Leveraging carbon revenue for poverty alleviation

Abstract

One of the intentions of the Kyoto Protocol and the Clean Development Mechanism (CDM) was to use markets to allow the developed countries to supplement their own greenhouse gas reduction efforts with carbon reductions made in developing countries by purchasing carbon offsets. By these means, it was hoped, global greenhouse gas emissions would be reduced and developing countries would benefit through incoming carbon revenue and technology transfer. This has worked for China and India, which together account for 88% of all CDM carbon credits issued so far, but it hasn’t worked for Africa which has only a miserly 1% of the issued credits. The main reasons for this disparity are thought to be the high transaction costs of the CDM and the long and complicated registration, validation, monitoring and verification processes. The costs are around R400 000 to R2 000 000 per project (CCWG, 2009) . In addition it can take up to three years to get carbon revenue, if the project is one of the lucky 13% of projects to make it through to the end (see Appendix A – CDM Pipeline analysis). Partly in response to these CDM shortcomings, the voluntary carbon market has emerged. The voluntary carbon market has many players using many different standards and rules and regulations. Unfortunately, the CDM-like standards used by the bigger voluntary carbon market registries also incur high transaction costs and long lead times and therefore don’t work for typical, small African poverty alleviation projects with low greenhouse gas emission reduction potential. This has encouraged the development of small, agile carbon registries using simplified standards, which better fit the African projects. One such small registry and one of its poverty alleviation projects are analysed in this paper.