Carbon Credit Revenues Cannot Replace Nigeria’s Oil Revenues – Chinnan Maclean-Dikwal
Dr. Chinnan Maclean-Dikwal has stated that Carbon Credit Revenues cannot replace Nigeria’s Oil revenues.
This was made clear during an exclusive interview with NewsTimes following the just concluded African Climate Summit in Nairobi, Kenya.
During the summit, African countries advocated for a significant market share in the global carbon credit market. seeking a substantially larger portion of the projected $2 billion carbon credit market, which is expected to expand five-fold by 2030.
He emphasized the need for the country to develop its carbon credit market to support the country’s oil revenues, noting that revenues from carbon credits cannot be a replacement for oil revenues.
He reflected on the importance of developing the oil and gas sector, especially around sustainability.
NAIRAMETRICS: What are carbon credits and how useful are they in the global energy transition?
Maclean-Dikwal: Carbon credits are also known as carbon offsets, they are market-based mechanisms that have been designed to mitigate climate change by encouraging governments and organizations to reduce their carbon emissions and greenhouse gases.
They are a way to compensate for emissions by investing in projects or activities that reduce greenhouse gas emissions.
They allow people to invest in green projects that offset CO2 in one place and because you are offsetting CO2 that is converted to a CO2 equivalent which is called the credit.
For example, if one invests in a solar farm, the amount of CO2 that has been offset or abated by that solar farm can be converted to a credit/certificate that the person has not emitted CO2 into the environment.
This can work through emissions reduction projects. There are several projects around the world that aim to reduce greenhouse gas emissions, these projects can take any form like reforestation, this is important because if the land is acquired for planting trees, carbon dioxide is needed for the trees to grow, and those trees that are being planted are taking c02 out of the environment and because of that whoever plants them gets a carbon credit.
Carbon could be offset through renewable energy installations, methane capture, and energy efficiency.
For a project to qualify as having carbon credit, it has to be certified by agencies that are qualified to do that.
For example, we have the Carbon Development Project which has several incentives for that, there is the European Emissions Trading Scheme, and the Voluntary Carbon Contribution as well as many others around the world. In Africa, the carbon market is only just developing.
You may be aware of Sustainable Energy For All (SEForAll), they are building the necessary framework to enable companies to put up projects that can be qualified for carbon credits in Africa.
Carbon credits are important for the global energy transition because they incentivize emissions reduction, they provide the financial incentive for governments and organizations to reduce emissions and invest in cleaner technologies.
Note also that carbon credits are transferable, they can be sold to another company. Bear in mind that one carbon credit corresponds to 1 ton of CO2 (1000 kilogram) saved and going by what is obtained at the European Emissions Trading Scheme, the price of 1 ton of CO2 is 93 Euros.
Carbon credits allow for a global reach, for example, in June 2023, some companies went from Saudi Arabia to Kenya to buy carbon credits because it is a global market.
NAIRAMETRICS: Nigeria is in need of revenue because major sectors like oil are drying up due to crude oil theft. What are the ways the country can make money from carbon credits?
Maclean-Dikwal: In 2021, Nigeria’s oil and gas sector earned $50 billion, that is no small feat, that is a lot of money. Carbon credits will not earn that kind of money, they cannot replace Nigeria’s oil revenues.
Of course, Nigeria can augment its oil revenue with carbon credits. Once the SEForAll is done setting up the frameworks needed to start certifying carbon credit schemes on the continent, Nigeria can become active in the global scheme.
It will then become possible to earn carbon credits as the owner of a biogas plant, a wind farm, or a related business and they can trade these carbon credits with people in the United States, United Kingdom, or anywhere else.
The Nigerian Sovereign Investment Authority (NSIA) recently signed a Memorandum of Understanding (MoU) with Vitol, one of the largest commodity traders in the world, with regard to carbon markets.
They are building a whole new platform that will enable small projects in Nigeria to proliferate so that they get certified and start to earn carbon credits.
This platform, when ready, will enable a farmer in Ogun state for example to earn carbon credits and trade with someone in Peru, Saudi Arabia, or anywhere around the world.
NAIRAMETRICS: Does Nigeria have any active policy/policies that will enable the use and implementation of carbon credits in the country?
Maclean-Dikwal: Nigeria has made some positive action steps towards not only carbon credits but generally sustainability, the latest being the setting up of the National Council on Climate Change under the leadership of Dr. Salisu Dahiru who is doing an incredible job, of making sure that Nigeria has a framework for carbon markets.
As for policies, yes, we have the National Policy on Climate Change, drafted in 2012 and aimed at addressing climate change issues in the country.
It outlines strategies for mitigation, adaptation, and even carbon credits. Now the question is – is it a live policy? Is it being implemented? That is a separate conversation.
We also have the Intended Nationally Determined Contributions (INDC) that was submitted to the United Nations in 2015. In that document, Nigeria outlines its plans to reduce greenhouse gases (GHGs) and increase its resilience to carbon impacts as well.
The plans also outline carbon credits as a strategy to reduce GHGs.
Nigeria also has the Renewable Energy and Carbon Reduction Initiative, which has enabled the country to work with several partners to enable the expansion of renewable energies within Nigeria and reduce energy poverty.
With these three policies, I think Nigeria has done some good work, but more can be done to deliberately establish an active carbon credit market in the country because the market is running away.
For example, Kenya is miles ahead in carbon credit and clean cooking.
NAIRAMETRICS: What are some ways local companies can partake in kickstarting and sustaining carbon credits in Nigeria?
Maclean-Dikwal: Those who want to earn carbon credits need to have a substantial amount when it comes to carbon abatement before they can be certified.
Once a framework is there to support small businesses that abate carbon, it becomes possible for big commercial banks to give out loans to those who want to set up these businesses, because the possibility of earning carbon credits becomes an incentive for those banks.
They know that once the business owner sets up the business, for example, a wind farm, they generate electricity and sell it to people, and outside of that, there is the benefit of the carbon credit.
NAIRAMETRICS: Nigeria’s president has recently appointed members of his cabinet. Looking through the list, what are the sectors you believe will play roles in ensuring that carbon credits become an active revenue source in Nigeria?
Maclean-Dikwal: The portfolios include the Ministry of State for Petroleum Resources and the Ministry of State for Gas. Much more exciting is the Ministry of Blue Economy which offers massive opportunities like wave energy generation, floating solar (which is a great option considering land in some coastal areas is constrained), and deep-sea mining, wind energy generation.
Also, the Ministry of Environment is also a viable portfolio for the development of carbon credit schemes in the country. They need to formulate viable policies that will enable the development of Nigeria’s carbon credit market.
Another important portfolio is the Ministry of Solid Minerals. We now know that there are huge deposits of Lithium up North.
It is my hope that the solid minerals minister has plans to ensure that companies and foreign partners come down to Nigeria to invest in Lithium and other minerals and set up processing plants here as opposed to taking the minerals and processing them abroad.
I would also like to point out that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) needs to ensure that oil and gas drilling practices are efficient and that the oil and gas sector becomes more sustainable so that stakeholders can earn from the carbon credit market.
It is also important that all stakeholders who are building the base for the establishment of carbon markets in Nigeria, come together and collaborate to make things faster and more structured.
