Isramart :SA missing the carbon bandwagon

Isramart news:
Companies around the world are hunting for investments in developing countries to improve their carbon profiles – but South Africa has been slow to cash in.

Fewer than 20 South African projects are registered with the international Clean Development Mechanism as providers of certified carbon off-set credits for the mainly European companies that are obliged by their governments to meet carbon dioxide emission-reduction targets.

And only three of those have issued certificates, according to Peet du Plooy, of the environmental group WWF SA.

Du Plooy and players in the carbon market said South Africa was lagging behind nations such as India and China because of the expense and complexity of getting projects certified as “green” and because of a lack of incentives.

“Until recently, the general environment for clean investment wasn’t there,” Du Plooy said. “Renewable energy feed-in tariffs was the big one. We’ve got the tariff now, but no one is signing purchase agreements.”

He said revenue from selling carbon credits through the Clean Development Mechanism would not by itself guarantee a project’s financial viability.

“In most cases, it improves the cost by 10% or 15%. If the bulk of the project isn’t viable, the mechanism isn’t going to tip it over.”

The mechanism was set up in the Kyoto Protocol on greenhouse-gas emissions, formulated to fight global warming. Countries that signed the protocol – South Africa is not among them – committed themselves to emission cuts, which they enforce with carbon taxes and other measures.

Companies that cannot meet their targets by increasing their energy efficiency are able to buy off-set certificates from projects, such as wind farms, that create carbon credits.

For South African companies, achieving carbon neutrality is still voluntary, but this might change after the Copenhagen climate conference in Denmark in December, which is due to debate a new version of the Kyoto Protocol.

“We should be [cutting emissions] anyway, but if South Africa signs on in Copenhagen it will have a ripple effect for corporate South Africa,” said Angus Rowe, chairman of Impact Choice, a company that offers off-set services.

The company, among other things, buys bulk carbon credits on the international market and splits them into “micro” certificates for customers wanting to offset, for example, a business flight from New York to London.

“In sustainability reporting, you can’t just use thumb-sucks. It has to be audited,” Rowe said. “That’s the only way you get credibility.”

He said 15 projects in South Africa had been registered with the Clean Development Mechanism and about 80 had their applications in the pipeline.

“We realise that there is a need for South African projects. A lot of customers do like to support local projects, but they’re also happy to support SADC projects.

“It’s very time-consuming and expensive to register true carbon projects, but we can’t support anything that isn’t completely verifiable or it makes a farce of the whole thing.”

Nedbank, one of leaders in the South African corporate race to carbon neutrality, said large-scale renewable energy projects “continue to be dependent on the regulators finalising the role and responsibility of Eskom as the single buyer and distributor of power”.

“This situation is unlikely to be resolved to allow renewable energy before the end of 2010,” said Kevin Whitfield, head of the bank’s carbon and financial products division.

“We know of a number of instances in which corporate energy-efficiency activities have missed Clean Development Mechanism opportunities because of lack of awareness, or through missing essential steps in the complex process of obtaining registration.”

The popular model for off-setting carbon dioxide emissions by planting trees is largely confined to the “voluntary” carbon market. Credits from such projects do not count towards Clean Development Mechanism compliance but can help a company burnish its environment-friendly image.

One such project is being run in Mozambique by Envirotrade, a UK organisation that pays about 1500 farmers to plant fruit and nut trees as part of an agro-forestry scheme.

“We haven’t broken even yet,” said Mark Heaton, head of Envirotrade’s South African office. “We’ve sold about $1.5-million of credits but we’re better at producing carbon than selling it. Part of the reason is that the voluntary market is more difficult to sell than the compliance market.”

Heaton said Envirotrade’s carbon had added value because of the related social and biodiversity benefits of the Mozambique project.

“We pitch our credits quite high price-wise: we’ve achieved à10 a ton but the value of sales in 2009 has been $10 a ton.”

Heaton said “quite a few people” were running similar projects in South Africa. “But they’re doing it on a small basis that doesn’t justify the cost of going through the whole auditing procedure to get carbon offsets,” he said.