Africa Eyes Carbon Market

May 25, 2010 — As Carbon Expo 2010 opens this week in Cologne, Germany, carbon traders face an uncertain future and lower prices, with a new global climate change agreement still up in the air.

But countries in sub-Saharan Africa remain optimistic that preserving and rejuvenating their forests, among other climate-friendly efforts, will someday bring revenues as well as environmental and other quality-of-life benefits.

In the highlands south of Mount Kenya, for instance, a small-scale tree-planting project operated by the Green Belt Movement is helping local people increase their food supply, and build skills and incomes while replenishing forests lost over time to illegal logging.

Under a 2006 agreement with the World Bank’s BioCarbon Fund, the project could eventually sell 375,000 tons of carbon dioxide equivalent (CO2e) emission reductions by 2017, with the possibility of selling an additional 150,000 tons.

In the world of carbon finance, though, that amount isn’t large. The base of 375,000 tons of CO2e is about equivalent to the emissions from 68,181 cars in the United States over a year, using U.S. Environmental Protection Agency estimates for the average vehicle (about 5.5 metric tons of CO2e) in 2004.

But the effort is an important test of whether larger-scale projects would yield greater financial rewards while promoting low-carbon growth, say World Bank experts.

“Africa’s land use challenges are so big—we must think of carbon finance as more than an experiment and begin using the carbon instruments as a reliable resource for Africa, looking closely at how we can best collaborate with partners so carbon finance becomes a transformational tool for Africa,” says Inger Andersen, the Bank’s Director of Sustainable Development for Africa.

‘No More Cutting’

The Kenya project is one of several in Africa testing the capacity of local groups to comply with the complicated rules governing projects that sell carbon offsets under the Kyoto Protocol of the current climate change regime.

Deforestation is increasing in Kenya, as it is throughout Africa. Only 2% of Kenya is covered by forest, according to the Green Belt Movement led by 2004 Nobel Peace Laureate Prof. Wangari Maathai. Yet, maintaining and rejuvenating forests is the main way Africa can contribute to climate change mitigation and participate in the carbon market.

The project aims to reforest areas that were deforested before 1990. A mix of fast-, medium- and slow-growing indigenous species will help reduce erosion, regulate water flows, and protect water sources and biodiversity.

The project’s first plantings occurred in 2008 in the upper region of Mount Kenya and in an area close to Nairobi.

Lydia Ngahu, leader of the mostly female TumuTumu Green and Ecotourism Self-Help Group—one of 4,500 Green Belt groups in the country—says her group formed in response to tree-clearing on TumuTumu hill which brought erosion and flooding.

“That was when we said, no more cutting, and that is when the Green Belt supported us. After [the loggers] moved out, that’s when we had a chance to plant trees, and now they’re surviving. We’ve experienced a lot of rain since then, so the trees are still growing,” she says.

20,000 Trees Planted

The group’s “green rangers” work several days a week raising and tending to saplings later planted on nearby hillsides. Some 20,000 young trees were to be planted this spring as part of an effort to reforest 2,000 hectares in the Aberdares and Mt. Kenya regions of Kenya.

The group is also keeping bees, raising goats, and producing eggs, milk, honey, nuts and vegetables through sustainable farming, where even manure is recycled as fertilizer. Group members may also remove firewood from deadfall from the forest for personal use.

A small stipend given in exchange for the work has helped members acquire assets for farming, and the group itself has had an empowering effect on its female members.

“Historically in Kenya, it’s entrenched in our culture that when it comes to education, land rights, property rights, women have a very small role,” says project officer Frederick Njau.

“To see such women doing things on their own, and believing they can bring change, I think it’s a big inspiration from Prof. Maathai herself, and from what she’s been able to do over the years.”

Value Beyond Carbon Offsets

The multiple benefits of the project give it a value beyond its carbon offsets, says Ellysar Baroudy, World Bank Senior Carbon Specialist and head of the BioCarbon Fund.
“You’re improving environmental conditions, and you’re improving people’s standard of living,” she says.

The World Bank has a diverse portfolio of carbon projects in Africa, but many have commonalities, says Baroudy. “There are huge social and environmental co-benefits, and the environmental benefits go beyond the CO2. The other benefits aren’t paid for, but the communities recognize them more than we do.”

Forest Carbon Promising, But Challenges Remain

Since the Copenhagen Climate Summit in December 2009, where nations made progress on efforts to reduce emissions from deforestation and degradation, interest in forest carbon is increasing, Baroudy says. International forest carbon offsets have also been linked with pending U.S. cap-and-trade legislation In addition, the volume of forest carbon projects is rising, suggesting a growing momentum, she adds.

But reforestation projects have higher hurdles to cross than other types of carbon-offset projects. European carbon markets don’t trade in forestry credits, so the Green Belt Movement projects of the world exist in a more constrained environment.

The current rules for the design, implementation and monitoring of these projects under the Clean Development Mechanism (CDM) of the Kyoto Protocol also entail sizeable transaction costs, making it hard for communities to have direct access to the market.

The big challenge for African carbon-offset projects is securing financing and developing expertise to carry out technical aspects of project, Baroudy says.

“The financing issue is huge because carbon revenues don’t kick in for at least three to five years. You need money ahead of that to invest in putting your forest into place and to grow and do all the hard work to document what you’ve been doing and to generate the credits.”

Also, “you need a multidimensional team. It’s not just sticking in the trees and that’s it. It’s quite a rigorous, disciplined, management undertaking, so you need someone on your team who can do that,” adds Baroudy.

The World Bank is looking for ways to build capacity, simplify CDM procedures and bring financing. The large audience at a recent Africa Carbon Forum indicated the effort will be worth it.

“There is interest from Africans and there is interest from industrialized countries,” says Baroudy. “And it’s not just in forestry projects -- there is big interest in Africa for everything.”