Africa seeks pathways into untapped carbon trade market

“This is an disadvantage for us because the carbon credits from voluntary markets are lower than obligatory markets and are not guaranteed.”

“Negotiators and scholars must use scientific evidence that shows the real value of forests in carbon reduction with a view to building a strong case for binding CDM markets.”

Companies have opportunities to develop carbon emission reduction projects from their existing operations by, for example, reducing use of fossil fuel to run their machines and vehicles, reducing staff travel by using video conferencing, redesigning their buildings to use less electricity for lighting and air conditioning.

But in Kenya, only a few projects have been identified to benefit from the global carbon fund, including one forest conservation plan by the Greenbelt movement, and electricity generation by Mumias Sugar Company, KenGen (three projects), and the Lake Turkana Wind Power Project.

The latter recently received a grant from a facility run by United Nations Environment Programme, Standard Bank, and the German government.

“African governments must promote awareness and train investors on the issues surrounding carbon trade which is a complex process,” said Mr Peter Oduol, the CEO of Bioearth Services.

“This way, the dollars will begin trickling in,” he said.

Carbon financing experts say companies should design projects that can stand on their own as businesses and seek earnings from carbon market as an extra income.

“We are not getting enough projects in Kenya. People are aware, but the proposals they present are poorly done,” said Tom Owino, of JP Morgan Climate Care, which helps corporate and non-profit organisations earn from the carbon market.

Proposals that are coming from Kenyan companies are requests for money to finance the intended projects with owners hoping to raise all the project money from the organisation which will buy the emission reductions.

This is not supposed to be the case, Mr Owino said, because the serious project proposals must have part or all of the financing requirements.

The proposal must also be accompanied by a good business plan that can raise the appetite of banks to finance the project.

Banks in Kenya are yet to start active financing of carbon trading projects partly because of lack of skills needed to evaluate risks of financing such projects.

The global carbon market involves sale of what are known as Carbon Emission Reduction (CER) units, with one unit being made up of one tonne of carbon dioxide that a project has succeeded in preventing from being released into the atmosphere.

One CER costs $10 or Sh760 based on Wednesday’s exchange rate. But this price changes depending on the players involved.