Beyond the export reflex: building sovereign carbon markets for an NDC-first future
Africa risks repeating past mistakes in carbon markets. Will it remain a low-cost credit supplier or claim sovereign control to shape its own climate and economic future?
Summary
- Article 6.4 of the Paris Agreement launches a UN-supervised global carbon market offering Africa potential revenue of USD 6 billion annually and 30 million jobs by 2030. However, it requires careful strategy.
- African nations face a choice: the ‘Kyoto reflex’ of export-led credits or a ‘Paris mindset’ prioritising domestic markets to meet national climate targets first.
- Readiness depends on five pillars: policy and institutions, registry and monitoring, reporting and verification (MRV) systems, sovereign authorisation with corresponding adjustments, community benefit safeguards, and domestic finance and market access.
- Countries are on varied paths: South Africa and Egypt lead with domestic-first strategies, Kenya and Nigeria pivot between domestic and export use, and Ghana and Rwanda excel in export infrastructure.
- True leadership requires prioritising domestic climate ambition, legislating community benefit-sharing, strengthening registries and using trade and finance policies to retain value in-country while strategically leveraging global markets.
A new rulebook and mechanism
Article 6.4 of the Paris Agreement establishes a centralised, UN-supervised market mechanism that succeeds the Kyoto Protocol's Clean Development Mechanism (CDM). It aims to create a global carbon market for issuing and trading credits, known as Article 6.4 Emission Reductions (A6.4ERs), which are tracked in a central UN registry overseen by a supervisory body. The mechanism has decisively moved from negotiation to early-stage implementation, with key operational components now completed or under development:
- Sustainable development (SD) tool: Mandates robust environmental and social safeguards, including requirements for local stakeholder consultation and monitoring of sustainable development indicators.
- Appeals and grievance procedure: Provides a formal process for recourse to address disputes and concerns from affected stakeholders.
- Registry procedures: Define the technical rules governing the issuance, transfer, authorisation and retirement of A6.4ERs, ensuring transparency and preventing double counting.
Host countries may authorise A6.4ERs for various uses, including for other countries’ NDCs or for international mitigation purposes (e.g., CORSIA). Once a credit is authorised for international use, it is subject to a corresponding adjustment (CA), an accounting process that ensures the emission reduction is counted only once by the buyer, not by the host/issuing country. This operationalisation signals that the era of preparation is over; the era of execution has begun.1
Parallel to the multilateral Article 6.4, Article 6.2 facilitates bilateral and plurilateral ‘cooperative approaches’ between countries to trade internationally-transferred mitigation outcomes (ITMOs). This track has served as a critical proving ground, allowing nations to gain hands-on experience with the foundational elements of international carbon trading.
The landmark Switzerland-Ghana agreement under Article 6.2 has provided African institutions with a real-world stress test of the required institutional plumbing.2 Through this and other emerging partnerships (e.g., with Singapore), nations like Ghana and Rwanda have trialled the development of letters of authorisation (LOAs), the application of corresponding adjustments and the establishment of interoperable registries. The lessons from Article 6.2 pilots are directly transferable, significantly lowering the barrier to entry for participation in the more complex Article 6.4.
A paradigm shift: from Kyoto to Paris
The sophistication of the Article 6 rulebook masks a simple, underlying tension between two competing philosophies for market engagement: export or domestic use. In practice, these represent a spectrum countries can traverse as their capabilities improve.
The export market (revenue) philosophy: a ‘Kyoto reflex’
Africa's historical experience with carbon markets was defined by the Clean Development Mechanism (CDM), where its participation was marginal (≤2% of projects).3 This legacy cemented an export-oriented ‘Kyoto mindset’, where the primary objective is to generate and sell (low-cost) credits to foreign buyers. This reflex is reinforced by several factors:
- Legacy infrastructure: The entire international consultant and project developer ecosystem is conditioned to serve foreign demand.
- Thin domestic demand: With few African economies having implemented a domestic carbon tax or emissions trading scheme (ETS), the only ‘real’ money appears to be from abroad.
- Fiscal caution: Finance ministries remain wary of introducing domestic carbon prices and taxes that could impact economic competitiveness.
- Gravity of donor programmes: Bilateral Article 6.2 agreements often come with technical and financial support, naturally pulling supply chains outward.
The consequence is a price asymmetry. As former African Development Bank (AfDB) President Akinwunmi Adesina warned, African credits have been offered at prices as low as USD 1-3 per tonne (USD 1-3/t), a fraction of their value in compliance markets, creating a high risk of exploitative ‘carbon grabs’.4
The domestic market (decarbonisation) philosophy: a ‘Paris mindset’
The Paris Agreement needs a fundamental shift. Its architecture of registries, authorisation and corresponding adjustments (CAs) is explicitly designed to empower countries to manage their own decarbonisation paths.5 A ‘Paris mindset’ reframes carbon markets as a sovereign tool for delivering a country's own NDC first,via domestic compliance markets, by shifting focus from international offsetting to national climate ambition and policy integration.
In this model, the domestic use of credits is the priority, whether for compliance with a national carbon tax or to meet sectoral targets. The authorisation of credits for export becomes a strategic policy choice to generate additional finance from a calculated surplus, not the default monetisation route. This approach ensures that the primary benefits of environmental, social and economic mitigation activities are retained in-country, building a coalition for climate action. The experience of some Global South nations, which have in the past cancelled credits to meet their own targets, serves as a powerful precedent for this sovereign-first approach.
The five pillars of a sovereign carbon strategy
Readiness is not a binary state; it is the deliberate construction of institutions that serve a sovereign, NDC-first vision. Based on the West African Alliance on Carbon Markets and Climate Finance,6 I have defined five interdependent pillars to establish readiness.
- Pillar 1 – from export policy to national climate economy policy: An export-focused policy requires little more than a designated national authority (DNA) to sign off on projects. A sovereign strategy demands an integrated plan that connects carbon pricing, sectoral NDC targets and industrial policy. It requires a clear definition of which credits and sectors are reserved for domestic use, and which are available for international sale. Regional guides, such as the West African Alliance's Article 6 Readiness Blueprint, provide implementable frameworks.
- Pillar 2 – building the ‘dual-use’ national registry: The national registry is the central nervous system of the carbon market. It must not only ‘talk’ to the UN's Article 6.4 system for exports, but must be primarily designed to issue, track and retire credits against domestic obligations. The operational Ghana Carbon Registry (GCR)7 and Kenya's legally mandated National Carbon Registry (Republic of Kenya, 2024) are promising prototypes, but full dual-use and MRV remains under development.
- Pillar 3 – authorisation as a sovereign act: under the ‘Kyoto reflex’, project authorisation amounts to transactional approval. Under the ‘Paris mindset’, it is a sovereign decision about the national carbon budget. The discipline of applying CAs is the key mechanism for enforcing this choice, ensuring environmental integrity. Rwanda's pioneering application of a CA to a project provides a tangible model for this critical practice.8
- Pillar 4 – legislating community benefits to build a domestic coalition: The Article 6.4 SD tool provides a global baseline for safeguards. A sovereign strategy goes further by writing benefit-sharing into national law. Kenya's groundbreaking Carbon Markets Regulations (2024) legally mandate a 40% revenue share for communities from land-based projects (25% from non-land-based).9 This hardwires equity into the market, transforming potential local opposition into a powerful domestic constituency for climate action.
- Pillar 5 – financing local markets, not just export pipelines: The focus of finance must shift from simply attracting foreign investment for export projects to catalysing domestic market liquidity. The AfDB's new Africa Carbon Support Facility is vital, especially if it helps nations list credits on local exchanges (like the Egyptian Exchange) and establish domestic price signals, directly countering the threat of undervaluation.10
Table 1: The five pillars
| Pillar | Readiness test | African examples | Gaps/risks |
|---|---|---|---|
| 1. Policy & Institutions | DNA legally empowered; national 6.4 strategy | Ghana Carbon Market Office; Kenya Climate Change (Amend.) Act 2023 | Many countries lack enabling laws |
| 2. Registry & MRV | National registry interoperable with UN registry | Ghana Carbon Registry (GCR); Kenya registry mandated in 2024 regs | Fragmented or manual systems |
| 3. Authorisation & CAs | LOA templates; annual CA reporting | Rwanda’s first CA (Gold Standard 2023) | Few nations have CA workflows |
| 4. Safeguards & Benefit-share | SD tool domesticated; statutory revenue share | Kenya 40%/25% rule; SB grievance channel | Enforcement & free, prior and informed consent (FPIC) capacity |
| 5. Finance & Market Access | Access to concessional finance & exchanges | AfDB Carbon Support Facility (AfDB 2025b); Egyptian Exchange (EGX) carbon board | Price asymmetry, limited liquidity |
A continental spectrum of readiness
African nations are already choosing their paths, creating a diverse landscape of action, ambition and strategy.
Table 2: Continental pathways
| Feature / Country | South Africa | Kenya | Ghana | Rwanda | Nigeria | Egypt | Morocco |
|---|---|---|---|---|---|---|---|
| Pillar 1: Policy | Operating carbon tax | Framework adopted (Climate Change [Carbon Markets] Regulations, 2024) | Framework adopted (Carbon Market Office [CMO]) | Framework adopted (National Carbon Market Framework [NCMF]) | Emerging CCA-2021 & Carbon Market Activation Policy (CMAP) | Regulated VCM on Egyptian Exchange (EGX) | Emerging (CBAM-driven) |
| Pillar 2: Registry | Domestic system | Mandated (2024), being digitised | Ongoing operationalisation (Ghana Carbon Registry [GCR]) | Planned (2025) | Planned (2025) | System for EGX | Planned |
| Pillar 3: Authorisation / CA | In development | Rules in place (2024) | Operational procedures | Demonstrated (2023) | Rules in draft | In development | In development |
| Pillar 4: Benefits | N/A (domestic) | Yes (40% / 25% share) | In policy discussion | In policy discussion | Rules in draft | N/A | N/A |
| Pillar 5: Finance | Domestic market liquidity | Seeking strategic partners | Bilateral A6.2 deals | Bilateral A6.2 deals | Seeking foreign direct investment (FDI) | Domestic exchange trading | Trade-driven investment |
| Dominant mindset | Paris (domestic) | Hybrid (pivoting to Paris) | Kyoto (export-led) | Kyoto (export-led) | Hybrid | Paris (domestic) | Paris (trade-driven) |
Groupings and analysis
- The Paris mindset in action – South Africa & Egypt: With its operating carbon tax, South Africa's market is fundamentally domestic, serving national compliance needs first.11 Egypt has used its financial regulators to create a domestic venue on the Egyptian Exchange (EGX) for trading carbon certificates, building local market capacity from the ground up.12
- The hybrids – Kenya & Nigeria: These nations sit at a crossroads. Their impressive new infrastructure is ‘dual use’, but immediate actions are often driven by the promise of foreign investment. Kenya is the most advanced in pivoting toward a Paris mindset, thanks to its powerful benefit-sharing laws (Pillar 4) that anchor the market in domestic reality.13 Nigeria's Climate Change Act (2021)14 and emerging Carbon Market Activation Policy suggest a strong foundation for both domestic and international trading, with high-potential sectors like flare-gas reduction, but we will have to wait until the final framework documentation is authorised by the Federal Executive Council.
- The export leaders – Ghana & Rwanda: These nations are regional frontrunners in operationalising the technical requirements for international trade. Their impressive progress, including Ghana's first ITMO issuance and Rwanda's early CA demonstration, has been driven by export-focused Article 6.2 deals. The challenge now is to leverage this technical leadership to build a corresponding domestic market.
- New drivers for domestic action – Morocco: Morocco shows that the impetus for domestic markets can come from other directions. It is building its carbon pricing framework in direct response to the EU's Carbon Border Adjustment Mechanism (CBAM), a trade imperative that necessitates a credible domestic carbon price.
Key risks to sustainable value
Readiness is fraught with risks requiring proactive management and institutional capacity:
- Value capture asymmetry: The ‘USD 1-3/t’ problem – where African credits generate minimal international buying interest – will persist unless African regulators develop domestic market procurement strategies, such as pooled buying, minimum price floors and listing on local exchanges, to negotiate from a position of strength.15
- Safeguards on paper vs. practice: The SD tool's requirements are only as good as their implementation. Consistent application of free, prior and informed consent (FPIC) principles and functioning grievance channels are vital to prevent conflict and protect community rights.
- Registry fragmentation: A patchwork of non-interoperable national systems would be a fatal flaw. Adherence to UN technical standards and regional cooperation through bodies like the Eastern Africa Alliance on Carbon Markets, which maintains and monitors these standards, is essential for a seamless global market.
Conclusions and recommendations
The question is no longer whether Africa is ready for Article 6.4. The rules are taking shape. Yet, although institutional capacity is growing in some countries, it remains under-developed in many others. The real question is: Are individual African countries ready to lead by developing their domestic markets? True readiness lies in the confident choice to prioritise the domestic good and use the global market as a tool, rather than being subject to its movements.
To execute a decisive pivot, African regulators should focus on the following actions:
- Ignite domestic demand: Introduce a carbon tax or emissions trading system (ETS), even at a low price, to create a guaranteed local buyer and shift the market's centre of gravity inward.
- Make the National Registry the hub: Design and brand the registry as the core of the national climate economy, with capability for domestic retirements from day one.
- Define and defend the NDC: Publish a clear policy on which sectors are reserved for meeting the NDC, making export authorisation a conscious strategic exception.
- Make benefit-sharing non-negotiable: Following Kenya's lead, legislate a mandatory, significant and transparent share of carbon revenue for local communities.
- Use trade policy as a lever: Proactively address measures like CBAM by establishing a credible domestic carbon price, turning a potential threat into a driver for modernisation.
By embedding Article 6.4 within a robust national strategy, African countries can pivot from being participants in a market designed elsewhere to fulfilling their potential as protagonists shaping a climate-resilient future of their own making.
Endnotes
[1] UNFCCC. (n.d.). Paris Agreement crediting mechanism. United Nations Climate Change.
[2] Klik Foundation. (2025, July 7). Ghana and Switzerland pioneer Africa’s first ITMO issuance under Paris Agreement's Article 6.2 for NDC use.
[3] UNCTAD. (2024). Trade and development report 2023. Chapter VI: The need for financial reform for climate-aligned development. United Nations.
[4] Pilling, D. (2025, April 5). ‘Carbon grab’ replacing ‘land grab’ in Africa. Financial Times.
[5] UNEP-CCC. (2016). Understanding the Paris Agreement: analysing the reporting requirements under the enhanced transparency framework.
[6] West African Alliance on Carbon Markets and Climate Finance. (2022). Article 6 readiness blueprint. Perspectives Climate Group.
[7] Environmental Protection Agency Ghana. (n.d.). The Ghana Carbon Registry. Government of Ghana.
[8] Gold Standard. (2023). Beyond national commitments: Rwanda, atmosfair and Gold Standard launch first carbon credit aligned with Paris Article 6. Gold Standard.
[9] Republic of Kenya. (2024). The Climate Change (carbon markets) Regulations, 2024. Kenya Gazette Supplement No. 126, Legislative Supplement No. 81. Government Printer.
[10] Miriri, D. (2025, May 29). African Development Bank to launch carbon credits support facility. Reuters.
[11] National Treasury, Republic of South Africa. (2024). Carbon tax discussion paper. Republic of South Africa.
[12] Baker McKenzie. (2024, August 29). Egypt: unlocking opportunities – navigating Egypt’s new carbon trading regulations
[13] Republic of Kenya. (2024). The Climate Change (Carbon Markets) Regulations, 2024. Kenya Gazette Supplement No. 126, Legislative Supplement No. 81. Government Printer.
[14] Federal Republic of Nigeria. (2021). Climate Change Act, 2021. Federal Government of Nigeria.
[15] Pilling, D. (2025, April 5). ‘Carbon grab’ replacing ‘land grab’ in Africa. Financial Times.
References
About the author
Ebipere K. Clark
Ebipere K. Clark, Managing Partner at Frontier-Alpha LLP, is a seasoned consultant in capital markets, energy, infrastructure, climate policy & finance. Former Special Adviser to CBN Governor & Technical Adviser to InfraCorp CEO.
