Across Africa, carbon credits are turning climate policy into a multi-billion-dollar engine for commerce and community development.
Carbon credits, each representing one tonne of carbon dioxide (or an equivalent greenhouse gas) avoided or removed, are created through forest protection, tree planting, renewable energy, and clean cookstoves. These credits are becoming tradable assets on global markets.
In 2024, Africa issued about 75 million credits, valued at roughly $15 billion, around 14 % of the global voluntary carbon market, where companies buy credits to meet ESG goals or offset emissions beyond legal requirements.
By contrast, compliance markets, such as the EU Emissions Trading System, require companies to hold credits to meet legally mandated emissions caps. These markets are larger, more tightly regulated, and often pay higher prices per credit. Africa’s current participation is mostly voluntary, which explains the lower average prices while also highlighting the potential value of tapping into compliance-market opportunities in the future.
For companies and investors, the question isn’t what carbon credits are anymore; it’s how this market can deliver environmental benefit, economic opportunity, and reliable returns.
How carbon credits are created
A carbon credit starts long before it reaches a corporate balance sheet. It begins on the ground, where a developer, which could be a conservation group, private firm, or community partnership, designs a project to reduce or remove emissions in order to provide clean energy solutions.
By comparing what emissions would have occurred without the project to the actual outcome, the developer calculates the true climate impact, a principle known as additionality.
Next, the project follows a methodology approved by an international carbon standard, such as Verra or Gold Standard, which sets rules for measuring, monitoring, and reporting carbon savings. Independent auditors validate the design and later verify reductions using field data, satellite imagery, or energy records. Only verified reductions become carbon credits.
Verified credits are issued into a digital registry, each with a unique serial number to prevent double-counting. Brokers, exchanges, or direct agreements then connect the credits to corporate buyers. Companies purchase credits to offset emissions they cannot immediately reduce. When a credit is “retired,” it is removed from circulation, allowing the buyer to claim the emissions reduction.
Revenue flows back to developers, investors, governments, and local communities. In 2025, the global carbon credit market was estimated at about $886.8 billion, with Africa contributing a meaningful but smaller share through voluntary carbon credit issuance. The continent accounts for roughly 14 percent of the global voluntary supply, with around 300 million credits issued so far and approximately $1.2 billion in retired credits.
Through this process, environmental protection is converted into a financial asset traded globally. The credibility of the market depends on transparent measurement, rigorous verification, and trust, without which the value of a carbon credit would collapse.
The financial flow of verified credits
Once credits enter the financial system, they are recorded in digital registries to prevent double-counting and sold through brokers, exchanges, or direct corporate contracts.
Most African credits are traded on voluntary markets, where companies offset emissions beyond legal requirements, while compliance markets, such as the EU Emissions Trading System, enforce mandatory caps, are more tightly regulated, and typically pay higher prices per credit.
Financial instruments further shape the market. Forward contracts allow buyers to lock in credits before projects are completed, reducing financing risk. Carbon funds and derivatives bundle credits from multiple projects into investment vehicles that attract institutional capital.
Exchanges like the AirCarbon Exchange are introducing tokenized credits, enabling fractional trading and faster settlement. Corporate demand is increasingly linked to ESG-driven finance, where verified offsets can affect access to capital or borrowing costs.
Prices vary widely, with high-integrity removal credits reaching $60–$100 per tonne, and avoidance credits trading at $6–$10. Market confidence depends on verification and transparent registries.
In 2024, a total of about 180 million carbon credits were retired. Renewable energy projects (including wind and solar) accounted for roughly 22.3 million credits of trading activity in voluntary markets last year, representing one of the largest individual project categories. Renewable energy captured about 28 percent of total carbon offsets in 2024, with solar credits making up a substantial portion of that share.
By channelling local climate action into global markets, carbon credits generate financial value that supports conservation and sustainable development.
The underlying assets of the carbon market
Carbon credits derive their value from measurable environmental and economic outcomes. Across Africa, climate mitigation is embedded in local economies, from Kenya’s Kasigau Corridor to Tanzania’s Rubeho Mountains and Ethiopia’s EthioTrees regenerating native woodlands while generating household income.
There is also Kenya’s Olkaria II geothermal plant which further links low-carbon electricity to credit issuance. Because this value depends on measurable impact, verification is central to market credibility.
However, challenges highlight the importance of rigorous governance. A 2023 investigation, based on academic analyses of roughly 40 Verra‑registered rainforest projects, found many credits did not correspond to real avoided deforestation. Satellite data and counterfactual analysis suggested only a small fraction reflected actual emission reductions, with baselines often overestimated by hundreds of percent.
Furthermore, evaluations of Zimbabwe’s Kariba REDD+ project found roughly 15.2 million tonnes of credits issued beyond what was justified by actual avoided deforestation. Verra also cancelled credits from some methane-reduction rice projects in China after over-crediting was identified.
These cases do not invalidate the market, but they show why accurate measurement, third-party auditing, and transparent reporting are essential to ensure credits deliver genuine emissions reductions and sustainable local benefits.
How carbon credits shape national economies
Across Africa, carbon markets are emerging as a new revenue stream for governments and communities. Projects that generate credits sell them to corporate buyers around the world and the proceeds, if properly managed, can fund public services, infrastructure, and climate‑resilient development.
In Nigeria, for example, the potential is significant. Estimates suggest the country could generate up to 30 million carbon credits annually by 2030, bringing in over $500 million in revenue each year.
Just like Kenya and South Africa, which already have domestic carbon pricing and trading systems, Nigeria could shift from global sales to a national market, using credits to meet climate goals, boost green investment, and ensure revenues benefit local communities.
As Temitope Adeoye, founder of the FactCheck Initiative and Kaci Help, notes, “Nigeria should not only be a victim of climate change; we must also become active participants in the green economy.”
Similarly, the Africa Carbon Markets Initiative (ACMI) envisions 300 million carbon credits produced annually by 2030, unlocking about $6 billion in income and supporting 30 million jobs across the continent. By 2050, that could grow to 1.5 billion credits and more than $120 billion in revenue.
United Nations Economic Commission for Africa officials have also emphasized policy opportunity, stating that carbon markets can “deliver jobs and resilience and inclusive economic growth,” framing carbon finance not only as climate mitigation but as a strategic economic tool for governments across Africa.
How much of this revenue reaches communities depends on land and carbon rights. Where communities hold the rights, they can receive payments directly, but unclear tenure or overlapping claims—as seen in DR Congo and Kenya—can allow projects to exploit rather than empower local people.
These are not just abstract possibilities. When carbon revenues reach communities directly, they can fund schools, clinics, clean water, and local infrastructure all while protecting ecosystems like the Congo Basin, which stores an estimated 60 billion tonnes of carbon and underpins the continent’s natural carbon value.
Can Africa capture the true value of its carbon credits?
Despite Africa’s vast natural carbon sinks, the continent currently captures just around 2 % of its theoretical annual carbon credit capacity, and the credits it does generate are often priced far lower than in wealthier markets.
Akinwumi Adesina, who served as president of the African Development Bank until 2025, warned that foreign buyers sometimes pay as little as $3 per tonne of CO₂ for African credits, while permits in regulated markets such as the EU Emissions Trading System can command premiums around €200 per tonne, highlighting a stark global price gap and what Adesina described as “carbon grabs” that shift value out of host countries rather than keeping it local.
Market data also reinforces this disparity. A 2023 analysis showed average voluntary carbon credit prices plunging about $3 for renewable energy credits and roughly $13 for avoided deforestation credits, as buyers pulled back amid doubts about the integrity of some forest‑based projects, leaving prices well below levels thought necessary to drive sustained emissions reductions.
Credibility concerns contribute to this discount. Reviews by independent analysts, including work tied to the Berkeley Carbon Trading Project, have found that many avoided‑deforestation credits under large voluntary standards were based on inflated baselines or failed to deliver real additional emissions savings, weakening buyer confidence and suppressing market demand.
Concrete events have further underscored these vulnerabilities. In Zimbabwe, the Kariba REDD+ project saw more than 15 million credits deemed “excess” and subject to cancellation after a review concluded that baseline projections overstated avoided deforestation, exposing risks in voluntary markets and shaking investor trust.
Other structural factors, from brokers capturing disproportionate revenue shares to high certification costs and limited local technical capacity, further depress prices and limit African participation in high‑value carbon markets.
Recognising these challenges, countries like Kenya have launched national carbon registries to improve transparency, standardise verification, and help African credits command stronger value by boosting buyer trust.
Why companies are investing in carbon credits
Companies invest in carbon credits not just to manage emissions they cannot reduce internally, but also to meet rising investor and ESG expectations. By supporting projects, including African forestry initiatives, firms like Apple, Delta, and Air France-KLM are helping drive real-world emissions reductions.
Participation in voluntary carbon markets encourages broader decarbonisation efforts, while demonstrating strong sustainability performance strengthens access to capital in a market where ESG assets now exceed $30 trillion.
Ultimately, carbon credits offer a pathway for businesses to align profit with purpose, turning environmental responsibility into tangible action.
