CARBON MARKETS AND UGANDA: LEGAL FRAMEWORKS, CHALLENGES, AND OPPORTUNITIES

BY CALVIN STEWART OBITA*

1.0  INTRODUCTION

Carbon markets have emerged as a critical tool in global efforts to combat climate change, offering a market-based mechanism to incentivise emissions reductions. Uganda, with its vast natural carbon sinks—particularly forests under REDD+ (Reducing Emissions from Deforestation and Forest Degradation)[1], has positioned itself as a key player in Africa’s carbon economy. 

The country has recently enacted the National Climate Change (Climate Change Mechanisms) Regulations, 2025,[2] operationalising the National Climate Change Act, 2021, and aligning with international commitments under the Paris Agreement[3], particularly under Article 6.[4]

This article briefly provides a comprehensive legal analysis of Uganda’s carbon market framework, examining its regulatory structure, institutional governance, compliance mechanisms, and the challenges hindering its full potential.

1.1  LEGAL AND REGULATORY FRAMEWORK FOR CARBON MARKETS IN UGANDA

1.1.1        INTERNATIONAL COMMITMENTS

Uganda is a signatory to key climate agreements, including: the United Nations Framework Convention on Climate Change (UNFCCC, 1993), the Kyoto Protocol (introducing the Clean Development Mechanism - CDM), and the Paris Agreement (2015) (Article 6.2 & 6.4 on carbon markets).[5]

These treaties provide the foundation for Uganda’s domestic carbon market policies, particularly in facilitating Internationally Transferred Mitigation Outcomes (ITMOs) under Article 6.2 and the Paris Agreement Crediting Mechanism (Article 6.4).[6]

Article 6 of the Paris Agreement plays a critical role in shaping international carbon markets, offering frameworks for countries and companies to cooperate in achieving emissions reductions. Under Article 6.2, countries can engage in bilateral or multilateral agreements to transfer emissions reductions, known as Internationally Transferred Mitigation Outcomes (ITMOs), which can be counted toward their own climate targets.

This mechanism is particularly useful where there's a mismatch between the capacity to reduce emissions and the financial resources available, allowing wealthier nations to fund climate efforts in developing countries. For instance, countries like Norway have supported forest conservation initiatives abroad without claiming those reductions toward their own Nationally Determined Contributions (NDCs).

Forest-related projects such as REDD+ (Reducing Emissions from Deforestation and Forest Degradation) are expected to gain more traction through Article 6.2, creating new opportunities for large-scale conservation and restoration.

On the other hand, Article 6.4—often referred to as the Paris Agreement Crediting Mechanism—sets out a more centralised and standardised framework for generating and trading carbon credits.

Overseen by the Article 6.4 Supervisory Body, this mechanism allows for the issuance of emission reduction units that could eventually integrate voluntary carbon market (VCM) credits into a compliance-grade system. This is significant for countries like Uganda, as these international rules provide a foundation for shaping domestic carbon market policies.

By aligning national frameworks with Article 6.2 and 6.4, Uganda can facilitate cross-border carbon trading and attract investments in high-quality carbon projects. Ultimately, Article 6 not only enhances trust and transparency in the carbon market but also promises to channel much-needed finance into forest protection and climate resilience efforts in countries with rich natural resources but limited climate funding.

1.2  DOMESTIC LEGISLATION

This case involved REDD+ initiatives within the National Climate Change Act, 2021 Cap. 182 established Uganda’s legal framework for climate action. The Act introduced climate change mechanisms,[7] later operationalised by the 2025 Regulations, which govern: Project approval and validation, Carbon credit issuance and trading, Benefit-sharing mechanisms, Verification and compliance.[8]

Key features of the National Climate Change (Climate Change Mechanisms) 2025 Regulations include: A two-stage approval process whereby the Minister grants a Letter of No Objection if he is satisfied with a request to participate in a climate change mechanism,[9] then the Project Proponent must proceed to apply for approval of the climate change mechanism/project,[10] Mandatory benefit-sharing plans ensuring local community participation,[11] Accredited third-party verifiers (e.g., Gold Standard, Verified Carbon Standard) and a National carbon registry to prevent double counting.[12]

While the framework is robust, indigenous and local communities are often excluded from decision-making, mirroring problems seen in Latin American REDD+ projects. The Constitutional Court of Colombia judgment in Pirá Paraná Indigenous Council and the Association of Traditional Indigenous Authorities of the Pirá Paraná River (ACAIPI) vs Corporation for the Sustainable Management of Forests (Masbosques) and others[13] offers a poignant illustration of this very critique that despite the existence of a seemingly robust legal and regulatory framework for REDD+ projects, indigenous and local communities continue to face systematic exclusion from meaningful participation in decision-making processes that directly affect them.

This case involved REDD+ initiatives within the territory of the Pirá Paraná Indigenous Council, where the Court found that both the Colombian State and private actors had failed in their constitutional and international obligations to safeguard the rights of indigenous peoples. The Court held that:

1. The companies failed to act with due diligence, neglecting to adapt their legal instruments to meet international and national human rights standards, and not securing genuine, free, prior, and informed consent (FPIC).

2. The State had not adopted an ethnic approach in REDD+ governance, thereby failing to ensure safeguards that consider indigenous autonomy and self-determination, particularly in relation to collective land ownership and identity protection.

3. The absence of clear state oversight and a deficient regulatory framework (e.g., gaps in Resolution 1447 of 2018) left Indigenous communities vulnerable to exploitation and marginalisation.

   
   

Although the case arises in Latin America, its implications resonate globally, including in Uganda, where similar legal and governance challenges arise in the implementation of forest conservation and climate change mitigation programs.

Uganda has increasingly become a target country for REDD+ and other carbon offset initiatives due to its rich biodiversity and extensive forest cover, particularly in areas inhabited by indigenous and marginalised communities, such as the Batwa in Southwestern Uganda, the Ik in Kaabong, and forest-dependent communities in central and western Uganda.

However, much like the indigenous communities of Pirá Paraná in Colombia, Uganda’s ethnic minorities and local communities have faced challenges in safeguarding their land rights, cultural integrity, and participation in environmental governance.

As the Colombian court noted, companies involved in REDD+ projects must adhere to due diligence standards and align their operations with both international and national human rights obligations. Uganda is similarly bound by international instruments like the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and the African Charter on Human and Peoples' Rights, which reinforce FPIC and the right to self-determination. Yet, in Uganda, implementation remains weak. Communities often lack access to timely, accurate, and culturally appropriate information, and consultations, if they happen at all, are often tokenistic.

Concerns have been raised about the lack of transparency and community engagement in forest carbon projects in Uganda, including those funded by international donors or developed under voluntary carbon market schemes. These concerns mirror those raised in the Colombian case: failure to obtain genuine consent, ambiguity over land ownership, and absence of effective State oversight.

Furthermore, the case of United Organisation for Batwa Development in Uganda (UOBBU) and 11 Others v Attorney General[14] is a domestic example that reflects similar principles. The Court affirmed the special constitutional protection owed to indigenous communities, particularly concerning evictions from ancestral lands without adequate consultation or compensation.

2.0  INSTITUTIONAL GOVERNANCE AND COMPLIANCE MECHANISMS

2.1  REGULATORY AUTHORITIES

The Ministry of Water and Environment (MWE) serves as the primary regulator, overseeing: Project approvals, Carbon credit issuance, and Monitoring and enforcement.[15]

A Technical Committee supports the MWE in evaluating project feasibility and ensuring compliance with sustainability criteria.[16]

2.2  COMPLIANCE OBLIGATIONS

Project developers must adhere to strict reporting requirements:

Bi-annual progress reports during feasibility (failure to submit is punishable by fines or imprisonment).[17]

Annual emissions reduction monitoring reports post-implementation once a year.[18]

3.0  CHALLENGES AND CRITICISMS

Despite progress, Uganda’s carbon market faces significant hurdles:

3.1  REGULATORY AND CAPACITY GAPS

Lack of fully operational licensing frameworks for carbon projects, leading to unregulated trading.[19] There is plenty of carbon trading in Uganda, but it is currently unregulated locally, with key law reforms pending but not yet passed. “We have players operating who are selling carbon credits as part of carbon projects, but we don’t have an operational licensing framework for these projects.”[20]

Weak institutional capacity in verification and enforcement.[21]The Ministry of Water and Environment (MWE) oversees carbon projects, but capacity constraints and a lack of transparency in approvals raise concerns about elite capture and unequal benefit distribution.[22]

3.2  MARKET INTEGRITY CONCERNS

Double-counting risks due to inadequate tracking systems.[23] Uganda currently lacks a fully integrated national carbon registry, creating vulnerabilities where the same emissions reductions could be claimed by multiple entities, both domestically and internationally.

For instance, a forest conservation project in the Albertine Rift might generate credits sold to a European corporation while simultaneously being counted toward Uganda’s Nationally Determined Contributions (NDCs) under the Paris Agreement. This undermines climate integrity and could trigger legal disputes under Article 6.2 of the Paris Agreement, which requires "corresponding adjustments" to avoid double counting.

Questionable additionality (whether projects truly reduce emissions beyond business-as-usual).[24] Many Ugandan carbon projects, particularly in afforestation and cookstove distribution, face scrutiny over whether they genuinely reduce emissions beyond what would have occurred without carbon financing. 

A 2023 study by the Berkeley Carbon Trading Project found that 30% of African carbon projects failed additionality tests, risking reputational damage and legal challenges from buyers.[25]

Exploitation of local communities, such as long-term land contracts with minimal benefits (e.g., Trees for Global Benefit project).[26] Many of the participants state they are suffering from economic hardship and food insecurity. They said the money received from TGB contracts was insufficient to support their families, and they had converted land previously used for food crops to grow trees.

As one local NGO representative told GFC: “You can’t eat money.” Underlying issues uncovered through the research of Global Forest Coalition suggest ECOTRUST failed to effectively inform participants of the technicalities of the project, including payment schedules and details, and even what specifically ECOTRUST was paying them for. Delays in payments and transfers made through alternative methods other than traditional bank deposits were also common issues raised by participants.[27]

3.3  PRICING AND EQUITY ISSUES

Disparities in carbon credit pricing ($12–$100 per ton) disadvantage Ugandan sellers.[28]

Global North dominance in carbon market governance is limiting Africa’s bargaining power.[29]

The African Group of Negotiators (AGN) has demanded reforms under the Paris Agreement’s "Common but Differentiated Responsibilities" (CBDR) principle, arguing that current governance violates procedural justice.

4.0  OPPORTUNITIES AND THE WAY FORWARD

4.1  ECONOMIC AND ENVIRONMENTAL BENEFITS

Job creation, for example, 3 million projected jobs in Africa by 2030.[30]

Foreign investment attraction, particularly in renewable energy and afforestation.[31]

4.2  Strategic Recommendations

1. Strengthen regional cooperation, for example, the East African Carbon Markets Alliance) to harmonise pricing and standards.[32]

2. Blockchain-based registries like Kenya’s Carbon Offset Registry should be adopted to ensure real-time, tamper-proof tracking.

3. Establish a national carbon exchange like Zimbabwe’s Carbon Credit Trading Platform to enable direct sales.

4. Community carbon cooperatives to empower locals as direct sellers modeled after Kenya’s Mikoko Pamoja initiative.

5. Prioritise community equity in benefit-sharing agreements.

6. Leverage COP29’s Article 6.4 mechanism to access compliance markets.[33]

   
   

5.0  Conclusion

Uganda’s carbon market framework represents a bold step toward climate resilience and sustainable development. However, effective implementation, robust enforcement, and equitable benefit distribution remain critical challenges. There is a need for these to be addressed and quickly, I might add, to ensure Uganda as a nation can benefit wholly.

CARBON MARKETS AND UGANDA_OBITA CALVIN STEWART.pdf

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* Editor-in-Chief Lawpointuganda.

[1] Ministry of Water and Environment, National REDD+ Strategy and Action Plan (Second Edition June 2020).  

[2] In exercise of the powers conferred on the Minister responsible for climate change matters by sections 8, 9, 12 and 29 of the National Climate Change Act, these Regulations are made this 7th day of November, 2024.

[3] Africa Legal, Uganda’s new Climate Change regulations a bold step forward, https://www.africa-legal.com/news/ugandas-new-climate-change-regulations-a-bold-step-forward/121420

[4] Afriwise, Uganda Operationalises Carbon Markets. Inside the 2025 Climate Change Mechanisms Regulations, <https://www.afriwise.com/blog/uganda-operationalises-carbon-markets-inside-the-2025-climate-change-mechanisms-regulations> [Accessed on 23rd May 2025]  

[5] AlliotGlobalAlliance, Carbon trading to save our planet, <https://www.alliottglobal.com/insights/carbon-trading-to-save-our-planet/> [Accessed on 23rd May 2025]  

[6] What the COP29 Agreement on Carbon Markets means for Uganda, <https://africanclimatewire.org/2024/12/what-the-cop29-agreement-on-carbon-markets-means-for-uganda/>  [Accessed on 23rd May 2025]  

[7] Section 9.

[8] Comprehensive Climate Change Regulations Expected To Boost Carbon Market Participation In Uganda, <https://www.mondaq.com/climate-change/1624316/comprehensive-climate-change-regulations-expected-to-boost-carbon-market-participation-in-uganda>  [Accessed on 23rd May 2025]  

[9] Regulation 11.

[10] Regulation 17.

[11] Regulation 18.

[12] Carbon Credits, Markets and Trading in Uganda: Inside The National Climate Change (Climate Change Mechanisms) Regulations of 2025, <https://onyangoadvocates.com/carbon-credits-markets-and-trading-in-uganda> [Accessed on 23rd May 2025]  

[13] Judgment T-248 of 2024.

[14] Constitutional Petition No. 03 of 2011.

[15] Ibid (4).

[16] Ibid.

[17] Regulation 15.

[18] Regulation 25.

[19] Ibid (n5).

[20] Ibid.

[21] Ibid (n6).

[22] https://www.sciencedirect.com/science/article/abs/pii/S1462901118305392

[23] https://www.afriwise.com/blog/uganda-operationalises-carbon-markets-inside-the-2025-climate-change-mechanisms-regulations

[24] Daily Monitor, Is carbon trading doing more harm than good? Sunday, January 12, 2025, <https://www.monitor.co.ug/uganda/news/national/is-carbon-trading-doing-more-harm-than-good> [Accessed on 23rd May 2025]  

[25] Haya, B. K., Alford-Jones, K., Anderegg, W. R. L., Beymer-Farris, B., Blanchard, L., Bomfim, B., Chin, D., Evans, S., Hogan, M., Holm, J. A., McAfee, K., So, I. S., West, T. A. P., & Withey, L. (2023). Quality assessment of REDD+ carbon credit projects. Berkeley Carbon Trading Project <https://gspp.berkeley.edu/research-and-impact/centers/cepp/projects/berkeley-carbon-trading-project/REDD+> [Accessed on 23rd May 2025]  

[26] Ibid.

[27] Global Forest Coalition, Trees for Global Benefit Uganda: A Case Study on the Failures of Carbon Offsetting. Available at <https://globalforestcoalition.org/uganda-offsetting-case-study/#:~:text=TGB%20annual%20report.,Economic%20Hardship,common%20issues%20raised%20by%20participants>  [Accessed on 23rd May 2025]  

[28] Ibid (n6).

[29] Ibid (n24).  

[30] Ibid (n3).

[31] Ibid n(6).

[32] giz, Building up the global carbon market in East Africa, <https://www.giz.de/en/worldwide/>  [Accessed on 23rd May 2025]  

[33] Space Intelligence, What Article 6 Means for Voluntary Carbon Markets with prof. Ed Mitchard, <https://www.space-intelligence.com/podcasts/what-article-6-means-for-voluntary-carbon-markets-with-prof-ed-mitchard/> [Accessed on 23rd May 2025]