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The grand development plans for the City of Cape Town leading up to and beyond the 2010 World Cup present two immediate challenges.  First - how do we finance these extensive developmental plans and, secondly - how do we develop our city in a way that is least damaging to the natural environment?

We all acknowledge the need for an integrated approach to current and future development of our city in which transportation is part of a larger focus on sustainable development that also addresses housing, land use and economic development.

With that in mind, it is important to understand that current infrastructure, investment and development decisions have a major impact on future pollution rates, where implementing sustainable solutions can now advance multiple goals.

When it comes to sourcing the financing for that development, the city cannot expect to achieve this monumental task solely on its allotted budget from the province's coffers and municipal revenue.

All the developmental plans for our city mean nothing without the appropriate funding.  The public outcry following the 15% rates increase and the city's assertion that we are on the verge of an infrastructural breakdown place the issue of funding for development and infrastructure in the spotlight.

In reality, we have barely enough funding to operate and manage the infrastructure that already exists, never mind the developmental plans for our city beyond 2010.  It is wholly unrealistic to imagine that the city's ratepayers and taxpayers should foot the bill for the extensive development that is envisaged.

It is time that the city and the province start thinking of alternative and innovative ways of increasing our funding sources.  It is time that we start thinking outside of conventional methods of securing funds for development, and I am not talking about introducing fuel levies and tourism levies, which further burden the taxpaying public.

I am proposing that we become serious players in the emissions trading market, and in particular carbon credits trading.

Carbon credits trading is a relatively unknown market mechanism which can yield not only the development plans we aspire to, such as a revamped and modernised transport system, but also development that is environmentally sustainable.  Climate change has undoubtedly become the most pressing environmental issue today, and in response to the ever-worsening crisis, countries have embarked on massive campaigns to address the issue.

Carbon trading was developed as a way to deal with climate change and assist developing countries in developing in a manner which will not further erode the environment.

The global climate change talks have focused on facilitating the transition of developing countries' current development path from one modelled after the industrialised nations to a clean and energy-efficient paradigm.  The Kyoto Protocol is an amendment to the UN International Treaty on Climate Change, which assigns mandatory emission limitations for the reduction of greenhouse gas emissions to signatory nations.

Under the protocol, ratifying countries agree to submit themselves to the obligation to reduce their emissions of greenhouse gases including carbon dioxide, sulphur dioxide, nitric oxide and ash.

The concept underlying carbon trading is straightforward.  Carbon emissions of industries and industrialised nations are limited and those that meet the requirements are allowed to sell any unused allocations on the open market.  Those that require more credits are free to buy any unused allocations.

Thus, a developing country can offer its credits in return for investment in its development projects.  Thus, social, environmental, technological and economic goals are achieved through market mechanisms.  Clean development mechanism (CDM) projects allow companies or industrialised countries to invest in projects in developing countries.  In return for this investment, carbon credits are received by the investor in the industrialised country.
However, a key clause in the Kyoto Protocol is that all CDM projects in developing countries must contribute to sustainable development goals in the host country and must not generate any negative environmental externalities.

Next year will see the beginning of the second phase of the European Commission's programme to reduce emissions.  This phase will run until 2012 and will coincide with the Kyoto commitment to reduce emissions by 8% from 1990 levels.  Countries such as the Netherlands, Sweden, Denmark and Finland, Switzerland and Austria, which are already ahead in their mandated domestic emissions reductions, are investing abroad in project-based reductions under the CDM projects.

As a city we have a five-year window of opportunity starting in 2008 to attract some form of benefit from this trading mechanism.

To gauge the extent of the economic benefits involved consider this: Europe traded one billion tons of carbon dioxide to the value of E18 billion in 2006 alone.  Looking at the number of CDM projects running in countries such as Brazil, India and China, it is clear that South Africa has been slow to take up the challenge.

As of February 13 this year, 500 CDM projects were registered worldwide. Of these, 167 are registered in India, 88 in Brazil and 37 in India.  Disappointingly, only six CDM projects are currently registered in the whole of South Africa.  Interestingly, 900 more projects worldwide are in the process of being registered. A staggering 80% of those are based in China alone.

Of the six CDM projects running in South Africa, three are in the Western Cape.  The benefits of increasing our market share of carbon credits trading are three-fold: a lower emissions benefit which is environmentally sustainable; meeting the cost-effectiveness and energy-saving targets; and the increase of funding for development projects.

In Cape Town, transportation is the largest contributor to air emissions in the city, while the modernisation of our transport infrastructure has been earmarked as a critical project for 2010 and beyond.

Carbon credit trading is an interesting opportunity for the City of Cape Town and the Western Cape in general to tap into a large revenue-generating scheme while contributing towards the fight against climate change.

Bogota, the capital of Colombia, has begun a process of modernising its transport system under the auspices of a Japanese CDM project.

The example of the Bogota transport system upgrade through carbon credit trading could be extremely helpful in the search for alternative sources of funding for developing our transport infrastructure into the best of its kind in the world.

During the 1990s, Bogota was plagued by serious transportation problems, including neglect of road maintenance.  While the largest portion of the budget for transport was being spent on road-widening and flyovers, the critical traffic situation was not being adequately addressed.

According to various commentators, this situation was compounded by other critical urban dilemmas, such as rising pollution levels, high accident rates, increasing population, a high crime rate, the growth of informal settlements, poor infrastructure and an absence of public spaces.  In essence, the situation was not very different from that in present-day Cape Town.

Bogota was approached by the government of Japan as part of a CDM initiative to introduce an energy-efficient solution to the prevailing transport crisis.  With the support of the Japanese government, the city created a more comprehensive transport and pollution control plan, which included the institution of a rapid transit bus system - known as the TransMilenio - encouraging the use of bicycles and discouraging the use of private vehicles.

The bus system is expected to be completed only in 2016, but it already uses intricate systems such as segregated bus lanes, rapid boarding and alighting; clean, secure and comfortable stations; efficient pre-board ticketing, and priority for buses over private vehicles.

The management control and planning is based on a public-private enterprise initiative.  Essentially, infrastructure facilities such as corridor, stations and garages are handled by the government, while operational activities such as equipment and ticketing are handled by the private sector, creating a favourable situation for both parties.

Since the project was instituted at the end of the last millennium, the system has grown to carry more than 875 000 passengers a day in more than 500 buses.

However, it is the reduction in greenhouse gas emissions that is astonishing.  In Bogota, transport's contribution to carbon emissions has been cut by more than 40%, although the project is still in its infancy.

The TransMilenio system re-duces greenhouse gas emissions through more efficient transport and the partial substitution of private transport by high-quality public transport.  This has also resulted in more than 2 000 public service vehicles being scrapped or removed from the public transport system.

In addition, the city stands to gain millions through the selling of carbon credits in energy efficiency initiatives. With the success of the first phase of the project, the Netherlands has realised its financial viability and has partly financed the second phase of the project under the CDM umbrella.

According to official estimates, the cost of instituting the system is considerably less than that of systems introduced in, for example, China and Japan.  In fact, the total investment cost of building the road network stood at $5 million a kilometre, transporting between 35 000 and 45 000 passengers an hour.

The system is envisaged to be completed in 2016, at which time the total investment is expected to be $1.97 billion.  The system is being funded from the Bogota mayor's office, the World Bank and private-sector stakeholders.  What is more exciting is the fact that the system is completely maintained from ticket revenue, with no subsidies provided.

With the approach of the World Cup, it seems that Cape Town has a significant challenge to meet. But at the same time, it could address climate change and fulfil its 2010 transportation mandate and many other development plans, much in the way that Bogota has done, by stepping into the global carbon credits trading market.

All we need is the political will and buy-in from all sectors.

Theuns Botha is provincial leader of the DA, Western Cape, and the DA spokesman on finance in the Western Cape provincial legislature.
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