My conversation this week marks a radical departure from the usual topics I write about— economic and business matters. Today, I am writing about carbon markets. Many rural communities in Tanzania are now earning millions of shillings through the “sale” of carbon dioxide. Yes, business in carbon dioxide.
However, this business is unlike conventional enterprises we are familiar with. It is not like selling cement, maize, or beans. The carbon dioxide business operates in an entirely different manner, driven by the global effort to mitigate the devastating effects of climate change. Forest conservation is one of the most effective strategies for climate change mitigation.
It is well known that forests absorb carbon dioxide and other harmful gases. Without the absorption by forests, carbon dioxide would remain in the atmosphere, contributing to environmental degradation. This means that the larger the forest reserve, the more carbon dioxide it can absorb. At the same time, forests release oxygen, which is essential to all human life. This regulatory role of forests is a crucial pillar in the fight against climate change.
The amount of carbon removed over a certain period can be verified by third-party specialists, such as SGS Tanzania. Once verified, carbon credits can be issued. These credits can be traded with international financiers, and the resulting funds channelled to host local communities as incentives for forest conservation.
The global carbon market was valued at nearly $949 billion in 2023—a staggering figure by any standard. Tanzania now stands at a pivotal moment to harness the opportunities of this market, leveraging its vast natural assets and an increasingly supportive policy environment.
The global carbon market was valued at nearly $949 billion in 2023—a staggering figure by any standard. Tanzania now stands at a pivotal moment to harness the opportunities of this market, leveraging its vast natural assets and an increasingly supportive policy environment. With nearly 48 million hectares of forest, expansive coastal ecosystems, and a growing regulatory framework, the country is well positioned to scale up carbon credit generation.
Tanzania has made notable strides, with 73 registered carbon credit projects. However, the revenue realised between January 2023 and July 2024 was only Tsh 36 billion (approximately $15 million)—a mere 3% of the estimated potential from these initiatives.
To enable Tanzania to realise its full potential, several actions must be taken. First, the policy and regulatory framework must be revisited. The National Carbon Monitoring Centre (NCMC), established in 2022 and housed at the Sokoine University of Agriculture, is tasked with monitoring and verifying carbon credits in collaboration with the Tanzania Forest Services Agency and the Tanzania National Authority.
Second, the revenue-sharing framework should be revised. The current regulation allocates 69% of revenue to government authorities, leaving only 31% for project developers and conservationists. This should be reversed—meaning project developers and local conservators should receive 70%, with the remaining 30% going to the government.
Third, to facilitate financing and market access, Tanzania must strengthen its linkages with high-integrity platforms. The African Development Bank is developing a continent-wide Carbon Credit Facility to integrate carbon credits into stock exchanges and compliance regimes—an initiative that could significantly boost the earnings of Tanzanian credits.
Finally, the government must take decisive action to raise awareness about the carbon market among village communities, local governments, and investors.
- Elly Manjale is an economic, business and management consultant based in Arusha. He writes on business and political issues.
