After the mid-2025 rainy season underwhelmed in the Tadjourah region of Djibouti – the small, Francophone nation wedged between Ethiopia and Somalia – authorities faced a crisis as thousands of nomads began to journey from the arid interior to the coastline in search of water. To make matters worse, crippling overseas aid cuts from Donald Trump in the US meant that emergency pools of funding were no longer easily available.
What authorities in Tadjourah then did is something that would not have been possible just a couple of years prior, and which potentially holds huge significance for cash-strapped African governments reeling from aid cuts. They sent an emergency request to Djibouti’s Sovereign Carbon Agency (SCA) – a national body established in 2023 to manage money raised by the country’s pioneering levy on emissions – to ask for support.
The SCA responded immediately by sending water trucks and solar-powered desalination units, staving off the crisis and preventing large-scale displacement in the country. It is just one of around 80 projects that have now been supported with funds raised from the carbon levy, which is making big polluters pay for the country’s climate response.
“We will never replace the UN, and we will never replace aid, but we can react quickly to events, we have a lot of local knowledge, and we can really make a difference in crises,” explains Bruno Pardigon, a French businessman who helped set up the carbon levy, and who now acts as the director of SCA. Other projects funded by the levy include plastic collection schemes, programmes around recycling, mangrove forest restoration, and the purchase of a new electric vehicle fleet.
Paul Sebastien, a former carbon trader who has held roles at the UN and numerous businesses in the space, has acted as a key technical in the establishment of Djibouti’s carbon pricing system.
The focus of the levy is Djibouti’s port, Sebastien explains, which is one of the largest in Africa, with its 2,500 visiting ships annually servicing around 95 per cent of neighbouring Ethiopia’s trade. Visiting ships are charged $17 (£12.60) per tonne of carbon dioxide emitted, with the levy covering 50 per cent of emissions per voyage. Both the carbon emitted and the money collected is independently monitored and audited to ensure that it corresponds to the number of visiting ships, and the system complies with international standards.
The money is then spent by the SCA on programmes across Djibouti that benefit its people, in coordination with aid groups and the Djiboutian government.
“Oftentimes NGOs or local communities’ associations will come to us with requests for impact projects to be funded” explains Pardigon. “We will then work with the NGO and relevant government ministries to ensure there is no overlap in their work, after which we will then run the proposal by our board to ensure that it meets our ethical guidelines, before financing and supervising the projects.”
The money raised from two and a half years of operation is “less than ten million dollars”, Pardigon says. While this might not sound massive, for a country of just 1.1m people and a GDP of around $3.7bn, it is hugely significant – and particularly so for a territory in a volatile part of the world that is so often overlooked by foreign investors.
“People look at us on the map and they see Yemen or Somalia and assume we are in a Civil War,” says Pardigon. “We are also not a country like Kenya – Bill Gates and Jeff Bezos are not lining up to fund our green projects – so this money really can go a long way, and is helping to derisk other projects.”
Djibouti’s carbon levy finds its origin in the Cop27 UN climate conference, which took place in Sharm El-Sheikh, Egypt, at the end of 2022. At the conference, many countries of the world had been talking about plans to introduce taxes on carbon emissions – and President Ismail Guelleh was frustrated that African nations were not doing the same.
“The feeling was: Why should it be that Africa produces just four per cent of global emissions, yet suffers the most – and also receives just three per cent of global climate finance,” explains Pardigon. Government authorities reached out to Pardigon, a man who already had extensive business interests in the country including in the carbon offsetting space, and the carbon levy was developed independently within Djibouti, with Djibouti’s needs as its focus, says Pardigon.
This is in contrast to some other African carbon schemes, which have been criticised for being developed for the benefit of big emitters in the Global North with too little reward for local people, as well as for the roles played by big global consultancies in their design.
Though it was launched by presidential decree and with significant third-party oversight, at first international organisations were skeptical. But now that aid has been cut, and numerous projects have been supported, the dynamic has flipped.
