Vara Energia, HydroThermIA Pitch $3bn-a-Year Carbon Finance Framework to FG

Two clean energy companies have presented the Federal Government with a technical and commercial framework that they say could unlock about $3 billion a year in carbon finance for Nigeria, using gas currently flared at industrial and oilfield sites to produce hydrogen and electricity.

Vara Energia Ltd and Canada-based HydroThermIA Inc made the presentation to officials of the Mitigation Division of the Department of Climate Change at the Federal Ministry of Environment in Abuja. The proposal was first put through a technical session reported on October 16 and 17, 2026, and was discussed again with the department on Monday, October 19.

Under the framework, containerised systems would be deployed at industrial sites to capture gas that is currently flared at source and convert it into clean hydrogen and reliable electricity. The proposal also integrates modular wastewater treatment with hydrogen production, which the companies say would help industrial facilities secure water and on-site low-emission energy. Vara Energia's Chief Executive Officer, Segun Aikulola, said the framework supports industrial decarbonisation and green hydrogen production under the National Carbon Market Framework and the Renewed Hope Agenda, and that it builds on the National Green Growth Dialogue organised by the Nigerian Economic Summit Group with the Federal Ministry of Budget and Economic Planning under the theme "From Commitments to Green Growth".

Dr Asmau Jibril, assistant director and head of the Mitigation Division, said the partnership aligned with the government's climate and green growth objectives. Vara Energia's executive director for commercial and business development, Ochonogor Uche Zoe, said the initiative could reduce industrial carbon emissions while creating alternative revenue opportunities, and stressed local technical integration and domestic manufacturing. The company's deputy chief executive, Victor Ntofon, said the projects could attract foreign exchange through verified carbon revenue, create jobs and improve access to international climate finance, including Green Climate Fund resources, and position Nigeria as an exporter of green hydrogen and ammonia.

The $3bn figure is the government's own target

The headline number requires careful reading, because it originates with the government rather than with the companies. When President Tinubu approved the National Carbon Market Framework in October 2025, ahead of the COP30 session in Brazil, the National Council on Climate Change asked for approval to unlock between $2.5 billion and $3 billion annually in carbon finance over the coming decade, alongside operationalisation of the Climate Change Fund and restoration of the Council's budget line through the Federation Accounts Allocation Committee.

The carbon market policy estimates put the current annual value of Nigeria's carbon market at about $736 million, rising to $2.5 billion by 2030, on the basis of the country's 32.2 per cent emissions reduction target for 2035 against a business-as-usual baseline of 573.5 million tonnes of carbon dioxide equivalent in 2018. The framework's sectoral plans include zero routine flaring by 2030 and a 60 per cent cut in fugitive methane emissions by 2035.

So a framework promising $3 billion a year is, at present, a proposal for how to reach an ambition the government itself set a year ago and has not yet delivered against. The more telling figure in the official valuation is $736 million a year today. The difference between that number and $3 billion is the space the private sector is being invited to help close, and it is also the space in which the regulatory machinery still has to function.

What has to be true before a dollar is paid

Three things stand between a presented framework and a carbon revenue line in the national accounts, and none of them is a technology problem.

The first is the measurement chain. A credit is only issued against a verified reduction, which requires a registry, baselines, monitoring, reporting and verification, and an auditor who will stand behind the number in a buyer market that has grown sceptical of offsets. The second is the accounting of the national target itself. Nigeria's own emissions reduction commitment is the asset being monetised, so any credit generated against it has to be accounted for consistently with the country's pledge under Article 6 of the Paris Agreement, with corresponding adjustments preventing the same tonne being counted twice. Third, and most concretely for Nigeria, the financial plumbing has to exist: the Climate Change Fund was approved for operationalisation in October 2025, and the Council's budget line was to be restored through the FAAC allocation, yet the companies are still calling on the Presidency, the Council and the Ministry of Environment to back the framework, which suggests that a year later the money has not yet moved.

There is also a question of permissions that sits outside the climate file entirely. Flared gas belongs, in law, to the federal government, and the right to capture it for commercial use runs through the operating agreements of the joint venture companies that hold the assets, with the Federal Ministry of Petroleum Resources and the upstream regulator involved. A project that promises to convert waste into product has to change what is flared, who owns the resulting gas and who has the right to sell the hydrogen, and that negotiation is harder than the technical work.

The commercial logic does not depend on carbon revenue

There is a stronger argument in this proposal than the headline suggests. If flared gas can be captured at the point of production and converted into hydrogen and power for industrial use, then the customer is buying energy at the site, and the value is measured in avoided diesel and avoided grid power, not in tonnes of carbon. The companies make this point directly, arguing that the technology lowers operating costs for heavy industries and upstream operators by reducing reliance on expensive diesel and unreliable grid electricity.

That matters for how the two revenue streams should be judged. Energy economics can be underwritten by an industrial offtake agreement with a refinery, a cement plant or a mining operator, and it does not need a functioning carbon market. Carbon revenue, by contrast, is the part that depends on the state of Nigerian climate infrastructure and on international buyers who have become markedly more careful. If the project structure makes carbon revenue an additional margin rather than the foundation, the framework is more likely to see light than if it depends on credits being issued at scale.

It also raises the question of what the credit is worth. Credits generated from flaring reductions in an oil and gas operation, and sold against a country's own nationally determined contribution, invite scrutiny over whether the underlying reduction is real or whether it is regulatory obligation being repackaged. The proposal's emphasis on verified revenue through the National Carbon Market Framework is the right answer to that question, and it is the part of the proposal that will be examined most closely.

What to watch

Three concrete developments would show whether this is a serious pipeline or a well-presented idea. The first is a named industrial host and a signed offtake, because the proposal is, in engineering terms, a distributed power project with a climate label and it needs a customer who wants the power. The second is a published verification and registry rule from the Ministry of Environment, since without it there is no credit, whatever the technology does. The third is the first disbursement from the Climate Change Fund, which would confirm that the October 2025 decisions have moved from announcement to execution.

For now, what has moved is the conversation. A framework that was described to the Mitigation Division with named officials, a stated policy alignment and a route to foreign exchange has at least a chance of being taken up, and the companies have been explicit about the domestic manufacturing and skills content they want, which is where such projects typically either build local capability or import everything. What Nigeria has is a policy target, an institutional structure and a private proposal that quotes the target back. What it does not yet have is the mechanism that turns $3 billion a year of potential into money, and the 2025 approvals that were supposed to supply that mechanism are still, on the evidence of this presentation, waiting to be operationalised.