Wind farm in Africa (Image by: lollie pop)

The United Nations’ Clean Development Mechanism (CDM) adopted a novel project approach to countering or offsetting developed countries’ emissions.  The most visible and controversial component of the Kyoto Protocol has made large political and regional advances since its inception.

However, when it comes to global distribution of the projects that are actually generating carbon offsets, it falls short.  Nowhere has this been felt more, than on the African continent.  But why should this be the case when the CDM was designed to be a means to transfer technology, finances and development to the poorest and most vulnerable countries on the planet?

Reasoning a Failure?

The barriers of CDM expansion in Africa surround emission reduction potential, financing and institutional stability.

Africa’s contribution to global emissions is minimal; UN data estimate that Africa accounts for only 4% (1,500 million tonnes of CO₂ equivalent) of annual world emissions.  Stunningly, 75% of Africa’s emissions originate from just four countries (Algeria, Egypt, South Africa and Nigeria).

Consequently, the carbon mitigation potential in the remaining 49 countries is clearly small.  Per capita emissions in sub-Saharan Africa are the lowest in the world at 0.77 tCO₂(e).  Relatively speaking, the financial costs that accompany these potential mitigations are more expensive than anywhere else, so why would a project developer choose an African country to invest in when better and faster returns can be sought elsewhere?

Potential From Nothing

In spite of the obvious low attribution to Certified Emission Reduction (CER) volumes generated so far in CDM projects on the continent, there is a potential for substantial growth.

A study commissioned by the World Bank, detailed the possible emission reductions which could be actualised by a mechanism such as the CDM.

Key areas include: fuel shifting, improved agricultural processes and industrial energy efficiency schemes.  Importantly, the CDM can accommodate these reduction areas – with small-scale renewable schemes and process changes being effectively undertaken within the CDM.

As it stands, only 120 projects are hosted in Africa; of that, only 65 are in 20 sub-Saharan countries.  It has been estimated that up to 3,000 CDM projects can be hosted in Africa – there is a great deal of development left to be done.

One setback is that a country must have a Designated National Authority (DNA) before any CDM project can be contemplated.  This body is responsible for the regulation of CDM projects in their country.  Unfortunately for most sub-Saharan Africa, there are only 21 DNAs, meaning that many reduction opportunities are missed.

Overarching responsibility for tackling this dilemma ultimately lies with the CDM’s administrative body, the Executive Board (EB) and the UNFCCC.  Only recently has any real progress been made with respect to this.

Delivering the Mechanism

The difficulty is that the CDM has been poorly refined for the special considerations that African countries require.

What progress they made was acknowledged at the UNFCCC negotiations in Copenhagen in December 2009.  Regional distribution was only briefly discussed (mainly due to limitations of actual negotiating time) but it was agreed that the DNA registration requirements would be reduced in countries that have difficulty hosting projects.  The reforms are expected to come into force sometime in the second half of 2010.

A CDM concept that is expected to benefit Africa received little negotiating time also.  It is thought that the programmatic CDM (pCDM), or sometimes known as a programme of activities (PoA), could unlock the delivery potential of the CDM in Africa.

In an effort to reduce transaction costs and generating bigger revenues by facilitating larger economies of scale, the pCDM approach would gather a group of similar emission reduction schemes under the umbrella of one project.  Consequently, this could provide an opportunity to tackle small-scale project barriers.

The number of pCDM projects that have progressed is small, but there are some that have the opportunity to generate substantial emission savings in other developing countries.

The same opportunity exists in Africa.  The pCDM concept could resolve some challenges that currently bedevil the African CDM.  However, a large set of barriers still exist before the pCDM can really live up to expectations – including risks associated to the lack of administrative clarity of the pCDM, high upfront costs and lack of successful experience implementing these unique schemes.

So Africa’s CDM potential categorically exists, but toil is required before it can compete with the emission reductions that are possible in the cheaper and more accessible countries such as Brazil, India or China.   Once unlocked though, the CDM could evolve into the flexible mechanism that was anticipated from the very beginning.

The announcement, made by the World Bank on the sidelines of the UN climate meeting taking place in Barcelona, will bring music to the ears of the millions of Africans suffering from climatic changes.  The decision made by the trustees of the Climate Investment Funds (CIF), will commit $1.1 billion dollars to six African nations.  The choice of benefiting countries illustrates both Africa’s opportunity and potential international competitiveness within the emerging low-carbon economy but also its extreme vulnerability and limited adaptive capacity to the implications of climate change. 

The six nations will receive the money in a combination of grants or low-interest loans from the CIF which was launched in 2008, and has pledges of over $6 billion dollars to date. The CIF is a collaboration of public development financiers and is run jointly by the European Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank and the International Finance Corporation and World Bank.

Leading Africa’s position in renewable energy and energy efficiency investments, South Africa will receive US$500 million which will be channelled into helping the country achieve its ambitious target of 4% renewable energy generation by 2013.   The money will be instrumental if South Africa is to achieve the target of a 12% increase in energy efficiency by 2015, a difficult task considering its dependence on coal.  Another large benefactor, Egypt, which is set to get $300 million dollars will also utilise the money to improve its power sector and the urban transport system in Cairo which is grossly under prepared to serve one of the world’s largest cities of over 17 million people.

A promising development for climate investment and possible innovation in low carbon growth is the pledge of US$150 million to Morocco for a fund dedicated to low carbon growth.  The fund will also boost energy security, a development which is likely to be viewed with keen interest from investors in the DesertTec Foundation. 

The climate finance will not all be focused on large scale infrastructure, with some of the money for South Africa dedicated to the distribution of solar water heating to millions of households, especially those with no access to electricity and in remote rural locations.

The CIF also earmarked between US$60 million and US$70 million for individual grants to Mozambique, Niger and Zambia which the World Bank felt all ‘shared dramatic risks in potential loss of land, life and livelihoods as a result of climate change’. These countries will utilise the money to pilot an initiative aimed at creating ‘resilience strategies’ against the impacts of climate change.