Our Planet
Boost for renewable energy sources
In the battle against climate change, it is paradoxically the developing countries, with the exception of oil producers, with a comparative advantage. Their economies, albeit precarious, are not overly dependent on fossil fuels, the main culprit of the acceleration of global warming. This is the perfect opportunity to develop renewable energy sources. But there are still a large number of obstacles to their development, not least money, which is the key to the battle. Going part of the way, the European Commission has proposed a world venture capital fund dedicated to renewables. The first beneficiaries, in 2007, will be ACP countries.
Berni Searle, Half Light, 2004 Lambda print, 238 x 120 cm.
Credit Michael Stevenson Gallery (Cape Town) and artist.
Investing in ‘clean’ technologies
Global warming is not only a concern of wealthy countries. The latest ministerial meeting of the International Convention on Climate Change, held last November, brought this out. It’s no coincidence that this 12th United Nations (UN) Conference was held in Africa for the first time. Africa has largely been ignored in discussions, up to now monopolised by skirmishes between industrialised countries which went over and over figures to find out how greenhouse gas emissions could be cut with the least cost. This time Africa was able to make its voice heard. The Nairobi conference discussed arrangements to be put in place after the initial period of measures under the Kyoto Protocol end in 2012. The larger, still unresolved issue was to decide whether developing countries should be included in a regime that relies mainly on so-called ‘flexible’ market mechanisms to stabilise emissions, including carbon emissions trading.
Another mechanism is the only one of interest to developing countries to date: the Clean Development Mechanism (CDM). This enables investors in the North to earn emission credits by financing ‘clean’ systems in the countries of the South. In Nairobi, Kivutha Kibwana, Kenyan Minister of the Environment, presiding the Climate Conference, issued an appeal for the 160 participating countries to back such projects.
Africa is in a different situation to Asia, where the energy requirements of the likes of China or India run the risk of eclipsing the limited efforts made by the industrialised countries of the old continent. Kivutha Kibwana underlined the difference: “We need a fair system that stabilises emissions while allowing sustainable development of our economies”, he said. This was enough to silence those still fiddling with their calculators in the Kenyan capital. A United Nations report, published early November, emphasised the “more serious than forecast” soil deterioration in Africa.
While soil erosion is mainly due to large-scale deforestation, agricultural practices and inappropriate water management, it could worsen in extreme situations – major droughts or floods – caused by climate change. “Climate change has become one of the most serious threats facing humanity, endangering the development of billions of the poorest people on the planet”, said Kivutha Kibwana in Nairobi.
The ‘Nairobi Framework’
Attacking the many causes of erosion and the deterioration of ecosystems is a long-term undertaking. Meanwhile, participants in the ministerial meeting of the Climate Convention dealt with what was most urgent first. Taking the lead from then-UN Secretary General, Kofi Annan, a new mechanism was launched – the ‘Nairobi Framework’ – intended to help developing countries, particularly African countries, to set up public and private partnerships supporting “clean development projects”.
These partnerships could draw on the Adaptation Fund under the Climate Convention to help the most vulnerable countries cope with the unfavourable effects of climate change – a fund Nairobi participants finally agreed to pay into.
The European Commission put its contribution on the table: a €100 million Global Energy Efficiency and Renewable Energy Fund (Geeref). “This fund”, said European Commissioner for the Environment, Stavros Dimas, “should enable a fair distribution of the CDM projects, offering venture capital to small-scale sustainable energy projects in developing countries and accelerating the transfer of clean technologies”. The Commission initially foresees annual contributions of €80 million for the next four years, relying on other public and private sources to inflate the amount up to at least €100 million.
The fund should enable investment projects to be financed to the tune of almost a billion Euros. In reality, the fund has already attracted €112 million – the Italian and German governments making commitments in Nairobi to contribute €8 million and €24 million, respectively.
The first beneficiaries of this mechanism which aims to help developing countries and those with economies in transition, will be ACP countries earmarked to receive €15 million venture capital in 2007. The ethical bank, Triodos International Fund Management, in association with E+Co, will have the task of setting-up of the fund, working with the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD).
Energy sources lack capital
Although proving to be a real success (at least in some industrialised countries), projects to promote energy efficiency and renewable energy sources find it hard to attract commercial capital. The problems arising, says the Commission, are complex and mostly to do with a lack of venture capital, which is a major guarantee for lenders. The venture capital requirement of developing countries and economies in transition is put at over €9 billion, way above current levels. It is vital to mobilise funds from the private sector, says the Commission. Geeref’s aim is to help to overcome such obstacles by offering new possibilities for sharing the risks and co-financing to encourage commercial investment from home and abroad. Rather than financing projects directly, Geeref will stimulate the setting up of regional sub-funds which specifically respond to regional conditions and needs. These sub-funds are planned for the ACP region, North Africa, the countries of Eastern Europe that are not members of the EU, Latin America and Asia. The emphasis will be placed on investments of amounts under €10 million, which are often shunned by commercial investors and international financial institutions. Commercial loans will be used to help small and medium-sized businesses and finance various projects. If the amounts invested were to reach the billion planned by the Commission, they would enable environment-friendly energy production capacity of nearly 1 gigawatt to be put on the market of third countries, enough to supply sustainable energy to between 1 and 3 million individuals, eliminating between 1 and 2 million tonnes of CO2 per year.
A record budget allocation for energy
Access to energy is one of the main priorities of the EU. In June 2005, the ACP-EU Council gave the go-ahead for the creation of an ACP-EU energy organisation. With a budget of €220 million, it is intended to underwrite the co-financing of a series of energy projects aimed at the poorest populations of the ACP countries, through public-private partnerships. As a priority, the organisation will fund energy infrastructure projects (60% of the budget), the rest being split equally between projects aimed at improving the access of rural populations to up-to-date energy services and modernisation of cross-border power grids. Following a call for proposals in July 2006, 91 tenders were pre-selected. The list of the projects selected will be published during the summer of 2007.
