Finance for projects in Africa that reduce carbon dioxide emissions as part of international agreements such as the Clean Development Mechanism (CDM) has been hampered by a number of institutional and financial barriers. Despite the rapid growth of a global carbon market, small-scale CDM projects in Sub-Saharan Africa are still being bypassed by commercial investors due to significantly higher transaction costs and risks, and the lack of appropriate policies. Because many countries also lack access to credit and investment in the energy, industrial and waste sectors, even the most attractive, low-cost projects to reduce carbon emissions encounter significant finance barriers.
The Carbon Finance for Sustainable Energy Services in Africa (CF-SEA) Programme is a unique and novel partnership to overcome these barriers. From 2005-2007, the Programme helped the five Sub-Saharan countries of Mali, Cameroon, Zambia, Mozambique, and Ghana participate in the booming carbon Market through projects with significant development benefits to local communities.
CF SEA is ambitious in several ways. Rather than focus on the most advanced economies in Africa, the project centers on some of the least developed countries on the Continent. In addition, the project focuses on CDM projects with a high degree of local community development benefits.
The project demonstrates the power of a "learning by doing" approach through international and regional experts working with key stakeholders to identify and develop carbon finance opportunities. A series of 3-4 national workshops in each country is coupled with hands-on training to constitute a core curriculum for building local capacity to assess and implement these project opportunities. These targeted local project sponsors in particular, but also nascent DNAs, relevant line ministries, local banks, technical consultants, and industry associations.
CF SEA was one of the first initiatives to demonstrate the workability of a "performance based" approach to developing more bankable PINs. As a result, a large pipeline of 39 CDM PINs was created through the project. A wide range of sectors were covered in the portfolio, including biomass power, hydropower, wind power, methane recovery, energy efficiency, biofuels, and fuel switching; most notably, two CF SEA projects achieved CDM validation in Mali and Mozambique. A number of these projects have been included in the World Bank’s carbon finance project portfolio. Others will be offered "to the market" for further development. The project also co-financed the African Bankers’ Carbon Finance Investment Forum, with the aim of bringing other African commercial banks into the market and showcasing a number of projects developed through the program for financing.
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