Nairobi, 9 June 2007 - The carbon markets could supplement the G8 aid package to Africa by billions of dollars the Executive Director of the UN Environment Programme (UNEP) said today.
Achim Steiner, speaking after the G8 Heads of State meeting in Heiligendamm re-committed themselves to the agreements made in Gleneagles, Scotland two years ago, said: "Today's affirmation on trade, aid, fighting poverty and disease in Africa comes just 24 hours after the G8 underlined its commitment to global greenhouse gas emissions reductions under the United Nations climate convention process".
"The two agreements are mutually supportive and are just the kind of joined thinking we need. A commitment to climate change ensures that the carbon markets will thrive and develop over the coming years and decades. This will assist in countering the climate challenge. But it will also transfer funds from the North to the South for climate friendly offset projects such as clean and renewable energy technologies. These will reduce greenhouse gas emissions while also delivering development on the African continent," he added.
The Clean Development Mechanism (CDM), which allows developed countries to meet part of their obligations in developing countries, is expected to generate around 100 million carbon credits in Africa from now until 2012, according to conservative estimates from the UNEP Risoe Center.
This translates into a market value of perhaps $1.6 billion of new foreign investment. Experts claim Africa could get an even bigger share of the global CDM market if the Continent is assisted with streamlining project proposals alongside the handling of issues such as risks and more focused investment criteria.
They also note that the $1.6 billion (1.2 billion Euro) figure does not take into account financial flows linked with voluntary carbon schemes, projects under negotation or ones that may emerge after 2012.
Mr Steiner's statement comes in the wake of a carbon finance meeting held in Johannesburg, South Africa, at the end of May billed as Africa's first ever Carbon Finance Investment Forum. IT was convened by UNEP, UNEP Risoe Center, and the Development Bank of Southern Africa (DBSA).
To date Africa has accounted for only 3% of total market share for the carbon markets which the meeting aimed to change.
The Investment Forum brought together over 150 delegates from Africa's financial community, private sector, and carbon emission buyers from overseas. While many banks were introduced to business opportunities in the carbon market for the first time, pioneers, such as the DBSA and the National Bank of Egypt, demonstrated how banks can play a pivotal role to enlarge Africa's market share.
According to conference organizers, the right institutions are in place in many African countries, as well as a wealth of real project opportunities. What is lacking is the capital and unique know-how of the region's financial sector, which has largely been left untapped.
A number of other pledges were made at the event. One of the oldest and leading banks in Nigeria announced its intention to develop a "Green Charter" to introduce greater sustainability and climate friendly principles into its operations.
The Investment Forum afforded entrepreneurs from across Africa, including Ghana, Kenya, Nigeria, Rwanda, South Africa, Uganda and Tanzania, the chance to present some three dozen concrete project proposals to carbon buyers and financiers.
Husk Fuel for Climate Friendly Cement Making
They demonstrated the breadth of Africa's potential and innovation by showcasing projects ranging from using coffee husks to replace fossil fuel in cement production in Kenya; capturing and utilizing methane gas from Lake Kivu in Rwanda for power generation; piping West African natural gas to replace coal-fired electricity in South Africa and a host of reforestation and forest management activities. Some financiers were so impressed with the quality and diversity of the project concepts on offer that a number of deals were advanced or concluded at the forum.
The Forum also provided a platform for the continued incubation of an industry association for CDM project developers in South Africa. Its objective is to promote and facilitate local industry to reap the advantages of entering into this new trading market.
Cas Coovadia of the Banking Association moderated a roundtable discussion among banking CEOs, international aid agencies, and high-level delegates to extract lessons and shape an agenda for enlarging the scope of opportunities in the region. Action points included establishing new methodologies which better suited the profile of African CDM opportunities and infrastructure challenges; for example, those for sequestering carbon in agricultural soils, stimulating modal shifts away from road transport, and capturing emissions from extractive industries.
Sylvain Goupille, a carbon finance specialist at investment bank BNP Paribas, was full of praise: "This was a great conference with high level officers allowing the creation of a strong bridge between the African CDM and European emission markets." Goupille described carbon credits as second only to cash in terms of its potential utility to banks.
Nicola Steen, Senior Vice President of Cantor CO2e, a leading emissions brokerage, was similarly enthusiastic: "We've just opened three offices in India and are now focusing on building our business in Africa. It has been great to have positive discussions with so many interesting project developers. I'm really looking forward to help bring carbon finance to Africa."
Likewise, another global carbon credit originator and project developer, EcoSecurities, announced shortly after the Forum plans to ramp up operations in Africa, noting that in 2007 alone the company had firmed up contracts for 12 million carbon credits.
"The investment conference enhanced knowledge transfer and the workshops were very engaging," remarked Warren Burns of Nedbank Capital. "Nedbank gained knowledge to broaden its base to include African countries in our carbon finance initiative. We hope to make carbon finance a reality in Africa [having gained a new] perspective on the need to move beyond traditional risk/return analysis to include potential carbon revenues. I feel encouraged."
For more information please contact:
Nick Nuttall, Spokesperson, United Nations Environment Program (UNEP)
UNEP Risoe Centre, Denmark
Tel: + 45 4677 5168; Mobile +45 28249099
UNEP News Release