* Kyoto extension key to future of carbon offset projects
* Only tiny fraction of such projects are in Africa
* Durban unlikely to land new, broader pact
By Helen Nyambura-Mwaura and Katy Migiro
JOHANNESBURG/NAIROBI, Dec 7 (Reuters) - Africa has been slow to tap investment through the U.N.&${esc.hash}39;s Clean Development Mechanism (CDM) carbon offset programme and stands to lose the most should talks to broker a continuation of the emission-reduction pact fall through.
Africa accounts for only two percent, or 76 of the 3,612 projects registered under the CDM programme, which lets firms in rich nations offset their climate-warming emissions by investing in emissions-reduction projects in the developing world.
"The balance sheet so far for Africa has not been a happy one with the CDM, but we should not discount the fact that actually quite a lot of money and projects have entered that pipeline but they have gone to other countries," said Achim Steiner, head of the U.N. Environmental Programme in Nairobi.
Under the 1997 Kyoto Protocol, industrialised nations were legally bound to cut greenhouse gas emissions as the world faces rising sea levels and greater weather extremes.
Delegates from over 190 nations are meeting in the South African port city of Durban to discuss a new global deal to replace the Kyoto pact when the first commitment period on tackling climate change expires at the end of 2012.
Critics say the process of registering CDM projects is arduous, expensive and too complex for many African firms, though others argue the pipeline of projects seeking registration is growing.
"In the last 18 months or so (we have seen) a significant growth in CDM projects and a growth in capability of technical advisers and financial advisors to assist in these projects," said Karin Ireton, Director Sustainability at Africa&${esc.hash}39;s biggest banking group Standard Bank.
"We could see a much greater investment in cleaner technology projects in Africa if we manage to get a second commitment period or a transitional arrangement," Ireton said.
Without a future commitment under Kyoto to cut emissions beyond the end of 2012 when the first phase expires, there will be no demand for carbon credits or offsetting.
The meagre number of projects is also due to the fact that most poor African countries do not have many polluting industries, putting the continent at a disadvantage.
CDM A FAILURE?
Most profitable CDM projects have been those destroying industrial gases HFC-23 and N20 at adipic acid plants and the only sub-Saharan country to list such schemes is South Africa.
Africa&${esc.hash}39;s largest registered project eliminates gas flaring at the Pan Ocean oil field in Nigeria, effectively blocking more than 2.6 million metric tonnes carbon dioxide being emitted annually. The second biggest is a similar project at Nigeria&${esc.hash}39;s Kwale field, hindering about 1.5 million tonnes of emissions.
Other projects in Africa are much smaller, mainly tapping gases at landfills and using them to generate electricity.
"Due to an absence of heavy industry, it is hard to generate emission reductions with classic types of CDM projects. For example, with a green grid adding more hydroelectricity resource generates very few emission reductions," said Paul Soffe, associate director at project developer EcoSecurities.
Investors are concerned about the future of Kyoto, slowing global growth prospects, record CDM credit issuance this year and stricter limits for using credits in the European Union&${esc.hash}39;s emissions trading scheme after 2012.
The uncertainty has already had a knock-on effect on the CDM market, pushing primary investment down to ${esc.dollar}1.5 billion in 2010 from ${esc.dollar}2.7 billion in 2009 and ${esc.dollar}6.5 billion in 2008.
Benchmark U.N. carbon credits have also been hit and were trading at 4.92 euros as of 1232 GMT, just shy of the 4.53 euros on Nov. 28.
But some critics say the scheme has never produced the gains that its proponents claimed.
"It (CDM) is a failure. What has it done. It was actually a distraction to delay action. Can you tell me what it has really achieved in Africa? Nothing," said Mithika Mwenda, coordinator for Pan African Climate Justice Alliance.
"Even if we turn the whole of Africa into forest, without addressing this problem where emissions are being produced, then I don&${esc.hash}39;t think we are going to do anything. We need action which is not happening there." (Editing by Jon Boyle)
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