An update on the Clean Development Mechanism in Africa in times of market crisis

Abstract

Africa and in particular African Least Developed Countries (LDCs) have in the past been neglected by the Clean Development Mechanism (CDM) to a large extent. This article reviews the mechanism's performance in the region and highlights current developments. The analysis is based on a quantitative breakdown of data provided by the UNEP DTU CDM Pipeline and was complemented by interviews with selected investors. The findings indicate that despite the various support measures for underrepresented regions, the overall share of African CDM activities continues to be low. The significant rise in the share of Programmes of Activities (PoAs) of recent years cannot make up for the continuing low numbers of African stand-alone projects. Further, the collapse of the compliance market has proved fatal in terms of timing: Ongoing efforts to support the development of a genuine African carbon market were suffocated by the lack of demand for CERs at a moment when capacity building had started to bear fruit. Consequently, instead of being a mitigation tool with significant scale the future role of the CDM in Africa might be limited to the voluntary market while at the same time serving as a tool to foster sustainable development, with mitigation benefits.

Evolution of international carbon markets: lessons for the Paris Agreement

“…The fall in carbon credit prices was particularly painful for LDCs where PoAs had finally started to foster many new projects and where past capacity building had started to bear fruit (Kreibich, Hermwille, Warnecke, & Arens, ). Indeed, by 2017 Africa represented 34% of PoAs compared to only 3% of regular CDM projects, while LDCs accounted for 19% of PoAs compared to only 1.6% of regular CDM projects (Figure ).…”

Emissions Trading

“…China has captured 59.2% of the expected CERs issued to date, with only three countries (China, India, and Brazil) taking up fully three-fourths of the CDM market. At the end of 2014, despite efforts by Europe to utilize CERs from least developed countries (LDCs), less than 3% of the CDM projects and less than 2% of credits issued were from Africa (Kreibich et al 2017).…”

Rethinking the governance of energy poverty in sub-Saharan Africa: Reviewing three academic perspectives on electricity infrastructure investment

“…Infrastructure can be damaged through acts of terrorism, vandalism or criminality; and key staff (especially expatriate), are increasingly under threat of unreasonable harassment by police and other 'officials', and in extreme circumstances kidnapping for ransom [49]. In Mozambique for example: RENAMO (the current political opposition and former military foe during the country's civil war) have recently threatened to again resort to armed conflict 14 ; or the local police often supplement their unreliable incomes with harassment of foreign identifiable personal.…”

“…For example, this occurred with the advent CDM, where African governments were led to believe that their countries would be huge beneficiaries of the CDM, resulting with many making significant reorganisations internally to support it -yet when the CDM commenced, it in fact had little impact [14,57].…”

“…This private investor reluctance is recognisable by the lack of SSA sourced 'Clean Development Mechanism' (CDM) projects that have been registered, whilst conceding the technology restrictions of this measure -the CDM was defined in 2007 and is a market-based mechanism designed to elicit private sector participation: yet by the end of 2014, the SSA region represented only 0.63% of the total of CDM projects globally [14]: despite the financial markets -consisting of pension funds, insurance companies, sovereign-wealth funds, mutual funds, (to name the major constituents) -having more than 100 trillion $US in assets under management to invest [15][16]. With this level of resource, and the clear investment need for such infrastructure to be developed within SSA -a lack of enthusiasm could still be argued to be a generous description of the private sector's willingness to invest.…”