Poorest nations see little low-carbon investment money

Lisa FriedmanbrA Kyoto Protocol program that tries to bring clean energy projects to developing nations has reached less than 1 percent of the world's poorest countries, a ClimateWire review has found.brOf the 1,146 projects under way across the globe, only 10 are in what the United Nations labels least developed countries that suffer from the most extreme poverty and weakest economies and that often are mired in political and social instability.brExperts say the result is that the countries most vulnerable to climate change - and which have the most to gain from renewable energy - are left out of the sustainable development market. That, many argue, undermines the U.N. Framework Convention on Climate Change's goal of delivering clean technology and opportunities for poverty reduction.brIt's supposed to be about helping those most affected, but because of the way it's structured, it's not fundamentally about clean development, said Janet Redman, a sustainable energy researcher at the Institute for Policy Studies.brUnder the Kyoto Protocol, regulated entities in countries committed to reducing greenhouse gas emissions can fulfill part of their obligations by creating clean energy projects in developing countries. The emissions that are reduced count as carbon credits that can be used to offset a company's or country's own obligations. Known as Clean Development Mechanism, or CDM, projects, they range from a wind power plant in Egypt to a small hydroelectric plant in Korea.brIndia and China are the biggest winnersbrIndia holds the title for hosting the most CDM projects, with 356 currently registered. It is followed closely by China, with 256, and Brazil, with 144. Hundreds more projects in each of those countries are awaiting approval.brMeanwhile, the world's least developed nations are struggling to attract low-carbon investment. Of the approximately 30 poorest countries that are party to the Kyoto Protocol and eligible to host CDM projects, only five have done so. They are Bangladesh, Bhutan, Cambodia, Nepal and Uganda.brThere has been a concern for the last number of years within the [United Nations] that the least developed countries are losing market share or never even got off the ground in CDM projects, said Doug Russell, managing director of Natsource, a leading emissions and renewable asset manager.brThe reasons, he and other carbon experts said, lie in basic foreign investment strategy. The CDM is a market mechanism, and investors want to put their money into countries with thriving private sectors, strong contract laws and a sizable pool of skilled labor. Rampant government corruption and political or social instability scare off CDM investors, like any others.brThe CDM is not different from any other investment. In principle, the investment is exactly the same, said Milo Sjardin, head of New Carbon Finance North America.brAt the same time, many entities go for the cheapest emissions reduction opportunity, which usually leads them to countries like China and India that already are large emitters of greenhouse gases. Applying for a CDM project can cost as much as $50,000, and companies look for big projects that will make the up-front investment worthwhile.brBut the world's poorest countries create just a fraction of global emissions, with all of sub-Saharan Africa responsible for only 2 percent.brLeast developed countries are not big emitters. India, China and Brazil have a lot to sell, said Saleem Huq, head of the climate change group at the International Institute for Environment and Development and an author of the Intergovernmental Panel on Climate Change's third assessment report.brAt the end of the day, it's still a market, noted Russell. You still have to have some profit involved in these things to make it go through. That's what makes it work.brThe promise of profits and cadres of skilled experts countbrNoting that the very poorest nations also lack the armies of CDM consultants and other experts that India and other countries have cultivated, Huq said poor countries also suffer from a lack of experience that makes it difficult for the countries to replicate projects and build on their successes.brThey are all sort of hobbling and not being successful at accessing the CDM market, he said.brOne country that has had broken out of the mold and started to attract CDM investment is Bangladesh, where two green energy projects are currently under way. One of them, Grameen Shakti - a subsidiary of 2006 Nobel Peace Prize winner Muhammad Yunus' microlending bank - extends credit to families to install solar home systems and improved cooking stoves.brThe organization has been financing the low-cost renewable energy products since 1996, but recently signed off on a deal to offset the approximately 375 kilograms of CO2 reduced each year and sell the credits to the European market. All of the money, a Grameen Shakti spokeswoman said, will be rolled back into the expansion of the organization.brThese days, the program powers more than 160,000 homes in Bangladesh with a device that includes a photovoltaic panel converting sunlight into electricity, a battery to store the electricity, a charger and installation kits. Meanwhile, the biogas plant uses poultry waste and cow dung to produce gas for cooking or power generation.brApril Allderdice, an adviser to Grameen Shakti and president of MicroEnergy Credits in Seattle, said the influx of renewable energy in a country where 70 percent of the population has no access to grid electricity has been stunning. For the first time in some people's lives, she said, they are able to work in the evening by decent light and children can continue to study once the sun goes down.brKerosene lighting and stoves that cause chronic respiratory conditions - one of the leading causes of death in poor countries - are slowly being phased out. And in a majority of cases, she said, when the government ultimately brings electricity to a village, those with solar home systems opt to keep it.brSolar power shines in Bangladesh, an exceptionbrIt's completely transformative, Allderdice said. She argued that CDM projects, because they are market-driven, create more lasting changes to energy consumption in poor countries than simple grants or charity work. CDMs, she said, enable a sustainable market-based approach to rolling out clean energy as opposed to dirty.brStill, she and others acknowledged, the experience of Grameen Shakti is not the norm. The vast majority of poverty-stricken countries are still grappling with how to attract investment and with confusion over how to shepherd a project through the system once a company expresses interest.brThe U.N. secretariat overseeing potential CDM projects in Yemen - where no such projects currently exist - wrote in a recent report that many developing countries find it difficult to digest the complex rules and to maneuver within the regulatory framework of the CDM rules.brIn Yemen, according to the report, the per capita gross national income is $760 (compared to $12,510 in Saudi Arabia and $23,900 in the United Arab Emirates). brInflation has hovered around 12 percent since 2002, and the country's gross domestic product growth rate has dropped steadily. Its economy is driven by oil exports, and its energy use relies heavily on fossil fuels.brRelatively little emphasis has been given to effectively access the CDM and to realize the full potential development benefits of Yemen as a host country, the authors wrote. Attracting foreign investors has shown to [have] been an almost unattainable task.brAfrica attracts some help and could get morebrIn 2006, then U.N. Secretary-General Kofi Annan launched the Nairobi Framework, aimed at spreading CDMs to more countries, and particularly to Africa. Groups have worked to help promote investment opportunities, share information about creating CDM projects and build governments' capacity to work with investors, with an eye toward helping the poorest nations.brA meeting Sept. 3-5 in Senegal will work to spotlight the issue once again. U.N. Framework Convention on Climate Change Executive Secretary Yvo de Boer is expected to deliver a keynote address.brDaniele Violetti, a UNFCCC official who works on CDM projects, noted that African countries increasingly are hosting the low-carbon projects. brAnd a review of pipeline projects does show 13 pending in least developed countries, including two hydropower stations in Bhutan, a jatropha plantation in Mali and a landfill methane recovery project in Senegal.brThey need experience, they need support, but this is coming, Violetti said of poor countries. New countries are coming along.brOthers note that with agriculture comprising the majority of emissions in many poor countries, the possibility of linking avoided deforestation projects to the carbon markets could open up more opportunities for sub-Saharan Africa and others.brEarth News