New Delhi: Claims for carbon credits by Indian cement manufacturers using fly ash are being rejected by the Clean Development Mechanism (CDM) executive board, created under the aegis of the United Nations Framework Convention on Climate Change.
Four out of 11 rejections for Indian projects have been for these cement projects which would, in the normal course, have earned extra revenue from the sale of carbon credits if they had received the stamp of approval from the board.
“The total CERs revenue loss from the four projects would be approximately Rs90-100 crore over a period of 10 years,” said Ashutosh Pandey of Emergent Ventures India Ltd, a consultancy firm for CDM projects.
The mechanism, which followed the Kyoto Protocol, allows projects in developing countries that reduce greenhouse gas emissions to register to earn carbon credits depending on the amount of carbon dioxide they reduce. These credits are then bought by industrialized countries which have committed to reduction of greenhouse gas emissions to mitigate global warming. The credits are both spot and futures traded.
All the rejected cement projects in India that had applied for these carbon credits had applied on the basis of production of pozzolana portland cement (PPC), which is cement blended with fly ash, a waste product of coal and lignite-based thermal power plants.
Blending of cement with fly ash, though not mandatory, is common practice in India, and 20% of the cement projects that have applied for carbon credits fall under this category. Such projects are eligible for carbon emission reductions (CERs) as fly ash blended cement consumes less energy. As of now, India is the leading country with 33 registered cement projects, followed by China with seven units.
The Cement Manufacturers’ Association (CMA) agrees that cement projects are facing hurdles in getting clearance for registration. The four rejected projects were of Jaypee Cement Ltd, Lafarge Cement India, Grasim Industries Ltd’s Birla Plus and Ambuja Cements Ltd.
To be eligible for CERs, projects have to prove that without CDM incentive, the project would not exist and it also has to prove itself to be the best in the sector. S.P. Ghosh, adviser technical, CMA, said projects are facing problems in the “sectoral best” aspect.
However, Pandey, who was the consultant for the rejected Jaypee Cement Project, said, “Jaypee Cement, which produces 28-30% fly ash blend cement, is the sector maximum in north India compared to other brands in the region (25-27%), was rejected, though other projects with lower blend in the region were earlier approved.” He claims that in addition to rejections, numerous such projects are also stalled or delayed.
The mechanism mandates that if a project exacts profitability out of the methodology, it is not eligible. Pandey said that it has been assumed that as fly ash is low-cost, compared to other raw materials, cement manufacturers would increase use of fly ash to enhance profitability and hence precluded the need to provide CDM incentives.
“However, many barriers, such as market acceptability of higher blend cement exist, and additional technical efforts are required for increasing the blend. The best proof for these barriers is that in India, up to 30% fly ash is allowed to be added in PPC and no Indian cement brand till date has been able to reach that level,” he added.
Ghosh agrees, saying that cement companies have to invest anything from Rs50 crore to Rs100 crore in fly ash collection systems. The cost of fly ash has also been increasing, say manufacturers.
Matters get more complicated in view of a new draft notification from the Union ministry of environment and forests, which mandates that thermal power plants will have to invite bids for fly ash disposal. An older, 1999, notification from the ministry specifies that coal and lignite-based thermal power plants have to supply fly ash, a pollutant, to cement and brick manufacturers free of cost to protect the environment.
Manufacturers insist that it is because of this notification that blended cement production has gone up to 60% of total production in 2006-07 from 52% in 2005-06. “Even though fly ash is supposed to be free, we pay for transport and administration costs, which means we buy fly ash at the rate of Rs80-280 per tonne,” said Ghosh.
However, the new draft notification, if notified, will mean that power plants will have to invite competitive bids for fly ash. Ghosh said that after the draft notification, prices have already gone up. The CMA has written to the ministry objecting to the notification.