Africa has so far failed to harness the opportunities for sustainable development offered by the Kyoto Protocol’s Clean Development Mechanism, but First Climate’s <strong>Durando Ndongsok</strong> says it doesn’t have to be that way. He offers a recipe for success post-2012 – and it starts on the ground.
Africa has so far failed to harness the opportunities for sustainable development offered by the Kyoto Protocol’s Clean Development Mechanism, but First Climate’s Durando Ndongsok says it doesn’t have to be that way. He offers a recipe for success post-2012 – and it starts on the ground.
– Dambisa Moyo
23 November 2009 | You may not totally agree with some iconoclastic critics of Zambian economist Dambisa Moyo‘s assessment of the impact of foreign aid on Africa’s economy, but you can’t argue with her assessment of the continent’s state of affairs.
You also can’t deny that, after more than five years of committed actions, the Kyoto Protocol’s Clean Development Mechanism (CDM) is still not working in Africa.
It was designed to promote sustainable development by creating a global system of payments for ecosystem services (PES) that funnel income to those in the developing world generating environmental benefits. It’s a sound idea, and one that has generated quantifiable results in places like China and India. Africa’s share of the global CDM pipeline, however, has not grown beyond a disappointing 2%. This fact takes on special meaning with global climate talks just ahead of us in Copenhagen and a global Katoomba meeting just behind us in Accra.
The situation is dire, but not hopeless. Africa can harvest the CDM to help reduce the amount of anthropogenic greenhouse gases in the atmosphere, and this help is dearly needed. The answer is to remove unnecessary hurdles to the CDM’s development in Africa, and to promote more grassroots action within the Continent. It is high time to tackle barriers to the CDM in Africa more efficiently to make sure this needed participation of Africa is not lost.
The CDM: Genesis and Principle
The CDM is one of the programs designed by the United Nations Framework Convention on Climate Change (UNFCCC) in 1997 under the Kyoto Protocol to reduce effectively and cost efficiently anthropogenic greenhouse gases emissions that are altering the natural greenhouse effect and creating global warming. The consequences of this alteration in temperatures are multiple and diverse, with different levels of severity attached to them on their effect on mother earth. The implications of global warming are widely known: we can expect a sudden increase of sea level, rising occurrences of flooding and uncontrolled precipitations and hurricanes; or desertification of some part of the world like the horn of Africa that presently is already experiencing noticeable changes.
The principle of the CDM is very straightforward, though a bit complex in practice: one develops in a developing country a project that, through a process designed by the UNFCCC, is proven to reduce greenhouse gases as compared to how much greenhouse gases should have been produced in the absence of the project. The developer of that project gets carbon credits (known also as Certified Emissions Reduction – CERs) that he can sell. Buyers are often utilities in a developed country. Utilities, based in countries where they are subject to an emissions cap or trading scheme, such as the EU ETS, will then use these carbon credits for each metric ton of carbon dioxide equivalent (tCO2e) that they have emitted but have no allowance for.
The sale of carbon credits brings (additional) revenues to the project and is a good incentive for the project developer to invest in an environmental-friendly technology that is usually much more expensive than an existing business-as-usual technology. This extra money tips the project into profitability and make sure it gets done.
Potential projects that can be accepted as CDM projects are in the sectors of renewable energies, landfill gas capture and usage, composting, energy efficiency, land use, land use change and forestry, fuel switch. Their huge potential in Africa has been demonstrated time and again.
The CDM Must Work for Africa
Africa to date has less than 2% of CDM projects registered all over the developing world. The biggest share comes from China, which is also home to more than 60% of the current pipeline, followed by India and Brazil, with considerable shares too.
The population of Africa has so far managed to live with extreme poverty, malaria and AIDS etc, while solutions to eradicate these problems are taking time to come to fruition. Climate change, unfortunately, is going to worsen this situation, with rapid, severe consequences. Africa is again very unfortunate to be the most vulnerable to this and will struggle the most to find suitable adaptation measures if climate change was to reach the point of no return.
It’s Already Happening
Africa’s climate is highly sensitive to changes, and striking examples of what climate change is causing and will continue to cause are innumerable.
For example, the Chad Lake, which sources fresh water to Cameroon, Nigeria and Chad, has lost 90% of its capacity from 1963 to 2001 and is projected to dry up completely if nothing is done. Already there are environmental refugees in East Africa as consequences of the desertification of the horn of Africa. Agricultural production will decrease tremendously on a continent where more than a quarter of the population is already touched by famine and malnutrition.
The fight against climate change is a global issue. Developed countries and many emerging countries are taking hard measures to contribute significantly to the reduction of greenhouse gases into the atmosphere. Africa’s participation is dearly needed for this common but differentiated objective of protecting our environment by reducing greenhouse gases as much as possible through the CDM platform. If we are to avoid irreversible damages, there is no time to waste and scientists are insisting that we must reduce greenhouse gases in the atmosphere by 20% until 2020 and by 50% until 2050, compared to 1990 levels.
No Benefits before 2012
It is no secret to anyone with understanding of the carbon market that Africa will not benefit from the CDM market until after 2012, when the first commitment period of the Kyoto Protocol ends. The analysis of the existing CDM pipeline shows that Africa cannot advance beyond a 3% share in the global CDM pipeline until then. Whether it can even reach this level is doubtful, because more than 2000 CDM projects are under validation at the UNFCCC, and Africa possesses less than 100 of those projects.
That means 3% is an ideal and will most likely not be met.
Apart from this simple analysis of the CDM pipeline, an individual CDM project takes between 12 and 24 months to get registered with the UNFCCC these days. This does not take into account any non-CDM related project development – i.e., the feasibility study, business plan development and financial closure or the contracting – which can take more than three years.
Of course it is possible to combine both developments, but to start the CDM process one needs a minimum level of certainty that the project will fly. All in all, any project with a CDM component starting today might not have any carbon credit issued before 2013.
This should, however, stop anyone from searching for solutions to the problems infringing on the success of the CDM in Africa.
Indeed, the future of the CDM looks bright after 2012 – especially for least-developed countries in general and Sub-Saharan Africa specifically.
The Future of CDM in Africa
The next UNFCCC meeting is taking place from December 7 to 18, 2009 in Copenhagen, and it is expected that a successor to the Kyoto Protocol will be conceived here, despite the skepticism that has gained attention in the media of late.
Even if the actual delivery of that successor is delayed as expected, there are already many incentives to continue developing CDM projects in Africa:
• The European Union is willing to accept carbon credits from African countries beyond 2012 in their Emissions Trading Scheme (EU ETS),
• Many trading schemes are under development all over the world and are likely to incorporate many lessons learnt from the EU’s experience,
• The principle of offsetting is widely accepted, i.e. reducing abroad to adjust the cap domestically has proven to be one of the most effective and cost efficient measures,
• Many existing and newly developing carbon funds are giving firm commitments by entering into binding contracts to buy carbon credits that will be issued after 2012. An example is the Post 2012 Carbon Credit Fund under the advisory of First Climate that is entering into forward binding contracts to buy carbon credits generated until 2020.
There is clearly an interest in and a market for carbon credits from Africa beyond 2012 – even if international negotiations in Copenhagen do not lead to a clear result for the future of the Kyoto Protocol beyond 2012. But the question that will continue to harass our mind is whether Africa will ever benefit from this clear opportunity of sustainable development which the CDM offers?
Top-Down Approach Has Not Worked
A lot has been said, written, discussed, and proposed during the last five years to make the CDM work in Africa. The result is clear today: 2% share of the CDM projects’ pipeline is from Africa. And discussions are going on, the same way.
Initially the main problem seemed to be the lack of CDM institutional support. While a lot of work has been done to install Designated National Authorities (DNAs, which represent the UNFCCC and make sure sustainable development criteria of the country are met in any single CDM project developed) in almost all African countries, there has not been any noticeable change in terms of the number of CDM projects from the region.
Many people believe that capacity building is urgently needed in order to stimulate the development of CDM projects in Africa. The result in some cases has been a perfectly developed Project Design Document (PDD) to put forward a project that only exists in the said PDD, totally ignoring that the CDM is merely an add-on to an underlying project.
Feed-in-tariffs are under development in many African countries to follow the example of South Africa. Although this is another very good initiative, there is no certainty that it will be the magical potion to make renewable energy CDM projects work for Africa.
On the UNFCCC side, efforts are undertaken to make the CDM a reality in Africa. For example to solve the problem of the small and therefore unattractive size of projects of Africa, the Programmatic Approach has been developed. In theory this will help putting small scale projects spread in time and space into one Program. Although the idea behind the concept is genius, this might end up being even more complex than “normal” CDM projects.
Too Many Planners and Too Few Searchers?
William Easterly, in his strongly recommendable book “The White Man’s Burden: Why the West efforts to aid the Rest have done so much ill and so little good” defines Planners as advocates of the top-down decision-making approach and Searchers as the agents for an alternative approach, that is the bottom-up one.
Let’s illustrate this with Mr. Easterly’s own example:
“The short answer on why dying poor children don’t get twelve-cent medicines, while healthy rich children do get Harry Potter, is that twelve-cent medicines are supplied by Planners while Harry Potter is supplied by Searchers…Planners determine what to supply; Searchers find out what is in demand”.
The difficult question of how to make CDM work in Africa seems to have always found desks of Planners. Despite their good intentions and thorough motivation to support Africa, however, nothing noticeable has so far been changed in the reality. It is maybe time to think differently and try to clearly understand and find the real solutions to this stubborn disease.
The Diversity of Africa
External analysts are sometimes prone to think in pan-African terms, but Africa is no more homogenous than Europe is. This simple truth has obvious implications for any analysis of the barriers to CDM development.
Africa is comprised of more than 50 countries, all of which are very different and diverse in terms of cultural differentiation and integration, historic development, language, economic situation, natural advantages and disadvantages, political regime and stability, physical appearance to name just a few. In addition, regions of the same countries in most of the cases are as diverse as the whole continent.
A well-designed capacity building might be of interest to Botswana or Ghana, whilst there is rather a basic need of institutional framework in Mauritania and Chad. Maybe the CDM is thoroughly understood in Senegal and Nigeria and there is a lack of seed money and venture capital to jump start selected projects and create a bandwagon effect that will see many projects in the pipeline within no time. Is English, the official and the only language of the CDM a huge and the main barrier to the Central African Republic? The feed-in-tariff may really boost the development of renewable energies in Cameroon, but can that be of some advantage to the CDM if the baseline of energy production in Cameroon is hydro? And is grid electricity a useful baseline when more than 70% of Africa’s population reportedly still relies on fuel wood as primary energy source for cooking and lighting?
Questions like these could span pages without clear answers today.
The Bottom-Up Approach
It is obvious then that the situation is extremely complex, and no simple solution can be envisaged. And if there is no simple solution, then it is more than clear that solutions designed off field will be totally obsolete.
There is a strong need for developing pilot projects (based on a bottom-up analysis) with people working on the field and having a better understanding of the business culture in countries where they are based. Instead of spending millions of Euros to develop(unreflected) capacity forever, it is important to develop success stories or at least to give it a hard try. In the end one will clearly know what the barriers are and find appropriate solutions or decide that CDM will never work for Africa and spare time, energy and money for other meaningful activities since there seems to be a lot left to do on the continent to meet the Millennium Development Goals.
Despite the diversity that African countries present, there can be meaningful similarities here and there that one can use to group countries. It might be too costly and cumbersome to start more than 50 pilot projects in different countries (and maybe there is no available capacity locally!). One can wisely choose six strategic countries to start with: One country in the Southern African regions (excluding of course South Africa); the other in Eastern Africa; then one French and one English speaking country in West Africa and one country in the Central African region; and finally one country in North Africa (perhaps Libya or Algeria who have no CDM at all in the pipeline).
The pilot projects mentioned here encompass all conventional and CDM related steps necessary to physically commission the projects and register them under the CDM to generate carbon credits. In the process, all barriers will be encountered, can be analyzed and suggestions and recommendations will be drafted and made available for future projects in the country. From these suggestions and recommendations, similarities can easily be drawn to be adapted to neighboring countries in the indicated region.
By the time all projects have been taken through the registration process and are implemented a new understanding of the diverse and manifold issues and ‘hurdles’ to African CDM development will have emerged – an understanding that should allow Africa to take up the challenge that climate change presents in its own unique and (hopefully for us all) powerful way. We have no time to lose!
Durando Ndongsok is a Senior Project Manager at First Climate. He earned his MBA at the University of Freiberg, Germany, with a focus on resources and environmental management. He also holds a B.Sc. in Mechanical Engineering from the University of Eindhoven, the Netherlands, and a B.Sc. in Chemistry from the University of Dschang, Cameroon. Please send your questions and comments to [email protected].
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