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Nov 10, 2009

Africa lags behind in carbon market

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The value of the global carbon market has more than quadrupled from $30-billion in 2006 to $126-billion in 2008, but Africa's share of this multibillion-dollar market has not progressed beyond 3%.

The carbon market has developed over the last few years as a result of the clean development mechanism (CDM), which is an arrangement introduced under the Kyoto Protocol allowing industrialised countries with a greenhouse gas reduction commitment to invest in projects that reduce emissions in developing countries.

Addressing delegates at the Carbon Markets Africa conference in Cape Town on Tuesday, CEF Carbon CEO Devan Pillay said that the carbon market had captivated the imagination of the world over the last few years evidenced by the fact that, since the introduction of the CDM in 2005, 1199 projects had been registered under the mechanism.

Pillay said that the majority of these projects were based in India and China and that only 3% of projects registered under the CDM were based in sub-Saharan Africa.

In fact, to date, Africa had only 36 registered CDM projects, 17 of which were based in South Africa.

A similar pattern could be discerned from projects currently in the CDM pipeline. According to Pillay, China and India had 1 878 and 1 92 projects in the CDM pipeline, respectively, while Africa only had 131 projects.

This had led to the perception among some individuals within the industry that the CDM system had failed in Africa.

However, it was acknowledged that there was significant demand for carbon emission reduction (CER) certificates from industrialised countries and that there was certainly potential for Africa to benefit more substantially from the CDM.

A number of factors were to blame for the continent's small share in the carbon market and for the relatively few registered and proposed projects within CDM.

According to CDM Africa Climate Solutions CEO Johan van den Berg the most significant factor that was inhibiting the development of a flourishing carbon market in Africa was the fact that the CDM project registration process was getting more complex.

The CDM project registration process was highly-complicated with many "hoops to jump through" and Van den Berg stated that African project developers and consultants often perceived it as impossible to fulfill the CDM registration requirements.

African countries had significant skills shortages and lacked the capacity and resources to fulfill CDM requirements, stated Van den Berg.

Another factor that was delaying the registration of African projects was the bottlenecks within the CDM system.

Speaking to Engineering News Online, United Nations Development programme principal technical adviser Marcel Alers agreed that the CDM registration process was certainly laborious and that there were bottlenecks affecting the system.

"The system is currently strained with the sheer volume of projects that have been submitted for registration," said Alers. (Approximately 500 projects are submitted to the CDM board each year for registration.)

However, he believed that the CDM was an easy target for criticism and it was only in very few cases that the process really killed the project.

But, it was important to note other factors that were influencing Africa's ability to realise its carbon market opportunities.

Firstly, Alers explained that, often, the continent did not have the fundamental enabling conditions required for the growth of a carbon market. These enabling conditions included a solid regulatory framework and, amongst other conditions, preferential feed-in tariffs.

He continued that capacity and skills were certainly an issue affecting the carbon market and it was essential to build up the continent's human resources.

Significantly, financing and investment, especially in the context of the global economic recession, was a factor that was inhibiting the growth of a carbon market in Africa.

Alers went on to suggest that, in order to grow market share, African project developers and consultants seeking carbon credits through the CDM process should broaden their focus to include more non-conventional projects within the agricultural and land-use sectors.

"Africa is one of the world's most important reservoirs of soil and other terrestrial carbon, accounting for an estimated 20% of the world's entire stock of forest carbon and a large share of its agricultural carbon, with very large potential for additional sequestration and other mitigation efforts," he said.

There was certainly potential for the continent to increase its share of the global carbon market but it was essential that Africa's governments be realistic about the enabling environment to facilitate such growth, Alers told Engineering News Online.

On the other hand, it was suggested that, in order for Africa to take advantage of the growing global carbon market, it was essential that the CDM process be made simpler.

Van den Berg elaborated that a simpler CDM process would be particularly good for sub-Saharan Africa and that a two-track CDM system should be introduced.

This two-track system would include the present CDM process in its present form and another, very simple model "where only proof at 80% level of certainty is required and only 80% of CERs are issued", explained Van den Berg.

Essentially, it was advised to reduce the quality of the process in order to get more volume of projects through the system.


Edited by: Creamer Media Reporter
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