Richer African countries will soon be shut out of European carbon markets and poorer ones are experiencing difficulties in accessing finance and meeting European Union standards.
Time is running out for carbon credit project developers in richer African countries who want to sell credits to Europe.
Last year, the European Union, currently the world's biggest buyer, ruled it would only buy carbon credits from least developed countries (LDCs) from 2013 onwards.
Carbon markets aim to encourage sustainable development by allowing poorer countries to offset the greenhouse gas emissions of the rich world.
Projects have to meet strict criteria in order to be registered by the United Nations Clean Development Mechanism (CDM), which issues tradable carbon credits.
In practice, much of the benefit goes to richer and larger developing countries.
Almost 80% of CDM projects are in India, Mexico, China and Brazil. Africa makes up just 2.9% of the total and is home to 260 out of more than 4,000 projects.
Fewer than 35 CDM projects are located in the 33 poorest African countries, according to the UN Environment Programme, partly because poorer African countries lack the large industrial sectors that the CDM is meant to incentivise.
Gambia's submission to the UN on behalf of the LDC group in March outlines some of the barriers to developing carbon- offset projects in these countries.
"Due to limited capacity, high transaction costs, political and economic risks, and technical characteristics of LDCs, the CDM has failed to reach many of its intended beneficiaries in the LDCs," the Gambian delegation explained.
The EU regulation recognises that subsidies for large emerging economies are politically unpalatable.
Existing CDM projects – and any project that is registered with the CDM's executive board and is receiving credits – will be able to continue selling credits to European countries.
New developers are rushing to make the 31 December deadline but, because it can frequently take two years or more to complete registration, many will not make the cut-off date.
As a result, several African countries will find themselves looking for a new market.
More than 100 CDM projects are in South Africa, Nigeria, Kenya, Egypt and Morocco – and none of these countries qualify for LDC status.
Developers in these countries will need to seek out new buyers – perhaps in a new carbon market being developed in Australia. China and South Korea are also planning carbon markets.
There are other concerns for developers. "Current prices are not that encouraging," says Lodewijk Nell, director of Johannesburg-based carbon developer EcoMetrix Africa.
Policy uncertainty and an oversupply of carbon credits in a sluggish economy have weakened the market considerably in the past two years.
The carbon price hit a record low of $3 per tonne on 30 August.
Investors in LDCs are looking for new ways to enter the market.
One way to create industrial-size projects is known as a 'programme of activities' or 'programmatic CDM', which allows the same activity – such as efficient cookstoves or solar water heaters – to be replicated on many different sites.
EcoMetrix Africa is attempting to register programmes of activities in the fields of wind, solar and biomass in South Africa before the end of the year, both for households and for industry●
Africa: Business leads the way