Malawi's Carbon Market Framework outlines structured approach to carbon market engagement, by providing clear guidelines and setting up procedures for participation in the mechanism. The framework also outlines how the institutional arrangements have been set up, along with clear fees structure.
Institutional Arrangements
- Ministry of Natural Resources and Climate Change (MNRCC): The MNRCC acts as the Authorizing Entity (AE) for all carbon market projects in Malawi. It is responsible for authorizing Mitigation Outcomes (MOs) and providing policy direction.
- Environmental Affairs Department (EAD): The EAD is the Designated National Authority (DNA) for carbon trading and is the entry point for all carbon market projects. It oversees carbon market transactions, manages a Carbon Registry, and is responsible for compliance, approvals, and reporting. The EAD also hosts the Carbon Market Office to support project developers and investors.
- National Steering Committee on Climate Change (NSCCC): This committee provides policy direction, oversight, and guidance on all matters related to international carbon markets.
- Mitigation Expert Working Group (MEWG): This group provides technical advice and recommendations to the DNA on which projects are eligible to participate in carbon markets, ensuring they align with Malawi's priorities and the ambition of its Nationally Determined Contributions (NDCs).
Malawi’s Mitigation Activity Development Cycle
The development cycle for mitigation activities in Malawi is a multi-step process managed by the EAD and MNRCC.
- Article 6.2 and VCM:
The process will involve:
- MAP Registration: The MAP registers with the MCRS to get a unique identification number (MAP-ID).
- MAIN Submission: The MAP submits a Mitigation Activity Idea Note (MAIN).
- Review and No Objection: The EAD reviews the MAIN and, if it is approved, issues a Letter of No Objection.
- MADD Validation: The MAP develops a Mitigation Activity Design Document (MADD), which is then validated by an accredited Validation/Verification Body (VVB).
- Authorization and Registration: The EAD reviews the positive validation report, and upon payment of an administrative fee, issues a Letter of Authorization (LOA) and registers the activity in the MCRS.
- Monitoring and Verification: The MAP monitors the activity and submits a monitoring report for verification by an eligible VVB.
- Issuance and Transfer: Upon a positive review of the verification report by the EAD and payment of an issuance fee, the MOs are issued. The EAD retains a portion of the MOs for the National Buffer Account and transfers the rest to the acquiring party.
- Article 6.4:The cycle for Article 6.4 activities is similar but operates under the supervision of the UNFCCC and its rules. This includes a global stakeholder consultation and validation by a UNFCCC-accredited Designated Operating Entity (DOE).
Requirements for Mitigation Activity Development
- Eligible Activities: Activities must contribute to Malawi's conditional NDC mitigation targets, respect human rights, and align with sustainable development goals. The framework includes a positive list of eligible activities across various sectors (Energy, IPPU, Waste, Agriculture) and a negative list of ineligible activities, such as those under Malawi's unconditional NDC scope or that use nuclear energy.
- Methodologies and Standards: Malawi pre-approves methodologies from international standards like the Clean Development Mechanism (CDM), Gold Standard (GS), and VERRA's Verified Carbon Standard (VCS).
- Verification and Validation Bodies (VVBs): VVBs must be registered in the MCRS and accredited by recognized international standards. UNFCCC-recognized DOEs are also eligible to validate Article 6.4 projects.
Fees and Share of Proceeds (SOPs)
Malawi has a fee structure to cover administrative costs and a Share of Proceeds (SOP) to fund adaptation and mitigation activities.
- Fees Levels:
- Administrative Fees: A total of USD 11,000 for Article 6 projects, which includes an application fee, review fees, and a registration/authorization fee. For VCM activities, MAP application fee of USD 1,000.00 for registration in the MCRS and its account maintenance.
- Listing Fees: USD 10,000 for VCM activities requiring Corresponding Adjustment and USD 7,500 for Article 6.4 projects.
- VVB Fees: USD 1,000 for VVB registration and a USD 500 application fee per project.
- MO Issuance Fee: USD 0.20 per MO.
- Corresponding Adjustment Fee: USD 4 per issued MO.
- Concessional Fees: Periodic payment for using public property and assets.
- Non-Monetary Fees:
- Buffer Fee: A 5% retention of issued MOs for Article 6.2 and VCM projects with a CA, and a 1% retention for Article 6.4 projects. These retained MOs are placed in a National Buffer Account to reduce over-crediting risks and for Malawi's own NDC achievement.
- Share of Proceeds (SOPs): The SOP is a monetary fee collected from mitigation activities with a Corresponding Adjustment. The revenue from SOPs is shared among key stakeholders at the national and local levels. The amount varies depending on the project type:
- Technology-based projects: 15% to 40% of gross revenue, depending of the type of activity implemented.
- Land-based projects: 15% for customary land and 25% for public protected land.
- Non-Compliance mechanism (VCM projects not requiring corresponding Adjustment): 25% of gross revenue from Certified Emission Reductions.
