CDM potential in SMEs. Onkar Nath

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CDM potential in SMEs Onkar Nath

Climate Change Climate Change No Longer a Topic of Scientific Debate: It s a Real Challenge World Faces Today

Climate Change Climate change is any long-term significant change in the expected patterns of average weather of a specific region (or, more relevantly to contemporary socio-political concerns, of the Earth as a whole) over an appropriately significant period of time. Climate Change Factors:- Glaciations :Melting of Ice sheets Ocean Variability :Increase in Sea level Hysteresis :Unusual pattern of natural calamities Solar Variation : Affects earth atmosphere Effects of CO2 on Environment :Green house gas effect causing global warming Plate Tectonics :Reposition of continents

Likely Impacts of Climate Change

Climate Change: Global Impacts

CDM in India India, being a Economy in Transition is signatory to Kyoto Protocol but does not have any commitment to reduce GHG. However India is aware of its common but differentiated responsibilities toward global problem. India is seller country Selling of CERs Under EU-ETS, Europe is the buyer of CERs India ranks second in the world of CDM and has 391 projects out of 1,198 registered projects, the highest number of projects, which have been registered with UNFCCC The total national GHG emissions from India have been reported to be 1228.5 million tons of CO2e where emissions from energy sector accounted for 61 %. About 96 % of the emissions from the energy sector came from fuel combustion Energy efficiency, renewable energy and biogas/ biomass/ related sub sectors have been identified as the major sectors for CDM project development. Energy efficiency (EE) is expected to drive the CDM projects in India.

Profile of registered CDM projects from India No of Projects Annual Emission Reduction (tco2/y) Total ERs by 2012 (tco2) Biomass 119 4,164,842 29,753,919 Wind Power 56 2,122,814 17,673,572 Hydro Power 43 3,271,569 12,817,102 Energy Efficiency 42 1,005,127 7,529,638 Fuel Switch 10 4,136,607 21,002,502 Methane Avoidance 3 368,893 1,282,448 Methane Recovery 1 64,599 569,990 Waste Heat Utilization 50 4,816,998 31,796,172

CDM Potential in Industries, and SMEs Industries Standards CDM Potential Reliance, TATA Group Cement, Power, Fertilizers SMEs Highly Un- organized sector GOLD SILVER BRONZE TIN Highly Energy Efficient Less Energy Efficient (CDM potential exists) Highly Energy Inefficient (CDM potential exists)) Highly Energy Inefficient

Baseline and Measurement Baseline: The baseline can be estimated through reference to emissions from similar activities and technologies in the same country or other countries, or to actual emissions prior to project implementation The volume of emission reduction or offsets created by activities can be calculated in various ways: Depends on type of project Location of the project Purpose of the transaction

SMEs in India Total No. of SMEs in India more than 3 million SMEs sectors contributes 40% of total GDP of India Provides employment to more than 22 million people and is growing at rate of 20% annually The no. of Indian SMEs participation in CDM is small. It constitutes only about 5% of the total registered CDM projects in India. The participation of SMEs in harnessing the CDM mechanism is slack due to: Lack of Awareness about energy efficient technology Affordability of transaction costs Uncertainties in the CDM process and consequent risks Inadequate contribution towards R& D

Small Scale Industries in Jammu & Kashmir Small scale industries make up a large part of Kashmir's economy. These units manufacture food products, beverages, machinery, plastic goods, chemicals, drugs, paper products, silk, brick and tiles, cement and automobile equipment. Food and Beverage Mini Steel Rerolling plants Chemicals Paper Products Bee Farming Mini Cement Plant Textile Industry

Applicability of CDM in SMEs Some of the sectors where SMEs could benefit by applying CDM are: 1. Textile 2. Foundry and Forging 3. Steel Rerolling 4. Brick Manufacturing 5. Lime Industry 6. Ceramics 7. Biomass Co-generation Clean Development Mechanism Energy Efficiency in heat use Installing efficient steam system Reducing steam leakage Fuel switching from fossils fuels to Renewable Energy.

Applicability of CDM in SMEs On its own, an SME unit may not be generating sufficient CER for trading the carbon credit in a cost effective manner but there are two ways through which SMEs can participate in to CDM financing. SMEs CDM Project Bundler Programmatic CDM Bundled project helps in reducing transaction cost of CDM projects. The transaction cost for bundled projects basically consist of : Upfront cost related to the CDM project cycle and organizational aspects of the bundle Annual running costs related to verification and certification of CER generated

Applicability of CDM in SMEs as a bundled projects SME-1 Debt/Equity Funding Banks Monetization of CERs SME-2 SME-3 Special Purpose Vehicle as ISTSL Agreement with ISTSL ISTSL bundlers Buyers Trading of CERs A schematic diagram of Bundling in SMEs

Indian SME Technology Service Limited Established in November 2005, providing professional service for technology transfer, support service in order to enhance market competitiveness among SME sectors and promoting sustainable development. It has strong pedigree of stakeholders like SIDBI, SBI, Indian Bank, Oriental Bank. It has equity capital of Rs. 44 million. ISTSL has been working actively in SME cluster to take advantage of Carbon Credit. It has entered in to Memorandum of Association (MoU) with kfw, a German Development Bank, for cooperation in the area of carbon trading. Working with multilateral organisation like GTZ to establish a program for CDM activities for energy efficiency in various SME sectors in India. ISTSL acts as Technology bank, as it maintain database for different latest and efficient technology options.

PoA - Programme of Activities Voluntary coordinated action by a private or public entity: which coordinates and implements any policy/measure or stated goal. PoA which leads to GHG emission reductions or increase net GHG removals by sinks; via an unlimited number of CDM project activities (CPAs) A single or set of interrelated measure(s) to reduce GHG emissions applied within a designated area defined by a CDM methodology CPA CPA CPA

PoA - Programme of Activities State government can initiate the PoA for Brick industry or Textile industry or Steel rerolling plants PoA PoA has a life of 28 years CPA may have different crediting period, however not extending beyond the crediting period of PoA Has only one baseline and monitoring methodology CPA CPA CPA

State level CDM promotion in India Establishment of State level CDM promotional Cell- To identify the potential CDM projects and provide project proponents with matchmaking service with buyers. In the longer run a CDM promotional cell should have the capacity in the following areas : Understanding CDM project concept, characteristics, project cycle, baselines, crediting period, contractual issues, banking of CERs, and associated procedures. Identification of CDMable project(s) and suitable promoters Identify and provide intensive capacity building for the stakeholders for better level of understanding of CDM and for developing CDM projects. Maintaining database of technologies, consultants, operational entities, funding agencies, CER buyers, etc Analyse the state sectoral potential under CDM

State level CDM promotion in India There have few states in India taking the lead and establishing such state nodal cells for promoting CDM in the state. They are listed below. Andhra Pradesh - The Government of Andhra Pradesh has recognized the Environment Protection Training and Research Institute (EPTRI), Andhra Pradesh as nodal agency for CDM. Madhya Pradesh - A CDM Cell has been set up at Madhya Pradesh Pollution Control Board (MPPCB), Bhopal. MPPCB is closely dealing with several industries regarding environmental up gradation and thus it can facilitate promotion of CDM in the state by sensitizing the industries. There are possibilities that the states of Maharashtra, Tamil Nadu and Karnataka also establish such cells for promoting CDM. SFRI, Jammu & Kashmir, can act as a state nodal cell for promoting CDM in the state.

State level CDM promotion in India- West Bengal West Bengal - West Bengal Renewable Energy Development Agency, the nodal agency for promoting renewable energy and energy efficiency projects has been recently designated as the nodal agency for promoting CDM in the state. In West Bengal 16 rice mills have formed an association to bring in funds for the units selling `carbon credits'. An association called the Rice Mill Owners' Green Power Consortium, is hopeful of getting international funding of about Rs 10 million through Carbon Credits The countries, which are proposed to be focused upon initially for funds sourcing, are the Germany, Australia and Canada These rice mills located in Burdwan and Purulia district of West Bengal were earlier using diesel generating sets for meeting their power demand Some 16 rice millers had switched to alternative fuels, setting up rice-husk based gasifier power plants - the total capacity of which is 4 MW now. West Bengal Renewable Energy Development Agency, is facilitating the entire project.

Chief Minister of Jammu & Kashmir Source News Date. http://www.samaylive. com/news/omar-foreus-cooperation-indevelopment-ofsmes/611545.html Omar for EU's cooperation in development of SMEs : Abdullah sought cooperation of the European union in capacity building in Jammu and Kashmir to address the unemployment problem and increase the employability of the youth in the job-market Sat, 28 Feb 2009 at 21:51 IST

Onkar Nath CDM Technical Expert, GTZ, Climate Change M Unit, S-35, Panchsheel Park, New Delhi Email : onkar@cdmindia.com Website : www.cdmindia.com Phone No : 011-40610030/31/32