Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan Global Carbon Market and CDM Potential in Cement Production Industry January 30 th 2008 Workshop on Carbon Credit Potential in Cement Production at Islamabad Syed Amjad Hussain CDM Expert (Forestry/Agriculture)

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan  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  Cement Production Process  GHG’s 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 Outlines of Presentation

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan Status of CDM Projects  To date 904 Registered CDM Projects million CERs expected  In Pipeline: 2800 CDM Projects 1.15 billion CERs expected to the end of 2012.

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan Global Carbon Sellers 2006

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan Global Carbon Buyers Overall volume: 466 million tCO 2 e 2006 Overall volume: 352 million tCO2e 2005

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan Sector Wise Global Carbon Market

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan 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 Roles of Service Providers

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan 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 ( °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. Cement Production Process

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan Fuel Switching Traditional fuels in the cement industry are Coal Oil and Petroleum Coke (petcoke) Clinker Substitution 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} Thermal Efficiency Improvements Type of Production Process (Efficiency of the Process and Sub-processes) CDM Opportunities in Cement Production

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 CostEstimated financial Requirement Project Development and Establishment 25,000–75,000 US$ Validation10,000–15,000 US$ CDM Registration FeesUS$ 0.10/CER for the first 15,000 t CO2-e/year, US$ 0.20/CER for above 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. Adaptation Fund2% of CERs issued under CDM project levied for fund to help vulnerable countries adapt to climate change (not for small-scale projects) Host Country Approval Fee No Fee in case of Pakistan Costs of CDM Projects

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan 1.Prototype Carbon Fund (PCF) 2.Italian Carbon Fund (ICF) 3.Netherlands Clean Development Mechanism Facility (NCDMF) 4.Community Development Carbon Fund (CDCF) 5.Spanish Carbon Fund (SCF) 6.Danish Carbon Fund (DCF)  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. Current Sources Available for CDM Projects Access to Global Carbon Markets for CDM Projects

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan  Total Capital US$180 million  Operated By World Bank with partnership between seventeen companies and Six Governments  FromApril  Purpose of PCF:  PCF is pioneer carbon market for project-based on greenhouse gas emission reductions while promoting sustainable development. Prototype Carbon Fund (PCF)

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan Italian Carbon Fund (ICF)  Total Capital US$ million.  Operated By World Bank and Ministry of Environment and Territory, Italy  From 2003  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$ million.  Operational By World Bank  Supported by Netherlands Government  From May 2002  Purpose of NCDMF:  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  Total Capital US$ million  Operational By World Bank  Supported by Nine Governments and 15 corporations/organizations  From March  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. Community Development Carbon Fund (CDCF)

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan  Total Capital US$ million.  Operated By Ministries of Environment and Economy of Spain and the World Bank  From 2004  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. Spanish Carbon Fund (SCF)

Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan  Total Capital US$ 68.5 million.  Funded By Ministry of Foreign Affairs of Denmark, Ministry of the Environment of Denmark and private sector participant  FromJanuary 2005  Purpose of DCF:  The purpose of this fund purchase carbon credits from developing countries under the Kyoto Protocol. Danish Carbon Fund (DCF)

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