It is the best of times and worst of times for climate finance. The US withdrawal from a swathe of climate bodies and treaties, a disappointing new climate finance goal, development aid cuts and limited progress on reforms to global financial architecture mean choppy waters for African countries looking to implement their climate plans and development agendas.
In the midst of this uncertainty also lies opportunity. Institutions such as the Africa Finance Corporation and the African Development Bank have called for African countries to mobilise more domestic resources to help them build resilience, assert sovereignty and promote local industrialisation. Veronica Jakarasi, a development finance analyst specialising in climate change management and diplomacy argues that the mix of finance is part of the problem. “Whilst we talk about investments to unlock funding, the concern is whether we can talk about investments in the absence of loans. The other question of concern is can we then talk about sustainable development through grants? How do we look at the blended approach of grant financing and concessional loan financing to support sustainable development and climate action across countries? There are certain guardrails or safeguards that we need to put in place as countries,” says Jakarasi. In this context, she argues that now is the time for developing countries to explore new financial mechanisms that are suitable for addressing Africa’s climate needs.
One mechanism that has received significant attention is the potential role of carbon finance generated by the sale and transfer of carbon credits. Over the past few years, countries have been firming up rules to operationalize Article 6 of the Paris Agreement, including the Paris Agreement Crediting Mechanism (PACM) and the rules relating to ITMOs: mitigation outcomes that are transferred abroad to enable other countries to meet their NDCs, or for CORSIA or other international purposes. Developments have also been apace in the region, where several African countries have made progress in bolstering their domestic carbon market frameworks and regulations. In Southern Africa, Malawi, Namibiaand Tanzania, Zambia and Zimbabwe have established carbon market frameworks, with most also having dedicated regulations to enable their implementation, while others like South Africa and Botswana are in the process of developing their frameworks.
But to date the region has lacked a collective body to support these developments, something that East and West Africa have hitherto pursued under their respective Alliances on Carbon Markets and Climate Finance. This is set to change with the introduction of the Southern Africa Alliance on Carbon Markets and Climate Finance, which was launched in March 2026. Encompassing eight member states, this new alliance aims to build capacity across the region and align national policies to avoid fragmentation. It mirrors SADC’s proposed Regional Carbon Market Framework, which in part aims to facilitate economic development and improve access to climate finance.
For Jakarasi, the Alliance can be a key component of boosting the region’s investment profile and standardising carbon market systems. To date, African carbon credits have been significantly cheaper, often trading at values significantly lower than in global north markets. Regional bodies and institutions are working hard to change this. “It is fundamental to supporting capacity building, lobbying for the adequate pricing of carbon credits, as well as increasing the convertibility of carbon credits into monetisation”, says Jakarasi. This approach means that the Alliance would not compete with national programmes, but rather work to prevent a regulatory patchwork across the region.
Coordination also unlocks collective bargaining power when seeking investments for carbon credit projects, reduces competition between countries and potential lowball offers from buyers, ensures equal sharing of profits between participating countries, and opens the door for cross-border deals and projects. “It’s difficult to mobilise resources as a country. But if you are a consortium, then you can build on the transboundary benefits,” says Jakarasi.
A regional alliance also facilitates interoperability amongst markets by offering an opportunity to harmonise baselines, create a forum to discuss the option of a shared carbon registry and the ability to align decisions, such as standardised authorisation letters under Article 6.2. of the Paris Agreement.
The Alliance also addresses risk in carbon trading through supporting monitoring, reporting and verification processes across national systems. Considering that previous large-scale carbon credit programmes (such as Zimbabwe’s Kariba REDD+ project) failed in part due to credibility and integrity concerns, verifiable and credible carbon credits boost investor confidence across Southern Africa as a whole. “We want to ensure that there is environmental integrity. We want to ensure that there is no double counting of the credits, that the credits created are at a premium and that everyone has the confidence that they are buying quality and existing credits,” explains Jakarasi.
Historically, the role of scaled carbon markets in Africa has been controversial. Ensuring high integrity markets is key not only to overcoming perceptions of risk, fostering social buy-in and demonstrating integrity in the region, but also to ensure their longevity and demand in international markets. The EU has recently revisited its longstanding position to permit the use of international carbon credits, such as those purchased from African markets, to meet the bloc’s 2040 mitigation target. It is currently discussing whether to allow the use of high integrity credits as part payment under its carbon border mechanism, the CBAM, a move that would help shore up domestic revenues instead of paying them abroad. Individual and collective regional efforts in Southern Africa to develop the necessary regulations and safeguards to support high integrity credits will go a long way in solidifying confidence in this sector of the market, and will help to ensure that they can be used in compliance systems both in the EU and elsewhere. Market integrity, harmonization and a collective response to international developments that affect African carbon markets such as the CBAM, is something that the Southern African Alliance could be instrumental in supporting.
