LONDON South Africa has set up a carbon finance
arm in London to follow the lead of countries like China, India
and Brazil in the potentially lucrative global carbon market.
The state-owned Central Energy Fund will encourage
investment in South African projects to cut emissions of
greenhouse gases blamed for global warming.
"It's an integrated carbon offering, so we will look at
identifying carbon projects, developing carbon projects and
trying to monetize the credits that come out of these carbon
projects," said Deven Pillay, head of CEF Carbon Markets.
"It is the first South African-driven initiative of this
kind, maybe in all of Africa," Pillay told Reuters on
Under the U.N.-backed Kyoto Protocol's clean development
mechanism (CDM), companies from rich nations invest in clean
energy projects in developing countries and receive CER
credits, each equivalent to the reduction of one ton of carbon
dioxide (CO2), which can be used to offset their own emissions.
The World Bank estimates that market, dominated by projects
in developing countries, was worth around $5.5 billion in 2006.
The CEF has a CDM portfolio worth an estimated five million
credits annually from projects involved in areas like landfill
gas, wind and solar energy. CERs currently trade at around
17.50 euro ($25.30). Click on
One hindrance for African projects has been the
administration costs of up to $200,000 per CDM project plus a
delay of a year or more to get official U.N. registration.
The CEF initiative could help encourage more projects in
Africa, which is badly lagging Asia and Latin America in carbon
"We're interested, as dealing with a state entity obviously
makes things easier," one CDM project originator told Reuters.
"Having a government guarantee CER delivery is one less
risk factor you have to deal with."
Of 47 Sub-Saharan countries, only four have projects
registered under the CDM, none of which has yet to receive
South Africa leads the pack with 10 registered projects,
while Nigeria, Tanzania and Uganda have one each.
In contrast, Asia hosts over 500 registered CDM projects,
the majority in China and India, while Latin America is home to
African projects represent less than two percent of the 827
projects registered globally, and are expected to generate
reductions of around 3.8 million metric tons annually, a
fraction of the 172 million metric tons anticipated from all
registered projects to date.
CEF is initially focusing on, but not limiting itself to,
the CDM market in South Africa, but it plans to expand both
into the voluntary credit (VER) market and to neighboring
countries, Pillay said.