Isramart : Africa In the Global Carbon Trade

Isramart news:
Carbon trading, as promoted by the Kyoto Protocol’s Clean Development Mechanism (CDM), has become a key global strategy to reduce greenhouse gas emissions.

Based on what some experts call “free market environmentalism”, Kyoto signatories, who have agreed to a specific emission limits, can purchase carbon credits in exchange for additional greenhouse gas emissions.

“Developing countries should not make the same mistakes as developed countries by creating high carbon economies first (that later need to reduce emissions),” Lex de Jonge, chair of the CDM Executive Board, which was put in place by and answers to the countries that have ratified the Kyoto Protocol, told delegates during the Carbon Markets Africa conference, which took place on Nov. 10 and 11 in Cape Town.

Instead, they should focus on developing environmentally-friendly industries that can make money by selling carbon credits to Western polluters while helping to mitigate climate change, de Jonge said.

So far, African countries have played only a small role in the international carbon trading market. According to 2007 World Bank statistics, African countries made only five percent of global carbon offset sales, compared to other developing countries, like China, where 73 percent of the deals are done.

However, experts believe Africa is a growing market. Two of the continent’s CDM schemes – a South African project that has been running for the past six years and a Botswanan initiative that is in a late planning stage – were presented as best practice examples at the conference.

The South African city of Durban is running Africa’s first landfill gas-to-electricity project on three municipal landfill sites. Gas produced by the waste from the landfill sites is trapped and burned to generate electricity which is supplied to the South African power grid.

Carbon credits for the project are calculated based both on the gas captured instead of released and the emissions saved by burning that captured gas instead of the coal that South Africa relies on for most of its power.

According to the CDM website, the project should reduce GHG emissions by the equivalent of just under 69,000 tonnes of CO2 every year.

“We are trying to address global warming by really changing the way we live in South Africa. Landfill gas is a viable new energy source when linked to carbon finance and CDM,” explained John Parkin, deputy head of plant and engineering at Durban’s eThekwini Municipality.

The project, which started in early 2003, is producing $300,000 in carbon credits and $88,000 in electricity sales a year. Parkin warned, however, that it was a hard and long process to get it up and running.

“It was a drawn-out process with lots of administrative hurdles. It took more than a year to get CDM registration. It can be very frustrating,” he admitted.

All carbon offset projects must go through a rigorous public registration process designed and managed by the CDM Executive Board to ensure that emission reductions are measurable and verifiable.

Parkin also mentioned a number of technical and operating challenges the project had to overcome, such as lack of technical expertise and financial resources, poorly-run landfill sites, high cost of services and lack of access to spare parts. “There was no technical ability in South Africa for this. We are all on a learning curve,” he admitted.

With an annual operating cost of about $1.1million, the project is still running at a loss at this stage, but Parkin says he hopes it will become profitable within a few years.

Another CDM initiative lauded at the conference was a planned project that aims to generate power from chicken litter and sewage sludge in Botswana’s capital Gaborone. The city, which was planned for 60,000 people but due to rural-to-urban migration has more than 300,000 inhabitants today, increasingly struggles with waste management.

Botswana has almost no official landfill sites that meet the standards set by the country’s 1998 Waste Management Act. Instead, waste is disposed of in open dumpsites scattered around the country.

“Waste management is a huge problem, and it produces increased greenhouse gases,” said Bostile Gubago, chief executive officer of G4 Consulting Engineers, the company that collaborates with the Gaborone city council in starting up a CDM initiative to produce electricity and sell carbon credits through incineration of waste.

Among the country’s largest producers of waste are chicken farms. One of Botswana’s major chicken farmers, for example, has about 600,000 chicks, which produce almost 200,000 tonnes of chicken litter a year. This litter is currently dumped on public garbage sites, Gubago says: “This is not in accordance with the national Waste Management Act and produces lots of methane (a greenhouse gas).”

That’s why G4 Consulting Engineers and the city council want to turn this environmentally damaging process into an accredited CDM initiative that uses the gas produced by the waste material to generate electricity and make money from selling carbon credits, similar to the eThekwini landfill project.

Like Parkin, Gubago admits that the project, which is set to start operations in October 2012, will take several years to become profitable. “Initially, it will barely break even, so we are looking to the global carbon market and the city council for financial support,” said Gubago.

Conference delegates hoped the waste-to-electricity projects in South Africa and Botswana will be emulated by other countries on the continent in the near future.

“Every city in Africa has similar problems with waste management. It would be useful to use these projects as blueprints that can be adopted in other countries,” reckoned Nikolaus Schulze, director of project finance at German carbon asset management firm First Climate.