By Kenya Engineer
Corporate Business
Kenya Electricity Generating Company (KenGen) will channel earnings from the carbon credit market towards realizing the full potential of the country’s geothermal energy resources in addressing the growing demand for power.
The geothermal potential is estimated at 3,000 megawatts but only 130 megawatts is exploited.
KenGen will now earn an estimated Sh 442 million every year from the sale of 662,000 tonnes of carbon credits at Sh670 per tonne to the World Bank. Last year KenGen and the World Bank signed an Emission Reduction Purchase Agreement (ERPA) for the purchase of 900,000 tonnes of carbon generated from one of the six Clean Development Mechanism (CDM) projects that it has offered to purchase emission reductions. The projects include Olkaria II 3rd Unit, Eburru, Kipevu Combined Cycle, Kiambere, Sondu Miriu and Redevelopment of Tana Power Station.
The bulk of the money will be used to finance geothermal development while an additional dollar per tonne of carbon credits will be used in community development projects. The World Bank Community Development Carbon Fund (CDCF) contributes an additional dollar for every purchase of a tonne of carbon credits to benefit communities.
Carbon trading is the sale of gases that contribute to global warming, eg carbon dioxide, which are not emitted to the atmosphere following installation of environment friendly production systems.
Carbon trading involves, though is not limited to, industrialized nations funding clean energy projects in the developing world to meet their greenhouse gases emission targets set by Kyoto Protocol under the treaty’s Clean Development Mechanism (CDM).
In a feature in the January/February 2007 issue of Kenya Engineer, David Muthike of KenGen explained that the triple purpose of CDM is to mitigate climate risk, help create sustainable development in developing countries and assist industrialized countries in achieving compliance with their emissions reductions commitments.
The carbon market has grown to over 19 billion US dollars by 2007.
Carbon credits are measured in units of certified emission reductions (CERs) where each CER is equivalent to one tonne of carbon dioxide not emitted into the atmosphere.
KenGen has established a CDM Centre with a mission to create a pipeline of CDM projects and to help Kenyan Industry unlock this potential. The company has developed internal capacity required in the preparation of documents required by the CDM approving authority.
Likewise, development banks, for instance the African Development Bank, are creating facilities to enable businesses and countries across the continent to take advantage of this emerging market.
Africa accounts for only 3% of global CDM projects.
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