One year ago, the World Bank posed the question, "Why so few carbon projects in Africa?" and called on the market for solutions to low project uptake by the time of the 2011 Africa Carbon Forum. This week’s V-Carbon news takes a look at how the market responded. And as always, it is complete with the latest news from around the world of voluntary carbon.
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12 July 2011 | One year ago, the World Bank posed the question, “Why so few carbon projects in Africa?” and called on the market for solutions to low project uptake by the time of the 2011 Africa Carbon Forum.
Over the last year, recognized challenges – from prohibitive transaction costs to community capacity building – have spawned new Programmes of Activities, micro scale schemes, REDD+ activities and regional market tools.
For voluntary carbon market players, has this push been enough to jump the double hump of supply and demand for African carbon credits?
Attendees of the Marrakech event said the report is mixed. “I always see an oversupply of credits in the voluntary carbon markets but I also see a shortage of credits from Africa,” points out EcoAct CEO Gerald Maradan.
In fact, this year’s State of the Voluntary Carbon Markets report found an increased volume of credits transacted from Africa-based projects – particularly as a result of forward sold emissions reductions from REDD activities and credits utilizing project aggregation tools.
However, the continent’s activities still represented a mere 4% of all credits transacted voluntarily, and only 8% of those credits were supplied by companies headquartered in Africa. Gold Standard CEO Adrian Rimmer foresees this dynamic changing quickly in the voluntary carbon markets as the third-party standard rolls out additional tools for scaling up Africa-based projects in its pipeline.
Rimmer hopes that the Gold Standard’s new tools for micro-scale projects and addressing “suppressed demand” – could help the region overcome what he says are the “two challenges that have held it back generally: transaction costs and low baselines.”
Of course, for Africa-based suppliers, accessing project finance and the broader marketplace is also a challenge. As Wildlife Works’ Business Development Director Gerald Prolman points out, “Deals happen because someone makes them happen, which means that project developers have to be a lot of things.” For African project developers, being a “lot of things” means accessing distant investors and responding to buyer motivations that – at least in the case of REDD – are unclear to most suppliers but especially those in isolated markets.
EcoAct’s Maradan sees hope in fund-based mechanisms, not only at the country level but also extending from the private sector. “I think the market will still be very difficult in 2011 but I can see it growing in the future from carbon funds, particularly those focusing on LDCs,” he says.
“We have seen some trends with companies creating funds and they are increasingly willing to invest in projects and social aspects. All of that should bring more volume and activity to the voluntary market.”
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