The response to Gabon’s planned release of a record 90 million credits onto the voluntary carbon market will be a gauge of how seriously developed economies are taking their commitments ahead of the United Nations COP27 climate summit in Egypt in November, the country’s environment minister said, writes Bloomberg.
Gabon, the world’s second-most forested nation, is working with the United Nations Framework Convention on Climate Change’s REDD+ mechanism to create the credits, which Lee White, the central African country’s environment minister, expects to be ready by early October.
Decision-makers in Gabon are trying to find a way to preserve its carbon-absorbing forest while diversifying its economy away from oil, demand for which is expected to plunge in coming decades at the same time as its own resources of the fossil fuel run down.
The credits have been generated based on the country claiming to have reduced emissions from deforestation and forest degradation from 2010 to 2018 compared to a 2009 baseline. They will be marketed by the country’s sovereign wealth fund and sold via a new platform, redd.plus, a collaboration between S&P Global’s IHS Markit, CBL commodity exchange, and the Coalition for Rainforest Nations, which represents over 50 developing countries.
Exploding Demand
Similar credits are selling on that platform for about $16 and « we have offers above that », as high as $30, White said. White previously told Bloomberg he won’t accept less than $15 per credit.
« This is a large injection of supply », said Luke Oliver, head of climate investments at asset manager Kraneshares. But « demand is exploding » and the market should be able to absorb it, he said.
Still, some market participants have warned that it isn’t yet clear how corporate buyers will perceive the credits and their quality may be questioned.
Gabon is in the process of finalizing a law to distribute the revenue from the credits.
« If there had not been a fight and political commitment and all of that hard work, we would have less forest today. We wouldn’t be net emitting but we would be absorbing a lot less. So it’s definitely made a difference, that sort of carrot at the end of the road is a part of that », White said. « But we’re also focusing very much on export of logs. We’re focusing on transforming timber into tables, chairs, adding value in country, making the forest valuable for the country through economic development. »
