Walter Brooke’s career advice in The Graduate, “Ben, I have just one word for you — plastics”, was spot on. In the years after the film’s 1967 release, plastic manufacturing boomed. But if Brooke had to counsel a confused university graduate today, the word would be “emissions”.
The green movement has shifted from activism to careerism, with the trading of “carbon credits” promising profits from pollution and desirable jobs in one of the fastest-growing industries — carbon management. As a major polluting nation, South Africa is well placed to benefit from the trend.
Carbon management aims to combat global warming through the reduction of greenhouse gas emissions. It embraces greater energy efficiency as well as renewable energy sources such as wind, hydro, solar and “biomass” — fuel from waste.
When these are not possible, the aim is to offset emissions with other carbon-reducing activities, usually far from the polluting problem. Planting trees is one such activity — the theory is that the carbon dioxide soaked up by the trees will compensate for noxious gases spewed out elsewhere.
Carbon credits are a triumph of capitalism, creating a commodity from nothing — clean pockets of air that gain value through being certified. They have created a market that will be worth between $10- and $30-billion by 2008, according to London-based advisory group EcoSecurities.
The new commodity is the by-product of the 1997 Kyoto Protocol on Climate Change, which entrenches the offsetting of emissions as one way to save the planet. The protocol commits most of the industrialised world to the reduction of carbon dioxide emissions by 2012. However, to meet overall quotas, the Clean Development Mechanism (CDM) of the protocol allows countries to trade carbon credits.
What is a credit?
Any effort to mitigate emissions beyond the norm or to use renewable energy sources instead of fossil fuels — in short, carbon not used that would have been emitted — can be converted into a credit.
Industry in the developed world —Annex 1 nations — is set to become the main buyer of credits, mainly from developing nations, which are exempt from targets under the protocol. The argument for setting up projects in the Third World is that reducing emissions is cheaper than in the First World, and creates development opportunities for the host country.
South Africa is well placed for carbon credit projects. It is not on the Annex 1 list of countries that must reduce emissions, but is ranked among the top 15 polluting countries, making reductions here possible and profitable.
Parties to the protocol must designate a national authority for the CDM. Cabinet approved the setting up of the South African Designated National Authority (DNA) in the Department of Minerals and Energy two weeks ago. The authority’s staff moved into their offices in Pretoria this week.
“Only a few legal details are now outstanding,” says Kevin Nassiep, chief director energy planning.
The financial sector is also going for the gap. Standard Bank has teamed up with EcoSecurities to provide carbon credit services. Financial services firm Sterling Waterford Securities, which has Valli Moosa, recently elected president of the World Conservation Union, as one of its directors, is releasing carbon credit notes — a promise to deliver a CER (certified emission reduction) to a purchaser at a future date.
This is in line with global trends. Trade has begun, even though Kyoto will only come into force next year. Selling is taking place on projects that have received credits but have still to be implemented.
In the pipeline
No local project has received a credit yet, but a number are in the pipeline. They include landfill gas to energy projects in eThekwini and Cape Town, with similar ones being considered in Johannesburg and Msunduzi (Pietermaritzburg). Mondi Kraft in Richard’s Bay has a fuel-switching project that replaces a coal boiler with a biomass boiler. Another company is involved in a mini hydro-project, and one in Khayelitsha involves giving houses energy-saving upgrades through solar heating, insulation and fluorescent lights.
Eskom is also looking at possible projects, says corporate sustainability manager Wendy Poulton.
With the DNA’s doors open, many more ideas are expected to leave the drawing board. But it is no quick fix. Acquiring a certificate is a complicated, costly procedure (see box).
The eThekwini landfill project is furthest advanced and is at the environmental impact assessment stage — although an agreement has already been signed with the World Bank over the sale of the credits.
Foreign government aid and private investment is set to flow in. And the sale of credits will plough back more funds. The DNA can veto any project it believes will not benefit the country or is unfairly weighted in favour of the funder. Development is a concern, and requirements for project approval cover environmental, economic and social criteria, such as job creation.
There will be plenty of work for environmentalists but, to repeat the age-old question: “What about the poor?”
Nassiep says the hope is that jobs and money will flow into the broader community. “There are not many jobs for urban projects, but rural projects such as biomass fuel production promise lots of employment.”
As to the question of whether all this toiling will save the planet, he is more sanguine. “It’s a modest step forward. But it’s a start.”
From PIN to CER
Carbon credits are controlled by the Clean Development Mechanism (CDM) executive board, which sets the rules for trading. Projects also need approval by governments and new organisations set up to verify the trade. The following are the acronym-ridden steps that must be followed to gain a saleable credit:
Step one is a project idea note (PIN). This needs a letter of approval from the Designated National Authority (DNA). A project design document (PDD) is then drafted.
Certain projects must have environmental impact approval.
Project participants must submit the PDD to a designated operational entity (DOE) for validation. Projects pay for validation. DOEs are private sector bodies, accredited by the board. There are no accredited DOEs in South Africa at present and validation is being carried out outside the country.
The validation and PDD then go back to the DNA for a final letter of approval. This is submitted to the CDM board, which will register the project. Credits, called CERs (certified emission reductions), that will be generated in the future from the project, are saleable even before the project begins.
It does not stop there. Credits are issued over a number of years, and the project is monitored throughout its life to ensure the promised emission savings happen. Regular monitoring and verification need to be undertaken by consultants accredited by the CDM executive board.