Posted by: Mark Scott on January 25, 2010
Africa represents roughly 3% of projects worldwide under the UN's Clean Development Mechanism. A combination of better investments to be found elsewhere (particularly in China and India), regional risks such as corruption and political unrest, and overall investor uncertainty towards the continent has kept Africa an also-ran in global carbon markets.
Yet some financiers are pushing ahead despite the problems. Take South Africa's Nedbank, the country's fourth largest bank. On Dec. 15, Nedbank Capital, its investment bank subsidiary, announced its first forestry-based carbon project in Kenya. The deal -- a link-up with San Francisco-based Wildlife Works -- will create 2.5 million carbon credits by 2026, which Nedbank will sell in the global voluntary market (mostly to Western and South African companies). Nedbank's head of carbon, Kevin Whitfield, reckons 20% to 30% of the project's credits have been sold so far. The Kenyan tree-preservation scheme falls under the UN-backed Reduced Emissions from Deforestation and Degradation, or REDD, program that aims to create financial incentives to protect forests, particularly in the developing world.
Some in the financial markets, though, remain skeptical, saying there's a lack of transparency and REDD could hurt other carbon credits. "The inclusion of forestry projects in emission trading systems runs the risk of devaluing other emissions credits," says Louis Redshaw, head of environmental markets at investment bank Barclays Capital.
Despite the skeptics, Nedbank's Whitfield says the bank has another five REDD projects slated across Africa. They include deals in Uganda, Ivory Coast, Cameroon, Congo, and Gabon, which will total roughly 1 million hectares of forest. He declined to give detail on the specific timeframe for the projects' completion.
"We also shared the skepticism [over forestry projects], says Whitfield, whose team spent over nine months interviewing the community in Kenya in preparation for the deal. "We chased down cattlemen in the middle of the night as part of our due diligence," he says. "There's an appetite for African credits."
If Nedbank is so keen, what has kept others from investing in Africa's nascent carbon markets? A major issue is risk. That includes everything from political unrest to fears carbon projects won't be completed. To overcome the problem, Whitfield reckons knowledge of the local markets is paramount. "We've got people on the ground, so we're better placed than most. We're biased towards Africa, we wouldn't look to invest in North Dakota because we don't know that market," he adds.
Now, Africa could gain billions of dollars of investment as policymakers begin to question whether Western cash should fund carbon projects in emerging economy giants. Adding to Africa's potential windfall: green-energy funds promised at the Copenhagen climate change conference are starting to flow. For sure, the continent will likely remain a bit player in the carbon markets in the short-term. But a combination of growing interest from financial institutions and the availability of Western-backed climate change funds could increase Africa's profile in the fight against global warming.
Posted by: Mark Scott on January 19, 2010
For most Europeans, it would be hard to find the Federated States of Micronesia on a map. But the small Pacific island nation is trying to punch above its weight. The country -- with a population of 110,000 spread across more than 600 islands -- is challenging the refit of a coal-fired power plant in the Czech report, according to Reuters. Micronesia says the 1,710 MW plant is a direct threat to its survival. The case could be the first time one country has tried to use another's laws to block construction because of climate change fears.
As the Prunerov power plant near the Czech-German border produces 40 times more carbon dioxide each year than all of Micronesia combined, the Pacific islanders may have a point. And under international treaties, European countries must consider the global impact of their infrastructure when carrying out plant environmental impact assessments. In an interview with Reuters, Andrew Yatilman, director of Micronesia's Office of Environment and Emergency Management, says the country will wait to hear whether Czech officials green-light the power plant's refit before taking further legal action.
In part, Micronesia's saber-rattling stems from the muted outcome at the Copenhagen climate change conference in December, 2009. While no one came away from the summit happy, island nations were particularly angry that they're goals, such as keeping temperatures from rising more than 2 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial levels, were largely ignored. The legal confrontation in the Czech Republic could well turn out to be a PR stunt to keep their cause alive.
That doesn't mean more legal challenges to polluting infrastructure in the West (and possibly in large emerging giants) may now be in the works. One thing's for sure. Utilities looking to make billions of dollars in investment will be keeping a close eye on Micronesia's legal battle in central Europe.
Posted by: Mark Scott on December 17, 2009
Global leaders woke up in Copenhagen on Dec. 17 to find a blanket of snow covering the ground. But it was inside the Bella Center—the conference hall where delegates from 192 countries are trying to hammer out a climate change deal—where things were really frozen. With less than 48 hours before the summit closes, policymakers were still at loggerheads over who should shoulder the brunt of carbon reductions. And it remains unclear whether a compromise can be reached before Dec. 18.
In part, the brinkmanship is a negotiating tactic used by all involved to get a deal done. With the likes of U.S. President Barack Obama and his Chinese counterpart Hu Jintao speaking at the summit over the next two days, there's a lot of political capital at stake. And negotiators reckon the combined political weight of all the global leaders attending could push through a deal, no matter how watered-down.
"The next 24 hours are absolutely critical and need to be used productively," Yvo de Boer, the UN's chief negotiator said late on Dec. 16. "Everyone wants to see ambitious reduction cuts by developed countries."
The push for the West to take on significant CO2 cuts is just one of the sticking points. Many developed countries, particularly the U.S., don't want to sign up to binding reductions without large emerging economies (read: China and India) doing something similar.
Another problem is carbon finance. Developing countries want billions of dollars from the West for everything from renewables to deforestation projects. There has been movement on the issue, including a pledge from the U.S to participate in a $100 billion funding project by 2020 if a climate change agreement is found, but many in the developing world want more.
Finally, governments still haven't agreed who will control the money being doled out, let alone who should monitor whether countries are meeting their CO2 reduction commitments. Among delegates in Copenhagen, it's referred to as 'transparency.' For you and me, that means policymakers haven't figured out who controls the purse strings of potentially billions of dollars of climate change funds. Until that questioned is answered, negotiations will remain in the deep freeze.
Posted by: Mark Scott on December 16, 2009
This entry is cross-posted from Europe Insight.
With protestors staking out the climate talks and politicians continuing to point fingers at each other, one issue isn't getting much play in Copenhagen—yet it could make or break a deal to tackle global warming. Simply put, trade is becoming a central sticking point at the Copenhagen talks.
That may not sound immediately relevant as negotiators look to bring carbon emissions under control. But trade (and trade barriers) are a key hurdle policymakers must cross if they want to hammer out a deal before the summit closes in 48 hours.
The implications for business are significant. Western countries and emerging countries still haven't agreed on who should make binding commitments to cut carbon emissions, and how much aid the developing world should get to offset the impact of global warming. Equally important, governments haven't decided how the mechanisms should work, and whether domestic governments will have the power to control the carbon funds allocated to them.
The connection with trade? An emerging economy could dole out carbon mitigation funds provided to it by foreign governments in a way that favored local companies over international rivals. Such favoritism could lead to trade disputes.
"Companies want to make sure there are no tariff or trade barriers incorporated into a [climate change] deal," says Peter Lacy, sustainability group lead for Europe, Africa, and Latin America at consultancy Accenture (ACN). "If that happens, the money at stake moves from the billions into the trillions."
Indeed, environmental targets are quickly becoming a tense trade issue between the U.S. and China. Both are pushing 'built-on-our-turf' clauses into their carbon reduction plans, which prioritize domestic firms (or, at least, foreign-own plants on national soil) over international rivals. The idea is to create green jobs...and no one wants to lose out on the multi-billion dollar global plans to tackle climate change.
Democratic Senator John Kerry, speaking at the summit on Dec. 16, said the carbon reduction legislation working its way through Congress would create U.S. jobs. But he warned U.S. politicians "fear that U.S. will take steps [to cut emissions] that be eclipsed by emissions from less developed countries."
Still, Rhone Resch, chief executive of the Solar Energy Industries Association, a U.S. trade group, reckons green jobs are moving fluidly between countries. He points to the U.S. solar industry, which has lost jobs in older manufacturing plants (mostly to cheaper Chinese competitors), but has added just as many in new technologies. In Toledo, Ohio, he says, there are now 6,000 people employed in the solar industry vs. 3,000 in the state's coal sector.
"What we need from the [climate change] treaty is a stable global price signal for carbon," he says. "That would help us fund new technologies."
Greater certainty on how much it would cost companies to pollute certainly would help execs make long-term investment decisions. But the business community also needs to know whether a deal from Copenhagen could lead to trade disputes. Over the next 48 hours, that question must be answered.
Posted by: Mark Scott on December 16, 2009
This entry is cross-posted from Europe Insight.
Snow was thick on the ground in Copenhagen on Dec. 16, but that didn't put off thousands of protestors who tried to force their way in the climate change negotiations. With colorful posters and anti-global warming chants, they had started off early from the Danish capital's city center. But near the Bella Center, where delegates from 192 countries have gathered to hammer out a climate change deal, police in riot gear blocked their path.
At least 200 activists were arrested, while many others were turned away. "They're trying to stop our legitimate protest," says Linda, a 23-year-old student who had left her house just after dawn to join the march. "World leaders must hear our voice."
Despite the protestors' failure to breach the Bella Center's security, many inside the Copenhagen summit share their fears over the stumbling climate change talks. The main issues—binding carbon reduction targets for developed countries, possible CO2 cuts in emerging economies like China and India, and development aid for the poorest countries—remain unsolved. And as global leaders start to arrive in Copenhagen, it's unclear whether policymakers can agree before the summit closes on Dec. 18.
That's the buzz making the rounds inside the Bella Center, and it mirrors fears dating back months that global leaders would fail to reach a compromise. With negotiations expected to head well into the night until the summit closes, delegates are holing out hope that a non-binding framework will make it through before Dec. 18. Others suggest negotiations will be suspended, only to be picked up in the new year. The West blames emerging economies, and vice versa. Non-governmental organizations and other civil society groups say it's both sides' fault.
That frustration explains why so many took the streets in Copenhagen on Dec. 16: Everyone wants a deal, but nobody knows how it will be achieved. As temperatures head below zero in the Danish capital, the heat remains squarely on politicians to push through a climate change compromise.
