Africa's "green" potential needs foreign cash: World Bank

LONDON (Reuters) - Investor ignorance, unskilled local labor and a lack of cash are contributing to a huge shortfall in clean energy investment in Sub-Saharan Africa, a World Bank report said on Wednesday.

Sub-Saharan Africa has only a tiny fraction of clean energy and other projects which rich countries pay for in developing countries to cut carbon emissions under a U.N. scheme, at 1.4 percent, or 53 out of nearly 4,000 proposed projects.

The region represents an untapped mine of such projects under the U.N. scheme, called the Clean Development Mechanism (CDM), which needs more foreign investment and local policy support.

"For any capital-intensive infrastructure in Sub-Saharan Africa, lack of investment and financing capacity is a chronic barrier, whether involving conventional or clean energy projects," found the report entitled "Unveiling the Potential, Addressing the Barriers."

"Regulatory gaps in the region's energy sectors hinder or prevent clean energy projects from selling their energy production," the report added. In addition, carbon market misconceptions were hindering investment in the region.

The $13 billion CDM scheme under the Kyoto Protocol on global warming allows companies and governments in rich nations to invest in clean energy projects in developing countries.

In return, investors receive offsets which they can sell for profit or use to meet emissions targets under Kyoto.

"A common assumption ... is that (Sub-Saharan Africa's) weak CDM portfolio simply reflects its poverty -- that is, its countries have few industries, little emissions, and thus limited emission-reduction opportunities," the World Bank said.

In fact, growing energy demand in Africa meant that there were large opportunities either to install new clean energy generation or improve the efficiency of existing installations.

GRID

The report identified some 2,750 clean energy projects in Sub-Saharan Africa that could be registered under the CDM, which would have an estimated total capital cost of $158 billion.

But not all that cost could be met by selling carbon offsets, meaning alternative sources of income needed to be found, possibly including the World Bank's newly-created Climate Investment Funds (CIFs), potentially worth about $10 billion.

The projects could cut projected future Sub-Saharan greenhouse gas emissions, blamed for contributing to climate change, by the equivalent of 741 million tons of carbon dioxide (CO2) annually, more than the region's current total of 680 million tons per year.

Assuming an offset price of $10 per ton, the World Bank said these projects could generate over their lifetime some $98 billion in carbon offset revenues.

If fully implemented, the projects could generate more than 170 gigawatts of energy capacity, or four times the region's current energy production, the report said.

China and India have dominated the CDM market thus far, and are home to more than two thirds of projects currently in the pipeline.

To read the report or for additional news and analysis on the carbon markets, go to communities.thomsonreuters.com

(Reporting by Michael Szabo; Editing by Gerard Wynn)