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24 Low-carbon Africa: leapfrogging to a green future Low-carbon and renewable potential<br />
Text box 6: Overview of the feed-in tariff and quota systems 81<br />
Feed-in tariffs are pricing<br />
systems that regulate<br />
electricity grid operators by<br />
obliging them to accept<br />
electricity generated from<br />
renewable energy, and pay<br />
fixed minimum prices. As<br />
prices are differentiated<br />
according to technology, size<br />
and location, feed-in tariffs<br />
prevent market domination<br />
of the cheapest technology<br />
and prevent sole exploitation<br />
of the locations with the<br />
most abundant natural<br />
resources (such as sunshine<br />
belts). There is a guaranteed<br />
payment schedule of about<br />
20 years, allowing investor<br />
confidence that projects will<br />
give a long-term return,<br />
which is formalised by a<br />
standard contract between<br />
the grid-feeder and the<br />
grid-distributor.<br />
Quota systems are the<br />
opposite of pricing systems<br />
because governments fix a<br />
realistic target instead of a<br />
price. This target represents<br />
a minimum share (quota) of<br />
energy that must come from<br />
renewable sources. While<br />
the European Union (EU) has<br />
set a quota for renewables<br />
that it is aiming towards,<br />
there is less experience with<br />
electricity quota systems<br />
compared to the feed-in<br />
system, and no known<br />
examples of quota system<br />
implementation in sub-<br />
Saharan Africa.<br />
certainty for investors as well as economies of scale, which<br />
has led to large-scale cost reductions. 82<br />
Since the announcement of South Africa’s feed-in tariff<br />
system in 2009, more than 100 renewable energy proposals<br />
amounting to more than 500MW have been received by the<br />
country’s Department of Minerals and Energy. However, the<br />
South Africa case study in Annex 1 raises scepticism about<br />
the effective implementation of the feed-in tariff by the<br />
government and the utility ESKOM.<br />
2.2.3 The Clean Development Mechanism and<br />
Nationally Appropriate Mitigation Actions in<br />
Africa<br />
As of July 2011, less than two per cent of all registered<br />
Clean Development Mechanism (CDM) carbon market<br />
projects were situated in Africa. 83 Worldwide, less<br />
developed countries – as very low emitters in comparison to<br />
the emerging economies – have not attracted projects due<br />
to two main reasons. First, ‘low-hanging fruit’ opportunities<br />
are offered by higher-emitting nations, which excludes those<br />
in Africa. Second, potential emissions-saving opportunities<br />
in Africa tend to come from smaller projects, which<br />
discourages investors because the high administrative<br />
costs in setting up and implementing CDM projects eats<br />
into a higher proportion of the project costs than for larger<br />
projects.<br />
Disappointment following the lack of financing and clean<br />
technology brought to Africa through the CDM presents a<br />
challenging context for the design and implementation of<br />
Nationally Appropriate Mitigation Actions (NAMAs). First<br />
introduced in the Bali Action Plan of 2007, and redefined<br />
in the Cancun Agreements of 2010, NAMAs are new<br />
instruments ‘aimed at achieving a deviation in emissions<br />
relative to business-as-usual emissions in 2020’. They are<br />
designed to be proposed by developing countries in the<br />
category of ‘voluntary emission reduction measures’. 84<br />
To date, international negotiations have failed to provide<br />
a specific definition of NAMAs and to decide the level of<br />
GHG reductions to be accomplished by different types<br />
of these, and how they should be subject to international<br />
measurement, reporting or verification processes.<br />
Also, investor interest and confidence in NAMAs are<br />
almost certainly likely to be affected by uncertainty<br />
of the negotiations under the UNFCCC, including the<br />
establishment of the Kyoto second commitment period.<br />
The biggest funds for mitigation projects in developing<br />
countries are the World-Bank-managed Climate Investment<br />
Funds. Two of the funds are for low-carbon technology:<br />
the Clean Technology Fund (CTF), which currently has<br />
pledged a total of US$4.4bn for climate mitigation in<br />
middle-income countries, and the Scaling Up Renewable<br />
Energy Programme (SREP), which has pledged US$340m<br />
to support investments in a small number of low-income<br />
countries for energy efficiency, renewable energy and<br />
access to modern sustainable energy. From sub-Saharan<br />
Africa, only Nigeria and South Africa are eligible for funds<br />
from the CTF, while Ethiopia and Kenya are pilot countries<br />
for the SREP. There is considerable concern that four years<br />
since the funds were set up, very few low-carbon projects<br />
have yet to be implemented.