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 Clean development methods for the supply chain |
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CHRIS CATTO-SMITH
Last week we discussed a number of initiatives as part of establishing carbon-efficient supply chains. Earlier this week, the British Embassy hosted a convention organised by the UK Climate Change Projects Office (CCPO), which several hundred leading Thai industry and government leaders attended. A panel of international experts and financial executives presented updates on carbon-exchange programmes and associated funding available to support projects that can reduce greenhouse gas emissions and encourage more environmentally friendly energy generation, supply chain and production methods.
A new global carbon trading initiative: The conference objective was to introduce Clean Development Methodologies (CDM). CDM is an arrangement under the Kyoto Protocol allowing industrialised countries with a greenhouse gas reduction commitment to invest in projects that reduce emissions in developing countries as an alternative to more expensive emission reductions in their own countries. The most important factor of a carbon project is that it allows projects and improvements to be made that would not have occurred without the additional incentive provided by emission-reduction credits.
Need for flexibility: Some governments desired flexibility in the way that emission reductions could be achieved and proposed international emissions trading as a way of achieving cost-effective reductions. At the time it was considered a controversial element and was opposed by environmental NGOs and, initially, by developing countries that felt industrialised countries should put their own houses in order first. They feared the environmental integrity of the mechanism would be too hard to guarantee. Eventually, and largely on US insistence, the CDM and two other flexible mechanisms were written into the Kyoto Protocol.
Cutting carbon emissions: Under the Kyoto protocol, developed countries must cut their emissions by an average of 5% compared with 1990 levels by 2012. As well as reducing their own emissions, they can invest in projects in developing countries that reduce emissions there through a system of carbon trading.
These projects, ranging from wind farms and hydro-electric dams to systems that capture methane from pig farms, and can be granted carbon credits for each tonne of carbon dioxide, or its equivalent, that is avoided. The idea is that global emissions are reduced and developing countries benefit by gaining access to technology they would not otherwise be able to afford.
High-return projects: Chemical factories for example, producing fluorocarbon-based gases can reduce their emissions using a simple piece of equipment called a scrubber. It can cost a few million dollars for an average-sized factory but in particular in the case of the potent HFC-23, companies can receive thousands of carbon credits for reducing a few tonnes of the gas. One tonne of HFC-23 is thought to have the same warming impact on the climate as 11,700 tonnes of carbon dioxide.
As a result, HFC-23 projects have been the biggest single source of credits on the carbon market although, as there are a limited number of factories producing the gas, they will make up a smaller share in future.
Still a few bugs in the system: According to a Financial Times report on Feb 7, 2007, billions of dollars have been wasted in the international carbon trading system owing to a loophole in the Kyoto protocol. A few Chinese factories and carbon traders were making large profits by exploiting the regulations in the protocol surrounding HFC-23. By installing cheap equipment, the companies could gain carbon credits that they could sell for hundreds of millions of dollars. Early in 2007, the CDM was accused of paying $4.6 billion for projects that would have cost only $100 million if funded by development agencies.
Opportunities for Thai industries: Despite the implementation challenges ahead, this week's convention has created significant interest in clean development projects and associated funding for production and supply chain infrastructure projects, specifically in regard to new opportunities in growth, energy or recycling technologies.
Both Thai manufacturers and project developers now have access to funding that allows future value to be recognised in projects that can reduce greenhouse gas emissions. This in turn makes trading mechanisms, finance and investment processes more efficient.
Some potential infrastructure developments in Thailand include:
- power plant re-powering (alternate sources of fuels, power plant efficiencies);
- renewable energy and fuel switching (ie, biofuels, petroleum to gasohol);
- transport upgrades or modal switching (moving truck transport to rail);
- direct energy recovery through recycling (waste plastic as fuel for power co-generation);
- more efficient energy distribution (pipelines);
- sustainable forestry practices (conversion of wood directly to heavy fuels);
- landfill and methane recovery projects (as being initiated in Korat in northeastern Thailand);
- general energy efficiencies (both in production and end use);
- more efficient refrigeration and air-conditioning (major consumer of energy).
Currently there is no shortage of funds to support CDM infrastructure projects in Thailand. There are, however, a limited
number of eligible projects.(For more information on CDM please see the Climate Change Projects Office site http://www.berr.gsi.gov.uk, and wikipedia. Thanks to the British Embassy Trade Organisation in Bangkok for hosting this event.)
Source: http://www.bangkokpost.com/Business/30Jan2008_biz33.php |
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