Carbon Markets for Developing Communities

Guest post by Evan A. Thomas, Manna Energy Limited, and Alison Hill, Vestergaard Frandsen

Climate change is expected to impact people in developing countries in significant ways, including dramatically changing water and energy availability. Robert Zoellick, president of the World Bank, said at the United Nations Framework Convention on Climate Change (UNFCCC) negotiations in Cancun, Mexico in December that, “We know that the poorest countries will suffer the earliest and the most from climate change. They will bear the brunt of changing weather patterns, water shortages, and rising sea levels even though they are the least equipped to deal with them.”

The carbon finance markets created by the UNFCCC exist to enable the reduction of greenhouse gas emissions worldwide through economic incentives, while allowing cleaner economic development to take place.

However, the carbon markets have not yet been well utilized for humanitarian technologies in least developed countries, particularly in Africa. For example, the United Nations Clean Development Mechanism, or CDM, is a multi-billion dollar a year industry, yet less than two percent of that benefits African nations.

Meanwhile, voluntary carbon markets, led by the Gold Standard Registry, are working to demonstrate significant impacts in rural communities around the world.

However, those markets are not easily accessible to smaller non-profits, companies, or even countries. Firstly, they are expensive to develop and register, on the order of several hundred thousand dollars and at least a year of concentrated effort by a team of professionals, which puts the markets out of reach of most development organizations. After registration, projects of any significant scale require capital resources that can cost tens of millions of dollars to deploy these projects. While the projects ultimately are anticipated to recoup these costs and benefit investors, the investor appetite for projects in rural communities is limited.

Secondly, the UN mechanisms currently only allow for emission reduction claims that are directly correlated to current “dirty” energy use. Because our target communities are in developing communities, many residents simply cannot afford the energy needed to live healthier lives. They continue to drink dirty water and are unable to afford the electricity needed to brighten their lives because the energy costs are too high.

As representatives of the humanitarian firms Manna Energy Limited and Vestergaard Frandsen, we worked in Cancun with our partners to advocate for the viability of “suppressed demand” — wherein emission reductions can be allowed for future projected energy use. Suppressed demand involves surveying an energy demand or need that isn't actually being realized at the present time, and then installing a cleaner alternative than what could normally be expected. Emission reductions are then claimed on the “demand” for the baseline energy source, rather than the actual existing usage.

For example, if a town has never had a power plant before, they aren't currently using power. But let's say a town nearby has a dirty coal plant. We could go in and assume that the people in the new town have an energy demand comparable to the other town, and then install a wind power plant, and claim emission reductions based on assuming the people were previously using a coal plant for their power, even if they weren't really doing this.

This is controversial because the emissions reductions are, in essence, theoretical.

But while this may well result in emission reduction claims that are theoretical in nature, this is hardly unprecedented. In fact, the vast majority of the carbon markets today are based on implementing new power plants in China and India where similar assumptions are already made on existing energy demands. We feel that this same allowance should be given to the truly least developed communities.

Finally, the expiration of the existing Kyoto Protocol commitment period at the end of 2012 makes the overall carbon market prospects bleak. However, the European Union Emissions Trading System market has stated that they will honor emission credits from Least Developed Countries after 2012, which leaves hope that our target communities may continue to benefit from carbon-financed development. 

Manna Energy Limited and Vestergaard Frandsen are working to make the markets more accessible for humanitarian development projects. Together we have demonstrated our commitment to working in this space through our own projects and through collaboration with the United Nations Development Program Millennium Development Goal Carbon Facility, the Gold Standard, national governments and other project partners to improve accessibility to this field.

Manna is the first organization in the world to submit for a United Nations carbon credit program for water treatment, enabling the deployment of community scale water treatment systems for thousands of rural residents in Rwanda. Meanwhile, Vestergaard Frandsen seeks to distribute over one million LifeStraw family water treatment units, serving more than four million people, in rural Kenya. Both projects will treat contaminated drinking water and reduce the demand for conventional water treatment through boiling water with non-renewable biomass — principally fire wood. With the assistance of carbon finance, these projects can be economically sustainable and provide a significant improvement in public health.

Evan Thomas is an executive vice president at Manna Energy Limited and an assistant professor at Portland State University. Alison Hill is a public health policy adviser at Vestergaard Frandsen.

(The views expressed here are the authors' alone and do not represent any position of Climate Central or its staff).