Indocement CDM Project

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Indocement CDM Project

• Presentation World Bank Office
• Jakarta 12th August 2008
• Oivind Hoidalen PT Indocement Tunggal Prakarsa
  Tbk.

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Structure of presentation

• Indocement and CDM Projects
• CDM and Preparation of Methodologies
• Alternative Fuel Project
• Blended Cement Project
• CDM Cycle
• Milestones Indocement CDM Projects
• Expected CO2 reductions
• Host country approval
• Environmental, Economical, Social and
  Technological Sustainability
• Final comments

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Indocement and CDM projects

• HeidelbergCement AG majority shareholder of
  Indocement and member of World Business Council
  for Sustainable Cement Production committed to
  sustainable cement industry centering on three
  pillars ? economic growth, ecological balance and
  social progress
• Cement industry worldwide contributes about 5 of
  anthropogenic greenhouse gases ? challenges as
  well as opportunities
• CO2-trading ? European emission trading scheme
  and CDM mechanisms for non-Annex I countries of
  importance since HeidelbergCement operates cement
  plants in several developing countries

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Indocement and CDM projects

• Tarjun 2,5 mill tons/year

• Citeureup 10 mill tons/year

• Cirebon 2,5 mill tons/year

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Indocement and CDM projects

• Cement is produced by burning a mixture of raw
  materials comprising mainly of limestone and clay
  in large rotary kilns at temperatures above 1450
  C. This process results in the formation of
  clinker which together with gypsum and other
  materials upon grinding to high fineness is
  transformed into cement.
• CO2-emissions are generated as follows
• Through Raw Meal Calcination
• CaCO3 CaO CO2
• Fuel burning since the Carbon in fossil Fuels
  will generate CO2
• CO2 generated from Power Consumption either
  from the grid or from on-site Power Generation
• On-site transportation, lighting etc.

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Indocement and CDM projects

• Indocements Energy efficiency
• About 3.150 kJ/kg clinker
• About 105 kwh/ton cement
• Main potential for CO2-reduction measures at
  Indocement
• Increased use of alternative materials (Reducing
  Clinker content in Cement through introduction of
  Blended Cements) by using Limestone, Fly-ash and
  natural Pozzolana (Trass)
• Increased use of alternative Fuels by using rice
  husk, palm oil kernels, saw dust etc.
• Initial estimations indicated that reductions of
  about 0,5 - 1 million tons of CO2 could be
  reduced annually through increased use of
  alternative materials and alternative fuels
  hence a considerable potential!

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Indocement and CDM projects

• Based on an overall assessment of risks and
  benefits, it was from beginning of the Project
  concluded to proceed with the World Bank
  (Prototype Carbon Fund PCF) acting both as a
  Project Developer/Consultant as well as being a
  buyer of a part of the CO2-reductions
• Reputation of the World Bank
• Due to the comprehensive documentation required,
  Indocement appointed URS (Dames and Moore), later
  changed to PT Solusi headed by Ibu Architrandi
  Priambodo

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What is CDM?

• CDM Projects require that a so called Baseline be
  established which defines
• the scenario that reasonably represents the
  anthropogenic emissions by sources of Greenhouse
  Gases that would occur in the absence of the
  proposed project activity
• Barriers have to be overcome with the help of the
  generated CER credits. It must be demonstrated
  that the CDM Project is not Business as usual
• As a consequence detailed and comprehensive
  requirements are to be met in order to safeguard
  that emission reductions from CDM projects are
  real, measurable and long-term and that they are
  additional to any that would have occurred
  without the project
• The project proponent requires to follow certain
  Baseline Methodologies which need to be approved
  by the Methodology Panel reporting to the
  Executive Board

Employee Presentation 3-00 - p 8
11/3/2009 73705 AM
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Preparation of Methodologies

• Following the modalities and procedures for CDM
  Projects established at COP-7 in Marrakech in
  2003, in principle three Baseline Methodologies
  can be used
• Existing actual or historical emissions, as
  applicable (Market Barrier Approach Blended
  Cement)
• Emissions from a technology that represents an
  economically attractive course of action, taking
  into account barriers to investment (Investment
  Barrier approach Alternative Fuels)
• The average emissions of similar project
  activities undertaken in the previous five years
  in similar social, economic, environmental and
  technological circumstances, and whose
  performance is among the top 20 per cent of their
  category

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Preparation of Methodologies

• Indocement Project a Pioneer Project and two new
  Methodologies had to be developed
• Methodology Blended Cement
• Baseline Methodology for barrier testing,
  baseline scenario and emission reduction
  calculation for project activities that
  substitute Ordinary Portland Cement (OPC) with
  blended cement
• Methodology Alternative Fuel
• Baseline methodology for project activities that
  substitute fossil fuels with alternative fuels in
  cement kilns

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Alternative Fuel Project

• Indonesia possesses large amounts of biomass
  fuels such as palm kernel shells, rice husk and
  saw dust since such fuels are considered CO2
  neutral - CO2 reductions are achieved
• Extensive discussions took place in Europe and
  the US during the 1980/1990ies as to the burning
  of alternative fuels in particular concerns
  about emissions of persistent organic
  constituents such as dioxins and furans
• Extensive stack measurements in cement kilns all
  over the world have confirmed that cement kilns
  are well suited to burn a wide range of
  alternative fuels in addition to biomass (car
  tires, oily sludge, plastics, paper, pretreated
  municipal wastes etc.)
• The use of some wastes will in addition to
  reducing CO2 also reduce generation of Methane
  from landfills thereby further reduce
  greenhouse gases

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Blended Cement Project

• A major breakthrough for wider use of Blended
  Cement new European Cement Standard EN-197
  introduced since end of the 1990ies
• Standard allowed introduction of a variety of
  blended materials under strict quality
  requirements thus assuring constructive
  properties of concrete not to be jeopardized
• Composition of Blended Cements deviates from
  Ordinary Portland Cement OPC.
• Blended materials are Pozzolanic materials,
  high quality limestone etc.
• Pozzolanic materials are siliceous or
  silicon-aluminous materials reacting with cement
  to form strength developing compounds

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Blended Cement Project

• The addition of blended materials to Ordinary
  Portland Cement (OPC) is limited by the
  Indonesian cement standard.
• In order to implement the CDM project for Blended
  Cement, Indocement had to introduce a new
  Indonesian Cement Standard allowing a wider use
  of blended materials ? New Indonesian Cement
  Standard (SNI-15-7064-2004) for Portland
  Composite Cement (PCC)
• PCC has compressive strength and other
  constructive properties equivalent to that of OPC

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CDM Cycle
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Milestones Indocement CDM Projects (1)

• Project Idea Note (PIN) with Letter of Acceptance
  from the Ministry of Environment sent to the
  Prototype Carbon Fund (PCF) of the World Bank ?
  Dec 2002
• Project Concept Note (PCN) sent to the PCF ? Mar
  2003
• Letter of Intent (LoI) signed with the PCF ? Aug
  2003
• Feasibility Study and Environmental Management
  Plans (EMPs) for each production site Citeureup,
  Cirebon and Tarjun prepared ? end of 2003
• Project Design Document (PDD) jointly prepared by
  Indocement and the PCF including proposal for new
  Methodologies for Alternative Fuel Project and
  Blended Cement Project sent to the UNFCCC ? 23
  Jan 2004
• Indocement (and PCF) initially expected to
  receive final approval of both project components
  by May/June 2004

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Milestones Indocement CDM Projects (2)

• Indocements proposed methodologies required
  however several rounds of discussions with the
  Methodology Panel (MethPanel making
  recommendations to the Executive Board on how to
  calculate and monitor CO2 emission reductions)
• In the meantime Indocement and the PCF signed an
  Emission Reduction Purchase agreement (ERPA) at
  the Carbon Expo in Cologne ? 9 Jun 2004
• Kyoto Protocol entered into force ? February
  2005
• Methodology for Blended Cement Project approved
  by the MethPanel ? October 2005 a revised final
  consolidated version approved ? 19th May 2006
• Methodology for Alternative Fuel Project approved
  by the MethPanel ? June 2005 a revised final
  consolidated version approved ? 28th July 2006

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Milestones Indocement CDM Projects (3)

• Validation process by DnV (Norway) ? Dec 2005 to
  Jul 2006
• Alternative Fuel project registered by UNFCCC ?
  27 Sep 2006
• Blended Cement Project registered by UNFCCC ? 28
  Oct 2006
• Verification by TUEV SUED (Germany) ? Dec 2006
  until beginning of 2008
• First CERs finally approved on the 15th March
  2008 for the Alternative Fuel Project
• CERs for the Blended Cement project under final
  revision and final approval expected soon
• You have to be patient entire process has taken
  gt 5 years

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CO2 reductions from biomass fuels and production
of Blended Cement
CO2 SOx NOx
CO2 SOx NOx

Fuels, Calcination, Power
Fuels, Calcination, Power
Alternative Fuels
Gypsum Additive
Gypsum Additive
Clinker (100)

Clinker
Alternative Material s
Clinker
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Summary of expected CO2 reductions
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Host Country Approval

• Indonesia ratified the Kyoto protocol in July
  2004
• Indonesian Designated National Authority (DNA)
  established July 2005
• Application with answers to a set of questions
  sent to the Indonesian National Authority DNA ?
  Sep 2005
• DNA approval ? Dec 2005
• CDM projects must be approved by the DNA and must
  in addition to reducing CO2 emissions meet
  specific requirements from the host country
• The Indonesian DNA set up a set of criteria's
  with which Indocement had to comply prior to
  acceptance by the host country
• The following slides show some of these
  criteria's

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L. Environmental Sustainability

• L.1. Criteria Environmental Sustainability
• L.1.1. Indicator
• Environmental Sustainability by applying natural
  resource usage , conservation and diversification
• L.1.2. Indicator
• Applicable national and local standards threshold
  values for environmental quality must not be
  exceeded (applies to air, water and soil
  contamination)
• L.1.3. Indicator
• Biodiversity (genetic, species and ecosystem)
  must be maintained and genetic contamination
  shall not occur
• L.1.4. Indicator
• Compliance with land use and spatial lay-out
  regulations

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L. Environmental Sustainability

• L.2. Criteria Local community, safety and health
• L.2.1. Indicator
• Provide evidence that project activity will not
  give any adverse effects on health for local
  communities
• L.2.2. Indicator
• Occupational Health and Safety regulations to be
  adhered to.
• L.2.3. Indicator
• Available documented procedures describing
  adequate efforts in order to prevent the
  occurrence of accidents as well as its remedial
  measures

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E. Economical Sustainability

• E.1. Criteria Local community welfare safety
  and health
• E.1.1. Indicator
• Project must not lead to any reduction in the
  income of the local community as a whole
• E.1.2. Indicator
• Describe efforts to handle potential impacts of
  reduced income for a parts of the community
• E.1.3. Indicator
• In case of lay-offs as a result of the project
  activity, lay-offs must follow applicable
  statutory regulations
• E.1.4. Indicator
• Project must not lead to any reductions in the
  quality of services to local community

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S. Social Sustainability

• S.1. Criteria Community Participation
• S.1.1. Indicator
• Have in place a consultation process for local
  communities
• S.1.2. Indicator
• Have in place a response and follow up to
  comments and complaints from local communities
• S.1.3. Indicator
• Project shall not impair the social integrity of
  community
• S.1.4. Indicator
• Project must not lead to any conflicts among
  local communities

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T. Technological Sustainability

• T.1. Criteria Technology Transfer
• T.1.1. Indicator
• The project activity must not create dependence
  from foreign countries in terms of knowledge and
  know-how.
• T.1.2. Indicator
• The project shall not apply obsolete technology
• T.1.3. Indicator
• Project shall improve the ability of and
  utilization of local technology

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Final comments

• A CDM Project must not only reduce CO2-emissions
  but must also lead to Sustainable Development in
  the Host Country
• Comprehensive documentation and transparency
  required ? PDD, Validation reports, Verification
  reports on the UNFCCC-web for public comments
  http//cdm.unfccc.int/
• Environmental Management Plans on Indocement
  web-site www.indocement.co.id
• Challenging in a plausible way to predict
  investments, market developments etc. (Time Frame
  10 years and more!)
• Additionality Why is a project only feasible
  with CO2-credits and not feasible without
  CO2-credits
• Arduous Validation and Verification processes
• Provide substantiation for Methodology
  applicability
• Provide substantiation for additionality
• Detailed Monitoring reports to follow Monitoring
  plan in PDD
• Detailed leakage calculations (Although less than
  5 of Emission Reductions)
• Continuation of flexible mechanisms now being
  discussed as part of Post Kyoto Agreement
  Uncertain outcome!

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Thank you