Isramart: EPA Regulation to Invite Private Sector to Carbon Trading

Isramart news:
The Environmental Protection Authority (EPA) is working on the Clean Development Mechanism (CDM) regulation which could avail the private sector of profit making projects related to the control and trading of carbon emissions.

The draft regulation mainly introduces CDM as a means for sustainable development. CDM is designed to prompt developing countries toward a path of less pollution with developed countries paying for such reductions. First introduced in the Kyoto Protocol, signed in 1997, the mechanism is intended to assist developing countries in achieving sustainable development and contribute to the prevention of the adverse effects of climate change through the development of forests and the use of renewable energy sources.

The Kyoto Protocol also levies limitations on the carbon emission of developed countries. In cases where these countries exceed their carbon emission levels, they will have to pay for projects in developing countries, such as forest development, which absorbs the excess carbon they emit.

The EPA’s draft regulation was discussed at a consultative meeting involving governmental and nongovernmental institutions at Harmony Hotel on May 18, 2010. The draft regulation wants to encourage projects that will serve as carbon sinks, which private sector companies, public institutions, and NGOs can take part in as long as they meet the requirements, according to Selam Kidane, environmental law expert at the EPA.

Common, in other countries such as China, is also the use of renewable energy sources which help a country progress economically without exhausting its emissions quota.

Among projects the regulation considers are those of forest development and solid waste management.

“Forests serve as carbon sinks,” Selam said. “The proper management of solid waste also minimises the emission of methane, which contributes to climate change.”

A factory in a developed country that wants to exceed its emissions quota will come to a country like Ethiopia where carbon sink projects are underway and pay for its excess in hard currency based on a computation of the amount of carbon which, for example, a given forest absorbs.

The draft regulation divides stakeholders in this implementation process as service providers and project proponents. The former includes brokers, who could bring together the buyers and sellers of carbon emission rights, consultants, and project designers. The proponents are the project developers who will own the forest or the waste management work.

The draft regulation which the EPA is working on vies to provide instruments with incentives.

“The project proponents will not pay tax for the first five years,” said Selam. “For the next five years, the tax will be only three per cent and after that four per cent. There will also be no value-added tax (VAT).”

The possible activities encompass a wide area including energy supply, supply or demand side energy efficiency, transportation, waste management, land use change, and forestry. The EPA will be empowered to ensure that ecological, social, and economic sustainability criteria are met for such projects.

“It is a source of foreign currency, technology transfer, emissions reduction, and a grounds for international cooperation,” said Ambachew Admasu, general manager of Ethan Bio-fuels, during the meeting.

“Solid waste management, animal waste, and forestry are good opportunities for Ethiopia to get foreign currency,” Yoseph Assefa, general manager of 3C Climate Care Consulting, told Fortune.

A new website is also expected to be launched at an unspecified date in the near future to facilitate the creation of contact between buyers and sellers of carbon emission rights.

“This is a market based mechanism, which needs the active involvement of private investors and banks,” Wondwossen Sintayehu, Environmental Systems Preparation director at the EPA, told Fortune.

The EPA will rework the regulation with feedback from the meeting.