The National Assembly has passed a law aimed at transforming the country's carbon credit market to maximize revenue from carbon trade while addressing climate financing challenges.

The Environmental Management (Amendment) Act 2024 will specifically empower the National Carbon Monitoring Center (NCMC) to enter into national and international carbon trading agreements with financiers.

The new law has come to replace the existing Environmental Management Act No. 20 of 2004.

The Minister of State in the Vice President’s Office (Union and Environment) , Hamad Yussuf Masauni told the National Assembly on Wednesday that the proposed Environmental Management (Amendment) Bill 2024 once ascended by the President,  will open up doors for fair carbon trading business in Tanzania.

The bill is strongly focusing on paving the way towards creating climate change adaptation and mitigation mechanisms.

The Minister said Article 23 of the bill proposes an addition of subsection (e) that recommends the capacitating of the NCMC, specifying the goals and responsibilities of the center, as well as setting conditions regarding the leadership and sources of funds.

The center based in Morogoro region is currently operational.

However, the center fails to perform its duties accordingly, including entering into national and international agreements due to the lack of legal recognition.

“This is denying the government revenues related to carbon trading and climate change projects," said Masauni.

He asserted that the center, under the Office of the Vice President, has failed to manage sales and purchases of carbon levels since its establishment in 2016 due to a lack of legal recognition.

Masauni said the bill proposes amendments in section 13 (1) to include issues related to climate change, especially those managed by the minister, to give him the authority to control and manage issues related to climate change by giving his opinion before national strategies are approved by parliament or government for implementation.

"The bill proposes the amendment of article 13 by adding subsections five and six, granting the ministers of environment and finance an authority to cooperate in the mobilizing funds for climate change initiatives," said Masauni.

Tabling the report by the Parliamentary Standing Committee on Water and Environment in parliament for the period covering February 2024 to January 2025, the committee’s vice chairperson Agnes Hokororo, said the bill was received in November 2024 and reviewed in consultation with environmental stakeholders.

“The absence of legal provisions for managing carbon trading should never have existed. To ensure economic benefits, proper regulations for this business are essential," Hokororo said, adding that the amendments will facilitate the implementation of the National Environmental Policy 2021.

Tanzania is set on reducing greenhouse gas emissions by 30- 35 percent by 2030 through capitalizing on carbon trade direct investment opportunities.

The country seeks to cut between 138 and 153 million tonnes of carbon dioxide equivalent (MtCO2e) through baseline efficiency improvements aligned with sustainable development goals.

Carbon trading has emerged as a source of income for communities, companies, and governments, particularly in developing countries where emissions are lower than in industrialized nations. As of November 2024, the Ministry of State, Vice President’s Office (Union and Environment) had registered 63 carbon trading projects nationwide.

The forestry sector led with a largest share of the registered projects that formed 51 per cent followed by the energy sector with 33 percent.

Other economic sectors were agriculture eight percent, livestock five per cent) and waste management three per cent.

According to the ministry's 2024/25 budget speech tabled in the National Assembly in April 2024, in the fiscal year 2023/24 until March, 2024, $12.63 million equivalent to approximately 32bn/- had been paid to Local Government Authorities across the country as dividends for carbon trading business.

These revenues were generated from projects implemented between 2018 and 2022 through local governments across the country.

During the period under review, a total of 690,500 hectares of forests were protected and an average of 899,825 tons of carbon was accumulated from forest protection projects.

Between 2022 and 2023 the ministry had received 35 carbon trade investment project proposals. The government expects to earn $1billion an equivalent of 2.4trn/- on an annual basis from these projects.

The erstwhile ‘Kyoto Protocol’ and  its successor ‘The Paris Agreement’,  though much more comprehensive  and wider in scope, both recognize  the importance of carbon trading (a  form of carbon pricing) in combating climate change, and in the Paris Agreement the same is enshrined  under Article 6 and its sub-components (more on this later).

Carbon credits are generated from avoiding, reducing, or removing greenhouse gas emissions by either switching from fossil fuels to cleaner alternatives, adopting energy efficient technologies or conserving and increasing forests which are primary providers of carbon cycle ecosystem services.

However, it must be noted, that apart from Article 6, carbon credits can be generated from domestic or closed jurisdiction carbon markets under national or regional compliance mechanisms such as the EU ETS and many other countries domestic carbon markets, as well as voluntary carbon markets where companies or countries can offset their emissions of their own accord by purchase of carbon credits arising for mitigation based economic activities.

The International Energy Agency  (IEA) has reported in its World Energy Investment 2023 report that  global clean energy investments  rose from $1.61 trillion in 2022 to  $1.74 trillion in 2023.

Thus, the rise in green investment is contributing to the growth of the carbon credit trading platform market.

Leading companies in the carbon credit trading platform market are concentrating on creating advanced technologies such as digitized tracking and trading platforms to support international carbon token trade.

For instance, in December 2023, the Technology Innovation Institute (TII) and the Advanced Technology Research Council (ATRC), both based in the UAE, introduced  a blockchain-based carbon tracking  and trading platform.

This platform simplifies international trade in carbon tokens and advances efforts to cut carbon emissions, aligning with the UAE’s Vision  2021 for enhanced environmental  sustainability and net-zero emissions, as well as COP28’s aim to accelerate the transition to a low-carbon, sustainable economy.

Between 2016 and 2021, only 10 percent of carbon credits issued globally hailed from an African country, and these were listed by merely 15 firms.

Most of the benefits from these projects often accrue to the traders, project developers, and bankers from outside Africa, rather than to local communities.