Ensuring Investment boost in Climate change

Although climate change has always been viewed as portending danger for the earth’s environment, economists and scientists nonetheless insist it holds numerous opportunities for Nigeria’s business environment, writes ALEXANDER CHIEJINA

The story of climate change is gradually shifting from that of perennial gloom to investment boom. Unlike in the past when the term "climate change" only reminds people of adversities such as global warming, desertification, erosion, flooding, and sea-level rise, the term now brings to mind mouth-watering investment opportunities.

This is partly because the theme of climate change has crept into the business terrain, thereby expanding climate change issues beyond the environmental bunker, which is largely characterized by discourses about environmental degradation and the negative impacts of climate change on livelihoods and the environment.

Rather than perpetually viewing climate change as an overpowering dracula that is about to consume the entire world, economists and other experts have begun reshaping our perception of climate change, turning it towards the positive elements inherent in it. In other words, they are helping us to understand the immense opportunities that climate change offers-opportunities that would not only help the world adapt to the menace of climate change, but would also open the world to an array of investment avenues.

In as much as climate change poses threats to humankind, it also presents us with great business opportunities. These opportunities, often referred to as green opportunities, are in the areas of clean renewable energy, carbon market trading, technology transfer, transport management, biofuels and so on.

Just last year, the carbon market grew to Euro 92 billion (US$125 billion), which is more than double its Euro 40 billion value in 2007. Tremendous growth has also been recorded in the area of clean development mechanism which is very much open to developing countries like Nigeria. The total value of the clean development mechanism was Euro 24 billion in 2008, and it is currently growing at a startling rate.

Unfortunately, Nigeria is yet to fully explore the environmental market, which rakes in billions of dollars annually on the global stage. Instead of tapping into these great investment opportunities in the green economy, Nigeria is still relying heavily on its oil reserves as well as oil export. This type of reliance is detrimental to the nation's economy, warned Ewah Eleri, executive Director, International Centre for Energy, Environment and Development.

"Crude oil prices have declined to about a third of its price 12 months ago. Global financial meltdown and pressure on governments to respond to climate change are curbing the demand for crude oil worldwide. The United States of America- destination for about half of Nigeria's crude oil exports- has recently announced an ambitious plan to invest in clean energy and reduce dependence on foreign oil."

An unstable oil market portends great danger to economic stability and growth in Nigeria, unless we join the
rest of the world in moving towards a clean energy economy," expressed Eleri.

While developing countries such as China, India and Brazil have long profited from the carbon market, Nigeria is yet to make headway in the market, despite its huge potentials in the business. In fact, the investment in the carbon market offers Nigeria a potent opportunity to fill existing funding gaps in power projects using clean technologies.

At a time when solar energy and hydropower are gaining prominence in the production of centralized energy for urban and rural livelihoods in other countries, Nigerians are still depending on diesel, fuel and firewood for their main sources of energy.

Many emerging economies are now exploring opportunities in renewable energy, especially biofuels. For instance, China has won the right to grow palm oil for biofuels on 2.8 million hectares of Congo. This promises to be the largest palm oil plantation in the world. The Asian country has also made plans to grow biofuels in Zambia on 2 million hectares. One wonders where Nigeria stands in this whole enterprise. When will it tap into the biofuel business, which also has enormous potentials for alleviating hunger and poverty in the country?

Nigeria occupies the 20th position on the 2006 Global Hunger Index. The report also revealed that 65 percent of Nigerians were under the yoke of food insecurity; about 40 percent of children less than five were stunted, while 25 percent were underweight. This grim data has not become any better since then. It certainly does not speak well of a country which is richly endowed with abundant human and natural resources.
Investment in green opportunities can change this gloomy picture.

It would aid the enhancement of the Nigerian economy and improve the livelihoods of the citizenry. In a bid to unveil these fresh opportunities, the International Centre for Energy, Environment and Development and the Nigeria Climate Action Network (Nigeriacan), in collaboration with BusinessDay and the Nigeria Conservation Foundation, recently organized a business forum on climate change in Lagos.

At the forum, Onno Ruhl, World Bank country director, who was represented by Amos Abu, pointed out that "development efforts can no longer ignore the risks of climate change or the local and global benefits of sustainable solutions. New knowledge, technology, and finance are fundamental to increasing the competitive landscape for sustainable innovations."

While stressing that "climate change makes people of every nation, citizens of one planet dependent on the actions of others," Ruhl further revealed that the World Bank Group's mandate is sustainable development and poverty reduction. This implies "bringing power to the people in every meaning of this word: to light their homes, to withstand difficult weather, and to make the right choices that open new opportunities to their families," he stated.

Advising Nigeria, Amos Abu emphasized the need for Nigeria to adopt the four pillars of the bank's strategic framework on climate resilient development. These pillars include making adaptation and climate risk management a core part of development; taking advantage of mitigation opportunities; focusing on knowledge and capacity development; and scaling up financing opportunities. Undoubtedly, Nigerian businesses stand to gain significantly from the Clean Development Mechanism (CDM) projects, expressed Felix Dayo, President, Triple E Systems, USA.

"A 2004 survey estimated that for the year 2010, between 869 and 1,098 million tons of CO2 emissions of carbon credits will be traded in the global carbon market. In 2007 and 2008, about 2.7 and 4.9 billion tons of CO2 emissions were traded in the market, respectively. In 2008, the carbon market was about US$ 125 billion worth, of this CDM accounted for over US$ 32 billion, of which 83 percent went to China, India and Brazil," Dayo revealed.

"There is money to be made by the Nigerian private sector from the global carbon market. For this to happen, the Nigerian private sector must emulate their counterparts in China, India and Brazil. The organized private sector's participation is the key factor in achieving CDM benefits and increasing Nigeria's participation."

A total of 17 types of technologies could be developed as CDM projects. These include generation of power from fossil fuels and renewable energy, power transmission and distribution, and production of fuels for industry, vehicles and households. The onus is on the organized private sector to take advantage of these investment opportunities.

In the same vein, Dayo decried the fact that there are only two registered CDM projects in Nigeria (i.e. the recovery of associated gas that would otherwise be flared at Kwale Oil gas Processing Plant and the Ovade Ogharefe Gas Capture and Processing Project), and then urged the government and the private sector to do more in that regard.

There are some bottlenecks facing CDM in Nigeria, asserted Asmerom Gilau, a researcher from Triple E Systems, USA. These include inadequate technical knowledge of the process, lack of awareness among policymakers and political leadership about carbon market and mitigation activities, and the absence of readily usable sustainable development indices. Others are weak management and organization infrastructure, low level of industrialization, heavy dependence on international aids for development activities, and limited funding for expansion in the power sector.

However, he advocated for institutional strengthening, revamping existing institutional settings and regulatory frameworks to promote carbon investment in Nigeria, connecting investment promotion and economic development planning to the opportunities in global carbon market, and promoting awareness of the global carbon market among Nigerian financial sectors stakeholders.

Indeed, there is no doubt that clean energy investment will offer enormous benefits to the Nigerian economy, as it would enable increased flow of green investments thereby providing foreign direct investment to the country, pinpointed Eleri.

He added: "most of what you hear about climate change is gloom and doom-but the truth is that it also presents major investment prospects for Nigerian businesses. The onus is on the private sector to turn the climate challenge into profitable investments in areas such as clean energy, the carbon market, real estate and new insurance products." However, failure to seize these opportunities will leave the Nigerian economy in great danger, he warned.

Clearly, if Nigeria is to make giant strides in seizing green investment opportunities, there needs to be a collaborative effort between the public and private sectors. Inadequate awareness of the vast array of opportunities by the private sector and weak promotional and regulatory performance by relevant agencies has both hampered progress in green investments.

More than ever before, the need for Nigeria to shift from an oil-dependent economy to a more diversified one cannot be overemphasized. The gory threats of climate change, coupled with its alluring opportunities, have brought this need to the front burner. Concerted efforts ought to be made now to address this urgent need.