By December 2020, more than 2,250,000 carbon credits had been issued to Rwanda from two carbon market mechanisms, Doing Business has learnt. A carbon credit, also known as carbon offset, is a kind of permit that represents one ton of carbon dioxide removed from the atmosphere. Carbon credits allow the owner to emit a certain amount of carbon dioxide or other greenhouse gases. They can be purchased by an individual or a company to make up for carbon dioxide emissions that come from industrial production. Carbon credit allows a country or organization to produce a certain amount of carbon emissions which can be traded. According to global management consulting firm McKinsey, demand for carbon credits could increase by 15 or more by 2030 and be a factor of up to 100 by 2050. Overall, the market for carbon credits could be worth upward of $50 billion in 2030. The carbon market is one of the promising avenues for climate finance mobilization, Minister of Environment, Jeanne d’Arc Mujawamariya, said on Friday at the COP27 UN climate summit in Sharm el-Sheikh, Egypt. Rwanda has committed to reduce emissions by 38 percent or to 4.6 million tons of carbon dioxide compared to business as usual by 2030, and be carbon neutral by 2050. “For a country that is already a low emitter and is growing quickly, this is ambitious. To achieve these goals, we cannot rely on public and external finance alone. We need new sources of funding, and the carbon market is one promising avenue,” she said at a COP27 side event on “The Future of carbon market in Rwanda.” Although Rwanda is still developing rules and regulations to leverage the carbon market scheme, it is already implementing projects related to the carbon market under Clean Development Mechanisms (CDM) and the Voluntary Carbon Market (VCM). The CDM allows a country with an emission-reduction or emission-limitation commitment under the Kyoto Protocol ( an international treaty to reduce greenhouse gas emissions that was adopted in Kyoto, Japan in 1997 and entered into force on 16 February 2005) to implement an emission-reduction project in developing countries. Such projects can earn saleable certified emission reduction (CER) credits, each equivalent to one ton of carbon dioxide, which can be counted towards meeting Kyoto targets. According to the United Nations Framework Convention on Climate Change, a CDM project activity might involve, for example, a rural electrification project using solar panels or the installation of more energy-efficient boilers. The mechanism stimulates sustainable development and emission reductions while giving industrialized countries some flexibility in how they meet their emission reduction or limitation targets Voluntary carbon markets allow carbon emitters to offset their unavoidable emissions by purchasing carbon credits emitted by projects targeted at removing or reducing GHG from the atmosphere. Rwanda has the potential for a range of carbon market projects due to its vision to become a developed, carbon-neutral, and climate-resilient economy by 2050. In Rwanda, carbon credits are currently dominated by improved cook stove projects which account for 87 per cent of total certified emission reductions issued, while lighting and solar together represent 9 per cent, and 4 per cent, respectively. All clean development mechanism activities have issued 724,320 certified emission reductions while the voluntary carbon market activities have issued 1,525,680 voluntary emission reductions. Mujawamariya said: “And as we develop global carbon markets, we must commit to openness and cooperation as well as acknowledge the downsides and address them. Carbon markets can accelerate the transformation needed by effectively putting a price on pollution and creating an economic incentive to reduce emissions. However, any new guidelines must ensure carbon credits, old or new, represent real emission reductions and also benefit communities.” She said that leveraging carbon market schemes is part of implementing Article 6 of Paris Climate agreement and carbon markets and taking up existing opportunities. The World Bank and UNDP are supporting Rwanda in getting ready for carbon markets. Article 6 of the Paris Agreement allows countries to voluntarily cooperate with each other to achieve emission reduction targets set out in their national climate plans. This means that, under Article 6, a country, or countries, will be able to transfer carbon credits earned from the reduction of emissions to help one or more countries meet climate targets. The Rwanda Environment Management Authority (REMA), the designated national authority for clean development mechanism, started the process of elaborating the modalities, guidelines, and procedures for the implementation of Article 6 of the Paris Agreement in Rwanda and setting all necessary requirements to maximize carbon market mechanism opportunities under Paris Agreement. Rwanda is partnering with some development partners to create a carbon market regulatory framework to guide the implementation of the carbon market during the Paris Agreement regime.