NAIROBI (Reuters) - African governments need to set clear rules in order to attract more projects under the U.N. Kyoto Protocol's Clean Development Mechanism (CDM), the United Nations Environment Programme chief said on Wednesday.
CDM promotes investments in emission-reducing projects in the developing world by companies and governments in rich nations.
In return for building wind farms or other projects, such investments can earn valuable carbon offsets called certified emission reductions (CERs) that can be sold for profit or used to meet mandatory targets to cut emissions.
"(There should be) clear signals by government that these policy frameworks are here to stay and will not change a year later, undermining the viability of these projects," UNEP executive director, Achim Steiner, told an African Carbon Forum.
According to data from the United Nations Environmental Programme's (UNEP) Risoe Centre, there are 4,890 CDM projects registered or being processed worldwide.
Only 122, or 2 percent, are in Africa and around 3 percent of CERs in the pipeline have originated from the continent.
Steiner said a predictable and resilient international carbon market would also help attract more investment.
"There are many on this continent who have ... invested in a great deal of time in developing CDM projects only to find that they were not being picked up in the global market," he said.
South Africa leads in the continent with 32 CDM projects, followed by Kenya with 15, Egypt with 13 and Uganda with 12, Steiner said.
Many of the projects in Africa were too small and could benefit from consolidation and regional collaboration in groupings like in the East African Community or the Southern African Development Community, Steiner said.
The shape that CDM will take after 2012, when the first phase of the Kyoto protocol expires, is unclear.
Critics say CDM is hampered by the fact it can only approve single projects at a time. But that did not mean developed countries should move away from it, said Henry Derwent, chief executive of the International Emissions Trading Association.
"There are criticisms of the CDM but there should be no criticisms of principles of international offset projects," he said. "This principle works in the voluntary sector and it must be sustained in the compliance markets however they develop after 2012."