Thu Mar 24, 2011 4:04pm GMT
By Beatrice Gachenge
NAIROBI (Reuters) - Kenya opened Africa's first climate exchange platform on Thursday, expected to unlock trade in carbon credits on the continent and benefit small scale projects.
Carbon markets are intended to cut the cost of fighting climate change by giving companies the flexibility either to reduce their own greenhouse gases or buy emissions permits.
The Africa Carbon Exchange in east Africa's biggest economy will provide holders of carbon credits with easier access to global markets and information, which in turn is expected to increase foreign investor interest in the region.
"The exchange will pull a lot of foreign direct investments through development of more carbon projects. We will start with a futures market in May and progress to spot once more projects are registered," said Tsuma Charo, chief executive officer at Africa Carbon Exchange (ACX).
Kenya has 17 projects awaiting registration by the executive board of the CDM, while three have already received approval, Charo said.
"In the next five years, Kenya will have attracted about $1 billion in foreign direct investments worth of business in the energy sector alone," he told Reuters.
Schemes, like those under the U.N. Kyoto Protocol's Clean Development Mechanism (CDM), promote investments in emission-reducing projects in the developing world by companies and governments in rich nations.
In return for building wind farms or other projects, such investments can earn valuable carbon offsets called certified emission reductions (CERs) that can be sold for profit or used to meet mandatory targets to cut emissions.
INTEREST FROM OTHER COUNTRIES
ACX said it had received several enquiries from other African countries interested in trading their credits.
"We have received very strong interest from Uganda, Zambia, Rwanda and after the launch we expect more African interest," John Kihumba, chairman of ACX, told a news conference during the exchange's launch.
GreenNext Sustainability Ltd, a Kenyan environmental management consulting firm, has been selling credits to international buyers who have access to global markets, but had to contend with low earnings due to high transactional costs.
"They dictated prices and take off their commissions which means the prices we got for our clients are not as good," said James Mwangi, managing director at GreenNext.
"With a local exchange we can probably try and influence the prices because the transactional costs are lower."
Mwangi said small scale climate projects would be the main beneficiaries of a local climate exchange platform, since they would have access to the market, previously a hard task.
Mwangi, who previously traded at most three projects in a quarter said the exchange would attract more players and was projected to at least trade one project per month.