Application of Article 6-Linked Debt-for-Climate Swap for the Clean Energy Transition in Africa
Abstract
:1. Introduction
2. Literature Review
3. Necessity of the Debt-for-Climate Swap Model
4. Conditions for the Success of Article 6-Linked Debt-for-Climate Swap Model
4.1. The Adaptability of Africa’s Clean Energy Transition and Market Mechanisms
4.2. Indicative Criteria: DNSH and Environmental Contribution Criteria
4.3. Combined Model of ODA and Article 6-Linked Debt-for-Climate Swap and Considerations
5. Article 6-Linked Debt-for-Climate Swap Model: Advantages and Considerations
6. Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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Type of Crisis | Major Mechanism | Limitations |
---|---|---|
Climate Crisis | Green Climate Fund (GCF) |
|
Debt Crisis | Debt Service Suspension Initiative (DSSI) |
|
Classification | Contents |
---|---|
Mitigation | Project participants should not cause an increase in global greenhouse gas emissions, including the host country. Project participants must estimate, measure, record, and calculate greenhouse gas emissions and reductions based on the most up-to-date scientific evidence and empirical data during the actual project implementation. The project should not be associated with the production, extraction, storage, or transportation of fossil fuels, and the use of renewable energy is highly recommended for contributing to carbon neutrality. When calculating greenhouse gases reduced or removed through the project, potential carbon leakage should be considered, and efforts should be made to minimize such potential leakage. To ensure that greenhouse gases reduced by the project do not re-emit in the future, non-permanence risks should be minimized throughout the nationally determined contributions (NDC) implementation period. |
Adaptation | Project participants must identify significant climate-related physical risks, which should be identified through climate-related risk and vulnerability assessments. Subsequently, project participants should develop an adaptation plan that takes into account the climate risks in the region/country where the project is being implemented while aligning with existing adaptation efforts. |
Sustainable Water Resource Management | Project participants should assess whether there are risks related to water quality, quantity, and ecosystems during the implementation of the project to maintain overall good water quality, including indicators such as surface water, groundwater, and springs, and ensure the health of aquatic ecosystems. |
Biodiversity & Nature Asset | The project should not cause any harmful impacts on the overall resilience and good condition of the ecosystem, and it should not adversely affect the conservation of species and habitats. The entities involved in the project must fundamentally avoid causing serious harm to biodiversity and ecosystems in the course of conducting their activities. Therefore, project participants should review whether the area in which they intend to carry out the project is designated as a globally recognized biodiversity protection area within the frameworks listed below:
|
Circular Economy | During the project implementation, there should not be a significant increase in the generation, incineration, or disposal of all waste, excluding the incineration of non-recyclable hazardous waste. Long-term disposal of waste should not have a lasting negative impact on the environment. Project participants should strive to use resources efficiently, restrict the generation of waste, and make efforts for the reuse of waste to reduce the consumption of natural resources/energy. When evaluating products throughout their life cycle from the perspectives of durability, reparability, upgradability, reusability, and recyclability, there should not be significant inefficiencies in the direct/indirect use of resources such as non-renewable energy sources, raw materials, water, and terrestrial resources at one or more stages. For energy production facilities, consideration should be given to designing equipment and components with good durability and the possibility of recycling during modification and dismantling. In manufacturing activities, adopting reusable technologies and designs for products and components and prioritizing recycling over disposal in the manufacturing process is encouraged. |
Pollutant Management | Project participants should not cause significant harm to the health and environment of all stakeholders, including local communities and indigenous people, due to the pollutants, including chemical substances and air pollution. Measures such as prevention of harm, proper and sustainable management and conservation of the atmospheric environment, and prevention of marine pollution through the management of sources and regulation of debris should be in place. Project participants should not result in a substantial increase in the release of pollutants into the terrestrial, marine, and atmospheric environments compared to conditions before the project’s initiation. Project participants must identify the best foreseeable environmental alternatives for pollution management and reduction, using optimal available techniques for each alternative to minimize environmental impact. |
1 | All greenhouse gas reductions, including greenhouse gas removal, must demonstrate additionality. Additionality can be evaluated via the UNFCCC tools for the demonstration and assessment of additionality for Article 6 of the Paris Agreement [33]. |
2 | Adaptation-related co-benefits of mitigation efforts should be considered while formulating an economic diversification plan. |
3 | All project outcomes should be real, measurable, and provide long-term benefits. |
4 | In the whole process of the project, negative environmental and social impacts that may arise during the implementation should be avoided and minimized. |
5 | Ensuring the participation of local stakeholders, including indigenous people and the local community, is essential during the project implementation in the project area. |
Type | Contents | |
---|---|---|
A | Project Period | Maximum 5 Years |
Renewal | Renewable: A maximum of twice | |
Amount of debt swap | A budget that can implement a 5-year project | |
Risk mitigation | The decision for renewal is based on regular monitoring | |
B | Project Period | Maximum 10 years |
Renewal | Non-renewable | |
Amount of debt swap | The budget that can implement a 10-year project | |
Risk mitigation | Phased debt swap based on regular monitoring | |
C (Removals) | Project Period | Maximum 15 Years |
Renewal | Renewable: A maximum of twice | |
Amount of debt swap | A budget that can implement a 15-year project | |
Risk mitigation | The decision for renewal is based on regular monitoring |
1 | Baseline GHG emissions or baseline net GHG removals |
2 | Project GHG emissions of actual net GHG removals |
3 | Leakage GHG emissions |
4 | GHG emission reductions or net GHG removals |
5 | Comparison of the GHG emission reductions or net GHG removals achieved by A6.4 Project with the estimates in the registered PDD (Project Design Document) |
Host Country | Potential A6 Reductions (KtCO2e/yr) | Investment (Million USD) | CER Price (Per ton) |
---|---|---|---|
Ghana | 1519.0 | 314.0 | USD 26.59 |
Angola | 447.0 | 150.0 | - |
Morocco | 66.0 | 6.0 | - |
Ethiopia | 713.0 | 40.0 | - |
Uganda | 95.0 | 21.6 | - |
Mozambique | 2708.0 | 230.5 | - |
Average | 925.0 | 127.0 | USD 26.59 |
Type | Crediting Period | Annual Provided Finance |
---|---|---|
A | 5 Years | USD 2,744,885.7 |
B | 10 Years | USD 1,372,442.85 |
C (Removals) | 15 Years | USD 914,961.9 |
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Lee, H.-C.; Choi, Y. Application of Article 6-Linked Debt-for-Climate Swap for the Clean Energy Transition in Africa. Sustainability 2024, 16, 7818. https://doi.org/10.3390/su16177818
Lee H-C, Choi Y. Application of Article 6-Linked Debt-for-Climate Swap for the Clean Energy Transition in Africa. Sustainability. 2024; 16(17):7818. https://doi.org/10.3390/su16177818
Chicago/Turabian StyleLee, Hyun-Chool, and Youngbin Choi. 2024. "Application of Article 6-Linked Debt-for-Climate Swap for the Clean Energy Transition in Africa" Sustainability 16, no. 17: 7818. https://doi.org/10.3390/su16177818