Carbon trading, the clean development mechanism and the perceived benefits for South Africa
Date
2008-05-20T06:52:15Z
Authors
Du Toit, Anne
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Abstract
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.
Description
Keywords
carbon trading, clean development mechanism