Global Carbon Market and CDM Potential in Cement Production Industry

Syed Amjad Hussain Acting Head CDM Cell

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Outlines of Presentation
STATUS OF CLEAN DEVELOPING MECHANISM (CDM) PROJECTS UNDER KYOTO PROTOCOL Global Carbon Market Sellers Global Carbon Market Buyers Sector Wise Global Carbon Market Roles of Service Providers

CDM Opportunities in Cement Production GHGs Reduction Target Areas in Cement Production Industry for CDM Project Activities Reasons for Low Carbon Market size in CDM Projects Activities in Cement Production Sector Costs of CDM Projects
ACCESS TO GLOBAL CARBON MARKET Current Financial Source Available for CDM Projects Activities

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Status of CDM Projects

To date 904 Registered CDM Projects 105.17 million CERs expected 2800 CDM Projects 1.15 billion CERs expected to the end of 2012.

In Pipeline:

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Global Carbon Sellers

R. of Latin America 6% India 12% R. of Asia 7% Aferica 3%

Brazial 4%

Other & Unsp. 7%

China 61%

2006
Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Global Carbon Buyers

Netherlands 8% Europe-Baltic Sea 9% Spain 7%
Spain 6% Italy 10% Austrilia 3% Japan 7% Netherlands 4% Europe-Baltic Sea 3%

Japan 46%

UK 15%
Other Unsp. 7% UK 50% Other Europe 10%

Other Unsp. 3%

Other Europe 12%

Overall volume: 352 million tCO2e 2005

Overall volume: 466 million tCO2e 2006

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Sector Wise Global Carbon Market

2002-2006

2006
Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Roles of Service Providers

Carbon Brokers - Buying and selling of CERs in the emerging carbon market,
- Educating potential market participants about the costs, benefits, and mechanics of carbon trading etc. - Brokers help counterparties by developing unique transaction structures that meet the individual needs of buyer and sellers.

Project Development Consultants

CDM Consultants assist CDM project proponents for: - Development of CDM Project Design Documents (PDDs) - Quantification and monitoring of CDM Project that may lead to a successful GHGs reductions. - Help to market for sale of CERs
Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Cement Production Process

Following three steps are involved in cement production Preparing Raw Materials:
Mixing/Homogenizing Grinding and Preheating (drying) produces the raw meal.

Burning of Raw Meal to form Cement Clinker in the Kiln:

The components of the raw meal react at high temperatures (900-1500 C) in the precalciner and in the rotary kiln to give cement clinker.

Finish Grinding of Clinker and Mixing with Additives:

After cooling the clinker is ground together with additives.

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

CDM Opportunities in Cement Production Carbon Dioxide Emissions from Fuel Use
Type of production process (efficiency of the process and subprocesses) Fuel used (coal, fuel oil, natural gas, petroleum coke, alternative fuels) Clinker/cement ratio (percentage of additives) {The specific process CO2 emission for cement production depends on the ratio clinker/cement. This ratio varies normally from 0.5 to 0.95}

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Target Areas for Carbon Dioxide Emission Reduction in Cement Industry

By improving the energy efficiency of the process Shifting to a more energy efficient process (e.g. from (semi) wet to (semi) dry process) Replacing high carbon fuels by low carbon fuels Applying lower clinker/cement ratio (increasing the ratio additives/cement): blended cements. Application of alternative cements (mineral polymers) Removal of CO2 from the flue gases

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Reasons for Low Carbon Market Size of CDM Projects Activities in Cement Industry
Lack of awareness amongst Project Sponsors and Investors/Banks on the projects CERs generation and sales potential
Host country CDM procedures not established or not sufficiently communicated with the Project Sponsors Limited local consultancy capacity to assist Project Sponsors in developing the CDM component, especially concerning validation services Lack of Project Sponsors money to bridge finance the CDM related costs

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Costs of CDM Projects

Cost Project Development and Establishment Validation CDM Registration Estimated financial Requirement 25,00075,000 US$ 10,00015,000 US$ US$ 0.10/CER for the first 15,000 t CO2-e/year, US$ 0.20/CER for above 15000 t CO2-e/year A project expecting an average of 50,000 CERs per annum would pay an upfront registration fee of US$ 8,500. 2% of CERs issued under CDM project levied for fund to help vulnerable countries adapt to climate change (not for small-scale projects) No Fee in case of Pakistan

Adaptation Fund

Host Country Approval Fee

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Access to Global Carbon Markets for CDM Projects Current Sources Available for CDM Projects
1. 2. 3. 4. 5. 6. Prototype Carbon Fund (PCF) Italian Carbon Fund (ICF) Netherlands Clean Development Mechanism Facility (NCDMF) Community Development Carbon Fund (CDCF) Spanish Carbon Fund (SCF) Danish Carbon Fund (DCF)
www.prototypecarbonfund.org www.carbonfinance.org www.carbonfinance.org www.communitycarbonfund.org www.carbonfinance.org www.carbonfinance.org

These funds provide cash flow to host countries and communities to develop CDM projects and produce carbon credits. Pre-financing also available for project activities like project identification preparation, capacity building, outreach and research which lead to create CDM Projects Most of the part of these funding serving as a loan and are repaid only once the projects are matured to produce carbon credits on annually basis.

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Prototype Carbon Fund (PCF)

Total Capital Operated By US$180 million World Bank with partnership between seventeen companies and Six Governments

From
Purpose of PCF:

April 2000.

PCF is pioneer carbon market for project-based on greenhouse gas emission reductions while promoting sustainable development.

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Italian Carbon Fund (ICF)

Total Capital Operated By US$ 155.6 million. World Bank and Ministry of Environment and Territory, Italy 2003

From

Purpose OF ICF:
Purchase GHGs emission reduction credits from projects in developing countries under Kyoto Protocol's mechanisms such as CDM and in Developed Countries as a JI.

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Netherlands Clean Development Mechanism Facility (NCDMF)

Total Capital US$ 264.7 million.

Operational By
Supported by From Purpose of NCDMF:

World Bank
Netherlands Government May 2002

Purchase of CERs from the developing countries under the Clean Development Mechanism (CDM) established under the Kyoto Protocol.

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Community Development Carbon Fund (CDCF)

Total Capital Operational By Supported by From Purpose of CDCF: Supports projects that combine community development attributes with emission reductions to create "development plus carbon" credits, and will significantly improve the lives of the poor and their local environment in Developing Countries. US$ 128.6 million World Bank Nine Governments and 15 corporations/organizations March 2003.

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Spanish Carbon Fund (SCF)

Total Capital Operated By US$ 278.6 million. Ministries of Environment and Economy of Spain and the World Bank 2004

From Purpose of SCF

Purchase greenhouse gas emission reductions from projects developed under the Kyoto Protocol to mitigate climate change while promoting the use of cleaner technologies and sustainable development in developing countries and countries with economies in transition.

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

Danish Carbon Fund (DCF)

Total Capital Funded By US$ 68.5 million. Ministry of Foreign Affairs of Denmark, Ministry of the Environment of Denmark and private sector participant January 2005

From Purpose of DCF:

The purpose of this fund purchase carbon credits from developing countries under the Kyoto Protocol.

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

THANK YOU

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan