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Africa could substantially increase its share of the global Carbon market

A new report from the World Bank highlighting the potential of the Clean Development Mechanism (CDM) for Sub-Saharan Africa was released today during the AFRICA CARBON FORUM in Dakar, Senegal.
Sub-Saharan Africa currently has a dismal 1.4% share of the 3,700 projects in the UNFCCC pipeline, as of September 1. The report— Low-carbon Energy Projects for Development in Sub-Saharan Africa: Unveiling the Potential, Addressing the Barriers—shows that it doesn’t have to be that way, that there is tremendous potential locked up in these African countries.

This report presents a first-of-a-kind attempt to inventory the potential of clean energy projects in Sub-Saharan Africa that could receive support from CDM/Carbon Finance and possibly the new Climate Investment Funds, and thus contribute to supply-energy energy balance in a cost-effective manner. It covers comprehensive analyses in 44 countries of Sub-Saharan Africa (English, French and Portuguese speaking countries) and develops a first inventory of opportunities for clean energy projects across various sectors (covering, supply side, demand side energy efficiency and renewable energy measures) in these countries.

To this end, the study team used the framework of methodologies approved under the Clean Development Mechanism (CDM) of the Kyoto Protocol (more than 100 approved methodologies), many of which have already been applied successfully to projects in other developing regions. The report was funded by the Norwegian Trust Fund for Private Sector and Infrastructure (NFT-PSI) and Carbon Finance Assist (CF-Assist) of the World Bank.

“This report shows the huge technical potential for clean energy projects in Sub-Saharan Africa,” said report lead author Christophe de Gouvello, a World Bank senior energy specialist. “If properly integrated with conventional sectoral assistance already provided by donors, the new climate change–related international financial instruments can boost energy development in Africa.”

For the 44 countries and 22 technologies considered, the study team estimated a technical potential of more than 3,200 low carbon energy projects, including 361 large programs (known as Programs of Activities), each consisting of hundreds or even thousands of single activities. If fully implemented, this estimated technical potential could provide more than 170 GW of additional power-generation capacity, more than twice the region’s current installed capacity. The additional energy provided, both electrical and thermal, would equal roughly four times the region’s current modern-energy production.

“But there is a caveat to all this. Although we did the technical analysis, the economic analysis would still need to be done on a project by project basis,”said Massamba Thioye, a senior energy and environment specialist and co-author of the report. “But the pipeline of similar projects in other regions shows us that such projects are often economically viable when carbon revenues are added.”

The achievable avoidance of future greenhouse gas emissions would total about 740 million tons of carbon dioxide equivalent per year, more than the region’s current annual greenhouse gas emissions (680 million tons of carbon dioxide equivalent). Two investment curves—one for greenhouse gas abatement and the other for additional generation capacity—were created for the whole region and for each country. A conservative estimate of the total capital cost for the potential is about US$157 billion (probably more than US$200 billion if large flared, associated-gas recovery projects are included).

The key word here is “potential”. The authors document the formidable barriers that now hold Africa back on the CDM. Among the barriers: It is essential to fill the regulatory and logistics gaps that bar clean energy projects from access to energy markets. Market access requires appropriate infrastructure planning and policies to overcome logistics bottlenecks. Technical information on mature clean energy technologies must be appropriately disseminated. Local skills required to run mature, clean technologies must be developed. Carbon finance alone will not solve the investment financing gap. Earmarked climate investment funds are essential.

“Moreover, the energy deficit in Sub-Saharan Africa is enormous,” said Dana Rysankova, senior energy specialist in the World Bank’s Africa Region. “The total generation capacity of the whole Sub-Saharan Africa is lower than that of Spain. 500 million people still lack access to electricity. It is estimated that the African countries will need to spend at least six percent of their GDP on energy over the next 10 years to keep up with their economic growth. It is therefore clear that a number of technologies (both traditional and new) will need to be applied. This report shows that clean technologies may be viable alternatives worth exploring, but getting there is daunting. As the authors caution, a number of significant barriers need to be removed first.”

The report was released at the Africa Carbon Forum, a first on the continent, which combines a carbon investment Trade Fair, a conference and policy forum as well as targeted capacity building on the Clean Development Mechanism of the Kyoto Protocol for climate change officials and carbon market participants in Africa.

Additional information: For more information please visit the World Bank
News date: 03/09/2008

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