MECHANISM

Clean Development Mechanism opportunities for the power sector and chemical industry

Clean Development Mechanism (CDM) allows industries in developing countries to reduce emissions of greenhouse gases such as carbon dioxide, nitrous oxide, methane, and benefit from selling certified emissions reductions to developed countries

The Earth’s climate has been changing continuously over the past several million years, but the last two decades have actually witnessed the development of greenhouse gas (GHG) related problems, which can lead to a change in climate in an unprecedented manner.

The excessive accumulation of GHGs in the atmosphere is generally attributed to intense industrialization in the past one century. The main GHGs are carbon dioxide, methane, nitrous oxide, hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexa fluoride. The presence of these GHGs in the atmosphere allows incoming solar radiation to pass through relatively unimpeded, but partially absorb and re-emit outgoing infrared terrestrial radiation. This natural process has a potential to raise the earth’s average temperature significantly leading to global warming and hence, of great concern to the human and other living beings.

Climate change was first recognized as a serious problem in the 1980s, with the occurrence of unusually warm summers in the United States. Storms, droughts, and floods in the last decade have strengthened the theory that the current warming is largely induced by industrialization.

The global average surface temperature is projected to increase by 1.4 oC to 5.8 oC over the period 1990–2100. The global mean sea level is projected to rise by 0.09 to 0.88 meters over the same period, as a result of the thermal expansion of the oceans and the melting of glaciers and polar ice sheets.

Changes in surface air temperature and sea level could change precipitation quantity and pattern, soil moisture, and vegetation cover. Regional temperature changes may lead to increased frequency, intensity, and duration of storms. Greenhouse-induced sea level rise could have a number of physical impacts on coastal areas, including loss of land due to inundation and erosion, increased flooding, and salt-water intrusion.

India is highly vulnerable to climate change as its economy is heavily reliant on climate sensitive sectors such as agriculture and forestry, and the low-lying densely populated coastline is threatened by a potential rise in the sea level.

In India, the government has taken significant steps toward the mitigation of GHGs at the national level. There is a detailed plan for energy efficiency improvement across all sectors of industry and power. For proper demand side management (DSM), energy efficiency measures as well as energy audits are being suggested.

The international community has long since debated on policies and measures to control the likely climatic change. Major initiative in this direction was taken under the aegis of the United Nations Framework Convention on Climate Change (UNFCCC) adopted in the Kyoto Protocol, Japan, in December 1997. This protocol commits developed countries (or Annex-1 Parties) to limit and reduce their GHG emissions. The overall reductions should add up to at least 5 percent lower from the 1990 levels in the period 2008-2012, specifying the individual targets for every country.

The protocol established three innovative mechanisms - Joint Implementation (JI), Emissions Trading (ET), and Clean Development Mechanism (CDM). CDM helps Annex-I Parties reduce the cost of meeting their emissions targets by achieving and acquiring GHG reductions at a lower price in other developing countries.

CDM has the dual purpose of assisting non-Annex-I countries (or developing countries) in achieving sustainable development and assisting Annex-I countries in meeting their emissions targets. Under CDM, a developed country entity can invest in a GHG mitigation project in a developing country by way of equity, loan or any other financing mechanism. The mitigation project, in turn, generates emission reductions that need to be verified by an independent party, hence called Certified Emission Reductions (CERs). Only those GHG mitigation projects are either eligible for CDM which are additional to those that would have happened anyway in the country. It is important to establish the ‘additionality’ of the project to avail the benefits of CDM. The GHG emissions are determined by comparing them to Baselines which will be a case depicting the Business as Usual scenario, that is emissions without the project. Under normal circumstances, the CDM project would not be implemented due to certain financial/technological/ investment/prevailing practice/other "barriers". Proceeds received under the CDM Mechanism for CERs generated by the project would make the project viable. Further, as per UNFCCC, the project start date should be after January 2000. For projects which have started in the past, but after January 2000, it is important to be able to demonstrate that CDM revenue was considered for the project. Under the Ministry of Power, the Government of India has formed a CDM India Cell which provides technical support and awareness to industries on CDM initiatives.

Major fossil fuel-based energy-intensive industries as well as renewable energy producers can benefit from CDM. By demonstrating clearly the efforts that are being made to reduce fossil fuel consumption or increase energy consumption, they can demonstrate GHG reductions. In addition, fuel switch, for example from fossil fuel to renewable fuel or to another fossil fuel of less CO2 emission factor (say coal to biomass, or coal/oil to natural gas) may also qualify as GHG abatement project. Typical other examples of GHG abatement projects could be: reduction of T&D loss in power distribution, improvement of power generation efficiency, fuel switch in transportation sector, and methane capture in landfill, just to mention a few. In addition, carbon sequestration projects such as afforestation, etc, also have immense potential as CDM projects. However, to qualify for carbon credit transaction benefits through CDM, it is important to establish "additionality" and/or "overcome of barriers" as specified by UNFCCC.

UNFCCC has published guidelines to prepare documentation for CDM projects known as Project Design Documentation (PDD). It has accredited several Designated Operational Entities (DOEs) worldwide for performing "validation" of CDM projects. The PDD (and methodology in case of large-scale projects) are required to go through DOEs who would facilitate Methodology Approval and accord PDD validation. But before registration, the CDM Project should get an approval of the Host Country, that is concurrence from the Director, CDM Projects in the Ministry of Environment and Forests. He is the Designated National Authority (DNA) announced by the Indian government. He convenes meetings at regular intervals for endorsement of CDM Projects. The final stage in the journey of a CDM project is registration at UNFCCC as a qualified CDM project. The Panel of UNFCCC Executive Board approves the various methodologies for calculation of emissions reduction.

After a CDM project starts operation, the GHG abatement would actually be monitored by the project proponent and require verification by a DOE on a periodic basis for the entire credit period, which would be either a one-time 10 years, or 7-year renewable twice subject to revalidation. The verification process would actually lead to issue of CERs by the UNFCCC, which will enable the CDM project promoter to realize CDM revenue after transaction of these CERs with a Carbon Credit Buyer. Among the developed countries, only the USA, Australia, Croatia and Monaco have not ratified the Kyoto treaty.

Opportunities seem abundant for the Indian GHG abatement project promoters for "Revenue" earning through implementation of cleaner and energy-efficient technologies. With the Kyoto Protocol coming into force from February 16, 2005, Carbon Trading has become a reality. Many Indian industries such as United Phosphorous, HLL, Tata Steel, Essar, Jindal Steel, Reliance, SRF Ltd, etc, are already at the forefront of CDM projects to get advantage of CO2 emission reduction from implementation/planning of energy efficiency schemes.

The largest and the most important climate change conference since Kyoto 1997 was held in Montreal from November 28 to December 9, 2006, the Eleventh Meeting. Until now, 34 CDM projects have been approved by the CDM Board with around 400 more in the pipeline.

It was mentioned at the conference that the largest financial losses ever due to weather-related natural disasters occurred in 2005. The highest number of hurricanes or tropical storms ever seen this year since 1850 is being linked by many in the industry with climate change as a result of GHG emissions from human activities.

There is a powerful indication from this that we are moving from predictions of the likely impacts to climate change proof that it is already fully underway. As a result, people and communities everywhere are becoming more vulnerable to weather related natural disasters. The UNFCCC’s recent conference on climate change was historic as more than 40 decisions were adopted that will strengthen global efforts to fight climate change. The market for project-based GHG emissions reductions, according to a recent analysis by Point Carbon, is expected to grow from $450 million this year to $23 billion by 2010. In the increasingly carbon constrained world, forms of renewable energy such as hydropower and wind power have the potential to meet the economic, social endorsement and sustainability criteria demand.

Probable CDM projects for the power sector Installation of Wind Mills for Back-up Power Substituting State Grid Power Generated Mainly through Coal Wind mills is one of the most prominent units for generating power in today’s Green Power movement. A large number of projects are coming up all over the world based on wind mills. Technology upgradation is making rapid progress and becoming more efficient. Inlet Air Chilling of Gas Turbine for Power Augmentation This is probably the best method of augmenting power using gas turbines. Retrofitting is expensive but cost-effective in the long run. Bigger machines and higher models of gas turbines already have inbuilt inlet air chilling arrangements. Power Import vs Power Generation: If imported power is substituted by own captive generation through better technology such as cogeneration, then CO2 emissions is substantially reduced. Many industries are adopting their own power generating systems for reliability with more efficient technology and reducing dependence on import from the state grid. Gets CDM benefit for implementation, which helps in reducing the pay-back period. Cogeneration technology efficiency is higher. Utilization of Hydrogen-rich (H2-rich) Waste Stream in Place of Liquid/Gaseous Fuels H2 is going to be one of the prominent future fuels. There is no CO2 emissions on burning hydrogen fuel. There is extensive ongoing research for its extraction/separation from different sources. Utilization of Biomass Waste/Waste Heat as Fuel for Steam Generation and Generation of Power through Steam Turbo-generator Biomass utilization helps in elimination of generation of GHG such as methane, which is formed on its decay. Burning of this fuel substituting conventional fuel will reduce equivalent CO2 emissions. Fuel Switchover, for example Naphtha to Natural Gas Switchover to a more environment-friendly fuel such as Natural Gas is widely becoming popular. CO2 emissions is reduced. Utilization of Municipal Waste as Fuel for Power Generation This helps in elimination of CH4 gas generation by burning of waste, which is formed by its decay. Utilization of Bio-diesel as fuel World over it is becoming popular. Present consumption is around 2 percent blended with diesel. India is likely to become the world leader in the future in bio-diesel utilization. Jatropha oil seeds is the most common Indian variety which will be blended/independently utilized. Other Renewable Energy Sources such as Hydropower Substituting Power Generation from Conventional Fuel Hydropower is gaining popularity. Extensive research is ongoing to make solar cells cheaper and more efficient. Probable CDM Projects for Chemical Industries Modifications in Fired Heater such as Additional Tube Bundle in the Convection Section Increasing convection zone area will improve the heat pick-up and hence help to reduce Stack Temperature, thereby saving fuel. Heat Integration Networking based on Pinch Technology Pinch technology implementation is the most important approach for optimizing energy consumption through retrofitting in an existing plant. New plants already have such inbuilt technology. Improvement in Technology to Achieve Significant Reduction in Specific Energy Consumption Thermal oxidation of GHG gases such as HFC-23 by Gujarat Fluorochemicals Burning of waste gases in incinerator, which has global warming potential instead of releasing it into the atmosphere. Internationally, various Carbon Funds are earmarked for getting Carbon Credits such as World Bank Fund, Japan Carbon Fund, Netherlands Carbon Fund, etc. India is leading in CDM projects, with around 40 projects under the validation stage with the CDM Board, Germany, under the UNFCCC. What about future commitments beyond 2012 for GHG mitigation? The historic decision taken by the delegates at the recently concluded Montreal Summit was to start urgent negotiations on a new round of emission reduction targets for the second commitment period, which runs from 2013 to 2017. Hence, the CDM movement for utilizing cleaner fuel and technology will continue for a long time. It provides immense opportunity for India for revenue earning through GHG mitigation. Its sustainability will help improve the environment and make the world less vulnerable to weather-related natural disasters.

Courtesy: Anil Kewalramani, GM (Technology), IPCL, Baroda