Carbon credits are one of several measures that contribute to addressing the growing concerns of climate change. As environmental conservation becomes an increasingly urgent issue, it is crucial for Zambia to embrace carbon credits not only as an environmental solution but also as an economic opportunity.

The mechanism of carbon credits is one of several measures that contribute to addressing the growing concerns of climate change. As environmental conservation becomes an increasingly urgent issue, it is crucial for Zambia to embrace this mechanism not only as an environmental solution but also as an economic opportunity. This article will explore the evolving landscape of carbon credits in Zambia, focusing on the country’s regulatory developments and procedures, as well as the significant environmental benefits and economic opportunities. It will also highlight the prospects for non-governmental organizations, individuals, and private sector entities interested in participating in carbon credit initiatives.

The concept of carbon credits worldwide started with the adoption of the Kyoto Protocol in 1997, which established legally binding emission reduction targets for developed nations. Despite laying the foundation for international climate policy, the Protocol’s effectiveness was constrained by the lack of commitments from developing countries and enforcement challenges. To address these limitations, the Paris Agreement was adopted in 2015, introducing a more inclusive approach whereby all participating countries set their own emission reduction targets, known as Nationally Determined Contributions (NDCs). This paradigm shift aims to consolidate global efforts in limiting global warming to well below 2°C above pre-industrial levels.

In 2021, Zambia demonstrated its commitment to sustainable development by establishing the Ministry of Green Economy and Environment. This Ministry plays a critical role in coordinating efforts to protect the environment and foster sustainable practices nationwide. With over 1.2 million hectares of protected dryland forests, including the Luangwa Community Forests Project, Africa’s largest REDD+ initiative, Zambia's rich biodiversity and vast forest cover position it to capitalize on this evolving market while reinforcing its role as a key contributor to global sustainability and climate action.

What are carbon credits and how do they work?

According to the Green Economy and Climate Chage Act, No. 18 of 2024, carbon credits in simple terms function as permits allowing pollution to a certain amount. Each credit lets someone release one ton of carbon dioxide or the equivalent of another greenhouse gas. These credits can be bought and sold, and they assist individuals, organizations, companies, and countries in meeting their goals for reducing pollution.

This is especially important for organizations and private entities to improve and enhance their Environmental, Social, and Governance (ESG) performance, as these standards are governed by internationally recognized frameworks. Such improvements contribute to sustainability goals and help meet global emission reduction targets, reinforcing a commitment to environmental responsibility.

Companies can earn carbon credits through various forestry-based activities, such as honey production, mushroom cultivation, caterpillar harvesting, and the collection of medicinal products from forests. They can also generate credits by planting trees and adopting sustainable agricultural practices that mitigate carbon emissions.

Carbon markets globally operate primarily through two systems; the compliance market and the voluntary market. The compliance market operates under the cap-and-trade system. In this system, governments establish a limit on total emissions and either allocate or auction a corresponding number of carbon credits. Companies that manage to reduce their emissions below their allocated credits can sell the surplus, while those exceeding their limits are required to purchase additional credits. In contrast, under the voluntary market, companies and individuals purchase carbon credits on a voluntary basis often to fulfil corporate social responsibility goals or offset their carbon footprint.

Benefitting from the Carbon Credit framework

The Green Economy and Climate Change Act imposes no restrictions on participation in carbon credit trading, as long as participants comply with its provisions. Access to carbon credits is available to individuals, organizations and countries. These, however, must obtain a certificate of authorization in accordance with the provisions of the Green Economy and Climate Change Act.

To create carbon credits in Zambia, a company can leverage the existing forestry framework. The process may begin with establishing or partnering with a legally recognized forest. The Forestry Act, No. 4 of 2015 allows individuals and companies to apply for and own private forests, creating a foundation for sustainable forest management. These managed forests then become the basis for generating carbon credits.

In addition, individuals and companies could work with local communities, supporting or partnering with existing Small and Medium Enterprises (SMEs) already active in the forestry sector in provinces like Eastern, North-Western, and Western. These SMEs can play a crucial role in managing the forest according to approved sustainable practices. These practices, such as reforestation, afforestation, or improved forest management, must demonstrably reduce or remove greenhouse gas emissions for carbon credits to be generated.

Once the emission reductions or removals are verified and certified under an internationally recognized standard, the company may sell the resulting carbon credits. The revenue from these sales may be reinvested in further forest conservation and community development, creating a sustainable cycle. This approach not only benefits the environment but also provides economic opportunities for local communities through employment and the use of local products.

Zambia’s legal landscape for carbon credits

Zambia stands out as one of fewer than ten African countries with a comprehensive, well-structured carbon credit framework, laying a strong foundation for the growth and success of carbon credit projects. The Green Economy and Climate Change Act includes provisions that directly address regulations and disciplinary procedures, ensuring the successful implementation and effectiveness of its framework.

In addition to the Green Economy and Climate Change Act, No. 18 of 2024, Zambia has established a comprehensive legal and regulatory framework to support carbon credit initiatives. This includes the Environmental Management Act, No. 12 of 2011, the Forest Act, No. 4 of 2015, the Forest (Carbon Stock Management) Regulations, Statutory Instrument No. 66 of 2021, the Interim Guidelines for Carbon Markets and Trading (2022), Part 1 of the Carbon Market Framework (2023), and the Eighth National Development Plan (8NDP). Zambia provides a stable and supportive environment for the growth and success of carbon credit initiatives, thanks to a dedicated ministry overseeing the sector and clear, new legislation outlining regulatory processes. The country’s strength lies not only in having a ministry specifically tasked with this area but also in its strong regulatory structure, which ensures protection and clarity for all parties involved. This framework significantly reduces the risk of contract cancellations and fosters long-term project stability.

Regional and global collaborations

Zambia actively participates in international and regional climate initiatives, strengthening its position. The country has hosted high-level discussions such as the Regional Dialogue on Carbon Markets with partners like the German government, to shape Africa’s carbon market future. As a member of the Southern African Development Community (SADC), Zambia collaborates on regional climate solutions, enhancing its influence in global carbon markets. Furthermore, Zambia's membership in the Global Green Growth Institute (GGGI) drives its sustainable economic growth agenda, positioning the country as a leader in green investments.

Investment potential: a green goldmine

Zambia’s carbon credit market presents an opportunity for climate action as well as an avenue for robust investment. Forests account for a significant portion of Zambia’s emissions, making carbon credits tied to forestry projects a prime investment opportunity. The government is actively expanding its forest plantations to meet ambitious climate goals. With approximately 49 million hectares of forest cover, Zambia holds substantial potential as a natural carbon sink. Estimates indicate that Zambia contributes about 6% of Africa's carbon credit output and 0.7% of the global output.

The European Union’s commitment to sustainable forest management translates into more funding and expertise for Zambia’s carbon credit projects. As a pilot country for the REDD+ mechanism (Reducing Emissions from Deforestation and Forest Degradation in developing countries), funded by developed nations, Zambia benefits from financing carbon offsets aimed at protecting forests and native forests. The demand for carbon credits is increasing as businesses and governments strive to meet their climate commitments. Zambia’s rich natural resources and forests provide a competitive edge in the global carbon market. The global carbon offset market was valued at US$331.8 billion in 2022 and is expected to grow by 31% per annum from 2024 to 2028. Significant momentum exists to develop carbon markets in Zambia, with major multinationals like Total Energies and ENI expressing interest in investing in Zambia’s carbon market and requiring expert forest management services.

Reflecting its commitment to carbon credits, Zambia’s Eighth National Development Plan and Green Economy and Climate Change Act, offer incentives for investors including tax benefits for carbon credit projects. Engaging in Zambia’s carbon market can enhance a business's Environmental, Social, and Governance (ESG) ratings, attracting investors and opening new revenue streams. PwC, Deloitte and Forbes studies found that ESG factors increasingly drive investment strategies. Nearly half of the investors surveyed (49%) indicated a willingness to divest from companies not taking sufficient action on ESG issues. More than half (59%) would likely vote against executive pay agreements due to inadequate ESG action, and a third have already done so. Additionally, 79% of respondents consider how a company manages ESG risks and opportunities an important factor in their investment decision-making.

Environmentally, emissions such as greenhouse gases and other pollutants should be minimized. Land use concerns like deforestation and biodiversity disclosures also fall under the Environmental Pillar. Companies report on positive sustainability impacts, which may translate into long-term business advantages. Socially, companies manage employee development and labour practices, ensure product safety and quality, and uphold supply chain labour and health standards. Governance-wise, shareholders' rights, board diversity, executive compensation aligned with sustainability performance, and corporate behaviour, including anti-competitive practices and corruption, are key considerations.

Globally, ESG has become a responsibility with nations reducing greenhouse gas emissions to protect the environment. Zambia has taken meaningful steps by investing in carbon credits. According to the Integrated Land Use Assessment II (ILUA II) forest inventory data released in 2016, the total carbon stock in forested land was estimated at 1,218.3 million tons, half located in Northwestern, Muchinga, and Western provinces. A 2015 United Nations Environmental Programme (UNEP) report estimated the carbon stock market value of one hectare of forest at approximately US$150, with intact forests reaching up to US$750 per hectare depending on location. Annual carbon sequestration values range from US$16 to US$30 per hectare. Non-Timber Forest Products (NTFPs) offer substantial opportunities for both carbon offset generation and rural development. NTFPs include honey, mushrooms, mopane worms (caterpillars), cosmetics, turmeric oils, and medicinal plants. In 2015, NTFPs in Zambia's forests were valued at approximately US$135.8 million. A 2018 Indaba Agricultural Policy Research Institute study projected the potential market value at around US$489 million.

Recently, the export of NTFPs, especially honey and beeswax, has grown rapidly. Zambia’s small-scale beekeepers, particularly in the Northwest province, supply over 90% of the country's natural honey, some of which is exported to European and U.S. markets under well-known Zambian brands such as Ubuchi, Zambezi Gold, and Safaribee. Zambia has obtained EU certification to export honey and beeswax to Europe, with plans to expand production and exports. As of 2022, the total export value of honey reached US$14.3 million. As a signatory to the Paris Agreement, Zambia aligns with global climate targets, making it an attractive destination for international carbon investors.

Overcoming challenges: the road ahead

While Zambia holds immense potential, several challenges need to be tackled. The absence of multi-facility economic zones for forest-related projects hampers certain investment incentives. Although some tax benefits exist, carbon credit investments currently miss out on widespread tax advantages. Political factors can introduce uncertainty in Zambia’s carbon credit market, causing volatility for investors. Moreover, the carbon credit market remains unpredictable, with prices swayed by global trends and supply-demand dynamics.

Local community challenges also present significant hurdles. Traditional activities like grazing and fire-setting disrupt carbon trading projects. Transporting and managing carbon credits prove difficult, and foreign investors face restrictions on land ownership, complicating long-term investments. Most of Zambia's forests are in rural areas inhabited by native populations, where access to quality education is often lacking. Dependence on forests for survival, such as charcoal burning for cooking and income, is common.

People in rural areas generally lack awareness about the benefits of carbon credits and their potential economic value. Convincing individuals to abandon activities like charcoal burning in favor of forest conservation for carbon offsets requires extensive education and training. However, the success of the Luangwa community project shows that rural populations can understand and participate in carbon credit investments when adequately informed and supported.

Despite the enactment of the Green Economy and Climate Change Act, No. 18 of 2024, which governs carbon credits, the Act remains non-operational as the Commencement Order has not yet been issued. This delay means there is no appointed Commissioner, Director, or Authorizer to enforce carbon trading under the Act, presenting a significant challenge that could lead to further delays or complications, potentially hindering the enforceability of the Act. Additionally, Section 46(1) of the Act requires the Minister to issue Regulations through Statutory Instruments to facilitate its proper implementation. However, no such Statutory Instruments or Regulations have been issued, further limiting the effective operation of the Act.

Case study

The Luangwa Community Project:

The Luangwa Community Development Project is the largest project in Africa by size and the largest in the world by quantified social impact. The project has directly benefited over 222,000 people in the community, resulting in a 220% increase in household average income between 2016, prior to the project’s implementation, and 2022. The benefit-sharing mechanism includes cash distribution, forest protection, livelihood activities, capacity building, and employment creation. The Luangwa Community Forest Project oversees four chiefdoms: Sandwe, Luembe, Nyalugwe, and Mwape.

Since 2020, each chiefdom has been receiving carbon funds, which have been allocated towards the development of community infrastructure. Notable projects include the construction of a clinic in Senior Chief Luembe’s Chiefdom, a one-room classroom block funded by carbon credits in Chief Luembe’s Chiefdom, a guest house built in Chief Makhanya’s Chiefdom to generate income for the community, and a COMACO shed established in Chief Nyamphande’s Chiefdom to support local income-generating initiatives. This is a prime example of the success of carbon credit projects, demonstrating both the positive impact they have on local communities and the significant potential for growth in Zambia.

The Luangwa Community Forest Project highlights the promise of carbon credits in driving sustainable development and improving livelihoods across the country. To date, the project has protected over 565 million trees and ensured that sustainable conservation and preservation have been imprinted into the hearts and minds of our communities. This has been done by developing initiatives that offer communities alternatives and viable income revenues that do not involve damage to trees and biodiversity.

Compliance and monitoring

The Green Economy and Climate Change Act outlines the compliance requirements for individuals or organizations wishing to engage in carbon trading, as set forth in Part VI, Section 23. Under this framework, it is imperative for any entity involved in carbon trading to first obtain a certificate of authorization in accordance with the provisions of the Act. Engaging in carbon trading without such a certificate is strictly prohibited and, if discovered, may result in severe penalties, including a fine of up to 500,000 penalty units or ZMW 200,000, imprisonment for a term of up to three years, or both.

To obtain this certificate, applicants must submit a formal application to the Director, adhering to the prescribed process and format, and accompanied by the required fee. The Director is mandated to render a decision on the application within 30 days, either approving or rejecting the request. This process ensures that carbon trading activities are properly regulated, reinforcing the legal framework designed to support the transition to a green economy.

Further discussing compliance to better assist with a successful application, the Director will take the following into consideration when making a decision on the issuance of a certificate of authorization in accordance with section 24 of the Act:

1. preservation of environmental integrity;
2. avoidance of double counting;
3. participation and benefit sharing in the profits arising from carbon trading with local communities;
4. demonstration of additionality; and
5. promotion of sustainable development.

Once granted, a certificate of authorization would be valid for up to 5 years.

Additionally, Section 33 of the Act is crucial in highlighting the importance of compliance. It specifies that if there is any reason to believe that an individual or organization involved in carbon credit trading is non-compliant or in violation of the regulations, they may be issued a Compliance Order. This order immediately suspends their certificate of authorization and requires them to take specific corrective actions to meet the Act's objectives. Failure to comply with these requirements could lead to the revocation of the certificate of authorization or other actions deemed appropriate by the Director.

Conclusion: the way forward for Zambia in the carbon credit market

Zambia stands at a pivotal moment in developing its carbon credit market, with significant opportunities for growth and investment. Zambia has made strides in aligning carbon credit management practices with international guidelines and standards, enhancing its credibility in the global market and attracting investment. The recent World Bank grant for forestry products is a step in the right direction, and with growing global concern about environmental preservation, Zambia is positioning itself as a leader in carbon credits. By showcasing our capacity to generate carbon credits, we open doors for further investment, particularly in industries seeking to offset emissions. Technological advancements in carbon harvesting and transportation are also playing a key role in improving the efficiency of carbon credit generation, enhancing both the quantity and quality of credits produced.

Additionally, transparency and community involvement are critical for the long-term success of Zambia's carbon credit market. Ensuring that both investors and local communities benefit from these projects encourages active participation and fosters sustainable forest management. Educating rural communities about the potential of carbon credits, such as through beekeeping or other carbon offset activities, empowers them to engage in and benefit from the market. Engaging experts in carbon markets helps Zambia navigate market fluctuations and capitalize on emerging trends. With our rich forest resources, strong legal framework, and commitment to sustainable development, Zambia is well-positioned to become a key player in the global carbon credit market. By combining international alignment, technological development, and community participation, we are driving both environmental sustainability and economic growth.