TRADE-AFRICA: Green Investment to Get Boost from New EU Fund

By IPS Correspondents Reprint | | Print |

Briana Sapp

BRUSSELS, Apr 19 2007 (IPS) - After years of promising a way to help Africa tackle climate change, the European Union has joined with the World Bank to attract foreign direct investment to the continent and help save the planet at the same time.

The Carbon Fund for Europe (CFE), a new open-ended joint venture between the World Bank and the European Investment Bank (EIB), aims to make it easier for African countries to participate in the Kyoto Protocol’s Clean Development Mechanism (CDM).

The CDM allows polluters in a developed country to buy “carbon credits” from projects that reduce greenhouse gas emissions in a developing country. Since global warming is a worldwide phenomenon, the mechanism reasons, it does not matter where the reductions actually occur.

Many of the world’s existing CDM projects are direct investments by companies or governments in developed countries, in turn creating economic development in those communities on top of just creating carbon credits.

The CFE will purchase up to 40 percent of the carbon credits created through CDM projects after 2012, when the Kyoto Protocol expires. With a guaranteed buyer for the carbon credits, developing countries can better leverage financing to get environmentally friendly projects off the ground.

The EIB’s vice-president Simon Brooks sees the Fund contributing towards sustainable economic development by increasing both public and private sector investment from the developed world’s purchases of carbon credits to help the developing world help itself.

CDM projects vary in scope. For example in Kenya, the Green Belt Movement Project is a small-scale CDM project that will reforest about 1,800 hectares of indigenous species within the Mount Kenya and Aberdares regions. The activities included in the project are expected to capture around 375,000 tonnes of carbon dioxide equivalent by 2017.

In Asia and Brazil, more than a half dozen CDM projects have been the production of electricity from bagasse, the leftover fibre material from sugarcane. Carbon credits are then issued for the amount of carbon emissions saved from creating “green” electricity rather than from coal or petroleum.

With the increase of sugarcane production in Africa, this kind of electricity production from bagasse can open new doors for technology and the funding to put it into place.

“This partnership with the EIB is one more critical element in helping the world to move towards a low carbon economy…it is essential that we demonstrate the power of the carbon market for greenhouse gas mitigation and continue to involve the developing world which will be hardest hit by the impacts of climate change,” says Warren Evans, director of the environment at the World Bank.

As the Kyoto Protocol expires in 2012, there is a big question mark as to how the agreement, or at least its principles, will continue beyond then.

The European Union has traditionally been a frontrunner in leading progressive global environmental policy but has fallen back in recent years. The CFE is the EU’s, through its vehicle the EIB, first real step in that direction.

“The fact that the fund will buy beyond 2012 is sending an important message for the need for a post-2012 stable regulatory regime,” Evans said.

Africa is viewed by climate experts as being most at risk of adverse effects from climate change, with extreme weather causing flooding, droughts and desertification that is already apparent. The Washington-based Climate Institute says those climate changes will also impact health and food security, and increase the number of refugees.

The world’s poorest countries have been unable to make a significant enough impact to counteract pollution from developed countries, but through the CDM, developing countries in Africa and elsewhere can develop environmentally-friendly projects that may in the future work to battle global emissions.

To make the Fund’s impact as global as possible, anyone can submit projects to the CFE as long as projects are credible and financially sound. Projects should be able to offer a minimum 100,000 carbon credits, or the equivalent of 100,000 tonnes of carbon emission reductions.

Ireland, Luxembourg, Portugal, the Flemish Region of Belgium and Statkraft Carbon Invest AS in Norway are all committed to meeting their Kyoto Protocol commitments and are financially supporting the CFE as a way to do just that.

Though the CFE’s 50 million euro budget is minor compared to the World Bank’s 2 billion dollars currently invested in nine other carbon funds, the CFE is a first step towards developing an international agreement which looks beyond Kyoto’s 2012 endpoint.

“The lessons learned from the activities and successes of the Carbon Fund for Europe should inspire new endeavours in the long battle to protect our future,” said Brooks.