underground.”

Agreeing with Kosamu, Kanaan urged the government to carefully screen potential carbon developers to ensure that Malawi partners with “well-established entities whose goals and ethics align with national interests.

He said: “Furthermore, Government can and should encourage and support the development of domestic carbon project developers, and should prioritise working with such entities and then effort to both increase carbon finance flows into Malawi, and to better sustain the delivery of carbon projects.”

In response, Minister of Natural Resources and Climate Change Michael Usi said the government has developed a Framework for International Carbon Market Engagement, a requirement under the Climate Change Convention for countries to use when transacting in Carbon Markets.

He said: “It provides an institutional setup for carbon trading in Malawi which includes the establishment of a carbon Market office, approval and authorisation process, fees to be paid by carbon project developers, eligible mitigation activities as well as monitoring and reporting requirements under the UNFCCC.”

The framework has undergone stakeholder validation and is scheduled for approval by the Cabinet by June 2024.

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