Clean Development Mechanism (CDM) Quick Overview: Catherine Martin-Robert

Clean Development Mechanism (CDM)
Quick overview
Catherine Martin-Robert
April 2007
Holcim Group Support

Agenda
Projects in the cement industry
Economic aspects
Development of a CDM project
2
Mechanism under Kyoto Protocol and the Marrakesh Accords
Reduce emissions in the developing countries
Encourage sustainable development (environmental, economic and social
development)
Industrialized
Exchange know-how,
countries:
Commitment to technologies and capital
reduce emissions
by 2008-2012 by
5,2% with
reference to 1990 Developing
countries:
No commitment but
Obtain carbon credit ready to use clean
(Certified Emission technologies
Reduction-CER) and sell it to
the industrialized countries
Global GHG emissions are reduced 3

Carbon credit under the Clean Development Mechanism
Baseline emissions
CO2 Emissions
(business as usual)
Project
Credit
CDM Project emissions
Time
Baseline emission - project emission = Credit

(CER: Certified Emission Reduction)
4
CDM Process
PIN: Project Idea Note
Use an approved methodology (or propose one)
PDD - Project Design Document
Applicability: Show that the methodology is applicable
Additionality: Demonstrate Intention (project not business as usual/CDM incentive)
Baseline emissions: Business as usual
Project emissions: Estimate emissions through the duration
Monitoring: Define future public reporting
Stakeholders comments: Local public consultancy
Letter of Approval (ministry of environment)
Validation / approval by third party (DNV, SGS, )

Registration by UN Executive Board
Realization of project (10 years or 3 times 7 years)
Verification /Yearly monitoring & certification
Creation (Issuance) of Certified Emission Reduction Units (CER)
Sell the CER 5

Agenda
Economic aspects
6
Current CDM project opportunities in cement industry
MIC AF
Decreasing the clinker factor in blended Substitution of fossil fuels with alternative
cement (meth.:ACM005) fuels (meth.:ACM003)
Raw material TF
Use of non carbonated calcium sources Fuel switching from coal or petroleum fuel
in the raw mix (meth.:AM0033) to natural gas (meth.: ACM009)
Use of alternative raw materials that Already approved
contain cabonates [ashes,slag,gypsum, methodologies that
anhydrite, fluorite, etc.]
can be used in
(meth.: AM0040) cement industry
Efficiency Power Plant

Waste heat recovery and utilization for Utilization of biomass for power
power generation generation
(meth.:ACM004 + AM024 or small (meth.:ACM006)
scale)
7
Coming opportunities in cement industry
Energy efficiency through small scale project
3 projects have been registered (end of march 07)
Applicable for a maximum saving of 60GWe or 180GWhth per year
Simplify methodology but same validation
Self plantation for industrial needs

One methodology is already approved.
No project has been validated yet.
Complex project (land status, increase and decrease of sink from growth and
harvest, emission from fertilization, etc)
Global emission reductions project through a benchmark

methodology (Cement Sustainability Initiative)
No methodology yet
Availability of the data expected in Autumn 07
8
Current CDM projects in cement industry (End of March 2007)
Certified Reductions:

6 projects have received about 850k CERs
Registered:
In total 26 projects have been registered (14 MIC, 4 AFR, 5 power, 3 energy
efficiency) creating a total expectation of 2,600kton credits (ER) per year.
Validated:
8 projects are close to registration, adding another 300kton/y
Under validation:
34 projects are under validation, hoping for 3,800kton/y reductions
In preparation:
An unknown number is under preparation but not yet proposed to the UNFCCC,
among these some projects within the Holcim group.
9
CDM projects within the HOLCIM group
Company Projects Status (PDD) Potential
CERs (kt/y)
GACL Power plant (biomass) registered 26
Blended cement registered 550
Blended cement (ACEL) Req. of registration 30
ACC Blended cement registered 400
HLL Blended cement At validation 65
PHI AFR Validation (April) 250-500
IDN AFR Validation (April) 550
Projects under discussion:

u?
yo
Vietnam, Thailand, South Africa, Tanzania, India, nd
A
10
Agenda
Economic aspects
11
Cost of a CDM Project
External cost
Steps Cost (US dollars)
Consultants (write PDD) / CIE Kick- ~ 20000-50000 / under discussion
off meeting, follow up and write a (0.20-0.25 per annual average
PDD ready for validation forecasted CERs)
Validation of the PDD by a third party ~ 14000-25000
Registration fee (EB UNFCCC) 0.2/forecasted CERs
Consultant / CIE verification report* ~ 10000-30000 / under discussion
Verification by a third party ~ 14000-25000 (per year)
Issuance of CERS (EB UNFCCC) 2% of the CERs
Internal cost
Local team on an ad hoc basis with one local project manager (20%)
(+Monitoring*)
12
Forward ER and CER prices
Emission reductions can be sold through the process.
The price is linked to the demand therefore to the EUA price
(carbon unit of the EU Emission Trading System)
Low risk for the seller: low price
High risk for the seller (wait until the issuance of CERs): High price
Price
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13
Pr
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CERs Prices
EUA
CER
Chinese floor: 8-9euro
Source: pointcarbon
CERS price difference: CER and EUA price difference:

-Project risk -Transaction risk (ITL)
-Host country risk, -Transaction and swap costs
-Counterparty risk, -Market psychology
-Compensation for costs
and time (project
development) 14
Holcim Environment Services (HEnS)
Holcim has now a 100% daughter company (HEnS) with emissions trading as
objectives
HEnS currently trade CO2 allowances within the EU Emission Trading System (EU
ETS)
Holcim EU companies sell and buy at market price first within the group and the
balance with the external market. HEnS charge a small service fee, within the EU
ETS the risk are low and the fee is 0.1 Euro/tonne CO2
HEnS is preparing a purchase agreement for issued CERs.
CDM registry
1st project participant pending
account (ex: Holcim Lanka Ltd)
2nd project participant pending

account (ex: HEnS) Purchase agreement
ITL (international transaction log) CITL (community transaction log)
National registry National registry National registry
Company registry (HEnS) Company registry (Holcim Italy) Company registry

15
Agenda
Economic aspects
16
Would you like to start a CDM project?
Draft PIN or E-mail / phone (contact me !) Support + info + applicability of methodology
PIN (project description, estimation of emission reductions, applicability of the methodology)
Approved PIN by the CEO
Kick off meeting (3-5 days)

-Crash course on the methodology
-Define task, responsibility and planning (PMA team)
-Start to collect the data
-Meet the DNA (ministry of environment)
-Meet potential consultant and make a decision (with or without)
Project Design Document (~5 months)

- Collect data, calculation, write the PDD, stakeholders' meeting
Validation Registration Monitoring and Verification
Issuance of CERs 17
Question? Idea?
Notes: methodology of absorption, now no benefit from selling CER, but clinker factor is beneficial, can we do
transaction like this in Vietnam, Monre aware of this, blending cement is to reduce clinker factor to be focus of,
actual no data available now in region for benchmarking. Baseline is clinker factor, 2% decrease is considered in
baseline. Forexample, all in the region will convert to the best in the region. 50000 CO2 per year reduced is small
project. HLL reduced 65000 CO2, howmuch clinker factor to be reduced ? Which material used in other countries
for blending,
How to consider the projects doing electricity effiency as CO2 reduction, instead increasing production, 40 tons of
CO2 absorbed per hecta per ten years if using plantation,
most of registration required design capacity.
How to translate projects at HVL to CDM registration. Big plant can save big CO2. waste heat recovery acquires
payback 7-10 years . Financial term. EU is the main buyer and how to negotiate with buying in 10 years project.
waste heat recovery of But son cement plant,
Vietnamese government commitment to Kyoto protocol.
Slag : shipment ready to leave in July from Jan pan, 2000 tons will be here end of July. No industrila test yet,
feasibility done . The outcome of trial 2006, not to change the workability of cement sold. The IT will be separate
grinding not intergrinding. CL mill is not designed for grinidng slag.
HTS1 cli. Factor 56% slag 10% pozz 9%
HTS2 cli. Facotr 45%, salg 30% pozz 0%
HRF cli. 74%, SLAG 10%, POZZ 0%, LS 11%
Catherine
Slag Martin-Robert
can replace 1 by 1 clinker. The study not consider the loss of grinding capacity. The objective of second trial
will be validate the outcome of LAB study and possible to keep going 50% depending on the benefit gained from
+41 79trial.
industrial 327 36 30 is different from LS cement, this is the marketing issue.
Workability 18
10% slag
Holcim can reduce
Group 100k tons of CO2 reduction. CO2 reduction is based on local clinker production. Slag mixed
Support
in cement.

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Clean Development Mechanism (CDM)

Holcim Group Support