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Clean Development Mechanism For Textile Processing and Tannery Sector of Pakistan
Clean Development Mechanism For Textile Processing and Tannery Sector of Pakistan
Clean Development Mechanism For Textile Processing and Tannery Sector of Pakistan
www.ihtpk.com
Table of Contents
ii
CDM Guidebook for Textile Processing and Tannery Sector
List of Figures
Figure 1: General Cycle of CDM ..................................................................................... 16
Figure 2: Registered project activities by host parties ...................................................... 25
Figure 3: Expected average annual CERS from registered projects by host parties ............ 26
Figure 4: CDM projects in China .................................................................................... 27
Figure 5: CDM projects in India ..................................................................................... 28
Figure 6 : CDM projects in Pakistan ............................................................................... 29
Figure 7: Overall Comparison of Pakistan, India and China .............................................. 30
Figure 8: CDM Projects in China by Type ....................................................................... 33
Figure 9: Number of CDM projects in India by type ......................................................... 34
List of Tables
Table 1: Abbreviations ................................................................................................... iv
Table 2: Designated Operational Entities in Pakistan ....................................................... 10
Table 3: List of Sectoral Scopes ..................................................................................... 12
Table 4: Sectoral distribution of GHG emissions .............................................................. 14
Table 5: List of CER Buyers Active in Pakistan................................................................. 24
Table 6: Breakup of CDM Projects in China ..................................................................... 27
Table 7: Breakup of CDM Projects in India...................................................................... 28
Table 8: Breakup of CDM Projects in Pakistan ................................................................. 29
Table 9: List of CDM Projects in Pakistan ........................................................................ 31
iii
CDM Guidebook for Textile Processing and Tannery Sector
Table 1: Abbreviations
iv
CDM Guidebook for Textile Processing and Tannery Sector
PVT - Private
SF6 - Sulfur hexafluoride
SSC - Small Scale
t CO2 - Metric tons of carbon dioxide
TPH - Metric tons per hour
UN - United Nations
UNEP - United Nations Environment Programme
UNFCCC - United Nations Framework Convention on Climate Change
WHR - Waste Heat Recovery
WMO - World Meteorological Organization
Yr - Year
v
CDM Guidebook for Textile Processing and Tannery Sector
G
lobal climate change is one of the most critical challenges of the 21st century. In the
last 100 years, the average surface temperature of the planet has risen by
approximately 0.7o Celsius and there is overwhelming scientific evidence that this
global warming is due to the intensification of the greenhouse effect, in turn caused by the
increased atmospheric concentration of greenhouse gases, namely, carbon dioxide (CO2),
methane (CH4), nitrous oxide (N2O), hydroflourocarbons (HFC 23 and HFC 134a) and sulfur
hexafluoride (SF6).
Climate change emerged on the political agenda in the mid-1980s with the increasing
scientific evidence of human interference in the global climate system and with growing
public concern about the environment. In 1988, the United Nations Environment Program
(UNEP) and the World Meteorological Organization (WMO) established the
Intergovernmental Panel on Climate Change (IPCC) to provide policy makers with
authoritative scientific information. The IPCC published its first report in 1990 concluding
that the growing accumulation of human-made greenhouse gases in the atmosphere would
―enhance the greenhouse effect, resulting on average in an additional warming of the
Earth‘s surface‖ by the next century, unless measures were adopted to limit emissions. The
United Nations General Assembly responded by formally launching negotiations on a
framework convention on climate change and establishing an ―Intergovernmental
Negotiating Committee‖ to develop the treaty. Negotiations to formulate an international
treaty on global climate protection began in 1991 and resulted in the completion, by May
1992, of the United Nations Framework Convention on Climate Change (UNFCCC). The
UNFCCC was opened for signature during the UN Conference on Environment and
Development (the Earth Summit) in Rio de Janeiro, Brazil, in June 1992 and entered into
force in March 1994.
The Conference of Parties is UNFCCC‘s supreme body responsible for monitoring and
implementing the Convention and any related legal instruments. The first Conference of
Parties held in Berlin in 1995 concluded that the vast majority of the developed countries
would not succeed in reducing their emissions to pre-1990 levels by around 2000, as they
were committed to do under the Convention. The Berlin Mandate declared that the
developed countries, based on the principle of common but differentiated responsibilities laid
down by the Convention, should establish, by means of a Protocol or other legal instrument,
quantitative emission reduction targets, as well as a description of the policies and measures
needed to achieve these targets. Following two years of intense negotiations held in Kyoto in
December 1997, adopted a Protocol to the Convention, known as the Kyoto Protocol, which
established quantified anthropogenic GHG emission reduction or limitation commitments for
the developed countries.
The Kyoto Protocol is an agreement made under the United Nations Framework Convention
on Climate Change (UNFCCC). Countries that ratify Kyoto Protocol commit to reduce their
emissions of carbon dioxide and five other greenhouse gases, or engage in emissions
trading if they maintain or increase emissions of these gases produced by them. According
to Kyoto Protocol, reducing these
emissions is crucially important, as
carbon dioxide is causing the earth‘s Parties (countries) to UNFCCC are classified
atmosphere to heat up. as:
Annex I countries – industrialized
The Kyoto Protocol defines legally countries and economies in transition
binding emission targets for the Annex Annex II countries – OECD member
I Parties and establishes mechanisms states
for meeting them. Non Annex-I - Mostly developing
countries (Pakistan is one of them).
The Kyoto Protocol established the
following three additional
implementation mechanisms to
complement the domestic GHG reduction targets implemented by the Annex I Parties:
The clean development mechanism (CDM) is a project-based mechanism under the Kyoto
Protocol that enables the
generation and issuance of
certified emission reductions Certified Emission Reduction (CER) is defined as
(CERs) from eligible CDM project
activities.; it allows industrialized
reduction of CO2 emission of one ton or
countries (Annex-I countries) to equivalent that has been verified and registered
achieve part of their emission
reduction commitments by through the procedure outlined by CDM
conducting emission reducing Executive Board
projects abroad in developing
countries, and counting the
reductions achieved toward their own commitments. CDM projects will take place in
countries without targets, i.e. developing countries. A condition for the issue of credits in
The rationale behind the mechanisms is that greenhouse gas emissions are a global problem
and that the place where reductions are achieved is of less importance. In this way,
reductions can be made where costs are lowest, at least in the initial phase of combating
climate change. It is estimated that the linking of project credits to the emissions trading
system will lower the annual compliance costs for companies covered by the scheme. CDM
will also transfer environmentally sound technology to developing countries, which will help
them move onto a sustainable path of development.
The basic principle of the CDM is simple: developed countries can invest in low-cost
abatement opportunities in developing countries like Pakistan and receive credit for the
resulting emissions reductions, thus reducing the cutbacks needed within their borders.
While the CDM lowers the cost of compliance with the Protocol for developed countries,
developing countries will benefit as well, not just from the increased investment flows, but
also from the requirement that these investments advance sustainable development goals.
The CDM encourages developing countries to participate by promising that development
priorities and initiatives will be addressed as part of the package. This recognizes that only
through long-term development will all countries be able to play a role in protecting the
climate.
Attract capital for projects that assist in the shift towards a more prosperous but less
carbon-intensive economy;
Encourage and permit the active participation of both private and public sectors;
Provide a tool for technology transfer, if investment is channeled into projects that
replace old and inefficient fossil fuel technology, or create new industries in
environmentally sustainable technologies; and,
Help define investment priorities in projects that meet sustainable development
goals.
The drive for economic growth presents both threats and opportunities for sustainable
development. While environmental quality is an essential element of the development
process, in practice, there is considerable tension between economic and environmental
objectives. Increased access to energy and provision of basic economic services, if
developed along conventional paths, could cause long-lasting environmental degradation —
both locally and globally. But by charting a different course and providing the technological
and financial assistance to follow it, many potential problems could be avoided.
In comparing potential CDM projects with what might otherwise take place, it is clear that
the majority will entail not only carbon reduction benefits, but also produce a range of
environmental and social benefits within developing countries. Sustainable development
benefits could include reductions in air and water pollution through reduced fossil fuel use,
especially coal and oil, but also extend to improved water availability, reduced soil erosion
and protected biodiversity. For social benefits, many projects would create employment
opportunities in target regions or income groups and promote local energy self-sufficiency.
Therefore carbon abatement and sustainable development goals can be simultaneously
pursued.
Many options under the CDM could create significant co-benefits in Pakistan, addressing
local and regional environmental problems and advancing social goals. For Pakistan, that
might otherwise give priority to immediate economic and environmental needs, the prospect
of significant ancillary benefits should provide a strong inducement to participate in the
CDM.
In joint implementation Annex I Parties which have ceilings for GHG emissions (emission
caps), assist other Annex I Parties to implement project activities to reduce GHG
emissions, and credits will be issued based on amount of emission reductions achieved by
the project activities. A Party where JI project is implemented, is called a host Party and the
credit from the JI is called emission reduction unit (ERU)
International Emissions Trading is to trade Kyoto Protocol units (KP units) including part of
assigned amounts, CERs, ERUs and etc, between Annex I Parties. Only Annex B Parties of
the Kyoto Protocol can participate International Emissions Trading. Through market
mechanism, International Emissions Trading can decrease total cost of Annex I Parties to
achieve their collective emission reduction targets.
The CDM is the only additional implementation mechanism that permits the participation of
non-Annex I Parties (so-called because they are not included in Annex I of the Convention),
which do not have reduction targets and are made up of the developing nations, such as
Pakistan. This economic instrument aims to make it easier for the Annex I countries to meet
their targets since it is frequently more cost efficient to reduce or remove GHG emissions
outside their frontiers.
As both joint implementation and international emission trading do not involve Non Annex I
countries like Pakistan, therefore these have not been discussed any further in this
document.
Project Developer
CDM Consultant
CER buyers
Project Financer
The role of each project participant may vary according to the structure of the project.
Article 12(4) of the Kyoto Protocol1 establishes an Executive Board to supervise the CDM:
―The clean development mechanism shall be supervised by an executive board of the clean
development mechanism (Kyoto Protocol, Article 12(4)).‖
1
http://unfccc.int/resource/docs/convkp/kpeng.pdf
The designated national authority (DNA) is the body granted responsibility by a Party (Host
Country) to authorize and approve participation in CDM projects. Establishment of a DNA is
one of the requirements for participation by a Party in the CDM. The role of the DNA is to
provide the letter of approval to project participants in CDM projects. In the case of the host
Party DNA, this letter of approval must confirm that the project activity contributes to
sustainable development in the country.
The Executive Board has clarified that in issuing the letter of approval, a DNA should include
all the required elements as requested by the Board, and in particular:
―That the country has ratified the Kyoto Protocol, the approval of voluntary participation in
the proposed CDM project activity, and, in cases of host country letter of approval that the
proposed CDM project activity contributes to sustainable development.2‖
Pakistan deposited its instrument of accession to the Kyoto Protocol on 11th January 2005,
and thus became eligible to benefit from CDM. For this purpose the Ministry of Environment
was declared as the Designated National Authority (DNA). A CDM Cell was established in
August 2005 for providing technical and policy support to, including implementation of CDM
Strategy, conduct awareness raising, enhancement of capacity for CDM project
development, review of CDM projects for grant of approval by the DNA and to advise the
Government in technical matters related to CDM in Pakistan3
2
http://cdmrulebook.org/64
3
http://www.cdmpakistan.gov.pk/
Pakistan National Operational Strategy for CDM was approved by the Prime Minister of
Pakistan in February 2006. The Strategy provides policy guidance for implementation of CDM
in Pakistan in line with national sustainable development goals. It is an incentive based
Strategy which ensures efficiency and transparency. The Strategy defines institutional
arrangement for implementation of CDM in Pakistan (for instance creation of CDM
Secretariat), tax and credit sharing policy and the criteria for grant of Host Country Approval
to CDM projects.
Tax and Credit Sharing Policies is the most remarkable feature of the Strategy; it is stated
that ―no income tax or duty shall be levied on transfer/sale of CDM emissions credits (i.e
Certified Emission Reductions, Verified Emission Reductions etc). Similarly, credits shall be
awarded fully to the project sponsors. Banks and other financial institutions shall also be
encouraged to provide special incentives to the investors.‖4.
The CDM Secretariat represents the DNA in Pakistan and ―is headed by the Director General
(Environment), Ministry of Environment, who is also the National Focal Person for DNA-
Pakistan. Contact details of Pakistan DNA are given in Appendix-I.
A CDM Cell is established and attached to the Secretariat. The functions of the Secretariat
are as follows:
4
http://www.cdmpakistan.gov.pk/cdm_stat.html
5
http://www.cdmpakistan.gov.pk/cdm_sectarirat.html
Designated operational entities (DOEs) are independent auditors that assess whether a
potential project meets all the eligibility requirements of the CDM (validation) and whether
the project has achieved greenhouse gas emission reductions (verification and certification).
They are accredited by the CDM Executive Board and designated by the CoP/MoP to perform
these functions, according to their expertise.
Usually, a DOE performs either validation or verification and certification, but the CDM
Executive Board can give permission for the same DOE to perform all three tasks for the
same project (a complete list of DOEs along with their contact details is provided in
Appendix II).
Following is the list of DOEs active in Pakistan. For complete list of DOEs, please refer to
Appendix III.
According to modalities and procedures for the CDM, three types of small-scale CDM
projects are possible. For the first two, there is a maximum size limit for the activity that
reduces emissions, but for the third type, there is a maximum limit on the total emission
from the project at the end of the project activity. The three types of small-scale CDM
projects are6:
These three types are interpreted by the Executive Board as mutually exclusive. For example
when a 60 MW wind turbine project is not eligible for type I, it cannot be eligible for type III
either, even though it emits less than 60 kt CO2.
The project activities which do not meet the requirements of the small scale project
activities, mentioned above, are categorized as large scale CDM project activities. In other
words the following project will be included in the large scale category:
I) Renewable energy project activities with a maximum output capacity more than
15 MWe (or an appropriate equivalent)
II) Energy efficiency improvement project activities which reduce energy
consumption, on the supply and/or demand side, more than equivalent of 60
GWhe per year; or
6
http://unfccc.int/resource/docs/cop7/13a02.pdf
III) Other project activities that both reduce anthropogenic emissions by sources and
directly emit more than 60 thousand tons (kt) of carbon dioxide equivalent
annually.
PoA is bundling of various CDM projects into a single CDM project. PoA is a flexible
mechanism for such projects which requires validation of PoA only instead of separate
validation of each and every CDM project in the PoA.
PoA is a voluntary coordinated action by a private or public entity which coordinates and
implements any policy/measure or stated goal which leads to GHG emission reductions.
The physical boundary of a PoA may extend to more than one country, i.e. a PoA can
involve CPAs (CDM Project Activities) being run in multiple countries, in which a separate
letter of approval would be required from each Party involved. Unlike bundled small-scale
project, it is possible to add new CPAs to a PoA without undertaking the validation process
afresh. No registration fee is payable on CPAs which are added subsequently to validation. A
PoA must be directed at coordinating and implementing a ―policy/measure or stated goal‖.
No clear definition is provided for these terms. However, the EB has explicitly referred to
―incentive schemes‖ and; ―voluntary programmes‖ in its definition of a PoA (EB 32, Annex
38, paragraph 1). In general, a PoA must demonstrate real, additional and measurable
emission reductions or removals attributable to the PoA. There is no technical restriction that
prevents the creation of a PoA which includes as CPAs projects which would normally be
registered as standard CDM projects.
The CDM-Accreditation Penal has adopted the following list of sectoral scopes, which is
based on the list of sectors and sources contained in Annex A of the Kyoto Protocol.
5 Chemical industries
6 Construction
7 Transport
8 Mining/mineral production
9 Metal production
10 Fugitive emissions from fuels (solid, oil and gas)
11 Fugitive emissions from production and consumption of halocarbons and
sulphur hexafluoride
12 Solvent use
13 Waste handling and disposal
14 Afforestation and reforestation
15 Agriculture
A complete list of baseline and monitoring methodologies relating to each sectoral scope
along with the details of DOEs accredited to validate/verify a CDM project activity under a
particular scope is available at UNFCCC‘s website7.
7
http://cdm.unfccc.int/DOE/scopes.html#1
be hosted by non-Annex I Parties (host countries) that have ratified the Kyoto
Protocol and established a designated national authority (DNA);
be developed by public or private entities authorized by the relevant host Party and
Annex I Party involved in the project activity;
promote sustainable development in the countries in which they are located;
result in generation of emission reduction which are real, measurable, long-term, and
additional to reductions that would have occurred without the project;
Consumption of halocarbons
and sulphur hexafluoride
Other
Solvents and Other Hydrofluorocarbons (HFCs)
Product Use Perfluorocarbons (PFCs)
Sulphur hexafluoride (SF6)
Carbon dioxide (CO2)
Nitrous oxide (N2O)
Agriculture Enteric fermentation Carbon dioxide (CO2)
Manure management Methane (CH4)
Rice cultivation Nitrous oxide (N2O
Agricultural soils
Prescribed burning of savannas
Field burning of agricultural
residues
Other
Waste Solid waste disposal on land Methane (CH4)
Wastewater handling Carbon dioxide (CO2)
Waste incineration Nitrous oxide (N2O)
Other
All stages of a project cycle are essential, the starting point being the preparation of the
Project Design Document. Its format has been standardized by international rules and it is
accompanied by specific instructions designed to guide the project participants through the
process of preparing and presenting the required information and documentation.
The PDD is the document that details the project activity in line with the procedures
established by the CDM Executive Board, covering its technical and organizational aspects,
justifying the choice of baseline and monitoring methodology and demonstrating its
Additionality.
The PDD should follow the current model established by the Executive Board available on
the website http://cdm.unfccc.int/, which also contains instructions on how it should be filled
in. Following are the mandatory stages constituting the PDD.
The first step in preparing the PDD is to provide a general description of the project activity.
This description must contain:
A list of the Parties and participants involved in the project, including contact
information to be included in Annex I of the PDD;
This section starts with a reference of the UNFCCC approved large-scale or small-scale
methodology applicable to the project activity, its version number and validity. The choice of
the methodology with respect to type and category of the project activity and the
compliance of the proposed CDM project activity with all the
applicability conditions of the chosen methodology has to be
established by the PP. Additionality is the
requirement that the
A clear understanding of the project‘s baseline, additionality,
boundary,and leakage is essential for this stage of the PDD
greenhouse gas
and, consequently, for calculating the net GHG emission emissions after
reductions promoted by a CDM project activity; these are implementation of a
explained in following sections: CDM project activity
5.1.2.1 Identification and Description of the Baseline
are lower than those
Scenario that would have
The baseline scenario of a CDM project activity refers to the
occurred in the most
most likely scenario for anthropogenic GHG emissions that plausible alternative
would occur in the absence of the proposed project activity. scenario to the
It serves as the basis for verifying additionality (explained in implementation of
sub-section 5.1.2.2) and quantifying the CERs resulting from
the project activity. The baseline is qualified and quantified
the CDM project
based on the business-as-usual scenario. activity.
There are three possible approaches to constructing the baseline scenario. The most
appropriate for the project activity in question should be indicated and justified.
There are various means and instruments for demonstrating additionality, the most used
being the “Tool for the demonstration and assessment of additionality”, developed
by the Executive Board. There is also the “Combined tool to identify the baseline
scenario and demonstrate additionality”. Other baseline and monitoring methodologies
contain a means of demonstrating additionality for the specific cases in question. However,
project participants may decide not to use a tool and simply present their arguments
demonstrating the additionality of their project (except in cases where a specific tool is cited
as part of the adopted methodology).
One key factor in demonstrating additionality is the project‘s starting date. Evidence that the
incentive from the CDM was seriously considered in the decision to implement the project
activity is also vital.
Project activities with a starting date on or after August 2, 2008, should inform DNA and/or
UNFCCC CDM Secretariat within 6 months of the official start date of the project activity.
A step-wise application of the ―Tool for the demonstration and assessment of additionality‖
is provided below.
The first step involves the identification of plausible baseline alternatives to the
project.
The next step involves elimination of all the alternatives except one (which is
proposed to be the most plausible baseline scenario) in the following manner:
a) Elimination of the alternatives which are inconsistent with the applicable laws
and regulations.
b) Elimination of alternatives which face prohibitive barriers, such as investment
and technological barriers (also called barrier analysis).
c) Elimination of alternatives using investment comparison analysis
financial/economic indicators (for instance, IRR, NPV, Payback Period, etc),
the remaining alternatives are compared in terms of their economic
attractiveness; the most cost-effective alternative, with the most attractive
investment indicator is selected as the baseline scenario (the remaining
alternatives are eliminated); it is then compared with the financial indicator of
the project activity, and if the latter is less attractive than the former, the
project activity is deemed to be additional.
The net reduction in GHG emissions is estimated in accordance with the following equation:
Leakage is defined as the increase in GHG emissions occurring outside the boundary of a
CDM project which are both measurable and attributable to the project activity.
A list of parameters that are determined ex-ante for the entire crediting period is presented
in this section. These parameters include such data which will be calculated/measured only
once and will remain fixed throughout the crediting period.
A detailed description of the monitoring plan is then presented in this section which includes
the description of the operational and management structure that the project operator will
implement in order to monitor emission reductions and any leakage effects generated by the
project activity. The responsibilities for and institutional arrangements for data collection and
archiving are clearly indicated. The monitoring plan should reflect good monitoring practice
appropriate to the type of project activity. Any relevant further background information can
be provided in Annex 4.
Finally a list of all such parameters which will be monitored during the crediting period is
presented in this section with such details as the measurement methods and procedures,
including a specification which accepted industry standards or national or international
standards will be applied, which measurement equipment is used, how the measurement is
undertaken, which calibration procedures are applied, what is the accuracy of the
measurement method, who is the responsible person/entity that should undertake the
measurements and what is the measurement interval.
In this section of the PDD information is provided about starting date of the project actvity,
its expected operational life time and type of the crediting period (fixed or renewable)
chosen for the project.
Start date of the project, in general, is date of the signing contract between the project
proponent and the technology supplier. The starting date of the project, and the justification
how is it determined should be clearly mentioned in the CDM-PDD.
Expected lifetime of the project relates to technical lifetime of the project activity. The
crediting period may either be fixed for 10 years or renewable after every 7 years. In case of
renewable crediting period, the maximum length of the crediting period can be up to 21
years. Exact date of the start and termination of crediting period is also mentioned in this
section of the CDM-PDD.
In this section of the PDD, a detailed assessment of the environmental impacts of the
proposed CDM project activity is provided.
Details of the invitation procedure, summary of the comments of the stakeholders, concerns,
and conclusion are summarized in this section of the PDD. All the relevant evidences are
provided to DOE.
The main procedure and brief detail of the validation process is given below
Based on its review, the DOE issues a validation report and opinion as to the adequacy of
the PDD. The project developer/PDD consultant must respond to queries and comments to
the satisfaction of the DOE for the final validation report to be issued.
The host country approval is an important step in CDM cycle as this step gets the project
approved form the host country in which the project is being implemented. Typically the
following documentation must be submitted to the designated national authority (DNA) for
host country approval:
1. The PDD, including a description of how the project will contribute to sustainable
development.
2. If required by local law, an approved environmental impact assessment. In case of
Pakistan an NOC issued by EPA based on the assessment of the IEE or EIA report of
the project serves this purpose.
3. A stakeholder meeting report conducted by the project developer. The stakeholder
meeting is also required by UNFCC and one meeting can be conducted involving all
stakeholders to meet the criteria of both DNA and UNFCCC.
Once the DNA requirements have been satisfied, a Letter of Approval is issued for the
project.
Following the issuance of the Letter of Approval and a positive validation report, a request
for registration is submitted to the CDM Executive Board in the form of the validation report,
including the PDD, the written approval of the DNA and an explanation of how this takes
into account any comments received. The CDM Executive Board reviews the proposal and
may invite public comment or ask for additional information/details before rejecting or
accepting the proposal, which becomes a public document once submitted to the CDM
Executive Board. Registration is a formal acceptance by the CDM Executive Board of a
validated project as a CDM project activity and is the official recognition of the project
feasibility to generate CER.
Once the project has been validated, detailed engineering activities can be undertaken in
parallel with the CDM approval process. Monitoring of emissions reductions, as specified in
the PDD monitoring plan, would then be implemented. In order to calculate the emissions
reductions, the emissions of the project activity have to be subtracted from the reference
scenario or Baseline outlined in the PDD.
Verification is required by a DOE, separate and apart from the preparer of the PDD and the
DOE responsible for project validation (applies in case of large-scale project activities only),
in order to demonstrate that actual emissions reductions are consistent with the PDD. A
certification report is required on an annual basis to quantify the actual emissions reductions
achieved during that period. The second DOE conducts on-site inspections, reviews
monitoring results, and provides a verification report to the CDM Executive Board.
The certification constitutes a request to the CDM Executive Board for issuance of CERs
equal to the verified amount of reductions from the project. This issuance should be
considered final 15 days after the day of receipt of the request for issuance, unless issues
are raised by the CDM Executive Board or other parties involved. The requisite amount of
CERs is then deposited in the registry account of the project developer.
The process of negotiating the sale of the CERs can usually start as the PDD is being
finalized. A Term Sheet spelling out the terms of the agreement is initially prepared and later
used for drafting the so-called Emissions Reductions Purchase Agreement (ERPA). These
agreements define the amount of CERs to be transferred, the purchase price, the time
period of delivery, and other relevant conditions. Typical buyers in the emissions reductions
marketplace include World Bank‘s Prototype Carbon Fund, tenders by national governments,
brokers, and private sector buyers.
17%
2%
2%
41%
4%
5%
7%
22%
Likewise, if we look at expected average annual CERs from these registered projects9 (see
fig below) China alone has a shared of 61.24 %, followed by India (11.26 %) and Brazil
(5.52%); these three countries together account for almost 78 % of the total CERs
generated so far. The CER share of Pakistan stands at 0.44 % which is almost 26 times less
than that of India.
8
http://cdm.unfccc.int/Statistics/Registration/NumOfRegisteredProjByHostPartiesPieChart.html
9 http://cdm.unfccc.int/Statistics/Registration/AmountOfReductRegisteredProjPieChart.html
1%
1%
1%
1% 9%
1%
3%
5%
6%
61%
11%
Further analysis of all CDM projects in the pipeline (registered, at validation, at request
review stage, etc) reveal that China and India are way ahead of Pakistan in terms of
implementation of Clean Development Mechanism. Please note that the tables and charts
given below are based on the information provided in the CDM pipeline.xlsx (last updated
October 14, 2010)10, therefore, there may be a slight difference in total number of
registered projects as provided on UNFCCC website and the ones provided below
10
http://cdmpipeline.org/publications/CDMpipeline.xlsx
38%
45%
1%
8% 2%
1% 1%
1% 3%
Registered Registration Request Correction Request Requesting Review
Under Review Rejected Validation Terminated Withdrawn
Validation Negative At Validation
29%
48%
1%
1%
2%
13%
5%
1%
34%
54%
4%
4%
4%
3000
2500
2000
No of CDM Projects
1500
1000
500
0
Registration Correction Requesting Validation Validation
Registered Under Review Rejected Withdrawn At Validation Total
Request Request Review Terminated Negative
Pakistan 9 1 1 0 0 0 1 0 0 14 26
India 534 9 12 9 3 44 242 15 85 872 1825
China 969 33 37 18 19 71 212 11 31 1135 2536
It is apparent from the data presented in figure 7 that Pakistan is way lagging behind from both
China and India in each category of projects in CDM pipeline. List of CDM projects in Pakistan in
CDM pipe line has also been provided in table 8 for reference. Pakistan needs to catch up with
other developing nations in benefiting from CDM. For that local industry will have to come
forward and take the leadership.
It is clear from the figures 8 and 9 provided below that major portion of the CDM projects (72
%) in China corresponds to renewable energy based projects (Hydro, Wind and Biomass
Energy); whereas in India biomass , wind and hydro projects constitute almost 63 % of the
total projects. Energy Efficiency Own Generation and Energy Efficiency Industry are other
categories which represent almost 16 % of the total Indian CDM projects.
1%
1%
5%
3%
24%
12%
1%
1%
1% 2%
2% 3%
43%
22%
30%
1%
3%
1% 7%
1% 3%
1%
2% 9%
11%
2% 3%
1% 1%
Afforestation Agriculture Biomass energy
Cement CO2 capture Coal bed/mine methane
Energy distribution EE households EE industry
EE own generation EE service EE supply side
Fossil fuel switch Fugitive Geothermal
HFCs Hydro Landfill gas
Methane avoidance N2O PFCs and SF6
Reforestation Solar Tidal
Transport Wind
Following is the detail of different projects that are in CDM pipeline in Textile and Tannery
Sectors. It is worth noting that out of the 13 projects that are presented, 12 are placed in India
while only 1 is in Pakistan.
Project Title Energy efficiency and fuel switch project at GHCL Ltd.
5 Host Country India
Number of 14,741 (10 Year Fixed)
CERs
Applied
AMS-II.D.
Methodology
Current Status At Validation
This project activity comprises of commissioning and operation of
a new energy efficient 5.67 MW gas turbine with Waste heat
recovery system for electricity and steam generation at the
Brief industrial facility of GHCL Ltd. The project activity will partially
Description replace the use of 1250 KVA DG set and Man B&W DG set (which
are having lower thermal efficiency in comparison with Gas
Turbine) for electricity generation and partially replace the use of
boiler for steam generation.
Barrier Analysis:
Additionality
1) Investment barrier
Criteria
2) Other barrier
Number of
35,656 (7 year)
CERs
Applied
AMS-II.D
Methodology
Current Status At Validation
The Project is located in unit 1 of Gul Ahmed Textiles Mills
Limited, which provides steam and electricity to units 1, 2 and
3, consisting of textile manufacturing, covering, spinning and wet
processing of fabric. Steam is currently supplied by three boilers
running on natural gas, and electricity is supplied by a mix
of gas-fired and oil-fired engines. This system will be replaced
Brief Description by a combined cycle gas turbine (CCGT) system. A 10 MW gas
turbine will be installed; its exhaust gases will be fed into a waste
heat recovery boiler to generate steam for the process, and for a
steam turbine that will generate additional electricity (therefore
bringing total electrical capacity above 10 MW). Steam for the
process will also be extracted from the steam turbine.
Barrier Analysis:
Additionality
1) Barrier due to prevailing practice
Criteria
2) Investment Barrier
Based on the detailed analysis presented in sections 7.1 and 7.2, the following areas are
identified for CDM intervention:
o Utilization of waste hot water from various locations like effluent, compressor,
finishing machine, etc.
o System Automation like introduction of system software, which helps in transfer and
translation of the data between different systems that helps in elimination of errors,
provides central link between different systems and facilitates quick and efficient
information exchange in order to achieve the reduction in extended dying cycle,
water, energy, dyestuff, chemical and steam consumption.
o Improvement in power distribution system by incorporating dry type transformers,
bus trunking in place of cable, position of distribution system near to the load,
and automatic power factor correction system etc
7.3.2 Cogeneration
o High pressure boilers based cogeneration: Natural gas or biomass based cogeneration
in industries with high pressure boilers and power export to grid
7.3.3 Fossil fuel switch, from high carbon intensive to low carbon intensive
7.4 Causes for Low Participation of Industrial Sector of Pakistan in the CDM
There are manifold causes for low participation of the industrial sector of Pakistan in the CDM.
These are enumerated below
Although Pakistan ratified Kyoto Protocol quite early in January 2005, majority of the industrial
owners are still not aware of various emission reduction schemes and emission trading
programs under the Kyoto Protocol and their environmental and financial benefits
Although few industrial owners have general awareness about CDM, they still do not know
about the intricacies and modalities of CDM registration process such as establishing prior CDM
awareness, seriousness of CDM consideration and above all additionality. Such project
proponents, who do not seek the assistance of an experienced CDM consultant, normally end
up developing projects which are rejected even at pre-validation stage.
The government does not provide any financial incentives (e.g. tax rebates, subsidies, attractive
tariffs) for the promotion of CDM related projects in Pakistan.
Institutional guidance both from the government and industrial associations plays an important
role in the successful development of CDM related project activities. Unlike India and China,
there are no specific statistics, sectoral studies and guidelines available for the industrial sector
in Pakistan which provide essential information with regard to current practices in the region,
financial indicators for decision making process, and opportunities which can be realized as CDM
project activities.
Timeline of CDM project registration is very long. A project proponent has to go through
processes of PDD development, DOE selection, on-site validation, responding to Validation
Protocols, waiting for completeness check, and Global Stakeholders‘ Consultation. Such
methodology, though very transparent, yet takes approximately up to 2 years for a project
proponent to get the project registered as CDM project. Furthermore, verification, issuance,
and emission trading process may add up more than one year into it, which means the project
participant shall start getting CDM income after approx 2.5 of starting date of the project
activity. During that phase, the project proponent has to bear all the project construction,
project development, and validation costs and at times it acts as a great hurdle for project
developers to participate in CDM.
Over the years the costs for validation of CDM project activities have increased a lot. For small-
scale project activities they range between 20,000 to 30,000 EUROs and for large scale 30,000
to 40,000 EUROs. These high costs can stall CDM decision making process; especially in those
cases where total number of estimated emission reductions (ERs) associated with the CDM
project activity is less than 7,000 tCO2/yr.
Different measures in textile and tannery sectors that can be adopted for CDM claims are:
Keeping in view the causes for low participation of industrial sector in CDM, the following
measures are suggested to accelerate the development of CDM in Pakistan
7.5.1 Create Awareness about CDM at the Private, Public and Policy Level
The relevant government bodies, ministries and industrial associations should actively get
involved to develop:
Sectoral studies elaborating key statistics of the sector, the status of technologies
prevalent in the sector and the kind of CDM initiatives that can be taken.
Public and sector specific benchmarks for decision making process of a CDM project
activity. Please note that for financial additionality of a CDM project there should be
either a publicly available benchmark (such as commercial lending rate) or sector
specific benchmark which can be clearly validated by the DOE. So far no such
benchmarks exist, except for the public sector Hydropower/Thermal projects or private
sector IPPs.
Although CDM projects can take considerable time to get registered as internal or external
delays may occur during any phase of the project, the overall time to accomplish these projects
can be minimized through efficient planning. Some of the crucial steps to be taken in this
regard are summarized below:
Appendix-I
Annex I Countries
1 Australia
2 Austria
3 Belarus
4 Belgium
5 Bulgaria
6 Canada
7 Croatia
8 Czech Republic
9 Denmark
10 European Economic Community
11 Estonia
12 Finland
13 France
14 Germany
15 Greece
16 Hungary
17 Iceland
18 Ireland
19 Italy
20 Japan
21 Latvia
22 Liechtenstein
23 Lithuania
24 Luxembourg
25 Monaco
26 Netherlands
27 New Zealand
28 Norway
29 Poland
30 Portugal
31 Romania
32 Russian Federation
33 Slovakia
34 Slovenia
35 Spain
36 Sweden
Appendix-I 46
CDM Guidebook for Textile Processing and Tannery Sector
37 Switzerland
38 Turkey
39 Ukraine
40 United Kingdom of GreatBritain and Northern Ireland
41 United States of America
Annex II Countries
1 Australia
2 Austria
3 Belgium
4 Canada
5 Denmark
6 European Economic Community
7 Finland
8 France
9 Germany
10 Greece
11 Iceland
12 Ireland
13 Italy
14 Japan
15 Luxembourg
16 Netherlands
17 New Zealand
18 Norway
19 Portugal
20 Spain
21 Sweden
22 Switzerland
23 United Kingdom of Great Britain and Northern Ireland
24 United States of America
1 Afghanistan
2 Albania
3 Algeria
4 Angola
5 Antigua and Barbuda
6 Argentina
Appendix-I 47
CDM Guidebook for Textile Processing and Tannery Sector
7 Armenia
8 Azerbaijan
9 Bahamas
10 Bahrain
11 Bangladesh
12 Barbados
13 Belize
14 Benin
15 Bhutan
16 Bolivia
17 Bosnia and Herzegovina
18 Botswana
19 Brazil
20 Brunei Darussalam
21 Burkina Faso
22 Burundi
23 Cambodia
24 Cameroon
25 Cape Verde
26 Central African Republic
27 Chad
28 Chile
29 China
30 Colombia
31 Comoros
32 Congo
33 Cook Islands
34 Costa Rica
35 Cuba
36 Cyprus
37 Côte d'Ivoire
38 Democratic People's Republic of Korea
39 Democratic Republic of the Congo
40 Djibouti
41 Dominica
42 Dominican Republic
43 Ecuador
44 Egypt
45 El Salvador
46 Equatorial Guinea
47 Eritrea
Appendix-I 48
CDM Guidebook for Textile Processing and Tannery Sector
48 Ethiopia
49 Fiji
50 The former Yugoslav Republic of Macedonia
51 Gabon
52 Gambia
53 Georgia
54 Ghana
55 Grenada
56 Guatemala
57 Guinea
58 Guinea-Bissau
59 Guyana
60 Haiti
61 Honduras
62 India
63 Indonesia
64 Iran (Islamic Republic of)
65 Iraq
66 Israel
67 Jamaica
68 Jordan
69 Kazakhstan
70 Kenya
71 Kiribati
72 Kuwait
73 Kyrgyzstan
74 Lao People's Democratic Republic
75 Lebanon
76 Lesotho
77 Liberia
78 Libyan Arab Jamahiriya
79 Madagascar
80 Malawi
81 Malaysia
82 Maldives
83 Mali
84 Malta
85 Marshall Islands
86 Mauritania
87 Mauritius
88 Mexico
Appendix-I 49
CDM Guidebook for Textile Processing and Tannery Sector
Appendix-I 50
CDM Guidebook for Textile Processing and Tannery Sector
130 Sudan
131 Suriname
132 Swaziland
133 Syrian Arab Republic
134 Tajikistan
135 Thailand
136 The former Yugoslav Republic of Macedonia
137 Timor-Leste
138 Togo
139 Tonga
140 Trinidad and Tobago
141 Tunisia
142 Turkmenistan +A168
143 Tuvalu
144 Uganda
145 United Arab Emirates
146 United Republic of Tanzania
147 Uruguay
148 Uzbekistan
149 Vanuatu
150 Venezuela (Bolivarian Republic of)
151 Viet Nam
152 Yemen
153 Zambia
154 Zimbabwe
Appendix-I 51
CDM Guidebook for Textile Processing and Tannery Sector
Northern Ireland
Postal Code: GU15 3EY
Postal Address: SGS House 217-221 London Road
http://www.uk.sgs.com
E-0011 Korea Energy City (county): Kyonggi-do
Management Corporation Country: Republic of Korea
(KEMCO) (KEMCO ) Postal Code: 448-994
Postal Address: 1157, Pungdukchun2-dong, Suji-
gu, Yongin-si
http://www.kemco.or.kr
E-0013 TÜV Rheinland Japan Ltd. City (county): Yokohama
(Formerly TUV Industrie Country: Japan
Service GmbH - TUV Postal Code: 22-0033
Rheinland Group) (TUEV Postal Address: Shin Yokohama Daini Center Bldg.
Rheinland) 3-19-5, Shin Yokohama Kohaka-ku
http://www.tuv.com
E-0016 ERM Certification and City (county): London
Verification Services Ltd. Country: United Kingdom of Great Britain and
(ERM CVS) Northern Ireland
Postal Code: EC3A 8AA
Postal Address: 2nd Floor, Exchequer Court, 33 St
Mary Axe
http://www.ermcvs.com
E-0021 Spanish Association for City (county): Madrid
Standardisation and Country: Spain
Certification (AENOR) Postal Code: E-28004
Postal Address: C/Génova, 6
www.aenor.es
E-0022 TÜV NORD CERT GmbH City (county): Essen
(Former RWTÜV Systems Country: Germany
GmbH) (TÜV Nord) Postal Code: D-45141
Postal Address: Langemarckstrasse 20
www.tuev-nord.de
E-0023 Lloyd‘s Register Quality City (county): Coventry
Assurance Ltd. (LRQA) Country: United Kingdom of Great Britain and
Northern Ireland
Postal Code: CV34FJ
Postal Address: Hiramford Middlemarch Office
Village Siskin Driv
www.lrqa.com
E-0024 Colombian Institute for City (county): Bogota
Technical Standards and Country: Colombia
Certification (ICONTEC) Postal Address: Calle 53 58-33
www.icontec.org.co
E-0025 Korean Foundation for City (county): Seoul
Quality (KFQ) Country: Republic of Korea
Postal Code: 153-786
Postal Address: 13 Fl., Woolim Lion's Valley B