Entrepreneurship and the carbon market: opportunities and challenges for South African entrepreneurs

Abstract

The Kyoto Protocol and its implementation brought forward issues of climate change and its mitigation strategy by national measures through the creation of market mechanisms in carbon trading. The trading of emission certificates has become an important trade commodity worldwide, and its markets have diversified. While this opportunity has created new markets for entrepreneurs and actors that range from farmers to brokers, unequal involvement in most developing countries is noted. This has been mostly observed in those countries where entrepreneurship is often regarded as the cornerstone of economic growth and social improvement. South Africa has spearheaded other African countries in its implementation of Clean Development Mechanism (CDM) projects leading to carbon trading. Based on our research on South African entrepreneurship and its involvement in the carbon market, we conclude that albeit a number of opportunities, the biggest challenge for entrepreneurial participation in the carbon market remains in the nature and processes of CDM project implementation, the lack of a clear supportive system, limited access to financing and--more importantly--general ignorance of the trading opportunities by entrepreneurs. The complex nature of CDM projects themselves limits participation due to lack of the necessary skills on the national level leading to uneven distribution of CDM projects on provincial levels in South Africa. Recommendations are provided to overcome the obstacles and to promote entrepreneurial activity in the carbon market.