Africa > Four years on, World Bank CDM fund signs up first PoA

Four years on, World Bank CDM fund signs up first PoA

Published 16:58 on January 29, 2016  /  Last updated at 09:22 on January 31, 2016  / /  Africa, International, Kyoto Mechanisms

The World Bank-led Carbon Initiative for Development (CI-Dev) has signed its first purchase agreement, contracting with developer SimGas to buy carbon credits from a PoA to roll out home biogas systems in east Africa.

The World Bank-led Carbon Initiative for Development (CI-Dev) has signed its first purchase agreement, contracting with developer SimGas to buy carbon credits from a PoA to roll out home biogas systems in east Africa.

“We have a pipeline of projects and SimGas’s Kenya project is the first to cross the finish line,” said Vikram Widge, who heads the World Bank’s climate and carbon finance unit, by phone on Friday.

The four-year old CI-Dev has whittled down hundreds of applicants and plans to sign contracts with 12-15 projects this year with its $100 million capitalisation ringfenced for buying carbon credits.

The agreements are expected to average between $3-15 million of so-called results-based financing, which pays out upon delivery of CERs for a period of 5-7 years.

The price the fund expects to pay for CERs from these projects varies between €4 and €10 each ($4.30-$10.80), with the exact price negotiated with each project.

The fund is seeking projects it deems beneficial in areas such as extending energy access and offering replicable and sustainable business models.

“Our due diligence process enables us to understand how the carbon revenues can be used to yield development benefits and support more sustainable business models in the long term,” said Widge.

SIMGAS DEPLOYMENT

SimGas was founded in the Netherlands in 2009 and also has operations in Kenya, Tanzania and Rwanda. Its products are designed in the Netherlands and produced in Tanzania by its joint venture partner Silafrica.

The digesters convert manure and organic household waste into methane gas, which can be used for cooking and lighting, and bioslurry that can be used as liquid fertiliser and compost.

SimGas plans to use the carbon finance to lower the price of the biogas digesters to make them affordable enough for the rural households that can get the most benefit from them to buy, SimGas CEO Sanne Castro told Carbon Pulse.

SimGas expects to the digesters to be bought by around 80,000 households initially in Kenya, which would otherwise use 3-7 tonnes a year of firewood to cook, much of it from unsustainable sources.

The company has a registered PoA that would allow it to earn CERs in more than one country. It already has an agreement to sell credits to German bank KfW’s Future of the Carbon Market Foundation.

Castro said that the company had benefitted from the Kenyan and Tanzanian governments both actively promoting the use of biogas by households – an initiative supported by the Dutch government, which is helping to set quality standards for biogas products in the region.

The PoA’s emission reductions are verified with surveys and site visits, but SimGas intends to continue working with CI-Dev’s staff under the fund’s Readiness Fund to develop remote monitoring of the digesters.

Castro said this had the potential to more accurately measure emission reductions and lower monitoring costs, and could also help enhance the company’s customer service by identifying changes in usage levels.

FACTFILE:

  • The $125 million CI-Dev is funded by donations from Sweden, the UK, and Switzerland via its Climate Cent Foundation. The UK is going to retire any CERs received, while the others use them to meet national emissions targets.
  • $25 million has been allocated under its Readiness Fund, including a Methodology Work Program to help develop the infrastructure to design, implement and check on CDM PoAs, including designing new and updated CDM methodologies.
  • 220 proposals pitched for funding, narrowed down to just 14 by end-2015: four cookstove and four mini-grid programmes, three biogas, two solar lantern, and one water purification – all in Africa.
  • CI-Dev was first announced at the UN climate talks in Dec. 2011 but its launch was delayed by more than a year against the backdrop of a collapse in CER prices, which at less than $0.50 each are too low to attract investment.
  • CI-Dev aims to promote low-carbon projects in LDCs, which largely missed out on market-driven CDM funding due to most projects being developed in richer emerging economies.

By Ben Garside – ben@carbon-pulse.com