Africa has generally been slow in taking up the advantage that the continent has for carbon credit trading. However, in South Africa a number of agribusiness and chemical industry-related projects have applied to the Designated National Authority (DNA) for evaluation and approval – the first step on a lengthy road to reap benefit from the so-called Clean Development Mechanism (CDM). Businesses throughout Africa should investigate taking advantage of the systems via the governments of their countries (see www.apo-tokyo.org/gp/51_6biogasmain.htm ).
Among the project which have been applied for in South Africa are a manure-to-energy project (by a piggery); a nitrous oxide reduction project (by a fertiliser company); and a wood-based biomass project (by forestry company). See page 8.
The CDM is part of the Kyoto Protocol, which allows industrialised countries with emission-reduction commitments to meet part of their commitments by investing in projects in developing countries that reduce greenhouse gas emissions while contributing to the local sustainable development needs of the host country.
To allow CDM projects to occur, host countries designate national authorities (DNAs) to evaluate and approve the operation of projects in their countries. South Africa's DNA falls under its Department of Minerals and Energy. It was established in 2004 and has so far approved over 50 projects nationally, though only 14 have achieved the approval of the CDM Board in Bonn, Germany. Registration with the international body is essential before tradeable Certified Emission Reductions (CERs, more colloquially known as ''carbon credits'') are issued.
The main task of the DNA is to assess potential CDM projects to determine whether they will assist the country in achieving its sustainable development goals, and to issue formal host-country approval when this is the case.
In South Africa, a project developer or owner has two points of entry into the process:
- Voluntary screening. This is done via the submission of a brief Project Identification Note (PIN) and application form to the DNA. This stage is voluntary, but provides the DNA with an opportunity to carry out an initial screening of the project and provide feedback to the developer on the likely performance of the project against approval criteria.
- Mandatory submission. All projects require the submission of a more detailed description of the project via a Project Development Document (PDD) and application form, before gaining a letter of approval from the DNA. The PDD has to detail the exact methodology the project will follow to reduce emissions.
The DNA posts the submitted PDD on its website for public consultation for a period of 30 days. PDD documents are also made available to any interested parties on request.
The DNA will then evaluate the project. It may ask for supplementary information.
The DNA sends its recommendation and comments to its advisory committee for consideration. Based on comments from the committee, the DNA makes its final decision on the approval of the project. If successful, the developer will be given a letter of approval.
Project approval by the host country is one of the pre-requisites of international registration of a potential CDM project with the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol.
The assessment of compliance of the project with other eligibility criteria and general rules of the CDM is not carried out by the host country's DNA. It is done by Designated Operational Entities (DOEs), which are basically auditors. The latter are also responsible for carbon credit audits (against the PDD methodology), which are done once the project has been up and running for a while. There are currently no DOEs in Africa; most are in Europe.
The entire process of application can take 8-24 months.
The price of CERs, as traded on world markets, has generally been in a range of of E5-E8/t ($7.14-$11.50/t) of carbon dioxide-equivalent. Over 90% of transactions from 2005 through the last quarter of 2006 fell within this range. However, there are reports of recent sales of E14/t ($20).
Fourteen projects from entities in SA have been approved by the global CDM Board. These include the Kuyasa low-cost housing energy-efficient project in Cape Town, the Durban landfill-to-energy project, the PetroSA biogas-to-energy project in Mossel Bay, the Omnia nitrous oxide destruction project in Sasolburg, the Mondi biomass project in Richards Bay, and the EnviroServe Choorkop landfill gas project on the East Rand,Gauteng.
Agribusiness projects which are most likely to qualify as CDM projects involve the use of forest and agricultural wastes to generate electricity and heat, according to Johan Posthumus of Promethium, a company that offers a turnkey service to project owners.
This is borne out by recently proposed and implemented projects:
- Humphreys Boerdery (agricultural estate) of Bela-Bela, Limpopo province, has proposed the reduction of methane emissions produced from the waste products from a piggery through the construction of a new, covered in-ground anaerobic reactor that will utilise the organic material currently treated in wastewater ponds.
- Kanhym Farms of Middleburg, Mpumalanga, proposes a project which entails energy generation from methane emanating from piggery farm manure. It comprises three stages, from collection of piggery waste in an integrated sewer system, into an anaerobic container, to collection and flaring and/or converting of methane into electricity that would be used on the farm.
- Mondi's biomass project in Richards Bay consists of the collection of biomass waste such as wood fines, chips and offcuts which were previously landfilled, and plantation waste previously left to decay. This is then used as an energy source, replacing coal in co-fired steam boilers. The project will result in a reduction of an estimated 239,000t/year of carbon dioxide. At the lowest price for carbon credits (E5), see page 6, this project would therefore earn E1.2m ($1.7m) for the company; but at the highest price (E14), it would earn E3.5m ($5m).
CERs can also be sold forward or discounted before a project is actually erected. They can therefore contribute, for instance, to financing the project.
The Kyoto Protocol's emission targets expire in 2012. This may influence the way CDM projects are run in the future, and the price of CERs. So far the EU has demonstrated commitment to the process through the introduction of EUETS (EU Emission Trading System) to facilitate ongoing trading after 2012 (these will ensure that there are still buyers for carbon credits, at least from Europe, after 2012).
South Africa’s DNA: +27-12-317-8227 or +27-12-317 8309 ; website: http://www.dme.gov.za/dna
Posthumus: +27-11-463-6142; email@example.com