Role of Development Finance Institutions (DFIs) in Promoting the Clean Development Mechanism (CDM) in Africa

This article outlines some of the latest developments and opportunities for development finance institutions¹ (DFIs) to become directly supportive of the Clean Development Mechanism (CDM²) in Africa. In striving to make development financing more environmentally friendly and sustainable, DFIs can play a key role in promoting the CDM on the African continent by providing monetary incentives through their project financing activities; encouraging and facilitating partnerships in support of sustainable development, particularly with reference to the CDM, and; providing technical advice and support to clients with regard to project design, planning and implementation. DFIs have traditionally focused on financing infrastructure and poverty alleviation projects. However, the emergence of the CDM has brought about a shift towards investments in services and products that reduce carbon dioxide emissions and encourage investments in environmentally friendly technologies. This can be ascribed in part to the development of a “carbon market” under the auspices of the Kyoto Protocol that took effect in February 2005. The carbon market and emerging carbon funds are some of the main drivers enabling DFIs to play an increasingly important role in promoting the CDM in Africa.