The African Development Bank (AfDB) has announced plans to establish the Africa Carbon Support Facility, a new initiative designed to unlock climate finance by developing and expanding carbon markets across the continent.

The announcement came during the bank’s annual meeting in Abidjan, where senior officials outlined the facility, which is currently in its design phase.

The facility will consist of two main components.

The first aims to assist African governments in creating policies and regulations that govern carbon trading.

The second will focus on increasing both the supply and demand for carbon credits, as well as building the necessary market infrastructure to promote their wider use.

“Through this, we envision a future where carbon credits can become a tradable commodity on Africa’s stock exchanges,” said Anthony Nyong, AfDB’s director for climate change and green growth.

Carbon credits have grown into a significant global industry, where wealthier nations offset their emissions by financing clean energy projects or paying developing countries to preserve natural ecosystems.

Each credit represents one metric ton of carbon emissions either reduced or removed from the atmosphere.

Countries and companies purchase these credits to meet climate commitments.

Despite Africa’s vast climate assets, the continent has struggled to fully capitalize on the carbon credit market.

Prices for African carbon credits remain substantially lower than those in regions with stricter regulatory frameworks.

According to Nyong, most of Africa’s credits, mainly derived from forestry, land use, and agriculture, are traded on voluntary markets.

He explained that integrating these credits into stock exchanges could substantially increase their value.

Africa, responsible for a small share of global greenhouse gas emissions, is among the regions most vulnerable to climate change impacts.

Yet, it receives only about 1% of global annual climate finance, officials across the continent have noted.

At the 2022 U.N. COP27 climate summit, the African Carbon Market Initiative (ACMI) was launched, bringing together countries such as Kenya, Malawi, Gabon, Nigeria, and Togo.

The initiative aims to increase Africa’s carbon credit generation to around 300 million credits annually by 2030, rising to 1.5 billion credits a year by 2050.

The AfDB’s new facility is expected to support these goals by providing the regulatory and market infrastructure needed to unlock greater climate finance for Africa.