A review of Nigeria’s Climate Change Act, 2021
At COP 26, President Buhari committed Nigeria to a net-zero carbon target by 2060.
The Climate Change Act (the Act) became law when, on 18 November 2021, the President of the Federal Republic of Nigeria, Muhammadu Buhari, signed the bill passed by the Senate on 13 October 2021. With the advent of the law, Nigeria joined United Kingdom, New Zealand, France, Sweden, Ireland, and Scotland in the league of countries with national legislation which sets targets for reducing carbon emissions.
Last year, at the 26th Conference of Parties (COP 26) to the United Nations Framework Convention on Climate Change, President Buhari committed Nigeria to a net-zero carbon target by 2060. The signing of the law is one of the key efforts of the government towards achieving this target.
The Act provides a framework for achieving low greenhouse gas emission (GHG), inclusive green growth and sustainable economic development by: (a) ensuring Nigeria formulates programmes for achieving its long-term goals on climate change mitigation and adaptation; (b) facilitating the coordination of climate change action needed to achieve long-term climate objectives; (c) mainstreaming climate change actions in line with national development priorities; (d) facilitating the mobilization of finance and other resources necessary to ensure effective action on climate change; (e) setting a target for year 2050 – 2070 for the attainment of a net-zero GHG emission, in line with Nigeria’s international climate change obligations; and (f) ensuring that private and public entities comply with the stated climate change strategies, targets and National Climate Change Action Plan (the Action Plan), amongst other objectives.
This article highlights the key provisions of the Act. We have also analysed the new legislation to identify its possible impact on different players in the Nigerian economy.
Key Highlights of the Act
1. Establishment of the National Council on Climate Change: The Act establishes the National Council on Climate Change (the Council) which is generally vested with powers to make policies and decisions on all matters concerning climate change in Nigeria. The Council is designated to (i) coordinate the implementation of sectoral targets and guidelines for the regulation of GHG emissions and other anthropogenic causes of climate change; (ii) approve and oversee the implementation of the Action Plan; (iii) administer the Climate Fund established under the Act; (iv) ensure the mainstreaming of climate change into the national development plans and programmes; and (v) collaborate with the Federal Inland Revenue Service (FIRS) to develop a mechanism for carbon tax in Nigeria, including developing and implementing a mechanism for carbon emission trading, amongst others.
The Council is headed by the President, with the Vice President as the Vice Chairman, and other ex-officio members. The Act also ensures that members of the public may be appointed into the Council such as representatives of women, youth and persons with disabilities, and representatives of environment related Civil Society Organisations (CSOs).
2. Establishment of the Secretariat: The Act also establishes a Secretariat headed by the Director-General of the Council, which will be responsible for advising and assisting the Council in the performance of its functions and duties. The Secretariat operates as the administrative, technical and scientific arm of the Council. The Act empowers the Secretariat to request reports, data, documents or any information necessary for the performance of its functions. A significant power granted to the Secretariat is the power to visit the premises of Ministries, Departments & Agencies of the Federal Government of Nigeria (MDAs), and private and public entities for the purpose of monitoring, verifying and reporting of emission profile or the collection of any other data necessary to undertake the functions and duties prescribed in the Act.
3. The Climate Change Fund: The Act establishes a Climate Change Fund (the Fund) to be maintained and administered by the Council. The Fund consists of funds appropriated by the National Assembly for the running of the Council; funding from international organisations and funds due to Nigeria for meeting her National Determined Contributions (NDCs), funds from carbon tax and emissions trading, fines, and charges from private and public entities for flouting their climate change mitigation and adaptation obligations. The Fund is to be applied towards the administration and general operation of the Council, the funding of innovative climate change mitigation and adaptation projects, conducting assessments on climate change impact on vulnerable communities, incentivizing efforts towards transiting to clean energy, and sustaining a reduction in GHG emissions amongst others.
4. The Carbon Budget: Under the Act, the Federal Ministry of Environment, in consultation with the Federal Ministry for Budget and National Planning, is required to set a carbon budget for Nigeria, to keep average increases in global temperature within 2°C and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels. The term “Carbon Budget” is defined by the Act to mean the approved quantity of GHG emission that is acceptable over a specified time. The Act empowers the Ministries to periodically revise the carbon budget, in line with Nigeria’s NDCs with a view to complying with Nigeria’s international obligations. The Carbon Budget, together with any revision, is to be presented to the Federal Executive Council for approval through the Council before it becomes effective.
5. National Climate Change Action Plan: The Act makes provision for the formulation of the Action Plan. The Secretariat in consultation with the Ministries is expected to formulate the Action Plan in every five-year cycle. The Action Plan will serve as a basis for identifying the activities aimed at ensuring that the national emissions profile is consistent with carbon budget goals, prescribing measures and mechanisms for achieving Nigeria’s climate goals, reviewing levels and trends of greenhouse gas emissions, identifying strategic areas of national infrastructure requiring climate proofing, setting out a structure for public awareness, and engagement in climate change actions, amongst others.
6. Obligations relating to Climate Change: The Act imposes the following obligations on MDAs, and public and private entities.
a) MDAs: MDAs are required to establish a climate change desk responsible for ensuring the integration of climate change activities into their core mandate. They are to adhere to the annual carbon emission reduction targets, in line with the Action Plan and the carbon budget. Any MDA that fails to meet its carbon emission reduction target shall be subjected to a review and its principal officers, upon being found liable, sanctioned and where appropriate fined as determined by the Council.
b) Public Entities: The Act defines a public entity as “an organisation or body providing services to the public on behalf of the Nigerian government.” It empowers the Council to by regulations impose obligations relating to climate change on any public entity and also vary or revoke such obligations where necessary.
c) Private Entities: The Act defines a private entity as “a person or bodies with functions of a private nature including bodies registered under the Companies and Allied Matters Act, No 3, 2020.” It obligates private entities with more than 50 employees to put in place measures to ensure annual carbon emission reduction targets are met in line with the Action Plan, and also designate a climate change officer or Environmental Sustainability Officer responsible for submitting annual reports on the entity’s efforts to meet its carbon emission reduction and climate adaptation plan to the Secretariat, through the State Director.
This is a key compliance obligation on the part of private companies as a private entity which fails to meet its reduction targets shall be liable to a fine to be determined by the Council. In order for the Council to determine the fine, it will rely on a system of Environmental Economic Accounting with attention on the health impacts, impact on climate variation and total damage to ecosystem services. The Council may also by notice in the Federal Government Gazette, require a private entity that fails to comply with its climate change obligations, to prepare a report within a specified time, on its past and current actions, and future actions to be taken to secure performance with its climate change obligations.
There are key issues that arise for consideration in view of the enactment of the Act. Some of these issues are highlighted as follows:
a) Duplicity of Regulators: We note that currently, the Department of Climate Change under the Ministry of Environment (the Department) drives the national response to climate change at the national and international level. Given the enactment of the Act that establishes the Council as a specific regulator on issues relating to climate change, the continued relevance and existence of the Department is unclear and in order to avoid regulatory uncertainty and duplication of responsibilities, a decision needs to be taken on the future role of the Department and if, given its role and traction over the years, it would be subsumed under the Council or totally dissolved.
b) Impact on Oil and Gas Industry: It is important to highlight that exploration, production and processing companies in the oil and gas sector, as high emitters of GHG, will be greatly affected by this Act as they are required to comply with the carbon budgets to be set by the Ministries or risk penalties. In view of the fact that the Petroleum Industry Act 2021 (PIA) already imposes penalties on oil companies for gas flaring, this increases the compliance obligations and financial implication on oil and gas exploration, production and processing companies.
c) Carbon Tax: Under the PIA, the FIRS is empowered to collect hydrocarbon tax. The basis for the imposition of the hydrocarbon tax is clearly set out in the PIA. On the other hand, the Act empowers the Council to collaborate with the FIRS in developing a mechanism for carbon tax in Nigeria. In this regard, it is unclear whether the carbon tax as used in the Act is the same as hydrocarbon tax provided for in the PIA. Also, given that the framework for hydrocarbon tax is already set out in the PIA, it is unclear what this collaboration between the Council and the FIRS with respect to carbon tax will entail and the possible impact on companies liable to hydrocarbon tax.
The Act represents a major legislative framework for Nigeria’s energy transition roadmap and is a key step in its bid to achieve inclusive green and sustainable economic development. Like many other countries, Nigeria faces the crippling challenges and effects of climate change, and the Act could potentially provide an all-inclusive and legal and regulatory framework for achieving Nigeria’s long-term climate goals and implementing an energy transition road map in a bid to achieving Nigeria’s net zero target.
Considering that Nigeria is significantly reliant on fossil fuels (i.e., oil and gas) as an energy and revenue source, it is yet to be seen whether Nigeria will indeed be able to achieve its net zero carbon target goal by 2060. A lot of effort would be required to develop a robust legal and regulatory framework and strategically align all stakeholders in the public and private sector.
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