Carbon trading, the clean development mechanism and the perceived benefits for South Africa

Du Toit, Anne
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The Kyoto Protocol allows for the development of an international emissions-trading system. This led to the formulation of various mechanisms, namely Joint Implementation (JI), the Clean Development Mechanism (CDM) and Emissionstrading (ET). Given the potential emission-reduction targets in 2012 for developing countries, and in particular for South Africa, the objective of this study is identifying the current implementation of the CDM project cycle steps, as well as assessing the appropriateness of them. Constraints, bottlenecks and opportunities, are identified and suggestions for improvement are made, in order to improve the body of scientific knowledge. From the literature survey, and from discussions with experts in the field, it appears as if the benefits and issues identified, corroborate international findings. Benefits for countries hosting CDM projects include improved balance of payment, technology transfer and replacement of inefficient technology. Commonly occurring concerns, are that baseline setting, additionality and the entire CDM project cycle is complex. Resource and time constraints could jeopardize projects. Transaction costs have been prohibitive, further compounded by lack of initial upfront funding. Bureaucracy from the CDM executive board has frustrated attempts to implement projects. Lack of methodologies, as well as huge risk and cost in developing new methodologies have been obstacles for project developers, while clear guidelines on monitoring, governance and additionality have been conspicuously absent. Suggestions for improvement have been regular baseline revision and standard assessment procedures, application of the gold standard and an additionality tool. Issues that seem to be uniquely particular to South Africa are the slow adoption of large companies to accept the benefits of CDM, difficulty in convincing company executives to embark on CDM projects, as well as unwillingness to delegate authority to technical staff. Another notable pattern is a mismatch of opinion between scientists, academics and business. South Africa uniquely, produces 90% of its energy from fossil fuels, which could limit the adoption of CDM. Lack of institutional knowledge and experience is concerning, as well as ethics and little collaboration amongst stakeholders. Innovative suggestions for improvement have included a weighting for sustainable development indicators, benchmarks to simplify baselines, sink projects to be excluded owing to their risk, sellers clearing houses, industrial gases to be excluded, and programmatic CDM. Another important suggestion is that taxation of CDM credits should be abandoned, and the restrictive Public Finance Management Act to be improved. The proposed study has attempted to highlight some of these significant issues, with the view to improving the current knowledge and advance the possibility of alleviating some of these burdening issues.
carbon trading, clean development mechanism