The cement sector is set to become one of the major gainers of the clean development mechanism (CDM) under the Kyoto Protocol Agreement, which enables developing countries like India to trade carbon credits with developed countries.
All the top notch cement companies in India have either registered at least one of their cement projects or are in the process of doing so for CDM projects. In addition, close to 80 more CDM projects are at various stages of approval and validation.
Cement companies in India like ACC, Grasim, Ultratech, Binani, Gujarat Ambuja, JK Cement, Shree Cement, Birla Corporation and Orient Cement have lined up projects under the CDM to claim carbon credits over a period of 10 years. These projects alone have a potential to generate an additional revenue in the range of Rs 1,500 crore to Rs 2,000 crore over a 10-year period.
ACC got project registration with the UN body (UNFCCC) in May this year for over 4 lakh CERs annually. Shree Cement’s two projects, producing close to 1.8 lakh CERs annually, were also registered this year.
"The CDM projects in the cement sector have huge potential. There are at least 70-80 projects in the sector at various stages of completion," Sudipta Das, partner, risk and business solutions, Ernst & Young (E&Y India) told ET.
The first cement project from India was registered with the UNFCCC in February this year and, since then, six CDM projects in the sector equaling 7m carbon credits or CERs (carbon emission reductions) over a period of 10 years have been registered. In addition, another 6.7m carbon credit worth of projects, including one from Ultratech Cement, are awaiting registration.
India is one of the largest cement producing nations with a total production in the range of 135mt in ’05-06 and set to touch 200mt by ’10. Many cement players are now looking at availing the CDM as means of additional revenue generation.
"We have about 4-5 CDM projects under fly ash utilisation and waste heat management in the pipeline," said Ravi Sanghi, managing director, Sanghi Industries. In addition, Orient Cement, which already has a project pending registration, is working on another CDM project. "The second project involves waste heat utilisation," said B Pandey, president (operations), Orient Cement.
"Utilising fly ash to improve the clinker efficiency is a big area of opportunity which can generate substantial carbon credits," Dr Vivek Kumar, associate fellow at The Energy and Resources Institute (TERI) said.
The other areas of CDM projects in the cement sector are in energy efficiency and waste heat management. "More projects in process improvement will produce large-scale CERs in the cement sector in future. We are working on some such cement projects," Mr Das of E&Y said.
The CDM proposed under article 12 of the Kyoto Protocol is an important potential instrument to promote foreign investment in Green House Gas (GHG) emission reduction options while simultaneously addressing the issue of sustainable development.
It also provides incentive to industrialised countries to invest in gas (carbon dioxide equivalent) reduction projects in developing nations like India.