While the world looks for ways to lessen its footprint on the planet and reduce emissions, different schemes have evolved to engage countries around the globe to do their part: carbon credits are one of those schemes. Carbon credits are a key component of national and international emissions trading schemes that have been implemented to aid in mitigating green house gas emissions to slow global warming.
Basically carbon credits provide a way to reduce greenhouse effect emissions on an industrial scale by putting a limit on total annual emissions. A monetary value is assigned to the shortfall in emissions by the market through trading; credits can be exchanged between businesses or bought and sold on world markets. The credits can also be used to finance carbon reduction schemes between trading partners and around the world.
As the use of carbon credits expand, many companies have begun selling carbon credits to commercial and individual customers who are interested in lowering their carbon footprint. Carbon “offsetters” purchase the credits from an investment fund or a carbon development company that has amassed the credits from projects and then sold through a rigorously-validated Clean Development Mechanism or CDM.
CDM was launched under the Kyoto Protocol and allows for industrialized countries with a greenhouse gas reduction commitment (called Annex 1 countries) to invest in projects that reduce emissions in developing countries as an alternative to more expensive emission reductions in their own countries. Africa is unfortunately lagging behind in the CDM department; according to China’s Office of National Coordination Committee on Climate Change, out of 1,047 CDM projects in developing countries around the world; only 25 of those were in Africa. However, under an UN-run offsetting scheme,
"Countries in Africa … emerged in the carbon market and offered buyers an opportunity to diversify their China-overweight portfolios," the World Bank report said, citing Kenya, Uganda and Nigeria as the main movers in 2007.
"African countries are arriving a bit later than other countries, but there are more and more projects," said Joelle Chassard, manager for the World Bank’s Carbon Finance Unit, which runs several funds that invest in CDM projects. "At the moment, about 17% of our operations are in Africa."
"There will be more growth as soon as countries have established good, working DNA’s (governmental CDM project-approval agencies) … and a corruption-free environment," Michael Fubi, vice-president of climate protection for German utility RWE was quoted as saying in a Reuters report. "We have not invested in Africa due to capacity … We have invested in North Africa and most probably we will invest in South Africa."
The continent does have some projects, although it does not have the financial or infrastructure wherewithal to support large projects it does have some smaller ones. Some 1.6 million tons of certified emission reductions (CERs) have been issued by the UN since 2005 to Africa. The vast majority of these have gone to a single industrial gas project in Egypt.
The continent is looking to pick up its totals and according to Eddie Njoroge, head of the Union of Producers, Transporters and Distributors of Electric Power in Africa, the continent’s electricity producers can raise additional funds for much-needed investment by developing clean energy that allows them to sell emission credits. "There is a realization that clean energy is the way forward and if you have got clean projects, there is no reason why you cannot claim some credits," he said at a union meeting in Kenya. We need to have innovative ways of financing the projects. I think we need to look at listing infrastructure bonds, export credit agencies and leveraging on our balance sheets."
Njoroge, also Managing Director of Kenya Electricity Generating Company (KenGen), told Reuters that firms like his were turning towards clean energy to raise funds. KenGen currently has nine CDM projects. "The projects are all in the process of being assessed by the executive board of the Kyoto protocol," said Njoroge, adding that modes of generating clean energy are cheaper as they do not require diesel power like thermal generation. Kenya is focusing on geothermal energy to meet growing demand in a fast-expanding economy.
In Madagascar the government is set to sell more than nine million metric tons of pollution credits to protect its Makira Forest according to the Wildlife Conservation Society. The government is targeting buyers from the Western world. “Protection of intact forests is a key mechanism for reducing carbon-dioxide emissions,” the wildlife society said in a statement on its website.