Fig. 1: Map of Ethiopia with Ten Land-use Categories.![\"Fig.](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2026\/04\/44168_2026_365_Fig1_HTML.png\")
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Carbon sequestration potentials vary across land-use types and depend on soil and climate conditions. Soil organic carbon (SOC) stocks across Ethiopia\u2019s land-use types also vary depending on a range of land management practices. For example, average carbon stocks range from 31.4\u2009Mg SOC\u2009ha\u22121 in soils of intensively grazed lands to 145.0\u2009Mg SOC\u2009ha\u22121 in soils of protected grasslands.23<\/a> The preference for a specific land management approach is influenced by the land\u2019s current use and value.25<\/a> We have applied the results of Buraka, et al. (2022),24<\/a> to estimate the SOC storage and Hailu et al (2021),26<\/a> for the sequestration potentials of five land uses at the national level (Table 1<\/a>).27<\/a><\/p>\n Table 1 Summary of National estimated SOC stock, annual sequestration<\/a> potentials, and annual revenue that can be generated by selling carbon credits in different land-based ecosystems of Ethiopia using various studies<\/p>\n To highlight Ethiopia\u2019s carbon market investment potential, we developed estimates of carbon sequestration potentials and revenue that can be generated (Table 1<\/a>). Despite limited data, our estimates for potential sequestration using the work of Hailu et al. (2021), demonstrate that by employing best land management practices on all its 112 million hectares of land, Ethiopia could sequester up to 700 million tons of CO2e (~400 million tons on privately held land, and >300 million tons on protected areas) across all land use types. Given the carbon credit market price fluctuations, at the current average carbon credit price of $6.97 per ton CO2e for nature-based solutions, this translates to a hypothetical maximum potential revenue of approximately $5 billion, were all land management practices implemented perfectly.28<\/a> It is important to recognize that this value is almost certainly an overestimate, and that this calculation should be treated as a theoretical upper bound.<\/p>\n Agricultural activities are the largest source of GHG emissions in Ethiopia, accounting for 80% of the national total, but it is important to recognize that overall emissions in Ethiopia are low, accounting for only 0.04% of global emissions, largely due to a lack of substantial heavy industrial activity. Using the carbon sequestration potentials for cropland reported by Hailu, et al. (2021), we estimate that more than 30 million tons CO2e can be sequestered.27<\/a> Through adopting best management practices, croplands can serve as a significant carbon sink, which can improve soil health and productivity, thus enabling expanded carbon sequestration and bringing a new source of revenue to the agricultural sector.<\/p>\n Legal and regulatory context of land resources in ethiopia<\/p>\n Well-designed markets require an understanding of the legal and regulatory institutions that govern land resources. Historical and current land-use practices are also crucial in carbon market development.29<\/a> Ethiopia has no formal legal or regulatory barriers specific to carbon markets. However, existing frameworks that govern land use\u2014such as land ownership and use rights, institutional hierarchies, and the existing general trade barriers\u2014need consideration, and we explore details of this below.<\/p>\n For a carbon market to evolve to its full potential, Ethiopia will need supportive legal and regulatory architectures governing land use and management. In this section, we highlight the existing legal and regulatory contexts obtained from exploring relevant government documents, meeting with representatives of agencies, and contacting legal experts familiar with Ethiopian market regulations.<\/p>\n Land ownership and tenure rights<\/p>\n Land ownership determines how fiscal benefits from carbon market participation may accrue. In Ethiopia, the government is constitutionally the sole owner of land.30<\/a> Land-use rights are granted by the government in three forms: private-holding (individual farmers-permanent use-right), communal-holding (pastoralists and semi-pastoralists), and state-holding (including protected areas). Small-scale farmers have broad freedom in land-use practices and can respond to market demands, while large-scale investor land-use practices are based on lease agreements that restrict certain practices.31<\/a> Because of this, it is paramount to merge the legal frameworks that govern land-use practices with property rights that are held by the government.<\/p>\n Legal provisions must be developed to encourage land use for the generation and sale of carbon credits that are verifiable and covered under an appropriate regulatory framework. This is important for creating legal titles to carbon credits because tracking carbon credit ownership and tying those credits to a specific geographic parcel is essential for verification. Buyers must be able to track the title of a carbon credit for confidence in a transaction. Ownership of land and title to commodities produced on that land must be clearly defined if any derivative market is to develop. Any ambiguity has direct implications for land-use management practices and can add significant, debilitating uncertainty to a nascent carbon market.<\/p>\n Land administration<\/p>\n Land in Ethiopia is administered by two federal institutions: the Ministry of Agriculture (MoA), which is responsible for rural land administration, and the Ministry of Urban Development and Construction (MUDC), which is responsible for urban land administration (Fig. 2<\/a>).27<\/a>,30<\/a>,32<\/a>,33<\/a> The Urban Land Development and Management Bureau (ULDMO), the Agricultural Investment Land Administration Agency (AILAA), and the Land Administration and Use Directorate (LAUD) are the offices fully engaged in administering land across the smaller administrative units (Regional, Zonal, Woreda, and Kebele).34<\/a> Regional governments have constitutional authority to manage small-scale land in alignment with the federal laws, which in some cases vary across different regions. Land administration can be challenged by policy and legislative gaps and insufficient institutional capacity. A lack of harmonization across all relevant agencies can also bring substantial challenges to the development of new land management and use strategies, including the development of a carbon market.<\/p>\n Fig. 2 Land Regulatory Structure in Ethiopia.<\/p>\n Institutional capacity and international engagement<\/p>\n Capacity building is a crucial prerequisite for the successful implementation of carbon markets in Ethiopia and Africa. However, a lack of sufficient expertise and technical capacity within government agencies and across local communities to develop, implement, and monitor carbon market projects presents a potential roadblock to market development. Similarly, limited awareness of carbon market benefits among policymakers, businesses, and local communities can delay the necessary steps to build the institutional capacity needed for successful carbon market development. Moreover, transparent and accountable institutional governance must also be ensured to facilitate carbon market growth.<\/p>\n In Ethiopia, there is no explicit policy barrier for trade and international capital flows that would impact carbon markets. However, a lack of transparency within the government procurement system, deficiencies in infrastructure, a lack of coordination across and within government agencies, and high transaction costs all present obstacles to attracting international capital inflows.7<\/a>. Individually, while each of these issues may not be overly burdensome, when taken together, they may present a challenge.<\/p>\n Fortunately, some positive steps have already been taken to address these challenges. For example, Ethiopia\u2019s revised NDC outlines an approach for international carbon market engagement that restricts the proportion of emission reductions achievable through international units, signifying an inclination to shape its participation in emerging international carbon markets. Ethiopia has also encouraged cooperative approaches with the Ministry of Planning and Development (MPD).35<\/a>,36<\/a> Ethiopia\u2019s strong interest in voluntary collaboration within the carbon market framework, governed by Article 6 of the Paris Agreement, recognizes carbon markets as instrumental tools for amplifying mitigation efforts. However, for these collaborations to move forward, Ethiopia must adopt a robust accounting process to ensure the integrity of carbon credits. This, of course, brings us full circle to the challenges the country faces in presenting an attractive investment environment. But these challenges are not insurmountable, and the land resource presents a tremendous yet untapped potential.<\/p>\n Investment risks<\/p>\n Complex regulatory structures that govern land management, the existence of competing value propositions for land, and a variety of socioeconomic and environmental factors can all create challenges for carbon market investments.37<\/a>,38<\/a> In Ethiopia, these issues come together to create a complex tapestry. This is true in many African nations, and it spans protected and privately held lands.<\/p>\n The first risk is associated with land conversion. Over the past six decades, agricultural expansion has significantly altered land uses in Ethiopia. Land conversion due to the transformation of natural vegetation into farmland and commercial investments, overgrazing, over-harvesting, deforestation, and the invasion of non-native species all pose significant risks to ecosystems in the country.39<\/a>,40<\/a> A lack of institutional depth created by understaffed and underfunded agencies also hinders effective action in protected areas.41<\/a> In addition, political and socioeconomic factors contribute to the ongoing threats, and they are most common in areas close to cities and protected areas.42<\/a> In theory, government-administered lands, such as protected areas, should be the least threatened. However, a mapping exercise using satellite imagery shows that population growth, urban expansion, and cropland expansion to ensure food security have led to rapid changes in land use, including land within the boundaries of protected areas. Figure 3<\/a> illustrates the encroachment of cropland in Menagesha-Suba (a), a key national forest area, while both cropland encroachment and urban expansion are evident in Chilimo-Gaji (b), another national forest. This, in turn, raises important questions for potential investors in carbon market expansion, above all, on the impacts of carbon market investments on regional food security.43<\/a>,44<\/a> In addition, essential questions remain regarding who has the right to invest and how subsequent revenues will be distributed if carbon storage increases. Market design and regulation must engage all stakeholders to instill market participants\u2014both buyers and sellers\u2014with sufficient confidence that the market will have a solid foundation.<\/p>\n Fig. 3: Land use change dynamics in Ethiopian protected areas. Spatial evidence of land use change in two protected forests in Ethiopia: (a) Menagesha-Suba National Forest and (b) Chilimo-Gaji National Forest). (DataSource: WLRC).<\/p>\n Another key investment risk is related to inconsistent land management practices. For any market, standardization of core market functions is critical for investment and growth. This can range from regulations that span the entire value chain for quality control in delivered goods and services to specifications that ensure safety in operations. Carbon markets are no different, as uniform accounting frameworks are needed for accurate measurement and verification of monetized carbon credits, and this must be robust to periodic changes in land use patterns.37<\/a>,38<\/a> This includes clear definitions around sellable carbon credits, the conditions under which they can be generated, and how they are warranted, all of which are important for product surety. Shifting and arbitrary standards will not ensure deepening market participation and growth; in fact, they will do exactly the opposite. Therefore, it is crucial to develop a tailored and flexible approach in Ethiopia that maps resources, incentivizes enhanced land-use and management monitoring capabilities to ensure carbon credits are secure once issued, all on the foundation of a strong collaboration between the relevant land administrative institutions (i.e., MUDC and MoA).<\/p>\n![\"Fig.](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2026\/04\/44168_2026_365_Fig2_HTML.png\")
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