Carbon tax on fossils fuels, marine and aviation transport could generate additional development financing for Africa

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A carbon taxation regime covering carbon tax on fossil fuel, maritime transport, and aviation could generate additional funds to support the Africa energy transition, says Claver Gatete, Executive Secretary of ECA at a dialogue on carbon markets and development held on the sidelines of the tenth Africa Regional Forum on Sustainable Development (ARFSD-10) in Addis Ababa, Ethiopia.

“If combined with other policy measures, carbon tax could help to mitigate those residual emissions that cannot be addressed by carbon credit markets or subsidies and technologies. Such a tax could allow countries to improve responses to their commitments to contribute to reducing climate instability,” said Mr. Gatete.

In reference to ECA’s preliminary studies in exploring to benefits of carbon tax, Mr. Gatete noted that carbon tax in the global supply chains could allow countries like Egypt and Ethiopia to reap substantial revenues that could be reallocated to research and development in the aviation and marine transports.  

ECA studies also indicate that investing in nature-based solutions in African countries could generate up to US$82 billion annually at a price of US$120/tCO2 equivalent.

“Renewable energy and carbon sinks from forests and other ecosystems are indeed a great potential that countries should harness to generate additional revenues and support the ongoing efforts to build climate- and disaster-resilient green and blue economies. This would enable the countries to make more progress towards their sustainability goals,” said Mr. Gatete.

Highlighting the importance of decarbonizing economies and expanding revenue streams through clean energy, Albert Muchanga, Commissioner for Economic Development, Trade, Industry and Mining at the African Union Commission said, decarbonizing economies through carbon taxation is crucial to address climate crisis. However, this requires strong engagement with stakeholders at national and global level is necessary for success.

“African economies are small and fragmented, integrating them together is necessary for a unified approach to promote a green transition across the continent,” said Mr. Muchanga.

Discussions at the dialogue session focused on the four themes of carbon markets: voluntary carbon markets, compliance carbon markets, Article 6 of the Paris Agreement, and carbon tax markets. Experts underscored that relying solely on carbon credit trading is insufficient and that fair negotiations and resource allocation to address development disparities effectively is necessary. 

In her contribution to the discussion, Ahunna Eziakonwa, Regional Director, United Nations Development Programme (UNDP) said climate carbon credits have the potential to address the financial challenges the continent is facing but favourable deals and ensuring resources are directed towards development initiatives are crucial to ensure that climate action in Africa is effective and sustainable.

“Beyond just understanding the carbon market space and carbon credits, there is need for experts to advise governments on the different options available to Africa and help them understand the opportunities presented by carbon markets as a source of development financing and how they function,” said Ms. Eziakonwa adding that this will require strong engagement with producers, consumers, investors, and many other stakeholders.

“Implementing the carbon tax requires evidence-based analysis and engagement with stakeholders including policymakers, investors and civil society organization.”

Sharing the results of the key findings of carbon emissions in the shipping industry, Jan Hoffmann, Head, Trade Logistics Branch, Division on Technology and Logistics, UNCTAD said there is disproportionate impact of climate change on small Islands developing states and coastal countries.

“Carbon dioxide emissions have increased by 21% in the last decade in the shipping industry which is a major concern in African countries. There is need for alternative fuels for Africa to become competitive,” he said.

“For African countries to become providers of alternative fuels, there is need to investment in infrastructure and trade to compensate for higher costs resulting from climate change mitigation,” he added.

Explaining why blue and green economies are important for Africa to mitigate climate change, James Kairo, a Senior Research Officer at the Kenya Marine and Fisheries Research Institute, said mangrove forests and other blue carbon ecosystems are crucial for achieving the SDGS, particularly SDG14 as they provide vital habitat for fisheries and support biodiversity.

However, Mr. Kairo said these ecosystems are under threat due to lack of awareness and capacity building and resource mobilization. To address these, we need to prioritize protection and restoration of these ecosystems and raise awareness about their importance to achieving SDGs.

Hence, countries should incentivize forest conservation and restoration efforts, while at the same time promoting sustainable forest management practices.

Experts at the dialogue session agreed that engagement, particularly from investors and civil society organizations is crucial for effective implementation of carbon taxation regime. Country-tailored engagement strategies (and/or cluster of countries with the similar contexts) were proposed to optimize support to governments in resource allocation and negotiation processes, promoting fairness and sustainability. Additionally, the establishment of institutional, legal, technical, and financial capacities was emphasized, alongside the nomination of focal points and reviewers for Article 6 implementation.

Distributed by APO Group on behalf of United Nations Economic Commission for Africa (ECA).

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