OPINION: Building a Carbon Project in Africa: Lessons from our Journey
Quantum Commodity Intelligence - Steve Pocock is chief executive of Zimbabwe-based company Rangelands Regeneration
In 2020, after five years working on economic development projects in Papua New Guinea, I co-founded Rangelands Regeneration. This work would take me back to Zimbabwe, the country of my birth, to partner with communities in the Beitbridge District to transform the local landscape and their livelihoods.
The area, on the Zimbabwean side of the border near South Africa and Botswana, has immense ecological value, and economic potential for local communities. But, like so many rural areas, little value is being realised. Wildlife populations and biodiversity are tanking due to poaching, livestock overgrazing and deforestation.
Communities live in all too frequent conflict with elephants raiding their crops and predators eating their livestock. Vulnerability is high, with crops regularly failing, droughts resulting in mass livestock die-offs, and a large proportion of people relying on money sent home by family members working in neighbouring countries.
Opportunity
We proposed a straightforward approach, bringing together resources and expertise to support the creation of a world-class wildlife area that could generate jobs and revenue to meet community needs. In partnership with local communities, we would address challenges such as protecting crops and livestock from wildlife, while also working to regenerate the land. One key aspect involved working with farmers to explore ways of improving livestock management and enhancing their economic returns.
Navigating the funding landscape in the early days
We expected to rely on philanthropy to get the ball rolling, with a medium-term goal of sustaining the project through a range of commercial ventures like ecotourism, renewable energy, carbon credits, wildlife breeding, livestock businesses and horticulture.
Following an early push on the philanthropic front, we secured donations from a mixture of high net-worth individuals and family offices. This provided seed funding to hit the ground in Zimbabwe, set up an office and hire key staff. This philanthropic funding has been immensely valuable, and underpinned our core operations to date. However, the scale of funding available through this network wasn't enough to enable us to scale at the rate required, so we began to widen the net.
Of the revenue streams that would enable us to scale, carbon emerged as the front runner. As we started to engage with various potential partners and funders in the carbon space, we were blown away by the positivity we were met with. Almost everybody was eager, in hindsight, perhaps a bit too eager.
Types of carbon funders
Based on who we came across, it seems there are three broad types of funders out there:
1. Polluter-Owned Carbon Funders: These companies are directly or indirectly owned and funded by large multinational polluters (oil, gas and other fossil fuel companies as well as other businesses from high-emitting industries). They don't tell you this up-front, but you work it out at some point. Their main motivation is to lock in large amounts of carbon credits for the lowest possible price. This ensures their core fossil-fuel driven businesses remain viable. It was apparent that these companies valued the integrity of carbon credits so much as it mitigated reputational damage, but a more pressing priority for them was the low price point and scale.
2. Carbon Cowboys: These carbon project developers saw the opportunity and jumped in because of the money to be made. They have glossy websites that promote their environmental credentials and plans to regenerate millions of acres of land globally, but they do this because it makes good business sense. I wouldn't demonise carbon cowboys - they were generally great people with good intentions, but our conflict was always around balancing the share that they and their investors take versus how much is returned to the project and the communities we serve.
3. Not-for-Profit Conservation Funds and Funders: Broadly, this is funding for carbon project development, but coming from a philanthropic source. In most cases, this is not free money, but rather you have the ability to tap into funding and expertise that will typically be repaid once the project is up and running, but they will not claim a big chunk of the carbon credits like the above funders do. These organisations have a core mission of developing high integrity carbon projects as a mechanism to preserve landscapes and benefit communities.
Running the gauntlet of carbon funders
We had clear intentions from the outset - to ensure maximum revenues would be returned to the communities we serve. We had the key ingredients of what pretty much all carbon funders were chasing - scale and additionality - spanning 370,000 hectares (3,700 square kilometres) and comprising mostly heavily degraded and desertified rangelands. Our project would also demonstrate co-benefits to local communities and biodiversity, hence the carbon credits should fetch a premium price.
After testing out a few organisations, our first 'partnership' was with a polluter-owned carbon developer. The irony of us as a conservation-focussed organisation potentially being backed by an oil giant wasn't lost on us, but we figured whilst we were learning from the discussions, we may as well continue to explore things. They funded a carbon scoping assessment, and then we got pretty excited.
The scoping assessment indicated that by improving how livestock are managed across the area, we could sequester 2 tonnes of carbon dioxide (tCO2) per hectare per year. Scaled across the entire landscape, this would be up to 740,000 tCO2 per year, or a conservative estimate of $7.4 million annually.
Even when factoring in a big cut to our carbon partner, we saw this as a real game changer. At this point we paused the discussions with this particular organisation, partly because we had significant reservations about taking fossil fuel money, but mainly because we received an indication of what their terms would look like, with the lion's share of revenues accruing to them, not our landscape and communities.
It was at this point that we started to question things. Paul Trethowan, one of our co-founders, is an ecologist and seriously smart guy - he did his PhD at Oxford then spent several years working for McKinsey in the US and London. Paul just didn't see how it was possible to sequester that much carbon annually through the soil.
He had spent the majority of his life in the area, and knew it was prone to drought and erratic rainfall, and spoke of the dominant grasses being annuals, not perennials. Paul's view was that in a best-case scenario, perhaps you could hit the projected carbon sequestration in a single year with high rainfall, but there are so many unknowns and uncontrollable variables.
I didn't disagree with Paul - his views were valid and he knew the landscape and science far better than I did. My thinking was more that 'if the money is there, we should take it'. I was happy to take fossil fuel money for good, but just make sure that they bear all of the risk if things didn't pan out as expected. In this case we would still be able to use the funds for a lot of the up-front capital we needed. In the end we decided both arguments were valid, and we should continue exploring carbon, but cautiously.
Carbon cowboy
Next, we moved onto a carbon cowboy that was masquerading as an environmental conservation organisation. In our first few meetings, carbon was hardly on the agenda, and this organisation made some bold claims about how they had the funds required and were ready to move into our landscape to protect the wildlife populations. It was only after the discussions progressed that we realised their entire plan was underpinned by carbon.
They outlined a model whereby they would fund and develop a carbon project. Carbon revenues would go towards management of the wildlife area and ongoing implementation of the carbon project, but then anything above this would accrue to them.
As an example: If the carbon project generated $7 million a year, and it cost $1 million a year to implement the carbon project, and it cost $1 million per year to manage the wildlife and biodiversity. Then: They would pocket $5 million a year to go to themselves and their investors and $2 million a year would be invested into the landscape. If the carbon price were to double, then they would pocket $12 million, and still invest $2 million into the landscape.
This model meant that no carbon revenues would accrue to the community members who own the land, and their only benefits would be through indirect benefits such as employment, healthier rangelands etc. Sometimes large carbon projects in Africa are referred to as modern-day neocolonialism. Perhaps under models like this one, they are. I have much more to say about this particular organisation, but won't. Needless to say, we swiftly cut ties.
Eventual funder
Through a fortunate series of events, my brother and Rangelands Regeneration cofounder, David, was on a fundraising mission for us at COP 26 in Glasgow and met with the global carbon lead of one of the world's largest conservation not-for-profit organisations.
This organisation had heavily invested in the potential of carbon markets to drive preservation of landscapes. Being a not for profit ourselves, we aligned strongly with this organisation, and their motivation to develop high-integrity and sustainable projects that maximised the returns to be invested into the local landscape and communities.
The challenge of partnering with an organisation like this one was that the barriers were high. They're a massive organisation with a well-established brand, and have a steady stream of potential projects like ours approaching them for support. Our challenge was to convince them that our project was worth exploring, and also that the country risks of Zimbabwe were worth taking. It took over a year, but we eventually got them across the line to undertake a carbon feasibility assessment. The key elements of this were:
1. Funding and Consultants: They provided funds for consultancies and key staff to assess the legal and regulatory environment, engage with communities and government, develop land use and grazing plans, and conduct soil sampling and analysis.
2. Technical Support: They provided technical staff to work alongside us, guiding our team through necessary safeguarding frameworks and risk assessments, which proved valuable (despite being tedious).
3. Advisory Engagement: An advisory firm was engaged to compile data, perform carbon modelling, and create the final feasibility document.
Balancing the demands of developing a carbon project versus daily operations
The feasibility process took about 12-months. At the time, we were rapidly expanding. Our Livestock Business Centre was going from strength to strength, holding regular cattle sales and using by-product orange pulp to fatten then directly market community owned cattle - this was a standalone business in itself and a full-time undertaking for 6 staff.
We had also just kicked off a grazing management program and had 600 community-owned cattle under the custodianship of 15 community-herders that we had employed and trained. Our team was stretched. As CEO, I was still building out organisational systems, getting my head around transacting in four different currencies - mitigating exchange rate losses and just trying to stay compliant in what is a complex regulatory environment.
I then spent the rest of my time managing donor relationships, navigating community engagement and politics, as well as fundraising. I simply didn't have the time to pore over safeguarding questionnaires and forms, or to fully engage and lead on the writing of carbon project implementation plans and associated budgets.
It was at this point that Ella Edwards, an Australian, reached out to us about a volunteering stint. Like' manna from heaven', Ella soon arrived in Zimbabwe, where she would spend six months with us on-site, in rural Beitbridge. Ella led all aspects of the feasibility from our end. She was brilliant - able to engage on the details and get into the weeds of implementation, yet with a deep understanding of carbon markets and requirements, being able to engage and meet our partners at their level. Without Ella, it would have been a far different and very painful process.
Nature-based carbon credits lose their sheen
During the 12-month feasibility, the narrative of nature-based carbon projects started to shift. In our early discussions, the views were almost entirely positive, and we were told that carbon credits we generated would attract a significant premium because they will also have a positive social and biodiversity impact. The price of nature-based credits however started to drop - the main reason being that their integrity was being brought into question.
In March 2023, the South Pole Kariba Redd+ project was in the headlines for massively over estimating the carbon credits generated, and local communities seeing a fraction of the €100 million in revenue from the project. In some cases, communities reported they had no awareness whatsoever of a carbon project taking place. Northern Rangelands Trust's carbon project in Kenya was also in the headlines due to a report from an indigenous rights organisation that made some serious allegations.
Zimbabwean government claims 50% of all carbon revenue
In May 2023, the Zimbabwean government announced that it would take 50% of all carbon revenues generated in the country. The announcement was unexpected, and appeared to be driven by the negative press around the Kariba Redd+ project.
In response, we came together with several other carbon project developers in the country under the banner of the 'Zimbabwe Carbon Association' to advocate for a change to the government's position, which we knew would make the majority of carbon projects in the country non-viable.
As of September 2024, the government has revised their position to a 30% share of all carbon revenue, and a carbon project development framework has been established.
Despite the regulatory uncertainty, we pressed on. The funds towards the feasibility had been fully committed by this point, and my general approach when working in less developed countries has been to pay attention to obstacles and challenges as they arise, responding where necessary, but in general continue to plough on and not allow the obstacles to derail or stop your forward momentum.
Developing the carbon model and crunching the numbers
Things got technical as we got to the latter stages of the feasibility process. We submitted over 15 project documents representing literally thousands of hours of work, to be compiled by the advisory firm who would crunch the numbers and present a final feasibility. I started to see how data could potentially be manipulated to make things look good for a carbon project.
You have the ability to play around with the inputs, and what may seem like minor changes can have significant impacts when they come out the other end of a carbon model. There were tough decisions to be made around methodology, model selection and calibration, time to reach equilibrium carbon stocks, modelling vs measurement approaches, many of which I don't pretend to fully understand.
For the carbon project to proceed, we knew that financial viability would be the deciding factor. Essentially, would the proposed carbon revenues be greater than the costs of implementing the project?
Based on an average of 2 tCO2 sequestered per year, we were confident that the project was viable, even when factoring in 30% of revenue to the government.
The results are in…
We were disappointed with what the final results showed. We'd generate a meagre sequestration of 0.11-0.16 tCO2 per hectare a year. With full scale implementation across the entire project area, we estimated this would bring in about $500,000 to $1 million a year - a fraction of the cost of implementing the project itself.
Of this revenue, 30% of the proceeds would go to the government, and then there is also 'non-permanence risk'. Essentially, we would need to set aside a portion of all credits generated to account for potential carbon losses due to natural events like flooding or fires, as well as political, economic and social risks to the project. For our project, the non-permanence risk was estimated at 30%.
This means even if we generated $1 million a year through carbon credits, $300,000 would go to the government, $300,000 would be set aside for non-permanence risk, and we'd only see $400,000 - a fraction of the project implementation costs. I've neglected to mention any of the ongoing monitoring, reporting and verification costs that would need to be paid as well.
When I called around and spoke to others who were also developing soil carbon projects, they had similar findings, perhaps not as extreme as ours. We started to get pointed toward recent research showing that the range of carbon sequestration from improved grazing management is typically within the range of 0.2-1.1 tCO2 equivalent per hectare a year.
What caused such a disappointing result?
There are two key factors behind our low sequestration potential. The first is the aridity of our landscape. We get an average of 300mm rainfall per year and are highly prone to drought. This means that regardless of how well we manage livestock across the landscape - if it doesn't rain, the grass won't grow, and carbon won't be sequestered.
The second factor is the rate of overstocking. As we started to get a handle on the livestock numbers, we realised the area is more than 500% overstocked with cattle, sheep, goats and donkeys. This is a huge issue, with deep cultural and social roots, to which there is no easy solution.
Given the high number of livestock and the social and cultural factors at play here, there is simply no way to effectively manage them in a way that regenerates the grasses and soils. It's a simple matter of science that there are too many cattle, and not enough grass is growing.
So where have we landed?
Obviously we aren't pushing ahead with a carbon project, but we're glad we went on the journey. The end result was disappointing, but making a tough decision now (and maintaining integrity and not trying to fudge the model) will save us from making the mistakes of others and paying the price at a later point.
There's still been interest from others to explore the potential of soil carbon in this landscape. We've been happy to share our lessons and experiences, and if others can make it work for the benefit of the local communities - then we'll fully back their efforts.
We're also following developments around other nature-based financial instruments such as biodiversity credits, but this seems to still be in a nascent stage, and I personally still think there are key questions to be answered around what will drive the demand for the purchase of such credits.
At a philosophical level, carbon, and now biodiversity credits have been created as a tool that essentially enables environmental 'harm' to continue. It brings me back to a question posed by author Anand Giridharadas as to whether "we are trying to solve the problem with the same tools that caused it"?
Our global capitalist system has led to these challenges of climate change, inequality and biodiversity loss, and now we're relying on tools developed by this system to try and address them.
Perhaps this is just a cynical view though, and I wouldn't be thinking this if our carbon project was viable and going ahead.
I hope by sharing this journey and the lessons we've learned we'll be able to help shed some light on the complexities of carbon credits and stimulate thinking on how best to engage with issues in complex landscapes with a range of factors from environmental to social, cultural and political.
This isn't intended to discourage others from engaging but to show what it could look like to engage in the process from partner selection through to model development and final decisions about whether and how to proceed.
If you'd like to chat further, or are interested in seeing any of our project documentation, please don't hesitate to reach out.
