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Friday, July 25, 2014
Cam McGrath* - IPS/IFEJ
- Egypt's pollution problem is a potential goldmine of foreign revenue – if the country can tap into the lucrative international carbon trading market. A 130-billion dollar market for so-called carbon credits has grown out of the idea that when it comes to global climate control, where carbon dioxide comes from is less important than the total amount produced.
The Clean Development Mechanism (CDM), a component of the UN's global programme to address climate change, permits governments and companies in industrialised nations to offset stringent greenhouse gas (GHG) emission quotas established under the Kyoto Protocol by investing in emission- reduction projects in developing countries.
Registered CDM projects receive one carbon emissions reduction credit (CER) for every ton of carbon dioxide reduction, or its equivalent. The CERs can be sold directly to polluters in industrial nations, or indirectly through a broker or fund manager.
China, the biggest emitter of greenhouse gases, is also the world leader in clean energy projects. The industrial giant has 586 registered CDM projects expected to generate 181 million CERs annually – or about 59 percent of the world's total. India and Brazil have registered CDM projects accounting for 12 and 7 percent of total annual CERs, respectively.
Egypt's lax environmental controls make it a prime candidate for simple and cheap emission reduction solutions. The government established a designated national authority for the CDM in 2005, but has registered just four projects worth 1.79 million average annual CERs, according to the United Nations Framework Convention on Climate Change (UNFCCC).
Carbon Egypt, a subsidiary of the Vienna-based Carbon Projektentwicklung, became the first company to broker a CDM in Egypt when it financed the installation of a gas treatment unit in a complex owned by Abu Qir Fertilisers, the largest producer of nitrous oxide in the Middle East. The catalytic filters absorb 99 percent of the plant's 4,700 tons of annual nitrous oxide emissions, generating up to 1.5 million CERs per year.
Under the terms of the agreement, all carbon credits belong to Carbon Egypt, which pays 30 percent of net income to the state-owned fertiliser company for the use of its facilities. "The project started three years ago and involved zero risk for Abu Qir," explains Hani Riskalla, general manager of Carbon Egypt. "All financing came from (our end); the client did not invest a penny."
According to Riskalla, most of the CERs have been contracted to German energy firm RWE through 2012, with the Austrian government agreeing to purchase the rest.
Egypt's other registered CDM projects comprise a waste gas capture system for a carbon black factory, methane gas trapping at a landfill near Alexandria, and a 120-megawatt wind farm on the Red Sea coast.
The Egyptian Council for Clean Development Mechanism has also approved more than 50 CDM project proposals with the aim of reducing greenhouse gas emissions by the equivalent of 9.1 million tons of carbon dioxide per year. The majority of these projects involve the conversion of fuel combustion machinery to renewable and cleaner-burning fuels.
A 2006 report prepared by the Tabbin Institute for Metallurgical Studies identified energy-related activities as the source of 71 percent of Egypt's greenhouse gas emissions. "Sectors with the highest GHG emissions are the main target for reduction measures and the implementation of CDM projects," it said.
The study went on to cite various obstacles that deter local firms and foreign investors from taking steps to reduce emissions. "The existing subsidies on fuel and power, bureaucratic hurdles as well as custom duties and taxes limit to some extent the attractiveness and potential of the CDM in the country," it concluded.
Energy analysts also see external factors at play, including falling international CER prices that have undermined the business argument for adopting clean energy solutions.
"The financial crisis has hit renewable energies very hard for various reasons," says Baelz. "One reason is that most of these projects are project- financed, and to get these funds has become very difficult. Another is that the global economy is contracting and therefore the carbon quota can be met – not because we changed the way we live and the technologies we use – but simply because the economy is shrinking and emissions consequently are declining."
There may also be reluctance to implement CDM projects given the uncertainty surrounding the future of the Kyoto Protocol, which expires in 2012. A better picture should emerge after government representatives of 170 nations meet in Copenhagen in December to discuss a new global climate agreement.
Riskalla is confident the CDM will remain in place for developing countries as an incentive to introduce clean technologies. "And even if it doesn't exist (beyond 2012), we still have to work on minimising emissions."
(*This story is part of a series of features on sustainable development by IPS – Inter Press Service, and IFEJ – the International Federation of Environmental Journalists.)