If public finances do not support the countries of the global south in the challenge of cutting emissions, perhaps the controversial carbon credit market can. Abuja is attempting to do so regarding the burning of methane in oil production.

Gas flaring, or the burning off of methane over oil extractions, is one of Nigeria’s most serious environmental problems and one of its main contributors to global warming. Oil fields often also contain methane gas: burning it into the atmosphere is less expensive than extracting and using it. From an economic point of view, flaring makes sense and has been practised by the oil and gas sector for decades, but from an ecological one it is a catastrophe.

Oil factory in Kaduna. Shutterstock/Richard Juilliart

Nigeria is the 37th country for greenhouse gas emissions, it is the seventh globally for flaring, with almost six billion cubic meters of gas burned into the atmosphere per year, according to data collected by the World Bank’s flaring tracker, causing environmental and climatic damage and a waste of energy. Solving this problem is expensive, but it has become a priority for President Bola Ahmed Tinubu, who has set 2035 as the year by which to eliminate oil flaring in the country. It is from this political impulse that the collaboration with Carbon Limits was born, a Norwegian company that promotes an innovative and risky way to address the crisis that worries Abuja: relying on finance, through the mechanism of carbon credits.

Nigerian President Bola Tinubu wants to achieve a flaring-free by 2035. CC BY-SA 4.0/Nosa Asemota

Nigeria has recently opened its own national carbon credit market, one of the largest on the African continent, with 2.5 billion dollars of trade. Carbon Limits has opened a subsidiary in Nigeria to manage this flow: Nigerian hydrocarbon companies or foreign companies that operate on its territory (such as Shell) sell credits on the international market. In this way, they access the financial resources to invest in the reduction of flaring. The buyers of these credits distributed by Carbon Limits Nigeria in exchange for the transaction can count this reduction in emissions as their own. Today, two-thirds of the carbon credits sold by Nigeria are managed by Carbon Limits Nigeria. If the experiment were to be successful, it could also expand the business to neighbouring countries that have similar problems: Gabon, Congo and the Democratic Republic of Congo. The CEO of Carbon Limits Nigeria is Heine Melkevike: he has a deep knowledge of petroleum processes as a former manager of Equinor, Norway’s largest oil and gas company.

Heine Melkevike is the CEO of Carbon Limits Nigeria. A former manager of Equinor, Norway’s largest oil and gas company. Courtesy Equinor.

For the global oil industry, reducing emissions that occur during extraction has become a priority since COP28 in Dubai, when the sector launched the Oil & Gas Decarbonization Charter, a controversial series of voluntary commitments to clean up hydrocarbon production processes without necessarily reducing production itself. For its supporters, it is a pragmatic approach: do little, but at least do it. For its detractors, it is an advanced form of greenwashing, which allows fossil fuel production to be presented as sustainable, something it will never be. In short, is oil without flaring better than Nigeria without oil? The country, with the help of Carbon Limits, seems to have chosen the first path. “The carbon credit system can be useful or harmful, depending on how it is used,” explains Jacopo Bencini, a researcher at Carbon Markets Hub, a European university institute, one of the leading experts in the sector: “Many countries are rushing to create national carbon credit markets, which if done well have the advantage of providing security to investors through a set of rules and governance mechanisms capable of attracting resources.” The sector had frozen in scepticism in 2023, due to a series of scandals related to the integrity and credibility of these credits. Companies were purchasing “emission reductions” in the global south that did not correspond to anything concrete, or that coincided with serious violations of human rights.

The COP 29 in Baku, Azerbaijan, was attended by the leaders of the world’s nations. COP29 has shown that public finances are still inadequate to help countries like Nigeria. Photo. COP 29

The COP29 in Baku changed everything, because it set up a certification that is no longer just up to private individuals but to the United Nations, which is responsible for restoring credibility to the system: «An attempt in the last two years has been to relaunch a system that comes from the time of the Kyoto Protocol, and is a tool to unlock useful resources for global decarbonisation», explains Bencini. For countries like Nigeria, it is an opportunity to access investments in reducing emissions that would otherwise not arrive in the country. It remains to be seen whether it will then be able to keep its long-term commitment: climate neutrality to be achieved by 2060. According to Carbon Action Tracker, the most authoritative database on the mitigation policies of various countries, the judgment on Nigeria is not negative. «Almost sufficient» is the mark given for its climate policies. «The efforts to reduce emissions to zero depend on international support, however». In short, money is needed to keep the commitments. COP29 has shown that public finances are still inadequate to help countries like Nigeria, and the election of Donald Trump in the US does not improve the scenario. Reducing flaring through carbon credits can be an alternative and innovative way.  (Open Photo: Gas flaring. File swm)

Ferdinando Cotugno