Anizoba 1

What are the Laws and Policies Influencing the Implementation of Clean Development

Mechanism Projects in Nigeria And What Challenges Do They Face?

Adanma N. J. Anizoba

Abstract: The development of renewable energy technologies has an important role in

achieving the goal of sustainable development. One of the methods of achieving sustainable

development is by implementing renewable or clean energy technologies in sectors of a

country’s economy. The Kyoto Protocol mandates countries which are parties he agreement to

aim at achieving sustainable development by embarking on renewable projects that contribute to

reduction in greenhouse emissions globally. A cost-effective market-based instrument that may

be used to achieve this is the Clean Development Mechanism (CDM). As plentiful as the benefits

are that come with the implementation of CDM projects, many developing countries including

Nigeria are yet to successfully operate such projects at maximum capacity and efficiency.

Estimates by the World Bank have visibly shown that many African countries have been

unable to live up to the great emission reduction credits potentials within its confines. With over

3,200 clean energy projects and about 740 million tons of greenhouse gas emissions reduction

per year, the continent still has only 2% share of global CDM pipeline. Studies showed that

Nigeria is currently the world’s leading gas-flarer with almost 2 billion standard cubic feet a day

being flared yet several barriers impede the implementation of CDM projects to curb or mitigate

the impact of these activities (Ademoroti, 2009). This paper discusses the legislative and

regulatory framework concerned with climate change and Clean Development Mechanism, the
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challenges CDM project implementation faces in Nigeria and possible practical solutions to these

challenges.

TABLE OF CONTENTS

Table of Contents--------------------------------------------------------------------------------------------2

List of Abbreviations----------------------------------------------------------------------------------------3

List of Tables-------------------------------------------------------------------------------------------------3

Introduction---------------------------------------------------------------------------------------------------4

CDM Implementation in Nigeria And Existing Projects-----------------------------------------------6

Environmental Regulatory Authorities in Nigeria------------------------------------------------------9

Key Legislation and Policies Supporting CDM Project Implementation---------------------------10

Challenges Facing CDM Implementation in Nigeria--------------------------------------------------13

Conclusion--------------------------------------------------------------------------------------------------16

References---------------------------------------------------------------------------------------------------17
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LIST OF ABBREVIATIONS

CDM Clean Development Mechanism

CER Certified Emissions Reductions

DCC Department of Climate Change

ECN Energy Commission of Nigeria

EIA Environmental Impact Assessment

ER Emissions Reduction

GDP Gross Domestic Product

GHG Greenhouse Gases

JI Joint Implementation

KP Kyoto Protocol

NESREA National Environmental Standards and Regulations Enforcement Agency

NNPC Nigerian National Petroleum Corporation

NOSDRA National Oil Spill Detection and Response Agency

UNEP United Nations Environment Programme

UNDP United Nations Development Programme

UNFCC United Nations Framework Convention on Climate Change

LIST OF TABLES

Table 1: Projects in Nigeria registered by the CDM Executive Board, accessed online via

https://cdm.unfccc.int/Projects/projsearch.html
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Introduction

In 1997, the Kyoto Protocol was adopted as an agreement under The United Nations

Framework Convention on Climate Change and serves as a binding commitment by setting

emission reduction targets for Annex I countries. Annex I countries are recognized as developed

or industrialised countries which are responsible for the currently rising levels of GHG

(greenhouse gases) emissions in the atmosphere. The Kyoto Protocol mandates these Annex I

countries to reduce their GHG emissions by 5.2 percent against 1990 levels during its first

commitment period from 2008 to 2012. Because of these conditions, the Kyoto Protocol places a

higher burden on these developed countries under the principle of “common but differentiated

responsibilities”. These means that all countries both developed and developing, have a role to

play in the task of emission reductions but recognized that these countries have varying social,

economic and political conditions. Therefore, it offers some cost-effective market-based

mechanisms by which they can meet their targets; these include the Joint Implementation(JI),

International Emissions Trading and Clean Development Mechanism (CDM).

The Joint Implementation is concerned with executing Emissions Reductions projects in

developed countries in exchange for Emissions Reduction Units and International Emissions

Trading involves the carbon trading in the energy market. The Clean Development Mechanism is

one of the instruments under the Kyoto Protocol, which mandates Annex I countries to establish

and sustain various low- carbon emission projects (ER- ‘Emission Reduction’) in developing

countries such as Nigeria and in return receive carbon credits (CERs – Certified Emission

Reductions) for successfully implemented projects. The goals that CDM aims to achieve are to

help developed (Annex I) countries reach their targets under the Kyoto Protocol and promote

sustainable development in developing (non-Annex I) countries.

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In 2004, Nigeria ratified the Kyoto Protocol, but the country has not taken any steps to

commit to fully implementing the mandate in any laws, standards or policies. The country

cooperates with these processes by ensuring that the emissions of greenhouse gases by gas

flaring and other activities are monitored and measured. In 2011, the National Adaptation Plan of

Action to the UNFCC was drafted and forwarded; and the government drew up the Presidential

Implementation Committee on Clean Development Mechanism. The goal was to create

awareness among stakeholders about the effects of climate change and the need to adopt clean

technologies in various projects and processes. By 2015, the total number of CDM projects in

Nigeria was approximately 12 and included project activities in various industries such as hydro,

biomass energy and landfill gas. The economic sustainability of implementing CDM projects in

any region is also measured by the value of CER’s generated by CDM projects in the region

relative to the combined GDP of the geographic region. In Nigeria CER’s arising from CDM

projects account for 44.87% of the GDP which is slightly higher than the overall average of 40%

for the African region (Pillay, 2016).

CDM and other carbon market-based instruments play an important role in promoting

sustainable development and addressing some social and environmental issues. Resources need

for executing these mechanisms such as finance and sustainable technologies have over the years

been accessed through official development assistance (ODA).

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CDM Implementation in Nigeria And Existing Projects

For a project activity to be registered as a CDM project with the UNFCC, it must be

submitted, and a registration fee must be paid by the designated operational entity. According to

the 2015 CDM pipeline report, a total number of 12 CDM projects in Nigeria have been

identified by UNEP and these project activities are spread across different industries (CDM,

2015). These projects cut across energy, construction, transport, agriculture and waste disposal

amongst various others. These projects are recognized as CDM because they bring about long-

term benefits that help mitigate the effects of climate change and result in sustainable

development. “In Nigeria, the criteria used to measure sustainable development, include the

following: the project must lead to real and verifiable emission reduction, ensure investment,

economic growth protection and increased income, enhance efficient energy development and

utilisation, bring about environmental and financial benefits, facilitate speedy transfer of

technology and result in real, measurable and long – term benefits related to climate change

mitigation” (Fodeke, 2011).

Below is a table showing the list of registered CDM projects in Nigeria:

S/N Date Project Host Parties Other Estimated

Registered description Parties Annual
and category Emissions
Reductions
(t CO2e)
1 09/11/2006 Recovery of Nigeria Italy 1496934
associated gas
at Kwale oil-
gas
processing
plant, Nigeria
(oil field
faring
reduction)
2 01/02/2009 Pan Ocean Nigeria Norway 2626735
Gas
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Utilization
Project (oil
field flaring
reduction)
3 12/10/2009 Efficient Fuel Nigeria Germany 31309
Wood Stoves
for Nigeria
(energy
efficiency in
households)
4 16/10/2010 Recovery and Nigeria Norway 256793
Marketing of
gas at the
Asuokpu/
Umutu
Marginal field
(oil field
flaring
reduction)
5 15/10/2010 Municipal Nigeria Belgium, 281781
Solid Waste Ireland,
(MSW) Norway,
Composting Luxembourg,
project in Portugal
Ikorodu,
Lagos
(landfill gas)
6 12/07/2012 LFG project Nigeria France 129932
in Nigeria
7 29/10/2012 Afam Nigeria 550234
Combined
Cycle gas
Turbine
Power Project
8 18/12/2012 Lafarge Nigeria France 166557
WAPCO
Partial
Substitution
of alternative
fuels in
cement
facilities in
Nigeria
9 24/12/2012 Recovery and Nigeria 288147
Utilisation of
associated gas
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from
Obodugwa
and
neighboring
oil fields in
Nigeria
10 28/12/2012 Kainji Nigeria Belgium, 873474
Hydropower Germany,
Rehabilitation Sweden, Italy
Project
11 19/07/2013 Golden Sugar Nigeria United 59421
(Submitted) 30MW High Kingdom of
08/11/2013 Energy Great Britain
(Rejected) Efficient and Northern
Combined Ireland
Heat and
Power (CHP)
System in
Apapa, Lagos,
Nigeria
12 16/12/2014 OML58 IPP Nigeria 264994
Gas Fired
Generation
Project
Table 1: Projects in Nigeria registered by the CDM Executive Board, accessed

online via https://cdm.unfccc.int/Projects/projsearch.html

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Environmental Regulatory Authorities in Nigeria

The main regulatory agencies or bodies that deal with environmental issues include the

following:

1. The Federal Ministry of Environment (now the Federal Ministry of Environment,

Housing and Urban Development) which is the chief regulatory body in the country and

oversees the activities of all other agencies involved with environmental laws and

protection. The regulatory authority for CDM projects, Department for Climate Change

(DCC) operates under this ministry.

2. The National Environmental Standards and Regulation Enforcement Agency (NESREA)

which is responsible for environmental protection, management and development.

3. The Nigerian Oil Spill Detection and Response Agency (NOSDRA) which is responsible

for detection and timely and effective response to oil spillages in the country and the

clean and remediation of affected sites.

There are various departments within these agencies and other parastatals that are

charged with environmental regulation and the establishment of the renewable energy industry.
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Key Legislation and Policies Supporting CDM Project Implementation

Nigeria does not have any nationally recognised institutional framework for the

implementation of CDM and no standard policy exists regarding renewable energy but there are

key forms of legislation in place regarding environmental regulation in the country. Some of

these include:

I. The National Environmental Standards Regulations and Enforcement Agency

(NESREA) (Establishment) Act 2007 and the 33 Regulations created under the

Ministry of Environment under section 34 of the Act under the 1999 Constitution

of the Federal Republic of Nigeria (section 20), which revoked the Federal

Environmental Protection Act 1988.

II. The Environmental Impact Assessment (EIA) Act (Cap E12 LFN 2004) which

states the general principles, procedures and methods of environmental impact

assessment in various sectors.

III. The Harmful Waste Act (Cap H1 LFN 2004) that prohibits the carrying,

depositing and dumping of harmful waste on land and in territorial waters.

IV. The Endangered Species (Control of International Trade and Traffic) Act (Cap E9

LFN 2004) which caters for the conservation and management of wildlife and the

protection of endangered species, as required under certain international treaties.

V. The National Oil Spill, Detection and Response Agency (NOSDRA) Act 2006

concerned with the availability of the resources, equipment and machinery for the

co-ordination and implementation of the National Oil Spill Contingency Plan for

Nigeria to ensure safe, timely, effective and appropriate response to major or

disastrous oil pollution.

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VI. The National Park Services Act (Cap N65 LFN 2004) which deals with the

conservation and protection of natural resources and plants in national parks.

VII. The Nigerian Minerals and Mining Act 2007 which revoked the Minerals and

Mining Act No. 34 of 1999, and guarantees the regulation the exploration of solid

minerals, among other purposes.

VIII. The Water Resources Act (Cap W2 LFN 2004) which aims at promoting the

optimum development, use and protection of water resources.

IX. The Hydrocarbon Oil Refineries Act which is concerned with the licensing and

control of petroleum refining activities.

X. The Associated Gas Re-Injection Act deals with gas flaring activities by oil and

gas companies and prohibits, without lawful permission, any oil and gas company

from flaring gas in Nigeria and stipulates the penalty for breach of permit

conditions.

XI. The Nuclear Safety and Radiation Protection Act that is concerned with the

regulation of the use of radioactive substances and equipment that emits and

generates ionising radiation, and the establishment of regulations for protecting

the environment from the harmful effects of ionising radiation.

XII. The Oil in Navigable Waters Act concerned with the discharge of oil from ships

and vessels and prohibits the discharge of oil from ships into territorial waters or

shorelines.

Other national policies that promote clean energy development and the implementation of

CDM include the National Electric Power Policy of 2001, the Electric Power Sector Reform Act
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of 2005, the National Energy Policy of 2003 developed by the Energy Commission of Nigeria

(ECN) and the National Oil and Gas Policy of 2004 produced by the Bureau of Public

Enterprises in 2004 which enacts provision for the establishment of a National Gas Grid and

investments in the promotion and use of renewable energy sources including research and

development. Another policy is the National Biofuels Policy of 2007 which the NNPC was

mandated to see it through; to establish a booming biofuel industry. Other policies and reforms

include the Petroleum Industry Bill (PIB), the National Gas Master Plan, the Roadmap for Power

Sector Reforms and Vision 2020.

In 2005, the ECN along with UNDP developed the Renewable Energy Master Plan

(REMP) which addresses the development challenges Nigeria faces by exploiting renewable

energy and clean energy development. In 2006, the National Policy and Guidelines on

Renewable Electricity was put in place by the Federal Ministry of Power. Alongside this was the

Renewable Electricity Action Programme to include renewable energy (excluding hydropower)

in the fuel mix for electricity generation by at least 5 percent of total power generation and at

least 5 TWh of electricity production by 2016.

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Challenges Facing CDM Implementation in Nigeria

Some of the challenges facing the CDM implementation and the advancement of policies

regarding clean energy development and subsequently execution of CDM projects are lack of

access to energy, delayed progress of energy sector reforms, and lack of access to conventional

finance. The lack of or there say, the slow pace in progress in clean energy development in

Nigeria is mainly because of a defective institutional framework in the country. Private sector

participation in the implementation of CDM projects in Nigeria has also been minimal,

influenced by unsupportive policy frameworks. The government acknowledges that climate

change serves as a threat to socio-economic growth and sustainable development in the country.

Inadvertently, there is a lack of capacity or political will to implement the policies and

programmes in the country. Some of the policy documents like the REMP and the National

Energy Policy are yet to receive legislative attention or presidential endorsement. Even the

Electric Power Sector Reform Act passed in 2005 has not been fully implemented.

Another major challenge for CDM project implementation is the lack of access to

finance, both domestic and international as stated above. The business math behind CDM

projects as enunciated under Kyoto Protocol is that carbon finance can only turn borderline

projects into viable ones if there is proof they will result in significant GHG reduction. Hence

CDM, according to Durando Ndongsok of First Climate in his write up on CDM IN AFRICA -

Facing the hurdle of conventional Finance, is not “a panacea for projects that make no financial

sense at all”. Research has shown that access to finance plagues the development of CDM in

Africa, as well as in Nigeria. The economic viability of most emissions reducing ideas is a huge

factor in the ability of the parties to access funds for the projects. Most times, these ideas tend

not to be bankable projects.

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The lack of capacity building also is a great barrier to the successful implementation of

CDM in Nigeria. Investors are not likely to be attracted to project ideas that have not been

proven to feasible for economic viability. It is necessary to perform the necessary feasibility

studies and have the right knowledge base to undertake CDM projects. Issues such as bottlenecks

in the governmental or institutional regulation, inadequate knowledge base and lack of support

services come into play when the need arises for capacity building CDM project implementation.

Active participation of stakeholders like the regulatory bodies involved is very important, as they

can ensure that adequate infrastructure and resources needed for execution are made available.

Without this intervention, there are likely to be glitches during the pre-project, mid-project or

launch phases or the project is likely not to be implemented at all. This is the case seen in the

non-implementation of the Renewable Energy Mater Plan that was never endorsed by the

Federal Executive Council or passed into law, according to a 2013 IIED (International Institute

for Environment and Development) publication.

Furthermore, another challenge that could be taken note of is the complex technical

framework involved with registering eligible CDM projects under the Kyoto Protocol (KP) of

the UNFCC. This may serve as an obstacle to proffering suitable CDM projects that can be

accepted and implemented, therefore, hindering the development of CDM in Nigeria. Due to

these circumstances, these requirements pose a problem for most CDM projects in Nigeria, as

most of them are small and are deemed to be unattractive to potential investors or ineligible as

their contribution to emissions reduction may be very insignificant, in the larger carbon market.

They are therefore categorised as not being economically viable or financially feasible.

Finally, another significant challenge or barrier that CDM implementation in Nigeria is

the global view of the country and its current socio-economic and political conditions. The
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perception of global energy market may see huge investments in CDM projects in the country as

very risky. The expected growth in CDM development and implementation in Nigeria is almost

lacking as most investors are cautious of taking such financial risks in the country. Consequently,

it is paramount that the government take necessary action by establishing and fully

implementation regulatory policies that assure potential investors of their investment security.

These challenges emphasise the need to overhaul the existing legislative and regulatory

framework at all levels in the country. This will encourage clean energy development investment

and CDM project finance, resulting in the growth of Clean Development Mechanism (CDM) in

Nigeria.
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Conclusion

Nigeria is a country that contributes somewhat significantly to greenhouse gas emissions

yet there are few key legislative instruments in place to help influence or implement clean

development mechanism or other market-based mechanism used to reduce these emissions. In

response to several international obligations and incentives and concerns such as the need to

develop power generation in the country, the policy framework to promote and support clean

development mechanism has continued to evolve.

Investment in CDM projects is probably the most ideal method or instrument that will

increase the participation of stakeholders in the implementation of the CDM process. This will

involve both private and public-sector investments in clean energy sources and technologies that

have minimal or no negative environmental impact and aid in the reduction of GHG (greenhouse

gases) emissions. “Investment into clean energy systems provides the most effective and

optimally efficient path to an increased CDM participation in Nigeria and hence an effective

participation in the global carbon market” (Oyedepo, 2012).

As a country that has the highest levels of gas flaring, Nigeria contributes significantly to

greenhouse gas emissions, affecting climate change. This has seen global temperatures rising,

but even locally or regionally. As a developing (non-Annex I) country, Nigeria can benefit from

have several implemented CDM projects and a legislative and policy framework that supports

this development. Currently, such a supportive system does not exist in the country’s energy

laws and policies. Recommendations are that the government and stakeholders should create

awareness on renewable energy sources and energy efficiency, establish a clean energy

development agency in charge of project finance and develop inclusive energy policies that act

as a guidance in efficient use of energy resources.

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References

Ademoroti, S.M. Challenges of CDM Implementation and Development in Nigeria.

November 2009.

CDM, (2015). CDM Pipeline report. Available online via: http://www.cdmpipeline.org/

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https://cdm.unfccc.int/Projects/pac/howto/CDMProjectActivity/Register/ index.html

Department of Climate Change website. Accessed online via:

http://climatechange.gov.ng/training-materials-at-cdm-capacity-enhancing-workshop-released/

Ejide, S. & Co. Environmental law and practice in Nigeria: an overview. Accessed

online via: https://uk.practicallaw.thomsonreuters.com/w-006-3572?

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Fodeke, V. The Nigeria DNA: CDM Project Registration Process and Criteria. 2011

Low-carbon energy development in Nigeria. Challenges and Opportunities. Available

online via: http://iceednigeria.org/backup/workspace/uploads/lceg03555.pdf. 2013.

Oyedepo, S.O. Energy, Sustainability and Society (2012) 2: 15.

https://doi.org/10.1186/2192-0567-2-15.

Pillay, S. “An Assessment of Clean Development Mechanism Project Contribution to

Sustainable Development in Nigeria.” International Business & Economics Research Journal –

November/December 2016 Volume 15, Number 6

Timilsina, G. & Gouvello, C. & Thioye, M. & B. Dayo, F. (2010). Clean Development

Mechanism Potential and Challenges in Sub-Saharan Africa. Mitigation and Adaptation

Strategies for Global Change. 15. 93-111. 10.1007/s11027-009-9206-5.