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Credible Carbon Offsets For African Households by Dean Cooper


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Boiling Point
Front cover of Boiling Point issue 54
Issue 54 (2007) Climate change and household energy
ArticleCredible Carbon Offsets for African Households: The Need for "Carbon Plus" Investments
AuthorDean Cooper
Climate change mitigation and the development needs of Africa are two subjects that are currently attracting great international attention. But matching the two through existing carbon mechanisms is proving to be very difficult. Private sector carbon markets, as with other commercial operations, perceive too great an investment risk in Africa. For carbon, only large-scale projects are generally considered, often with significant doubts over their additionality. The great potential for carbon savings from households supplied with efficient and alternative energy systems is currently being overlooked. The global climate change impact of appropriate energy supplies for growing household energy demand in Africa, and the associated development benefits for local residents, are not part of the current framework. This suggests that a new approach is required.

[top] [end]Market Failure

The Stern Review identified anthropogenic climate change as, “The greatest market failure the world has seen” (Stern 2006). For countries in Africa, and other “non-Annex I” nations, the official mechanism established to help address this is CDM – the Clean Development Mechanism. But, of the 2424 projects in the CDM pipeline at the end of August 2007, less than 3% were hosted in Africa. Worse still, the type of carbon-saving activity that can be achieved by individual households is simply not on the radar screen for potential buyers of carbon credits – the transaction costs overwhelm any economic returns, even for projects that cover hundreds of dwellings.

Figure 1. Solar Water Heaters on farm workers housing (Photo: Parallax)
Figure 1. Solar Water Heaters on farm workers housing (Photo: Parallax)
One motivation for CDM is the expectation that the cost of carbon savings in non-Annex I countries will be less than the cost of generating the same level of savings in industrialised countries. On this basis, companies expect that it will be cheaper to invest in carbon-saving activities in Africa, rather than soon face a fine of €100/tonne per excess tonne of carbon dioxide emitted above their target. In fact, this may be the case for large-scale projects in the few developing countries that have an appropriate level of infrastructure. But the small number of CDM projects in Africa must raise a question over the feasibility of this process in poor countries. CDM is simply inappropriate to bring any carbon income to African households that take steps to reduce energy consumption or to use alternative, cleaner energy sources.

[top] [end]New Approach Required

This realisation has pushed increasing attention towards the voluntary market as the basis for carbon-saving investments in Africa. Voluntary carbon offsets certainly have much greater potential since many of the inhibiting transaction costs of CDM are avoided. The increasing awareness of climate change, and growing tendency towards ethical investments from individuals and businesses in the world’s “richer communities”, also suggests that voluntary contributions for appropriate carbon-saving activities in Africa have great potential. (Note that “rich communities” are not necessarily confined to the industrialised countries of the northern hemisphere since there are many examples of relatively “rich” centres in developing countries, including the countries of Africa)
Figure 2. Solar PV in use in a remote area of KwaZulu Natal (Photo: Parallax)
Figure 2. Solar PV in use in a remote area of KwaZulu Natal (Photo: Parallax)


The voluntary carbon market has expanded rapidly in the past five years with leaders such as HSBC Group, BP and the FIFA World Cup pursuing off-set schemes. At the same time individuals, motivated by moral persuasion, have begun off-setting the emissions associated with their flights, their motorcars and their houses. A large number of financial institutions and northern-hemisphere based companies have set up businesses as intermediaries to these transactions, linking investors with projects that reduce emissions.

However, recent surveys have found that many of these companies and their projects lack credibility; that is they do not make a significant contribution to greenhouse gas abatement. For example, “Industry caught in carbon smokescreen”, a Financial Times headline from last April (FT 2007) described an investigation that uncovered widespread failings in the new markets for greenhouse gases, suggesting some organisations are paying for emissions reductions that do not take place. Eric Carlson, executive director of Carbonfund has described the problem as “No definition of what a carbon offset is. It’s a little bit of a Wild West out there. Is this thing real? Is it good?” (GIES 2006).

Figure 3. LP Gas stored at the home of a rural distributor (Photo: Parallax)
Figure 3. LP Gas stored at the home of a rural distributor (Photo: Parallax)
Another growing concern for voluntary carbon markets aimed at investments in Africa is the limited supply of viable carbon-saving projects. This is due to an inequality of carbon economics that does not yet appear to be recognised. Reducing carbon in the developing world often requires additional investment in infrastructure that already exists in industrialised countries. On this basis, the cost of one tonne of “rich world” carbon is clearly less than the cost of one tonne of “credible carbon” offset in Africa. This means that the basis for CDM is inappropriate for carbon-saving projects in Africa, particularly at the household level. It also suggests that voluntary markets cannot expect that the finance provided to offset carbon emissions in the rich world will be translated directly into the same carbon savings in Africa.

A new mechanism is therefore required to facilitate credible carbon investments in Africa. Such investments must have a clear development focus, aiming to reduce or avoid carbon emissions in the longer term. The vast majority of such investments should be aimed at African households where woodfuel and paraffin/kerosene remain the most common energy sources. Increased efficiency of appliances and increased conversion to renewable energy sources would significantly reduce carbon emissions from households, as well as improving living conditions through better health and safety. Renewable energy systems for household electricity generation will also avoid increased future demand for grid connection to coal-fired (and hence carbon emitting) power stations.

[top] [end]Africa’s Carbon Investment Needs

What are the unnecessary constraints to investments in African households that are imposed by current carbon trading activity? Why is the development intention of the Clean Development Mechanism not being achieved in Africa?

A large part of the reason is because the cost of saving carbon in the “rich world” economy relates to improving existing operations in existing structures with existing supply chains and distribution networks. Energy efficiency can often be achieved through no-cost and low-cost measures. Alternative energy technologies are readily available and often subsidised by national programmes.

In Africa, there are a range of constraints to carbon investments, which are highlighted at the household level:
  • the structures must first be established before the carbon can be saved
  • people must be educated about the energy use implications, and advised of the alternatives
  • access of households to energy supplies must be addressed, in terms of both remote locations and affordability
  • financing mechanisms are required to enable the use of appropriate energy systems, so additional costs are incurred
  • most importantly, distribution channels to remote users are simply not in place and are not cost-effective for regular suppliers

Improving the rate of take-up of carbon investments in Africa is also undermined by global concerns over the viability of current carbon market mechanisms. Great attention is being given by rich world scholars to “post-2012 scenarios” for carbon investment mechanisms, where nothing is yet in place. Current rich world investors seem content to pay for their own carbon use, which somehow alleviates any further responsibility. Where this money is invested seems to be a secondary issue – but the lack of investment opportunities in Africa is starting to raise concern.

Alternative mechanisms must therefore be developed and implemented before the carbon savings in African households can be considered. This need for pre-investment, before changing the actual energy use to save carbon, inevitably means that carbon savings will cost more in Africa. Credible carbon investments are required to address this reality.

[top] [end]Public-Private Partnerships in Carbon

Figure 4. A solar cooker in use in the Vulamehlo region (Photo: Parallax)
Figure 4. A solar cooker in use in the Vulamehlo region (Photo: Parallax)
After acknowledging the cost inequality of carbon savings in Africa when compared to the Annex I countries, the concept of carbon neutrality is undermined. Private contributions, based on carbon market prices, from individuals or organisations will not immediately save in Africa the same amount of carbon that was emitted in Europe or America. However, a level of savings nearer to parity may be possible with some commitment from the public sector. Governments at national and local level have a responsibility to provide basic services such as clean energy supplies. The cost of this service provision can be reduced by carbon income.

Public authorities therefore have good motivation to commit funds to credible carbon investments since this will lead to them fulfilling their obligations for local households. By stating their intention to supplement any private sector contributions to credible carbon offsets, public authorities will attract further interest from private investors who see that their contribution will draw additional carbon-saving investment. This public-private partnership must be the foundation for any sustainable carbon income initiative aimed at African households.

[top] [end]The Need for Credible Carbon

Credible Carbon(TM) refers to contributions (made on the basis of “rich world” carbon use) that are invested to provide energy in Africa in a way that reduces or avoids carbon emissions and improves the quality of life for the local people involved. Most often it is African households that are the focus for this investment, since there is currently no other carbon mechanism available to consider their interests.

A Credible Carbon investor must accept that payment for the use of one tonne of “rich world” carbon will not immediately offset one tonne of carbon in Africa. But, when invested properly, this payment will bring development through access to appropriate energy sources that will avoid future carbon emissions.

Credible investment is therefore longer term. The value of rich world carbon offsets invested in Africa will not save an equivalent amount of carbon now, but may save a greater amount in the future. The immediate need is to invest in the structures that will enable this saving. And at the same time improve the living conditions and livelihoods of households in need. Credible Carbon investors realise and accept that payment of carbon offsets at global market rates will not achieve carbon neutrality when committed at the household level in Africa. Instead these contributions will enable realistic carbon savings from the development of sustainable clean energy projects. Credible Carbon offsets are used to invest in projects that are selected on the basis of local demand to meet local needs identified by local people.

[top] [end]Notes and References


[top] [end]Download the original article

pdf file link Credible Carbon Offsets for African Households: The Need for "Carbon Plus" Investments by Dean Cooper (632 KB)

[top] [end]Contents: Boiling Point 54 - Climate change and household energy

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Theme Editorial - Carbon finance for clean cooking – time to grasp the opportunity - BP54:Health and Greenhouse Gas Impacts in Africa - BP54:Carbon Finance for Healthy Kitchens - BP54:Critique of GHG stove assessment methods - BP54: Practical Action CO2 offsetting experience - BP54: Credible Carbon Offsets for African Households - BP54: GTZ News - BP54: Practical Action News - BP54: Marine conservation and energy efficient stoves - BP54: Can Carbon Finance Clean Cooking? - BP54: Rates of smoke emissions - BP54: A Polyethylene Dome for Biogas Plants - BP54: HEDON news





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