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28 January 2008

Opportunities for Carbon Credits in Pakistan’s Cement Sector. 28 January 2008. EcoSecurities is a leading company in the business of sourcing, developing and trading carbon credits throughout the world .

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28 January 2008

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  1. Opportunities for Carbon Credits in Pakistan’s Cement Sector 28 January 2008

  2. EcoSecurities is a leading company in the business of sourcing, developing and trading carbon credits throughout the world. Our carbon credit portfolio is the largest in the industry and consists of 402 projects with the potential to generate over 142 million carbon credits: Who we are • spanning 36 countries, using 18 technologies • 99 projects registered with the CDM Executive Board • 220 projects validated or submitted for validation • 196 of the projects have secured financing • 158 projects are operational

  3. What we do Consultancy services Creating and selling carbon credits Developing and financing projects Buying from our carbon credit portfolio

  4. Global expansion of offices and employees Dublin Tokyo Oxford The Hague • 2 Offices in China • Beijing • Chengdu New York Bern* Kiev Rome* Portland Makati City Madrid Los Angeles Dubai Kuala Lumpur Casablanca Mexico City Singapore San Jose Karachi Jakarta Lima Mumbai Johannesburg Rio de Janeiro Santiago de Chile Bangkok DateHeadcountOffices and Representatives June 2005 27 employees 5 IPO Dec 2005 72 employees 15 August 2007 280 employees 28

  5. Company History Jan 1997EcoSecurities formed Nov 1997EcoSecurities develops first carbon verification service in the world Sept 2003EcoSecurities develops one of the first methodologies to be approved by the CDM Executive Board Nov 2004EcoSecurities’ NovaGerar landfill gas project is the first CDM project worldwide to be registered Oct 2005La Esperanza project, structued by EcoSecurities, receives carbon credits from first-ever issuance Nov 2005EcoSecurities Conusltancy Services is voted the world’s leading greenhouse gas advirosy firm for the 5th year in a row Dec 2005EcoSecurities successfully lists on AIM

  6. The Carbon market • The issue at hand: Anthropogenic (i.e., man-made) climate change is a fact. If and what the implications are and if and how to address them is under dispute. • The Kyoto protocol: Aims to reduce GHG emissions by 2012 and distinguish two types of countries: • Annex I countries: With binding emission targets for industrialised countries: • Western and Eastern Europe, Canada, Japan, New Zealand, Russia, Ukraine • Non-Annex I countries: With voluntary participation of developing countries: • China, India, Pakistan, South Africa, Philippines, Uruguay, Brazil, etc.

  7. The Kyoto protocol Annex I Non-Annex I Not ratified

  8. How to comply with Kyoto • European countries and companies have specific targets. • To comply, European companies can choose to: • Do nothing, pay fines • Reduce emissions on site enough to meet target • Reduce emissions on site in excess of target and sell surplus credits • Buy surplus reductions from other companies in EU • Buy credits from other flexible mechanisms, e.g. CERs from Pakistan

  9. A CDM project reduces the GHG emissions in the CDM country The Kyoto protocol The reduced GHGs in a Non–Annex I countries can be sold to an Annex I country Pakistan United Kingdom Carbon Credits (CERS) Actual emissions Emission cap Carbon value ($) Buyer Seller

  10. Costs of compliance drive the market • Flexible mechanisms allow countries to achieve their emission targets in a cost effective way • Emission Trading (trading of allowances between Annex I governments) • AAUs • Joint Implementation (projects between Annex I countries) • ERUs • Clean Development Mechanism (projects in Non-Annex I countries with participation of Annex I countries) • CERs The costs of compliance differ greatly worldwide

  11. Eligibility Criteria • Country must have ratified Kyoto Protocol and set up national office to approve projects • Project must reduce/displace one of the six greenhouse gases • Project must not have been commissioned yet • Emission reductions must be additional to emission reductions that would occur under normal business-as-usual scenario • Project funding must not result in diversion of official development assistance • Project must contribute to the country’s sustainable development • Project must use technology that is readily available in a market (that is, cannot use experimental or trial phase technology)

  12. Methane GWP: 21 Nitrous oxide GWP: 310 Carbon dioxide GWP: 1 Sulphur hexafluoride GWP: 23,900 Hydrofluorocarbons GWP: 11,700 Perfluorocarbons GWP: 9,200 Different Values for Different Gases SIX types of gases with different Global Warming Potential (GWP). Usually expressed in CO2-equivalent:

  13. Proving Additionality • The Clean Development Mechanism set up to provide financial incentives to invest in new/more efficient/cleaner technologies • Consider CNG in cars versus CNG in buses in Pakistan. Every other car runs on CNG. Where are the CNG buses? If it hasn’t happened yet, there are probably barriers to investment. • If project likely to happen anyway—i.e., without carbon credit revenue—then it becomes difficult to prove additionality • Thus carbon credit revenue needs to play a role in your decision-making as you consider investing in a project! • What are the barriers to your investment? Cost, financial penalties, lack of available service providers, lack of skilled technicians, etc.

  14. Landfills Small scale hydropower Agricultural biodigestors Pig waste biodigestors Biomass and waste mgt Industrial efficiency Current projects based on 18 technologies in 36 countries

  15. Summary of project types • Increase the share of additives (and reduce the share of clinker) • Recover waste heat/gas from the kiln • Substitute fossil fuels by biomass or clean fossil fuel to fire the kiln • Increase the efficiency of the process (kiln, mill), e.g. • Change from wet to dry process • Upgrade kiln, tower, burners, etc • Use alternative raw materials with less CaCO3 and MgCO3

  16. Raw material blending: Carbonated materials: Limestone (CaCO3, MgCO3) Clay Fe and Si content correctives: Iron ore Sand Others: Pyrite? Project examples:Options in the Cement sector • Ad additives: • Fly ash, Slag • Limestone • Pozzolane • And/or Gypsum • Grinding: • Grind mill consuming grid or onsite electricity • Blended cement: • Ad water and gravel to make concrete • Clinker generation: • CaCO3 => CaO + CO2 • MgCO3 => MgO + CO2 • Heating:: • Burning the limestone using: • Coal, HFO, LNG • Other (e.g. tires) • Energy provision: • Onsite generation or grid electricity

  17. Cement process and CDM methodologies • Transport of additives with • vehicles using petrol • conveyor belt using electricity Preparation of additives using electricity ACM0015 (use alternative raw materials with no carbonates) AM0024, ACM0012 (recover waste heat) • ADDITIVES, e.g.: • Fly ash • Slag • Limestone • Pozzolane • + Gypsum Heat (1500°C?) in a kiln fired by fossil fuels • RAW MIX • Carbonated materials from mining: • Limestone (mostly) which contains CaCO3 and MgCO3 • Clay • Fe and Si content correctives: • Iron ore • Sand • Alternative raw materials possible: • Bottom ash • Blast furnace slag • Gypsum • Anhydrite • Fluorite • Etc e.g. 0.25 tCO2/t clinker ACM0003 (substitute fossil fuel) e.g. 25% e.g. 0.8 tCO2/ t clinker CLINKER (contains CaO and MgO) Grinding mill using electricity e.g. 75% CaCO3 => CaO + CO2 MgCO3 => MgO + CO2 e.g. 0.04 tCO2/t cement ACM0005 (increase additive share in cement) e.g. 0.50 tCO2/t clinker NM0225 rejected (increase additive share in concrete) Electricity to run the kiln e.g. 0.05 tCO2/t clinker - Gravel - Water BLENDED CEMENT Preparation of raw materials (e.g. drying, crushing) using fossil fuels and/or electricity Key: e.g. 0.64 tCO2/ t clinker • + other general methodologies: • Energy efficiency (AMS II.C, AMS II.D), e.g for: • - switch from wet to dry process • - upgrade of kiln, towers, grinding separators, burners, expert control systems... Sources of emissions Leakage CONCRETE

  18. Examples of Registered Projects

  19. Carbon Credit Cycle vs. Project Cycle Remember: Carbon Credits must play a role in project decision-making

  20. Carbon Credit Application Process UN/Kyoto Protocol rules require the following to achieve registration: • Project Design Document using approved methodology and monitoring protocol • Approval by host country • Stakeholder workshop • Validation by third-party auditor (Designated Operational Entity) • Registration with United Nations • Verification of emission reductions by third-party auditor (2nd DOE) • Formal request for issuance submitted with verification report Average time from PDD to registration is 6-8 months Carbon credits start to accrue from time of registration

  21. Carbon Credit Transaction Costs • PDD development, legal fees, stakeholder workshop, site visits = Variable • Validation = €15,000 • Registration = US$0.10/CER for first 15,000, + US$0.20/CER for rest • First Verification = €15,000 • Issuance = US$0.10/CER for first 15,000, + US$0.20/CER for rest • Subsequent Verification = €10,000

  22. What EcoSecurities will do for you: Assess your commercial viability of using your existing assets to create a carbon credit project Develop all the CDM components and guide the project through the complex UN regulatory process Buy all the carbon credits through an Emissions Reduction Purchase Agreement (ERPA) Working with EcoSecurities EcoSecurities has a large and experienced team dedicated to creating carbon credits from greenhouse gas emission reduction mitigation projects and enabling project developers to secure revenue by taking them through the entire carbon credit process from creation to sale

  23. EcoSecurities will: Cover all carbon credit transaction costs up front, so you can focus on your project and not worry about getting your project registered Bear the financial risk related to carbon credit creation Work on a success fee model: we only get paid when you get paid for carbon credits For the project developer this means: Securing additional revenues from carbon credits Immediate start of their project development EcoSecurities bears the financial risk related to carbon credit creation by providing time and expertise before carbon credits are issued thus significantly lowering the risk Working with EcoSecurities

  24. MOVE QUICKLY: 2012 IS NOT FAR OFF!! Let EcoSecurities screen your project for carbon credit potential. If we believe your project qualifies and will generate sufficient carbon credits, we will take on the project. Sign an Emission Reduction Purchase Agreement (ERPA) with us: Similar to a power purchase agreement, in which we agree to develop and buy your carbon credits as long as there is a market for them. Develop your project as we develop your carbon credits! If I have a project, what do I do?

  25. Thank you! Toby Tiktinsky Pakistan Country Director Ofc: +92 (0) 21 2410627 Fax: +92 (0) 246 0097 Mob: +92 (0) 301 850 3082 Email: toby.tiktinsky@ecosecurities.com

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