Africa should do more to attract Low-carbon Investments

 

Although sub-Sahara Africa is responsible for only 2 percent of global GHG emissions it should not loose out on the sustainable development market. "Only about two percent of the entire CDM projects worldwide are in Africa which is unacceptably low in contrast to 45 percent located in China, 16 percent in India and 13 percent in Chile," head of Nigeria-based International Centre for Energy, Environment and Development Ewah Otu Eleri said recently. To date Africa has just 53 of 3,902 projects worldwide -- just 1.4 percent of the total, and nine times smaller than its share of global carbon dioxide emissions, according to a World Bank study released in Dakar on Wednesday September 3 2008.

Critics have argued that Africa gets a small fraction of the CDM intervention because it offers smaller emissions reduction potential compared to Asia and Latin America. i.e., countries with higher economic growth also attract more investment.

That the CDM benefits the great emerging economies of China and India, among others, more than Africa because of their fast rate of development and stable conditions for investment.

 Africa must grasp funds generated by carbon credit trading to pay for cleaner low carbon energy and help fight climate change that threatens to undo years of economic development, Yvo de Boer, the UN climate chief said on Wednesday. Speaking at the first pan-African carbon-trading forum designed in part to match specialist investors with low-emission projects in Africa, de Boer added "If you look at the potential impacts of climate change those are likely to undo many of the investments that have been made to eradicate poverty, so I think dealing with climate change is an economic imperative,"

 Experts see a market for carbon dioxide allowances and emission reduction credits eventually developing into the world's largest commodities exchange, rivalling oil trading.

The Energy Debate

With the ever-escalating price of energy in Kenya, contrasting views have emerged prompting differing proposals. While the government seems bent on letting the market set the price of fuel, captains of industries under the auspices of the Kenya Private Sector Alliance (KEPSA) wants the government to reign in on the cost of electricity through price controls and or subsidy. But this is not where the problem lies however. KEPSA has intimated that some of its members are considering or are in the process of relocating to countries where electricity prices are more affordable.

The government has not responded directly (at least not publicly) to the 'threat' issued by KEPSA, which seems to suggest that it is probably serious about its market friendly position. Meanwhile, a National Energy Conference (NEC) is scheduled to begin in Nairobi this week from 7-10 October 2008. The 2008 National Energy Conference aims to provide an insight into pricing issues impacting development of competitive energy markets, among other topics.

The position taken by the government to let the market reign supreme is perilous from several perspectives. One, fuel and energy are major inputs in the process of production and transportation and any significant rise in the cost of these two means higher inflation. Higher inflation and decline in consumer demand will result in a slowing down of the economy. Given the crisis that followed the 2007 Elections, the last thing that the Kenyan economy requires is another shot in the foot.

 

Two, higher and rising prices of locally manufactured goods and services will reduce our regional competitiveness with the attendant risk of losing to our competitors in the region the lucrative East African Community (EAC) and Common Market for Eastern and Southern Africa (COMESA). Three, with food prices already beyond the reach of many households and a looming national food shortage (with famine having been declared in parts of the country), there is a danger of major social and political unrest breaking out unless urgent action is taken to remedy the situation.

 On the other hand, the position taken by KEPSA members is surprising given trends in other countries where the high cost of energy has inspired investments in energy efficiency (EE) and energy technology (ET). Given Kenya's higher energy cost relative to its competitors, shouldn't more be done to promote EE? This is the crux of the matter and where vision and leadership is mostly required. Many things need to happen at the legislative, policy, research, design and development (RD&D) and financing levels if Kenya is to become energy efficient. Certainly one hopes that going into the NEC some of these issues will be discussed and clear positions taken with regard to each.

A growing economy and expanding industry and manufacturing sector will demand more energy in the future. Vision 2030 acknowledges that Kenya must generate more (sic cleaner) energy at a lower cost and increased efficiency in energy consumption. There is need for substantial amount of investments to deploy Best Available Technologies (BATs) as cost effective emission and energy reduction options.