NIGERIA’S ENERGY TRANSITION WATCH – THE CLIMATE CHANGE ACT: AN EVALUATION OF TWO YEARS OF IMPLEMENTATION

Introduction

The Climate Change Act 2021 (the “Act”) was signed into law on November 18, 2021. The Act seeks to provide a framework for achieving low Green House Gas (GHG) emissions, inclusive green growth and sustainable economic development with the goal of achieving zero emission of GHG by 2050-2070. The succeeding paragraphs highlights our thoughts with respect to the implementation of the Act.

Carbon Budget and National Climate Change Action Plan

The Act provides for the Federal Ministry of Environment in consultation with the Ministry of Budget and National Planning to set a carbon budget and national climate change action plan (“Action Plan”) for the country. For clarity, carbon budget as defined under the Act means “the approved quantity of GHG emissions that is acceptable over a specified time” (“Carbon Budget”). The Action Plan is meant to ensure national emissions are consistent with the Carbon Budget.

The pilot Carbon Budget and Action Plan are expected to be presented through the National Council on Climate Change (“Council”) to the Federal Executive Council (“FEC”) for approval not later than 12 months from the date the Act is assented to by the President of the Federal Republic of Nigeria. Based on the foregoing, the pilot Carbon Budget and Action Plan ought to have been published by November 2022. The Carbon Budget is yet to be published. The reason for this may not be unconnected with the fact that the Director General of the Council who is expected to drive implementation of the Act, was appointed in July 2022 while former President Buhari only approved the Council’s work plan in February 2023.

While the country is yet to publish the pilot Carbon Budget and Action Plan, in November 2022, the country announced rules to reduce methane emissions from the oil and gas sector, making it the first country in Africa to enact regulations to curb methane in the energy sector. In January 2023, the country adopted the Methane Guidelines, which include mandatory measures for oil and gas companies, such as leak detection. However, much more than what has been done, achieving carbon neutrality by 2050 compels every country to reduce emissions unrelated to energy consumption (agriculture and industrial processes), increase carbon sinks (natural and technological) to absorb residual incompressible emissions, and develop biomass production.

Carbon Tax

One of the functions of the Council as established by the Act is the responsibility of collaborating with the Federal Inland Revenue Service (FIRS) to develop a mechanism for carbon tax in Nigeria.[1] Prior to the enactment of the Act, the Carbon Tax Act (“CTA”) came into force on June 1, 2019, and aims to reduce carbon footprint in Nigeria. Carbon tax is a fee imposed on the burning of carbon-based fuels (coal, oil, gas) and is a means of ensuring that entities who participate in the burning of these carbon fuels pay for climate damage that is the resulting effect of the emission of GHG into the atmosphere. Since the enactment of the CTA, the government has not achieved its full administration, as companies still engage in carbon-fuel burning without paying the applicable tax. The enactment of the Act and the consequent establishment of the Council as well as its obligation to collaborate with the FIRS on developing a mechanism for carbon tax in Nigeria is an attempt at enforcing the provisions of the Carbon Tax Act.

While there is yet to be any implementation with respect to carbon tax, the Council earlier in 2023 communicated its intention to create a framework for carbon tax system. The carbon tax will be based on two forms: (1) an emissions tax based on production, and (2) a tax on goods or services that are generally GHG intensive. According to the Director General of the Council, the foregoing arrangement is expected to set a price which emitters pay for each ton of GHG emissions. This will help generate revenue for the government and encourage consumers to take steps to switch fuels, adopt new technologies and reduce emissions to avoid paying the carbon tax.

Carbon Trading  

Another function of the Council as established by the Act is the responsibility to collaborate with the Federal Ministry responsible for Environment and the Federal Ministry responsible for Trade to develop and implement a mechanism for carbon emission trading.[2] This mechanism is yet to be implemented as it is a work in progress. In August 2023, the Director-General of the Council expressed the government’s determination to explore carbon pricing as a strategy to tackle the climate change challenges in the country. The Director-General stated that carbon pricing would address the nation’s climate challenges, as it curbs GHG emissions by placing a fee on emissions and/or offering an incentive for emitting less carbon. Also, the Council stated its determination to ensure that every opportunity for harvesting emission reduction certificates from ongoing activities in Nigeria is linked to the Council as well as all ministries, departments and agencies or sectors that are interested in pursuing projects that can end carbon emissions.

Conclusion

Despite the fact that there are some gaps in the implementation of the Act, the Federal Government has been able to develop initiatives which are at best, steps towards implementation of the Act. One of the initiatives is the Presidential Compressed Natural Gas Initiative (“PCNGI”)[3] which was set up by President Bola Ahmed Tinubu in August 2023. This initiative is geared towards fostering a cleaner environment by reducing carbon emissions, which is in line with the objectives of the Act.

While steps are being taken with respect to the implementation of the Act, it is obvious that there is more than needs to be done in order to (i) achieve the intent of the Act in reducing GHG emissions and (ii) ensure Nigeria is on a path towards sustainable and responsible energy use.