Executive Summary

Africa’s ability to convert its iron ore into green hot briquetted iron (HBI) is emerging as one of the most consequential industrial and climate opportunities of this decade. And while mineral processing features increasingly in African industrialisation discussions, this is the first time the employment potential of green HBI has been fully scoped. Processing all African iron ore into green HBI at the mine site would generate over 480,000 jobs — including over 410,000 once-off construction jobs (quantified in job-years) and over 70,000 permanent industrial and operations roles. The majority of these jobs stems from Africa’s renewable-energy build-out and operation, underscoring the centrality of clean energy in enabling competitive green industry.

The global climate implications are equally significant. Producing green HBI in Africa cuts emissions associated with African iron ore from 126 MT to 47 MT, a 79 MT annual reduction. Nearly 70 MT of this comes from reduced emissions in China (54 MT) and Europe (15 MT) — the two largest importers of African ore — when they replace fossil-based ore processing with green HBI.

This shift also clarifies a broader global opportunity. Green HBI demonstrates the gains from allocating renewable energy across borders according to the intrinsic comparative advantage, accelerating global industrial decarbonisation. Europe is one clear example: it faces interlinked constraints — tight electricity systems, slow permitting, and structural limits on affordable green hydrogen — that make expanding energy-intensive upstream ironmaking domestically expensive and slow. Producing green HBI in Africa resolves these constraints by shifting the most energy-intensive step of steelmaking to regions with abundant, low-cost renewable energy while supplying Europe with the clean metallic inputs needed for its industrial transition and allowing it to retain strategically important steelmaking capacity.

The opportunity extends well beyond green iron. The methodology developed here provides a replicable template to assess the potential for Africa across other energy-intensive value chains. Realising this potential requires aligning trade, investment and industrial policy frameworks with this emerging global industrial structure.

1. Africa’s Industrial Opportunity: Processing at the Source

Most of Africa’s iron ore is exported in raw form, with processing taking place elsewhere, often in highly fossil-intensive systems. This prevents African economies from capturing industrial value and limits the deployment of renewable energy that could anchor competitive heavy industry.

Africa’s solar, wind and geothermal endowment is among the strongest in the world, providing Africa with the intrinsics to become globally cost-competitive in renewable generation, and thus in green hydrogen and renewable-powered reduction.

New jobs, new value, new capability

Processing all iron ore exported from Africa into green HBI would:

• Generate over 480,000 jobs, including
  • over 410,000 construction job years, and
  • nearly 70,000 permanent industrial and operational roles.
• Retain USD 21 billion annually on the continent.
• Reduce associated emissions from 126 MT to 47 MT, avoiding 79 MT each year.

Methodology: Estimating job opportunities

We estimated job creation by modelling the industrial and energy capacity required to process all African iron ore exports into green HBI. First, we calculated the scale of processing capacity needed using 2024 export volumes for non-agglomerated iron ore and industrial conversion rates from established green-steel studies. We then translated this capacity into energy requirements using process-level energy-intensity benchmarks for direct-reduced iron.

Next, we determined the renewable-energy build-out required to power this production. This relied on solar resource data for high-quality sites associated with existing iron-ore production regions and used top-decile capacity factors to derive indicative installed capacity needs. Job estimates for construction and operations were then produced by applying detailed labour coefficients for renewable-energy deployment alongside industrial labour estimates from comparable large-scale green steel and hydrogen projects. The results represent direct jobs only and exclude indirect or induced employment effects. Figure 2 provides further detail on the methodology and includes assumptions. A bibliography of sources can be found in the Annex.

2. Global Climate Impact: 79 MT of Emissions Reduced —Driven by China and Europe

Shifting iron-ore processing to Africa and powering it with renewable energy cuts global emissions associated with African iron ore from 126 MT to 47 MT — a 79 MT annual reduction. This is one of the single largest decarbonisation levers available in the global iron and steel system today.

Within this total global reduction, two regions drive the majority of the impact:

China: 54 MT of emissions reduced annually

China is the dominant destination for African iron ore. Its current steel production remains heavily coal-dependent, particularly in the upstream reduction stage. When African iron ore arrives as green HBI instead of raw ore, China avoids 54 MT of emissions every year. This represents the largest share of the global climate benefit delivered by African green HBI.

Europe: 15 MT of emissions reduced annually

Europe is a smaller importer of African iron ore but still a significant contributor to global impact. Replacing fossil-based processing with African green HBI avoids 15 MT of emissions annually for the volumes Europe currently imports. It also supports Europe’s transition to cleaner EAF-based steelmaking without putting additional pressure on its already constrained power systems.

Taken together

China and Europe account for nearly 70 MT of the 79 MT global reduction, underscoring the central role of African green HBI in decarbonising the world’s two largest steel markets. This reduction potential excludes any further greening of the power grid for downstream Electric Arc Furnace steel-making. As this greening is happening, the total associated emission reductions will only grow.

Methodology: Estimating emissions reductions

Baseline emissions were calculated by assessing current destination-country emissions associated with African iron-ore exports. This baseline reflects prevailing industry practice and therefore assumes that exported ore is processed into crude steel through integrated Blast Furnace–Basic Oxygen Furnace (BF-BOF) routes. We combined 2024 export volumes with destination-specific steel emissions intensities from international benchmarking data to determine baseline emissions.

We then modelled the alternative pathway in which African iron ore is processed into green HBI using renewable energy and subsequently converted to steel in Electric Arc Furnaces (EAFs) in destination markets. The emissions intensity of this route was derived from current EAF benchmarks combined with assumptions of renewable-powered DRI in Africa. Emissions reductions equal the difference between the baseline BF-BOF pathway and the green HBI– to-EAF pathway, applied to current export volumes. Potential further reductions from fully renewable-powered EAFs in Europe were noted as additional upside but excluded from the headline savings figure. Figure 3 includes further detail and assumptions, with sources detailed in the Annex.

3. How Green HBI Helps Europe Resolve Its Interlinked Decarbonisation Constraints

Europe’s steel transition is constrained by interlinked system challenges: electricity scarcity, slow permitting, and structural limits on scaling affordable green hydrogen. These constraints are not discrete — they are interconnected and compound one another. Green HBI addresses them directly.

Europe’s electricity system is tight —and every megawatt has an opportunity cost

Electrification of transport, buildings and data-intensive industries is accelerating. But renewable expansion is slowed by permitting timelines, land availability, and grid bottlenecks. This creates structural scarcity.

In this context, allocating huge volumes of renewable electricity to upstream iron reduction — one of the most energy-intensive industrial steps — carries high opportunity costs. Hydrogen-based reduction competes with direct electrification of heating, mobility and large industrial loads.

Green hydrogen is constrained by the same system friction

Electrolysers need large volumes of stable, low-cost renewable electricity. Europe cannot provide this at scale fast enough. Importing hydrogen over long distances is also not the solution: liquefaction, ammonia conversion or use of carriers adds energy losses and cost premiums that undermine its role in large-volume industrial decarbonisation.

Green HBI solves this system -level problem

Green HBI embodies the clean energy needed for iron reduction in a stable, tradable form. It shifts the most energy-intensive stage of steelmaking to regions with abundant, low-cost renewables — such as Africa — while allowing Europe to:

• Free domestic renewable capacity for higher-value uses;
• Accelerate the shift to EAF-based steelmaking;
• Reduce emissions by 15 MT annually without expanding energy-intensive upstream capacity.

Green HBI is therefore not only a commodity but a system solution: it reconciles Europe’s industrial decarbonisation goals with its structural energy constraints.

4. Why This Matters —and What It Takes to Get This Right

The green HBI opportunity shows that climate-aligned industrialisation can be a source of strategic resilience, not a constraint. But realising this potential at scale is not automatic. It depends on whether trade, investment and industrial policy frameworks evolve to reflect this emerging global industrial structure. It also requires a very significant expansion of Africa’s generation capacity, much of it likely renewable, which will influence project design and regulatory planning.

Getting this right requires four shifts:

• Align measures with emissions performance, not location. Standards, incentives and border measures should recognise and reward verifiable low-emissions products, regardless of where the energy-intensive processing takes place.
• Design trade and investment rules for integrated value chains. Financing tools, trade agreements and industrial strategies need to treat African green HBI as a core input to Europe’s industrial transition, not as a residual import.
• Translate policy intent into bankable projects. Long-term offtake arrangements, risk-sharing instruments and clear eligibility rules are needed to crowd in investment on both sides of the Mediterranean and support large-scale HBI projects anchored in African renewables.
• Integrate energy system design into industrial strategy. African countries face a large new build-out rather than a transition from legacy fossil systems. Designing this expansion around renewable generation for energy-intensive industry allows for step-changes in capacity while addressing persistent energy deficits. Doing so requires coordinated planning for storage, load balancing and grid management from the outset.

Proposed EU legislation such as the Industrial Accelerator Act will be pivotal. If designed narrowly around domestic-first production — for example by tying support to locally produced hydrogen or upstream processing — such measures risk making Africa–EU industrial collaboration harder, not easier. They could misalign incentives, crowd capital into higher-cost domestic options and limit Europe’s access to low-emissions HBI from Africa.

It matters a great deal: Africa’s renewable advantage can underpin a new, globally efficient industrial structure. Europe secures a credible, lower-cost decarbonisation path. China can accelerate steel decarbonisation without waiting for full domestic hydrogen build-out. And Africa realises jobs, revenue and industrial capability at the core of its growth model.

5. Applying This Methodology to Future Industrial Opportunities

The methodological approach developed for green HBI provides a replicable way to assess the benefits of different options for green industrial focus for Africa in energy-intensive industries. It is designed for any process for which competitiveness is fundamentally shaped by access to abundant, reliable and low-cost renewable energy — including solar, wind, geothermal and hybrid configurations. These are the processes where Africa’s energy endowment, land availability and industrial expansion potential combine to offer a distinct strategic edge.

By quantifying baseline production routes, modelling renewable-anchored alternatives, and estimating job creation, economic value, and emissions outcomes, this methodology enables evidence-based prioritisation of Africa’s green industrial opportunities. Job creation is central: high-energy processes require large construction and operational workforces when combined with renewable-energy deployment. Economic value — through retained earnings and upgraded exports — provides a complementary and distinct benefit.

This approach is already being applied to bauxite refining and aluminium production, among the world’s most electricity-intensive industrial processes. Early work indicates similar dual advantages: substantial job creation and significant global emissions reductions when these processes are shifted from fossil-constrained regions to Africa’s renewable-rich locations. Further applications may include green fertilisers, cement substitutes, battery precursor materials and green chemicals.

Used consistently, this methodology becomes a strategic tool for governments, financiers and investors to determine where Africa can prioritise green industrial development based on the climate, revenue, and job creation benefits each option can realise. A visual summary of this replicability framework is captured in the slide below.

Annex: References and Sources

The following references constitute all sources cited in the two methodology slides (Figures 2 and 3) that underpin the analytical approach used in this report. Please note that labour intensity is an area of much uncertainty. We explored many sources across reported projects, surveys, and academic (including partially modelled) sources. Upon request, we can provide further detail on sources considered and rationale for using the IRENA/ ILO source. As data and insights evolve further, we will adjust the inputs accordingly.

ArcelorMittal. (2022, Apazasril 14). ArcelorMittal acquires majority stake in voestalpine’s state-of-the-art HBI facility in Texas [Press release]. https://corporate.arcelormittal.com/media/press-releases/arcelormittal-acquires-majoritystake-in-voestalpine-s-state-of-the-art-hbi-facility-in-texas (Accessed: February 2026).

Bhaskar, A., Assadi, M., & Nikpey Somehsaraei, H. (2020). Decarbonization of the iron and steel industry with direct reduction of iron ore with green hydrogen. Energies, 13(3), 758. https://doi.org/10.3390/en13030758 (Accessed: February 2026).

Bower, G., Jones, W., King, B., & Pastorek, N. (2023). Clean hydrogen workforce development: Opportunities by occupation. Rhodium Group. https://rhg.com/research/clean-hydrogen-workforce-development/ (Accessed: February 2026).

Climate, Infrastructure and Environment Executive Agency (CINEA). (n.d.). Stegra: Welcoming a new era of green steel production. Featured Projects. https://cinea.ec.europa.eu/featured-projects/stegra-welcoming-new-era-green-steelproduction_en (Accessed: February 2026). Corroborated by Midrex Technologies project disclosures; Boden municipality employment Q&A (October 2024); AFP/Sun-Commercial construction site workforce report (November 2025).

Climate Action Platform Africa (CAP-A) & Dalberg Research. (n.d.). Energy Dashboard: Solar and Wind. https://gisresearch.dalbergresearch.com/cap-a_energydashboard/ (Accessed: February 2026). Dashboard draws on the Global Solar Atlas and Global Wind Atlas.

Hasanbeigi, A. (2025). Steel climate impact 2025: An international benchmarking of energy and GHG intensities. Global Efficiency Intelligence. https://www.globalefficiencyintel.com/s/Steel-benchmarking-10102025-E1.pdf (Accessed: February 2026).

International Renewable Energy Agency (IRENA). (2017). Renewable energy benefits: Leveraging local capacity for solar PV. IRENA. https://www.irena.org/- /media/Files/IRENA/Agency/Publication/2017/Jun/IRENA_Leveraging_for_Solar_PV_201 7.pdf (Accessed: February 2026).

Wood, T., Dundas, G., & Ha, J. (2020). Start with steel: A practical plan to support carbon workers and cut emissions. Grattan Institute. https://grattan.edu.au/wpcontent/uploads/2020/05/2020-06-Start-with-steel. (Accessed: February 2026).

World Bank. (2024). World Integrated Trade Solution (WITS): UN Comtrade trade data. Trade statistics for iron ores and concentrates (HS 2601). https://wits.worldbank.org/trade/comtrade/ (Accessed: February 2026)

About CAP -A

Climate Action Platform – Africa (CAP-A) exists to demonstrate how Africa can achieve inclusive economic growth through climate-action – a focus we call Climate Positive Growth. CAP-A’s work starts from a simple premise: Africa’s structural advantages in untapped renewable energy potential, young and entrepreneurial workforce, and relevant natural assets and resources make it one of the most competitive regions globally for climate action across green industrialisation and manufacturing, climate-smart agriculture, nature protection and carbon removal.

Africa’s unparallelled untapped solar, wind, geothermal and land availability, paired with the continent’s rapidly growing workforce and abundant mineral endowment, and relatively limited existing industrial infrastructure that needs to be dismantled or transitioned away from, positions Africa to lead in the next wave of global green industry.

CAP-A translates this potential into action by generating rigorous, sector- and country-specific evidence on where Africa can compete in low-carbon production. This includes quantifying job creation, assessing renewable-energy requirements, mapping global supply-chain dynamics and identifying opportunities where African production can deliver lower emissions and lower costs than incumbent systems. The green HBI opportunity presented in this report is one such case: a combination of potential for industrial competitiveness, system-level decarbonisation, and large-scale employment anchored in renewable-energy deployment.

Beyond analytics, CAP-A works directly with governments, investors, industrial actors and global rule-shapers to align policy, financing and market access with Africa’s emerging industrial advantage. This includes supporting the conceptualisation of bankable industrial projects, informing trade and industrial policy, building proof-of-concept demonstrations and ensuring African priorities are reflected in global market frameworks. Across all of its work, CAP-A connects economic development and climate ambition, showing that climate-aligned industrialisation is not a trade-off but a pathway to long-term competitiveness, job growth, and inclusive development.

CAP-A Co-Founder Carlijn Nouwen is the lead author for this report. CAP-A staff Matthew Hill and Caris Zwane provided much of the analytical work, along with Dr Jasper Grosskurth and his team at LOCAN/ DR.

Please contact us at [email protected] if you have any questions, comments, or suggestions. We look forward to hearing from and partnering with you.

Why we must put a price on emissions

Putting a price on emissions is necessary to accelerate the green transition – and thus crucial for the future of all life on earth. As long as it remains free to emit and pollute, the world as a whole and vulnerable populations in particular will pay the price for climate change. When it costs money to emit (and avoiding or reducing emissions thus saves money), the business case for climate action solutions will improve, so-called green premiums will reduce, and the transition will accelerate.

One way to put a price on emissions, is to charge for embedded carbon, like CBAM does. To be effective, these mechanisms need to follow certain principles.

Principles for the pricing of embedded carbon

1. Systems like these should maximise the pace and extent of global decarbonisation. Given the urgency to combat climate change, we need both high ambitions, and a high realisation speed – and embedded carbon pricing must create incentives that drive that.
2. Carbon trade measures should NOT result in barriers to market entry that are NOT related to the actual embedded carbon content. After all, these measures are climate measures and should not be used for protectionist industry policy – otherwise, they will probably fail to achieve their climate objective.
3. Humanitarily damaging unintended consequences must be mitigated, to avoid unacceptable damage and costs, and to maximise broad-based support for these measures, even amongst groups that may be negatively impacted by them.

Implications of these principles

Taking these principles to their logical conclusion, results in three clear implications

1. Pricing mechanisms for embedded carbon should not cherry-pick their scope. In particular, emissions from energy/ electricity involved in production (so-called scope 2 emissions) MUST be included, especially for industrial products where they represent a very big part of the associated emissions. For example, over 70% of the emissions embedded in aluminium, are driven by the power used in the processing, but those are currently excluded in the EU CBAM mechanism. If these mechanisms do cherry-pick, they will not maximise pace and extent of decarbonisation – violating principle 1 set out above.
2. Discussions about HOW one can prove compliance, must involve a wide range of actors, including African countries. The design of the data that suppliers will need to hand over, systems, and timelines, needs to be a joint discussion involving a wide range of potential providers of solutions. Even with the right overall scope, details of the proposed mechanism can make or break the potential for new green producers. These details can create barriers to market entry, violating principle 2 set out above.
3. Interventions like these should appropriately recognise different starting points and historic trajectories, which should translate in focused engagement in specific circumstances. Most notably, this calls for:
   • Partnership to accelerate transition for countries with historically low emissions and limited industrial footprint. These partnerships need to help such countries ‘come up to speed’ and contribute their solutions. This may include proactively shaping industrial partnerships, deploying levy revenues towards system build-up, and support for impacted workers. Failure to do so, will lead to implicit barriers to entry, violating principle 2 set out above.
   • Support to mitigate unintended negative consequences that follow directly from the measures. One key example is the need to ensure a ‘just transition’ for workers in emission-intense industries in countries with relatively low levels of industrialisation, great potential for much bigger green industrialisation, and a real, potentially insurmountable transition cost and resistance. This could apply to workers in Mozambique’s current aluminium industry, which is sizeable for Mozambique yet operates in the context that Africa processes less than 2% of its bauxite, exporting the rest as unprocessed bauxite. Failure to provide this kind of support violates principle 3 set out above.

What happens if these principles are not applied?

Embedded carbon pricing tools that do not follow these principles will drive globally inefficient allocation of capital and production capacity and create barriers to market entry. As a result, the distribution of production capacity incentivised by such tools will NOT make the most climate sense. In short, they will fail to realise their climate objectives. They could create incentives for producers to divert export to other regions (e.g., for African producers to export more to China and India than to the EU). They could also give rise to retaliatory measures, such as blanket bans on raw exports, which are not ideal for climate or economic reasons: local processing is not necessarily climate-smart and cost-competitive for all inputs at all locations.

Various stakeholders have argued for exemptions for LMICs, or for alternatives such as a method that prices carbon based on either cumulative historic emissions or national per capita emissions rather than product-related measures. However, those options give emission-intense industries an ‘escape option and incentive’ to move emission-intense production to the lowest-emission locations. That would slow down rather than accelerate global decarbonisation and create a ‘race to the bottom’ rather than a ‘race for green’. Moreover, it would lock low-emission (African) countries out of their leapfrogging potential to become global green manufacturing powerhouses and instead lock them into an emission-intense industrialisation path with high stranded asset risks. It would make these low-emission countries part of the past and of the problem, instead of part of the future and the solution.

Each of these types of responses would be worse for Africa, and for the world.

1. An alternative to pricing, is banning certain levels of GHG emissions. This is how localised pollution tends to be managed. Cities regulating vehicle access based on emission levels, are an example of such a mechanism in GHG emissions. However, carbon pricing is much more widely considered. Compared to banning, pricing has the advantage that it realises financial room to close gaps in green business cases, creating tailwind for new industries and solution providers. Conversely, regulated ceilings may make it harder for new entrants – e.g., African production locations – to come to the table.
2. Another example, are potential incoming shipping levies. IMO is recognising the potential impact of such levies on food price increases and increased food insecurity for vulnerable populations – and they are currently running a study to understand these implications, with various proposals on the table to mitigate these risks.

COP29 outcomes created a UN-governed market, and a baseline that will be used for many future market and rule initiatives.

• COP29 operationalised two key mechanisms of Paris Treaty Article 6: (i) Bilateral trading- Article 6.2- governing country-to-country carbon trading, which is already being implemented in some contexts; and (ii) centralised UN market- Article 6.4- establishing the Paris Agreement Crediting Mechanism (PACM), a global market for UN-backed carbon credits.
• Specifically, the UN Advisory Body adopted two sets of standards:
  • Standards for credit methodologies: These outline requirements for transparency, measurability, baseline criteria, and additionality for credits traded in the UN-backed market.
  • Standards for emissions removal and reduction projects: These address monitoring, accounting, and measures to prevent or mediate reversals for projects with reversal risks under the PACM.
• Many details still require further clarification – which speaks to both the additional work, the potential risks, and the opportunities for Africa. Nevertheless, the creation of UN-backed market mechanisms is widely seen as an important boost to the credibility of carbon markets.
• Beyond an anticipated growth in carbon trading, experts predict that the minimum standards set by the PACM will become a baseline for quality and integrity of carbon credits globally, and will shape the development of future methodologies and rules across voluntary and compliance mechanisms

The value of compliance instruments is already more than 1,30 the VCM’s, with COP outcomes expected to boost the former

• In traded volume, the Voluntary Carbon Market, after a record size of nearly $ 2 billion in 2022, dropped to less than $ 0.7 bn in 2023 (in line with historic evolution).
• Meanwhile, the total traded value of credits and allowances under compliance instruments rose to $ 949 billion in 20232

Opportunities for Africa – What is in it for us?

In addition to climate benefits, carbon projects have the potential to generate economic, and social benefits for African communities

• By definition, carbon projects yield a climate impact: they avoid new emissions (for example, by reducing deforestation), reduce current emissions (for example, by introducing clean cooking solutions, or remove carbon (for example, by planting trees).
• Whether or not this climate impact can help the host country achieve its NDC, depends on the status of the credit. If the host country decides to authorise the credit (grant it a corresponding adjustment – see explanation in the next section), then it can no longer count it towards its NDC. The host country would do that to benefit in different ways, and ideally uses this to attract interventions it wants done for socio-economic reasons, but cannot afford itself (see other benefits below).
• Apart from climate impacts, carbon project can yield other benefits:
  • They can create jobs or improved livelihoods. For example, African nature-based removal solutions alone could support 88 – 167 million jobs and livelihoods. Most jobs are likely to be in the implementation of certain (labour-intense) interventions, yet there is potential across the entire value chain, creating demand pull for new “green” skills in, amongst others, verification and monitoring.
  • They can help reduce imports, thereby strengthening trade balance and currency, and reduce product costs. For example, blends of biochar and bio-fertilisers, co-financed with carbon revenue, have been proven to be as good as or better than chemical fertiliser (which is often imported) in some settings – and at a lower (pre-subsidy) wholesale price
  • They can resolve social or health problems, often by making the ‘green’ solution more affordable thanks to carbon co-finance:
    • Clean cooking solutions reduce indoor air pollution (which is estimated to cause 600,000 avoidable deaths per year in Africa), and free up time currently spent on gathering firewood.
    • Adoption of electric transport options can reduce dangerous levels of air pollution, especially in urban environments.
    • The opportunity to earn carbon credits from controlled waste treatment can improve overall waste collection and recycling, cleaning up urban environments and waterways (as wastestreams can become financially viable).
    • Thanks to carbon credits, sustainable water and sanitation programmes may increase access to clean water.
    • Thanks to co-finance from carbon credits, new renewable energy generation can help to address energy poverty.
  • They can improve soil health and improve agricultural yields – especially when undertaken in concert to make sure improved soil does not wash away and is used optimally.
    • Intercropping of specific trees in agricultural land (such as faidherbia in maize fields) can improve nutrient retention, improving plant yields – and carbon revenue from the trees can help strengthen the business case of this intervention.
    • The application of biochar (a carbon removal intervention) can improve soil health and improve yields.
    • The application of enhanced rock weathering (paid for through carbon credits) can reduce soil acidity, and thus help to improve yields and may be a substitute for liming (which has no auxiliary revenue stream and thus tends to be more expensive).
    • Carbon-co-financed renewably-powered irrigation systems can make irrigation available for more farmers, addressing soil erosion and improving nutrient absorption and retention.
  • They can ensure nature and biodiversity are protected, by providing an alternative mode of income for communities (who otherwise might need to clear new land to sustain themselves).
  • They can contribute to the development and scaling of new climate-smart products needed in the local market, such as bio-based building materials. In many cases, such innovations need to reach larger scale to become more cost effective and carbon revenue can assist towards that.
  • They can introduce new technologies and solutions, driving new economic sectors through tech transfer (such as direct air capture).
• Carbon projects are economic activities in and of themselves and contribute to the tax base (independent of any government levies), and bring (foreign) investment.

Whether this potential materialises, depends on rules and buyer choices, requiring action to make carbon markets work for Africa

• For a project to generate carbon revenue, it needs to comply with a predetermined methodology and meet buyer demand.
• Many interventions do not have a methodology (yet) and it takes real time and effort to develop these and get them accepted by registries (who issue the credits).
• African carbon credit activity has been heavily shaped by 2 categories and may not be meeting buyer needs very effectively:
  • Cumulatively, over 40% of all African carbon credits generated for sale in VCM, were REDD+ (avoided deforestation) and another 36% were linked to the provision of clean cookstoves.
  • REDD+ has come under severe scrutiny, with a substantial drop in demand and project activity. REDD+ credits have gone from being 63% of African-generated credits in 2019 to a mere 5% in 2023. Over the same period, clean cookstove credits steadily grew from 16% to 65% of African credits.
  • Nearly half of all carbon credits generated in Africa for sale in VCM, have not yet been retired. This means no ‘final buyer’ has bought them to use them to make a claim – they are either unsold, or remain with a broker for reselling signalling limited final buyer demand for African credits.
• Buyer preferences are shifting with a rapidly increasing focus on removals which creates opportunities and challenges for Africa.
  • Extensive press coverage on issues with credits (both systemically and incidentally) has hit buyer confidence – particularly with REDD+
  • A combination of issues/ scandals, evolving perspectives on the validity of certain claims, and associated norms and rules (such as SBTi and the incoming EU Green Claims Directive) has shifted buyer focus more and more towards removals, with still some interest in emission reduction (such as clean cookstoves), but a truly waning interest in emission avoidance (such as REDD+).
  • This trend is expected to continue in the (rapidly growing) set of compliance mechanisms and markets, and is reflected in early Article 6.2 buyer interest, and in regulation such as the EU Removals Certification.
  • Whilst Africa does have great potential to offer high-quality, high-integrity removals (across nature-based, hybrid, and engineered solutions), it also has a high potential and need for carbon finance in avoidance. Its low current emission levels limit the potential for emission reduction – and a lot of interventions support “green growth” (e.g., providing people with renewable power or renewably-powered irrigation where they did not have power or mechanised irrigation before) rather than displacing a high-emission alternative (which is what a transition would be). It is exactly the emission avoidance category which is most shunned by buyers.
• These carbon market trends call for proactive engagement by African stakeholders to both ensure the availability of relevant methodologies, and acceptance of African solutions by buyers (in the rules and preferences) to make carbon markets work for Africa. The next section explains the key priorities here.
• Of the examples mentioned above, the following are based on removals-driven credits (and more likely to be favoured by buyers going forward): nature restoration and expansion, trees in agricultural land, biochar, engineered removal (like direct air capture, DAC), enhanced rock weathering – and a portion of the climate impact of bio-based building materials.

To accelerate green industrialisation, Africa must be able to benefit from measures around embedded carbon pricing

• One sizeable set of economic opportunities for Africa, lies in green manufacturing and green industrialisation. To a limited degree, this requires transitioning existing industrial activity to greener alternatives – but the real opportunity lies in new green-from-the-start industrial and manufacturing capacity.
• Since in many cases the “green” alternative still carries a higher cost than the option with high embedded emission, regulation or pricing is needed to level the playing field. For most cases and industrial processes, there are no methodologies for carbon credit generation – and that seems not to be the route most taken to close the ‘green gap’.
• Instead, a growing set of instruments, with the EU’s CBAM being the first and most prominent, is coming to the fore, to put a price on embedded carbon of products.
• Africa’s intrinsic competitiveness lies in its potential to produce products with low embedded carbon, yet the realisation thereof depends on whether Africa can comply with the (reporting) rules and will be recognised as low carbon.
• This is separate from carbon market rules – yet important to drive Africa’s growth and investment.

What will it take? Implications and priorities for African governments: taking agency

Africa must (1) get ready to engage, (2) learn from early engagement, (3) maximise Africa’s opportunities in the current set-up, and (4) shape the future rules of the game in line with its potential

African stakeholders (regulators, project developers, and communities alike) ideally both capture current demand and actively evolve the market for better climate and developmental outcomes. In order to achieve that, they should (A) operate from a sound understanding of buyer concerns and needs (see topic 2 below), (B) innovate to meet these expectations with a superior African offer (see topics 1 and 3 below), and (C) simultaneously work towards further evolving the market towards higher prices, higher expectations on quality, integrity, and transparency (in a way that allows Africa to capture a sizeable market share in that market – see topic 4 below).

1. Getting ready to engage

• To attract carbon projects and investment, African governments need to develop a suitable enabling environment, which includes both general investor attractiveness and Article-6 compliant carbon market policies and regulation that enable credits from projects in African countries to be traded under Article 6 mechanisms.
• Key regulatory priorities include:
  • Developing transparent and efficient systems to oversee market activities.
  • Defining clear rules for granting corresponding adjustments (CA), including defining a white list of eligible project types.
  • Setting fair and predictable tax regimes that balance revenue generation with market competitiveness, and
  • Establishing transparent, equitable revenue distribution and benefit sharing systems that uphold carbon credit integrity through measurable social and environmental outcomes.
• In doing so, African governments must align with existing global standards (e.g., Paris Agreement Article 6.4, ICVCM Core Carbon Principles).
• As this is a lot of work and will take time, African countries should prioritise projects and approaches that can accelerate Africa’s increased participation in carbon markets. This includes, for example, fast-tracking specific projects already close to meeting new standards, facilitating regional Centres of Excellence (e.g., East African Alliance, West African Alliance) and leveraging public-private partnerships (PPPs) to co-develop pilot projects that meet standards from the outset.
• When defining criteria for white lists (for CAs), countries must understand and distribute value appropriately:
  • The climate impact of projects that will receive a CA (also known as “authorised” credits), can no longer count towards the achievement of the country’s own NDC.
  • Authorised credits attract higher prices and in exchange for giving up the ability to count it towards its own NDC, the country should see a benefit. This can include:
    • Interventions that solve a challenge for communities that the government has no means/ capacity to resolve: e.g., provide climate-smart agricultural inputs to very remote communities. Here, the socio-economic/ developmental impact is valuable to the country, and this tends to result in higher cost to operate (e.g., to reach the more remote communities), and the higher carbon revenue of the authorised credit helps make the project financially viable.
    • The growth of country capacity in a particular economic activity that the country wants to expand. This can include being the “first location for X”, becoming an industry location standard attracting subsequent investment and activity, training in specific skills, and/ or technology transfer (which can be required in exchange for the authorisation).
    • A particularly high, explicit, and transparently regulated transfer of benefits to host communities.
  • Because of the economic value of authorisation, countries should find processes that help realise a transparent and fair distribution of this value that attracts investment and activities the country wants to support and expand, in a way that communities benefit appropriately

2. Learning from early engagement:

• The experience from early engagement with these new markets will help set priorities and refine African policies and regulation – and vice versa. The benefits from early experience also help justify the effort of setting policy, regulation, and institutions to engage. It can also build Africa’s “brand” as a potential provider of solutions (in turns attracting more buyer interest).
• Therefore, ideally, countries lean into well-structured opportunities for engagement, prioritising and fast-tracking Article 6.2 and 6.4 transactions to prove Africa’s ability to meet compliance standards. In addition to proving Africa’s ability, MoUs and early deals will also help African countries build a deep understanding of buyer needs and preferences, which helps both set priorities, shape appropriate policy and regulatory responses, and help identify African priorities for rules improvement.
• Concurrent engagement with deals, global and buyer rules, and Africa’s rules allows African countries to focus their efforts on what will realise the biggest climate and developmental impact with fit-for-purpose levels of regulation and bureaucracy.

3. Maximising Africa’s opportunities in the current set-up

• In addition to prioritising the most promising buyers (in inclination to engage, size, and signalling value) and interventions, as articulated in 1 and 2 above, Africa can begin to nudge towards rule improvements, whilst capturing maximum value in the current markets.
• One mechanism can be to introduce minimum price floors to prevent undervaluation, while ensuring national ownership and control over carbon assets.
• Another will be to leverage co-benefits as a competitive advantage: Position social, economic, and environmental co-benefits as integral outcomes of African carbon projects, enhancing their appeal to buyers seeking high-impact credits (as committed to in the Nairobi Declaration – see rules-based next steps under 4 below).
• In parallel, many global actors are currently looking for new partnerships, and for ways to support developing countries in their carbon market development. Now is the right time to advocate for dedicated funding to support infrastructure development, capacity building, and project pipeline acceleration, as well as financial support to invest in African institutional capacity and regulatory oversight to enhance transparency, enforce compliance / standards, and build long-term market confidence.
• In this process, Africa should utilise AU, AfCFTA, and regional economic blocs to harmonise policies, pool technical expertise, and improve Africa’s collective bargaining position in global markets. It will help “rise the tide that lifts all boats” and create market conditions under which African solutions can thrive.

4. Shaping the future “rules of the game” in line with Afri potential:

• Many rules are still being defined further. As standards continue to evolve, African countries must ensure that the emerging standards reflect African priorities and strengthen Africa’s intrinsic competitive advantage.
  1. A key priority is inclusion of high-quality, high-integrity emission avoidance, and Nature Based Solutions (NBS), which represent a substantial part of Africa’s current project portfolio and its potential. However, the likely stringent requirements for additionality and permanence/durability risk sidelining these categories under Article 6, underscoring the need for proactive engagement to safeguard their inclusion6.
  2. A second priority is leading global innovation on rigour around socio-economic cobenefits of carbon projects. Africa not only has unique potential to realise these in its carbon projects, but also a strong developmental need for these benefits – and upholding similar (or even higher) rigour on transparency and measurement of cobenefits as is applied to carbon, can give African projects a unique competitive advantage, especially in a global market where at least some of the buyers are keen to not just avoid negative side-effects, but realise these synergistic inputs. This focus is not new for Africa: the AU explicitly commits to this in the Nairobi Declaration, and this aligns with a coalition of project developers from the Global South writing to the Science Based Target initiative (SBTi) to ask that they allow the use of credits against scope 3 targets because of the benefits projects deliver.
• Beyond these topical approaches, African countries will also need to engage with specific jurisdiction as they define their regulation, including their eligibility criteria, seeking market access for African credits in all markets and instruments. This should be based on strong quality and integrity performance, backed by transparent evidence, and a proactive role from Africa and a seat at the table as rules are shaped. Priority instruments and jurisdictions will be the EU Removals Certification (the incoming ‘liquid currency’ in the EU ETS as allowances are phased out), ICVCM Core Carbon Principles (CCP), ISO Net Zero Standards, and any new SBTi standards.

1. More information about the outcomes can be found in this Reuters article, and this Brunswick perspective. The latter also includes an overview of responses to these developments.
2. https://www.reuters.com/markets/commodities/global-carbon-markets-value-hit-record-949-bln-last-year-lseg-2024-02-12/ , noting that the vast majority of this (770 billion euros) or 87%, is the EU ETS, which is not accessible for African credits
3. Importantly though, 8 leading methodologies in this space, jointly responsible for 1/3 of all VCM credits, failed to obtain the ICVCM Core Carbon Principles (CCP) label because of insufficient additionality – see https://www.climatechangenews.com/2024/08/07/renewableenergy-carbon-credits-rejected-by-high-integrity-scheme/
4. All quantitative data from the Berkeley Project Database – data on sales into compliance instruments is not available comprehensively, yet can safely be assumed to be rather low because of market access challenges for African credits; and certainly well below Africa’s inherent potential.
5. The exact value here is 47% of African credits not yet retired – as compared to 42% globally. The difference is small, indicating a challenge with the VCM demand in general – not just for Africa.
6. The PACM Supervisory Body (SBM), formerly the 6.4 SB, is tasked with expediting the development of key standards and tools, including those for additionality, non-permanence, and baselines, with a goal to finalise an additionality standard this year. Meanwhile, the Methodological Expert Panel (MEP) will draft methodologies aligned with these standards, likely mandating compliance with SBM tools for demonstrating additionality and managing non-permanence risks.

This work has been developed in partnership with and with support from FSDA

Climate finance and the NCQG

COP29 negotiation outcomes

Key elements of discussion for the NCQG included

• The overall quantum
• The quality of and access to finance (questions such as the balance between provision and mobilisation, and between grant (equivalent), concessional loans, and commercial finance)
• The so-called contributor base (who is obliged to contribute and who can do so voluntarily)
• Allocation and destination (for example, whether or not there would be ring-fenced portions for adaptation and for loss and damage, or for specific groups of developing countries )
• Transparency mechanisms

Most press coverage has gone to the quantum agreement – which has often been shortened to the statement that the previous $ 100 billion annual goal has been tripled to $ 300 billion (and falling much short of the $ 1.3 trillion needed per year). It is more nuanced than that. The $ 1.3 trillion ambition has stayed alive, yet the $ 300 billion includes both public funds, private funds mobilised by public funds, and alternative funds, as well as all MDB climate finance flowing to developing countries (irrespective of the source of that funding). Moreover, the $ 300 billion is a nominal objective and is not corrected for inflation.

The agreement also includes decision on the other elements. Two of the best sources describing the outcomes on NCQG, include an overview by Joe Thwaites from NRDC and a detailed breakdown of decisions by GFLAC, which includes an assessment of these results from a Global South perspective.

Perceptions of and responses to these outcomes

Many activists have pointed out that the agreed-upon ‘core’ falls short of the finance needed, even more so when inflation is taken into account – and many state that this reflects a disregard for developing nations by developed nations. The agreement to include MDB resources could limit the additionality of these funds. Many feel that the approach to the negotiations by the COP chair did not help to achieve a more ambitious outcome. A good overview of the political economy prior to and during the negotiations, can be found in this step-by-step account by Michael Jacobs.

Notwithstanding this criticism, many actors close to the negotiations acknowledge the tough geopolitical circumstances: a much higher number of core funding was not expected. Nobody really expected the full needs of $ 1.3 trillion to be covered by public funds and the question always was how to best mobilise and leverage other sources of funding on the back of public funds committed.

Implications for Africa

There are 5 key implications for Africa. Some require individual country action, some collective action – in either the UNFCCC and COP processes or other processes,

1. Proactively shape the “roadmap to Belem”. The NCQG decision mandated the Presidencies of COP29 and COP30, Azerbaijan and Brazil, to produce a “Baku to Belem Roadmap to $1.3T” to look at how to scale up climate finance to developing countries (paragraph 27), including through grants, concessional and non-debt-creating instruments, and measures to create fiscal space. This is a crucial next step in which African countries, through AGN, should engage proactively, to make sure their needs and preferences are included.
2. Link the roadmap process to ongoing efforts to reform the international financial architecture by prioritising engagement with these reforms. The include in particular efforts around the MDB reform, the Global Solidarities Levies Taskforce, the Independent Expert Review on Debt, Nature and Climate, and the UN Tax Convention. For all but the MDB reform, African countries (individually or collectively) are amongst the chief architects of these initiatives. Yet their capacity to continue proactive engagement with these processes is constraint which could lead to a lessening of African voice and influence on these important processes that, if successful, can yield additional ‘alternative finance’, and improve African debt positions.
3. Develop and implement national, regional and continental policies and regulation that optimise Africa’s opportunity as a destination for (commercial) climate finance. The necessary climate finance cannot be met with public sources alone – and plenty of opportunities exist to attract commercial climate-oriented capital. That capital not only requires attractive pipeline, but also the right ‘enabling environment’ with clear and consistent policies and regulation. African countries should tap into the ‘core’ finance for assistance to accelerate the transformation of their economies – and the associated policies and regulation (including but not limited to those governing carbon markets). Africa should also use its mechanisms for continental collaboration such as AfCFTA, AU, and regional blocks to harmonise where needed.
4. Use the updated NDCs to inch the target upwards in 2025. In a last-minute addition, the words “at least” were added to the $ 300 billion and the $ 1.3 trillion objectives. This opens up a key window for advocacy in the ‘road to Belem’ in 2025. Early 2025, updated NDCs need to be submitted and they tend to include an unconditional commitments and a conditional one – for developing countries, this is usually conditional upon availability of finance. If the updated NDCs were to make clear that conditional commitments can achieve global climate objectives, but unconditional ones cannot, that offers great input for a strong global advocacy campaign to put pressure on global leaders to up commitments at COP30; not unlike the process followed to get to the Paris Treaty. For this, African countries need to (1) develop strong NDCs with a clear distinction on conditionality and ambitious conditional goals, and (2) engage actively with various global advocacy movements (who are keen to take this up).
5. Make the most of the agreed-upon 5-year review. Again in a last-minute addition, a 5-year review of the targets was included in the agreement. Shaping this review process early, can yield an important mechanism – not only to increase ambition, but also to track progress towards it.

Carbon markets and Article 6

COP29 negotiation outcomes and perceptions and responses

COP29 operationalised two key mechanisms of Article 6: (i) Bilateral trading- Article 6.2- governing country-to-country carbon trading, which is already being implemented in some contexts; and (ii) centralised UN market- Article 6.4- establishing the Paris Agreement Crediting Mechanism (PACM), a global market for UN-backed carbon credits. Specifically, the UN Advisory Body adopted two sets of standards:

• Standards for credit methodologies: These outline requirements for transparency, measurability, baseline criteria, and additionality for credits traded in the UN-backed market.
• Standards for emissions removal and reduction projects: These address monitoring, accounting, and measures to prevent or mediate reversals for projects with reversal risks under the PACM.

Many details still require further clarification – which speaks to both the additional work, the potential risks, and the opportunities for Africa. Nevertheless, the creation of UN-backed market mechanisms is widely seen as an important boost to the credibility of carbon markets. Beyond the anticipated growth in carbon trading, experts predict that the minimum standards set by the PACM will become a baseline for quality and integrity of carbon credits globally, and will both shape the development of future methodologies and rules governing the Voluntary Carbon Market (VCM and emerging climate legislation and associated compliance markets.

More information about the outcomes can be found in this Reuters article, and this Brunswick perspective. The latter also includes an overview of responses to these developments.

Implications for Africa: risks, opportunities and priorities

With their abundance of relevant opportunities and relatively low current emissions, African countries hold a lot of potential for carbon credit generation. After a period of intense scrutiny on carbon markets, specifically the VCM, and a significant reduction in traded volume and many credits left unsold, the COP29 outcomes are expected to strengthen carbon markets.

Whilst this creates substantial opportunities for African communities and countries, there are concerns that the increased standards will increase the complexity and costs to participate in carbon markets, which could make it harder for Africa-based projects to be eligible and be traded.

In this context, we see 5 key priorities for African stakeholders on carbon markets, 3 of which are concrete activities and 2 reflect on the attitude and approach to carbon markets.

1. 1. To attract carbon investments and projects, African countries need to develop a suitable enabling environment, which includes both general investor attractiveness and Article-6 compliant carbon market policies and regulation that enable credits from projects in African countries to be traded under Article 6 mechanisms. Key regulatory priorities include developing transparent and efficient systems to oversee market activities, defining clear rules for granting corresponding adjustments (CA), including defining a white list of eligible project types, setting fair and predictable tax regimes that balance revenue generation with market competitiveness, and establishing transparent, equitable revenue distribution systems that uphold carbon credit integrity through measurable social and environmental outcomes.
   2. As standards continue to evolve, African countries must ensure that the emerging standards reflect African priorities and strengthen Africa’s intrinsic competitive advantage.
      • A key priority is inclusion of high-quality, high-integrity emission avoidance, and Nature Based Solutions (NBS), which represent a substantial part of Africa’s current project portfolio and its potential. However, the likely stringent requirements for additionality and permanence/durability risk sidelining these categories under Article 6, underscoring the need for proactive engagement to safeguard their inclusion1.
      • A second priority would be to lead global innovation on rigour around socio-economic co-benefits of carbon projects. Africa not only has unique potential to realise these in its carbon projects, but also a strong developmental need for these benefits – and upholding similar (or even higher) rigour on transparency and measurement of cobenefits as is applied to carbon, can give African projects a unique competitive advantage, especially in a global market where at least some of the buyers are keen to not just avoid negative side-effects, but realise these synergistic inputs. This focus is not new for Africa: the AU explicitly commits to this in the Nairobi Declaration, and this aligns with a coalition of project developers from the Global South writing to the Science Based Target initiative (SBTi) to ask that they allow the use of credits against scope 3 targets because of the benefits projects deliver
   3. As carbon project activity is likely to pick up increasingly, African countries should prioritise projects and approaches that can accelerate Africa’s increased participation in carbon markets. This includes, for example, fast-tracking specific projects already close to meeting new standards, facilitating regional Centres of Excellence (e.g., East African Alliance, West African Alliance) and leveraging public-private partnerships (PPPs) to co-develop pilot projects that meet standards from the outset.
   4. In their positioning, African stakeholders should strike a productive balance in which rules and procedures recognise limited African capacity and the urgent need to strengthen this (potentially include a transition mechanism that protects ongoing activities that are important to Africa), without further entrenching the idea that African credits cannot meet rigorous requirements and thus need a ‘leniency allocation’. With increased scrutiny on quality and integrity, priority for African countries should be to capture a share of new demand for highquality, high-integrity credits at a higher price.
   5. In all of this, African stakeholders (regulators, project developers, and communities alike) ideally both capture current demand and actively evolve the market. In order to achieve that, they should (1) operate from a sound understanding of buyer concerns and needs, (2) innovate to meet these expectations with a superior African offer, and (3) simultaneously work towards further evolving the market towards higher prices, higher expectations on quality, integrity, and transparency (in a way that allows Africa to capture a sizeable market share in that market). Efforts such as the AU’s drive towards an African Gold Standard ideally emphasise and strengthen Africa’s competitiveness, whilst meeting buyers where they are to make sure Africa can tap into existing demand, and working to grow and mature the market together with the buyers.

1 The PACM Supervisory Body (SBM), formerly the 6.4 SB, is tasked with expediting the development of key standards and tools, including those for additionality, non-permanence, and baselines, with a goal to finalise an additionality standard this year. Meanwhile, the Methodological Expert Panel (MEP) will draft methodologies aligned with these standards, likely mandating compliance with SBM tools for demonstrating additionality and managing non-permanence risks.

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At its core, CAP-A aims for the dashboard to be a catalyst for unlocking Africa’s potential as a hub for economically viable solutions to the global climate challenge – also known as Climate Positive Growth (CPG). It can equip project developers, investors, and policymakers with data to inform early decision-making towards CPG on the continent. From renewable energy-powered industrial manufacturing to engineered carbon removal, the possibilities for green innovation are vast and now stakeholders can see where to start. Besides quantifying potential energy output in 1x1km pixel areas across the continent and at a national level, the dashboard also provides downloadable country maps indicating where renewable energy is feasible.

As a public benefit organisation, CAP-A wants the Energy Dashboard to extend beyond individual projects and realise systemic change for Africa and the world. It can lay the groundwork for a sustainable and resilient Africa, and support the global green transition needing clean energy sources. This, in turn, can drive job creation, foster technological innovation, and enhance Africa’s global competitiveness in the green industry sector.

You can explore the dashboard here!