TANZANIA: KEY HIGHLIGHTS OF THE CARBON TRADING REGULATIONS

By Flora Mukasa,Charles Mmasi,Bertha Mwarija Wednesday, January 25, 2023
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On 28 October 2022, the Minister of State, Vice President’s Office, Union and Environment (Minister) published the Environmental Management (Control and Management of Carbon Trading) Regulations, 2022 under Government Notice No. 636 of 2022 (Regulations) signalling Tanzania’s formal participation in the global carbon trading industry.

The Regulations are divided into 11 parts and formalise the Government’s role and participation in the establishment of carbon trading investments in Tanzania, a critical area which has previously been missing.

The Regulations provide the legal framework necessary for ensuring sustainable environmental development by enhancing environmental conservation and Tanzania’s contribution towards global efforts on greenhouse gases emissions reduction.

Administration and institutional framework

The Regulations provide for the administration and institutional framework for the management and control of carbon trading. The Minister responsible for environment has the overall responsibility for matters relating to climate change and will be responsible for the articulation of policy guidelines necessary for climate change, including carbon trading.

Regulation 6(3) gives the Minister the mandate to approve and issue letters of endorsement for the implementation of carbon trading projects that meet the necessary requirements. The Ministry responsible for environment (Ministry/ Designated National Authority) is designated as the national authority or national focal point of regulating carbon trading in Mainland Tanzania.

The other responsible bodies, authorities and stakeholders include the Director of Environment, the National Carbon Projects Assessment Technical Committee, sector ministries, the Ministry responsible for local government authorities, the Regional Secretariat, local government authorities, the owner of the property involved in the carbon trading project, the person proposing the execution of the carbon trading project or programmes, the National Environment Management Council, Village Government or Mtaa, private sectors, development partners and civil society organisations.

Requirements for carbon trading

Regulation 23 requires applicants of carbon trading projects to be legal or natural persons. The provision further requires a proponent to have relative expertise in carbon trading, capacity to invest in carbon trading and to adhere to applicable laws. 

All carbon trading projects require registration with the Designated National Authority prior to operation. According to regulation 24(2), a registerable carbon trading project must contain the following elements:

  • be in line with national policies, laws and strategies;
  • indicate how the project will contribute to the Nationally Determined Contributions;
  • adhere to national priority carbon trading sectors;
  • a letter of consent and participation of the partners engaged in the project;
  • clearance of ownership of the property involved in the project;
  • involve local communities in the project implementation;
  • adhere to transparency and fairness in business requirements;
  • adhere to national investment priorities, ecological, social, cultural and economic safeguards;
  • disclose relevant project information including costs incurred, verified emission reductions and estimated revenues;
  • indicate expected employment creation to the national experts and local communities; and
  • indicate commitment to corporate social responsibility.

Further to the above, carbon trading projects are required to undergo an environmental and social impact assessment in accordance with the Environmental Management (Impact Assessment and Audit)(Amendment) Regulations, 2018 and undergo a Reduction of Emissions from Deforestation and Forest Degradation (REDD+) safeguard standards assessment.

Applications for carbon trading projects

Applications for carbon trading projects are conducted through the submission of an application form/project idea and payment of an application fee prescribed under the Regulations to the Designated National Authority.

Where the requirements for application have been complied with, the Designated National Authority will direct the proponent or the owner of the property involved in the carbon trading project to develop a project concept note (Project Concept Note).

The Project Concept Note must contain, among other things, the proposed activities, stakeholders to be involved, potential project benefits, sources of finance and estimated investment cost, and mode of financing or crediting mechanism.

The developed Project Concept Note must then be submitted to the Designated National Authority accompanied by the consent of the owner of the property in the form of minutes and proof of payment of project registration fees.

Within 30 days of submission of the Project Concept Note, the Designated National Authority may issue a letter of no objection to the qualified Project Concept Note or a letter of recommendation for improvement of the Project Concept Note.

The proponent is required to develop a project document (Project Document) within 12 months from the date of the issuance of a letter of no objection. Within 30 days of submission of the Project Document and upon satisfying the regulatory requirements, the Designated National Authority will submit the Project Document to the Minister where he will provide the project with a letter of endorsement.

A proponent will be required to commence operations within two years of the endorsement. Failure to comply with this requirement may lead to cancellation of the endorsement.

Costs and benefit sharing

The Regulations also introduce costs and benefits sharing schemes in the carbon trading which must factor in the capital invested, and roles and responsibilities of project stakeholders. A prescribed costs and benefits sharing scheme is provided for land-based projects. 

Ongoing projects 

The Regulations apply retrospectively and to all types of carbon trading projects in Mainland Tanzania. This means that ongoing carbon trading projects in Tanzania are required to comply with these Regulations. The Designated National Authority may, however, grant to the proponent a transition period of not more than one year to allow the proponent to comply with the requirement of the Regulations.

Offences and penalties

Implementation of a carbon trading project without endorsement, violation of conditions of the endorsement, failure to provide information as and when required by the relevant authority, and providing false or misleading information are offences under the Regulations and attract a fine of not less than TZS 10 million (approx. USD 4 279) but not exceeding TZS 10 billion (approx. USD 4 279 000) or to imprisonment for a term not exceeding 12 years or to both.