Gabon intends to sell a $200 million green bond in the latter part of the following year to turn environmentally friendly policies into a dependable source of income.
The majority of Gabon's income has long come from oil exports. However, because many of its oil fields are nearing the end of their useful lives and the global movement towards switching to cleaner fuels, Gabon is looking to green bonds, a type of loan used to fund climate change initiatives.
Gabon hopes its $200 million risk will pay off the following year.
Akim Daouda, head of Gabon's sovereign wealth fund, says they expect a size of $200 million to push for developing various projects. The bond sale, he said, would take place in the second half of 2023.
According to Daouda, the bond sale will aid in funding projects such as constructing three hydroelectric dams, which will be finished in the following four years.
He added that authorities in one of the most heavily forested countries in the world, central Africa, intend to raise money by selling carbon credits to businesses trying to offset their carbon emissions.
Daouda stated that Gabon intends to release 90 million carbon credits the following year and will pursue a "fair and just price" of between $20 and $25 per credit.
According to him, the carbon credit system "will enable us to avoid having to choose between preserving nature, growing our economies, and meeting the needs of our people."
The plans put forth by Gabon may serve as a model for some other African nations looking to diversify their economies and reduce their reliance on fossil fuels. Its policymakers have demonstrated how to use the green economy to create multiple revenue streams.
For example, the promotion of hydroelectric power would increase access to electricity, and the expansion of ecotourism using the returns from the sale of carbon credits would generate employment.
However, Gabon might have trouble getting its desired price of up to $25 per tonne. Bloomberg estimates that comparable credits sell for around $16 each, so Gabon needs to convince investors that its praises are valuable enough to demand a premium.
Gabon's plans also presuppose a significant shift in perceptions regarding carbon capture. For example, the Congo Basin, the second-largest rainforest after the Amazon, is claimed by Gabon to be worth credit for absorbing gases that would otherwise cause global warming.
According to the World Bank, the nation absorbs carbon emissions yearly, equal to a third of France's annual emissions.
However, wealthier nations and development organizations are pushing for global penalties for logging forests without providing financial incentives. Gabon might find it difficult to raise $200 million through its green bond if this way of thinking doesn't change.
Reducing emissions through the maintenance of carbon sinks, according to David Oxley, a climate-focused economist at consultancy Capital Economics, "is not guaranteed to last" because changes in land use or natural disasters can impact them.
Carbon credits, according to Oxley, are only helpful if efforts to reduce emissions can never be undone. He claims that concentrating on biodiversity is not a replacement for reducing overall emissions.
The authors of a white paper released by the multilateral Africa Finance Corporation (AFC) earlier this year contend that deforestation pledges have a negative side. AFC headquarters are in Lagos, Nigeria.
According to the report, "many in Africa would have no other energy source available if they did not have access to charcoal and wood fuel to meet their energy requirements." It also notes that subsistence farmers, who make up a small portion of global emissions, frequently clear forests.