06.08.2012

ACAD scales up activities in the African carbon market

The International Climate Initiative (ICI) of the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) will continue its support for the African Carbon Asset Development (ACAD) Facility as part of a second project phase. In this work, the BMU is supporting a development project for the clean development mechanism (CDM) under particularly difficult conditions, as the Kyoto Protocol expires in 2012 and the international community has yet to establish a successor. ACAD receives additional funding from the French Government. At the Carbon Expo 2012, ACAD announced that it now intends to scale up its activities and implement an additional 22 innovative climate projects by 2013 with the help of new and existing financing partners such as Standard Bank.

The United Nations Environment Programme (UNEP) coordinates the Facility, which it set up in 2008. ACAD supports projects that reduce greenhouse gas emissions from the development stage right up to registration with the CDM. In addition to building the emissions trading competence and capabilities of partners on the ground, the Facility is giving independent impetus to the African carbon market and is motivating the financial sector in particular. In the first phase, one of ACAD’s tasks was to raise awareness among private lenders and state-owned development banks on the economic potential of the carbon market. ACAD also worked to convince local and regional financial institutions and investment agents involved in setting CDM projects in motion to provide more financial support during the early stages of the projects. The Facility itself also takes on a portion of the transaction costs incurred. This facilitates the implementation of projects involving high initial investment costs and which are unable to be financially independent from the outset. This has enabled commercial private lenders and government development banks to gain initial experience regarding the economic potential of the carbon market. At workshops on project development and climate financing held for investors, project developers and local CO2 traders in Botswana, Rwanda and Nigeria, regional experts exchanged know-how and improved their understanding of CDM challenges such as market entry barriers and transaction costs. Participants received information on designing and implementing projects, including, for example, how to demonstrate additionality and successfully conduct contract negotiations on emissions trading.

ACAD has selected 15 projects for financial support up to now. These include a wind energy project in Kenya which has already been registered as a CDM project, and a further four currently undergoing evaluation. The ACAD-supported wind farm in northern Kenya should, for example, generate 300 megawatts of wind energy reliably, at low cost, and in a climate-friendly manner. It is one of the largest renewable energy projects in Africa and will supply around 2 million Kenyan households with electricity. ACAD took on a portion of the assessment costs for the project and helped it to achieve CDM Gold Standard status. It is the first registered CDM wind energy project in Africa.

Experience gained through ACAD projects is fed directly into the international negotiation process. ACAD was officially recognised as a representative of best practice in its field at the climate negotiations in Durban, where its pioneering role was acknowledged. The CDM funding facility agreed during the conference will be based on ACAD’s start-up funding model.