africapractice in PointCarbon
Author: Gregor Pfeifer
Date: 20/01/2009
Africa has big potential for carbon financing: observers
Published: 20 Jan 2009
Carbon financing in Africa may soon flourish as more countries embrace the complex offset market.
For varying reasons many African countries have not tapped into the UN-backed clean development mechanism (CDM), which has created a multibillion-dollar market aimed at cutting greenhouse gas emissions and expanding growth in developing countries.
Despite lagging behind Asia and Latin America in CDM, Africa 'has the strongest potential' for growth, Deven Pillay, chief executive of CEF Carbon, said on Monday evening in London at the launch of Carbonstream Africa, an advisory firm for carbon offsets.
Carbonstream Africa is a joint venture between South African state-owned CEF Carbon and Nordic firm GreenStream Network.
Pillay said he hopes to see a doubling or tripling of registered CDM projects on the African continent over the next few years as more and more countries overcome the barriers to the offset market.
'I'd like to see projects in Africa, by Africans, for Africans,' he said.
The African continent is host to 28 registered CDM projects, only 2 per cent of the total number of registered projects in developing countries.
Limitations
Limited capacity in project identification and development, mixed perceptions about investment risk and potential, and the complex nature of the CDM framework are just some of reasons cited by observers for the low turnover of registered projects in Africa.
'Another reason often mentioned is Africa's relatively low industrial base but a recent World Bank report on the clean energy potential in sub-Saharan Africa has shown significant potential in the sector across the subcontinent,' Gregor Pfeifer, senior consultant at Africapractice, told Point Carbon via email.
In a September 2008 report, the World Bank estimated a technical potential of more than 3,200 low carbon energy projects in the region should it use the framework of methodologies approved by the CDM.
Yet Pfeifer reckons the existing CDM framework 'discriminates' African economies, for example by excluding most land-use carbon.
'A reformed CDM should be a key component of financing low-carbon projects in Africa,' Pfeifer said.
He added: 'It would be helpful to allow more official development assistance (ODA) to be utilised in the development and identification of CDM projects'.
Nairobi Framework
Launched by several UN agencies in November 2006, the Nairobi Framework has been assisting developing countries, especially those in sub-Sahara Africa, to improve their level of participation in the CDM.
'The framework itself has been a success, both in terms of improving inter-agency coordination and in raising awareness of the need to catalyse CDM development in Africa and elsewhere,' said Marcel Alers, climate change manager at the UN Development Programme (UNDP).
'But the CDM is a financial tool and, like other financial investments, requires other 'enabling conditions' to flourish - a stable macro-economic environment, supportive policies, investor confidence, availability of upfront capital and so on,' he said.
'There is only so much that the Nairobi Framework on its own can achieve,' he said.
Alers said that donor governments 'are increasingly earmarking funds' to UN agencies, including UNDP, for various initiatives, such as the Nairobi Framework.
'It's difficult to say how much additional money has been mobilised by the Nairobi Framework, but I am confident that is has been significant,' he added.
Speaking at the launch of Carbonstream Africa on Monday, Arne Jakobsen, chief executive of GreenStream, said he wants to have a strong presence in Africa because it is 'the most politically correct region in which to develop CDM projects'.
By Jeff Coelho – jc@pointcarbon.com, http://www.pointcarbon.com/news/1.1039949