Introduction

Over the years, the world has experienced unprecedented climate change, highly attributed to human activities, which in turn creates long-term shifts in temperatures and weather patterns.  Climatic changes have severely affected various socio-economic activities such as agriculture, natural biodiversity (wild animals, forests, and coastal lives), energy and tourism, amongst others. The extreme changes in weather conditions, such as increased drought, loss of species, severe storms and hotter temperatures necessitate the need for immediate action.  To respond to these situations, governments around the world have adopted and put in place various mechanisms aimed at mitigating these impacts on the climate for sustainable development. One among these mechanisms is carbon trading, otherwise known as carbon pricing.

It is worth noting that, carbon trading is a creature of the Kyoto Protocol, which developed three innovative mechanisms giving state parties a certain degree of flexibility in meeting their emission reduction targets. These mechanisms include Emission Trading/Carbon Market (ET), Clean Development Mechanisms (CDM) and Joint Implementation (JI). These three mechanisms play a crucial role in the international response to climate change by stimulating investments in innovative technologies and encouraging public-private partnerships to achieve clean energy growth and sustainable development, mostly in the developing world.

The amendment adopted in Doha, Qatar, in December 2012 provided a basis for the three Kyoto mechanisms to continue from 2013–2020. Looking ahead, carbon trading can play a pivotal role in realizing the ambitions of the Paris Agreement and implementing the Nationally Determined Contributions (NDCs). Article 6 of the Paris Agreement provides a basis for facilitating international recognition of cooperative carbon trading approaches and identifies new concepts that may pave the way for this cooperation to be pursued.  The voluntary market caters to the needs of those entities that voluntarily decide to reduce their carbon footprint using offsets.

Tanzania is not behind on this portfolio. It has joined the global efforts of protecting the climate by signing various international agreements/conventions, adopting new environmental policies and formulating various regulations while putting in place various strategic plans and guidelines to ensure a sustainable climate. At global level, Tanzania ratified the United Nations Framework Convention for Climate Change (UNFCCC) of 1992 in 1996. On 26th August 2002, Tanzania ratified the Kyoto Protocol of 1997 and on 18th May 2018, Tanzania ratified the Paris Agreement of 2015. These instruments provide for the mechanisms through which member states can meet their emission reduction obligations.

At the national level, Tanzania maintains sets of enactments, policies, regulations, strategies and guidelines to cater for climate change sustainability. These include the Environmental Management Act of 2004, the National Environment Policy, of 2021, the National Climate Change Response Strategy 2021-2026 (NCCRS), the National Environmental Master Plan for Strategic Intervention 2022-2032 (NEMPSI), the Zanzibar Environmental Policy, 2013, Zanzibar Climate Change Strategy 2014-2030, Zanzibar Environmental Management Act, 2015 and the National Climate Change Communication Strategy, 2013. Additionally, Tanzania has recently put in place the Environmental Management (Control & Management of Carbon Trading) Regulations of 2022 and the National Carbon Trading Guidelines 2022, to specifically cater for carbon trading projects.

Highlights on Carbon Trading in Tanzania

2.1   Concept of carbon trading in Tanzania

As highlighted above, Tanzania is not behind in this arena. Before the development of specific guidelines and regulations for this potential ecosystem, carbon trading projects were operational in the country without being regulated. Over the past years, we have seen the flourishing of nature-based projects operated by private partners in collaboration with local communities. These projects fit well within the ambits of the international carbon market standard and they are implemented with a view to contributing to global efforts to reduce greenhouse emissions while enhancing environmental conservation and socio-economic development in the country.

In light of this fact and the opportunity at hand, the government decided to put in place the Environmental Management (Control and Management of Carbon Trading) Regulations, 2022 (hereinafter referred to as “Regulations”) and the National Carbon Trading Guidelines of 2022 to provide an effective and efficient legal, institutional, and administrative framework for the control and management of carbon trading projects in the country. These legal and policy instruments support the implementation of carbon trading and emerging credit mechanisms under the United Nations Framework Convention on Climate Change and voluntary carbon market to all potential sectors. The Regulations apply to all carbon trading projects in mainland Tanzania.

Regulation 3 specifically defines Carbon Trading as the act of buying and selling verified carbon emissions, reductions and removals in accordance with the recognized international standards. Carbon trading is authorized with the goal of gradually reducing overall carbon emissions and mitigating their contribution to climate change to achieve a sustainable climate.

2.2   Setting a Carbon Trading Project in Tanzania

A person who intends to carry out carbon trading in Tanzania does so through a carbon project. Such a person (whether legal or natural) is called ‘a proponent’ under Regulation 3 of the Regulations. The functions of the proponent are enlisted under Regulation 19(1) of the Regulations. These include registering the carbon trading project with the Registrar, developing the carbon trading project, selling the carbon credits generated by the project and preparing and submitting progress reports on the implementation of the carbon trading project, amongst others.

2.3   Requirements for Setting up a Carbon Trading Project in Tanzania

A person shall not set and operate a carbon trading project that has not been registered with the Registrar. For the project to be registered with the Registrar, the proponent has to comply with the following elements as provided under Regulation 24(2);

1. A proponent must obtain a letter of consent and participation of partners engaged in the project;
2. Have clearance of ownership of the property involved in the project;
3. Involve the local communities in the implementation of the project;
4. Disclose relevant project information, including costs incurred, verified emission reductions, and estimated revenues;
5. Indicate expected employment creation to national experts and local communities;
6. Indicate commitment to corporate social responsibility;
7. Adhere to national priority carbon trading sectors;
8. Be in line with national policies laws and strategies;
9. Show how the project will contribute to the Nationally Determined Contributions;
10. Adhere to transparency and fairness in business; and
11. Adhere to national investment priorities and ecological, social, cultural and economic safeguards.

2.4   Steps in setting and operating a Carbon Trading Project in Tanzania

There are crucial steps that a proponent must take to successfully set up and operate a carbon trading project in Tanzania and they are as follows;

1. The project proponent or Managing Authority (the owner of the property involved in the carbon trading project) shall apply for the approval of the carbon trading project idea to the Registrar, who under Regulation 3 is defined as the Designated National Authority or National Focal Point. This is done by filling out the application form prescribed in the First Schedule of the Regulations. The completed application form shall be accompanied by proof of payment of a non-refundable application fee of USD 250 (for citizens) and USD 500 (for non-citizens) as prescribed in the Second Schedule of the Regulations.
2. The Designated National Authority or National Focal Point shall within thirty (30) days process and respond to the proponent on the registration of the project idea.
3. Where the requirements for the application have been complied with, the Designated National Authority or National Focal Point shall direct the proponent or the Managing Authority to develop a Project Concept Note.
4. The project proponent (in collaboration with the Managing Authority or project partners) shall have ninety (90) days from the date of registration of the project idea to develop a Project Concept Note. The Project Concept Note shall be required to have the elements as provided under Regulation 27(2) of the Regulations.
5. The Project Concept Note shall then be submitted to the Designated National Authority or National Focal Point for review and scrutiny. It shall be accompanied by proof of payment of project registration fees (1% of the expected CER from the project) as prescribed in the Second Schedule of the Regulations and consent from the Managing Authority in the form of extract minutes or letter in line with established procedures of the respective authority as stipulated under Regulation 27(3)(a)(b) of the Regulations.
6. The Designated National Authority or National Focal Point shall within thirty (30) days of receiving the Project Concept Note issue a letter of no objection for a qualified Project Concept Note as prescribed in the Third Schedule or a letter of recommendation for improvement of the Project Concept Note.
7. After obtaining a letter of no objection, the project proponent (in collaboration with the Managing Authority or project partners) shall have twelve (12) months to develop a Project Document. The proponent may, by way of written notice request for an extension of time by stating the reasons for the delay in developing and submitting the Project document, and an extension time of not more than six (6) months may be given if the Designated National Authority or National Focal Point is satisfied with the reasons for the delay as stated under Regulations 28(2)(3). The Project Document submitted to the Designated National Authority or National Focal Point must abide by accepted international standards on carbon trading, including validation of the project where required.
8. The developed Project Document shall then be submitted to the Designated National Authority or National Focal Point for review and scrutiny.
9.  The Designated National Authority or National Focal Point shall, within thirty (30) days from the receipt of the Project Document and upon satisfaction that the Project Document meets all the requirements, submit to the Minister responsible for the environment (the Minister) the project proposal for endorsement of implementation (the letter of endorsement shall be prescribed in the Fourth Schedule of the Regulations.
10.  The proponent shall, within two (2) years after receiving the endorsement start implementing the project activities.

2.5   Cancellation of endorsement for project implementation

There are certain circumstances where carbon projects can be cancelled. These include circumstances where;

1.  The proponent has voluntarily cancelled the project by submitting an official notice
2. The endorsement was obtained through misrepresentation;
3. The continued operation of the project activity is likely to be injurious to the environment or human health;
4. The project activities are overridden by other public interests;
5.  There was insufficient or holding of information in the application process;
6.  There is failure to submit the Project Concept Note or Project Document within the prescribed time;
7. There is failure to commence the project activities within the prescribed time; and
8. There is non-compliance with the project requirements as stipulated under the Regulations.

Conclusion

Carbon trading regulations in Tanzania play a pivotal role in driving environmental sustainability and curbing climate change. These Regulations outline the framework for businesses to engage in emission reduction efforts while promoting economic growth. The policy and legal frameworks particularly Nationally Determined Contributions, outline priority sectors for climate change mitigation and adaptation actions in the country. The priority sectors identified to meet national mitigation targets are energy, transport, forestry and waste management. Other potential sectors include industrial processes and products use, agriculture and other land use.

As Tanzania continue to address its carbon offset footprints and attract more investors in the ecosystem, our dedicated experts are committed to offering client-tailored solutions to your legal challenges as you navigate the intricacies of setting carbon trading project.