eBusiness Weekly
Business Writer
Zimbabwe has launched an investigation into potential money laundering and tax evasion within the carbon credit market prior to the implementation of its framework designed to ensure transparency in the trading of the “green” securities.
Environment, Climate and Wildlife Minister, Mangaliso Ndlovu, recently told Business Weekly that the opaque nature of the carbon trading market before Government intervention likely led to widespread money laundering and tax evasion.
Carbon trading, also known as emissions trading, is a market-based approach to regulate and reduce greenhouse gas emissions, primarily carbon dioxide. It works by assigning a price to carbon emissions and allowing companies or individuals to buy and sell permits to emit a certain amount of carbon. This system incentivises entities to reduce their emissions, as they can benefit financially.
“We are pursuing quite a number of projects to see if they did not engage in money laundering; to see if they did not engage in tax evasion to make sure that corrective measures are taken,” said Ndlovu. “We will follow the money.”
In August 2023, Zimbabwe passed a law governing the trading of carbon credits, significantly increasing the share of revenue received by project proponents. This share now stands at 70 percent, a substantial jump from the previous 20 percent for foreign investors and 30 percent for local participants. The remainder will constitute an Environmental Levy to be deposited in the Environment Fund, says the regulations.
This shall apply during the first 10 years of the project and thereafter, the contract can be “re-negotiated taking into account the prevailing circumstances.”
At least 25 percent of the 70 percent retained by the project proponent will be invested in the community in consultation with the local authorities while the owners shall retain not more than 75 percent. The Environmental Levy deposited in the fund shall be shared as follows; investment in climate change adaptation and low carbon, 55 percent; loss and damage relief fund, 5 percent; local authority levies, 10 percent; administrative costs, 15 percent and 15 percent to the Treasury.
The regulations also invalidated all existing contracts and provided a limited timeframe for participants to adapt their projects to comply with the new framework.
According to reports, Zimbabwe is believed to be the world’s 12th largest producer of offsets, with 4,2 million credits generated from 30 projects.
The country’s first and largest project, encompassing a 785 000-hectare stretch of forest in northern Kariba, was run in part by the South Pole, the world’s foremost seller of offset.
However, the project promoters are being probed for allegedly making super profits by inflating the number of carbon credits and side lining local communities.
There is also suspicion some players have been clandestinely profiteering in the brisk carbon entrepreneurship by claiming they are conserving forests even in areas under Forestry Commission and the Zimbabwe Parks and Wildlife Management Authority.
Ndlovu said Zimbabwe was among the first countries to develop and implement a government-approved framework for transparency in the carbon credit market.
“We have (also) come up with a legislation governing the management of carbon credit. We have gone a step further to give a widow period to those who had started contracts without the government knowledge to come forward for regularisation.
“The Kariba project is typical example of why it was necessary to nullify those contracts.
“Yes, it is the first carbon credit project Zimbabwe ever did and unfortunately at a time there was no framework. Because of that absence of oversight, a lot of things have been happening including non-remittances to the State, non-remittances to the communities because there was no clear framework for that. It is perhaps not the only one.
Ndlovu dismissed the negative publicity surrounding carbon credit markets as unfounded noise, attributing it to those with vested interests in dubious deals previously nullified by the Government. The minister also stressed that such attacks did not reflect the progress Zimbabwe made in the carbon credit space.
The recent US$1,5 billion carbon credit deal between Zimbabwe and the United Arab Emirates generated a lot of speculation and controversy, with some suggesting it is not good for the country. While the potential benefits of the deal are significant, concern have been raised about transparency, local communities and land ownership.
“It is just a non-event; we know it is sponsored noise and it is merely coming from the fact that because of the dubious deals that have been there which we have nullified, there are people who then want to attack the progress that we have been made.
“It does not make sense to hear international headlines saying Zimbabwe has sold 20 percent of its land…(but there) are no reports of the projects that have been there before the Government put in place measures to ensure transparency.
“It is something that does not deserve to be taken serious. (In fact), a number of countries have been enquiring the main partner that the Government has engaged and I know two countries that will be signing the agreements,” said Ndlovu.
Carbon credits remain a valuable tool in the fight against climate change. As the world transitions to a low-carbon economy, the demand for carbon credits is likely to increase, driving further investment in clean technologies and emission reduction projects.
European researchers have reported in a new study that carbon dioxide (CO2) emissions from fossil fuels reached a record high in 2023. While the United States and Europe saw decreases in their fossil fuel emissions, the global total still rose.
Scientists warn that global action to cut these emissions must be accelerated to prevent dangerous climate change.
