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Shell, C-Quest team up on Nigeria CDM programme
Point Carbon
A CDM programme in Nigeria could deliver at least 2 million credits from 2012, but has needed hefty upfront financing to be viable.
The initiative was financed by US-based carbon finance firm C-Quest Capital through a loan by a charity part-funded by oil major Royal Dutch Shell, the firms said in a joint release on Wednesday.
The programme of activities, to operate under the Kyoto protocol’s clean development mechanism (CDM), aims to deploy 2 million efficient cookstoves across northern Nigeria over the next seven years.
It could eventually deliver 9 million carbon offsets by 2020, but only if a relatively high emissions factor is used and the programme is scaled up further, C-Quest Capital chief executive Ken Newcombe told Point Carbon News.
The stoves to be distributed could each generate 1-2 tonnes of carbon dioxide reductions a year, but a more detailed measurement of baseline emissions is needed, the firms involved said.
"It would have been very difficult to raise the money required for a programme in northern Nigeria without the loan from the Shell Foundation," Newcombe said, adding that repayment was linked to the issuance of CDM credits.
If for any reason the offsets expected to be generated from the project do not transpire, C-Quest won't have to pay the money back to the charity, Newcombe added.
"They have taken on a good deal of risk, and such risks usually make it difficult to finance CDM programmes.”
The initiative could start generating credits sometime next year, said Pradeep Pursnani, business director with the Shell Foundation.
“Once the first credits get issued we expect buyers to come in and sign offtake deals,” he told Point Carbon News.
Few buyers have been willing so far to sign binding deals on credits issued after 2012 due to uncertainty about the role of the CDM once Kyoto’s first commitment period expires at the end of next year.
But some developers are pushing ahead with plans to develop carbon-cutting initiatives in Africa, where projects registered after 2012 may attract premium prices for their offsets because they are more likely to be eligible under the EU’s emissions trading scheme from 2013.
Barriers
Today’s deal follows a $250 million public-private partnership launched last year by the US government which aims to remove barriers – such as challenges linked to accessing carbon finance – that currently prevent the sale of clean cookstoves in a number of developing countries.
Over three billion people in the developing world cook on open fires or inefficient stoves in poorly ventilated homes, contributing to climate change and prompting severe lung and respiratory illness in households, the programme developers said.
In the CDM, around 25 projects and 15 programmes currently in the pipeline aim to cut emissions through the introduction of efficient cookstoves, but have a combined pre-2012 mitigation potential of just 1.5 million tonnes of carbon dioxide equivalent.
Through CDM programmes, the potential to scale up emissions reductions could be much greater, but many developers have said they are unlikely to participate until the UN clarifies the rules.
By John McGarrity - jm@pointcarbon.com