The Democratic Republic of Congo will allow carbon credit and cryptocurrency companies to bid in an oil and gas licensing round that has drawn criticism from environmentalists who say drilling in the country’s rainforests and peatlands would risk releasing large amounts 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 Cuvette Central, the world’s largest tropical bog that naturally absorbs carbon from the atmosphere.
Didier Budimbu, the minister for hydrocarbons, told the Financial Times he would accept bids for exploration rights in rainforest and peatlands from carbon market start-ups that have no ties to oil and gas companies, as long as they have solid financial backing .
Instead of looking for hydrocarbons, such groups suggest leaving oil and gas in the ground and instead generating revenue by selling carbon credits to companies looking to offset their emissions.
“If it can help our economy and the country, why not?” said Budimbu. “We’re not doing this to destroy the rainforest, we’re doing it for economic reasons. . . With or without oil, the important thing is that we earn [money].”
Congo produces about 25,000 barrels of crude oil per day from a small number of onshore and offshore blocks along its Atlantic coast. The government’s long-held ambitions to explore other parts of the country’s interior have so far been held back by environmental concerns, corruption and a lack of export opportunities.
Because of these challenges, it remains uncertain how many oil and gas companies plan to participate in the licensing round. France’s TotalEnergies, which has a project in neighboring 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 by WeWork co-founder Adam Neumann earlier this year, is among the carbon credit groups that have expressed interest.
Phil Fogel, Flowcarbon’s head of cryptocurrencies, said the company contributed staff and resources to RedemptionDAO, a campaign organized through messaging platforms Telegram and Discord and set up two days before the start of the July auction.
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. She hopes to raise at least $50 million but has only raised money so far $2.57M and received commitments from $74,000both 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 looking to make a joint bid for the blocks.
Companies have until February to submit offers. However, there is currently no official method for bringing abandoned oil and gas exploration loans to market, and analysts say it could take up to two years to develop one.
The idea of using loans in this way was first tested 15 years ago when Ecuador’s then-President Rafael Correa called on the international community to compensate the country for not drilling in an oil exploration block in Yasuni National Park. However, drilling resumed in 2016 after raising only a fraction of the $3.6 billion target.
The reliance of multinational companies on carbon offsets to achieve net-zero goals or to promote their products has created a demand for credits for avoided deforestation, making this type of credit a more viable option. Gabon, the second most forested country in the world, plans to issue 187 million tonnes of carbon credits for avoided deforestation.
Carbon credit companies typically enter into agreements with local communities or landowners to issue credit.
Ben Rattenbury, head of policy at carbon credit rating start-up Sylvera, said the upfront cost of buying land or exploration rights could create a “catastrophic cash flow problem” for a carbon credit company unless it raises funds through it crowdfunding or other means. “I can’t think of a traditional carbon credit developer. . . Raising the funds to bid.”