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Undertaking CDM Projects in Africa – Challenges, Trends and Opportunities Belinda Kinkead, EcoSecurities DNA Forum, Addi

Undertaking CDM Projects in Africa – Challenges, Trends and Opportunities Belinda Kinkead, EcoSecurities DNA Forum, Addis Ababa, October 2007. Rules Make CDM in Africa Challenging. Overbuilding the CDM – barriers to entry, esp for small developers. Lack of consistency, no precedents.

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Undertaking CDM Projects in Africa – Challenges, Trends and Opportunities Belinda Kinkead, EcoSecurities DNA Forum, Addi

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  1. Undertaking CDM Projects in Africa – Challenges, Trends and OpportunitiesBelinda Kinkead, EcoSecuritiesDNA Forum, Addis Ababa, October 2007

  2. Rules Make CDM in Africa Challenging Overbuilding the CDM – barriers to entry, esp for small developers Lack of consistency, no precedents Complex, long and uncertain process Reduced certainty, reduced investment, favours large projects, countries Complicated rules Unpredictable process Uncertainty SD benefits reduced – impacts small projects

  3. The CDM process is becoming more difficult…

  4. And more uncertain….

  5. Other Challenges in Africa • High proportion of RE, small, emerging grids = very low grid emission factors – perverse incentive to increase ‘dirty’ generation • Capacity additions to these grids do not consider the displacement of current and future off-grid diesel/heavy fuel oil generation • Projects which extend the grid, or serve off-grid demand, within this group could be allowed to use a default emission factor of 0.8 kg CO2eq/kWh (extension of AMS I.D)? • Diversion of ODA – confusion over what constitutes a diversion? • Programmatic CDM – huge potential, but will it be user-friendly? • Newly established DNAs – open, transparent process important. Learn by doing, do not need to wait for the ‘perfect’ system • Absence of a meth which covers displacement of NRB

  6. How Could we Continue to Improve the CDM? Consistency Use precedents. Provide more feedback to DOEs, PPs. Reduce uncertainty of outcome, reduce transaction costs, enable small projects, new developers to enter Simplification Strengthen existing institutions, such as the DOEs, AP. Reduce layers. Simplified procedures/meths/ GEF for small projects. P-CDM – will it be user-friendly? Professionalise CDM is an important global market. The EB has done an admirable job on a P/T basis. Next stage we need experienced ‘regulators’, supported by administration.

  7. Trends: What is the Private Sector Doing? • Significant growth in private sector activity across Africa – many carbon buyers now active in Africa, consultants etc being established on the ground • Large projects have been the first to be snapped up – predominantly in South Africa and Northern African countries (where there are more emission reduction opportunities) • Capacity building of financial institutions continues to be important, to understand the value of an ERPA • Genuine interest in smaller projects with excellent sustainable development benefits (e.g. LULUCF) • High transaction costs and uncertainty of the CDM process means these projects are more likely to be undertaken as VER projects

  8. Trends: What are Private Sector Buyers Looking for? • Sound business plan • Creditworthy counterparty • Relatively stable investment climate • Transparent DNA approval process • Responsive and engaged clients – enthusiasm goes a long way when dealing with the CDM • Large projects and/or excellent sustainable development benefits • Off-grid (avoid GEF), bagasse cogeneration, biomass electricity, landfill gas, energy efficiency, fuel switch projects and local energy solutions (e.g. solar water heaters)

  9. Opportunities: There are Projects Out There!

  10. Opportunities: Current Projects Under Development • Solar Thermal Plant, Botswana • Hydro, Congo • Natural Gas Cogeneration, Egypt • Landfill Gas to Electricity, Ghana • Palm Oil Biomass, Ghana • Anaerobic Digestion, Ghana • Bagasse Cogeneration, Morocco • Hydro, Mozambique • CCGT, Mozambique • Solar Water Heaters, South Africa • Industrial Energy Efficiency, South Africa • Landfill Gas to Electricity, South Africa

  11. Summary • Project opportunities do exist in Africa • CDM rules are working against African projects: • Low grid emission factors effectively kill grid-connected RE and EE projects (both for CDM and VERs) – this can be changed? • Complexities and potentially uncertain outcome means investors are naturally biased towards larger projects (greater rewards for the potential risks) • Carbon investors are doing business in Africa, there is significant interest in the region • Learning by doing is happening • Private sector carbon investment is starting from a small base, but growing quickly

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