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African CDM Market
Frost & Sullivan, Dec 2009, Pages: 101
The clean development mechanism (CDM) has become one of the most important elements of the Kyoto Protocol. In 2008, the value of the global carbon market was estimated at approximately $118 billion. It is estimate that transaction volume for carbon dioxide emissions allowances reached 4.0 billion tons for the same year. This illustrates the vigour of the CDM market worldwide, having contributed to developing a new and global market for GHG emission reduction projects. Africa is likely to intensify its focus on this significant source of revenues as it is one of the most vulnerable regions to the adverse effects of climate change. This study intends to quantify the opportunities created by the CDM in Africa.
Research Overview
This Frost & Sullivan research service titled African CDM Market provides market size and growth rates, market drivers and restraints and strategic recommendations for the clean development mechanism (CDM) markets. The research service identifies key listed projects and potential growth markets. In this research, Frost & Sullivan's expert analysts thoroughly examine the following end-user markets: chemicals, renewable energy, energy efficiency, landfill gas, waste handling and disposal, manufacturing, reforestation and others.
Market Overview
The African CDM Market Trails the Global Market, but many Promising Projects Expected to Propel it into the Big League
The tremendous potential of the African CDM market is currently reined in by the global uncertainty regarding potential developments post Copenhagen. Africa has abundant resources to develop the CDM market, often at relatively low costs. The rising global awareness about sustainable development is going a long way in establishing and supporting projects that cause minimal damage to the environment. The recent feed-in tariffs in South Africa are likely to offset the additional investment in coal-fired base stations. However, there is some uncertainty regarding the future mechanisms for carbon finance. “In 2008, the carbon market was valued at $118 billion, which represented a robust increase of 84.0 per cent in the total value of greenhouse gas (GHG) emission reductions traded in 2007,” says the analyst of this research. “Africa can capitalise on this as, under the United Nations’ CDM, developed countries are allowed to offset some of their GHG emissions by funding cleaner energy projects in developing countries.”
Although most potential CDM projects, especially renewable energy (RE), remain undeveloped in Africa, sustainable development could help many new projects to qualify for CDM credits. Many countries are increasingly realising the benefits of diversifying their energy mix or reducing waste. Hence, CDM projects are likely to multiply over the next two years despite the long CDM process and all the administrative hurdles. The governments must take steps to co-ordinate and simplify the approach to CDM management to stimulate private investments because private financiers tend to be sceptical about the role CDM can play in making marginal projects feasible. This apprehension is causing a delay in the flow of funds, which, in turn, limits utilities’ ability to expand supply. Recently, the International Monetary Fund (IMF) indicated that the sub-Saharan African region would have to invest about 3.0 per cent of its gross domestic product (GDP) in the power sector to redress its chronic power shortages.
Despite the considerable financial challenges, many projects still hold value. “Companies are gradually realizing that they need to become more sustainable and hence, are changing their wasteful practices and often benefiting from this as a result of CDM,” notes the analyst. “The chemicals sector in South Africa is a fine example of this with a number of projects in this space qualifying for CDM.”
Market Sectors
Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:
- Chemicals
- Renewable energy
- Energy efficiency
- Landfill gas
- Waste handling and disposal
- Manufacturing
- Reforestation
- Others
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