Carbon Finance and Carbon Finance and Opportunities in Opportunities in

AfricaAfrica

Patrick KaraniPatrick Karani

BEA InternationalBEA International

Situation of CDM and Situation of CDM and Carbon Markets TodayCarbon Markets Today

Low Level of Activities in relation to registration Low Level of Activities in relation to registration of new projects similar to the initial years of of new projects similar to the initial years of learning curvelearning curve

Compliance-driven market demand has out-Compliance-driven market demand has out-paced voluntary offset demandpaced voluntary offset demand

Collapse of the CER/EUA, due to global Collapse of the CER/EUA, due to global economic melt-down, uncertainty about Kyoto economic melt-down, uncertainty about Kyoto ProtocolProtocol

Decline of requests correlated to international Decline of requests correlated to international markets conditions for CER excluding non-LDC markets conditions for CER excluding non-LDC in the EU-ETSin the EU-ETS

Speculation on CDM for Speculation on CDM for possible Carbon Financepossible Carbon Finance Redefining the role of CDM to attract Redefining the role of CDM to attract

private investmentsprivate investments Changing stakeholders’ attitude, Changing stakeholders’ attitude,

perception and conception and embrace perception and conception and embrace business approach and fundingbusiness approach and funding

Promoting CDM as a transition to full Promoting CDM as a transition to full fledged carbon market driven by forces of fledged carbon market driven by forces of demand and supplydemand and supply

Carbon Finance Opportunities in Carbon Finance Opportunities in AfricaAfrica

Financing Financing ToolsTools

(1) Mobilize(1) Mobilize

ConcessionalConcessional

ResourcesResources

(2) Catalyze(2) Catalyze

PrivatePrivate

CapitalCapital

(3) Maximize(3) Maximize

MarketMarket

MechanismsMechanisms

MitigationMitigation

MeasuresMeasures

Renewable Renewable EnergyEnergy

Energy Energy EfficiencyEfficiency

Low Carbon Low Carbon PathPath

Transport Transport Policy & Policy & LULUCFLULUCF

Application of Application of Efficiency Efficiency SystemsSystems

Urban Urban SanitationSanitation

MethaneMethane

AdaptationAdaptation

MeasuresMeasures

Vulnerability Vulnerability risks into risks into development development strategiesstrategies

Climate Climate resilience of resilience of vulnerable vulnerable sectorssectors

Climate Climate proofing proofing projects & projects & social social dimensionsdimensions

EDF/CIH/RDD/ECO/ E.BRANCHE

Hydropower and CDM in Africa: situation at the end of 2009

All registered African CDM projects (country, type) - state December, 29th 2009 (source: UNFCCC, 2010)

Morocco (5), incl.

-Biomass energy (2) -Landfill gas (4) -Solar (1) -Wind (2)

Ivory Coast (1), incl.

-Landfill gas (1) Nigeria (3), incl.

-Energy efficiency (1) -Fugitive (2)

EDF analysis 2010

Tunisia (2), incl.

-Landfill gas (2)

South Africa (17), incl.

-Biomass energy (2) -Energy efficiency (2) -Fossil fuel switch (2) -Hydro (1) -Landfill gas (4) -Methane avoidance (2) -N2O (4)

Egypt (4), incl.

-Energy efficiency (1) -Landfill gas (1) -N2O (1) -Wind (1)

Uganda (2), incl.

-Hydro (1) -Reforestation (1)

Kenya (1), incl.

-Biomass energy (1)

Tanzania (1), incl.

-Landfill gas (1)

ISSUESISSUES

Countries are installing massive Countries are installing massive power/thermal capacity with conventional power/thermal capacity with conventional systemssystems

Green technology is expensiveGreen technology is expensive Initial capital is lackingInitial capital is lacking Banking sector and capital markets not Banking sector and capital markets not

up to speed with green fundingup to speed with green funding High risks linked to Post Kyoto 2012High risks linked to Post Kyoto 2012

ProspectsProspects

Carbon credit is becoming a common link Carbon credit is becoming a common link in financingin financing

African can generate about 4,000,000 African can generate about 4,000,000 CER per yearCER per year

More PoA with added CPA will reduce More PoA with added CPA will reduce transaction costs per activity and transaction costs per activity and increase volumes of CER from Africaincrease volumes of CER from Africa

Carbon Financing for Revenue Certainty

Carbon financing can be defined as financial resources provided to projects generating (or expected to generate) green house gas emission reductions in the form of the purchase of such emission reductions.

In simple term, carbon finance is a purchase contracts whereby one party pays another party in exchange for a given quantity of Green House Gas (GHG) emission reductions.

Payment made in different forms to abate GHGPayment made in different forms to abate GHG

EQUITYDEBT/

SOFT LOANIN KIND

CONTRIBUTION FOR TECHNOLOGIES

CASH

Carbon Concept

Industrialized Country (Annex B)

②Carbon Credits

Entity A GHG Emissions

①Finance

Technology

(Capacity Building)

Developing Country (non-Annex B)

Entity B Project Activity

Emission Reduction

Industrialized Country (Annex B)

Entity A GHG Emissions

Carbon Reality

① Carbon Credits

②Payment

Developing Country (non-Annex B)

Entity B Project Activity

Emission Reduction

Way ForwardWay Forward

Reduce capital cost by leveraging carbon Reduce capital cost by leveraging carbon investments and promoting tradeinvestments and promoting trade

Remove Financial and Institutional Remove Financial and Institutional barriers and provide incentives for private barriers and provide incentives for private sector participationsector participation

Mobilize Resources for Technical Mobilize Resources for Technical Assistance and Build Local CapacityAssistance and Build Local Capacity

THANK YOUTHANK YOUwww.BEAInternational.orwww.BEAInternational.or

gg