Frequently Asked Questions

Carbon Finance

To download a PowerPoint presentation on carbon finance please click here.

 

I see ACCE is financing low-carbon projects to generate credits for trading on the Exchange while also running the Exchange itself.  Isn’t this a conflict of interest?

It is natural to wonder why a trading platform would also engage in financing a supply of the instruments to be traded.  This is an issue ACCE took very seriously in its business design, and we strongly believe that the African context demands a concerted effort to stimulate project development so that an exchange has sufficient supply of credits.  Ideally, ACCE foresees the funding feature gradually dropping off as more projects are undertaken across Africa and there is less of a need to provide the particular gap-financing and risk-sharing products we have created.  Certainly, ACCE welcomes the supply of credits from other project developers as part of a rising tide that enhances the credibility and marketability of all African projects. 

 

What’s climate change?
Industrial pollution and unsustainable land management are just two of a number of human practices that are rendering our planet less healthy and less resilient.  It is now generally accepted by scientists and governments worldwide that human activities are contributing to very severe changes in the earth’s ecosystems. 

 

Although some degree of climate change is a natural part of long-term cycles, the changes that have happened in the past 150 years have been much greater than any fluctuations known before.  It is likely that this severe rise in earth’s temperatures has been caused by a dramatic increase during the past 150 years of ‘greenhouse gases’ in the atmosphere.  Greenhouse gases are a group of airborne pollutants (except water vapor, which is non-polluting but still a greenhouse gas) that gather in our atmosphere and trap the sun’s heat on earth. The most common greenhouse gas is carbon dioxide (CO2), and for simplicity’s sake scientists refer to emissions of other greenhouse gases in numbers that indicated the equivalent amount of CO2 that would have the same impact (so emissions are written as CO2 equivalents, or CO2e) . 

 

The resulting increase in the surface temperature of the earth is a change that humans will be deeply affected by for decades and centuries to come – though it will not result in warmer temperatures every day, everywhere. The change that a long-term warming of the earth’s surface will bring will involve increasingly unpredictable rains, new phases of unusual heat or cold, more frequent and severe droughts and floods, expansion of deserts and shifting of climatic zones, new species of pests that never used to survive in certain places, and more – with potentially disastrous consequences. And as Africans we are at particular risk without the infrastructure, financial resilience and technical capacity to deal with such enormous changes.

 

Why Zambia?
The founders of ACCE have been involved in African project financing for many years through Lloyds Financials, which is based in Lusaka. The ACCE Chairman is former CEO of the Lusaka Stock Exchange and, along with the highly experienced Board of Directors and senior ACCE management, has a robust network of contacts within the financial and environmental arenas in Zambia and throughout the Southern African region. In establishing an electronic trading platform for a virtual commodity, ACCE is investing in state-of-the-art IT and financial support services that ensure fluid, secure transactions from anywhere in the world. 

 

What does ‘low-carbon’ mean?
Certain activities create emissions of greenhouse gases, the most common of which is carbon dioxide (CO2). The CO2 emission-intensive nature of current global transportation, agriculture, energy generation and industrial production processes is wreaking havoc on the earth’s ecosystems, and to prevent disastrous climate change it is widely agreed that we need to shift to a ‘low-carbon’ trajectory.

 

The phrase ‘low-carbon’ is used to refer to technologies and activities that result in lower emissions than either what is currently happening, or what would be likely to happen if we continued on the same path as we’re on now.

 

What’s the different between climate change mitigation and adaptation?
‘Mitigation’ refers to activities that directly reduce the level of greenhouse gas emissions. This can happen either through ‘cleaning up’ existing high-emission processes or through ensuring that all future activities within a given project or sector are lower-carbon than what would happen if we stuck with our current path. Mitigation occurs through both reduction of greenhouse gas emissions (such as through improving energy efficiency or driving less) and removal of greenhouses gas emissions currently in the atmosphere (this is also called ‘sequestration’ and can be done by  trees and other plant life as well as some more technologically-based methods).  

 

‘Adaptation’ is the preparation for the inevitable impacts of climate change, through adjusting our habits to suit the new circumstances as well as increasing our resilience to unpredictable events.  Of course, a changing climate doesn’t only impact temperature and weather – through this it has strong ripple effects on crop yields, diseases and pests, biodiversity, freshwater availability, and other essential features of our ecosystem. These changes ripple out yet further to impact socioeconomic development, migration patterns, national security dynamics, and much more. 

 

It is not possible to choose mitigating or adapting – both must happen in parallel, and urgently.

 

Have a question on ACCE, climate change, carbon markets or low-carbon project financing you’d like more information on? Email us at info@africacce.com.