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Gabon’s Carbon Credit Bond: A Viable Proposition?

By Julian Gary

In an effort to reduce global emissions and protect Gabon’s forests, The African Conservation Development Group (ACDG) laid out a plan to issue a $300 million bond that would generate returns through the sale of carbon credits. The bond would be backed by 731,000 hectares of Gabon’s rainforests, which would be preserved under the carbon credit issuance agreements. On the surface, this plan may seem like a practical solution to the urgent issue of deforestation and climate change; however, the implementation faces several challenges.

 The carbon credit market first came to fruition at a large scale after the Kyoto Protocol of 1997. Thirty-seven industrialized nations agreed to instate cap-and-trade systems under which companies were limited to a set number of carbon emissions per annum, measured in metric tons of CO₂. If companies emitted more than their limits, they had to purchase carbon credits to offset their emissions.

Alongside the regulatory market, a voluntary market for carbon credits has flourished and is on track to reach $1 billion in 2021. In this market, companies purchase carbon credits to fulfill self-imposed commitments—rather than regulatory requirements—to reduce emissions.

Although selling regulatory compliance carbon credits would give the ACDG a clearer path to revenue generation because of the guaranteed demand, the carbon credits generated through ACDG’s Gabon project would be voluntary credits. Historically, carbon credits generated through deforestation reduction initiatives have only been sold on voluntary exchanges due to the different issuance standards between voluntary markets and compliance markets.

Price variability in the voluntary carbon credit market presents challenges to ACDG’s funding model. Unlike compliance credits, the prices companies pay for voluntary credits are often dependent on the sustainability project from which the credits are generated. Credits from smaller scale emission reduction projects with additional community benefits often warrant a premium price. So far, many of the forestry-related projects have focused on planting trees and reforestation rather than simply preserving already existing forests, making these credits more attractive than those issued solely from forest protection. Since ACDG’s plan is large-scale and focuses on simply preserving pre-existing forests, the carbon credits generated may not be sold at their intended price targets.

ACDG hopes to secure 10-year contracts with companies to purchase carbon credits while charging $10 per ton of carbon sequestered. However, given the variability of carbon credit prices and the unprecedented nature of the market, companies may be hesitant to enter long-term contracts when carbon credits are readily available for purchase. If the carbon credits sold by ACDG fail to attract reliable demand, ACDG won’t be able to generate a steady return. Thus, the variability of carbon credit prices presents a challenge to securing large amounts of funding necessary to expand programs like that of the ACDG.

There is also skepticism about the amount of emissions programs like that of the ACDG would save. If companies find it cheaper to purchase voluntary carbon credits generated from pre-existing forests than investing in more efficient assets, the effect would be an increase in total emission rather than a decline. Furthermore, skeptics have expressed concern about “leakage,” or the idea that if some forest is protected while other areas aren’t, loggers will simply cut down the unprotected forest. These concerns may impact demand for carbon credits if buyers question the efficacy of the underlying project.

The government of Gabon hopes to follow a similar model of the ACDG. Currently, around 85% of Gabon is covered in rainforest. In an interview with the Financial Times, Tanguy Gahouma-Bekale, permanent secretary of Gabon’s national climate council, expressed that Gabon should be rewarded by industrialized nations for its forest protection. However, corruption in Gabon’s government presents a problem for tracking forest preservation, which would be necessary to implement a system like the ACDG’s on a national scale. On Transparency International’s corruption index, Gabon ranks 129th out of 180. Given Gabon’s high unemployment rate of 20.47%, Gabon also has strong economic incentives to ignore deforestation. According to Lee White, Gabon’s environmental forest minister, Gabon’s forests generate only 27,000 jobs while comparable Malaysian forests support 320,000 jobs.

Concerns around reporting integrity are justified given historical carbon credit abuses. For example, in 2008, a project was launched in Cambodia to preserve 246 square miles of forest. According to an analysis by ProPublica, between 2008 and 2017, the area lost 42% of its forest cover during which 48,000 carbon credits were sold to companies to offset their emissions. If the government of Gabon fails to accurately track the preservation of its forests, similar destruction could occur.

While carbon bonds like those planned by the ACDG face many obstacles, doing nothing to stop deforestation is not an option. For similar systems to be implemented at a large scale in the near-term, a shift from a private sector approach to a public sector strategy may be necessary. Ideally, the companies that produce pollution would purchase the carbon credits that allow conservation funds and governments to preserve forests. However, given the urgency of climate change and deforestation, forest preservation cannot be delayed until there is proof that carbon credits can create reliable income streams. Rather, in the near term, international public funding may be necessary to acquire and preserve forests, with any revenue from carbon credits serving as a secondary benefit. The success of this model has been demonstrated through an agreement in which Norway agreed to pay Gabon $17 million for Gabon’s emission reductions from deforestation in 2016 and 2017.            In the COP26 climate summit in November, carbon credits for emission absorption will be a focal point. Gabon hopes to present its case to other countries and gain international funding for its role in absorbing emissions. While this will surely be a tough pitch, ACDG’s private sector approach is no less challenging. Despite the challenges, if ACDG’s carbon bond has success, it will prompt other organizations and governments to follow in its footsteps, thus serving as a powerful solution in preventing deforestation. □

Work Cited

  1. Image source
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  3. Farand, Chloé. “Norway Pays Gabon $17M for Forest Protection despite Deforestation Spike.” Climate Home News, Climate Home, 28 June 2021,
  4. “Gabon Is First African Country Paid to Protect Its Rainforest.” BBC News, BBC, 22 June 2021,
  5. Pilling, David. “Africa’s Green Superpower: Why Gabon Wants Markets to Help Tackle Climate Change.” Subscribe to Read | Financial Times, Financial Times, 20 July 2021,
  6. Sguazzin, Antony. “Gabon Pitches New Funding Model to Protect Africa’s Amazon.”, Bloomberg,
  7. Song, Lisa. “An (Even More) Inconvenient Truth: Why Carbon Credits for Forest Preservation May Be Worse than Nothing.” ProPublica, 22 May 2019,
  8. Team, Ecosystem Marketplace Insights, et al. “Voluntary Carbon Markets Rocket in 2021, on Track to Break $1B for First TimePress Release.” Ecosystem Marketplace, 28 Sept. 2021,
  10. “Value of Carbon Market Update 2021.” Carbon Credit Capital, 24 June 2021,

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