The Democratic Republic of Congo will allow carbon credit and cryptocurrency companies to bid in an oil and gas licensing round that has been criticised by environmentalists who say drilling in the country’s rainforests and peatlands would risk releasing vast quantities of carbon dioxide.
Last month, Congo put 30 oil and gas exploration blocks up for auction. Some of the exploration areas are in Virunga National Park and the Cuvette Central, the world’s largest tropical peatland, which naturally absorbs carbon from the atmosphere.
Didier Budimbu, the hydrocarbons minister, told the Financial Times he would accept bids for exploration rights in the rainforest and peatlands from carbon market start-ups with no links to oil and gas majors as long as they had solid financial backing.
Rather than explore for hydrocarbons, such groups propose keeping any oil and gas in the ground and instead generate revenue by selling carbon credits to companies looking to offset their emissions.
“If it can help our economy and the country, why not?” Budimbu said. “We’re not doing this to destroy the rainforest, we’re doing it for economic gain . . . With or without oil, what’s important is that we earn [money].”
Congo produces about 25,000 barrels a day of crude oil from a small number of onshore and offshore blocks along its Atlantic coast. The government’s long-held ambitions to produce oil in other parts of the country’s interior have previously been held back by environmental concerns, corruption and a lack of export options.
Those challenges mean it remains uncertain how many oil and gas companies plan to participate in the licensing round. France’s TotalEnergies, which has a project in neighbouring Uganda, and Italy’s Eni, which is active in other parts of Africa, have both told the FT they will not bid.
Flowcarbon, a start-up co-founded earlier this year by WeWork co-founder Adam Neumann, is among the carbon credit groups to have expressed interest.
Phil Fogel, Flowcarbon’s head of cryptocurrencies, said the company had contributed staff and resources to RedemptionDAO, a campaign organised over messaging platforms Telegram and Discord and founded two days before the auction launched in July.
RedemptionDAO aims to buy at least one of the blocks in partnership with an oil company or through crowdfunding, and use it to issue “avoided emissions” carbon credits. It hopes to raise at least $50mn, but has so far only raised $2.57mn and obtained pledges of $74,000, both in USDC, a so-called stablecoin digital currency pegged to the dollar.
Venture capitalist Thomas Annicq said he had contacted the Congolese government separately on behalf of another coalition of carbon market companies that wanted to mount a joint bid on the blocks.
Companies have until February to submit bids. However, there is at present no official methodology for bringing credits from foregone oil and gas exploration to market and analysts say that developing one could take up to two years.
The idea of using credits in this way was first tested 15 years ago when Ecuador’s then president, Rafael Correa, asked the international community to compensate the country for not drilling in an oil exploration block in Yasuni National Park. But drilling went ahead in 2016 after only a fraction of the targeted $3.6bn was raised.
Multinationals’ reliance on carbon offsets to meet net zero targets or advertise their products have created demand for avoided deforestation credits, making this type of credit a more viable option. Gabon, the world’s second most-forested country, plans to issue avoided deforestation credits equivalent to 187mn tonnes of carbon.
Carbon credit companies typically agree deals with local communities or landowners to issue credits.
Ben Rattenbury, head of policy at carbon credit rating start-up Sylvera, said the upfront cost of buying land or exploration rights could lead to a “catastrophic cash flow problem” for a carbon credit company unless it raised funds through crowdfunding or other means. “I can’t imagine a traditional carbon credit developer . . . raising the funds to be able to bid.”