Department for Environment, Food and Rural Affairs
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Springboard initiative for the carbon market in Africa
A ground breaking scheme to boost sustainable development and carbon market investment in Africa has today been announced at the UN Climate Conference in Bali by UK Environment Secretary Hilary Benn today.
The African Springboard - a partnership between the UK Government and major UK-based financial firms - will be a for-profit company to develop Clean Development Mechanism (CDM) projects in sub-Saharan African countries that have so far benefited little from carbon market investment.
The Springboard will focus on projects that suit local conditions, maximising the value from the carbon market to host countries and communities, and is expected to generate $2 million in CDM investment in its first year.
The CDM permits industrialised countries, which have emission targets under the Kyoto Protocol, to invest in sustainable development projects in developing countries that reduce greenhouse gas emissions, and thereby generate tradable emission credits.
The UK has pledged an initial $200,000 (£100,000) in start up
costs as well as in-kind support and local liaison help to the
Springboard, which will initially focus on sub-Saharan countries
that have no CDM projects yet. The Springboard partners will
decide on three initial target countries early in the new
year.
The UK is a leading participant in the CDM and supports
CDM projects as a vital symbol of global commitment. UK companies
are now the largest investors in the programme. However, the
scheme has not delivered in Africa which is why action is needed.
African projects currently represent only 2.6 per cent of all
registered CDM projects.
There are significant barriers to CDM
projects in Africa which include an absence of capacity to
undertake projects and a lack of local capital and private sector
engagement, as well as investment and institutional barriers.
Ministers at the Bali talks are expected to abolish the payment of registration fees and shares of the proceeds from CDM project activities hosted in least developed countries on Friday. This is intended to encourage confidence in CDM investment in Africa and other areas.
Hilary Benn said:
"Action from the City and the broader financial sector is crucial to developing the carbon market in Africa. To be effective, we need to find a way to make CDM projects in Africa as attractive as those in Asia and Latin America.
"These leaders in the London carbon market are experts - making them the best people to find and undertake the projects that will work. That's good for the City, and good for the people in Africa who will benefit from their technical expertise.
"By establishing this as a profit-making company, we're ensuring that there will be the right financial incentives for success - so that others can follow what the Springboard achieves.
"This effort needs to link with the other good work that's being done by development banks, environment departments, NGOs and others, including strong links with the Nairobi Framework partners."
The Springboard will help to establish the Clean Development
Mechanism in these countries by establishing CDM projects, and
will:
* Allocate the projects to buyers through a fair,
transparent allocation process that maximises the returns to the
community hosting the project.
* Work alongside Government and
other agencies to establish and resource a Designated National
Authority (which approves projects) in host countries;
* Help
to establish CDM methodologies that are applicable and appropriate
to local circumstances; and
* Providing demonstration projects
including bringing projects to the project registration stage.
The Springboard will initially be subsidised due to the difficulty and additional cost of developing projects in sub-Saharan Africa, but is expected to break even within three years.
It will be locally-based, with a secretariat in an African country to be established in January 2008, and initially will have local representatives in three countries, with all to be in place by the middle of next year.
Participating organisations have agreed that the African Springboard will complement existing programmes and initiatives by governments and others. The Springboard will charge a mixture of up-front fees and commission for developing the projects, with partners excluding Defra receiving equity in proportion to their share of the overall amount contributed.
The UK Government believes learning by doing will show that investment in Africa can deliver both profits and sustainable development in Africa, and will form part of the UK's contribution to the Nairobi Framework launched last year.
The founding contributors are Defra, Agrinergy, Barclays, Carbon Capital Markets, Climate Change Capital, JP Morgan Chase, Norton Rose, Rabobank, Shell Foundation and Standard Bank.
Commenting on the Springboard Initiative, Mark Woodall, CEO, Climate Change Capital said:
"As the carbon market develops, so does our collective responsibility to ensure the benefits are increasingly visible worldwide. We want to demonstrate that transforming the global economy will bring new, sustainable investment opportunities to Africa while protecting the global atmosphere."
"It's important for us to be involved in a public-private initiative to boost CDM activity in sub-Saharan Africa" said Geoff Sinclair from Standard Bank, Africa's largest bank.
"The Springboard will be practical, commercial and will make sure local communities benefit from their Projects. It's a hand up, not a hand out, so it has real potential to achieve concrete results."
Notes to editors
1. The African Springboard Initiative is not related to the Shell Springboard.
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