The need to reduce the global carbon footprint and mitigate the adverse effects ofglobal warming led to the Kyoto Protocol, an international action plan set up underthe United Nations Framework Convention on Climate Change. Under theProtocol, South African industry stands to benefit financially, if businesses were toregister and successfully implement Clean Development Mechanism (CDM)projects through which they would reduce their Green House Gas emissions.Theoretical projections show that South Africa’s CDM potential ranks alongsidethat of China, India, Brazil, Argentina and Mexico. However, in practice, SouthAfrican projects still represent a low fraction of the entire CDM pipeline.This study builds upon the limited existing body of knowledge on the CDM withinSouth Africa. Specifically, it aims to determine the relative importance of barriersthat currently exist, or are perceived to exist, and which have resulted in limitedinvestment in the CDM in South Africa.The research performed was largely qualitative and used a questionnaire-baseddescriptive survey method to solicit opinion from key South African CDM expertsacross all spectra of the industry.Based on responses, the main GHGs that are likely to be reduced by investmentin the CDM within South Africa are CO2 and then methane. Reduction of thesegases is most likely to occur through investment in energy efficiency, renewableenergy (such as wind, biomass and solar power) along with methane recoveryand utilisation, predominantly from landfill gases and animal waste. The researchexamined the critically important barriers to investment in such projects, whichwere found to include: lack of clarity of the Kyoto Protocol post 2012, complicatedproject identification and validation, lack of awareness within industry, low andvolatile Certified Emission Reduction (CER) prices and high transaction costs.Other factors deemed important, but not necessarily critical, included poornational policy and legislation and delays in decisions by the Executive Board.Factors such as tax on cash streams from registered CER sales, approval- ii -process of Designated National Authority (DNA) and CDM project opportunitieswithin South Africa did not appear to have a major influence on investment in theCDM within South Africa.Given the uncertainty and confusion around the CDM market within South Africa itis suggested that government provide provisional CDM guidelines to facilitate thesmooth implementation of key CDM project types. This would raise awareness ofCDM projects to local/national development banks and other commercial entities,and thus facilitate increased engagement and investment by the businesscommunity.Within South Africa, it appears the critical mechanism to ensure that CDMbecomes embedded in business models is the replacement for the Kyoto Protocolpost 2012 (when it is due to expire). This is likely to facilitate increased investmentin the CDM, as well as to demonstrate a continued commitment by South Africa,and global governments, to address climate change through a replacementmechanism. Such a mechanism provides a platform through which business canplay a crucial role to ensure success of the Kyoto replacement and activelyaddress climate change. South African Government will have an integral role innegotiating the replacement within the global arena, and will subsequently need toestablish national priorities to facilitate the long term policy implementation andnational success of carbon markets.
