Sustainable Development at Sea: Exploring the Interplay of Carbon Trading and the Blue Economy in Nigeria -By John O. Oladipo

Nigeria, as the most populous and largest economy in Africa, has a significant role to play in the global efforts to combat climate change and promote sustainable development. One of the ways that Nigeria can contribute to these goals is by participating in the carbon trading market and harnessing the potential of its blue economy.

Carbon trading is a mechanism that allows countries and entities to buy and sell carbon credits, which represent a reduction or avoidance of greenhouse gas (GHG) emissions. By putting a price on carbon, carbon trading creates an incentive for low-carbon development and generates revenue for climate finance. According to the African Carbon Markets Initiative (ACMI), Africa can produce up to 300 million carbon credits per year by 2030, which at US$20 per credit would earn the continent more than US$6 billion annually[1]. Nigeria has the potential to produce up to 30 million carbon credits per year by 2030, which at US$20 per credit would earn Nigeria alone more than US$500 million annually. By 2050, over US$120 billion and 110 million jobs will be supported by the annual production of over 1.5 billion carbon credits in Africa[2].

Nigeria has expressed its commitment to the Paris Agreement, which aims to limit the global temperature rise to well below 2°C above pre-industrial levels. Nigeria has pledged to reduce its GHG emissions by 20% by 2030, compared to a business-as-usual scenario, and by 47% with international support[3]. Nigeria also announced that it will aim to reach net-zero emissions by 2060 at the COP26 climate summit in 2021[4].

To achieve these targets, Nigeria has established a legal framework for carbon emission trading through the Climate Change Act of 2021, which provides for the reduction of GHG emissions. The Act also establishes the National Council on Climate Change (NCCC) and saddles the NCCC with the duty to collaborate with the Ministry responsible for Environment and the Ministry responsible for Trade to develop and implement carbon emission trading. The NCCC has published regulatory guidance on Nigeria’s carbon market approach, which aligns with the Paris Agreement. These mechanisms include internationally transferred mitigation outcomes (ITMOs), which allow for the trade of emission reductions between countries, and corresponding adjustments, which ensure that double counting of emission reductions is avoided.

One of the challenges that Nigeria faces in developing its carbon market is the lack of a clear and consistent carbon pricing system, which would provide a signal and an incentive for low-carbon development. The Nigerian government is working on establishing a carbon tax system, which would impose charges on entities that emit beyond a certain limit of greenhouse gas emissions[5]. The carbon tax rate and structure are expected to reflect the social and environmental costs of emissions and the benefits of emission reductions.

It is important to note that carbon trading is a controversial and complex issue with different schools of thought. Arguments in support of carbon trading include that it is an effective and flexible way to reduce GHG emissions by creating a market incentive for low-carbon development. That is, Carbontrading allows entities that can reduce their emissions at a lower cost to sell their surplus carbon credits to entities that face higher costs of emission reduction. This way, the overall emission reduction target can be achieved at the lowest possible cost for society. Carbon trading also generates revenue for climate finance, which can be used to support mitigation and adaptation measures in developing countries, as well as to support low-income and vulnerable groups. Carbon trading can also foster innovation and technology transfer in low-carbon sectors, such as renewable energy, energy efficiency, and carbon capture and storage.

On the other hand, the critics of carbon trading argue that it is ineffective and unjust in addressing the root causes and consequences of climate change. Carbon trading does not guarantee that the emission reduction target will be met, as it depends on the supply and demand of carbon credits, which are influenced by various factors, such as economic growth, industry lobbying, and political will. Carbon trading may also create perverse incentives for entities to increase their emissions in order to sell more credits or to invest in dubious or harmful projects that claim to reduce emissions, such as large-scale monoculture plantations, waste incinerators, or coal power plants. Carbon trading may also have negative social and environmental impacts, such as displacing local communities, violating human rights, destroying biodiversity, and increasing local pollution. Carbon trading may also widen the gap between rich and poor countries, as the former can continue to emit at the expense of the latter[6].

Carbon trading is a contentious issue. Thus, it is important to consider the economic, environmental, and ethical implications of carbon trading before implementing or expanding it. It is also important to complement carbon trading with other policies and measures that can address the structural and systemic drivers of climate change, such as reducing fossil fuel consumption, promoting sustainable consumption and production patterns, and enhancing global cooperation and solidarity.

The concept of blue economy refers to the sustainable use of ocean resources for economic growth, improved livelihoods, and environmental protection. The blue economy encompasses a range of sectors and activities, such as fisheries, aquaculture, tourism, shipping, renewable energy, biotechnology, and seabed mining. The blue economy has enormous potential for Nigeria. According to some estimates, Nigeria’s blue economy could generate up to US$5 billion by 2030[7].

Nigeria has recognized the importance of developing its blue economy in line with its national development plans and its obligations under various international agreements, such as the UN Convention on the Law of the Sea (UNCLOS). Nigeria has also established institutional and legal frameworks for managing its marine resources, such as the Ministry of Marine and Blue Economy, which was created in 2023 to coordinate and implement policies and programmes on blue economy development.

However, common challenges Nigeria should be prepared to tackle in developing its carbon trading market and its blue economy include:

• Enhancing its capacity to measure, report, and verify its GHG emissions and emission reductions;
• Attracting private sector investment and participation in low-carbon projects and activities;
• Ensuring transparency, accountability, and environmental integrity in its carbon market transactions;
• Promoting regional cooperation and integration with other African countries on carbon trading and blue economy issues;
• Addressing the social and economic impacts of climate change and ocean degradation on its vulnerable populations;
• Improving its governance, enforcement, and compliance mechanisms for managing its marine resources;
• Leveraging its comparative advantages in renewable energy, fisheries, tourism, biotechnology, and other blue economy sectors.

In conclusion, the concept of the blue economy and carbon trading represents a dynamic synergy that holds profound economic importance on both local and global scales. Carbon trading and the blue economy offer great opportunities for Nigeria to achieve its climate change mitigation and adaptation goals, as well as its socio-economic development objectives. When we combine the blue economy and carbon trading, a powerful economic ecosystem emerges. Carbon trading provides an additional source of financial support for blue economy initiatives. Revenue generated through carbon credits can be channelled into marine conservation, eco-friendly tourism, sustainable fisheries, and clean energy projects. This not only enhances the economic viability of the blue economy but also ensures its long-term sustainability by aligning it with climate goals and environmental preservation.

Ultimately, the economic importance of the blue economy and carbon trading transcends borders and ideologies. These concepts embody a vision of economic growth that is inextricably linked to the health of our planet and the well-being of future generations. By strategically integrating these two approaches, nations can foster green growth, create jobs, reduce poverty, combat climate change, and protect the invaluable marine ecosystems that support life on Earth. That is, Nigeria can position itself as a leader in Africa’s green and blue transition.

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John O. Oladipo

Partner, Chayfield Law Practice

[1] Climate Champions, ‘Africa Carbon Markets Initiative launched to dramatically expand Africa’s participation in voluntary carbon market’, 2022  https://climatechampions.unfccc.int/africa-carbon-markets-initiative/ Accessed October 26, 2023.

[2]Ibid

[3]Daisy Dunne ‘Carbon Brief Profile: Nigeria ‘, 2023,  https://www.carbonbrief.org/the-carbon-brief-profile-nigeria/ Accessed October 27, 2023.

[4] Ibid

[5]William Ukpe, ‘ ‘ Nairametrics 2023, https://nairametrics.com/2023/02/14/nigeria-to-launch-carbon-tax-system-to-reduce-emissions-and-raise-revenue/ Accessed October 27,2023

[6]Steffen Bohm, ‘ Why are carbon markets failing‘, Guardian 2013, https://www.theguardian.com/sustainable-business/blog/why-are-carbon-markets-failing Accessed October 27, 2023.

[7]ZekeriIdakwo, ‘An Exploratory Look at Nigeria’s $5bn Blue Economy Sector’, Economic Confidential 2023,  https://economicconfidential.com/2023/09/nigeria-blue-economy/ Accessed October 28, 2023.