By Nnanda Kizito Sseruwagi
I wish to first pre-empt the scepticism shared by some people about the feasibility of different modes of climate finance and the efficacy of their impact on mitigating climate change. The climate finance architecture easily seems to be capitalism’s mode of commercialising climate change without solving it. I am partly doubtful of the impact of offsetting emissions through buying carbon credits. However, I believe that to abstain from partaking in this business would only guarantee us a double loss. We lose nothing by being involved, yet we miss out on so many opportunities to raise capital to finance our other development needs if we boycott these international climate change mitigation efforts.
Uganda currently lacks a clear climate financing strategy despite the urgent need to meet its growing cost of addressing climate challenges. We stand to suffer serious economic consequences if we do not act. The recent decades have seen an increase and the frequency of arbitrary climate events in the country which have affected agriculture- the breadwinner industry for the majority of our population.
We are particularly at extreme risk of economically suffering from climate change due to the heavy dependence on farming, a very sensitive sector to our livelihood yet it’s highly vulnerable to climate change. With Agriculture affected, 40% of our GDP could be significantly reduced and 80% of our labour force could be rendered unemployed. A random destabilisation of rain seasons could put our economy on its knees since less than 2 % of farming in this country depends on irrigation.
I do not want to imagine a scenario of a hungry and jobless population and its likely effect on our security and political stability. Many Ugandans might be governable for now because of the high and reliable supply of food and water across the country. We are a country of subsistence farmers. Ugandans may not highly be impacted by the cost of clothes, sugar, spices, cooking oil or gas. These are considered luxury goods in our villages. But a serious decline in food production could detonate a time bomb of incipient political disgruntlement in our people. Therefore, just like Uganda partners with powerful countries on security, it is time we partnered with China on addressing climate change as though it were a security matter; because it is.
China has dedicated a serious stake in our infrastructure development, with a vision to contribute to our industrialization and consequently our development. This is a strategic investment, with a broad shared vision for both Uganda and China. However, the two states cannot blind themselves from factors that could potentially sabotage their grand strategy for development. We need to keep working together to tie any loose ends where our investment in development could be upset.
We would need this partnership because we lack the financial and human resources to adequately invest in the Carbon Credit Market. Just like with the oil industry where we partnered with international firms to negotiate and design our oil and gas agreements, we reasonably need some help here. The global Carbon Credit Market was valued at $103.8 billion in 2023 with a predicted growth at a CAGR (Compounded Annual Growth Rate) of 14.8% from 2024 to 2032. Last year, the value of this market hit a record of $949 billion. This is a market we cannot be indifferent about!
China would find financing us worthwhile because we have one of the most attractive carbon market profiles on the continent. Our carbon market portfolio boasts a total of over 33 million carbon credits issued from the Clean Development Mechanism (CDM) and Voluntary Carbon Market (VCM) standards. A carbon credit is worth about $40 to $80, on average. However, if Uganda sits on its potential in this market, it could fluctuate greatly since just like any other market, it depends on demand and supply.
It is therefore urgent that we collaborate with a major global climate finance funder. China already contributes about $1.2 billion annually to climate finance through multilateral development banks and also contributes $1.4 billion bilaterally. This would be a strong partner to work with on this. The added advantage of working with China, as President Museveni normally quips, is that “…they don’t waste our time.” So, we would efficiently work through the modalities of a partnership in time to find the market still fertile.
The good news is that China has already initiated steps meant to address climate change in Uganda and Africa in general. For example, among other reasons, China’s support for bamboo growing is that it will help in addressing climate change.
Also, the Eighth Ministerial Conference of the Forum on China-Africa Cooperation (FOCAC) held in Dakar, Senegal (29-30th November 2021) adopted a consensus in which 53 African countries and the African Union Commission (AUC) and China agreed on “China-Africa Cooperation on Climate Change.” The two sides further committed to “support efforts to vigorously develop the green economy, advocate a green, low-carbon, circular and sustainable way of development, and work actively to build an environment-friendly society.” With the already functioning China-Africa Environmental Cooperation Center which was established to advance policy dialogue, exchanges and cooperation on environmental protection, Uganda and indeed other African countries should leverage it to advance climate mitigation policies including collaboration on climate financing.
We need to act early to meet the twin challenges and opportunities presented by climate change. On the one hand, we need to mitigate it because it threatens us economically and politically. Secondly, we need to participate in the booming climate change industry as espoused in the Carbon Credit Market. we need a reliable partner to face both challenges. Uganda’s vision for 2040 on achieving upper middle-income status and reducing poverty to 5% could dissipate into the wind if we only focus on infrastructure and energy and forget about potential subversive factors like climate change. Harnessing climate finance should thus be primary to our development agenda.
The writer is a senior research fellow at the Development Watch Centre.