Clean Development Mechanism Projects in the Cement Industry Using a Process-Step for Carbon Credits.

Submitted by:-

ROHIT R.BIYALA MANISH SHARMA JYOTSANA DOGRA AKANKSHA AGARWAL SHILPA PAWAR

OVERVIEW OF CEMENT INDUSTRY The Cement Industry

The cement industry is an interesting one to analyze as on one hand the similarity of raw materials and processing units makes differentiation difficult, while on the other hand large companies are acquiring smaller ones, changing industry dynamics. Competitors: The Indian cement industry has a large number of fragmented firms. There is also a dearth of new players as incumbents have already procured key raw material sources, like limestone reserves on long-term leases. Further, large firms are continuously consolidating by acquiring smaller ones that find it difficult to attain minimum efficient scale of production. Product: Cement is a bulk commodity and a low value product. It is sold in 50 kg packs as OPC grade 33, 43, and 53. It is used in all construction activities as a primary constituent of concrete. Due to similar raw material inputs and production processes, there is no significant differentiation in the cement produced across firms. Environmental Issues: Greenhouse gas emissions from cement manufacturing pose a serious environmental threat. Currently, the cement industry generates 5% of India's total carbondioxide emissions.2 With stringent emission norms, the production process needs to be made environmentally sustainable. The cost of implementing new production processes that help reduce emissions can be offset by trading certified emission reductions (CERs). CERs are a component of national and international emissions trading schemes, implemented through Clean Development Mechanism (CDM) projects, in an attempt to mitigate global warming.3 Credits obtained through implementation of such projects can be traded in international markets. Having studied the cement industry and identified the main issues facing the firms, we engage in an in depth analysis of the firm's resources to identify the sources of sustainable competitive advantage Cement is considered one of the most important building materials around the world. It is mainly used for the production of concrete. Concrete is a mixture of inert mineral aggregates, e.g. sand, gravel, crushed stones, and cement. Cement consumption and production is closely related to construction activity, and therefore to the general economic activity. Cement is one of the most produced materials around the world. Due to the importance of cement as a construction material, and the geographic abundance of the main raw materials, i.e. limestone, cement is produced in virtually all countries. The widespread production is also due to the relative low price and high density of cement, that limits ground transportation because of the relative high costs Cement production is a highly energy intensive production process. The energy consumption by the cement industry is estimated at about 2% of the global primary energy consumption, or almost 5% of the total global industrial energy consumption. Due to the dominant use of carbon

intensive fuels, e.g. coal, in clinker making, the cement industry is also a major emitter of CO2 emissions. Besides energy consumption, the clinker making process also emits CO2 due to the calcining process. The cement industry contributes 5% of total global carbon dioxide emissions.

Historical Production Trends in the Cement Industry: Global cement production grew from 594 Tg in 1970 to 1453 Tg in 1995 at an average annual growth rate of 3.6% [Cembureau, 1998]. Table below provides historical cement production trends and average annual growth rates for 10 world regions and countries. Cement Production 1970 1975 1980 Region/Country Tg Tg Tg China(incl Hong Kong) 27 47 81 Europe 185 194 223 OECD-Pacific 69 83 113 Rest of Asia 20 31 49 Middle East 19 29 44 Latin America 36 52 76 Eastern Europe/Soviet Union former 134 177 190 North America 76 73 79 India 14 16 18 Africa 15 20 28 World 594 722 901 Average annual growth 1985 1990 1995 1970-1995 1990-1995 Tg Tg Tg % % 148 211 477 12.20% 17.70% 178 196 181 -0.10% -1.70% 100 126 154 3.30% 4.10% 57 89 130 7.80% 8.00% 75 93 116 7.40% 4.60% 71 82 97 4.10% 3.40% 190 190 96 -1.30% -12.70% 81 81 88 0.50% 1.50% 31 49 70 6.60% 7.30% 35 38 44 4.50% 2.70% 965 1156 1453 3.60% 4.70%

Figure 1. Cement Production Trends in Major World Regions, 1970 to 1995. Source: Cembureau, 1998

JK CEMENT LTD Company Overview.

J.K.Cement started its commercial production in May 1975 in its first plant Nimbahera in Rajasthan. The company was incorporated in the year 1994. Today J. K. Cement is one of the largest cement manufacturers in north India. It is also second largest producer of white cement in India. The company exports white cement to countries like South Africa, Nigeria, Singapore, Bahrain, Bangladesh,SriLanka, Tanzania, UAE and Nepal. The company has two manufacturing facilities located at Nimbahera and Mangrol in the state of Rajasthan. The company produces white cement and its production unit is located in Gotan at Rajasthan. During August 2009, Allahabad HC had sanctioned the scheme of amalgamation of Jaykaycem a wholly owned subsidiary with the company. Jaykaycem was implementing 3 million tones per annum Green Field Grey Cement Plant at Mudhol, District Bagalkot, Karnataka state which was at final stage of implementation. The installed capacity of grey cement of JK Cement with the merger increased to 7.5 million tones per annum. These plants have received various certifications ISO-9001:2000 for quality management system, ISO-14001:2004 for environment management systems and OHSAS-18001:2005 for occupational health and safety systems.

PRODUCTS
J K Cement produces ordinary Portland cement of 53-grade, 43-grade and 33-grade. It markets these cements under the brand name J K cement and Sarvashakitman. It also manufactures Portland Pozzolana Cement and markets it under the name J K Super. It markets white cement under the name J K White and Camel. J.K. Cement has introduced water repellent material in powder form. It has also introduced white cement based putty for plastering walls and ceiling and sells the same under the name JK Wall Puty.

MANAGEMENT TEAM
S.No 1 3 2 4 5 6 7 8 9 10 11 Name Gaur Hari Singhania Yadupati Singhania Shambhu Singh Achintya Karati Ashok Sharma Jayant Narayan Godbole Jyoti Prasad Bajpai Kailash Nath Khandelwal K B Agarwal Raj Kumar Lohia Suparas Bhandari Designation Chairman Managing Director Company Secretary Director Director Director Director Director Director Director Director

COMPETITORS Sales (Rs.Million) 132099.10 Ultratech Cement 73764.40 Ambuja Cement Company ACC Samruddhi Cement Shree Cement Madras Cement India Cements Century Textile &Ind Chettinad CementCorp 15030.10 561.00 -3.11 12.51 21429.64 584/390 77173.30 42906.30 35118.73 26048.99 34170.67 47472.50 Current Price 1222.65 160.00 1172.00 520.50 2210.00 108.95 77.80 262.85 Change Market 52-Week P/E Ratio (%) Cap.(Rs.Million) High/Low 1.24 14.64 337643.13 1234/890 1.30 0.67 -1.01 -0.75 1.07 3.11 4.35 20.80 19.81 22.04 36.03 8.13 9.43 37.17 246419.70 136206.30 25736.39 23437.73 23326.55 166/112 535/518 123/80 105/62 395/216 220037.56 1233/917 78693.81 2200/1505

The Cement Production Process :

Cement Production Process: Cement production is an energy-intensive process in which a combination of raw materials is chemically altered through intense heat to form a compound with binding properties. The main steps in cement production are illustrated in Figure 1.

The production process for cement consists of drying, grinding and mixing limestone and additives like bauxite and iron ore into a powder known as raw meal. The raw meal is then heated and burned in a pre-heater and kiln and then cooled in an air cooling system to form a semi-finished product, known as a clinker. Clinker (95%) is cooled by air and subsequently ground with gypsum (5%) to form Ordinary Portland Cement (OPC). Other forms of cement require increased blending with other raw materials. Blending of clinker with other materials helps impart key characteristics to cement, which eventually govern its end use. There are two general processes for producing clinker and cement in India : a dry process and a wet process. The basic differences between these processes are the form in which the raw meal is fed into the kiln, and the amount of energy consumed in each of the processes. In the dry process, the raw meal is fed into the kiln in the form of a dry powder resulting in energy saving, whereas in the wet process the raw meal is fed into the kiln in the form of slurry. There is also a semi-dry process, which consumes more energy than the dry process but lesser than the wet process. The basic steps involved in the production process is set out below: All J.K. Cement plants are dry process plants. Limestone is crushed to a uniform and usable size, blended with certain additives (such as iron ore and bauxite) and discharged on a vertical roller mill, where the raw materials are ground to fine powder. An electrostatic precipitator dedusts the raw mill gases and collects the raw meal for a series of further stages of blending. The homogenized raw meal thus extracted is pumped to the top of a preheater by air lift pumps. In the preheaters the material is heated to 750C. Subsequently, the raw meal undergoes a process of calcination in a precalcinator (in which the carbonates present are reduced to oxides) and is then fed to the kiln. The remaining calcination and clinkerization reactions are completed in the kiln where the temperature is raised to between 1,450C and 1,500C. The clinker formed is cooled and conveyed to the clinker silo from where it is extracted and transported to the cement mills for producing cement. For producing OPC, clinker and gypsum are used and for producing Portland [Pozzolana] Cement (PPC), clinker, gypsum and fly ash are used. In the production of Portland Blast Furnace Stag Cement (PSC), granulated blast furnace slag from steel plants is added to clinker.

Carbon Dioxide Emissions from the Cement Production Process

Carbon dioxide emissions in cement manufacturing come directly from combustion of fossil fuels and from calcining the limestone in the raw mix. An indirect and significantly smaller source of CO2 is from consumption of electricity assuming that the electricity is generated from fossil fuels. Roughly half of the emitted CO2 originates from the fuel and half originates from the conversion of the raw material. Carbon Dioxide Emission from Calcination (Process Emissions) Process CO2 is formed by calcining which can be expressed by the following equation: CaCO3 -> CaO + CO2 1 kg 0.56 kg+ 0.44 kg The share of CaO in clinker amounts to 64-67%. The remaining part consists of iron oxides and aluminium oxides. CO2 emissions from clinker production amounts therefore at about 0.5 kg/kg clinker. The specific process CO2 emission for cement production depends on the ratio clinker/cement. This ratio varies normally from 0.5 to 0.95. Carbon Dioxide Emissions from Fuel Use Practically all fuel is used during pyroprocessing during the production of the clinker. The pyroprocess removes water from the raw meal, calcines the limestone at temperatures between 900 and 1000C and finally clinker the kiln material at about 1500 C. The amount of carbon dioxide emitted during this process is influenced by the type of fuel used (coal, fuel oil, natural gas, petroleum coke, alternative fuels). The total CO2 emission during the cement production process depends mainly on: Type of production process (efficiency of the process and sub-processes) Fuel used (coal, fuel oil, natural gas, petroleum coke, alternative fuels) Clinker/cement ratio (percentage of additives) Table 3 shows the carbon dioxide emission from the cement production (dry and wet-process) in relation to the clinker/cement ratio and fuel used. The cement/clinker ratio may vary by adding more or less additives to the cement. Not accounted for are the carbon dioxide emissions attributable to mobile equipment used for winning of raw material, used for transport of raw material and cement, and used on the plant site.

Global Carbon Emissions from Cement Production: Cement Producti on Region/ Countr y China Europe OECD Pacific Other Asia Middle East North Americ a EE/FS U Latin Americ a India Africa World total Clinker/c ement ratio Primary Intensit y Primar y Energy Process carbon emission Carbon emission energy use Total carbon emissions

Tg 423 182 151 124 111

% 83%

MJ/\kg 5 4.1 3.5 4.9 5.1

PJ 2117 749 533 613 563

Tg CO2 175 73 65 56 51

Tg CO2 197 56 41 179 44

Tg CO2 372 129 105 105 95

88 101

5.4 5.5

480 558

39 42

40 38

78 80

97 62 41 1381

89%

4.7 5 4.9 4.8

462 309 201 6585

41 28 18 587

30 30 15 830

71 60 33 1126

CDM PROCESS AT JK CEMENT LTD.

JKCL is one of the leading grey cement producer in North India and second largest producer of white cement in India. JKCL has state-of-the-art cement manufacturing facilities at Nimbahera. JKCL project activity entails a reduction of the clinker content of Portland Pozzolana Cement (PPC) by increasing fly ash percent, thereby replacing an equivalent amount of clinker at JKCL Nimbahera, Rajasthan state in North India. In cement production process,content would substantially reduce CO2 emission due to calcination process and fuel combustion in kiln and would also reduce CO2 emission due to reduction in specific electrical energy consumption of the cement plant. The reduction of clinker percent would conserve natural resources like limestone and avoid depletion of fossil fuels like coal. The project activity contributes to sustainable development at the local, regional and global levels in the following ways: Direct and indirect reduction of Green House Gas (GHG) emissions Clinkerisation is the main source of CO2 emissions in cement production. Reduction of clinker percent in cement production by increase of additive percent fly ash, results in direct and indirect GHG emission reductions. Industrial waste utilization Fly ash disposal by power utilities has become a contentious environmental issue in India. The project activity facilitates fly ash utilization and reduces the cost of waste handling and disposal on the part of coal fired thermal power plants. It also reduces Land pollution due to the burden of the ever-increasing volume of waste in landfills Air pollution caused due to fugitive emissions from fly ash dumped in the vicinity of the thermal power plants Water contamination problems arising from landfill leaching Thermal and electrical energy conservation The project activity reduces specific thermal and electrical energy consumption for cement production and conserves energy, hence positively contributes towards conservation of nonrenewable natural resource (coal/lignite) and making coal/lignite available for other important applications. Resource Conservation The project activity reduces clinker content per ton of PPC and hence reduces the quantum of limestone required per unit of cement produced. Reduction in limestone and coal consumption / demand further reduces quarry mining, and its associated fugitive dust emissions, loss of biodiversity because of land destruction and erosions arising from such activities. Therefore project activity has excellent environmental benefits in terms of reduction of GHG emissions, limestone conservation, fuel conservation, decreased environmental destruction and enhanced restoration, economical and social prosperity by opening avenues for investment in waste management

CER CALCULATION.
JK Cement Limited Emission Reduction Calculations: 1st October 2009 to 31st March 2010 Total Auxiliary Net Generation Generation(KWh) Generation(KWh) (KWh) 5769300 567962 5201338 6112750 563169 5549581 6879658 611997 6267661 6432450 593832 5838618 5945400 566390 5379010 6089000 608827 5480173 37228558 3512177 33716381 Emission Factor (tCO2/MWh) 0.786 0.786 0.786 0.786 0.786 0.786 0.786 Emission Reduction (tCO2) 4088.25 4361.97 4926.38 4589.15 4227.9 4307.42 26501

Month Oct. 09 Nov. 09 Dec. 09 Jan. 10 Feb. 10 Mar. 10 Total

Emission Factor : Carbon Emission Factor of the grid as per the baseline adopted (EFy) = 0.786 kg CO2/kWh = 786 kgCO2/MWh

Baseline Emissions: Carbon Emission Factor of the grid as per the baseline adopted (EFy) = 0.786 kg CO2/kWh = 786 kgCO2/MWh Total electricity generated (EGGEN) = 37228558 KWh Auxiliary Electricity consumption (EGAUX) = 3512177 KWh Net electricity supplied (EGy) = 33716381 KWh Baseline emissions (BEy) = EFy x EGy = (0.786) x (33716381) kgCO2 = 26501 tCO2 Project Emissions (PEY): Emission Reductions (ERY) NIL = BEy - PEy = 26501 t CO2 NIL = 26501 tCO2

CER

= Tonnes of green house gas reduced x Global Warming Potential of the gas = 26501 TCO2*1 ( Global Warming Potential of CO2 is 1)

CER

=26501