Dar es Salaam. Tanzania has lost a staggering Sh1.26 trillion in potential revenue from carbon trading due to weak coordination, lack of proper guidance, and limited public sensitisation, the Controller and Auditor General (CAG) reveals in a recent audit report.
Despite the country’s active participation in global climate change mitigation efforts, the Performance Audit Report on the Management of Carbon Trade Projects paints a concerning picture of missed opportunities and underutilised potential in one of the world’s fastest-growing environmental finance markets.
Carbon trading allows countries and companies to earn money by reducing emissions and selling credits to those exceeding their emission limits.
This global mechanism is not only a tool for climate mitigation but also offers developing countries like Tanzania an opportunity to earn substantial income and fund local development.
However, from January 2023 to July 2024, Tanzania managed to generate only Sh36 billion from carbon credit sales, representing just 3 percent of the Sh1.26 trillion the country could have earned.
This shortfall is mainly attributed to delays in implementation, lack of strategic guidance, and limited stakeholder engagement in the sector.
“The government has not fully taken advantage of its carbon trading potential due to limited guidance and lack of awareness among key stakeholders,” the CAG report states.
The audit shows that of the 56 carbon trading projects registered during the period under review, only four (4) reached the implementation stage.
The remaining 52 projects stalled at the planning phase due to delays in reviewing proposals, lack of capacity assessments, and limited follow-up by the Vice President’s Office (VPO), which oversees the National Carbon Monitoring Centre (NCMC).
The audit noted that the situation was further compounded by the limited engagement of stakeholders from the public and private sectors.
The CAG report further highlights that of the 87 percent of projects, 55 percent are concentrated in the forestry sector, while 32 percent are focused on energy.
This leaves significant untapped potential in other sectors, including the transport and industrial processing.
“This uneven distribution points to underinvestment and underutilisation of carbon trading opportunities in these critical sectors, limiting the overall impact of the projects," the CAG notes.
The audit further revealed that Tanzania’s reliance on international databases instead of establishing its own carbon credit tracking and inventory system hampers participation in global markets and hinders transparency.
It also found that 71 percent of the registered projects experienced delays due to ineffective management at the VPO, which oversees the carbon trading framework.
The CAG found the VPO had failed to adequately verify the capacity of project proponents and did not effectively coordinate the functions of the National Carbon Projects Assessment Technical Committee.
This was largely due to limited expertise and financial resources. There were also glaring gaps in the management of contractual agreements.
For instance, contracts were signed without proper vetting by the Attorney General’s office and without environmental safeguards or clear follow-up mechanisms.
The audit also highlighted a lack of transparency in pricing and the use of revenue from carbon credits.
The Sh36 billion collected was not reinvested into environmental projects, as expected, but treated as general income and used for other purposes.
Forest conservation—the backbone of most carbon trade projects in Tanzania—received minimal funding, the report revealed.
There was no structured follow-up on corporate social responsibility commitments by project proponents, meaning local communities who should benefit from carbon projects have seen little to no impact.
“The absence of a well-defined institutional framework has hindered enforcement of compliance and the overall management of carbon trade projects,” the report said.
To rectify the situation, the CAG recommended strengthening the institutional framework by elevating the NCMC into a fully-fledged body with the capacity to coordinate and manage all aspects of carbon trade.
CAG Charles Kichere also recommended a timely review of project proposals, standardised procedures for contractual agreements, improved monitoring and evaluation systems, and the development of a national carbon crediting mechanism to ensure pricing transparency.
“Carbon trading is not just an environmental issue—it’s an economic opportunity. But without proper oversight, we’re selling ourselves short,” Dr Mwakalinga warned.
Speaking to The Citizen, environmental economist, Dr Amani Mwakalinga, said Tanzania’s missed opportunity underscores the need for stronger leadership in the carbon market space.
“The carbon economy is a goldmine for developing countries. With proper systems, we could fund climate-smart agriculture, reforestation, and green energy projects in remote areas. But with this level of disorganisation, we are losing both money and credibility,” he said.
Legal expert and environmental policy analyst, Ms Grace Mushi, emphasised the risk of poor contracts in the carbon trade sector.
“Carbon contracts can be complex and long-term. If you don’t have proper legal oversight, you might sell your forest cheaply, lose control over land rights, or end up in legal disputes. Let this report help us take this very seriously going forward,” she said.
