P CDM/JI S S NSS PROGRAM - World...

Zimbabwe

STRATEGY

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ACTIVITIES IMPLE

A

CLEAN DEVELOPM

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PROGRAM OF NATIONAL CDM/JI STRATEGY STUDIESNSS PROGRAM

NSS Reporti

FOR ZIMBABWE

RESPECT TO

MENTED JOINTLY (AIJ)ND THE

ENT MECHANISM (CDM)

tober 2000

Zimbabwe NSS Reporti

TABLE OF CONTENTS

EXECUTIVE SUMMARY 61. NSS Background ..................................................................................................................................... 62. Zimbabwe’s Energy Base ....................................................................................................................... 73. Zimbabwe’s Potential Participation in the CDM................................................................................ 84. Mitigation................................................................................................................................................. 95. Zimbabwe’s Offer to OECD Countries on the GHG Market ............................................................ 96. Selection Criteria for CDM Projects.................................................................................................... 107. Risk Identification ................................................................................................................................. 128. Decisions For Zimbabwe...................................................................................................................... 129. Conclusions............................................................................................................................................ 13

1. THE UNFCCC, KYOTO PROTOCOL AND AIJ 141.1 Introduction ........................................................................................................................................... 141.2 Earlier Climate Change Studies/Activities in Zimbabwe............................................................... 151.3 UNFCCC and the Kyoto Protocol....................................................................................................... 161.4 Conclusions............................................................................................................................................ 17

2. DOMESTIC PREREQUISITES 182.1 Introduction ........................................................................................................................................... 182.2 Proposed Institutional Arrangements................................................................................................ 182.3 Some Crucial Elements in CDM.......................................................................................................... 21

3. DEMAND FOR GHG OFFSETS AND MATCHMAKING POTENTIALBETWEEN DEMAND AND ZIMBABWEAN SUPPLY 23

3.1 GHG Emissions in OECD Countries, Target Emissions, and Expected Trading Prices.............. 233.2 International Demand for and Zimbabwean Supply of GHG Reductions ................................... 233.3 Market Mechanisms ............................................................................................................................. 263.4 Architecture of an Emission Market................................................................................................... 283.5 How to Position Zimbabwe in the Offset Market............................................................................. 31

4. SECTORIAL GHG EMISSIONS, INVENTORY, DEVELOPMENT,AND OFFSET POTENTIAL 39

4.1 Introduction ........................................................................................................................................... 394.2 Macro-Economic Analyses and Major Assumptions ....................................................................... 394.3 Zimbabwe Energy Supply ................................................................................................................... 414.4 Zimbabwe GHG Emissions Inventory ............................................................................................... 474.5 Emissions Projections ........................................................................................................................... 514.6 GHG Abatement Potentials ................................................................................................................. 574.7 Other Possible GHG Abatement Projects .......................................................................................... 60

Zimbabwe NSS Reportii

5. GHG MITIGATION IN ZIMBABWE: OPTIONS AND BENEFITS 615.1 Introduction ........................................................................................................................................... 615.2 Significant Identified Mitigation Options.......................................................................................... 615.3 The Value of the Potential GHG Market for Zimbabwe.................................................................. 615.4 Projects Pipeline .................................................................................................................................... 625.5 Project Selection Criteria ...................................................................................................................... 625.6 Secondary Project Benefits................................................................................................................... 645.7 Regulatory Mitigation Options ........................................................................................................... 645.8 Conclusions............................................................................................................................................ 66

6. CONCLUSIONS 67

APPENDIX: GHG PROJECTS – UNIFORM REPORTING FORMATFOR AIJ UNDER THE PILOT PHASE 68PROJECT 1 OSBORNE DAM.............................................................................................................. 69PROJECT 2 TOBACCO CURING....................................................................................................... 75PROJECT 3 SEWAGE GAS POWER.................................................................................................. 81PROJECT 4 BOILER EFFICIENCY IMPROVEMENT ..................................................................... 86PROJECT 5 COAL BED METHANE.................................................................................................. 90

REFERENCES 96

Zimbabwe NSS Reportiii

FIGURES

Figure 0.1 The National Energy Balance in Pie Chart Form.................................................................. 7Figure 2.1 Proposed Institutional Arrangements for CDM Project Screening and Approval ........ 19Figure 3.1 Hypothetical Situation in the GHG Market ........................................................................ 27Figure 3.2 Zimbabwe's Offer at a Given Price P1 ................................................................................. 28Figure 3.1 Prototype Carbon Fund Suggested by the World Bank .................................................... 30Figure 3.4 Forces Determining Attractiveness of the Offset Market for Zimbabwe ........................ 31Figure 3.5 Profile of Demand of OECD Countries................................................................................ 33Figure 3.6 Matchmaking Prerequisites for DCs to Get into Successful Trade .................................. 34Figure 4.1 The National Energy Balance in Pie Chart Form................................................................ 41Figure 4.2 Sectoral Distribution of GHG Emissions from Commercial Fuels ................................... 47Figure 4.3 Contribution of Individual GHGs to Total Emissions in Zimbabwe............................... 48

TABLES

Table 0.1 Emission Projection by Sector ................................................................................................. 8Table 0.2 General Benefits Accruing to Zimbabwe............................................................................. 11Table 3.1 Estimates of the Size of the CDM Market in 2010 .............................................................. 24Table 4.1 GDP Growth............................................................................................................................ 40Table 4.2 The Energy Resource Base in Zimbabwe ............................................................................ 41Table 4.3 ZESA Plants, Interconnectors, and Latest Approved Expansion Plan ............................ 43Table 4.4 Extent of Household Electrification Zimbabwe by Province (1992) ................................ 44Table 4.5 Summary of GHG Emissions in Zimbabwe, 1994 .............................................................. 46Table 4.6 Coal Demand Schedule.......................................................................................................... 52Table 4.7 1994 Emissions and Projected GHG Emissions from Electricity Generation and

Coal Supply ............................................................................................................................. 52Table 4.8 Present and Expected Capacities of the Cement Plants .................................................... 53Table 4.9 Emission Projections for the Industry, Commercial and Residential Sector................... 54Table 4.10 Projection of GHG Emissions from the Transport Sector Based on GDP

Growth Rate ............................................................................................................................ 55Table 4.11 GHG Eission Pojections from Lnd-use Cange and Frestry ............................................... 55Table 4.12 GHG Emissions Projections from Agriculture.................................................................... 55Table 4.13 Summary of Emission Projections by Source...................................................................... 56Table 4.14 Projects Pipeline...................................................................................................................... 59Table 4.15 Mitigation Options Analysed for the Supply Side ............................................................. 60Table 5.1 National Economic Development Priorities and Strategic Options for

Zimbabwe................................................................................................................................ 62Table 5.2 National Environmental Priorities for Zimbabwe.............................................................. 63Table 5.3 Sectoral Environmental Priorities......................................................................................... 63Table 5.4 General Benefits Accruing to Zimbabwe............................................................................. 64Table 5.5 Specific Project Benefits ......................................................................................................... 64

Zimbabwe NSS Reportiv

ACKNOWLEDGEMENTS

The Zimbabwe government would like to thank the government of Switzerland for financing theNational Strategy Study and the World Bank as well as Swiss companies (Ernst Basler and Partnersand Carbotech) for providing technical assistance to the project.

Furthermore, the Zimbabwe government would also like to thank the following consultants forproviding the technical support as well as carrying out the research work.

External Consultants

Dr J Fuessler Ernst Basler and PartnersDr U Brodmann Ernst Basler and PartnersDr J Janssen Ernst Basler and PartnersDr T Buerki CarbotechDr W Kaegi University of Sankt Gallen, Switzerland

Zimbabwe Consultants

Dr T Ngara Project CoordinatorMs M Sangarwe and Dr R S Maya GHG Offsets Potential (Energy Sector)Mr C Dube and Mr S Matema GHG Offset Potential (Industry, Residential and Transport

Sectors)Dr C Matarira and D Kwesha Land-use Change and Forestry and Agriculture SectorsMr R Chizema and Mr D Corri Markets and Financial MechanismMrs D Kayo and Dr M Muyambo Options for Zimbabwe

Zimbabwe NSS Reportv

ACRONYMS

AEEI Autonomous Energy Efficiency ImprovementAIJ Activities Implemented JointlyCDM Clean Development MechanismCER Certified Emission ReductionCOP I Conference of the Parties ICSO Central Statistics OfficeCZI Confederation of Zimbabwe IndustriesDCs Developing CountriesEIA Environment Impact AssessmentEIT Economies in TransitionEPA Environment Protection AgencyERU Emission Reduction UnitsESMAP Energy Sector Management Assistance ProgrammeEST Environmentally Sound TechnologyFC Forestry CommissionFINESSE Financing Energy Use in Small Scale EnterprisesGDP Gross Domestic ProductGEF Global Environmental FacilityGHG Greenhouse GasGTZ German Technical Co-operationICs Industrialised CountriesIET International Emission TradingIMF International Monetary FundIPCC Intergovernmental Panel on Climate ChangeIRT Industrial, Residential and Transport (Sector)LPG Liquid Petroleum GasMAC Marginal Abatement CostMMET Ministry of Mines, Environment and TourismNAFTA North Atlantic Free Trade AssociationNRSE New and Renewable Sources of EnergyNSS National Strategic StudyOECD Organisation for Economic Co-operation and DevelopmentPV Photo voltaicSADC Southern Africa Development CommunitySAPP Southern Africa Power PoolSCEE Southern Centre for Energy and EnvironmentUNDP United Nations Development ProgrammeUNEP United Nations Environmental ProgrammeUNITR United Nations Institute for Training and ResearchUNFCCC United Nations Framework Convention on Climate ChangeURF Uniform Reporting FormatWWF World Wide Fund for NatureZIC Zimbabwe Investment CentreZIMASCO Zimbabwe Mining And Smelting CompanyZIMPREST Zimbabwe Programme for Economic and Social TransformationZPC Zimbabwe Power CorporationZESA Zimbabwe Electricity Supply Authority

CONVERSION FACTOR FROM CARBON (C) TO CARBON DIOXIDE (CO2)

To calculate the conversion factor to CO2, total carbon oxidised should be multiplied by themolecular weight ratio of CO2 to C (44/12) to find the total carbon dioxide.

Zimbabwe NSS Report6

EXECUTIVE SUMMARY

1. NSS Background

1.1 Rationale for NSS

In Zimbabwe most of the national aggregated greenhouse gas (GHG) emissions are associatedwith CO2 that originates from coal combustion and land-use change and forestry. Most of theCO2 emissions can be linked to the energy, industry, transportation, agriculture, residential, andpublic sectors. A 25-percent decrease of CO2 emissions is possible through technological up-grading. The national target for Zimbabwe would therefore be to substantially reduce future CO2emissions (relative to GDP) with a process of economic growth based on policies and measuresthat increase energy efficiency and, in particular, that introduce new production and energy-saving technologies.

To facilitate this, the World Bank, through the National Strategy Study (NSS), assists countries inexploring opportunities and benefits that may be accessed through the Clean DevelopmentMechanism (CDM) framework. It is, therefore, the aim of the NSS to provide Zimbabweanauthorities with information that allows them to better understand opportunities presented bypotential international markets for GHG offsets and to develop options for their potential use. Inorder to achieve this objective, the study has quantified the potential for Certified EmissionReductions (CERs) in some selected sectors of the Zimbabwean economy.

1.2 Activities Implemented Jointly (AIJ)

At the First Conference of the Parties (COP I) the pilot phase of the Activities Implemented Jointly(AIJ) was adopted. This was designed to provide a learning curve for the Joint Implementation(JI) (Article 4.2 of the UNFCCC). The concept of JI introduces the idea of international cooperationamong all parties of the UNFCCC with the goal of stabilising atmospheric greenhouse gasconcentration. Cooperation is perceived as a cost-effective means for encouraging Annex Icountries to meet their respective UNFCCC commitments when mitigation activities abroad offsetdomestic greenhouse gas emissions. Such an arrangement allows any Annex I party to exploitclimate-change- mitigation cost differentials between countries. The amount of emission reduc-tion units that can be credited depends on the amount of greenhouse gas emissions avoided byimplementing projects abroad. AIJ provides a similar transaction, with the major difference beingthat credits do not yet accrue to the investor country. It should be noted that AIJ projects can alsobe undertaken between Annex I countries.

Zimbabwe signed and ratified the United Nations Framework Convention on Climate Change(UNFCCC) in 1992 and the Convention entered into force in March 1994. By being a party to theConvention Zimbabwe is entitled to participate in the AIJ framework.

Since the initiation of the AIJ pilot phase in 1995, Africa has not gained much experience, as aresult of which Africa’s contribution to the JI learning curve is negligible. The reason for this isthat very few AIJ projects – only four – have been implemented in Africa. One of the four Zim-babwe projects is the Manyuchi Mini-Hydro Scheme, an AIJ project between Zimbabwe and theE-7 electricity utilities.


1.3 The Clean Development Mechanism

In the Kyoto Protocol, which was signed in December 1997, the parties to the UNFCCC agreed onlegally binding GHG limitation and reduction commitments. A new concept, the Clean Develop-ment Mechanism (CDM), is set forth in Article 12 of the Kyoto Protocol. The CDM allows anAnnex I party to invest in a host country (non-Annex I) and get Certified Emission Reductions(CER) to meet their obligations in the Kyoto Protocol while the host country gets cash as well assustainable development benefits associated with the CDM projects. Though the Kyoto Protocolhas not yet been ratified, it is strategic for parties to take an early lead in the CDM process byimplementing CDM projects.

Given this background, there are a number of pertinent questions to ask. At this stage in thenegotiations toward the ratification of the Kyoto Protocol where does Zimbabwe stand? Whatadvantages does Zimbabwe have if it enters into the CDM markets early? Does Zimbabwe have apipeline of projects that could attract potential investors to enter into CDM arrangements? DoesZimbabwe have, or is it ready to create, a suitable domestic infrastructure to accommodate thedifferent players in the CDM process in a cost-effective way? This study attempts to lay thegroundwork for Zimbabwe to address some of these questions.

2. Zimbabwe’s Energy Base

Zimbabwe has a large conventional fuel resource base − coal with total reserves of 10.6 billiontonnes, of which half a billion are proven, and hydroelectric power with a total potential of 13 300MW mainly on the Zambezi River shared system.

Figure 0.1 The National Energy Balance in Pie Chart Form

Coal makes up about 42% of the primary energy supply in the country and about 70% of domes-tic power generation, with the remaining internal power generation being hydro based. Petro-leum, which amounts to about 8% of primary supply, is imported exclusively in the form offinished distillates. Firewood is the second dominant fuel, making up about 40% of primarysupply. It constitutes a major source of energy, especially for the rural population and low-income urban group. Although statistics to support this do not exist, it is possible that the use ofwood as a fuel results in significant deforestation. Clearing land for agricultural purposes is thebiggest cause of deforestation, and 1994 estimates put such clearing at over 18 000 hectares perannum [Zimbabwe Initial National Communication, 1998].

Primary Energy Supply, 1996100% = 359PJ

Coal42%

Oil derivatives8%

Electricity Imports

6%

Woodfuels42%

Other Fuels2%

Final Energy Consumption, 1996100% = 283PJ

Coal15%

Oil derivatives18%

Electricity12%

Woodfuels49%

Other Fuels6%


Forms of renewable energy such as solar gas and biogas have received notable attention, but thishas been mainly at the research level or under diffusion activities funded on a non-commercialbasis. While solar water heaters are becoming more common in high-income urban areas, the costrelative to alternative and more traditional heating appliances still puts them beyond the meansof the majority of the people. Energy balance pie charts are shown in Figure 0.1. It should benoted that some of the coal is used as raw coal and in electricity and coke production. Thisexplains the disparity between the percentages for the primary energy supply and final energyconsumption.

3. Zimbabwe’s Potential Participation in the CDM

In the coming years economic growth and rising residential demand will require an increasedsupply of all the above-mentioned fuels. There are significant expansion plans for coal-basedpower generation in the short to medium term (i.e., until 2004). However, expansion of large-scale hydro generation on the Zambezi River is planned for 2010 and beyond. This will requireclose co-ordination with neighbouring countries. The Zimbabwe Initial National Communicationshows that Zimbabwe has a big potential for participation in the CDM process due to its growinggreenhouse gas emissions, particularly in the energy sector. As a consequence, there is a potentialfor Zimbabwe to undertake CDM projects in those identified sectors where emissions are likely togrow.

Table 0.1 summarises emission projections from all major sources in the country up to the year2020. Emissions in 1994 are based on Zimbabwe’s Initial National Communication. Emissions inlater years have been extrapolated using the GDP growth rate of 4.6% up to 2010 and 3.8%thereafter.

Table 0.1 Emission Projection by Sector (Gg/CO2 Eq.)

GDP Rate 4.6 % GDP Rate 3.8 %

1994 2000 2005 2010 2015 2020

All Energy 19 076.68 24 990.45 31 288.04 39 172.63 47 203.02 56 879.64

Fugitive FuelEmissions

324.32 424.86 531.92 665.97 802.49 967.00

IndustrialProcesses

4 732.20 6 199.18 7 761.38 9 717.24 11 709.27 14 109.68

Agriculture 13 388.96 17 539.54 21 959.50 27 493.30 33 129.42 39 920.96

Land Use Change &Forestry

18 831.74 24 669.58 30 886.31 38 669.66 46 596.94 56 149.31

Waste 616.06 807.00 1 010.41 1 265.00 1 524.36 1 836.81

TOTAL Emissions 56 969.96 74 630.61 93 437.56 116 983.80 140 965.50 169 863.40

NB: The 1994 emissions are based on the Initial National Communication. It is assumed that the GDP growth rate is proportional tothe emissions. The GDP growth rate is taken to be 4.6% up to 2010 after which it declines to 3.8% (see Section 4.2.2).


4. Mitigation

This National Strategy Study (NSS) considers a pipeline of five projects selected from a longer listof twenty-one mitigation options previously presented in the Initial National Communication.These five mitigation options are drawn from the energy, industry, agriculture, and residentialsectors. The project titles are as follows:

• Use of coal-bed methane for ammonia generation• Investment in a mini hydro-project to supply electric power to rural and peri-urban

consumers• Increasing boiler efficiency in industry• Improving energy efficiency in tobacco curing• Generation of power from gas produced at the sewage plant

It should be noted that these projects are examples that have a high replication potential. How-ever, the full reduction potential in Zimbabwe at various cost levels could not be determined.

An Example of a Mitigation Project: Improving the Technology of Tobacco Curing

Background: The tobacco is cured on the farms and causes significant CO2 emissions. Very simplefurnaces are employed for the curing process; and wood is being used as a fuel. The fuelwood isharvested largely and increasingly from common property resources at a level well aboveregeneration levels. Thus the wood used for curing is not CO2-neutral.

Project: Introduction of “slot furnaces” would reduce wood fuel requirements by about 55%.Given an annual baseline CO2 emission of approximately 100 000 t CO2 per annum, annualemission reductions of approximately 50 000 t CO2 could be achieved. Assuming a projectlifetime of 11 years (2002-2012), total savings could amount to 550 000 t CO2.

Benefits: Global emission reductions as well as social, environmental, and economic benefits forthe local population are also associated with the project.

5. Zimbabwe’s Offer to OECD Countries on the GHG Market

The Organisation for Economic Co-operation and Development (OECD) countries are responsiblefor about 70% of the global GHG emissions (1990 emissions of about 3.3 Gg CO2 equivalent). Thisamount is expected to increase by between 1.3 Gg and 2.8 Gg CO2 equivalent between 2008 and2012 (total for 5 years).

Mitigation of these GHG emissions can be attained through emissions reduction or sink en-hancement. Emissions can be reduced by countries with commitments either domestically orexternally by making use of the flexibility mechanisms (ET, JI, CDM). With this in mind, manyOECD countries are increasingly becoming concerned about the impact of their GHG reductioncosts on the economies. Quite a number of these countries are expected to meet a considerableshare of their commitments abroad. The trade with GHG emissions reduction is attractive due tovarying marginal costs of GHG mitigation in OECD countries and developing countries (DCs).The price of CO2 reductions under the CDM is predicted to be approximately US $20/ton ofCO2. As demonstrated by the project pipeline, Zimbabwe can attain emission reductions at costsbelow US $20 per ton of CO2. However, not being an Annex I country, Zimbabwe has no legallybinding commitment to reduce GHG emissions.


5.1 Mechanisms of the GHG Market

Zimbabwe’s emission trading with OECD countries follows the rules of the CDM (i.e., Article 12of the Kyoto Protocol). Through the CDM, DCs will benefit from a technology transfer to increaseenergy efficiency in the industrial sectors. At the same time theCDM stipulates a sustainable development goal which is attained through the protection of thelocal environment and the promotion of health benefits and improved infrastructure develop-ment.

The varying emission-reduction costs between ICs and DCs can be attributed largely to thevarying efficiencies in energy use and the wide disparity in developments in infrastructure andtechnology. To promote markets and reduce risks the World Bank has recently launched aPrototype Carbon Fund (PCF) that foresees that the World Bank act as a broker between theinvestor and host country. The PCF intends to develop market know-how for the CDM anddemonstrate its feasibility.

5.2 How to Position Zimbabwe in the Offset Market

Zimbabwe’s situation in the Certified Emission Reduction (CER) market can be equated to that ofa company selling a new product in a new and unknown market. Zimbabwe’s chances in thismarket are accordingly influenced by market behaviour. A market analysis to determine Zim-babwe’s matchmaking advantages shows that the target focus for Zimbabwe in the carbon offsetsmarket would be Annex 1 countries with which Zimbabwe presently enjoys favourable tradingrelations.

5.3 Market Constraints on Zimbabwe

The comparative disadvantages that would impede Zimbabwe from operating in an optimalmanner in the market are obstacles that originate in Zimbabwe such as transaction costs, Zim-babwe’s risk structure, weak institutional structure, and human resource capacity.

5.4 Recommendations for Zimbabwe

Zimbabwe must fulfil the following conditions to be able to participate successfully in the futureGHG market:

• establish an office where the CDM is promoted• clarify controlling, verification, and monitoring procedures in Zimbabwe• introduce clear rules and regulations on how to proceed in implementing GHG reduction

projects• introduce formats, including baseline and additionality calculations and other project infor-

mation demands, that allow project developers to offer or propose high quality projects.

If Zimbabwe wants to be an early participant in the CDM process, then the country has to make astrategic decision based on the initial prices of the CERs i.e., if, in Zimbabwe’s opinion, theprices for the CERs that are first traded are too low, then the policy could be to “bank” the CERsand sell when market prices are right.

6. Selection Criteria for CDM Projects

In addition to watching the GHG market behaviour, Zimbabwe has to set out project criteria thatmaximise the benefits from the CDM. Some of the criteria follow.


The project should be compatible with and supportive of national environmental and develop-ment priorities and strategies and contribute to cost-effectiveness inachieving global benefits.

The project should be officially accepted, approved, or endorsed as a CDM project. It shouldbring about real, measurable, long-term environmental benefits that are related to the mitigationof climate change and that would not have occurred in the absence of such an activity.

Financing the CDM must be in addition to the financial obligations of the donor country withinthe framework of the financial mechanism of the UNFCCC (i.e., the Global EnvironmentalFacility) and in addition to current official development assistance (ODA).

The principle of additionality will be applied to ensure that projects have real environmentallong-term benefits related to the mitigation of climate change which would not occur without theproject. Risks and barriers to project implementation such as prohibitive capital costs must beclearly identified and demonstrated. Extra or additional financing will be over and above thealready existing arrangements and obligations that occur under business-as-usual conditions.

CDM projects must also satisfy broad, national environmental priorities and strategies. Besidescausing a reduction in GHG emissions, the projects should also provide secondary benefits for thehost country and the local communities. The host country’s (secondary) benefits are shown inTable 0.2.

Table 0.2 General Benefits Accruing to Zimbabwe

Benefits Description

Technology Transfer Encourages private sector diffusion of innovative technology that canhelp meet Zimbabwe‘s development priorities

Investments Expands investments in technologies and projects that reduce GHGemissions while contributing to overall host country developmentpriorities

Environment Reduces SO2 emissions resulting in reduced acid rain effects Reducespollution of air, water, and soil from coal combustion productsReduces deforestation and soil erosion from reduced forest clearing

Economic Encourage capacity building and skills transfer, cost saving fromfacilities and production processes, and provision of new energyservices

Social benefits Lead to improvements in general quality of life; cottage industries;improved health

SustainableDevelopment

Encourages additional private sector investment and dissemination oftechnologies and practices that contribute to sustainable development

Learning Effects Participants get an opportunity to learn about the market andinfluence the direction of the development of the CDM beyond theinitial stages


7. Risk Identification

Zimbabwe should identify and assure potential investors that financial risks are identified andreduced in order to improve the chances of project success and reduce the cost of financing.Potential investors are by nature risk averse and need to be convinced that all financial obliga-tions will be met. In the interest of furthering the spirit of mutual trust between the potentialinvestor and host country, project proposals should identify the actual major risks and shouldhave a clear project structure that best allows GHG emissions to be mitigated. Both Zimbabweand the potential investor should address the risk factor in some of the areas listed below. Whilesome of these risks are well known to international investors, others are new and specific to theCDM. Not all of these risks can be insured.

Host Country Investment Climate:

• There must be a consideration of the enforceability of agreements in general and of regula-tory risk and some adverse political risk.

• The potential currency devaluation risk is a factor for consideration.• Currency convertibility risk also needs to be considered.• A market risk exists that sales fail to meet projections.• The adequacy of local infrastructure must be taken into consideration.

Technology and Project Completion:

• Technology should be proven.• Site and/or facility availability should be assured by enforceable agreements.• Assets of the project need to be covered by insurance against accidental loss due to fire,

flood, and other insurable causes.

Operations and Management:

• Raw materials and inputs need to be available at budgeted qualities.• Skilled labour availability can be enhanced by implementing a training programme.

Environmental:

• Systems for verification and certification of the avoided GHG emissions must be clear andenforceable.

8. Decisions For Zimbabwe

The present study puts forward the potential benefits for Zimbabwe. These include sustainabledevelopment, environmental, and social benefits. In order to profit from these benefits, Zim-babwe has to formulate an appropriate policy for participation in the CDM process. This policyshould bring with it or promote the development of a domestic infrastructure that facilitates theimplementation of CDM projects with minimum transaction costs. Such an infrastructure shouldensure that the approval process is not loaded down with institutions that are not absolutelyessential.

Furthermore, Zimbabwe should also ensure that climate-change-mitigation response options areconsistent with local environmental agendas--for example, that the importation of advancedtechnologies contributes toward technology transfer and increased industrial competitiveness indomestic and international markets. Increased use of domestic non-fossil fuel energy sources


improves fuel supply security at the national level while decentralised renewable energy usecontributes to cost-effective rural electrification as well as important health benefits.

9. Conclusions

The CDM could become an important policy tool in Zimbabwe for addressing environmental anddevelopmental challenges through the use of projects financed, inter alia, by foreign investment.Both the government and Zimbabwean local population will gain from these projects, not onlythrough local environmental benefits at no extra cost, but also because reductions in greenhouseemissions will be realised at a lower cost to society. Moreover, the CDM provides an opportunityfor Annex I countries to reduce their costs of compliance with their quantified emission limitationand reduction objectives.

Zimbabwe can decide that now is the opportune time for the country to seize this opportunityand put policies and institutions in place that facilitate the speedy implementation of CDMprojects. Such a strategic decision will put Zimbabwe in an early lead in the CDM process andallow it to reap the associated benefits despite the fact that there are still many areas in the CDMprocess that need to be defined. On the other hand, Zimbabwe might want to wait until all theCDM rules and regulations are finalised before it participates. There are risks and advantages toboth sides depending upon the outcome of the negotiations.


1. THE UNFCCC, KYOTO PROTOCOLAND AIJ

1.1 Introduction

At the First Conference of the Parties (COP I) the pilot phase of the Activities Implemented Jointly(AIJ) was adopted. It was designed to provide a learning curve for the Joint Implementation (JI)(Article 4.2 of the UNFCCC). The JI concept introduces the idea of international cooperationamong all parties of the UNFCCC in order to stabilise atmospheric greenhouse gas concentration.Such cooperation is perceived as a cost-effective means for Annex I countries to meet theirrespective UNFCCC commitments when mitigation activities abroad offset domestic greenhousegas emissions.

The parties to the UNFCCC agreed on legally binding GHG limitation and reduction commit-ments in the Kyoto Protocol, which was signed in December 1997. A new concept, the CleanDevelopment Mechanism (CDM), is set forth in Article 12 of the Kyoto Protocol. The CDM allowsan Annex I party to invest in a host country (non-Annex I) so as to get Certified Emission Reduc-tions (CER) to meet their obligations in the Kyoto Protocol while the host country gets cash aswell as sustainable development benefits associated with the CDM projects. Though the KyotoProtocol has not yet been ratified, it is strategic for parties to take an early lead in the CDMprocess by implementing CDM projects.

Even though the Kyoto Protocol has not yet entered into force, the CDM could become aninteresting instrument for Zimbabwe’s future environmental investments. The CDM may notonly lead to modernisation of the existing capital stock for energy production and consumption,but could also generate a financial surplus for Zimbabwe in the form of additional financial flowsbased on the CER opportunities.

Through economic development Zimbabwe has shown a steady increase in GHG emissionsmeasured by a variety of criteria, e.g., cumulative emissions, emissions per capita, emissions perunit of GDP, etc. It is therefore important to estimate the economically feasible reduction potentialof different sectors and calculate abatement costs for different types of projects such as fuelswitching, energy savings, renewable energy sources, etc. Given this background, it is importantto note the following points.

• In Zimbabwe, most of the national aggregated GHG emissions are dominated by CO2 thatoriginates from the combustion of coal, land-use change, and forestry.

• Annual emissions of CO2 from coal production and use are very high. It is therefore evidentthat the country has a substantial abatement potential. Decreasing CO2 emissions by about25% is possible through technological upgrading. The national target for Zimbabwe wouldtherefore be to reduce future CO2 emissions relative to GDP substantially during the processof economic growth through appropriate policies and measures and, in particular, by intro-ducing new production and energy-saving technologies.

Zimbabwe would like to benefit from Article 12 of the Kyoto Protocol by participating in projectactivities that fall under the framework of the CDM. This would pave the way for real, measur-able, long-term benefits related to the mitigation of climate change.


1.2 Earlier Climate Change Studies/Activities in Zimbabwe

Zimbabwe was involved in climate change studies and activities prior to the current Swiss-sponsored National Strategy Study (NSS). Some of these studies and activities are describedbelow.

United Nations Institute for Training and Research (UNITAR) Project

In 1992 and 1993 UNEP, through its RISO Centre, conducted studies on various abatementoptions through a local non-governmental organisation, the Southern Centre for Energy andEnvironment (UNEP, 1993). This study identified mitigation options in industry and agriculture.

United States Country Studies

In 1995/96 the United States Country Studies Programme was carried out in Zimbabwe underthe auspices of the Ministry of Mines, Environment, and Tourism. These studies contributedtoward capacity building associated with the preparation of GHG inventories and vulnerabilityand adaptation assessments.

UNDP Capacity Building Project

In 1996 Zimbabwe participated in a two-year, regional, four-country Capacity Building Projectwith the assistance of UNDP (GEF). The main objective of this project was to enable the fourparticipating countries--Mali, Ghana, Kenya, and Zimbabwe--to meet their obligations under theUNFCCC. The method of project execution was through national and provincial workshopsthroughout the country as well as focused studies on mitigation options, particularly in theenergy sector. The greenhouse gas inventory was also revisited using 1994 as a baseline year.Capacity building achieved through this project had a positive impact on the preparation of theInitial National Communication. The project also attempted to examine climate change policies inthe four participating countries.

Climate Change in Southern Africa (Climate Research Unit, United Kingdom)

In 1996 the WWF International commissioned a regional report on the climate change impacts inthe Southern African Development Community (SADC) (Hulme, 1996). This report was co-ordinated by the Climate Research Unit (United Kingdom). The report covered a wide range oftopics, i.e., the regional impact of climate change by the year 2050–e.g., changes in naturalvegetation, surface water availability, agriculture, disease vectors, biological diversity andadaptation strategies, and development policies.

Initial National Communication

In 1997 Zimbabwe started working on its Initial National Communication under the UNEP/GEFEnabling Activity Programme. This project was also executed by the Climate Change Office.Under the general framework of the Zimbabwe Initial National Communication Project green-house gas inventories were improved by expanded areas of sources of emissions and higher-quality data. This exercise was facilitated by the presence of a reasonable number of previousstudies. The final product--the Initial National Communication--was submitted to the UNFCCCSecretariat in May 1998. The results of all these studies and activities formed a good basis for theNational Strategy Study.


1.3 UNFCCC and the Kyoto Protocol

Since the Rio Earth Summit, the topic of foreign investment and technology transfer has been asubject of contention between North and South. The transfer of environmentally benign technolo-gies between the North and South provides an excellent opportunity for developing countries todevelop with minimum greenhouse gas emissions in the atmosphere. The slow progress ininternational climate technology transfer has been due largely to the lack of incentives to private-sector actors in the North. The CDM under the Kyoto Protocol is expected to provide these muchneeded incentives.

The CDM may be defined as the process of jointly implementing emissions reduction/sequestra-tion project(s) in a developing country (host) with funds from a developed country (investor). Theusual rationale for this is that, since it does not matter in global biophysical terms where green-house gas emissions are reduced, it is better to invest in reduction where abatement is cheapest.The CDM has the potential to bring international investments to developing countries. This mayhave double benefits for climate change mitigation as well as local economic and environmentalbenefits.

Before the Kyoto Protocol the debate on flexible mechanisms centred on Emissions Trading andJoint Implementation (JI). Emissions trading allows Annex I parties to obtain commitments bytrading permits among themselves. JI allows Annex I parties to offset commitments by investingin projects in foreign countries that mitigate climate change. The AIJ pilot phase facilitated AnnexI parties to invest in climate-change-mitigation projects in non-Annex I parties, but with nocredits accruing to them. These mechanisms, particularly JI/AIJ, were viewed with suspicion bysome parties because they were seen to be strategies for Annex I countries to avoid takingmeaningful measures at home.

This may possibly explain the fact that by mid 1998 there were only three AIJ projects in Africa–the Dutch forest protection project in Uganda, the Norwegian fuelwood project in Burkina Faso,and an E7 hydro-electric project in Zimbabwe (Forsyth, 1999). Another reason may be that thereare no sufficient incentives for Annex I parties to invest in Africa.

Many AIJ projects have focused on the sequestration of carbon dioxide by forests rather than onthe transfer of badly needed environmentally sound technologies (EST) to developing countries.Reforestation, or forest conservation projects, are often adopted because they are relativelycheaper than the complex investment in industry and also because they allow investors to benefitfrom additional sustainable forestry business. Scientific justifications adopted for forestry-basedprojects have, however, been challenged for being too simplistic and unduly optimistic. Suchprojects also do not add to industrial technology transfer as demanded by the South.

AIJ and the CDM offer opportunities for North-South co-operation in mitigating climate change.Although these mechanisms are controversial, there is a need to be involved in AIJ and CDMinvestment for climate change mitigation by transferring badly needed technology to developingcountries. Some investment schemes for climate change mitigation may in fact be driven bydeveloped countries’ concerns and markets rather than the priorities of the people in countriesreceiving investment.

Integrating foreign investment and climate change policy therefore is not simply about increasingopportunities for private investors, but rather which combination of market and regulatory forceswill allow firms the greatest freedom to achieve profits while fulfilling global goals of climatechange mitigation.


1.4 Conclusions

Zimbabwe should therefore weigh the pros and cons of actively participating in CDM mecha-nisms. Being a party to the UNFCCC, it is in the long-term interests of Zimbabwe to get on boardand take measures that will help it meet its obligations in the Convention. Whatever misgivingsmay exist about these mechanisms, the consensus is that they are outweighed by the potentialbenefits--technology transfer, climate change mitigation, and socio-economic and environmentalbenefits. This is one of the avenues Zimbabwe should take to acquire EST. That said, it is reason-able for Zimbabwe to seize transfer-of-technology opportunities presented by the Kyoto mecha-nisms (UNDP, Issues and Options, 1998).


2. DOMESTIC PREREQUISITES

2.1 Introduction

Participation in the pilot phase of the AIJ and the Clean Development Mechanism makes itpossible for Annex I and Non-Annex I Parties to jointly achieve the twin objectives of globalmitigation of climate change and sustainable development for developing countries. Under thispartnership Annex I Parties receive credits for the implementation of projects in developingcountries. As a party to the UNFCCC, Zimbabwe has an interest in attaining the above-men-tioned objectives by participating in either the AIJ or CDM or both.

Participating in the AIJ/CDM is expected to lead to emissions reduction or avoidance of GHGemissions. By participating in these mechanisms, Zimbabwe will be able to attract additionalinvestment and income for some of its national development programmes in poverty alleviation,rural infrastructure, education, health, and other socio-economic development objectives.

So far Zimbabwe has only one approved AIJ project, a mini hydro project on the Manyuchi Damin south eastern Zimbabwe (Forsyth, 1999). The investor for this project is the E7, a consortium ofelectricity utilities from OECD countries. Approval for this project took two to three years partlybecause there were no streamlined domestic procedures for AIJ projects in Zimbabwe.

In order to realise maximum benefits from AIJ programmes, the Ministry of Mines, Environment,and Tourism was officially given the task of acting as the government clearing house for AIJprojects in July 1997. This move demonstrated Zimbabwe’s political will to participate in the AIJprogramme. It is expected that this same ministry will continue to play the same role for CDMprojects.

The non-Annex I Parties in turn get technology transfers through investments in CDM projects,profits (producers rent) that can be shared with the public sector as well as sustainable develop-ment and environmental benefits associated with CDM projects. It is therefore advisable forZimbabwe to put in place a domestic institutional framework that facilitates the country’sparticipation in the process and derives the aforesaid benefits. Such a framework should show aclear project approval process with no red tape--i.e., the role of each institution in the processshould be clear and non-duplicative. In addition to this, several aspects of the risk factors associ-ated with the project implementation should be addressed to demonstrate to potential investorsthat it is worthwhile to invest in Zimbabwe. In the next section the domestic institutional ar-rangements that Zimbabwe would need for the CDM are described.

2.2 Proposed Institutional Arrangements

The proposed operational structure for a CDM regime in Zimbabwe could consist of the follow-ing actors:

• Clean Development Mechanism Office (CDMO)• Ministry of Finance• Zimbabwe Investment Centre (ZIC)• Ministry of Mines, Environment and Tourism (MMET)


• Climate Change Office• Confederation of Zimbabwe Industries (CZI)

The operational structure of these institutions is illustrated in Figure 2.1.

Figure 2.1 Proposed Institutional Arrangements for CDM Project Screening and Approval

2.2.1 Clean Development Mechanism Office [Proposed]

The Clean Development Mechanism Office (CDMO) should be an inter-ministerial (Ministry ofFinance and Ministry of Mines, Environment, and Tourism (MMET)) independent organ dedi-cated to CDM projects. It is expected to deal with all institutions that are relevant in the projectcycle as well as providing technical support to on-going projects. It is to be the project-imple-menting arm of both ministries and will be expected to coordinate the national CDM policy andassociated activities. The CDMO will be manned by people from both ministries with financialsupport from the government. Other functions of the CDMO will include ensuring transfer oftechnology, foreign currency transfer, and micro-economic benefits and defining baselines andthe principle of additionality.

2.2.2 Ministry of Finance [Existing]

This ministry coordinates all foreign investment coming into the country. It will be one of the twoco-ministries responsible for the political process, coordination of the policy, and implementationof CDM projects. It is essential that there is a good relationship between this ministry and MMETsince they both approve CDM projects (see organogram). The Zimbabwe Investing Centre fallsunder this ministry. It therefore follows that in terms of administrative functions, ZIC shouldinform the Ministry about the projects coming into the country.

CleanDevelopmentMechanismOffice

Ministry of Mines,Environment andTourism

Climate ChangeOffice

Ministry ofFinance

Zimbabwe Invest-ment Centre

Discussions Discussions

OutcomeNO

Implement

CZI (Advisor)

YES

Local Partner Investor


2.2.3 Zimbabwe Investment Centre (ZIC) [Existing]

The ZIC is one of the most important actors in implementing projects in Zimbabwe. All newforeign investment into Zimbabwe has to be registered and approved by the Investment Centrewhen applying for an Investment Certificate.

Registration or approval by the ZIC may take from 48 hours to 10 working days depending on thenature of the project. This is in accordance with the Investment Centre Act, which stipulates thatwithin 45 days after receiving an application, the Investment Committee shall reach a decisionand notify the applicant.

The Investment Committee consists of the executive (chairperson), representatives from variousgovernment ministries, and three private sector board members whose role is to represent andspearhead the interests of the private sector.

To streamline the project approval process, the ZIC registers projects that meet the followingcriteria.

• Projects are in the preferred sectors, i.e., manufacturing, including agro-processing andassembling activities, and mining and tourism development. Projects in these sectors can be100%-owned by foreign investors, but joint ventures with local investors are encouraged.

• The project meets all the other criteria above including satisfying the Environment Manage-ment Act and the immigration requirements.

2.2.4 Ministry of Mines, Environment, and Tourism (MMET) [Existing]

This ministry coordinates all environmental programmes and activities in the country. When theCDM process is in operation, its additional responsibilities will be to jointly coordinate nationalCDM policy formulation with the Ministry of Finance. MMET is expected to liase with all otherline ministries and government departments that have input into the CDM process.

2.2.5 Climate Change Office [Existing]

The Climate Change Office is a technical arm of the Ministry of Mines, Environment, and Tour-ism (MMET). It provides the link with the CDMO, UNFCCC Secretariat and the Conference of theParties and its subsidiary bodies.

2.2.6 Confederation of Zimbabwe Industries (CZI) [Existing]

The CZI is an umbrella organisation for all Zimbabwe Industries. It will play an important role inthe sense that it will be the advisor on the project implementation partnership between theinvestor and local partner. It is expected that after an initial agreement between the potentialinvestors and local company, the CZI is notified on the nature of cooperation. The CZI will alsobe expected to disseminate relevant information on AIJ/CDM to Zimbabwe industries at largeand organise relevant seminars.


2.3 Some Crucial Elements in CDM

The following section provides some key information on crucial elements in CDM mechanisms.

2.3.1 Sustainable Development Criteria

Although Zimbabwe is positively disposed toward participating in a CDM process, it needs todetermine the criteria for sustainable development on socio-economic issues, poverty alleviation,and cultural and community values.Sustainable development has only been broadly defined. This broad definition will have to befine-tuned to address national objectives and concerns. Still under debate is whether developingcountries like Zimbabwe should set the national criteria or this should be done jointly with someinternational authority. The merit of having joint responsibility is that it ensures internationalstandards or indicators since it may be tempting for host countries to exaggerate the efficacy oftheir CDM projects.

2.3.2 Risk Management

There is a close connection between finance, risk management, and project viability. It is thereforevital that AIJ/CDM projects are structured in a way that minimise risks. In project financing, it isa normal practice to introduce guarantees and insurancemechanisms. It is therefore important for Zimbabwe to create an environment that convinces thepotential investor that there is minimum project risk in the country. If need be, Zimbabwe couldpool its projects together so as to enhance better risk management.

The following constitute possible areas of risk:• political risks: the rules of law may change with a change of government• technology risks: for example, system failure or the unsuitability of technology in Zimbabwean

conditions• financial or economic risks: for example, competitiveness or investment profitability are

impacted by interest rates, exchange rate movements, and other fiscal considerations• Zimbabwe is not in a position to guarantee potential investors against risks that are associ-

ated with trends in international markets. However, project financiers can mitigate losses ormajor project failure through conventional insurance. This aspect is discussed in greaterdetail in Chapter 3.

2.3.3 Portfolio of Projects

A useful basis for an effective AIJ/CDM process is the existence of a ranked and judiciouslyselected pipeline of projects based on nationally acceptable criteria. This portfolio of projectsshould pass the screening test of project implementation in Zimbabwe. A brief description(investment cost and benefits) of each project on the basis of a uniform reporting format shouldbe provided in the pipeline. In this study details of the project pipeline are given in Chapter 4.

2.3.4 Project Baselines

Under Article 12.5c of the Kyoto Protocol, CDM projects are required to demonstrate a reductionin emissions additional to any that would occur in the absence of certified project activity. It istherefore imperative for CDM projects to have baselines against which the reduction of emissionswill be gauged and certification eventually conferred. However, the question of project baselinesis part of the ongoing climate change debate. Hopefully it will be finalised in COP6.


2.3.5 Some Remarks

It should be noted that there are still many issues that are yet to be defined in the CDM process.For example, issues of certification, verification, validation, and evaluation are not governmentfunctions but are an international responsibility since CERs are an international commodity. Thisstudy only mentions some areas of risk. It would take a detailed project with a specific detailedstudy to go into greater depth about risk management strategies.

Coal as a source of energy is strategic for Zimbabwe. Any CDM project in the coal sector willfocus on a reduction in future expansion rather than in reduction in production. The latter wouldimply laying off coal miners, resulting in social and possibly political unrest.

Some issues such as the National Sustainable Development Criteria evolve out of political pro-cesses and decisions between the two ministries shown in the organogram. Such issues cannot bedealt with in a study of this nature.

2.3.6 Outlook for Zimbabwe

Although much work remains to be done in the clarification of how the CDM could function inthe way it is defined in Article 12 of the Kyoto Protocol, Zimbabwe will find itself in an advanta-geous position if it effects these institutional arrangements now in preparation for a fully func-tioning CDM process. Zimbabwe’s institutional domestic prerequisites should ensure that theCDM projects are characterised by the elements discussed in section 2.3 of this chapter. Ideally,Zimbabwe should create an infrastructure that accommodates national/political priorities andpolicies that enable the country to achieve the twin goals of mitigating climate change as well asattaining sustainable development under the Kyoto Protocol.


3. DEMAND FOR GHG OFFSETSAND MATCHMAKING POTEN-TIAL BETWEEN DEMAND ANDZIMBABWEAN SUPPLY

3.1 GHG Emissions in OECD Countries, Target Emissions, and ExpectedTrading Prices

The OECD countries are responsible for about 70% of the global GHG emissions. In 1990, theOECD countries emitted about 3.388 Gg CO2. The forecasts for the development of the GHGemissions in the first commitment period 2008/12 show that an excess of GHG emissions com-pared to the Kyoto commitments of approximately 1.3 - 2.8 Gg CO2 equivalent is expected.

Price estimates for CERs depend on demand factors involving Annex B countries, the ratificationof the Kyoto Protocol, ceilings on trade, the design of final regulations, domestic reductions ofOECD countries including policies used to implement domestic reductions, inclusion or non-inclusion of sinks (leading to a bigger or smaller offer and thus a lower or higher price), and theCER (as well as ET offer) in the market. Most price estimates come to a price range of around US$20 per ton of CO2 equivalent for CERs including sinks and US $35 excluding sinks. As a maxi-mum emission trading volume for Zimbabwe we can thus take all CDM projects with a marginalcost lower than US $20 including transaction, risk, certification, validation, and marketing costsand associated fees.

3.2 International Demand for and Zimbabwean Supply of GHG Reductions

3.2.1 OECD Countries: the Demand Side

Expected Demand

The projected demand for GHG offsets depends on GHG growth projections and the reductioncommitments in accordance with the Kyoto Protocol. Once the Protocol enters into force, theemission targets will become legally binding. Because emissions are expected to continue to riseunder the business-as-usual scenario and the emissions targets will only become binding in thefirst commitment period, the real reductions are measured against their projected business-as-usual scenario over the commitment period. This also explains to a considerable extent thedifferences between the projections made for this market by different models.

Variations of a factor of 2 can be observed for the different estimates for the total emissionrequirements of Annex 1 countries and a factor of 5 for the CDM market, which also depends onoutcomes of decisions such as inclusion or non-inclusion of sinks and other factors.


Table 3.1 Estimates of the Size of the CDM Market in 2010

Size of the CDMmarket (MtC)

Total emissions reductions required ofAnnex I countries (MtC)

Contribution of theCDM

EPPA

Haites

G-Cubed

GREEN

SGM

Vrolijk

Zhang

723

265-575

495

397

454

67-141

132-358

1312

1000

1102

1298

1053

(not available)

621

55%

27-58%

45%

31%

43%

(not available)

21-58%

The international price expected for CO2 reductions depends again on the demand estimates aswell as the marginal cost estimates, which again vary considerably according to sources. WhileCicero estimates, e.g., marginal abatement costs of US $128 for the US, the MIT model (Ellerman)estimates them at US $279 per ton carbon. Similar discrepancies exist for Europe, where estimatesrange from US $58/ton (Cicero) to US $604/ton (Abare). Resulting CDM prices again depend onquantities of hot air, inclusion of sinks, supplementary costs, sellers agreements, etc.

The real trade market depends not only on maximum potential trading volumes but also on realreduction costs for GHG emissions and trading prices. Experience with emission trading marketprognosis shows that considerable caution should be taken regarding expected price and volumeoutcome.

Examples are the cap-and-trade allowance system for controlling sulphur dioxide emissions inthe US, where the allowance to emit one ton of SO2 was valued by the EPA at US $1,500 in 1990,but allowances traded at US $150/ton in 1995 and dropped to US $66/ton in 1996 due mainly topoor estimates that regulators could make on the cost of controlling emissions due to asymmetricinformation between the regulator and the economic agent responsible for the change. A similarexample can be found in the RECLAIM (Regional Clean Air Incentives Market) of the SouthCoast Air Quality Management District in the US, where expected trading prices for NOx wereassumed to be between US $4 and 5 per pound and real auctioned allowance prices tradedbetween US $0.2 and 0.7 on an average. Growth assumptions as well as the economic reductionpotentials of measures to increase energy efficiency and use renewable energies can thus be easilyestimated inaccurately, leading to a much smaller than expected trading market at lower tradingprices.

Factors Influencing Demand

The reduction needs of the different countries depend to a considerable extent on the projectedgrowth of GHG emissions, which relies on various factors such as GDP growth, economicstructure, energy and carbon intensity, etc. These factors in themselves are projections and theircorrelation to GHG emissions is estimated, thus leading to various uncertainties over the realgrowth of GHG emissions in the future.


The major factors that will affect future trading volumes and prices are thus:

− There is limited availability of baseline/underlying projects and capacity to develop them.− The Kyoto Protocol has not yet entered into force. Should it happen that the required

amount of ratifications cannot be attained, there will be a low demand of CERs.− Inclusion or non-inclusion of sinks in CDM has an effect. If sinks are eligible, the supply of

CERs increases considerably and trading prices will be lower;− Ceilings to trading especially advocated by the EU exert effects.− CDM surcharges which wedge a price between sellers and buyers have an influence.− Cartelization of supply is another factor to consider.− Inefficient supply will cause trade to grow slowly. Supply can be inefficient due to high

transaction costs (e.g., due to additionality criteria) and information costs. Domesticreduction potentials in Annex B countries including policies chosen are also a factor.

− Limited availability of baseline/underlying projects and capacity to develop them alsohave an effect.

The question of how sink projects are eligible under the CDM is not yet defined. This question isimportant especially to DCs. If sinks do not become eligible under the CDM, the amount of CERswould be reduced considerably and vice versa.

3.2.2 Recent Developments in the OECD Affecting the Demand for GHG Offsets

Many OECD countries are developing energy and environmental policies. Many of these coun-tries have strengthened their respective policies. All these policies indicate that a good number ofOECD countries are willing to reduce GHG emissions in the near future and they show how theeconomies and consequently the individual companiescould act. These policies have a strong influence on the GHG trading volume. But it must beclearly postulated that the energy and climate policies of the OECD countries are far from beingthe only influencing factor on the attitude of companies in ICs.

In the last 2 - 3 years some important studies have examined the domestic potential to increasethe energy efficiency and the use of renewable energies in OECD countries. The results show thatthe goal of creating more jobs is consistent with an improvement of energy efficiency and thus areduction of GHG emissions. A reduction of energy consumption by 30% in 2020 compared to1990 seems feasible.

The pressure on an efficient use of energy and the use of renewable energies leads to the devel-opment of new and better energy technologies as well as to improved marketing of the latter. Allthese trends show that at least the European OECD countries tend to fulfil a considerable share ofthe Kyoto commitment domestically through an orientation toward sustainable development.

Finally, energy programmes currently being realised show that even voluntary approaches leadto considerable results. Enterprises can, e.g., be motivated to increase energy efficiency consider-ably.

All these factors result in a reduced demand for trade with CO2 and other GHG emission reduc-tions in the market and consequently in a reduced price for emission reductions.

3.2.3 Incentive for Trading

However, the trade with GHG emissions reduction makes sense due to varying marginal costs ofGHG mitigation in OECD countries and DCs. Under such a scenario a domestic abatement option


in an OECD country with hypothetical costs of US $30/t of carbon (corresponding to US $8/tonof CO2) could result in an abatement option in a DC where the investment undertaken in aproject could be at a cost of US $15/ton of carbon--i.e., much lower due to the disparity inmarginal abatement costs. The surplus revenue (US $15/ton of carbon minus the transaction andrisk costs) could therefore potentially accrue to both buyer and seller.

Here the question of sharing the benefit from trade with ERU/CER arises. The ERU/CER marketis similar to a homogenous good in a competitive market with many suppliers. Zimbabwe as wellas other DCs will clearly be price-takers in this respect. The potential gain of a DC arises from itsproducer surplus, which depends in the end on its individual marginal cost curve in generatingGHG offsets in relation to the price paid for GHG offsets.

3.2.4 Zimbabwe’s GHG Offer

Zimbabwe’s emission figures are published in various publications. The GHG emissions ofZimbabwe are projected to increase by 38% from 1994 to 2010. Zimbabwe is party to the Conven-tion (UNFCCC), but not an Annex I party; in the Kyoto Protocol no commitment to reduce GHGemissions is required for non-Annex I Parties. By adopting the Convention Zimbabwe hasaccepted some commitments but no legally binding commitments to reduce GHG emissions.

3.3 Market Mechanisms

3.3.1. General Remarks

The Kyoto Protocol defines three flexibility mechanisms. Since Zimbabwe is not an Annex I party,emission trading with an OECD country must be defined according to article 12 of the KyotoProtocol (CDM). But for the market as a whole, all mechanisms for mitigating GHG emissions areimportant.

3.3.2. Gains from Trade

The system of GHG trading (JI, CDM and IET) is based on two key facts: GHG emissions do notstop at national boundaries. And the effect on climate change of reduction or avoidance of theseemissions is not connected with the source of the emissions. GHG reduction measures haveincreasing marginal costs after implementing so-called no regret projects. In general, the marginalabatement costs in DCs and EITs tend to be lower than in ICs. Thus investments in the protectionof the climate can be done more efficiently in DCs.

Through the CDM, DCs will benefit from technology transfer in the energy and industrial sectorsthrough energy efficiency technologies and fuel switching, while at the same time protecting localenvironment and promoting health concerns and infrastructure development. In addition to this,if sinks are included, DCs may profit from reduced deforestation, watershed protection, andmore sustainable land-use patterns. Such environmentally conscious investments will to a greaterextent spearhead sustainable resource exploitation and economic growth – thereby providing aleverage for checking poverty threats to future generations.

It is common premise that the different emission reduction costs between ICs and DCs stemlargely from the varied efficiencies of energy use and wide disparity in infrastructure andtechnological development. An emissions market may evolve on the basis of marginal abatementcost differentials among countries obliged to and committed to emissions reduction with suchactivities being credited under consideration of transaction, marketing, risk, and other costs.


Figure 3.1 shows a hypothetical situation in the future GHG market. The demand curve of allAnnex B countries represents the market volume of demanded GHG reductions. The supplycurve represents the offer of GHG emissions for trade through JI/CDM. The supply contains themarginal costs as well as the transaction costs, certification, verification and other costs andeventual fees.

Figure 3.1 Hypothetical Situation in the GHG Market

Demand of theOECDcountries

Q1:Quantity tradedin world

Supply by theworld

Price at market

Quantity

P1:Price in theworld

The price P1 in Figure 3.1 is the price at a defined time and is the point of intersection of demandand supply curves. Zimbabwe is a small seller of tradable GHG reductions and thus a price taker.From the point of view of Zimbabwe, the price is fixed. The quantity traded by Zimbabwe is theintersection of the (horizontal) price curve and the country’s marginal cost curve. (See Figure 3.2.)The quantity Q2 traded by Zimbabwe is a (small) part of the quantity Q1 traded in the wholeworld market.

Involvement of DCs and EITs in a global GHG trading arrangement will reduce the costs ofemissions reductions. Estimates by the OECD confirm that gains from co-operation among OECDcountries are relatively smaller in view of the limited marginal abatement cost differentials.

GHG trade is not completely beneficial to all parties and stakeholders in an economy: local andsocial issues have to be considered as well. If, e.g., coal would be substituted largely by otherfuels, consequently resulting in carbon offsets, losers (e.g., coal miners) would be affected, leadingto a limited expansion of activities.


Figure 3.2 Zimbabwe's Offer at a Given Price P1

Q2:Quantityby Zimbabwe

price

Quantity

Supply curve

P1 given by world

3.4 Architecture of an Emission Market

3.4.1 Basic Conditions

Basically, the offset market is determined by the UNFCCC, the Kyoto Protocol, and the differentdecisions of the Conference of Parties (COP). Because Zimbabwe is not an Annex I country, it cantrade under the CDM only.

To date many problems in implementing the CDM are not yet solved: the setting of emissionbaselines, the determination whether or not project activities are additional to what would haveoccurred without a project, and the monitoring of the results will be the key parameters.

Besides the parameters given by the Kyoto Protocol additional criteria must be fulfilled for asuccessful implementation of a project. They must also address

− local needs,− poverty eradication (job creation, providing sources of income),− transfer and development of environmentally friendly technologies,− improvement of institutional capacity (training, capacity building),− contribution to sustainable development (biodiversity, water and air quality, tourism),− national economic impact,− compatibility with other environmental goals.

The institutional architecture of a GHG offset market must therefore meet the demand to considerthe mentioned environmental, social, and economic criteria.


3.4.2 Scenarios of Market Structure

With projects in the AIJ pilot phase the transaction costs of bilateral project-by-project procedureshave proved to run up to 30% of the total project costs. If the transaction costs reduce the benefitsubstantially there will not be enough incentives in future to realise CDM projects that needsignificant resources for validation, monitoring, verification, and certification. Therefore simplemarket rules and a simple market structure have to be implemented in order to decrease transac-tion costs and to minimise the risk of project failure.

In the absence of direct incentives for private sector involvement CDM will not take off. It is alsoapparent that risk and minimisation of transaction costs is a major determinant of the return onCDM projects. For effective implementation of CDM projects, the following will be necessary:

i. government commitmentii. predictable, flexible regulatory frameworkiii. hospitable investment climateiv. sound financial system adequately catering for risk managementv. government promotion i.e. public awareness and putting up CDM focal points or

project appraisal centres

Free Market Scenario

Annex I parties prefer market determination of prices. They would therefore purchase the least-cost emissions reduction available in DCs: a competitive and economic efficient market couldarise. A cartelisation in order to sustain prices above marginal costs is unlikely due to homogene-ity of the good and numerous suppliers. The emission trade will be dominated by large sellersand buyers which influence the price. According to various studies the USA might be a largebuyer whereas Russia and Ukraine (in general EIT) are liable to be big sellers. The small countriesinvolved - Zimbabwe included - would be price-takers. The potential benefit for Zimbabwe is therevenue minus production costs in the country including transaction costs, control costs and theextra charge due to the estimate of the risk premium for investments in Zimbabwe. PotentiallyZimbabwe will have additional costs (or in other terms must offer GHG reductions cheaper) duebasically to the following reasons:

− in Zimbabwe rather small projects will be realised,− the country offers a comparatively unfavourable investment climate,− investment risks are estimated to be high,− the potential to increase projects is limited.

Prototype Carbon Fund (PCF) Scenario

The World Bank has established a Prototype Carbon Fund (PCF). The PCF is a relatively smallfunding vehicle (ca. US $150 million) that intermediates between buyers and sellers. The objec-tives of the PCF are to facilitate market development and reduce risks. The major risk or cost-reducing benefits arising from the fund are:

− risk management through a project portfolio approach,− decreased sovereign risks,− registered emission reduction units (improved tradability),− quality assurance system (validation, verification),− lower transaction costs,


− improved price transparency.

With the PCF the World Bank has created a ”learning-by-doing” opportunity to implementemission reduction projects by companies and governments according to Joint Implementationand the CDM. The objectives of the PCF established by the World Bank are.

− High quality emission reductions registered by the UNFCCC,− Know-how creation and transfer to the ICs, EITs, and DC, and− Public-private-partnership synergies.

The PCF operates as follows. ICs and companies invest money and technology through the PCFin EITs (JI) and DCs (CDM). The investors receive a pro rata share of the emission reductions,verified and certified in accordance with the Kyoto Protocol and transferred as agreed with therespective EITs and DCs.

Figure 3.3 Prototype Carbon Fund Suggested by the World Bank

3.4.3 Conclusions

For GHG reductions the market does not yet exist and the modalities are not yet defined, themarket price of CERs or ERUs is to date only forecast by models. It is expected to be in the orderof magnitude of US $35/ton of CO2.There is a great number of proposals for the construction of offset market structures. It seems tobe important that some key functions of trade must be strictly under international control to meetthe above-mentioned criteria. Other functions like brokerage, monitoring, verification, andsponsoring may be realised by private entities.

The following items must be under international control (e.g. COP):

− certification of project activities as eligible for the CDM (including social, environmentaland economic issues),

− international tracking system to provide accurate information about national credits,


− additionality and baseline setting,− certification of emission reduction units.

National governments should meet the following tasks:

− estimate value of national participation,− identify risks involved in participation,− create domestic infrastructure,− create sectoral or national emissions trajectories.

3.5 How to Position Zimbabwe in the Offset Market

An idea of developing Zimbabwe’s situation in the CER market is to consider Zimbabwe as acompany that sells a new product in a new and unknown market. The opportunities for Zim-babwe in this market are therefore considered from the viewpoint of marketing: Zimbabwe sellsCO2 reductions to ICs. The country competes with other countries: ICs (Annex I countries), EITs,and other DCs. Thus, matchmaking advantages need to be found.

3.5.1 Forces Determining the Attractiveness for Zimbabwe in the Offset Market

Threat of Intense Rivalry

There is the probability of intense competition in the market.

Figure 3.4 Forces Determining Attractiveness of the Offset Market for Zimbabwe

SupplierSupplierSupplierSupplier PowerPowerPowerPowerZimbabweanPrivateSectorand NGO

BuyerBuyerBuyerBuyer PowerPowerPowerPowerUSAEUOECD

PotentialPotentialPotentialPotential EntrantsEntrantsEntrantsEntrantsChinaPoor Africancountries

SubstitutesSubstitutesSubstitutesSubstitutesRockefeller FundInternational IECGlobal EEIWWF, CI, IUCNPhilippineNPAPetroleum IECA

CompetitionCompetitionCompetitionCompetitionSouth AfricaAfrican CountriesEITsAsia & S. America


Threat of New Entrants

As the trading system matures, many new entrants will enter the market. These may includecountries like China, India, and "poorer" African states. The competitiveness of the latter will beincreased when land use and forestry projects are eligible under the CDM. Whether and how thistype of project will be eligible is unclear to date.

Threat of Substitute Products

There is a real threat of substitute products in this area. The following is a list of products cur-rently available that could substitute or supplement offset trading.

– The Rockefeller Foundation has co-financed renewable energy and conservation projectswith the GEF in Jamaica, Brazil, India, and Morocco and is supporting development of theGlobal Photo-voltaic Market Transformation Project.

– The International Institute for Energy Conservation has worked on climate change mitiga-tion projects.

– The Global Energy Efficiency Initiative has signed a formal agreement with the WorldBank.

– The World Bank and WWF-US produced "A Conservation Assessment of the TerrestrialEco-regions of Latin America and the Caribbean."

– WWF, CI, IUCN, and the World Bank produced a proposal for the Critical EcosystemsProtection Fund (CEPF).

– In the Philippines the NGOs for Integrated Protected Areas (NIPA), a legally incorporated,non-profit consortium of 12 national NGOs, received a GEF grant to co-ordinate, supervise,and fund local groups to undertake management and community development activities in10 priority protected areas in the country.

– The International Petroleum Industry Environmental Conservation Association (IPIECA)and the International Maritime Organisation (IMO) intend to collaborate with the WorldBank with regard to environmental issues in Africa.

– The Forest Market Transformation Initiative (FMTI) is supported by the MacArthur Foun-dation, the National Fish and Wildlife Foundation, the Rocky Mountain Institute, and theChurch and Dwight Company.

While these products currently complement CDM, they can reduce the market of low-cost carbontrading, as measures are already taken inside other programs without trading the resultingcarbon offset benefits.

The market structure for Zimbabwe can be sketched as follows under the assumption of directtrade, i.e., no PCF existing.

Demand Side

It is theoretically possible that energy projects could buy offsets from an agricultural project inDCs like Zimbabwe (e.g., a power corporation wishing to expand in an Annex I country offsets itsemissions by investing in a forest project in Zimbabwe providing a sink). The transaction costs ofsuch trade are assumed to be rather high as is the “aversion” of a power corporation to trade witha partner from an unknown branch. The promoters of the energy project will probably not haveexpertise in forestry, thus increasing the cost. It is much more likely for companies to trade withother companies from the same holding, then from the same branch, and least frequently withunfamiliar companies. This does not confine the search to a strict “one to one mapping” of thebuying sector and selling sector. The scope includes all sectors that have synergy such as supplychain synergy. Thus wood or paper mills sponsoring forestry projects have less transaction costs


and risks attached than unrelated sector trades. Company representatives declared these prefer-ences in a recent survey.

Figure 3.5 Profile of Demand of OECD Countries

Supply Side

Existing trade links may also influence the readiness to trade. It is more likely that OECD coun-tries go into trade with countries where strong trading links exist. While it may be possible forZimbabwe to enter into a CER trade with any country, it is more likely that countries with atraditional association with Zimbabwe will be interested (e.g., it is much more likely for British orGerman companies to trade with Zimbabwe than, say, American companies).

With regard to the traded product it is obvious that trading starts with CDM projects that havelow reduction costs and only in a late and costly stage will CDM projects at high reduction costsbe traded. Thus the target market will focus mainly on those Annex I countries with an existingstrong trade link with Zimbabwe and on trade with CDM projects that have low reduction costs.

It is in view of this that the target focus for Zimbabwe in the carbon offsets markets would belimited to those Annex I countries with which the country presently enjoys favourable tradinglinks in projects that have low CO2 abatement costs.

The basic requirement Zimbabwe has to meet is to install a CDM office that facilitates the creationand transfer of CO2 reductions. This institution must guarantee that an overall CO2 reduction isreached by singular measures. This means that one project must not reduce CO2 emissions to thedebit of another field (leakage). It makes no sense if, e.g., a railway company substitutes Diesellocomotives for electric ones, thus reducing the CO2 emissions of the locomotives but increasing

Dec

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Decreasing attraction of selling country

Neighbourednations

(far away) OECDcountries

DCs

Within

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the CO2 emissions of coal-fired power plants (especially when they have a poor efficiency) whichproduce the necessary electricity. In this case the overall balance of CO2 emissions may easily benegative.

Figure 3.6 Matchmaking Prerequisites for DCs to Get into Successful Trade

Therefore the certifying institution must assure that the way to fulfil the Kyoto goal, namely anoverall and real reduction of CO2 emissions is assisted--i.e., it must evaluate all projects andsecure that no leakage exist and that the additionality of certified projects is guaranteed. Withsuch an institution transaction and information costs are also reduced.

3.5.2 Market Constraints and Obstacle Originating in Zimbabwe

Basically the operations of the market would hinge on a commitment by OECD to bindingemission reductions, encouraging them to search for the least cost emission reduction options. Inthis market, DCs will have to face some important handicaps that undermine their positions.

Comparative disadvantages or constraints of Zimbabwe to operate in an optimal manner in thismarket are elaborated in the sections below.

Transaction Costs and Risks

The transaction costs are an extra charge to the production costs of CO2 offsets. Together with therisk premium the production cost is determined. Zimbabwe will operate on the market if thistotal production cost is lower than the international CO2 price. It is thereby assumed that Zim-babwe is price taker.

Dec

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of buye

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Strength of trading links

Annex 1countrieswith strongtrading links

Annex 1countries withweak tradinglinks

Countrieswith notrading links

Low

CO

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The transaction costs depend largely on legal and administrative requirements and search costsfor finding optimal project partners. Independent verification also contains a certain risk forenterprises which can be translated into a transaction cost. For investment projects opportunitycosts are also an important element as additional studies require not only more money but alsomore time, which leads to lost opportunities for profits (profits of alternative investment projectsare not realised).

An important further cost factor is the risk structure of Zimbabwe. It is determined by factorssuch as the policy-regime, the form of government/political system, the level of uncertainty orthe reliability of data and information, country stability, and the economic situation. The rating ofcountries by financial institutions show that risks to investors in Zimbabwe are estimated to behigh. It must be assumed that the rating of Zimbabwe concerning its position in the CO2 offsetmarket is regarded to be at the same level. Therefore the extra charge to the production cost inZimbabwe will be rather high.

An additional component to the relative disadvantage of Zimbabwe compared to more devel-oped countries lies in reduced information on the past as well as less experience with newtechnologies, making forecasts less reliable. This makes the definition of the projected emissionstrajectory more complex and insecure. It can result in less or more certified emission reductionsthan projected ones.

Weak Institutional and Human-Resource Capacity

The implementation of new technologies as well as their operation and maintenance requiresconsiderable manpower and competence in order to assure a real and lasting reduction of CO2emissions. The presence or absence of such a capacity determines whether a country is regardedto be an attractive, reliable, and dependable partner.

Lack of Support from the Other Players in the Market

The formation of a DC seller cartel is highly improbable, for such an organisation is highlydemanding and requires the fulfilment of a lot of conditions. At the same time the variouscountries have strongly diverging interests and prerequisites. The large number of potentialsellers is the biggest obstacle to such a cartel, which would anyway have doubtful economicusefulness.

Political Field

The political conditions in a country influence the willingness of foreigners to invest in thosecountries. Therefore the opportunity of the political system in a country and its stability decidewhether investments in projects and in technology transfer are made as a basis for CO2 reduc-tions.

3.5.3 Obstacles to Zimbabwe Originating in OECD Countries

Tax Policies

CO2 taxes increase the pressure to reduce CO2 emissions. Being an economic instrument theyfoster steps toward reducing offset costs, thus favouring CO2 trading as long as the domesticstructure chosen permits such trading. Before international trading between companies can takeplace a national system which solves the allocation problem must be designed and come into


force. Regulations in contrast prescribe, e.g., maximum emission rates and would thus not permittrading (e.g., maximum fuel consumption levels of car fleets).

Regulation

In OECD countries a strong trend toward a stricter environmentally orientated legislation hasformed: laws on energy (efficiency), CO2 reduction, and other topics that eventually result indecreasing the use of fossil energy. Again the impact of such regulations on trading volumes andprices depends on the national system established and the instruments used for reducing GHG.

Indications show that a relation between domestic and traded share to fulfil the Kyoto commit-ments could be fixed.

Technical Innovation

The trend to improve the efficiency of energy use leads to new technologies, more sensitivebehaviour, and optimum operation of installations that end in reduced consumption. The instal-lation of new computer generations, new screen technologies, new boiler technologies, but alsonew efficient production technologies and improved processes in the industry will get a boost atthe beginning of the next decade. Also the transport sector is in considerable motion, especiallyconcerning higher fuel efficiency of produced cars, e.g., the EU sets out a strategy to reach anaverage CO2 emissions objective of new cars of 120 grams CO2 per kilometre by 2005 (2010 at thelatest), with the fleet average in 1995 being 186 g/km. The European Commission recentlydecided to conclude an environmental agreement with the European Automobile ManufacturersAssociation (ACEA) which will make the major contribution to achieving this objective. Similaragreements were made, e.g., by Switzerland, which will be complemented most probably byinstruments such as car labelling or vehicle taxes based on fuel consumption, thus reducing CO2domestically and reducing the demand for trading carbon.

Higher Energy Prices

It is obvious that high energy prices are favourable to realising energy efficiency measures andtherefore to CO2 abatement. In Europe a big share of electricity is produced by burning fossilfuels. Increased prices of fossil fuels therefore lead to a rise in electricity prices. On the otherhand, the liberalisation of the electricity market decreases the prices remarkably--above all in theindustry, as this can be seen, e.g., in Norway and Germany after electricity markets have beenderegulated. As a whole electricity prices for companies in Europe will drop. All the same thereare big potentials for improving the energy efficiency in all economic sectors and in privatehouseholds that are far from being exhausted. These potentials are profitable at today’s pricesand even with decreased prices. After the removal of non-technical obstacles (e.g., by informationinitiatives, legal incentives) they will be exploited to a big extent.

Market Strategy

Whenever countries or companies invest outside of the core market or start developing a newmarket, medium and long term trade is considered. Such considerations are also made whenentering into the CO2 offset market. The interest of investing countries or companies thereforelies in countries that represent a big potential or future market to the CO2 offset buyer. Suchmarkets are at present above all in EITs. Moreover the relation to EITs is important to EuropeanOECD countries because of historic relationship or political reasons (peace keeping, controlledtransition to a market economy, etc.). The US and Canada as important non-European OECDcountries will tend rather to trade with NAFTA and other countries in Central and South Americafor reasons analogous to European countries with EITs.


Therefore, the chance of DCs, especially in Africa (Zimbabwe being no exception), to enter intotrade with OECD countries in general is rather poor. An exemption could be countries havingalready strong trade relations to DCs, in the case of Zimbabwe, e.g., Great Britain.

3.5.4 Obstacles to Zimbabwe from International Constraints

Rules of CDM

The rules for CDM are far from being clear. The main operational definitions are still to bedefined:

− definition of the baselines;− restrictions on trading;− prerequisites of a country that enables it to trade;− certification and validation issues.

Therefore the positioning of the sellers of GHG reductions is considerably unclear.

In order to participate in a CDM market the following recommendations are suggested forZimbabwe:

− declare the will to participate in the market;− inform possible GHG reducers. They must be aware of opportunities and threats the new

market offers. Conditions under which GHG reductions are recognised as CERs shall becommunicated, especially to big energy consumers (e.g. industrial companies) and elec-tricity producers;

− establish an authority/office where CERs can be announced. This office should be man-aged efficiently and free from political considerations to ensure high quality projects,credibility, continuity, and low transaction costs;

− develop mechanisms to group small projects. Otherwise transaction costs will be too high,thus reducing the amount of potential GHG projects Zimbabwe can offer;

− conduct training and outreach seminars and workshops to inform potential project devel-opers, government officials, and other interested parties about CDM potentials and meth-ods. CDM must be seen as a development potential for Zimbabwe, and interested partieshave to be informed about how to take advantage of this opportunity;

− include unilateral CDM projects to reduce risks perceived by external investors. This alsofacilitates the inclusion of project realisation of national or international Non Annex Iparties. More projects could thus be included in the Zimbabwean offer;

− clarify controlling, verification, and monitoring procedures in Zimbabwe;− elaborate clear rules and regulations on how to proceed when realising a GHG reduction

project, and− elaborate formats including baseline and additionality calculations and other project

information demands which allow project developers to provide high quality projects.

Entering a new market is associated with certain risks, including the following.

− The price of CERs will not be known when starting a project. This precludes knowledge ofopportunities and threats associated with producing CERs.

− If the demand to CERs is delayed, how will the price be determined?− If the Kyoto Protocol does not come into force, a total or at least partial loss of investment

for the CER generation could occur.


If Zimbabwe is in the situation of being an early market participant, some uncertainties enter thescene.

− The first traded CERs could either be traded at a high price (for trading partners have noexperience) and due to a lack of concurrence the price- making is not yet according toclassic market rules.

− For the same reasons the price may be too low because in the initial phase the cheapestmeasures are realised. This leads to cheap GHG reduction costs in the demanding countryas well as in the supporting country.

− Therefore a possible policy could be to "bank" CERs and to bring them to the market onlywhen prices are high. This scenario will be very risky to countries like Zimbabwe, whichhas small sellers and therefore few possibilities to influence prices. Moreover for thereasons described in sections 3.1.2 a price forecast is rather difficult. The developments inthe demand in OECD countries and developments in the supply of competing countries(especially with a big offer of CERs and later ERUs) cannot be predicted at the time.


4. SECTORIAL GHG EMISSIONS,INVENTORY, DEVELOPMENT,AND OFFSET POTENTIAL

4.1 Introduction

This chapter of the study looks at the sectoral (energy, industry, residential, transport, land-usechange and forestry and agricultural sectors) generation of greenhouse gas emissions in theirhistorical, current, and future perspectives so as to provide the policy makers with a basis fordecision making in AIJ/CDM process. The chapter will discuss the energy base in Zimbabwe andthen demonstrate to the Zimbabwe government that national GHG emissions will certainlyincrease with economic development and demographic trends. It is hoped that the governmentwould then see the need for seizing AIJ/CDM opportunities in reducing GHG emissions, therebyopening doors for bringing Environmentally Sound Technology (EST) into the country.

The chapter also aims to show potential investors the existence of large and easily accessible GHGabatement potentials in Zimbabwe for the discussed sectors as well as sustainable developmentsbenefits for the host country. The results of this study should strengthen the conventional view inthe OECD countries that the CDM is basically an avenue for minimising Kyoto commitment coststo them. This could be achieved by OECD countries investing in emissions reduction/avoidanceactivities in non-Annex I parties thereby obtaining credits through the CDM.

In order to meet the above objectives this chapter will discuss the relevant issues in the followingsequence: main energy supply base in Zimbabwe, GHG inventories, future GHG emissions trendsin different sectors, and abatement potentials and their likely development in the coming years.Finally, the chapter will present a pipeline of selected potential CDM projects.

4.2 Macro-Economic Analyses and Major Assumptions

Zimbabwe’s Initial National Communication provides information on the principal sources ofGHG emissions and the quantified emissions for the selected base year (1994) and projectedtrends based on assumed economic and technological developments. This is backed by the mostrecent data from the sectoral analyses. Because the current and future GHG emissions in Zim-babwe will be largely determined by the economic development of the country, a commoneconomic scenario has been defined for the different sectors.

4.2.1 Economic Status Quo and the Zimbabwe Programme for Economic and SocialTransformation - ZIMPREST (1996-2000)

The Zimbabwe Programme of Economic and Social Transformation (ZIMPREST) launched in1998 calls for enhanced liberalisation of the economy, expanded industrial sector to provideemployment for the increasing population, and an improved quality of life for the people.

A recent assessment (mid-1999) of the Programme indicates that little headway has been made.The country has been going through turbulent economic times during the past twelve months.The collapse by about 50% of the Zimbabwe dollar with respect to all hard currencies has resulted


in spiralling inflation and a great deal of instability in the economy. The net result is that targetsset in the ZIMPREST are not being met.

Table 4.1 GDP Growth (Real GDP at 1990 prices Z$ million)

Year Agriculture Mining Industry Other GDP Growth%

1994 3375 888 6219 9802 5.3

1995 3119 935 5888 10117 -1.1

1996 3774 925 6091 10677 7.0

1997 3709 884 6323 10986 2.0

1998 3825 875 6449 11100 1.6

1999 3901 889 6593 11312 2.0

Source: Zimbabwe CSO Statistics, Quarterly Economic Bulletins: Standard Chartered Bank, Barclays Bank.

Table 4.1 illustrates how poorly the Zimbabwean economy has performed in comparison with theZIMPREST minimum target scenarios for the key variables, i.e., GDP, investment, savings, andexport growth. The GDP growth rate was expected to average a minimum of 6% annuallybetween 1996-2000. This was only achieved in 1996 (7%). In 1997 GDP growth plunged to 2%.

Generally, the Zimbabwean economy has been characterised by an inability to restore andmaintain a stable and conducive macro-economic environment. The government has not beenable to contain expenditure within the set targets with the result that inflation, interest andexchange rates continue to spiral upwards. As a consequence, economic volatility is currentlybeing experienced in Zimbabwe. Most of the gains made prior to 1996 have been eroded.

4.2.2 Economic Outlook

There is little indication that the above trend will reverse in the short-term. However, the econ-omy is expected to stabilise and start picking up eventually. The important consideration is whatregulatory drives will lead the economy to rebound. Solutions seem to lie in implementing a tightfiscal policy, with emphasis on significant reduction in government spending. One major regula-tory driver is the government’s commitment to meet the economic restructuring targets set out inagreement with the IMF. This is important if the government is to continue receiving the struc-tural adjustment credit financing.

GDP growth in the short term is not expected to exceed 3%. The economy is expected to startpicking up in the medium term (2005-2010), basically driven by infrastructure needs. Currentforecasts support an average growth rate of 4% in the long term. There is no significant differencebetween this forecast and the 4.6% GDP growth rate in Initial National Communication. Thus the4.6% GDP growth is adopted for purposes of this study for the period until 2010. For 2010 - 2020 asomewhat lower growth rate of 3.8% is expected.

Although projected emissions have to move in the same direction with economic growth (orvolume of production), one has to analyse carefully whether this actually means that the forecastemission projections in the Zimbabwe Initial National Communications need to be revised.

What is certain is that, while the economic growth prospects for Zimbabwe look gloomy at themoment, the energy demand forecasts show normal growth (ZESA, SDP) in the short, mediumand long term. This is because of unsatisfied demand and the lack of cost-competitive alternative


forms of energy. Thus the projected emissions for the energy supply sector will not be directlyaffected because of the continual growth in energy demand.

4.3 Zimbabwe Energy Supply

4.3.1 Domestic Resources and Current Energy Balance

Zimbabwe is rich in natural resources including energy, as outlined in Table 4.2.

Table 4.2 The Energy Resource Base in Zimbabwe

Source Potential

Coal (million t) 17 000

Hydro (MWe) 13 300

Coal Bed Methane (million m3) 50 000 000

Oil (million t) Nil

Solar radiation (KWh/m2.yr) 2100

Wind (m/s) 3.2Source: Maya, R.S., et. al. SAPP Study, 1998

The primary energy supply base and end-use distribution of fuels is shown in Figure 4.1. Thesepie charts portray the energy balance. The following sections describe the various forms ofsignificant energy sources in Zimbabwe.

Figure 4.1 The National Energy Balance in Pie Chart Form

Electricity

Total bulk energy supplied by ZESA, a statutory body, was 9 700 GWh in 1996. The systemoperated on a transmission loss rate of 2.6% and a distribution loss rate of 8.4%. Maximumdemand for the operating period 1996/97 was 1 828 MW.

Primary Energy Supply, 1996100% = 359PJ

Coal42%

Oil derivatives8%

Electricity Imports

6%

Woodfuels42%

Other Fuels2%

Final Energy Consumption, 1996100% = 283PJ

Coal15%

Oil derivatives18%

Electricity12%

Woodfuels49%

Other Fuels6%


Imports from Mozambique, Zambia, and Congo (DRC) amounted to 4 012.9 GWh in 1996/97,equalling 35% of the total energy consumption for that period. Currently, power imports aremostly hydro from Mozambique and the Congo (DRC) as well as thermal (coal-based) fromSouth Africa. The current total installed capacity of 1 857 MW is made up of 666 MW of hydropower from the Zambezi and the rest is coal based [ZESA Annual Report and Accounts, 1997].Any future expansion on the Zambezi River except for expansions limited to the Kariba South(the Zimbabwean side of the Kariba

Scheme, the other being Kariba North, the Zambian side) will require the consent of Zambia andneeds to be a joint investment between the two countries. This naturally limits freedom ofdecision for either party where expansions or new installations are concerned.

As of 1999, imports stand at about 45% of bulk supply. Power imports are transmitted throughinterconnectors linking regional power utilities built to enhance regional electricity trade andresource sharing. This inter-connector network is critical for any mitigation options such as hydroelectricity. Because of the small size of most regional economies, large-scale electricity sectordevelopment will have to be coordinated closely with the development plans of other regionalpartners. Those partners, which include all utilities in SADC except Mauritius, are groupedtogether under the Southern African Power Pool. This is a power trading and power develop-ment co-operation arrangement concluded through the Energy Protocol under SADC.

Recent studies (Southern Centre and GTZ, 1998) have shown that the Power Pool is a majoroption for implementing power sector mitigation options. This can be achieved in two main ways.The first is to engender a regional generation and investment schedule that favours fuel switchingto hydro, coupled with a conducive mechanism for cross-border power exports whereby cleanhydro dominates the supply base. The second is by ensuring amicable trade but in an environ-ment where the more efficient and cleaner coal plants are optimised and the dirtier ones are runat peak loads only.

The exclusivity of power supply by ZESA has been recently altered to allow independent powerproducers and even consideration for ZESA to become a grid operator rather than a generator tobring competitiveness into the industry. There is also new innovation on the fuel-base tradition.Instead of coal and hydro plus a few stand-alone diesels, there is a serious chance for introducingcoal-bed methane into the generation base and another possibility in the remote future to perhapsintroduce natural gas fuels. Presently, however, the supply base and expansion plans are asindicated in Table 4.3. After 2000, some smaller capacities currently used for peak load may beretired.

4.3.3 Petroleum

Petroleum imports are the responsibility of the National Oil Company of Zimbabwe, a statutorybody administered by the Ministry of Transport and Energy, but distribution is accomplished byprivate companies. Zimbabwe has no local crude oil resources and imports all its fuels as finishedproducts.

The total supply and end-use consumption is shown in the 1996 national energy balance (Figure4.1). The three major liquid fuels - diesel, gasoline and paraffin – are consumed in ratios of 12:7:1.Diesel is the most important fuel for agriculture and commercial transport while gasoline is usedmainly in light passenger transport. Paraffin is an important fuel for lighting and cooking in low-income urban households. In rural households it is used mainly for lighting.


Table 4.3 ZESA Plants, Interconnectors, and Latest Approved Expansion Plan

Station Net Capacity (MW) In-Service Date / Current Status

Refurbishment of BulawayoPower station (Thermal)

90 1 January, 1999 (Project Underway)

Harare (Thermal)Munyati (Thermal)

90120

Old plantOld plant

All recently refurbishedHwange Upgrade (Thermal) To produce the rated

capacity of 9202001 (Project being implemented)

Kariba (Hydro) 666Kariba South Upgrade (Hydro) 84 1999 (Project being implemented)Total existing – thermalTotal existing – hydro

1220750

Interconnectors:Cahora Bassa-BinduraInterconnect (Hydro)SAZambiaBotswana

500

4001200120

October – 1997(Project complete)

Planned expansions:

Hwange 7Hwange 8 (Thermal)

1st Unit – 3002nd Unit –300

1st Unit – 20012nd Unit – 2003 (Advanced

Planning stage)Gokwe Power Station (Thermal) Units 1-3: 300 each

4th Unit:30020042007

(Advanced Planning Stage)Batoka Hydro Power Plant(Hydro)

1st Unit – 2002nd Unit – 2003rd Unit – 2004th Unit – 200

2010201120132014

(Feasibility Studies Complete)Total expansions planned Thermal (coal) – 1800 MW

Hydro – 800 MWSource: ZESA, 1999

4.3.4 Coal

Coal is mined by one private company, Wankie Colliery Company Ltd. Present mining capacity is6 million tonnes a year from both open-cast and underground mining. About 50% of this coal issold as raw overburden coal to ZESA for a mine-head, 920-MW Hwange Power Station, which isdue to be expanded by an additional 660 MW. The remainder is sold as washed and graded coalfor industrial steam raising and industrial heat supplies.

A second coal mine with a similar capacity is under active consideration to feed the plannedGokwe North power plant shown in Table 4.3. This mine has coal to last 200 years at the currentrate of extraction.


As indicated in the energy balance, coal supplies 42% of energy for power generation, 13.7% ofenergy to industry, and is a critical fuel for tobacco curing. It has limited application in transportand households.

4.3.5 New and Renewable Sources of Energy (NRSEs)

The role of NRSEs in the Zimbabwean energy sector could be quite significant. This is mainly dueto the potential created by the low level of household electrification, which averages about 20%,as can be determined from Table 4.4, where the extent of electrification in the various provinces ofthe country is presented.

Table 4.4 Extent of Household Electrification Zimbabwe by Province (1992)

Province Household Electrified % Actual Unelectrified % Actual

Mashonaland West 232 340 21.13 49 093 78.87 183 247

Mashonaland Central 177 011 9.03 15 984 90.96 161 009

Mashonaland East 219 516 8.74 19 186 91.25 200 308

Manicaland 320 944 13.49 43 295 86.5 277 617

Masvingo 231 727 11.22 26 000 88.76 205 681

Midlands 247 723 24.21 59 974 75.79 187 749

Matabeleland South 108 815 10.12 11 012 89.84 97 759

Matabeleland North 116 115 15.47 17 963 84.39 97 989

Major City Harare 364 136 64.4 234 504 35.55 129 450

Bulawayo 145 962 91.83 134 037 9.16 11 910

Total 2 163 289 28.24 610 913 71.74 1 551 944

Area Wise Urban 763 706 71.65 547 195 28.32 216 282

Rural 1 399 583 4.55 63 681 95.43 1 335 622Source: Southern Centre, JICA. 1997

The large demand that remains unmet for rural electrification cannot, in the short to mediumterm, be met by grid extension. National policy makers are aware of this and in response therehas been a significant effort to include NRSEs in the supply base to meet rural household energyneeds.

Recent studies conducted under the SADC Programme for Financing Energy Use in Small ScaleEnterprises (FINESSE) have indicated a large market and investment potential in this sector[SADC FINESSE Study, 1998]. The study considered five different NRSEs: biogas digesters, solarhome systems, solar water heating, and small-scale hydro and wind energy.

The study estimated that there is a total of 256 biogas digesters installed in the country with a costrange of US $200-US $350. Zimbabwe has a large population of livestock to allow for the widediffusion of biogas digesters for home application and for community or institutional energysupplies. There is a reliable local supply of end-use devices such as lamps and cookers. Thediffusion rate for this technology has nonetheless remained impeded by cost and lack of skilledpersonnel to market and construct the units.

If we define a micro hydro unit to be 300 kW or less, we can identify numerous options on smalldams and run-off river options with a combined potential of 10 MW. Capital cost per kWinvested is estimated at US $2000. To-date, a few (eight) of these options have been installed, and


a number of them have been investigated. The latest of these, Manyuchi Dam, is a pilot phase AIJproject between E-7 and the government of Zimbabwe.

In general, wind speeds in Zimbabwe are too low for the generation of electricity, although forsome time now wind energy has been used primarily for the mechanical pumping of water. Thereare current investigations, which seem to indicate that the generation of electricity might bepossible in some areas of the country.

Other options such as use of biomass and the production of plant oil for fuel purposes are underactive investigation. Tertiary biomass conversion has been tried. The Triangle Ethanol Plant hasbeen producing 40 million litres of ethanol from sugar annually in years of good rainfall since theearly 1980s. Ethanol is blended with petrol up to a content of 13%.

National policy on NRSEs and the requisite experience with financing these systems was greatlyenhanced by the UNDP/GEF Solar PV project, which started in the early 1990’s and ended in1999. This project made significant inroads into market development, financing mechanisms,institutional arrangements and policy reorientation of benefit to the NRSE sector. The projectstarted off with a goal of installing some 9 000 PV units over a period of five years. This goal wasachieved with minor adjustments to the actual figures installed, based on a 45-W unit equivalent,the most common size used in Zimbabwe. The FINESSE study projected a saturation level of 260000 solar home systems with a combined capacity of 11.7 MW around 2010, assuming a unitpanel capacity of 45 W.

4.3.6 Summary of Energy Sources

Zimbabwe has a large conventional fuel resource base: coal with total reserves of 10.6 billiontonnes, of which half a billion are proven, and hydroelectric power with a total potential of 13 300MW mainly on the Zambezi River shared system.

Coal makes up about 42% of the primary energy supply in the country, and about 70% of thedomestic power generation, the remainder of internal power generation being hydro-based.Petroleum, which covers about 8% of primary supply, is exclusively imported as finished distil-lates. Firewood is the second dominant fuel, making up about 40% of primary supply. It consti-tutes a major source of energy, particularly for the rural population and the low-income urbangroup. Although there are no statistics to support this, it is possible that the use of wood as a fuelresults in significant deforestation. Clearing land for agricultural purposes is the biggest cause ofdeforestation, and 1994 estimates put such clearing at over 18 000 hectares per annum [ZimbabweInitial National Communication, 1998].

Other forms of renewable energy such as solar gas and biogas have received notable attention,but this has mainly been at research level or under diffusion activities funded on a non-commer-cial basis. While solar water heaters are becoming more common in high-income urban areas, thecost relative to alternative and more traditional heating appliances still makes them unobtainablefor the majority of the people.

In the coming years economic growth and rising residential demand will require an increasedsupply of all the above-mentioned fuels. There are significant expansion plans for coal-basedpower generation in the short to medium term (until 2004). Expansion of large-scale hydrogeneration on the Zambezi River, in contrast, is timed for 2010 and later and requires closecoordination with neighbouring countries.


Table 4.5 Summary of GHG Emissions in Zimbabwe, 1994 (Gg)

Greenhouse Gas Source andSink Categories

CO2 CH4 N2O Nox CO CO2 Equivalent

Global Warming Potential 1.00 24.50 320.00 40.00 3.00

1: All Energy (Fuel Combustion + Fugitive) 14 772.13 77.19 1.18 10.08 544.46 19 076.68

A: Fuel Combustion 14 772.13 63.95 1.18 10.08 544.46 18 752.36 i. Power Generation 6 803.17 0.01 0.01 6 806.73 ii. Residential 151.22 0.00 0.00 151.28 iii. Transport 1 851.40 0.98 0.56 2 054.20 iv. Agriculture 1 814.96 0.04 0.03 1 825.95 v. Mining 224.46 0.01 0.01 227.48

vi. Industry 2 397.25 0.05 0.03 2 409.35 vii. Commercial & Others 1 529.67 0.17 0.11 1 568.00 viii. Biomass burned for energy 62.69 0.43 10.08 544.46 3,709.36 B: Fugitive Fuel Emissions 0.00 13.24 0.00 0.00 0.00 324.32 i. Coal Mining 11.78 288.65 ii. Post coal mining 1.46 35.67

2: Industrial Processes 2 316.35 19.08 6.05 0.21 1.38 4 732.20

A: Mining Industries 23.70 6.05 1,959.70 B: Metallurgical & Mineral Processing 1 844.00 19.08 0.04 1.38 2317.25 C: Beer, Wine & Spirit Manufacture 0.00 0.00 D: Sugar Manufacturing 0.00 0.00 E: Cement Production 448.65 448.65 F: Fertiliser manufacture 0.17 6.60

3: Agriculture 0.00 236.84 2.39 66.91 1,381.81 13 388.96

A: Agricultural Waste 0.00 0.93 0.03 1.10 19.81 135.82 B: Enteric Fermentation 179.82 4 405.54 C: Manure Management 7.09 173.71 D: Savanna Burning 49.00 2.36 65.81 1,362.00 8 673.90

4: Land Use Change & Forestry 18 734.48 1.26 0.01 0.20 18.44 18 831.74

A: Forest & Grassland Conversion 2 500.28 1.26 0.01 0.20 18.44 2 597.54 B: Changes in Forest & Other Woody

Biomass Stocks16 234.20 16 234.20

C: Managed forests NE NE D: Abandonment of Managed Lands NE

5: Waste 0.00 25.15 0.00 0.00 0.00 616.06

A: Landfills 24.31 595.60 B: Wastewater 0.84 20.46

TOTAL 35 822.96 359.52 9.63 77.40 1 946.08 56 645.63


4.4 Zimbabwe GHG Emissions Inventory

4.4.1 Summary of National GHG Emissions 1990-1994

The latest GHG inventories from Zimbabwe were compiled in 1998 as part of the ZimbabweInitial National Communication to the UNFCCC Secretariat (Table 4.5). The baseline year forthese inventories was 1994. The method used in compiling these GHG emissions was based onthe 1995 and 1996 IPCC Guidelines.

The following remarks are associated with these current emissions.

(a) Although the previous estimates of emissions shown in this table indicate Zimbabwe as anet sink, new arguments being put forward refute this on the premise that only the addi-tion of biomass sequesters carbon. However, Zimbabwe still remains a massive absorberof CO2 from its standing forests and other forms of biomass.

(b) Commercial energy data are relatively accurate (~90-95 %) while the accuracy for bio-fuels used in rural areas is much lower (~75-80%). The accuracy level of emissions fromLand Use Change of Forestry is not known because of significant uncertainties (Zim-babwe Initial National Communication, 1998).

Fig 4.2 shows the sectoral GHG emissions. Power generation from coal is the highest contributorto GHG emissions, followed by industry, transport, and agriculture. The domestic sector onlyaccounts for 1% of commercial fuel emissions, most of which come from traditional biomass fuels.

Figure 4.2 Sectoral Distribution of GHG Emissions from Commercial Fuels

Source: Zimbabwe Initial National Communication, 1998

CO2 remains the most important pollutant of the GHGs with 63% contribution to overall emis-sions. Methane is second in importance with 16% followed by carbon monoxide. The oxides ofnitrogen contribute a combined total of 11% (Fig 4.3).

Commercial & Others10%

Industry15%

Mining3%

Agriculture11%

Transport12%

Residential1%

Power generation

48%


4.4.2 Emissions Associated with Energy Sector

Emissions from the supply side for energy arise from coal mining, post coal-mining activitiesexcept combustion at the end use point, coal conversion, to electricity and electricity generationfrom small diesel plants.

Activity levels associated with these emissions for the chosen base year, 1994, were known fromprevious studies (the US Country Studies Programme, UNEP GHG Abatement Costing Studies,and the National Communication and updates in the Southern Centre/GTZ studies on ClimateChange and the Southern African Power Pool, 1997). The emission levels were derived from theseactivity data. They are presented in Figure 4.4, which gives an overview of the main GHGemissions from various sectors.

Figure 4.3 Contribution of Individual GHGs to Total Emissions in Zimbabwe

Source: Zimbabwe Initial National Communication, 1998

4.4.3 Emissions from the Industrial, Residential and Transport (IRT) Sectors - Overview

In the present study, the emissions in the energy sector are restricted to sources on the supplyside, i.e., emissions from coal combustion for power generation, coal mining, methane fromhydro-reservoirs, etc. In turn, the emissions in industry, residential and transport (IRT) alsoinclude contributions from fuel combustion and fugitive emissions from industrial processesexcluding coal mining.

Fig 4.4 shows that in the IRT sectors, biomass burned for energy is the highest contributor to GHGemissions, with nearly 4 000 Gg of CO2 equivalent emissions. This is much more than emissionsfrom industrial combustion alone, although combined industrial emissions would surpassbiomass emissions. Biomass burned for energy is usually associated with rural domestic con-sumption with few cases of industrial and agricultural usage. Contributions to emissions of otherfuels in the domestic sector are much smaller (4%) compared to the use of biomass, mainly in theform of fuelwood. Industrial fuel use and mineral processing also account for significant indus-trial emissions of 2 409 Gg and 2 317 Gg of CO2 equivalent, respectively.

CO10%

NOx

5%

N2O6%

CH4

16%

CO2

63%


Industry

Although it is acknowledged that energy generation is by far the principal source of CO2 emis-sions, industrial processes such as mining, mineral processing, and manufacturing also contributesignificant quantities to emission levels of CO2 and other GHGs as shown in Figure 4.4.

Figure 4.4 Sectoral Distribution of GHG Emissions /C02 Eq

Source: Zimbabwe Initial National Communications, 1998

A principal source of emissions from mining operations includes the decomposition of calciumcarbonate into lime, which releases CO2, and this was estimated to be 23.7 Gg. In addition,explosives used in blasting operations during mining produce N2O, estimated to be 6.5 Gg in1994.

Estimates made for 1994 indicate emissions of 1 440 Gg of CO2 from iron and steel as well as 404Gg from the ferro-alloy sector. Insignificant amounts of NOx and CO in the order of 0.04 and 1.38Gg, respectively, were also released during such processing.

Estimates based on the IPCC methodology indicated that 448.65 Gg of CO2 were released fromcement manufacture in 1994, excluding 360 Gg of CO2 arising from the combustion of coal duringcement manufacture. The two major cement production plants in Zimbabwe utilise the dryprocessing technology that consumes less energy than the wet process route.

0 1 0 0 0 2 0 0 0 3 0 0 0 4 0 0 0

Em is s io n s ( G g )

M in in g (c o m b u s tio n )

M in in g In d u s tr ie s

In d u s try (c o m b u s tio n )

M e ta llu rg ic a l a n d M in e ra l P ro c e s s in g

C e m e n t p ro d u c tio n

F e rtil is e r m a n u fa c tu re

R e s id e n tia l c o m b u s tio n

B io m a s s b u rn e d fo r e n e rg y

T ra n s p o rt


Residential Sector

Zimbabwe’s urban population relies to a great extent on electricity and kerosene for its domesticenergy needs. Use of wood in urban areas is largely restricted to periods of severe winters, whichrun for very short periods of time.

Fuel wood is a major energy source in Zimbabwe, accounting for about 40% of primary energysupply and 50% of final energy consumption [1996, Energy Balance]. Low-income urban house-holds consume on average 2 kg of fuel wood per day with load-limited electricity supplies and 12kg a day for those without electricity. Over 96 % of the energy that rural households depends oncomes from fuelwood; they consume on average 14.5 kg wood per household per day.

Urban Waste

Waste generated in Zimbabwe’s urban areas is normally disposed of by land filling, recycling,incineration, and open-dumping, the latter being applicable in the case of solid waste. Liquidwaste is primarily disposed of through managed treatment works. In cases where residential siteshave septic tanks, they are considered to be temporary storage, as they are periodically emptiedinto municipal systems. The principal GHG emitted from waste is methane. According to 1994assessments [Initial National Communication], total CO2 equivalent emissions amounted to 595.6Gg from landfills and 20.46 Gg from wastewater.

Transport Sector

Road transport is another important source of GHGs in Zimbabwe. The total locally registeredvehicle population has doubled between 1992 and 1998 [Central Vehicle Registry Statistics] andreached about 900 000 vehicles in 1998. The 1994 GHG emissions from transport were estimatedat a total CO2 equivalent of 2054.20Gg.

Commercial and Other Sectors

The commercial sector is a significant contributor to GHGs emissions in Zimbabwe. In 1994, theemissions from this sector were estimated at a total of 1 568 Gg of CO2 equivalent. The mainsources of emissions from the commercial and other services sector are associated with the use ofliquid and solid fuel combustion in public and private institutions such as hotels, schools,hospitals, and police camps. Fuels include coal, LPG, paraffin used mainly for cooking, and to alesser extent heating. Government departments are usually considered alone when consumptionof petrol and diesel are accounted for. This is mainly because these large consumers are taken asbulk consumers and are therefore accounted for separately.

4.4.4 Emissions Associated with Land-Use Change and Forestry, Agricultural Sectors

Zimbabwe has a total land area of approximately 390 000 square kilometres. The land area underagricultural production amounts to 10 738 077 hectares, with another 20.5 million hectarescovered with forests and the rest being rock outcrops, water bodies, and settlements (FC, 1996).

In Zimbabwe the underlying causes of deforestation involve the interplay of historical, biological,economic, and political factors at both national, village, and household levels. The causes includepopulation pressure for agricultural land, the demand for industrial timber production, andinappropriate government policies regarding land tenure, economic incentives, and forestsettlement. Rapid population growth (2.9%) appears to be the critical factor affecting deforesta-tion. The majority of the population depends on agriculture. Most of the increases in agricultural


production necessary to sustain a high population come from the expansion of the area undercultivation through deforestation.

The agricultural sector contributes about 14% to the GDP and employs 70% of the work forcepopulation. Emissions of GHG’s occur from several sources, including burning of crop waste,enteric fermentation, manure management, and savannah burning. Using the 1994 crop produc-tion, livestock figures and the IPCC guidelines (1995), the GHG emission levels were estimated tobe 13 388.96 Gg CO2 equivalent (Table 4.5).

Changes in land-use and forestry activities both emit carbon dioxide (e.g., through conversion offorestland to agricultural or urban use) and have the potential to act as a sink for CO2 throughimproved forest management activities.

4.5 Emissions Projections

4.5.1 Objectives

The objectives of this section are to show the development of business-as-usual GHG emissions inZimbabwe. These projections will be used to calculate the GHG reduction potentials, i.e., the basisof investors’ involvement in AIJ/CDM projects in non-Annex I countries. The projections in thissection are based on the projected level of economic activities and other macro-economicparameters in the country.

Projections are primarily based on a projected GDP growth of 4.6% in the period 2000 to 2010 and3.8% thereafter. It should, however, be noted that the projected GDP growth may be on theoptimistic side since recent developments do not support such growth rates. GDP growth isfactored into current sectoral energy intensities and GDP contribution to derive future sectoralGDP contribution. Sectoral consumption is then derived from the assumed energy intensitytaking into account international improvements in efficiency as represented by the AutonomousEnergy Efficiency Improvement (AEEI) Index.

4.5.2 Future Trends in GHG Emissions from the Energy Supply

GHG emissions from the energy supply are projected based on ZESA's expansion plans forthermal power generation, the coal demand schedule (see Table 4.3.), and associated coal miningactivities. A high dependence on coal conversion to electricity will increase supply-side emissionssignificantly while a high dependence on hydro generation will reduce emissions to lower levels.It therefore follows that the following emissions projections for the power sector are based on thecurrent thermal generation capacities and the current approved ZESA expansion plan shownearlier in Section 4.3.2.

We also assume that imports will remain constant in absolute terms. This is because of the presentuncertainty with the future role of imports. ZESA would prefer to import no more than its reservemargin but may not be able to hold to this preference. The present structure of excess capacityamong ZESA regional suppliers indicates that these suppliers may not be able to continuesupplying ZESA due to increased internal demand. Under these circumstances, it appears safenot to vary the present level of imports (i.e., projected emissions are at the upper range of whatcan be expected).

ZESA's expansion plan shows the scheduled plant installations. The projected coal demand forZESA's power generation and the total national coal demand is given in Table 4.6 below. Thiscoal demand projection is based on the current consumption patterns with additional consump-


tion at the new plants (Hwange 7 and 8 and Gokwe North). Coal consumption in a thermal powergeneration plant is based on the expected electrical output from the plants (in GWh) and plantefficiencies (i.e., conversion from TJ of coal to GWh of electricity). The calorific/heat values of thecoal are also taken into account to estimate the quantities of coal needed to produce the requiredenergy in joules.

Table 4.6 Coal Demand Schedule (TJ)

1994 2000 2005 2010 2015

National coal demand 132 436 162 657 193 046 229 112 254 439

Coal demand for powergeneration

72 247 78 085 120 550 141 799 141 799

Coal demand for generation as% of national demand

54.55% 48.01% 62.54% 61.89% 55.73%

Source: Southern Centre/UNEP Country studies Phase II, 1993

The above coal demand schedule and IPCC emission factors for coal, diesel, and coal fugitivesforms the basis of the emissions projection shown in Table 4.7. Consistent with the approachadopted in the previous sections, projections for energy use in sectors other than power genera-tion are provided in separate sections. Table 4.7 shows that CO2 emissions from power genera-tion are expected to approximately double until 2015. The increase will be highest between 2000and 2005 when Hwange 7 and 8 and Gokwe North are planned to come on stream. On average,CO2 from power generation will grow at approximately 4.3% per year, which is close to theprojected GDP growth of about 4.6%/year. Methane emissions from mining will grow parallel tothe coal demand for power generation and industrial heat production.

Table 4.7 1994 Emissions and Projected GHG Emissions from Electricity Generation and CoalSupply

1994 2000 2005 2010 2015

CH4 emissions from coal/Gg

Underground mining

Mining 8.79 11.20 13.20 15.21 17.21

Post mining 1.23 1.57 1.85 2.13 2.41

Surface mining

Mining 3.27 4.17 4.92 5.66 6.41

Post mining 0.28 0.36 0.43 0.49 0.56

Total emissions 13.58 17.30 20.39 23.49 26.59

GHG emissions from thermal power generation/Gg

CO2 6 803 7 313 11 290 13 280 13 280

CH4 0.01 0.16 0.25 0.30 0.30

NOx - 10.45 16.13 18.96 18.96

CO - 1.31 2.02 2.37 2.37

NO2 0.01 0.27 0.42 0.49 0.49Source: Southern Centre for Energy and Environment, 1999


4.5.3 Future Trends in GHG Emissions from Industry (Cement Manufacturing, IndustryCombustion, Mining and Metallurgical Operations)

Sectoral projections are based primarily on expected growth in the macro-economic activitiesdescribed earlier. These projections are presented in Table 4.7. However, where information isavailable for specific projects to be implemented, estimates of energy consumption in suchprojects are made. This is the case with the electricity supply outlined above. The same applies toother industrial projects where enough details on production levels allow us to estimate energyuse.

Cement Manufacturing

There are planned cement manufacturing projects which will in future contribute to GHGemissions. The projects may be expansions of existing installations or entirely new ones. Currentcement production comes from two companies, namely, Portland Holdings Ltd. and Circle Ltd. Athird producer, an IDC- Chinese joint venture, is presently constructing a large plant near the cityof Gweru.

The expansions indicated in Table 4.8 above are intended to meet the growing needs of theconstruction industry and replace current imports of cement or clinker. The projected CO2emissions are expected to increase by 139 % on the 1994 levels after the implementation of theproposed projects. This would exceed projected GDP growth rates for the time being until thefirst commitment period (2008-2012). The new cement production facilities are planned to use thedry processing route.

The total emissions indicated above include only emissions from the calcination process itself.The emissions from the coal that is used to provide the process heat for the cement production(current: 360 Gg/year) is included in the category ”industry combustion” below.

Industry Combustion

The use of coal for combustion in manufacturing is a major source of CO2 emissions, as can beseen in Table 4.5. Projected emissions from this source are expected to follow the country’s GDPgrowth, as was described in Section 4.2.

Table 4.8 Present and Expected Capacities of the Cement Plants

Plant Current Production( ‘ 000 tons)

Planned Capacity Year on line

Portland Holdings ltd 600 1000 2001

Circle Cement Ltd 300 450 2 002

Sino – Idc Ltd. Nil 700 2 000

Total 900 2 150

Total Emission CO2 448.7 1 070

Source: Portland, Circle & Sino - Pers. Comms .

Mining

During the period between 1994 and 2010 a number of large mines are expected to come onstream. The Hartley Platinum Mine, which had reached about half of its targeted capacity when itshut down in June 1999, but it is expected to resume operation in a year. Mimosa, Ngezi and Unki


Platinum mines on the Great Dyke are under feasibility studies, and indications are that each willproduce upwards of one million tonnes of rock per year from 2001 on. Eureka Gold mine is duefor full-scale production by the end of 1999. Based on anticipated tonnage of rock to be produced,the level of N2O derived from explosives used is set to increase by 350% on the 1994 levels(Eureka Mine internal Information, personal communication)

Metallurgical Operations

Metallurgical operations constitute one of the principal sources of CO2 emissions in the industrysector. For several years during the 1990s, the production of iron and steel at the Zimbabwe Ironand Steel Company was at levels far below normal capacity. According to company officials only350 000 tonnes of steel were being produced during the last seven years. This was due to the factthat the large Blast Furnace No. 4 was offline for the period. The No. 4 furnace was recommis-sioned into production in July 1999, and when fully operational at the end of 1999, could produceabout 800 000 tonnes of steel per year. Emission levels from these works are expected to increaseby 50% by the end of 1999 compared to the 1994 levels.

The two Ferro-chrome smelters at Gweru and Kwekwe do not have any plans for major expan-sions, and thus CO2 emissions projections are based on the GDP growth rate of 4.6%, as describedin Section 4.2. above. This should take into account any conceivable unknown projects that couldbe implemented during the period.

Future Trends in GHG Emissions under Residential Sector

In order to make reasonable projections of emissions emanating from the urban residential sectorit will be necessary to take into account new policy interventions by the government. In trying toredress the inadequacies of the past, the government has recognised the lack of adequate accom-modations, which has given rise to the construction of shacks within existing premises. Oftensuch shacks are of a low standard in terms of the provision of electricity, water and space.

The new policy is intended to redirect investment into the residential sector not just from gov-ernment and local authorities but more importantly, from the mobilisation of resources from theprivate sector. With the improvement in the quality of housing, waste generation is expected toincrease correspondingly in keeping with the GDP growth rate of 4.6% until 2010 and 3.8 % forthe year 2030 (Section 4.2). Projections for the residential sector are also shown in Table 4.9.

Table 4.9 Emission Projections for the Industry, Commercial and Residential Sector (Gg of CO2equivalent)

SECTOR 1994 2010 2030

Mining operations 1 959.7 5 889.2 10 365.9

Mining combustion 227.7 684.3 1 205.3

Metallurgical processing 1 849.7 2 774.6 4 883.3

Commercial & Others 1 529.7 2 998.2 5 876.5

Industry combustion 2 406.9 4 813.8 8 472.2

Cement production 448.7 1 346.1 2 369.2

Fertiliser manufacture 6.8 10.2 13.9

Residential 595.6 1 169.3 2 465.3

Total 9 024.8 19 685.7 35 651.6


4.5.5 Future Trends in GHG Emissions in the Transport Sector

For transport-related GHG emissions, we assume a development parallel to the GDP growthdescribed in Section 4.2. Growth in the transport sector has been erratic over the last two decades,with sharp growth experienced in the 1990s. The growth of motor vehicles over the period 1992 to1999 can be estimated to be about 12.2% per annum and this is used to estimate emissions in year2000. However, this growth is not likely to remain high as markets saturate. After the year 2000, itis more realistic to match growth in this sector with general economic growth as given by theGDP. This leads to the following projection shown in Table 4.10.

Table 4.10 Projection of GHG Emissions from the Transport Sector Based on GDP Growth Rate

Year CO2 CH4 N2O CO2 Equivalent Annual GDP growth

1994 1851 0.98 0.56 2055 Nat. com.

2000 3702 1.96 1.12 4 108.42 12.2%

2010 5804 3.07 1.76 6 441.57 4.6%

2020 8428 4.46 2.55 9 353.31 3.8%

4.5.6 Future Trends of GHG Emissions in the Land-Use Change, Forestry, and AgriculturalSectors

Forestry, together with land-use change, is one of the most important sectors in Zimbabwe, bothin the context of GHG emissions and general development. This sector is a major source of GHGemissions, primarily because of rapid rates of deforestation and forest degradation from croplandestablishment and timber and fuelwood collection (Forestry Commission, 1996). It also representsopportunities for emission mitigation by both reducing emissions and increasing sinks. Emissionsfrom this sector will be influenced increasingly by population demand for agricultural land atboth the subsistence and the commercial agriculture level. Expansion in the demand for land isgoverned by the population’s food requirements.

Table 4.11 GHG Emission Projections from Land-use Change and Forestry/Gg

Gas Source 1994 2010 2039

CO2 Land clearing 2 500.28 16 234.20 158.38

Biomass removals 16 234.20 15 490.00 1 030.00

CH4 Forest clearing 30.88 29.40 1.94

N2O Forest clearing 2.78 2.66 0.19

NOx Forest clearing 8.16 7.60 0.52

CO Forest clearing 55.32 52.80 3.51

CO2 eq. Total 18 831.62 31 816.66 1 194.54

N.B. Decimal in the totals have been rounded. Source: Zimbabwe Initial National Communication (1998)

During the 1980-91 period the livestock herd increased by 21%, although there was a negativetrend from 1991-96 due to drought (CSO 1997). If we extrapolate from the 1980-91 trend, thelivestock population is expected to increase during the first 20 years, after which it should reach a


ceiling due to constraints on land availability. Tables 4.11 and 4.12 show emission projections forthese (Agriculture, Land-use Change, and Forestry) sectors for the indicated years.

Table 4.12 GHG Emissions Projections from Agriculture/Gg

Gas Source 1994 2010 2039

CO2 Land clearing 2 500.28 16 234.20 158.38

Biomass removals 16 234.20 15 490.00 1 030.00

CH4 Forest clearing 30.88 29.40 1.94

N2O Forest clearing 2.78 2.66 0.19

NOx Forest clearing 8.16 7.60 0.52

CO Forest clearing 55.32 52.80 3.51

CO2 eq. Total 18 831.62 31 816.66 1 194.54

N.B. Decimal in the totals have been rounded. Source: Zimbabwe Initial National Communication (1998)

4.5.7 Summary of Emission Projections

The following table summarises emission projections from all major sources in the country up tothe year 2020. Emissions in 1994 are based on Zimbabwe’s Initial National Communication.Emissions in later years have been extrapolated using the GDP growth rate of 4.6% up to 2010and 3.8% thereafter.

Table 4.13 Summary of Emission Projections by Source

GDP Rate 4.6 % GDP Rate 3.8 %

1994 2000 2005 2010 2015 2020

All Energy 19 076.68 24 990.45 31 288.04 39 172.63 47 203.02 56 879.64

Fugitive FuelEmissions

324.32 424.86 531.92 665.97 802.49 967.00

IndustrialProcesses

4 732.20 6 199.18 7 761.38 9 717.24 11 709.27 14 109.68

Agriculture 13 388.96 17 539.54 21 959.50 27 493.30 33 129.42 39 920.96

Land Use Change &Forestry

18 831.74 24 669.58 30 886.31 38 669.66 46 596.94 56 149.31

Waste 616.06 807.00 1 010.41 1 265.00 1 524.36 1 836.81

TOTAL Emissions 56 969.96 74 630.61 93 437.56 116 983.80 140 965.50 169 863.40NB: The 1994 emissions are based on the Initial National Communication. It is assumed that the GDP growth rate is proportionalto the emissions. The GDP growth rate is taken to be 4.6% up to 2010 after which it declines to 3.8% (see Section 4.2.2).


4.6 GHG Abatement Potentials

4.6.1 Objectives of GHG Abatement Potentials

This section provides both the Zimbabwe government (host partner) and potential investors withthe sizes and nature of the GHG mitigation potentials in the country. A pipeline of potentialAIJ/CDM projects is described in detail in Annex I of the study.

4.6.2 Methodology

GHG abatement potentials were determined on the basis of the bottom-up approach method.(UNEP Greenhouse Gas Abatement Costing Studies, 1993). This method entails the identificationof abatement technologies and their associated emissions savings in the identified sectors, i.e.,energy, industry, residential, transport, agriculture, forestry and land-use change, and forestry.To determine the overall reduction potential of each option, assumptions on maximum diffusionrates of the technology are required. Note that these assumed diffusions are, in most cases, rough,conservative estimates. The study gives an overview of the most promising GHG abatementoptions.

In this section we consider a pipeline of five projects (mitigation options) selected from a longerlist of up to twenty one mitigation options previously studied and presented in the Initial Na-tional Communication for Zimbabwe. The strategic significance of this projects pipeline in theAIJ/CDM process is discussed in Chapter 5 below.

4.6.3 Projects Pipeline

This pipeline of projects is derived from the energy, industry, agriculture and residential sectors.Details of the projects pipeline are found in Annex I.

Energy

Investment in Small-Scale Hydroelectric Power Stations to Supply Rural and Peri-Urban Consumers

The example for the mini-hydro project was drawn from the Osborne Dam. This investmentreduces consumption of power generated from coal, thereby reducing GHG emissions associatedwith thermal power from coal-fired plants. The potential for mini hydro to exceed 10 000 MWand units of up to 300 kW can be supported by the hydro power in some sections of the country.This is an attractive option in areas where grid extension is expensive as a supply option and toincrease the reliability of supply where grid supply is intermittent. Arrangements can be made toenter into a power purchase agreement with major suppliers such as ZESA. The penetration ofthis technology is assumed at 1000 kW.

Agriculture and Land Use Change and Forestry

Improved Technology of Tobacco Curing

Agriculture contributes 14% to the GDP. Of this contribution tobacco accounts for 10% GDP andemploys 152 000 people, supporting an estimated 700 000 people). Tobacco is cured using coal(mostly large-scale commercial farmers) and wood (mostly small-scale commercial farmers). Thecuring process causes significant CO2 emissions. The fuel wood used by the small-scale farmers isbeing harvested unsustainably from common property resources. The small-scale sector producesabout 2% of the tobacco sold every year (6 million kg), which uses 14.5 m2 wood per 1000 kgtobacco cured. The estimated annual CO2 emissions from this sector alone is 96 325t CO2 (Annex


I). The introduction of slot furnaces would result in a 55% reduction in CO2 emissions, as well assavings in the amount of fuelwood harvested for curing.

Residential Sector

Wastewater Plant

This project involves the generation of power from gas produced in a sewage plant. It involvesthe installation of three gas engine generator sets fuelled by methane from three sewage plants.They will provide heat and 150 KW of electricity. The cover and piping of sewage gas is alreadyinstalled. It is assumed that the power will be used in the sewage plant itself. This will reduce theconsumption of power from the grid.

A continuous production of sewage gas at the site is an important precondition for an efficientengine operation. Currently the sewage plant seems overloaded at the time. This might endangerthe gas production at the site. Engine operation and maintenance must be assured by the propertraining of operators. The lifetime of the project is expected to be ten years during which 159 580tonnes of emissions (CO2 eq) are expected to be reduced.

Industry

Among the various mitigation options encountered in industry only the efficiency improvementin boilers is considered to offer real potential for adoption. The others–e.g., the change in furnacedesign type from electricity and coal to plasma arc, waste heat recovery, replacement of motordrives, etc.--are all considered too small and isolated for single project applications.

Boiler Efficiency

Zimbabwean industry has about 700 coal-fired boilers in service for steam generation. Theircapacity ranges from as small as 30 kg of steam per hour to as large as 20 tonnes of steam perhour but the majority is in the range of 2 tonnes per hour. The largest number of installed unitsrelies on solid fuel in the form of pulverised coal. One of the boiler manufacturing companies inZimbabwe estimates that boiler operating efficiencies are quite low–as low as 50 %. This meanshalf of the calorific energy from coal used in heating the boilers is lost and not put to useful work.

There is therefore potential for improvement to higher levels such as 74 %. Measures to improveboiler efficiency include the replacement of old equipment or the introduction of monitoring andcontrolling devices. Such devices would monitor the temperature and composition of exit gasesand, where necessary, make adjustments to the fuel-air ratios in order to optimise combustion. Inaddition, improvements in work practices such as soot cleaning and the installation of insulationon steam piping would ensure more efficient heat transfer.

For the purposes of analysing this project in the context of CDM, improved performance could beachieved by replacing existing units in industry. It is easier to estimate savings by such anintervention than other measures, where quantification of savings is difficult. The analysis isbased on one 2-tonnes-perhour boiler unit. It is assumed that the analysis carried out on one unitcan be replicated on 700 other units by the year 2010. The renewal of one boiler results in anannual emission reduction of 1.052 Gg CO2. For 700 boilers, the project’s annual effect reaches736.4 Gg CO2.

Among many other potential CDM projects, the boiler efficiency improvement is considered tooffer the best reduction potential prospects for the following reasons:


• There is a large number of units in existence already in the country (700).• As industries grow, there is a growing market for new installations, which is estimated to

reach 2000 by the year 2030.• The manufacture of complete boiler units and any efficiency improvement devices is carried

out in Zimbabwe and hence has fewer constraints. Replication potential is high.

Energy

Use of Coal-Bed Methane for Ammonia Generation

This option envisages the introduction of a new ammonia conversion plant based on coal-bedmethane, which was recently discovered in Zimbabwe. The methane would be mined directly forpurposes of feeding the ammonia conversion plant and will not be tapped from ongoing coalmining works. The rationale for this option is that the country presently generates ammonia (usedas raw material for fertiliser and explosives) from an energy-expensive, electrolysis-based system.The electrolysis plant currently has a demand of 80 MW derived from coal-fired plants. Theammonia from the CH4 plant would mitigate emissions associated with the 80 MW presentlysupplied to Sable Chemicals. Only one plant will be built, with a capacity to reduce 808 000tonnes per year over the reduction period. This is a negative-cost plant but one with a very highinitial capital outlay. The option has been studied quite thoroughly and would be tied to a newlyproposed coal-bed methane mine. The details of the project, presented in Annex I, were derivedfrom old data which do not reflect the present situation. These figures only serve to present thecoal-bed methane enterprise as a potential CDM project. The negative cost estimates are likely tobe revised given the experience with significant barriers to implementation over recent years. Inthe event that a donor is interested in the project, then more detailed and more accurate calcula-tions with new data will have to be used in order to ascertain the viability of the project. Thecalculations as they are now in Annex I do not present a viable economic scenario. The projectidea has been under discussion for along time. The major obstacle to its implementation has beenthe large initial financial investments required.

Table 4.14 Projects Pipeline

Option Reference scenarioC02 Reduction at

assumed diffusion(tonnes per year)

Reduction Cost(US$/ton C)

AssumedDiffusion

Coal bed methane* NH3 from electrolysis 808 000 -30 1 plant

Mini Hydro Coal-fired power 20 000 -2 1 000kW

Industrial boilers Low energy efficiency 1 052 1.3 7000 units

Improved tobaccocuring technology

Use of more fuel woodthrough low energyefficiency

45 480 1.40

Power production fromsewage plant methane Flaring of methane 15 958 29.0 1 plant

* Though coal-bed methane is presented here, it should be noted that it is still a project concept whoseviability needs to be recalculated with new data. The figures presented in the table above are not represen-tative of the current situation.


4.7 Other Possible GHG Abatement Projects

Apart from the options given in Section 4.6 above, other possible mitigation projects from thedifferent sectors are listed below (Table 4.15).

Table 4.15 Mitigation Options Analysed for the Supply Side

Option Reference scenarioC02 reduction at

assumed diffusion(tons/yr)

Reduction Cost(US$/ ton)

Assumeddiffusion

Afforestation No afforestation 774 0.4 1 000 ha

Biogas digester Fuel wood use,deforestation

910 000 1.5 100 000digesters

Hydro-power Coal-fired power 8 200 16.0 1 000kw

Central PV Coal-fired power 6 99.1 100kw

PV Pumps Diesel Pump 40 5 091.1 700 pumps

Source: National Communication For Zimbabwe, 1998


5. GHG MITIGATION IN ZIMBABWEOPTIONS AND BENEFITS

5.1 Introduction

The overall objective of this section is to illustrate the opportunities that exist in Zimbabwe for thereduction of GHGs. The country is presented with strategic and recommended options that thepolicy makers of Zimbabwe can use as a basis for decision-making. The conclusions at theoutcome of this chapter should enable Zimbabwe to make informed decisions to respond to theopportunities and risks presented by international markets for GHG offsets under the AIJ/CDMprocesses.

The value of potential GHG offset markets for Zimbabwe is analysed, taking into account the bestsectoral mitigation options and the associated projects. The CO2 reduction potential for eachoption was evaluated both quantitatively and qualitatively as well. The projects were alsoevaluated on the basis of their environmental, ecological, economic, and social benefits.

The analysis would be incomplete without a consideration of the required regulatory mitigationoptions and their abatement potential. Although the energy sector presents the major opportuni-ties, other sectors have also been considered.

The outputs are expected to be the options for Zimbabwe under the given circumstances, takingon board such issues as national and sectoral priorities and risk assessments. Carefully analysedcriteria were used for the selection of the projects that form part of the project pipeline forZimbabwe.

5.2 Significant Identified Mitigation Options

The summary of major findings is a synthesis of the most significant sectoral outputs, comprisinga qualitative description of the proposed mitigation options, quantitative estimates of the GHGreduction potentials, as well as the associated costs. An analysis of the proposed mitigationoptions shows that the measures can generally be categorised into• improving combustion efficiency (boiler efficiency, tobacco curing)• environmentally clean technologies (mini-hydro)• renewable alternatives (coal-bed methane, sewage-plant methane)

5.3 The Value of the Potential GHG Market for Zimbabwe

The value of the potential CDM market for Zimbabwe is extensively discussed in Chapter 3. Inorder to strategically position itself in the offset markets, Zimbabwe should create appropriatedomestic prerequisites. The effectiveness of these external markets will, to a large extent, dependon the local factors. Though the demand for offsets markets exists, domestic actions could alsoresult in the reduction of GHG emission.


By participating in AIJ/CDM processes Zimbabwe will benefit from EST with spin-offs insustainable economic growth. Creation of a favourable investment climate by reducing risks andadditional costs (transaction and production) is imperative if Zimbabwe is to participate ininternational markets.

5.4 Projects Pipeline

The purpose of the projects pipeline (discussed in Section 4.6.3) is to demonstrate show Zim-babwe’s position, with respect to CDM under the Kyoto Protocol, to potential investors. From thepipeline, potential investors get a sample of a cross-section of projects that are candidates forfinancing under the AIJ/CDM process in Zimbabwe. Vital information on these projects such asannual emissions, potential GHG abatement reduction costs, the life of the projects, and replica-tion potential and risks are given in the Uniform Reporting Formats in Annex I. Such strategicinformation should help Zimbabwe to realize potential benefits from the AIJ/CDM process at anearly stage compared with other developing countries. Potential investors could also carry outdetailed feasibility studies for projects of their interest. These projects are shown in Table 4.14.

5.5 Project Selection Criteria

General project selection criteria for AIJ/CDM are as follows.

• The project must be compatible with and supportive of national environmental and devel-opment priorities and strategies and contribute to cost-effectiveness in achieving global bene-fits.

• The project must be officially accepted, approved or endorsed as an AIJ/CDM project.• The project must bring about real, measurable, long-term environmental benefits related to

the mitigation of climate change that would not have occurred in the absence of such anactivity.

• The financing of CDM must be in addition to the financial obligations of the donor countrywithin the framework of the official development assistance (ODA) flows.

Table 5.1 National Economic Development Priorities and Strategic Options for Zimbabwe

National Economic Development Priority Strategic Options

� Sustained high rates of economic growth � Establishment of macro economic stability byreducing government budget deficit

� Speedy development in order to raiseincomes and standards of living

� Continuous growth in exports.� Mobilising public and private sector savings

and investment

� Economic empowerment and povertyalleviation

� Generating opportunities for employment andencouraging entrepreneurial activities

� Investing in human resource development� Providing a safety net for the disadvantaged

AIJ/CDM projects must fulfill national economic development priorities and be in line with setstrategic options. The national economic development priorities and strategic options for Zim-babwe are outlined below in Table 5.1. A project has to have real measurable, long-term envi-ronmental benefits related to the mitigation of climate change. The principle of additionality will


be applied for projects with real environmental long-term benefits on the mitigation of climatechange that would otherwise not occur without the project. Risks and barriers to project imple-mentation such as prohibitive capital costs must be clearly identified and demonstrated. Extra oradditional financing will be over and above the already existing arrangements and obligations.The other criteria for project selection was the reduction potential.

AIJ/CDM projects must also satisfy the broad national environmental priorities and strategies.These priorities are outlined in Table 5.2 .

Table 5.2 National Environmental Priorities for Zimbabwe

National Environmental Priorities Strategies

� Integrated management of Zimbabwe’seco-systems

� Integrated land use planning� Environmentally friendly production

principles

� Sustainable and equitable use of naturalresources

� Waste management practices� Undertake research on unsustainable

resource use

� Protection of the resources base andconservation of bio-diversity

� Develop community based environmentalprogrammes and interventions.

Source: ZIMPREST: Zimbabwe Programme for Economic and Social Transformation, 1998

AIJ/CDM projects must satisfy sectoral environmental priorities as shown in Table 5.3.

Table 5.3 Sectoral Environmental Priorities

Sectoral prioritiesResponsible

organisations Strategies

Integratedmanagement andsustainable use ofnatural resourcesand protection ofthe environment

Ministry ofMinesEnvironmentand Tourism

� Increasing the annual afforestation rates� Developing plans for conservation management

and protection of the resource base� Enforcing environmental and energy audits� Research and development of new and

renewable sources of energy� Rational use of energy through demand side

management and pricing policies

To promoteeconomic growththrough efficient,equitable andsustainable use ofnatural resources.


� Increase employment capacity� Compliance with existing regulatory

instruments� Increase world market share for local products

Improve andmaintain the qualityof life forZimbabweans


� Establish programmes to safeguard social andcultural values

� Reduce effluent into water bodies� Reduce air pollutants to acceptable standards

Source: Strategic Directions. Ministry of Mines, Environment and Tourism, July 1998. The National ConservationStrategy: Zimbabwe’s Road to Survival. Ministry of Natural Resources and Tourism, April1998.


5.6 Secondary Project Benefits

Besides the global reduction in GHG emissions the projects should also provide secondarybenefits for the host country and the local communities. The host country secondary benefits areshown in Tables 5.4 and 5.5.

Table 5.4 General Benefits Accruing to Zimbabwe

BENEFITS DESCRIPTION

Technology Transfer Encourage private sector diffusion of innovative technology that can helpmeet Zimbabwe ‘s development priorities.

Investments Expands investments in technologies and projects that reduce GHGemissions while contributing to overall host country development priorities.

Environment Reduced SO2 emissions resulting in reducing acid rain effects.Reduced pollution of air, water and soil from coal combustion products.Reduced deforestation and soil erosion from reduced forest clearing.

Economic Capacity building and skills transfer, cost saving from facilities andproduction processes and provision of new energy services.

Social benefits Improvements in general quality of life; cottage industries; improved health.

Promoting SustainableDevelopment

Encourages additional private sector investment and dissemination oftechnologies and practices which contribute to sustainable development.

Learning Effects Participants get an opportunity to influence the direction and AIJ/CDMstructure beyond the pilot phase.

5.7 Regulatory Mitigation Options

In the Zimbabwe energy market electricity and most liquid fuels are charged prices below theireconomic costs. This is being worsened by current harsh economic conditions where the prices ofenergy products have not been adequately adjusted for the depreciation of the Zimbabwe dollarand for inflation. This means that consumers are not being given the correct price signals, for theyare enjoying subsidised energy products.

Table 5.5 Specific Project Benefits

Sector Project Type Environmental Benefits Socio-Economic Benefits

Industry Boiler Efficiency � Reduced GHG emissions due toreduced consumption of coal

� Reduced pollution due toefficient consumption

� Financial benefits fromreduced coal consumption

Energy Coal bedMethane

� GHG emission reduction due todisplacement of coal

� Pollution reduction� GHG emission reduction at

source due to replacement ofelectrolytic processing ofammonia (NH3)

� Employment creation� Reduction in power

imports for ZESA� Plant savings from reduced

power bill.� National capacity building

in new gas technologies


Mini Hydro � Reduced emissions from cleanpower generation technology

� No hydrological-ecological� Problems due to small levels of

river/stream damming

� Autonomous powersupplies to off-gridconsumers

� Improved amenities� Possible income generating

facilities of ruralcommunities

� Electrification of ruralhealth or educationalcentres.

Agriculture EfficientTobacco Curing

� Reduced GHG emissions due toreduced consumption of coaland wood

� Reduced deforestation

� Financial savings fromreduced coal and fuelwood consumption

Residential Waste WaterPlant

� Reduction of methane in theatmosphere

� Financial saving fromreduced consumption

There is scope to increase the efficiency of energy use by reducing subsidies and charging pricesthat reflect costs. The associated benefits are threefold:

• reduced government spending, which is crucial for improving macro-economic stability asoutlined in Section 4.2 of this study

• reduced energy demand and consequently lower GHG emissions as a result of higher energyprices paid by consumers.

• positive employment effects as energy prices increase relative to labour prices.

The energy saving will in effect feed into an effective demand-side management programme. Ifdemand is curtailed this also reduces the required investments in energy supply alternatives. Thesame effect can also be achieved by regulations requiring utilities to engage in demand-sidemanagement and energy conservation programmes.

While it is important to charge economic costs for all energy products, non-pricing regulatorymeasures could also assist in improving end-use energy efficiencies. This study shows thatZimbabwe, being a developing country, should give greater scope to technological, industrial,and developmental advancement. Previously regulatory mitigation options have been consideredin the energy sector as a non-pricing measure to improve energy efficiency. The informationbelow is based on the Integrated Energy Strategy Evaluation for Zimbabwe published in 1992(ESMAP, Report No 8768-ZIM), which made an in-depth analysis of the potential to use regula-tions as a mitigation option in Zimbabwe. The following section outlines possible areas whereregulatory measures and improvements could be introduced.

In infrastructure or industrial development, innovation and expansion, there is scope forincreasing efficiency by installing state-of-the-art energy-saving equipment. End-use efficiency isstill low, and there are considerable opportunities in industry, transport, and public buildings toreduce energy consumption. The potential has been estimated at 15-20% of current use, half ofwhich can be realised through low-cost measures. In monetary terms these savings were esti-mated to be Z$140 million.

In the transport sector regulatory mitigation options could consist of improving efficiency in fuelpricing and fuel quality monitoring. Strict regulations on maintenance of vehicles and retrofittingto improve combustion efficiencies could be formulated and instituted. Public transport operators


could be encouraged to rationalise routes and schedules as an option for reducing fuel consump-tion.

Appropriate building codes for power levels and standards for new constructions, especially forlighting, water heating, and air conditioning, could be developed and implemented for newpublic buildings such as offices, schools, hospitals, as well as commercial establishments. Energyaudits for existing buildings should be undertaken and, where necessary, retrofits fitted to ensureefficient ventilation, power levels, and indoor temperature control.

General conservation legislation, including appliance labelling, could be introduced to complywith international environmental standards. Government taxation policies could offer grants andtax incentives and credits for GHG emission reduction projects and training related to these.These policies must be pushed through and implemented. There is also need to establish institu-tions that can raise awareness and provide technical knowledge on energy efficiency.

5.8 Conclusions

From the foregoing sections on the mitigation projects pipeline, structure of international markets,projects selection criteria, national domestic prerequisites, environmental and sectoral priorities,and the required regulatory measures Zimbabwe should have a clear picture of the way to moveforward regarding risks, options, benefits and requirements under an AIJ/CDM framework. ForZimbabwe to gain maximum benefits (sustainable development, technology transfer, etc.) fromthese mechanisms, strategic decisions should be taken now on the basis of the findings from theNational Strategy Study. The country should utilise this advantage by strategically ranking itsoptions with reference to the projects pipeline and other important considerations associated withthe AIJ/CDM process.

In this regard there is great scope to undertake new initiatives in the areas highlighted in thischapter with the participation of both private and public sectors. Reviews should be undertakento find areas where current legislation could be strengthened and amended or areas where newlegislation should be introduced.


6. CONCLUSIONS

The objective of the present study has been to expose the Zimbabwean authorities and potentialinvestors to CDM projects opportunities that exist in the country. It is hoped that this study willfurther assist the Zimbabwe government in formulating policies targeted at involvement inAIJ/CDM projects. By taking cognisance of existing and projected macro-economic conditionsand considering future trends of GHG emissions, the Zimbabwean authorities are expected tomake strategic decisions aimed at maximising the country’s participation in the AIJ/CDMprocess.

This study has demonstrated that Zimbabwe has some GHG abatement potentials in the eco-nomic sectors of energy, industry, residential, agriculture and land-use change, and forestry. Theestimated costs of these abatement potentials per ton of carbon were also determined so as toprovide potential investors with a snapshot of the level of financial commitment required toimplement any of the selected projects. The bureaucracy, baselines, and risks associated with theinvestment climate in Zimbabwe were also discussed within the general context of domesticprerequisites.

This study has described the energy supply base of Zimbabwe-i.e., thermal power electricitygenerated from coal, liquid fuels (petroleum products), wood fuel, and hydroelectric power.Zimbabwe imports all of its petroleum requirements.

On the basis of the 1994 baseline year, the study has demonstrated that 90% of Zimbabwe’semissions come from the energy sector. As the country develops, it is projected that these emis-sions will grow. From this perspective, this study puts Zimbabwe in a strategic position to takesteps to reduce emissions through AIJ/CDM processes.

Having discussed the emission projections, the study looks at GHG abatement potentials andtheir costs, lifetime, and risks.

A selected pipeline of projects is also presented to give both Zimbabwean and potential foreigninvestors a snapshot of CDM possibilities in Zimbabwe.

Finally, the present study looks at national economic development and environmental andsectoral priorities, together with possible regulatory measures, that encourage the public at largeto participate in mitigation options.

On the international scene the primary role of the CDM is to guide foreign corporate investmentin developing countries toward goals of sustainable development. These intentions are fraughtwith difficulties in the sense that, on the one hand, Annex I countries want to minimise GHGabatement costs globally while, on the other hand, developing countries want to maximiseresource and technology flows and minimise interference with normal foreign aid. In theseNorth-South discussions it is appropriate that developing countries have meaningful input intohow the CDM unfolds. There is support for this in the fact that the history of foreign investmentand technology transfer has shown that investor-driven projects frequently fail if there is mini-mum local participation and acceptance at the project inception level. The way this study hadbeen conducted is therefore appropriate in the sense that the Zimbabwe government has beeninvolved right from the outset. This is one of the ways in which large flows of foreign investmentcould be channelled into sustainable development and how greenhouse-gas developments couldbe achieved in non-Annex I countries.


APPENDIX:

GHG PROJECTS – UNIFORMREPORTING FORMAT FOR AIJUNDER THE PILOT PHASE

This Annex contains project details presented in the format of the Unified Reporting Format(URF) developed under the pilot phase of AIJ. The information is taken from organisations andinstitutions mentioned in the URF.

Further studies are necessary, in particular, to assess and include the consequences of possiblebarriers of implementation in the cost calculations. Project 1 (Osborne Dam) and Project 5 (Coal-Bed Methane), having negative incremental costs over the baseline that make their implementa-tion likely, have been included here because their reassessment could lead to positive costestimates that may make them eligible for the CDM.


PROJECT 1 OSBORNE DAM

A. Description of Project

A.1 Title of Project: Osborne Dam Hydroelectric Power Generation Project

A.2 Participants/actors:

Item Please fill in if applicable Name of organisation): Zimbabwe Power Company Acronym ZPC Function within activity: Overall project management, main sponsor Street: 12th floor, Megawatt house, Samora Machel Av. Post code: P.O. Box 377 City: Harare Country: Zimbabwe Telephone: +263 4 250407/9 Fax: +263 4 705193 E-mail: [email protected] Contact person (for this activity): ------------------------------------- Surname: Mupotsa First name, middle name: Isaac F. Job title: Managing Director Direct tel: +263 4 705193

Direct fax: +263 4 705193 Direct E-mail: [email protected]

Item Please fill in if applicable Name of organisation): Ministry of Rural Resources and Water Development Acronym MRRWD Function within activity: Water authority and owner of dam. Street: 6TH Floor Kurima House, 89 Nelson Mandela Ave. Post code: Private Bag 7712 City: Harare Country: Zimbabwe Telephone: +263 4 737691 Fax: +263 4 722752 E-mail: Contact person (for this activity): ------------------------------------- Surname: Kabell First name, middle name: Terry C. Job title: Deputy Director, Designs Direct tel: +263 4 737691 Direct fax: +263 4 722733 Direct E-mail:

Item Please fill in if applicable Name of organizationa): Ministry of Mines, Environment and Tourism Department: Climate Change Office Function within activity: Government Contact, Zimbabwe Street: Nyerere Street

mailto:[email protected]



Item Please fill in if applicable Post code: P Bag 7753 Causeway City: Harare Country: Zimbabwe Telephone: +263 4 757 881 1/5 Fax: +263 4 757 006 E-mail: [email protected] Contact person (for this activity): ------------------------------------- Surname: Sangarwe First name, middle name: Margaret Job title: Under Secretary Direct tel: +263 4 757 880

A.3 Activity:

Item Please fill in if applicableGeneral description - AIJ/CDMproject

Installation of a 3 MWe hydro electric plant at Osborne Dam. The dam alreadyexists, it was erected for irrigation purposes.The power will be fed into the grid. To this end, a power purchase agreementwill be entered into with ZESA: ZESA will be willing to purchase power fromthe project because it is a renewable energy project and, because it will addcapacity to the system and provide reliable backup power in the area.Uncertainties, risks, gaps:• Plant size will depend on the agreed water release plan for power genera-

tion. The indicated 3 MW take into account possible water release restric-tions (to be confirmed in discussion with the Ministry of Lands and WaterResources).

• Dam design has no specific provision for water take off for power genera-tion. Appropriate modifications need to be done.

• Additionality of the project's climate benefits need to be studied in detail(see Section E1). A crediting time considerably shorter than the technical lifeof the project seems appropriate, since the project is likely to be imple-mented soon even under non-CDM conditions.

General description - projectbaseline (reference scenario)

The project baseline assumes that an equivalent amount of electricity will beproduced in a new coal-fired power plant

Type of project:a) Renewable energyLocation (exact, e.g. city, region,state):

Osborne Dam, Makoni District, Manicaland

Activity starting date: Approx. Dec. 2003: commissioning of plantExpected activity ending date: Time during which the project yields certified emission reductions: 10 years

(preliminary proposal)Stage of activity:b Pre-feasibility stageLifetime of activity if differentfromending date:

Technical life of investments: 20 years

Technical data: Capacity: 3 MWPower generation: 21'000 MWh/year

a) For example, using Intergovernmental Panel on Climate Change (IPCC) classification: energy efficiency; renew-able energy; fuel switching; forest preservation, restoration or reforestation; afforestation; fugitive gas capture;industrial processes; solvents; agriculture; waste disposal or bunker fuels.

Describe existing work on the project:

The project forms part of the development plan of the newly established Zimbabwe Power Company(ZPC), which is a subsidiary of ZESA. See the following documents:



• ZPC, Project Development Plan, June 1999• ZPC, Renewable Energy Projects, June 1999

ZPC's development plan includes several other power generation projects of similar size, based on hydro,waste wood, and sugar-cane wastes.

A.4 Cost (to the extent possible):

CDM ProjectBaseline

GOKWE NORTH(14000 MW)

Total Investment 1999 Z$ 100'000'000 114'000'000Technical life of investment Years 20Discount rate % 12.5 %

Levelized investment 1999 Z$ 15'300'000 17'400'000Operation and maintenance p.a. 1999 Z$/yr. 7'000'000 2'800'000Fuel p.a. 1999 Z$/yr. -- 3'900'000Total levelized cost p.a. 1999 Z$/yr. 22'300'000 24'100'000

Incremental cost p.a. 1999 Z$/yr. -1'800'000 not applicableGHG reduction p.a. (see details in Section E) t CO2 eq/yr. 20'000 not applicableUnit abatement cost 1999 Z$/t CO2 -90 not applicable

Unit abatement cost 1999 US$/t CO2 -2 not applicable

Describe briefly how costs are determined; specify key assumptions.

• See calculation details in the Annex to this URF.• The project baseline assumes that an equivalent capacity (3 MW) is installed in a new coal-

fired plant and that an equivalent amount of power (21'000 MWh/yr) is produced.• Exchange rate July 1999: 1 US$ = 38 Z$

A.5 Mutually agreed assessment procedures:

Not applicable to projects of NSS pipeline at the current stage

B. Governmental acceptance, approval or endorsement

Not applicable to projects of NSS pipelinet at the current stage

C. Compatibility with and supportiveness of national economic development and socio-economic and environment priorities and

Describe (to the extent possible) how the activity is compatible with and supportive of national economicdevelopment and socio-economic and environment priorities and strategiesZimbabwe has an active renewable energy program, which supports the development and utilisation of renewableenergy for sustainable development. The President of Zimbabwe is the current chairman of the World SolarCommission.There is need for a significant number of renewable energy projects in Zimbabwe.The Osborne Dam Hydroelectric Power Plant Project will go a long way in supporting Zimbabwe’s renewable


energy programme.The project will also provide local capacity building in small-scale hydroelectric schemes and hence increase thepotential for use in hydroelectric power in Zimbabwe.It will provide jobs during construction and operation. It will provide a basis for improved access to electricity forthe local rural settlements, schools and community clinics. It will encourage the development of tourist activities onthe dam and hence improve the economy by providing jobs and business growth.

D. Benefits derived from the activities implemented jointly project

Whenever possible, quantitative information should be provided. Failing that, a qualitative description should begiven.

Item Please fill inDescribe local environmental benefits (excluding benefitsfor global climate; see Section E) in detail:Describe local social/cultural benefits in detail:Describe local economic benefits in detail:

E. Calculation of the contribution of activities implemented jointly projects that bring about real,measurable and long-term environmental benefits related to the mitigation of climate changethat would not have occurred in the absence of such activities

E.1 Estimated emissions without the activity (project baseline):

Description of the baseline or reference scenario, including methods applied. Specify key assumptions and emissionfactors used.

The baseline scenario assumes that an equivalent amount of electricity is produced in a modern coal-firedpower plant: (21 GWh/yr; transmission losses neglected, thermal efficiency 36%, 95 kg CO2/GJ coal)

Additionality: The project is currently being developed by the commercially-oriented company ZPC. Thequestion whether the project would not be implemented "anyway", i.e. without the CDM incentive,therefore remains to be examined in detail to determine whether the project in fact yields additionalclimate benefits. The main barrier to non-CDM project implementation will, most likely, be the lack oflocal funding in Zimbabwe, the lack of interest of international investors, and possibly the risks of theproject (e.g., possibility of droughts, conflict of interest between power generation and irrigation ofagricultural land). To ensure additionality of the project's climate benefits, the crediting time (time duringwhich the project yields transferable certified emissions reductions) should be kept significantly lowerthan the technical life of the project (for instance, 10 years).

The additionality test for the project also has to ensure that

• the project does not increase overall power consumption by supplying power to local residentsthat would otherwise remain unconnected to the grid and that does not have stationary (fossil-fuelled) power sources

• the project does not replace hydro power imported from the Southern African Power Pool• That, in brief, the project will actually replace power from fossil-fired sources.

E.2 Estimated emissions with the activity:

Description of the project scenario, including methods applied. Specify key assumptions and emission factors used.


Hydropower generation does not cause any direct CO2 emissions. Indirect emissions, e.g., from construc-tion activities, are negligible. Methane (CH4) emissions from the hydro reservoir are not relevant since thereservoir already exists.

Crediting time is assumed to be 10 years.

Summary Table: Projected emission reductions

GHG Unit Emission per yearTotal emission over project life(10 years)

A) Project baselinescenario

CO2CH4

N2Oothertotal

ttttt CO2 eq.

0 0

B) Project activityscenario a)

CO2CH4

N2Oothertotal

ttttt CO2 eq.

20'000 20'000

C) Effect ( A-B ) CO2CH4

N2Oothertotal

ttttt CO2 eq.

20'000 200'000

Summary Table: Actual emission reductions

Not applicable, since project was not yet implemented

F. Bearing in mind that the financing of activities implemented jointly shall be additional tofinancial obligations of Parties included in Annex II to the Convention within the frameworkof the financial mechanism as well as to current official development assistance flows, pleaseindicate:

Source of project funding includingpre-feasibility phase (for each source one line)

Amount(1999 Z$)

Amount(1999 US$)

(leave blank if funding has not been agreed yet)

G. Contribution to capacity building, transfer of environmentally sound technologies and know-how to other Parties, particularly developing country Parties, to enable them to implement theprovisions of the Convention. In this process, the developed country Parties shall support thedevelopment and enhancement of endogenous capacities and technologies of developingcountry Parties.

Describe briefly the transfer of environmentally sound technology and know-how including where appropriate thetype of technology, terms, education, capacity building etc.

H. Additional comments, if any, including any practical experience gained or technicaldifficulties, effects, impacts or other obstacles encountered.



URF Osborne Dam - Calculation Details

Exchange rate Zim$ : USD (07/99) 38

CDM Project Baseline Remarkshydro coal

Installed capacity kWe 3'000 3'000 1)Capacity factor - 80% -Power generation MWh/yr 21'024 21'024 1)Generation efficiency - - 36%Fuel consumption MWh/yr 0 58'400CO2 emission factor t CO2/MWh fuel 0 0.342Yearly CO2 emission t CO2/yr 0 19'973

Fuel price 1999 Zim$/MWh 0 66 2)Net calorific value GJ/t 25.75 3)

Specific investment USD/kWe 877 1'000 4)Total Investment 1999 Z$ 100'000'000 114'000'000Technical life of investments years 20 20

Discount rate % 12.5% 12.5%

Levelized investment 1999 Z$ 15'281'089 17'420'442Operation and maintenance p.a. 1999 Z$/yr. 7'000'000 2'777'770 5)Fuel p.a. 1999 Z$/yr. 3'854'400Total levelized cost p.a. 1999 Z$/yr. 22'281'089 24'052'611

Incremental cost p.a. 1999 Z$/yr. -1'771'522Yearly GHG reduction t CO2 eq/yr. 19'973Unit abatement cost 1999 Z$/t CO2 -89Unit abatement cost 1999 US$/t CO2 -2Crediting time years 10 6)Cumulative GHG reduction t CO2 eq/10 yrs. 199'728

Remarks:1) Impact of higher transmission losses in the baseline case are neglected, since the uncertainty in other parameters is much higher2) Coal price: 0.51 USD/MBtu (Source: ZPC), @ 0.293 MWh/MBtu. Note that this price is only about 10% of the world market price level.3) Source: Revised 1996 IPCC Guidelines for Nat. GHG Inventories, Reference Manual (Specific value for Zimbabwe coal)4) Project investment is based on the feasybility study of a similar project (Claremont hydro PP) + 10% contingency.Baseline investment is a conservative estimate for coal-fired PP excl. flue gas desulfurisation (comparison: Southern Centre assumes 1'500 USD/kW for coal-fired reference plant; GEF 1'250 USD/kW incl. FGD)5) Source: ZPC. Project O&M is assumed as three times the salaries of the staff required to run the plant under normal circumstances. Baseline O&M is assumed as 2.05 USD/MWhe variable O&M plus 10 USD/kW/a fixed O&M.6) Assumption: Project would have been implemented autonomously (i.e., in the baseline case) after 10 years.


PROJECT 2 TOBACCO CURING

A. Description of project

A.1 Title of Project: Improved Technology of Tobacco Curing


Item Please fill in if applicable Name of organisation: Ministry of Agriculture Department: Tobacco Research Board Acronym: TRB Acronym (English): - Function within activity: Research Officer Street: Tobacco Research Board Post code: - City: Harare Country: Zimbabwe Telephone: 263-4-575289/94 Fax: 263-4-575288 E-mail: [email protected] WWW-URL: - Contact person (for this activity): Jane Gonese Surname: Gonese First name, middle name: Jane Job title: Research Officer Direct tel: 263-4-575289/94 Direct fax: 263-4-575288 Direct E-mail: [email protected]

Item Please fill in if applicable Name of organisation: Ministry of Mines, Environment and Tourism Department: Climate Change Office Function within activity: Government Contact, Zimbabwe Street: Nyerere Street Post code: P Bag 7753 Causeway City: Harare Country: Zimbabwe Telephone: 263 4 757 881 1/5 Fax: 263 4 757 006 E-mail: [email protected] Contact person (for this activity): Margaret Sangarwe Surname: Sangarwe First name, middle name: Margaret Job title: Undersecretary Direct tel: 263 4 757 880Name of consultant: Dr. Wolfram Kägi Function within activity: Consultant Affiliation B,S,S. Economic Consultants Street: Blumenrain 16 Post code: CH-4051 City: Basel





Item Please fill in if applicable Country: Switzerland Telephone: +41-61-262 05 55 Fax: +41-61-262 05 57 E-mail: [email protected] Contact person (for this activity): Dr. Wolfram Kägi Surname: Kägi First name, middle name: Wolfram Job title: Partner of B,S,S. Direct Email: [email protected] [email protected]

A.3 Activity:


In Zimbabwe, 3000 small-scale farmers produce and cure tobacco. The tobaccocuring process causes significant CO2 emissions. For the curing process verysimple furnaces are employed; wood is being used as fuel. The fuel wood isharvested largely and increasingly from common property resources at a levelwhich is well above regeneration levels. Thus, the wood used for curing is notCO2-neutral (sustainably produced) biomass energy, but current productionpatterns cause net CO2 emissions and furthermore destroy valuable Miomboforests.By means of introducing so-called ”slot-furnaces”, and by the adoption ofother minor changes within the furnaces of the small-scale farmers, significantemission reduction effects can be achieved. Wood fuel requirements could bereduced by up to 55%. Given baseline CO2 emissions of approximately 96'000 tCO2 per annum, annual emission reductions of approximately 53’000 t CO2 canbe achieved.We assume a project life time of 11 years (2002 – 2012). The time horizon ischosen because the credibility of the baseline would be hampered if we were tochoose a much longer time period and because potential CDM investors will beprimarily interested in credits for the Kyoto commitment period (until 2012).But it is well possible that the project can be extended beyond the year 2012.The investment phase of the project is expected to last 5 years. First emissionreduction effects are achieved after the first year. Once the investment isundertaken, emission reductions are achieved without major further costs.Over the life time of the project CERs of 424’000 t CO2 can be delivered. Theproposed technological changes are very simple and can be carried out by thelocal farmers partially themselves (with some external help and some extrafinance). Thus the costs of the project are moderate.Furthermore a large number of social, environmental and economic sidebenefits are achieved for the local population: valuable Miombe forests areprotected which in turn helps to protect biodiversity in the area, prevents soilerosion and enhances watershed services of the forested land.

General description - projectbaseline (reference scenario)

At least 90% of the tobacco produced by small- scale farmers is cured usingwood, of which 95% is harvested in an unsustainable manner. This causesbiomass loss and thus net CO2 emissions of a magnitude of 96'000tCO2/annum (see part E below for calculations)

Type of projecta): energy efficiency1

1 The activity of this project is the improvement of energy efficiency and the direct effect of the project is an emission reduction effect. Thefuel being wood, we have an additional effect of forest protection, because the wood used is not harvested sustainably. It is now possible thatthis project is to be seen as a land use change or forestry project rather than an energy efficiency project. This is a (small) risk which has to bekept in mind when evaluating this project, since it is not clear to date whether land use change and forestry projects will be accepted under theCDM. However, if projects increasing the efficiency of wood fuel use should be ruled out by the CDM, many of the most sensible projects inAfrica will be ruled out. Wood remains to be the prime energy base in rural Africa and the increased efficiency of fuel wood use is a majordevelopmental requirement.





Item Please fill in if applicableLocation (exact, e.g. city, region,state):

Communal and resettlement farming areas in Zimbabwe

Activity starting date: 01/01/2002 (or earlier)Expected activity ending date: 31/12/2012Stage of activity Project option and project partners are identified, first assessment of project

potential is completed.Lifetime of activity if differentfrom ending date:

-

Technical data: Energy efficiency improvements of 55% are expected by installing slot furnacesin tobacco curing barns and by further minor improvements (which aim toincrease the yield of the produced heat by improving the air circulation withinthe tobacco barns)



A.4 Cost (to the extent possible)

CDM Project BaselineTotal Investment 1999 Z$ 15'000’000

(3'000 per annumduring the initial 5years of the project)

0

Operation and maintenance p.a. 1999 Z$/yr. 1’000’000 0Incremental total investment 1999 Z$/yr. 15'000'000 0Incremental operation and maintenance p.a. 1999 Z$/yr. 1'000'000 0Project life years 11 0Discount rate % 10 not applicableNPV of total project 1999 Z$ - 19'650'000 not applicableGHG reduction p.a.(see details in Section E) t CO2 eq/yr. 11'000-53’000 not applicableUnit abatement cost 1999 Z$/t CO2 82.67 not applicableUnit abatement cost 1999 US$/t CO2 2.18 not applicableExchange rate July 1999: 1 US$ = 38 Z$

Assumptions of Cost Estimates

It is assumed that the costs of improving the efficiency of tobacco barns is Z$ 5000 / barn. This cost takesinto account that farmers contribute to the improvement of their barns. Furthermore we assume annualcosts for the extension work of Z$ 1'000'000. These costs will have to borne during the total life time of theproject to ensure that the efficiency improvement is maintained during the whole period.

For the calculation of the NPV, all cash flows (both from investments and maintenance costs) are dis-counted. In order to calculate the costs per ton CO2 reduction, also the cash flows resulting from the saleof CO2 credits are discounted.


Not applicable to projects of NSS pipeline




C. Compatibility with and supportiveness of national economic development and socio-economic and environment priorities and strategies.

Describe (to the extent possible) how the activity is compatible with and supportive of national economicdevelopment and socio-economic and environment priorities and strategiesTobacco is one of the major sources of income for Zimbabwe. Increased production is expected in the years to come.This project targets small-scale tobacco farmers in resettlement areas who are a priority group within Zimbabwe'sdevelopment strategy. Through the CDM project tobacco can be grown and cured using less wood thereby reducingdeforestation and environmental degradation.


Whenever possible, quantitative information should be provided. Failing that, a qualitative descriptionshould be given. If quantitative information becomes available, it could be submitted using the update(s).(If the amount of quantitative information is too large, the source could be indicated.)

Item Please fill inDescribe local environmentalbenefits (excluding benefits forglobal climate; see Section E) indetail:

Small scale farmers will use less wood to cure tobacco, thereby reducingdeforestation and maintaining the biodiversity of the Miombo forests. Fur-thermore, forest protection reduces soil loss and enhances watershed servicesprovided by the forest.

Describe local social/culturalbenefits in detail:

Less time will be spent harvesting wood since small amounts will be requiredper cure. The surrounding Miombo forests will be maintained.

Describe local economic benefits indetail:

Less time will be spent harvesting wood since small amounts will be requiredper cure.



In the resettlement areas of Zimbabwe, small-scale tobacco producers use wood for curing tobacco. Thewood is harvested in a non-sustainable manner and use of wood thus causes net-CO2 emissions. Cur-rently, some of the wood cut from land, which is put into agricultural production. But it is only a matterof time until these resources will have been exhausted and woodlands will be cleared solely for woodrequired is for tobacco curing. Furthermore, the number of small-scale farmers who engage in tobaccoproduction is increasing rapidly, but in our baseline calculations we assume that the number of farmerscuring tobacco will remain constant – we thus use a very conservative baseline.

Communal farmers produce approximately 6 million kg of tobacco per year out of the projected280million kg (Masuka,1999). About 1000kg of tobacco requires 14.5m3 of wood for curing (Brooker,1995). At least 90% of the tobacco (5.4million kg) from small-scale farms is cured using wood (Flower)and we assume that 95% of the wood is non-sustainably harvested. This causes biomass loss and thus netCO2 emissions.

The following factors were used in the calculations

– conversion factor from m3 to t wood biomass 0.7 [t/m3]– conversion factor wood tons biomass to tons carbon 0.5 [t/t]– conversion factor from tons carbon tC to CO2 3.67 [t/t]


Calculation of baseline annual CO2 emissions

– Total quantity of tobacco produced by small-scale farmers 6'000’000 kg– Tobacco cured using wood 5'400'000 kg– Wood used by small scale farmers: (5400000*14.5/1000) 78’300 m3

– Wood unsustainably harvested to cure tobacco 74’385 m3

– Wood biomass in tons 52’069 t– Carbon loss 26’034 tC

Annual CO2 emissions 96’325tCO2


At the end of the project, CO2 emissions will be reduced by 55%. During the investment phase, each year20% of the final goal is attained. The table summarises the CO2 effect of the project over the whole projectlife time of 10 years.


Year '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 totalA) Project baseline

scenario(in 1000 t CO2)

96 96 96 96 96 96 96 96 96 96 960

B) Project activityscenario(in 1000 t CO2)

85 75 64 54 43 43 43 43 43 43 536

C) Effect ( A-B )(in 1000 t CO2)

11 21 32 42 53 53 53 53 53 53 424


GHG Unit Emission per year Total emission over project life


CO2

CH4

N2Oothertotal

ttttt CO2 eq.

96’000 960’000

960’000

B) Project activityscenarioa)

CO2

CH4

N2Oothertotal

ttttt CO2 eq.

85'000 – 43'000(depending on year)

85'000 – 43’000

536’000

536’000

A-B CO2

CH4

N2Oothertotal

Ttttt CO2 eq.

45 482

45 482

424’000

424’000







Source of project funding including pre-feasibilityphase (for each source one line)

Amount(1999 Z$)

Amount(1999 US$)



Describe briefly the transfer of environmentally sound technology and know-how including where appropriate thetype of technology, terms, education, capacity building etc.:

The project should assist in changing the traditional way of doing things by broadening the responsibilityand focus of project personnel by removing elements that discourage them from being concerned withsustainability.

Incentives that motivate project personnel to adopt the project should be established.

The project should make the local people an integral part of planning and implementation for all newactivities. Continuity should be secured through participation of the project beneficiaries. Beneficiariesshould adapt the project technology and institutions to their own needs and begin to initiate their own.

The project should encourage institutional linkages between all tobacco farmers in the country as well asproviding training in the improved technology.

All the positive impacts of the projects should be communicated to the project beneficiaries.


Not applicable, since project is not yet implemented


PROJECT 3 SEWAGE GAS POWER


A.1 Title of project: Power generation from gas produced in sewage plant


Item Please fill in if applicableName of organizationa):Name of organization (English): Crowborough Works City of HarareDepartment: SewageAcronym: City SewageAcronym (English): City SewageFunction within activity: (standard classifiers to be developed)Street:Post code: Box 683City: HarareCountry: ZimbabweTelephone: +263 4 698633Fax:E-mail:WWW-URL:Contact person (for this activity): -------------------------------------Surname: ManhambaraFirst name, middle name:Job title: SuperintendentDirect tel:Direct fax:Direct E-mail:

Item Please fill in if applicableName of organizationa):Name of organization (English):Department:Acronym:Acronym (English):Function within activity: (standard classifiers to be developed)Street:Post code:City:Country: ZimbabweTelephone:Fax:E-mail:WWW-URL:Contact person (for this activity): -------------------------------------Surname: CorriFirst name, middle name: DavidJob title: ConsultantDirect tel: +263 4 620434 Mobile +263 11 606 154Direct fax: + 263 4 860143Direct E-mail: [email protected]



a) Organisation includes: institutions, ministries, companies, non-governmental organisations, etc. involved in theactivity, i.e. research institutes associated with the project, auditors, government agency closely following theactivity.

A.3 Activity:

Item Please fill in if applicableGeneral description –AIJ/CDMproject:

Installation of three gas engine generator sets fueled by Methane from 3 sewageplants will provide heat and 150 kWe of electricity. Cover and piping of sewagegas is already installed.It is assumed that the power is used in the sewage plant itself. This reducesconsumption of power from the grid.Uncertainties, risks, gaps:• A continuous production of Sewage gas at the site is an important precon-

dition for an efficient engine operation.• Sewage plant seems overloaded at the time. This might endanger the gas

production at the site.• Engine operation and maintenance must be assured by proper training of

operatorsType of project:a) Fugitive Gas CaptureLocation (exact, e.g. city, region,state):

Crowborough Works City of Harare, Zimbabwe2

Activity starting date: 2002 (estimate)Expected activity ending date: 2012Stage of activity:b) FeasibilityLifetime of activity if differentfrom ending date:c)

10yr

Technical data:d) 3 gas engine generator sets with 150kWe each.a) For example, using Intergovernmental Panel on Climate Change (IPCC) classification: energy efficiency; renewable energy;

fuel switching; forest preservation, restoration or reforestation; afforestation; fugitive gas capture; industrial processes;solvents; agriculture; waste disposal or bunker fuels.

b) Circle the appropriate option.c) Methodological work will be required to define lifetime of activities.d) Methodological work will be required to determine for each type of activity what the minimum data requirements are.:


Project:Sewage Plant Gas Utilisation CDM Project Baseline

Total investment 1999Zim$ 15'200'000 0Project life Year 10 yearsDiscount rate % 15 %Levelized investment 1999 3'028'631 0Value of electricity generated 1999 -- --Operation and maintenance p.a. 1999 3'040'000 --Total levelized cost p.a. 1999 4'662'284Incremental cost p.a. 1999 4'662'284 n. a.GHG reductions p.a. T CO2 15'958 n. a.Unit abatement cost 1999 Zim$/t 292.2 n. a.Unit abatement cost 1999 US$/t 7.7 n. a.

2 Other sewage gas projects could be implemented in the File Plant Works City of Harare or in the cities of Bulawayo, Gweru, or Mutare. TheCrowborough plant has been chosen because of data availability.


Describe briefly how costs are determined:• Investments (400’000US$) and O&M costs (80’000US$) estimated based on a similar project in

Switzerland by Ernst Basler + Partners (at 1US$ = 38 Zim$ 1999)• Efficiency of gen-set is estimated at modest 30%. This leads to 3750MWhe per year.• Electricity price of 0.375 Zim$/kWh (0.01 US$/kWh) is very low. Price might increase in the fu-

ture which would make the project more profitable: Assuming a price of 0.03US$/kWh, the unitabatement costs are reduced to 2.9US$/tCO2 equivalent.





C. Compatibility with and supportiveness of national economic development and socio-economic and environment priorities

Describe (to the extent possible) how the activity is compatible with and supportive of national economicdevelopment and socio-economic and environment priorities and strategies– Zimbabwe has an active renewable energy program, which supports the development and utilisation of

renewable energy for sustainable development. The President of Zimbabwe is the current chairman of theWorld Solar Commission.

– There is need for a significant number of renewable energy projects in Zimbabwe.– The domestic clean energy production will make the City Works sewage plant at Crowborough less dependent

from the reliability of power supply from the grid.– There is a large replication potential in the File Plant Works, City of Harare or in sewage plants in the cities of

Bulawayo, Gweru, or Mutare.



Item Please fill inDescribe local environmental benefits (excludingbenefits for global climate; see Section E) indetail:

Capture the fugitive Methane gas from Municipal SewageTreatment Plants and convert it into useable power and reduce itto CO2

Describe local social/cultural benefits in detail: Sewage plant is part of public works of the city.Describe local economic benefits in detail: There should be a benefit deriving from the use of a waste

resource.



Baseline is the current state of operation of the Crowborough Works City of Harare. From 5096 cubicmetres of sewage gas produced per day, 3663 cubic metres are emitted directly to the atmosphere, 1433cubic metres are used in boilers. Other assumptions:


• Sewage gas contains 65% Methane, 35%CO2. Methane content might be higher.• Greenhouse Warming Potential of Methane is 23.• Electricity which is generated by gas engine generator set in the project activity case is produced

by coal power plant in the baseline case at 0.95 t CO2 /MWhe.


With the activity, all sewage gas is used in 3 gas engine generator sets which produce a total of3750MWhe/yr and heat. Assumptions:

• The heat produced by the gen-set replaces the heat produced by the boilers in the baseline case.• Low heating value of methane is 37.71MJ/m3.• Efficiency of gen-set is 30% (might be higher in reality).• Crediting time assumed is 10 years




CO2

CH4

N2Oothertotal

tt CO2 Eq.t CO2 Eq.t CO2 Eq.t CO2 Eq.

548314082

54830140820

B) Project activityscenario)

CO2

CH4

N2Oothertotal

tt CO2 Eq.t CO2 Eq.t CO2 Eq.t CO2 Eq.

36060

360600

C) Effect ( A-B ) CO2

CH4

N2Oothertotal

Tt CO2 Eq.t CO2 Eq.t CO2 Eq.t CO2 Eq. 15958 159580




Source of project fundingincluding pre-feasibility phase(for each source one line)

Amount(1999 Z$)

Amount(1999 US$)








PROJECT 4 BOILER EFFICIENCY IMPROVEMENT

A. Description of Project

A.1 Title of project: Boiler Efficiency Improvement


Item Please fill in if applicable Name of organisationa): Cochrane Engineering (pvt) ltdName of organisation (English): Same Department: Technical Function within activity: Manufacturer of Steam Boilers Street: Tilbury Road, Post code: P.O.Box ST 361, Southerton. City: Harare Country: Zimbabwe Telephone: 263-4-611611 Fax: 263-4-611619 E-mail: [email protected] Contact person (for this activity): See below Surname: Ndlovu First name, middle name: Fidelis Job title: Technical Manager Direct tel: 263-4-611621 Direct fax: 263-4-611610 Direct E-mail: [email protected]

Item Please fill in if applicable Name of organisationa): Ministry of Mines,Environment,and TourismName of organisation (English): Same Department: Climate Change Office Function within activity: Government Contact, Zimbabwe Street: Nyerere street Post code: P.Bag 7753 , Causeway City: Harare Country: Zimbabwe Telephone: 263-4-757 881 Fax: 263-4-757 006 E-mail: [email protected] WWW-URL: - Contact person (for this activity): See below Surname: Sangarwe First name, middle name: Margaret Job title: Under Secretary Direct tel: 263-4-757 880

Item Please fill in if applicable Name of organisationa): Matema & Associates Department: - Function within activity: Consulting Street: Ashburton Avenue Post code: 16 Ashburton Avenue





City: Harare Country: Zimbabwe Telephone: 263-4-573258 Fax: 263-4-752214 E-mail: [email protected] Contact person (for this activity): See below Surname: Matema First name, middle name: Stephen Job title: Consultant Direct tel: 263-4-573258 Direct fax: 263-4-752214 Direct E-mail: [email protected]

A.3 Activity:

Item Please fill in if applicableGeneral description: Project aims to replace inefficient steam boilers in operation in Zimbabwe. There

are about 700 boilers currently in operation in Zimbabwe with the majority infood process industries, laundries and metal process industries. In size, theyrange from as small as 30kg of steam per hour to as large as 20000 Kg of steamper hour. The most common unit is the 2000 kg steam per hour.

Type of project:a) Energy EfficiencyLocation (exact, e.g. city, region,state):

Throughout Zimbabwe

Activity starting date: Not decidedExpected activity ending date: Ten year activity periodStage of activity:b) Project option identifiedLifetime of activity if differentfrom ending date:c)

10 years

Technical data:d) New boiler installation based on a 2 tonne unit with efficiency of 74 % animprovement from the regular 50 % on most units in operation. The unitconsumes about 200 kg of coal per hour.



CDM project Baseline

Total InvestmentProject lifeDiscount rate

1999 Z$years

%

3 400 0001015

-1015

Levelized Investment p.a.Fuel costs p.a.Operating & Maintenance cost p.a.Total levelized cost p.a.

1999 Z$1999 Z$1999 Z$1999 Z$

6774571338624

340002050081

-1981163

170001998163

Incremental cost p.a.GHG reduction p.a.Unit abatement costUnit abatement cost

1999 Z$t CO2 eq.

1999 Z$/t CO2

1999 US $/t CO2

51918105249.4

1.3Exchange rate July 1999: 1 US $ = 38 Z$




Description of how costs are determined: Investment cost for the 2 tonne unit was supplied by Manufac-turer. Costs of operating fuel were estimated over the life of the project.





C. Compatibility with and supportiveness of national economic development and socio-economic and environment priorities and strategies

Describe (to the extent possible) how the activity is compatible with and supportive of national economicdevelopment and socio-economic and environment priorities and strategiesThis project is consistent with National policy priorities in meeting the capital renewal of Zimbabwe’s industry.Many of the country’s equipment and machinery is outdated and inefficient and requires replacement. It also meetsthe criteria for environmental standards compliance.


Whenever possible, quantitative information should be provided. Failing that, a qualitative descriptionshould be given. If quantitative information becomes available, it could be submitted using the update(s).(If the amount of quantitative information is too large, the source could be indicated.)

Item Please fill inDescribe environmental benefits in detail: The more efficient boilers will not only reduce the quantities of CO2

generated but also SO2 and dust and thus create a cleaner workingenvironment.

Describe social/cultural benefits in detail:Increased employment creation by the adoption of newer technology.Both the manufacturer and the industries adopting the new units willhire better skilled workers to operate the units.

Describe economic benefits in detail: The country stands to benefit economically in terms of: more fuelefficiency, better skills to workers etc.



The base line situation entails the existing situation in the country. Old boilers of low energy efficiencywill continue to run in the country.


The adoption of the project will mean a programmed replacement of old boiler units by the more efficientones resulting in operating cost savings.

Fill in the tables on the following page as applicable:


Summary Table: Projected emission reductions based on ONE BOILER UNIT

GHG Unit Emission p.a Total emission over project life


CO2

CH4

N2OTotal

TonneTonneTonnet CO2 eq.

2834.50.0450.090

2864.4

283450.450.90

28644B) Project activity

scenarioa)CO2

CH4

N2OTotal

TonneTonneTonneT CO2 eq.

1794.00.0280.057

1812.9

179400.280.57

18129C) Effect ( A-B ) CO2

CH4

N2OTotal

TonneTonneTonneT CO2 eq.

1040.50.0160.033

1051.5

104050.160.33

10515


Source of project funding including pre-feasibilityphase (for each source one line)

Amount(1999 Z$)

Amount ( 1999 US $ )

Not yet determined - -





PROJECT 5 COAL BED METHANE


A.1 Title of Project: Ammonia Produced From Coal-bed Methane


Item Please fill in if applicable Name of organisationa): Sable Chemicals Ltd. Function within activity: Street: Post code: City: Harare Country: Zimbabwe Contact person (for this activity): ------------------------------------- Surname: First name, middle name: Job title: Direct tel: Direct fax: Direct E-mail:

Item Please fill in if applicable Name of organisationa): ZIMASCO Pvt. Ltd. Function within activity: Project partner (methane wells development) Street: 6th floor Pegasus House, Samora Machel Ave Post code: PO Box 3110 City: Harare Country: Zimbabwe Contact person (for this activity): ------------------------------------- Surname: Mr. Jena First name, middle name: Sidney Job title: Managing Director Direct tel: 263 4 739 622 Direct fax: 263 4 707 758 Direct E-mail: [email protected]

Item Please fill in if applicable Name of organisationa): Ministry of Mines, Environment and Tourism Department: Climate Change Office Function within activity: Government Contact, Zimbabwe Street: Nyerere Street Post code: P Bag 7753 Causeway City: Harare Country: Zimbabwe Telephone: 263 4 757 881 1/5 Fax: 263 4 757 006 E-mail: [email protected] Contact person (for this activity): ------------------------------------- Surname: Sangarwe First name, middle name: Margaret Job title: Under Secretary Direct tel: 263 4 757 880




A.3 Activity:


Production of ammonia (NH3) using coal bed methane instead of hydrogenderived from water electrolysis. The methane is to be extracted from coal seamswhich are not used for coal production (i.e., no capturing of vented methane).Project elements:installation of a second-hand methane based ammonia plantdevelopment of the methane well field (Save Basin)Today, ammonia is produced at the Sable Fertilizer Plant. In the project,ammonia will be produced at the well field and transported to the fertilizerplant by rail.Uncertainties, risks, gaps:Size of methane reserves remains to be assessed in detail by an independent

entity.General description - projectbaseline (reference scenario)

The project baseline assumes that ammonia will be produced using hydrogenderived from water electrolysis, as it is done today. The electricity required isproduced in a coal-fired power station.

Type of project:a) industrial processesLocation (exact, e.g. city, region,state):

location of new ammonia plant to be determined

Activity starting date: earliest possible date to be determinedExpected activity ending date: to be determinedStage of activity:b pre-feasibility studies carried outLifetime of activity if differentfromending date:

approx. 15 years (=technical life of installations)

Technical data: Amount of ammonia produced: 31’200 t/aPower capacity required: 3.67 MWe (project), 111 MWe (baseline)Power consumption project: 814 kWh/t NH3, or 91 TJ/a; baseline: 2’781 TJ/a;electricity saved 2’690 TJ/a



In 1991 and 1993, the possibility of retrofitting the existing electrolysis-based ammonia plant with meth-ane from Zimbabwean coal seams was investigated in two comprehensive studies:

08/1993: Status report on coal bed methane and anhydrous ammonia development (63 pages)12/1993: Financial analysis - retrofitting and upgrading of Sable ammonia facility (60 pages)

Reports were prepared by C.D. Wall Chemical Engineering (PVT) Ltd., Harare, on behalf of AfpenResources. Feasibility of three main project elements was investigated:

• coal bed methane wellfield in Zimbabwe• 300 km pipeline to the Sable ammonia plant• retrofit and upgrade of Sable fertiliser plant (use of methane instead of electrolysis for ammonia

production)

All three elements were found to be economically viable (IRR up to 12%). Retrofit of the ammonia plantwith coal bed methane was found to be more attractive (higher IRR) than the existing situation whereammonia is mostly produced by means of water electrolysis, the remainder being imported from South


Africa. Using Zimbabwean methane also appeared superior to two other alternatives, methane importsfrom Mozambique fields, and coal gasification.

In a later study on behalf of Afpenn, installation of a second-hand US ammonia plant at the wellfield wasinvestigated. Emission and cost values presented below are based on this latter report (i.e., no methanepipeline is included), and on calculations prepared by the Southern Centre, Harare.

Other potential uses of coal bed methane were investigated in separate studies:04/1991: Afpen exploration - coal bed methane module 2: the production of methanol (50 pages).


CDM Project Baseline

Total Investment 1999 Z$ 511’000’000 0Project life years 15Discount rate % 15%Levelized investment 1999 Z$ 87'400'000 0Operation and maintenance p.a. 1999 Z$/yr. 51'100'000 -3'000'000Fuel p.a. (only electricity) 1999 Z$/yr. 35'300'000 1'075'000'000Total levelized cost p.a. 1999 Z$/yr. 173'800'000 1'072'000'000Incremental cost p.a. 1999 Z$/yr. -898'200'000 not applicableGHG reduction p.a. (see details in Section E) t CO2Eq/yr. 800'000 not applicableUnit abatement cost 1999 Z$/t CO2 -1'123 not applicableUnit abatement cost 1999 US$/t CO2 -30 not applicable

Describe briefly how costs are determined; specify key assumptions.

The project investment includes the price of the second-hand ammonia plant, its installation, and the costof the methane wellfield development (to be verified).

O&M of the project is estimated at 10% of the investment. O&M of the baseline includes about 100'000 Z$yearly costs, and about 3'120'000 Z$ returns from byproduct sales (78'000 tons of oxygen at 40 Z$/t O2).

Fuel costs are based on electricity consumption (91,45 TJ/a and 2'781 TJ/a for project and baseline,respectively) at an average generation price of 1.39 Z$/kWhe (coal-fired plant).

Exchange rate July 1999: 1 US$ = 38 Z$




Not applicable to projects of NSS pipelinet at the current stage

C Compatibility with and supportiveness of national economic development and socio-economic and environment priorities and


Describe (to the extent possible) how the activity is compatible with and supportive of national economicdevelopment and socio-economic and environment priorities and strategiesGenerally, the project appears to be compatible with national development strategies, since it yields local environ-mental and economic benefits:– reduced electricity consumption in the Sable ammonia plant (savings up to 100 MW / 2800 TJ), and therefore,

reduced environmental impacts associated with coal-based power generation, and reduced need to expanddomestic power production or to import power from abroad (improved import-export balance)

– improved economic viability of Sable ammonia plant. Today, the plant is indirectly subsized by the Governmentby means of special low electricity tariffs

– increased utilisation of domestic energy resources; employment in methane production and transfer technologyand know-how transfer (no coal bed methane is produced in Zimbabwe today)

– potential to expand methane utilisation at a later stage, e.g. methanol production for use in transport (substitu-tion of imported liquid fuels), or direct use of methane as a fuel

Detailed criteria for local economic, socio-economic and environmental assessment of CDM projects remain to bedefined.



Item Please fill inDescribe local environmental benefits (excluding benefitsfor global climate; see Section E) in detail:

not been studied in detail

Describe local social/cultural benefits in detail: not been studied in detail

Describe local economic benefits in detail: Studies conducted in early 90ies found significanteconomic benefits of the project. Results remain to beupdated according to latest developments.



The baseline scenario is based on the following assumptions:– the current hydrolysis-based ammonia production is maintained (31'200 t NH3/yr)– power production in a coal-fired plant: power consumption 2'781 TJe/yr; transfer losses 12%; coal to

power conversion efficiency 35%; fuel emission factor 95 t CO2/TJe (overall emission factor 1'110 tCO2/TJe consumed)

The baseline is a plausible reference scenario because the project is at present confronted with three mainbarriers:

– lack of investment capital of the owner of the ammonia plant;– lack of experience of the local mining companies with coal bed methane production, exact size of

methane reserves still uncertain;– coal seams are not planned to be mined after methane production, because the coal is of rather low

grade. This is a rare, or even unique, situation world-wide: Usually, coal bed methane is producedin conjunction with coal mining, because it reduces the safety risks associated with high methanecontents. This lack of synergy with coal production renders coal bed methane production in theSave Basin less competitive, compared with coal bed methane reserves in other regions.

Due to these barriers, the project is unlikely to be implemented in the short to mid-term under non-CDMconditions. Other project alternatives, such as methane production from coal gasification or methane


import from Mozambique wellfields, were found to be far less economically viable than the project, andare therefore not plausible reference scenarios. In conclusion, CO2 emission reductions associated with theproject can be assumed not to occur in the absence of the project over the project lifetime of 10 to 15 years(i.e., emission reductions are additional).


The project scenario is based on the following assumptions:– same ammonia production as in baseline– power consumption 91 TJe/yr at 1'110 t CO2/TJe

– ammonia production leads to CO2 emissions of 0.971 t CO2/t NH3 according to Haber Bosch proc-ess:

3 CH4 + 6 H2O → 3 CO2 + 12 H2

4 N2 + 12 H2 → 8 NH3

– emissions of other GHG (CH4, N2O etc.) are negligible project life is assumed as 15 years




CO2CH4

N2Oothertotal

ttttt CO2 Eq.

858'000 12'870'000

B) Project activityscenario a)

CO2CH4

N2Oothertotal

ttttt CO2 Eq.

58'000 870'000

C) Effect ( A-B ) CO2CH4

N2Oothertotal

Ttttt CO2 eq.

800'000 12'000'000




Source of project fundingincluding pre-feasibility phase(for each source one line)

Amount(1999 Z$)

Amount(1999 US$)


G. Contribution to capacity building, transfer of environmentally sound technologies and know-how to other Parties, particularly developing country Parties, to enable them to implement the


provisions of the Convention. In this process, the developed country Parties shall support thedevelopment and enhancement of endogenous capacities and technologies of developingcountry Parties.


The project involves the following transfers of technology and know-how to Zimbabwe:– coal bed methane production– ammonia production from methane




REFERENCES

1. Adhoc International Working Group on the Clean Development Mechanism (1998) UNCTAD,Geneva

2. Climate Change in the Global Economy: Policy Dialogues of the International Academy of theEnvironment: Geneva, Switzerland

3. Central Statistics Office Annual Report, (1997)4. Fecher, R. Matibe, K Mavhungu. J. and Simmonds G, 1998. The Clean Development

Mechanism: Key Issues for Southern Africa Paper presented at GLOBE Southern AfricaConference Partnership for Sustainability 4-5 September 1998, Cape Town

5. Energy Sector Management Assistance Programme Report, no 8768- Zimbabwe, (1992)6. Forestry Commission Report, (1997)7. Greenhouse Gases for Zimbabwe, Ross and Touche Consultants, 19918. T. Forsyth, 1999. International Investment and Climate Change. Energy Technologies for

Developing Countries. Royal Institute of International Affairs.9. M. Grubb, C. Vrolijk and Dr Brack , 1999. The Kyoto Protocol: A Guide and Assessment. Royal

Institute of International Affairs (1999)10. Intergovernmental Panel on Climate Change Guide Lines 1995-611. Janssen J. 1998, “Strategies for Risk Management of Joint Implementation Investment” in:

Reimer, P Smith, A. and K Thambinunthi (eds.) Greenhouse Gas Mitigation: Technologies forActivities Implemented Jointly, Elsevier, 357-365

12. Kyoto Protocol (1997)13. Donald R Larson and Paul Parks, 1999. Risks, Lessons Learned and Secondary Markets for

GHG Reductions. World Bank14. Makarau, A and T. Ngara, 1998. Mitigation Study for Zimbabwe. Final Draft Report. Climate

Change Office, Ministry of Mines Environment and Tourism, Zimbabwe16. S. Maya, 1998. Southern African Power Pool Study.17. Michaelowa A. and Dutschke M, 1999. Interest Groups and Efficient Design of the CDM

Executive Board . Paper presented at the third session of the International Working on CDMin Paris,(March 1999).

18. Michaelowa A. and Dutschke M, 1998. Creating and sharing of credits through the CleanDevelopment Mechanism under the Kyoto Protocol HWWA Discussion Paper 6, Hamburg(1998).

19. Mullins F and Baron R, 1997. International GHG Emissions Trading, Policies and Measures forCommon Action; Working Paper 9;IEA/OECD; Paris

20. Zimbabwe’s Initial National Communication, 199821. More Employment by Ecological Management: An investigation for Germany, Switzerland

and Austria. Prognos: Cologne, 199922. SADC Financing Energy Use in Small Scale Enterprises Study (1998)23. Southern Centre for Energy Environment Report (1999)24. Southern Centre Report in Collaboration with JICA (1997)25. Southern Centre / UNEP country Study Phase II (1993)26. United Nations Development Programme Issues and Options. The Clean Development

Mechanism (1998)27. United Nations Framework Convention on Climate Change (1992)28. Zimbabwe Electricity Supply Authority (1999)29. ZESA Annual Report and Accounts (1997)30. ZESA System Development Plan (1998)

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