When the word ‘carbon market’ is mentioned, people understand quite a few different things. For some, it’s about a market where coal is sold, while for others the first word that comes to mind is pollution, for carbon is seen as the biggest polluter. Even though the latter are a bit knowledgeable, they still cannot tell what it is and how it works as these are not yet exactly understood.
In order to promote the carbon market in Rwanda, the Clean Development Mechanism (CDM) was introduced since almost a decade.
The Clean Development Mechanism refers to one of the programs that encourage individual and institutional projects aimed at reducing greenhouse gas emissions and thus mitigate the causes of climate change.
It is also part of the flexible mechanisms under the Kyoto Protocol, the international agreement within the United Nations Framework Convention on Climate Change-UNFCCC to reduce greenhouse gas emissions.
The protocol came into force in 2005 and requires developed countries to reduce their emissions by 5.2% of the level in 1990 over 2008-2012.
The CDM was formulated in a way that makes it possible for developed countries –also known as annex I countries – to engage in emissions reduction projects with sustainable development benefits in developing countries, which are not required to reduce their emissions as they are still to develop their industrial sector.
According to Yves Tuyishime, carbon market and CDM investment promotion officer at the Rwanda Environment Management Authority REMA, the mechanism allows developed countries to meet their emissions reduction targets in a cost effective manner.
“Reducing emissions would require them to reduce their industrial production as well, affecting their economy in a way they would not like,” explained Tuyishime adding that in this way they can meet their targets while helping sustainable development in developing countries.
Through the CDM, developed countries can engage in economically and environmentally competitive emission reduction projects that are conceived and implemented in developing countries.
In Rwanda, projects that have the potential to be included in CDM include reforestation, waste management, biomass waste/biogas usage, energy efficiency and renewable energy.
A project must go through a process to be approved as a CDM project and be able to access the market.
As Tuyishime explained for Rwandan case, to get the process started, a concept note that provides information about the project such as technology to be used and expected greenhouse gas emissions is submitted to REMA along with a project design document required by the United Nations.
Of course, first condition to be eligible; the project must be aimed at reducing greenhouse gas emissions, at the same time contributing to development.
Upon approval of the validation report issued by an auditor, as well as other required documentation by REMA and an interested developed country; the project is officially registered by an executive board and can then start its operations.
Monitoring is done according to established parameters and once the monitoring reports are validated, certified emissions reductions are issued by the executive board to the project.
“The certified emissions reductions, also known as carbon credits, can then be bought by the interested developed country,” said Tuyishime.
Countries benefit differently from the existence of the market: Developing countries benefit from the carbon market through the provision of an extra revenue stream for projects that reduce greenhouse gas emissions and contribute to the sustainable development of the country while developed countries can buy emissions reduction instead of reducing emissions in their own companies.
In Rwanda, there are currently a number of projects that are part of the CDM. One of those is the distribution of compact fluorescent lamps by the Energy Water and Sanitation Authority EWSA.
Tuyishime explained that “the distribution of the energy saving light bulbs is expected to decrease the general consumption of energy, leading to an increased reliance on hydropower and decrease of the use of fuel generated energy.”
The reliance on hydropower will help to reduce greenhouse gases emitted by fuel generators used by EWSA. The consequent emissions reduction and carbon credits are already put on the market since the project was registered by the CDM executive board on May 30, 2010.
Hydro power projects, efficient cook stove programs are among other projects that were still undergoing the process of validation in May 2012.