Global Carbon Market and CDM Potential in Cement Production Industry

1. Global Carbon Market and CDM Potential in Cement Production Industry Syed Amjad HussainActing Head CDM Cell Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

2. 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 • 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 Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

3. Status of CDM Projects • To date 904 Registered CDM Projects105.17 million CERs expected • In Pipeline: 2800CDM Projects 1.15 billion CERs expected to the end of 2012. Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

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

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

6. Sector Wise Global Carbon Market 2002-2006 2006 Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

7. 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

8. 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

9. CDM Opportunities in Cement Production Carbon Dioxide Emissions from Fuel Use • Type of production process (efficiency of the process and sub-processes) • 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

10. 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

11. 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

12. Costs of CDM Projects Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

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

14. Prototype Carbon Fund (PCF) • Total Capital US$180 million • Operated By World Bank with partnership between seventeen companies and Six Governments • From April 2000. • Purpose of PCF: • 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

15. Italian Carbon Fund (ICF) • Total Capital US$ 155.6 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

16. Netherlands Clean Development Mechanism Facility (NCDMF) • Total Capital US$ 264.7 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

17. Community Development Carbon Fund (CDCF) • Total Capital US$ 128.6 million • Operational By World Bank • Supported by Nine Governments and 15 corporations/organizations • From March 2003. • 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. Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

18. Spanish Carbon Fund (SCF) • Total Capital US$ 278.6 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. Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan

19. Danish Carbon Fund (DCF) • Total Capital US$ 68.5 million. • Funded By Ministry of Foreign Affairs of Denmark, Ministry of the Environment of Denmark and private sector participant • From January 2005 • 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

20. THANK YOU Clean Development Mechanism Cell, Ministry of Environment, Government of Pakistan