Temasek firm to generate carbon credits through Ghana project

A decarbonisation investment platform owned by Temasek, is set to invest in a landscape restoration project in Ghana that aims to generate carbon credits which businesses in Singapore could use to offset a portion of their carbon tax.

GenZero has inked a memorandum of understanding with AJA Climate Solutions, a Singapore-based firm managing nature-based climate mitigation projects. The goal is to restore an estimated 100,000 hectares of degraded and deforested landscapes in the Kwahu area of Ghana's Eastern Region. This transformation seeks not only to re-establish the area's biodiversity but also to create an economically productive ecosystem to benefit the local population.

Set to begin later this year, the first phase of the US$30m project will prioritise the regeneration of deforested cocoa lands and the rewilding of off-reserve forests. The subsequent phase, slated for 2027, will concentrate on reviving native tree species within the degraded forests of the Kwahu Afram Plains.

The carbon credits generated from the restoration will allow Singapore firms to offset part of their carbon tax liability. These credits may also be used to offset Singapore’s national emissions.

The Singapore government has allowed companies to use high-quality, international carbon credits to offset up to 5 per cent of taxable emissions, in lieu of paying the carbon tax. It is currently at US$4 per tonne of carbon dioxide equivalent, but will be raised to US$19 in 2024 and 2025, and then US$34 in 2026 and beyond. The plan is for the carbon tax to reach between US$38 and US$60 per tonne by 2030. The first issuance of such credits is expected to come in 2028.

Carbon credits that come with corresponding adjustments mean that the emissions being offset is only counted once by the country that bought the credits, while the country that produced them would give up the right to use the credits to meet their own national targets. This is to avoiding the double counting of underlying emissions reductions or removals when carbon credits are traded.

AJA Climate Solutions was co-founded by John Mason and Alan Hodges, who were both born and spent their formative years in Nigeria. The company capitalises on opportunities in the carbon market by generating and managing climate impact reduction projects across Africa and Southeast Asia.

The Kwahu project takes advantage of Article 6 of the Paris Agreement, which enables countries to trade emission reductions to achieve climate goals. Singapore and Ghana have leveraged this framework to finalise an agreement in 2022 that facilitates the bilateral transfer of carbon credits between the two nations. Ghana has made meaningful strides in terms of policies and governance related to climate and carbon issues, standing as one of the first countries globally to implement a comprehensive Article 6 policy.

Carbon markets provide African countries a valuable opportunity to leverage their abundant natural resources – from forests to renewable energy sources like solar, wind, and geothermal – in order to generate economic benefits and accelerate sustainable development. The industry received a push during the 2022 COP27 when the African Carbon Markets Initiative was launched. The aim of this endeavour is to generate 300 million new carbon credits per year and unlock US$6bn in revenue by 2030. Right now, Africa only taps into a small portion of its potential for carbon credits.

Earlier this year, Singapore-based fund manager Impact Capital Asset Management (ICAM), announced a partnership with Indian carbon credit developer EKI Energy Services to launch a new fund that will invest in the manufacturing and distribution of energy-efficient cookstoves in Africa and India. The EKI ICAM Clean Cooking Fund aims to generate returns for investors by selling carbon credits. The common open-fire cooking method in rural Africa and Asia has environmental downsides. It requires a substantial amount of firewood, leading to deforestation, and is energy inefficient, using only about 10% of the fire's thermal energy and creating excessive smoke. By reducing smoke and firewood use, energy-efficient cookstoves help cut carbon emissions and protect forests.

In a further development, the Nairobi Securities Exchange (NSE) has partnered with Singapore-based ACX, a carbon credit trading platform, and the Nairobi International Finance Centre (NIFC) to start Kenya's first carbon offset exchange. By hosting the African Voluntary Carbon Credits Market Forum earlier this month, Zimbabwe’s Victoria Falls Stock Exchange has also shown its intention to become a prominent hub for carbon credit trading. The government Tanzania claims to have attracted over 20 companies that are set to invest over US$20bn in carbon offset projects across the country. It has already attracted more than US$1bn since Dar-es-Salaam adopted regulations and guidelines on carbon trading in October 2022.

During a trip to Kenya in May, Prime Minister Lee Hsien Loong of Singapore signed an agreement with Kenyan President William Ruto, focusing on cooperation over carbon credits.

 

References

‘What you need to know about Article 6 of the Paris Agreement’, The World Bank Group, 17 May 2022

‘Kenyan bourse brings carbon exchange to East Africa’, How we made it in Africa, 13 July 2022

‘Africa Carbon Markets Initiative launched to dramatically expand Africa’s participation in voluntary carbon market’, United Nations Framework Convention on Climate Change, 08 November 2022

‘What is Article 6 of the Paris Agreement, and why is it important?’, United Nations Development Programme, 09 November 2022

‘Climate change: Africa has a major new carbon market initiative - what you need to know’, The Conversation Africa, 23 January 2023

‘Making carbon markets work for Africa’, United Nations Economic Commission for Africa, 14 February 2023

‘Singapore firm launches fund for energy-efficient cookstoves in Africa’, NTU-SBF Centre for African Studies, 23 March 2023

‘PM Lee Hsien Loong at the joint press conference with Kenyan President William Ruto (May 2023)’, Prime Minister's Office Singapore, 18 May 2023

‘GenZero invests in restoration project in Ghana aiming to generate carbon credits with corresponding adjustments’, GenZero, 8 June 2023

‘African nations take a big swing to rule global offset market’, Bloomberg, 10 July 2023