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Linking market mechanisms and climate finance in Africa

(Photo by Suganth on Unsplash)
(Photo by Suganth on Unsplash)

In the international climate change negotiations, Parties are fleshing out the rule book governing the implementation of the new market mechanisms prescribed under Article 6 of the Paris Agreement. Further development of the global carbon market is of particular interest for Africa: a total of 36 African states have included carbon pricing and the introduction of market-based mechanisms in their NDCs. Many countries are also striving for improved access to funding from the Green Climate Fund (GCF). While operationalisation of the GCF is moving ahead, expectations regarding the flow of funds have so far not been met.

In the negotiations on the new market mechanisms and results-based climate finance, it must be ensured that the carbon market experience already gained by African countries is taken into account. Africa was only able to benefit from the CDM at a relatively late stage and, in some respects, both the progress and the capacities achieved through tremendous effort in the areas of project development, implementation and financing are going to waste because a decision has yet to be reached on the role of the CDM under the Paris Agreement. To date, the CDM methodologies are the only UNFCCC standards that can be used to calculate mitigation effects that could be used as a basis for results-based climate finance.

Against this backdrop, the Federal Environment Ministry (BMU) as part of its International Climate Initiative (IKI) is promoting an initiative from Perspectives Climate Group in collaboration with Climate Focus, AERA, Carbon Africa, Afrique Energie Environnnement and South South North. Under this project and in cooperation with the three partner countries Ethiopia, Uganda and Senegal, replicable climate finance models are being piloted that can help the respective countries achieve the goals contained in their NDCs. The partner countries have set ambitious climate policy targets and have already either implemented or initiated lighthouse projects involving energy efficiency and renewable energy use. This enables them to play a key role in the climate change negotiations. In each of the three countries, the project team works with governments and the private sector to formulate climate finance proposals that leverage the potential of host countries’ existing climate policies and activities. For example, measures such as rural electrification are implemented which significantly contribute to sustainable development in local communities.

As part of the project, innovative climate finance proposals are developed to mobilise resources for use in scaling existing pilot activities. This involves adapting components of the CDM (such as MRV methodologies and perhaps certificates) for use with climate finance projects, for example to demonstrate mitigation effects in a transparent way. The results of the experience gained are to flow into the multilateral climate change negotiations. The success and sustainable implementation of the climate finance proposals, as well as their policy integration, will be ensured by means of supportive capacity-building measures and close cooperation with qualified local partners.

The knowledge and experience gained in developing innovative climate finance models will subsequently be used to strengthen both regional institutions and sub-regional stakeholders, among them GCF-accredited organisations and Designated Operational Entities (auditors) under the CDM. Methodologies and concepts will also be developed that can be used in future climate finance proposals and/or replicated for regional-level use. Supplemental policy briefs align the abstract climate change negotiation process to the African arena and foster opinion-forming in African countries, while the publication of handbooks and studies make the knowledge and experience gained available to a broad user community and the specialist public. In this way, the potential for linking market mechanisms and climate finance is to be promoted, both in the climate change negotiations and in public debate. The various project activities are designed to improve African countries’ access to climate finance, increase their chances of implementing their NDCs and boost their resilience to the effects of climate change.

Climate Finance Innovators Project

Implementation: Perspectives Climate Group

Other Organisations Involved: Climate Focus, AERA Group, Carbon Africa Limited, Afrique Energie Environnement (AEE) & South South North.

Lifecycle: 2018 -2021

Contact: Stephan Hoch,

Further Information: Climate Finance Innovators

Downloads: Synthesis Report: Carbon Pricing Approaches In Eastern And Southern Africa