Zimbabwe cancels 30 carbon credit projects, 4.2M credits produced
Carbon credit producers must comply with new rules in 2 months
- Carbon credits industry worth $2B, expected to reach $1T
Harare- Zimbabwe's recent decision to cancel offset programs has shaken the global carbon credits industry. However, the country has now given producers of carbon credits two months to comply with new rules, including giving the state half of its revenue. The move is meant to enhance benefits for the state and the communities that host the projects, according to Environment Minister Mangaliso Ndlovu, who spoke at a meeting in the capital, Harare.
The new rules also include a mandatory level of at least 20% of revenue for local investors and a maximum of 30% for foreign investors. Ndlovu said he wants to see communities empowered and level the field. However, last week's announcement that the projects were "null and void" with immediate effect highlighted to investors in the $2 billion global industry that governments can change the rules overnight, jeopardizing projects.
Zimbabwe is the world's 12th largest creator of offsets, with 4.2 million credits from 30 registered projects last year, according to BloombergNEF. Programs often consist of reforestation projects as trees absorb carbon dioxide, effectively storing emissions. The industry is projected to grow to as much as $1 trillion per annum in 15 years.
The decision comes just days after Zimbabwe’s cabinet declared all carbon credit programs in the country “null and void.” All agreements in Zimbabwe will now have to pass through the Attorney-General’s office, Ndlovu said. Traditional rulers or chiefs, and municipalities, have no legal standing to sign agreements.
While the government attracted criticism for the abruptness of its announcement, Ndlovu said the government had been working on the framework for three years and had consulted extensively. However, the decree has been greeted with scepticism as Zimbabwe's government has a history of making policy pronouncements with no prior warning.
This move by Zimbabwe is significant for the carbon credits industry, as it highlights the potential risks of investing in offset projects. Governments can change policies or cancel programs with little warning, which can jeopardize investments. However, the move also shows that governments are taking steps to ensure that communities benefit from offset programs, which is a positive development.
Zimbabwe's decision also highlights the importance of transparency and clarity in government policies. Investors need to have clear guidelines and regulations to follow, so they can make informed decisions about their investments. This is particularly important for emerging industries like the carbon credits industry, which is still in its early stages.
Overall, while Zimbabwe's decision to cancel offset programs has caused uncertainty in the industry, the country's move to implement new regulations that benefit communities and the state is a positive step. However, it remains to be seen how these regulations will be enforced and whether they will lead to significant changes in the industry. Investors in the carbon credits industry will need to closely monitor developments in Zimbabwe and other countries that are implementing offset programs.
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