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S. Kumar C. Visvanathan Sizhen Peng R. Rudramoorthy Alice B. Herrera Gamini Senanayake Ly Dinh Son

The Asian Regional Research Programme in Energy, Environment and Climate (ARRPEEC) is organised
as a regional network involving 22 national research institutes from China, India, Indonesia, Philippines,
Sri Lanka, Thailand and Vietnam. ARRPEEC is funded by the Swedish International Development
Cooperation Agency (Sida) and coordinated by the Asian Institute of Technology. The first and second
phases of ARRPEEC started in 1995 and 1999.

ARRPEEC’s third phase began in 2002 and involves four regional research projects:

1. Biomass Energy in Asia: Assessment and Strategy Formulation
2. Small and Medium Scale Industries in Asia: Energy, Environment and Climate Interrelation
(SMIs in Asia)
3. Strategies for Promotion of Energy Efficient and Cleaner Technologies in the Urban
Transport System
4. Strategies for Promotion of Energy Efficient and Cleaner Technologies in the Power Sector.

The broad objectives of ARRPEEC are:
• Production of high quality policy oriented outputs in the selected areas of energy,
environment and climate research.
• Capacity mobilisation and enhancement at NRI level through project level joint activities
and fellowships.
• Linkage of project level activities in the participating countries with national, regional and
global initiatives for reducing GHG and other hazardous emissions.
• Dissemination results of the programme among policy personnel with a view to creating
an impact on policy making.

Details regarding ARRPEEC and its publications are available at

SMIs in Asia
Small and Medium scale Industries in Asia (SMIs in Asia) is one of the projects under ARRPEEC. It was
aimed at studying five SMI sectors :- brick/tiles/ceramic, desiccated coconut, foundry, tea and textiles -
in China, India, Philippines, Sri Lanka and Vietnam with the following objectives:

· Greenhouse gas emission estimation
· Review of barriers inhibiting adoption of energy efficient and environmentally sound
technologies (E3STs)
· Techno economic assessment of E3STs

The participating institutions of SMIs in Asia project are

• Asian Institute of Technology, Thailand
• Center for Environmentally Sound Technology Transfer, Beijing, China
• PSG College of Technology and Industrial Institute, Coimbatore, India
• Industrial Technology Development Institute, Metro Manila, Philippines
• Industrial Services Bureau of North Western Province, Kurunegala, Sri Lanka
• Consulting Center for Cooperative Promotion and Capacity Building, Hanoi, Vietnam
Learn more about SMIs in Asia projects and publications at
to Promoting Energy Efficient and
Environmentally Sound Technologies
to SMIs in Asia

S. Kumar
C. Visvanathan
Sizhen Peng
R. Rudramoorthy
Alice B. Herrera
Gamini Senanayake
Ly Dinh Son
to Promoting Energy Efficient and
Environmentally Sound Technologies
to SMIs in Asia

School of Environment, Resources and Development
Asian Institute of Technology
PO Box 4, Klong Luang
Pathum Thani 12120
Fax: (66) 2 524 5439
Email: and

Neither the Swedish International Development Cooperation Agency (Sida) nor the Asian
Institute of Technology (AIT) and its partners, the National Research Institutes of the
study countries, make any warranty, expressed or implied, or assume any legal liability for
the accuracy or completeness of any information, apparatus, products, or represents that its
use would not infringe privately owned rights. Reference herein to any trademark or
manufacturers or otherwise does not constitute or imply its endorsement, recommendation,
or favoring by Sida or AIT.

ISBN: 974-8208-60-5
600 copies

 Asian Institute of Technology, 2005
Printed in Thailand
Project Team
Principal Investigators

Dr. S. Kumar, Professor, Energy Field of Study, School of Environment, Resources and
Development, Asian Institute of Technology, Thailand (

Dr. C. Visvanathan, Professor, Environmental Engineering and Management Field of Study,
School of Environment, Resources and Development, Asian Institute of Technology,
Thailand (

National Research Institute (NRI) Team Leaders

Dr. Sizhen, Peng, Director, Center for Environmentally Sound Technology Transfer,
Administrative Center for China’s Agenda 21, Beijing, China (

Dr. R. Rudramoorthy, Professor, Energy Engineering Department, PSG College of
Technology and Industrial Institute, Coimbatore, India (

Dr. Alice B. Herrera, Fuel and Energy Division, Industrial Technology Development Institute,
Department of Science and Technology, Metro Manila, Philippines (

Mr. Gamini Senanayake, Director, Industrial Services Bureau of North Western Province,
Kurunegala, Sri Lanka (

Mr. Ly Dinh Son, Director, Consulting Center for Cooperative Promotion and Capacity
Building, Hanoi, Vietnam (

Research Staff
Mr. Aruna Manipura (March 2002 - December 2003)
Ms. Priya Ambashankar (December 2003 - August 2004)
Mr. Prajapati Shapkota (September 2003 - November 2004)
Mr. Prantik Bordoloi (Since May 2004)

Research Fellows
Mr. I.S.B.P. Ratnakumara (June 2004)
Mr. Oscarlito Malvar (June 2004)
Mr. R. Kannan (March - May 2005)
The Asian Regional Research Programme on addition of Vietnam. Phase II analyzed the
Energ y, Environment and Climate energy and environmental issues of the
(ARRPEEC) funded by Swedish desiccated coconut, tea, foundry & metal
International Development Cooperation casting, textile, and brick, tile & ceramic
Agency (Sida) and coordinated by Asian sectors and studied the policy issues to
Institute of Technology (AIT), is aimed at promote E3STs concerning the above sectors
policy-oriented research in selected areas of in these participating countries.
energy, environment and climate change.
Other objectives include capacity The current phase, as a continuation from
mobilization and enhancement of the Phase II, addressed the following issues for
participating research institutions and linkage the same sectors as in Phase II:
of the project activities with national,
regional and global initiatives for reducing • Estimation of the greenhouse gas (GHG)
greenhouse gases and other hazardous emissions in selected SMIs
emissions. Small and Medium Scale • Study and prioritization of barriers that
Industries in Asia (SMI in Asia) project is inhibit the promotion of E3STs in SMIs
one of the regional research projects under • Techno-economic evaluation of E3STs
ARRPEEC and involves the following available for mitigating GHG emissions,
research institutions: Center for improving energy efficiency and abating
Environmentally Sound Technolog y environmental pollution
Transfer, China; PSG College of Technology
and Industrial Institute, India; Industrial
Services Bureau of North Western Province, This report discusses the availability, degree
Sri Lanka; Industrial Technolog y of impedance, and provides a comparison
Development Institute, Philippines; and of barriers inhibiting the promotion of
Consulting Center for Cooperative E3STs for the selected sectors based on the
Promotion and Capacity Building, Vietnam. studies carried out in the study countries.
Ranking the barriers from the perspective of
Phase I of ARRPEEC focused on the industry personnel and policy personnel has
assessment, adoption and propagation of been done and recommendations are made
energy efficient and environmentally sound to incorporate the mechanisms to remove
technologies (E3STs) among the selected these barriers while formulating national
developing countries, (China, India, policies for promoting the use of E3STs in
Philippines and Sri Lanka) and a cross SMIs.
country analysis was made on large industry
sectors representing steel, cement and pulp Documentary research indicates that no
& paper. previous studies had been carried out with a
specific focus on SMIs and E3STs. Therefore,
In phase II, the focus was narrowed down to this report will act as a start up document
SMIs in participating countries, with the for providing the impetus to further remove

barriers that inhibit the promotion of
environmentally sound energy technologies.

We would like to acknowledge the support
of Mr. Ar una Manipura, Ms. Priya
Ambashankar, Mr. Prajapati Shapkota and
Mr. Prantik Bordoloi, Research Associates
of SMI Asia Project of the School of
Environment Resources and Development
of the Asian Institute of Technology,
Thailand; and Research Fellows Mr. I.S.B.P.
Ratnakumara, Mr. Oscarlito Malvar and Mr.
R. Kannan, who contributed to this study.

The financial support of the sponsor, Swedish
International Development Cooperation
Agency (Sida), is gratefully acknowledged.
We would like to thank Dr. Gity Behravan,
Senior Research Advisor, Sida, without
whose support and guidance this study could
not have been carried out.

S. Kumar
C. Visvanathan
Sizhen Peng
R. Rudramoorthy
Alice B. Herrera
Gamini Senanayake
Ly Dinh Son

September 2005

Executive Summary
The contribution of SMIs to the national In China, the lack of financial and fiscal
economies of the selected countries is incentives such as tax exemptions or
significant. The energy and environmental subsidies for installation of E3STs is an
performance of SMIs, however, is poor. SMIs important barrier. Weak enforcement of
contribute 7-9% to the national GHG environmental regulation is also an important
inventories in the study countries, in addition barrier.
to significant environmental pollution from
wastewater and solid wastes. Because they In India, the high capital cost of E3STs and
face a number of barriers, the use of energy poor returns are identified as important
efficient and environmentally sound barriers. SMI management appears to be
technologies (E3STs) is limited to a few satisfied with their current processes and
demonstration projects. technologies and are wary of adopting new
technologies. Their investment priority is for
This report presents the results of a study expansion of production capacity rather than
carried out to identify the barriers faced by improving technologies.
SMIs for E3ST application and their
prioritization. This is expected to assist policy In the Philippines, high capital cost of E3STs
makers develop mechanisms for the removal and difficulties in accessing finance are
of these barriers by formulation of suitable identified as important barriers.
policies focused on SMIs. Management’s priorities are towards
expansion of production capacity and
Views regarding the barriers to promote increasing market share rather than
E3STs vary amongst the SMI stakeholders implementing E3STs.
i.e., policy makers, SMI management,
representatives from financial institutions In Sri Lanka, high capital cost of E3STs,
and technocrats. The study has found that difficulties in accessing finance and poor
the most significant barriers are financial and returns on capital are identified as major
policy barriers. The degree of significance barriers. Lack of information and non-
varies from country to country. availability of E3STs and service are also
important barriers.
The most significant barrier in India, Sri Lanka
and the Philippines is the high cost of E3STs; In Vietnam, management is deeply
in China it is the lack of financial incentives; concerned that adoption of E3STs would
and in Vietnam it is the management’s fear incur additional costs and undermine their
of the high cost of production due to E3STs. competitiveness in the marketplace. Lack of
In none of the countries is the non- information on E3STs is identified as the
availability or the lack of technical or second most important barrier although non-
managerial skill seen as a major barrier for availability is not seen to be a barrier. Lack
adoption of E3STs. of enforcement of regulations is also
identified as an important barrier.

The following broad recommendations are

• Re-evaluation of existing energy and
environmental policies, impacts and
constraints in promoting E3STs in all
• Integration of energy and environment,
financial and technical policies, so that
they are constructive in application,
monitoring and enforcement.
• Assess the introduction of market-based
instruments backed by fiscal policies
across sectors.
• Include financial institutions in existing
and future capacity building programmes
on E3STs.
• Develop mechanisms to carry available
finances to lower level strata of the
industry sector.
• Enrolment of public support into the
energy and environmental dialogue to
strengthen the enforcement and
acceptance of innovative policies to
promote E3STs in the SMI sector.

Table of Contents
Project Team ................................................................................................................................. III
Preface ............................................................................................................................................. IV
Executive Summary ...................................................................................................................... VI

Chapter 1 Introduction ................................................................................................................. 1
1.1 Background ................................................................................................................................ 1
1.2 Status of the Study Sectors ..................................................................................................... 2
1.2.1 Foundry & metal castiing ..................................................................................................... 3
1.2.2 Texttile sector ........................................................................................................................ 4
1.2.3 Brick, tile & ceramic sector ................................................................................................. 5
1.2.4 Tea production sector ........................................................................................................... 7
1.2.5 Desiccated coconut sector ................................................................................................... 7
1.3 Rationale and Objectives ........................................................................................................ 8
1.4 Organization of the Report .................................................................................................... 9

Chapter 2 An Overview Of Barriers ........................................................................ 11
2.1 Barriers to Promoting E3STs in the Study Countries ...................................................... 11
2.1.1 China ..................................................................................................................................... 11
2.1.2 India ....................................................................................................................................... 12
2.1.3. Philippines ........................................................................................................................... 13
2.1.4 Sri Lanka ............................................................................................................................... 13
2.1.5 Vietnam ................................................................................................................................. 14
2.2 Types of Barriers .................................................................................................................... 14
2.2.1 Managerial barriers .............................................................................................................. 14
2.2.2 Human resource barriers .................................................................................................... 16
2.2.3 Technical barriers ................................................................................................................ 16
2.2.4 Financial barriers ................................................................................................................. 16
2.2.5 Market barriers ..................................................................................................................... 17
2.2.6 Regulatory barriers .............................................................................................................. 17
2.2.7 Information barriers ............................................................................................................ 18
2.2.8 Research and development ................................................................................................ 18
2.3 Earlier Studies on Barriers Inhibiting Adoption of E3STs ............................................. 19
2.4 Summary ................................................................................................................................... 21

Chapter 3 Study Approach & Activities................................................................... 25
3.1 Identification and Finalization of the Barriers .................................................................. 25
3.2 Tools for Prioritization of Barriers ...................................................................................... 25
3.3 Procedure of the Study .......................................................................................................... 29
3.4 Allocation of Weights for Judgments .................................................................................. 32
3.5 Consolidation of Responses ................................................................................................. 33
3.6 Summary ................................................................................................................................... 33

Chapter 4 Results & Discussion .............................................................................. 35
4.1 Overall Assessment ................................................................................................................ 35
4.2 Assessment of Barriers by Policy Personnel ...................................................................... 37
4.3 Sector Specific Overall Ranking of Barriers ...................................................................... 37
4.4 Country Specific Factors ....................................................................................................... 42
4.5 Enhancement of Energy and Environment Performance by Removal of Barriers .... 45
4.6 Incorporation of Barrier Removal in National Policy Implementation ......................... 47
4.6.1 Policy Framework ................................................................................................................ 47
4.6.2 Regulations and Standards ................................................................................................. 50
4.6.3 Financing E3STs ................................................................................................................. 50
4.6.4. Strategies/Drivers .............................................................................................................. 55
4.7 Summary ................................................................................................................................... 55

Chapter 5 Conclusions ............................................................................................. 57
5.1 Prioritized Barriers .................................................................................................................. 57
5.2 Recommendations .................................................................................................................. 59

References.................................................................................................................. 61
Appendix A: Sample Questionnaire used in Ranking of Barriers ......................................... 65
Appendix B: Weights and Ranking of Barriers for each Study Sector and Country .......... 69

List of Abbreviations
AHP Analytical Hierarchy Process
AIT Asian Institute of Technology
APCTT Asian and Pacific Center for Transfer of Technology
APEC Asia Pacific Economic Cooperation
ARRPEEC Asian Regional Research Program in Energy, Environment and Climate
AWPLR Average Weighted Prime Lending Rate
BOD Biochemical Oxygen Demand
CDM Clean Development Mechanisms
CP Cleaner Production
DC Desiccated Coconut
DNA Designated National Authority
DOE Department of Energy
E3ST Energy Efficient and Environmentally Sound Technology
ECP Endless Chain Pressure
EMB Energy Management Bureau
FBD Fluidized Bed Dryer
FRP Fiber Reinforced Plastics
GEF Global Environment Facility
GERIAP Greenhouse Gas Emission Reduction from Industry in Asia and Pacific
GHG Greenhouse Gases
ISB Industrial Services Bureau
LPG Liquefied Petroleum Gas
MBI Market Based Instruments
MCDM Multi-criteria Decision Making
NDB National Development Bank
NRI National Research Institute
SETC State Economic and Trade Commission
SIDBI Small Industry Development Bank of India
SLR Sri Lanka Currency, Rupees
SMI Small and Medium Scale Industries
TERI The Energy and Resources Institute
TVE Town and Village Enterprises
UNIDO United Nations Industrial Development Organization
UPASI United Planters’ Association of Southern India
USAID United States Agency for International Development
VND Vietnamese Currency, Dong


Chapter 1
1.1 Background
Box 1.1 Asian Regional Research
Programme in Energy, Environment and
Small and medium scale industries (SMIs) are
a significant sub-sector of the industrial
The Asian Regional Research Programme in
economy in Asia and play an important role
Energy, Environment and Climate (ARRPEEC)
in national economies in terms of is a regional network involving 22 national
contribution to Gross Domestic Product research institutes (NRIs) from seven Asian
(GDP) and employment creation. They are countries. ARRPEEC is funded by the Swedish
International Development Cooperation Agency
found in all major manufacturing sectors.
(Sida) and coordinated by the Asian Institute
Usually they employ traditional, labour of Technology (AIT), Thailand.
intensive and inefficient technologies and are
not very much concerned about the impact The main objectives of ARRPEEC are:
of their energy use (Visvanathan and Kumar,
• Production of high quality policy oriented
1999; Kumar et al., 2005; Thiruchelvam et outputs in the selected areas of energy,
al., 2003). Despite this lack of concern, there environment and climate research.
have been no significant efforts undertaken • Capacity mobilization and enhancement at
NRI level through project level joint activities
to address SMI energy-environment issues.
and fellowships.
The Small and Medium Scale Industries in • Linkage of project level activities in the
Asia: Energy, Environment and Climate participating countries with national,
Interrelations (SMI in Asia) is one of four regional and global initiatives for reducing
GHG and other hazardous emissions.
components of the Asian Regional Research
• Dissemination of results among policy
Programme in Energy, Environment and personnel with a view to creating an impact
Climate (ARRPEEC) to address the energy- on policy making.
environment issues of SMIs (Box 1.1).
ARRPEEC carried out research on the power,
industrial technologies, urban transport and
The industry sector study of ARRPEEC biomass sectors and focused on policy
Phase I addressed the status of technologies aspects of GHG mitigation emissions and
pollution reduction. The first and second
in energy intensive and environmentally phases of ARRPEEC started in 1995 and 1999
polluting industries in Asia. It also assessed and the third phase began in 2002.
the impacts and the pollution mitigation
potential of energ y efficient and More information on ARRPEEC and its
activities are available at
environmentally sound technologies (E3STs)
in large-scale industries in China, India, Sri Industries (SMIs) in Asia and carried out
Lanka and the Philippines. ARRPEEC Phase cross-country evaluations on energy and
II concentrated on Small and Medium Scale environment issues with a focus on processes

Chapter 1 1
Barriers to Promoting E3STs to SMIs in Asia

in five SMI sectors: foundry and metal out, the results of the prioritization are
casting, textile, desiccated coconut, brick, tile presented and recommendations suggested.
& ceramic and tea processing. The study
countries were China, India, the Philippines,
Vietnam and Sri Lanka. The project activities
were focused on capacity building, analyzing 1.2 Status of the Study Sectors
and benchmarking energy use patterns of
selected SMI sectors, and identification of The selected SMI sectors were foundry &
E3STs for SMIs (AIT, 2002a; 2002b; 2002c). metal casting, textiles, desiccated coconut,
tea processing and brick, tile & ceramics in
In the current phase (ARRPEEC III), the SMI China, India, Philippines, Sri Lanka and
in Asia Project continuing from Phase II Vietnam (Table 1.1). These sectors were
addressed the following issues: selected based on their importance in the
study countries. A brief summary of their
• Greenhouse gas emission estimation in industrial status in the countries and the
selected SMIs, relevant energy and environment issues is
• Study and prioritization of barriers that presented below.
inhibit the promotion of E3STs in SMIs,
• Techno-economic evaluation of E3STs
available for mitigating GHG emissions,
improving energy efficiency and abating
environmental pollution.

As an outcome of the project, the GHG
emissions from the selected SMI sectors and
their mitigation potentials were estimated
and reported elsewhere (Kumar et al., 2005).
1.2.1 Foundry & metal castiing
This document presents the results of the Foundry & metal casting is one of the oldest
research carried out to study the barriers industries in the world and is an important
inhibiting the adoption of E3STs in SMIs. base for the manufacturing world.
Overviews of the energy and environmental Technology improvements in the foundry
status in the study countries relevant to the sector have led to improved product quality,
selected SMI sectors are presented. This efficient use of resources and reduction in
report discusses previous studies in barrier environmental pollution. Variations in
analysis and the details of the methodology technology use and production costs make
adopted in this study and the activities carried the foundry industry diverse from one country
out. The barriers were prioritized based on to another.
inputs from policy makers, SMI management,
representatives from financial institutions and Foundry & metal casting industries in China
technocrats. Based on the activities carried and India consist of both large and small-

2 Chapter 1

scale industries. There has been a steady scrap, can be melted and used. The main
increase in the production of foundry disadvantages of this type of furnace include
products over the years in these two the low capacity of the system and the
countries, while in the Philippines there is a environmental pollution caused by dust and
decrease due to increasing costs of slag produced during operation.
production. Table 1.2 summarizes the state
of the sector in the study countries. In India,
the sector contribution to GDP is estimated
at 0.4%. The foundry & metal casting sector
in China and India is still dominated by
ferrous casting with almost 80% dedicated
to cast iron products and the remaining 20%
shared by cast steel and non-ferrous products.
In the Philippines, about 50-60% are cast
iron (Gray iron products), while 40-50% are
cast steel and non-ferrous products.

The foundry industry mainly contributes to
air pollution. The degree may vary with the
type of resource and raw material use and
the technology adopted. The use of low-
grade fuel, especially coal with high sulfur
content, is the main reason for air pollution.
The amount and quality of emission also
depends on the type of cupola used. Small-
scale foundries do not have the capacity to
employ soot or ash recovery equipment or
use better fuel with efficient combustion
Medium scale foundry in India

Foundries are highly energy intensive In India, air pollution problems are the main
processes and pollute significantly if concern though there is also significant
inefficient technologies are used. In India inorganic solid waste. Chinese foundries have
and China the main fuels are coke, coal, oil, problems meeting national standards for dust
natural gas and electricity, while in the emission, waste residue and noise. In the
Philippines LPG is used. Philippines, emissions of dust and harmful
gases with bad odors are the main problems.
The melting furnace is the main equipment CO2 emission in China’s foundry sector was
in a foundry. Cupola furnaces and electric estimated to be about 16.69 million tonnes
induction furnaces are the most common. in 2000. For India and the Philippines it was
Cupolas are widely used mainly because they about 1.6 and 0.24 million tonnes of CO2
are cheap and a variety of metal, including respectively (Kumar et al., 2005).

Chapter 1 3
Barriers to Promoting E3STs to SMIs in Asia
Introduction of E3STs such as replacing 1.2.2 Texttile sector
conventional cupolas with cokeless cupolas
or converting them to burn natural gas (Box The textile process consists of several unit
1.2) will help reduce energy consumption, operations and involves a large amount of
thereby making the sector more competitive machinery of varying scale and uses both
while reducing GHG emissions. electrical and thermal energy. The Indian
textile industry is characterized by its
innovativeness and growth in terms of the
Box 1.2 Selected technologies available
technology and scale. India produces and
for improvement of energy and
environmental performance exports a substantial amount of the world’s
textile requirements. The Indian textile
Foundry sector industry encompasses both large enterprises
• Replacement of main frequency induction
and SMIs. Table 1.3 shows the details of the
furnace, medium frequency furnace
• Replacement of cupola furnaces with textile sector in the study countries.
electric induction furnaces
• Conversion to natural gas from coal The textile industry is energy intensive.
Energy accounts for nearly 20% of the total
Brick and tile sector
• Autoclave aerated concrete block instead production cost. The Indian textile sector
of clay brick consumes about 9-10% of the industrial
• Insulation of inner walls with ceramic fiber energy use in India. Thermal and electrical
• Replacement of traditional kilns with vertical
energy demands are met by using coal,
continuous kilns
firewood and electricity.
Tea sector
• In-house power generation
• Two-stage motors for withering troughs
• Replacement of indirect oil fired heater with
direct oil fired heater

Desiccated coconut sector
• Flash steam recovery in dryer
• Use of dual fuel boilers
• Use of energy efficient motors for processing
& materials handling units The main environmental issues for the textile
industry are emissions from energy use and
Textile sector
water pollution, of which the latter is
• Installation of photocells for speed frame
• Installation of soft starter cum energy saver significant. The textile industry uses water
in simplex frame as the principal medium in removing
• Use of FRP (fiber reinforced plastic) fan impurities, applying dyes and finishing agents,
blades for humidification fans in weaving
and steam production. The effluents from
Source: Kumar et al., 2005 textile processes have a high level of
biochemical oxygen demand (BOD), high
dissolved solids and high temperature. When
released to ground or common water channels
without proper treatment, they damage water

4 Chapter 1
quality, kill or damage fish and living considered under cottage industry status.
organisms and make water sources unusable. Only brick and roofing tile manufacture are
The other aspect is air pollution from the discussed here. Table 1.4 shows details of
combustion of fossil fuels. The total CO2 the brick, tile & ceramic sector.
emission from textile industries in India in
the year 2000 was about 18.12 million tonnes
(Kumar et al., 2005).

Lack of modernization of textile mills
through the introduction of E3STs has been
the main reason for continued pollution in
the sector. Installation of energy efficient
pneumatic fans in spinning mills,
implementation of soft-flow dyeing, and use
of equipment for recovery of chemicals
otherwise discharged as effluents are some
of the technology options for improvement
of energy and environmental performance.
The Chinese brick-making industry is mainly
under Town and Village Enterprises (TVEs).
1.2.3 Brick, tile & ceramic sector The total number of enterprises involved has
been declining steadily over the years. About
The brick, tile & ceramic sector by definition 77% of the total brick production is solid clay
includes manufacture of all clay products, bricks and the rest hollow bricks. In the
including bricks, roofing tiles and small-scale Philippines, the brick, tile & ceramic sector
ceramic manufacture. The brick, tile & has its base in the traditional manufacture of
ceramic sector is considered a cottage terra cotta products and pottery by small-
industry and uses traditional technologies. scale and cottage type operations.

The roofing tile industry, even though it still In India, about 65-70% of the bricks are
uses traditional technologies, is no longer made in the northern and eastern plains. In
Vietnam, the brick industry is widely
dispersed in four key economic regions in the
northern part of the country. Sri Lankan tile
manufacturing is centered in the western part
of the country and the total monetary value
of tile production was around SLR 600
million (US$ 6 million) in 2000.

The major energy source in China, India and
Vietnam is coal. In Sri Lanka it is firewood
and in the Philippines LPG is used in ceramic
Speed frame of a textile mill in India

Chapter 1 5
Barriers to Promoting E3STs to SMIs in Asia
tile production. The Indian brick industry natural woodlands.
consumes about 20 million tonnes of coal
(TERI, 2003). Sri Lanka consumes around The type of kilns used has an effect on the
40 m3 of fuel wood per batch (i.e. 15,000 energy efficiency and level of pollution (Box
tiles). The average, production is 3-4 batches1.3). Brick production uses only 25% of the
per month. heat supplied to the kiln while the rest is lost
in exhaust and losses due to imperfect
The main pollution issues from brick and tile burning, radiation and convection from the
production are GHG emissions and the kiln walls. Some heat loss in the flue gas could
destruction of agricultural land due to clay be recovered and used for drying.
extraction. Most of the brick and tile kilns
are inefficient in combustion and hence emit The industry represents a substantial
high amounts of GHG. The use of coal in component of SMIs. If technology can be
China, Vietnam and India creates significant introduced to increase energy efficiency, the
pollution. In 2000, the total CO2 emissions savings in money, resources and reduced
from the SMI brick, tile & ceramic sector was pollution will be substantial.
about 197, 35, 1.8 and 0.04 million tonnes
of CO2 in China, India, Vietnam and Sri
Box 1.3 Improvement of energy efficiency
Lanka, respectively (Kumar et al., 2005). in the brick industry

The brick industry is flexible in energy sourcing
and brick makers prefer certain fuels (notably
fuelwood and coal). However, these are not
always available at competitive prices and
hence they use lower grade fuels. Little is
known about specific energy consumption in
different kilns among brick makers or
technology providers. Hence, possibilities to
improve the energy efficiency by relatively
simple measures are disregarded. The newly
developed kilns appear to be attractive and offer
larger production capacity, but often require
higher investments. The better technologies
offer better energy efficiencies and less
Stacking bricks in a continuous fired tunnel kiln in pollution.
Energy Statistics of commonly used brick kilns
Kiln type Capacity ('000 bricks) Specific energy Investment
The destruction of agricultural land is a Per firing Per day consumption (US$ '000)
serious environmental impact of this industry Clamp kiln 5 - 1,000 2.0 - 8.0

in all countries. Production of 5 million solid Scove kiln 5 - 100 2.0 - 8.0
Scotch kiln 5 - 40 2.0 - 8.0 <5
clay bricks needs around 12,000 m3 of clay, Downdraft kiln 10 - 40 2.0 - 6.0 < 20

rendering the land unusable for agricultural Hoffman kiln 2 - 24 1.5 - 2.8 > 80
Bull's Trench kiln 10 - 48 1.5 - 2.8 >7
purposes for a long time after extraction. This High Draught kiln 20 - 40 1.2 - 1.8 > 15

is in addition to soil erosion, localized Tunnel kiln
Vertical Shaft Brick kiln
50 - 150
4 - 30
1.2 - 2.5
0.8 - 0.9
> 1,000
pollution and reduced aesthetic value of
Source: FAO, 1993

6 Chapter 1
1.2.4 Tea production sector Sri Lankan tea factories still use Endless
Chain Pressure dryers (ECP) with 32%
India is the largest producer and consumer efficiency. However, Fluidized Bed Dryers
of tea in the world. Sri Lanka is the largest (FBD) can provide 49% efficiency. Changing
exporter of black tea. Export is an important dryers from ECP to FBD in the entire sector
source of foreign exchange and an would reduce energy consumption and GHG
employment generator (Table 1.5). emissions. There are technologies available
for the tea industry (Box 1.2) that would
reduce the GHG emissions while increasing
the energy efficiency.

1.2.5 Desiccated coconut sector

The desiccated coconut (DC) industry is one
of the major export earners for Sri Lanka and
the Philippines. The DC sector in Sri Lanka
Energy is required for tea processing during belongs to the SMI sector while in the
drying (ther mal energy) and withering Philippines they are classified as medium to
(electrical energy). The thermal energy large industries in terms of production. A
requirements are supplied by coal, fuel oil or summary of DC sector statistics for these
firewood. Electrical energy is most often countries is shown in Table 1.6.
supplied by the power grid. In Sri Lanka, the
tea sector consumes annually about 2.3 TWh
of energy (AIT, 2002c). Thermal energy is
supplied by firewood (80-85%) and fuel oil
(15%) while electricity is obtained from the
grid. Annually, the Indian tea industry
consumes about 0.632 million tonnes of
firewood, 0.274 million tonnes of coal,
64,000 tonnes of oil and 550 million kWh Electrical energy is used by processing
of electricity (estimates based on data from equipment. Of the electrical energy
UPASI Tea Research Foundation, India, consumption, 60% is used for drying and
2002). about 30% is used for size reduction. Of the
thermal energy, over 65% is consumed in the
The environmental concerns in the tea drying operation. The average specific
processing sector are related to emissions. For thermal energy consumption is 23 MJ/kg
drying, thermal energy is required and this is and the specific electrical energy
obtained by using fuel wood or coal in India consumption is 1 kWh/kg (AIT, 2002b).
and Vietnam, and by fuelwood in Sri Lanka.
The use of inefficient heat transfer DC processes generate solid waste and
equipment results in the consumption of effluents. From the environmental point of
higher amounts of fuel. For example, many view, the effluents are the main concern. The

Chapter 1 7
Barriers to Promoting E3STs to SMIs in Asia

Sri Lankan DC industry generates an Box 1.4 Institutional intervention to
estimated 0.5 million cubic meters of promote E3STs in SMIs through
wastewater annually with around 10 tonnes identification and prioritization of barriers
of suspended solids and 3,850 tonnes of
Case study: Firozabad glass industry cluster
BOD. in India

1.3 Rationale and Objectives To save the famous Taj Mahal, situated close
to Firozabad, the Indian Supreme Court passed
a landmark judgment and directed 292 specified
E3STs address the energy and environmental industries using coke/coal as fuel to switch over
concerns of industries, but many barriers to natural gas, relocate outside the zone, or
prohibit their adoption. Due to scarcity of shut down.
resources (funds, labour and time), all the
Through detailed diagnostic studies carried out
barriers cannot be addressed simultaneously, in various SMI clusters in 1995, it was found
hence, priority must be given to the most that there is tremendous scope for increasing
serious and pervasive barriers. energy efficiency in the glass industry cluster.
The cluster accounts for roughly 70% of the
total glass production in the small-scale sector.
Though general studies on the various
barriers inhibiting the promotion of E3STs A new design focused on the pot and muffle
are available, prioritization of barriers from furnaces in view of their high share of coal use
(48% for pot furnaces and 27% for muffle
the perspective of SMIs, technocrats and
furnaces), very low operating efficiency and
policy makers would provide an important inability of the segment to mobilize support for
basis for introducing E3STs and thus lead to technology upgrades.
energy efficiency, reduced pollution and
The demonstration pot furnace using natural gas
GHG emissions. By prioritizing the barriers
was commissioned in February 2000. The
in terms of their importance, appropriate specific energy consumption was found to be
strategies and action plans can be developed 2,460 kcal/kg of glass, a reduction of nearly 60
to use the limited resources. This approach per cent while meeting environmental standards.
will be beneficial to SMIs and will yield
positive impacts that could be translated to
a bigger scale as energy savings and emission
reductions at the national level (Box 1.4).

The main objectives of the study are:
• To identify the prominent barriers
inhibiting the promotion of E3STs in the
SMI sectors in the study countries Natural-gas fired TERI furnace
• To prioritize these barriers according to
the views of the stakeholders, and Source: TERI, 2000
• To disseminate the outcomes among
policy makers and other stakeholders for
necessary action in formulation of
environmentally friendly policies.

8 Chapter 1
The study used Analytical Hierarchy Process
(AHP), a multi-criteria decision tool, for
prioritizing barriers. Once the barriers are
prioritized, issues that lie within the
enterprise or factory level, industry level and
national level can be segregated and targeted
for elimination or mitigation by factory
owners, SMI associations or policy makers
as appropriate.

1.4 Organization of the Report

The report is organized in five chapters with
the structure shown in Figure 1.1. The
objectives are organized for clarity within the
structure of the report.

Fig 1.1 Organization of report

Chapter 1 9
An Overview of Barriers

Chapter 2

This chapter describes the various barriers to adopt E3STs due to their reluctance to
that inhibit the promotion of E3STs and their change and other barriers. To promote the
significance from the viewpoint of SMI dissemination of E3STs, the barriers in
stakeholders. This initial assessment of adopting them were identified. They include
barriers has been consolidated using similar lack of awareness, education and training on
studies done elsewhere. E3STs; financial and economic factors; lack
of coordination and slackness; and lack of
infrastructure (Thiruchelvam et al., 2003).
2.1 Barriers to Promoting E3STs in the
Study Countries The following sections provide an overview
of the barriers inhibiting the promotion of
Despite their significant contribution to E3STs in the study countries. The key
economic development in the Asian region, elements and diversity of the environmental
SMIs are energ y inefficient and cause issues in relation to energy and environmental
environmental pollution. Under these performance vary from one country to
circumstances, E3STs provide sustainable, another.
adoptable and affordable technology
solutions that will conserve energy, mitigate 2.1.1 China
pollution and reduce unfavorable impacts on
climate. Application of E3STs in industries As one of the fastest growing economies in
ensures that energy resources are used more the world, China experiences the ill effects
efficiently, eco-efficiency is improved and the of rapid development in the most obvious
environment is preserved and is therefore an way. The environmental pollution in China
important means of achieving the dual goals has been unprecedented, especially in the
of energy conservation and emission industrial areas, and the Chinese government
prevention and reduction. Many developed has given a high priority to abating
countries have adopted cleaner production environmental pollution due to
technologies and gained the economic industrialization (Jonathan, 1999).
benefits. However, E3STs are not widely
adopted in developing countries outside of • Increased employment requirements
large industries that can easily adopt them focused more on workers’ skills and
and benefit financially. SMIs are still hesitant physical abilities than on their ability to

Chapter 2 11
Barriers to Promoting E3STs to SMIs in Asia
cope with the consequences of poor • The brick and tile industry finds it difficult
environmental management. Managerial to access new technologies and market
staff lack capacity to educate workers infor mation and still operates in a
because they themselves have a low traditional way.
awareness of E3STs and their positive
• Chinese SMIs lack capacity in identifying,
assessing, introducing and applying Box 2.1 Growth of consumption of energy
and GHG emissions in India
E3STs at factory level. Even when capital
is available it is often accompanied by India’s high concentration of pollution is not
introduction of obsolete process due to the absence of a sound environmental
technologies and inefficient equipment legal regime, but due to lack of environmental
enforcement at the local level. Regulatory
that pollutes the environment.
reforms aimed at improving the air pollution
• Lack of experience and resources, problem in cities such as New Delhi have been
including capital, is the main reason for difficult to implement.
difficulties in technology transfer options.

2.1.2 India

The Indian economy is growing rapidly and
pollution has increased, fueled by industrial
production (Box 2.1).

The industrial value chain consists of cottage
level manufacturing, subcontracting by SMIs,
and outsourcing by medium to large
companies. However, the SMI sector still
uses outdated technologies although some
larger manufacturers have upgraded their
technologies and improved their efficiencies.

• The SMI sector in India is grappling with
problems of outdated management
practices and use of inefficient and
polluting processing technologies. Many
employees are not skilled or technically
competent to operate and maintain
advanced energy saving technologies.
• The foundry sector in India generates
heavy environmental pollution and wastes
resources and energy because of outdated
technologies and equipment.

12 Chapter 2
An Overview of Barriers

2.1.3. Philippines • High cost of equipment for E3ST
application is an impediment, as most of
The SMI sector in the Philippines lacks these items are imported. This raises the
awareness of energy and environmental issue of technology transfer related to
issues. E3ST technologies such as locally
manufacturing these technologies. The
• At enterprise level, lack of collateral has obstacle here is the lack of competent
been a major obstacle in obtaining technical service providers.
finances from banks for implementation • Policy level barriers come from either not
of E3STs. Due to a lack of financial having a mechanism for SMIs for adopting
records and collateral requirements, better technologies or having an equal
assessing credit risk is difficult for lenders. policy for all industries irrespective of
The tedious procedures for
documentation, processing and reporting
requirements are also obstacles for Box 2.2 Non-enforcement of regulations is
procuring funds. Lack of expertise to a barrier to promoting E3STs
appraise E3STs is a barrier for lending
institutions. Sri Lanka
• The use of E3ST initiatives as a political
The Sri Lankan Desiccated Coconut sector
tool by pressure groups that claim that faces the continuing problem of treating
these initiatives are trade barriers retard wastewater. Some research institutions have
investment in E3STs. Industries succumb developed solutions for treatment, but these
are not adopted widely. Further development
to these pressure groups because of their
and promotion of available methodologies is
limited knowledge and understanding. not progressing since the factory owners do
not consider them a necessity. Measures like
E3STs can only be developed or marketed if
2.1.4 Sri Lanka there is a strong need at industry level.

SMIs in Sri Lanka are faced with unfavorable Philippines
conditions locally and from high competition
The Department of Energy and Environmental
from neighboring countries. Increasing cost Management Bureau (EMB) are two key
of inputs and insufficient economies of scale institutions, which oversee the energy and
have decreased their profit margins. environment sector in the Philippines. DOE has
no regulatory power and activities are mainly
• Reasons for not implementing E3STs are limited to raising awareness and information
dissemination. They cannot force a company
primarily cost oriented. Additional capital
to be energy efficient. EMB is the
deployment, increased operational costs environmental regulatory agency, which carries
and non-realization of net financial-gains out monitoring and enforces environmental
from E3STs are some of the important laws. Due to the wide scope of EMB, it cannot
comprehensively conduct monitoring and
reasons. Even the implemented E3STs or
enforcement activities on all industries. SMIs
those proposed to be implemented are also pose difficulties for the enforcement
more or less compliance driven rather agency due to their fragmented nature and
than needs driven. large number.

Chapter 2 13
Barriers to Promoting E3STs to SMIs in Asia
their size or sector. These perceived Box 2.3 Lack of government assistance is
anomalies at policy level prevent SMIs a barrier to promoting E3STs
from taking action in implementation of
E3STs (Box 2.2). An assessment on the Vertical Shaft Brick Kiln
(VSBK) Technology in Vietnam focused on its
technology status, performance and
2.1.5 Vietnam government policy in promoting it. Some of the
findings of the study are highlighted below:
The Vietnamese economy is in a transition
• In the short span of two years about 100
from central control to a market economy. new VSBKs were added. The technology
Still, the government owns most of the seems to have become firmly established
enterprises, although private investments are in the country. This has been a noteworthy
picking up. Government enterprises mostly achievement given the history of slow and
often-difficult introduction in several other
use outdated technologies. During the period countries.
of a centrally controlled economy, the • VSBK is the most efficient kiln among the
principle had been to build the largest possible different types of brick kilns used in
factories with the aim of providing Vietnam, with a specific energy
consumption of 0.85-1.1 MJ/kg of fired brick.
employment. Revamping these enterprises
Stack emissions from VSBK are lower
will be a major task in terms of technology compared to other kilns.
and investment.
VSBKs are replicating very quickly in different
locations in Vietnam, but at the central level,
• Enforcement of environmental
there is no clear policy to support the
regulations has had a low profile and is technology.
one of the reasons that SMIs, both existing
and new, are reluctant to invest in E3STs. Source: TERI, 2003
• Cost of new technologies and difficulties
in obtaining finances are barriers in barriers that inhibits the promotion of E3STs
Vietnam for the promotion of E3STs. could be illustrated as follows (Table 2.1),
• During this transition from centralized to with some examples at each level.
market economy, many industrial sectors
resist introducing E3STs. However, the The following sections describe these barrier
brick sector has been an exception (Box categories specific to the promotion of
2.3). E3STs through examples.

2.2.1 Managerial barriers
2.2 Types of Barriers
Promotion of E3STs in SMI sub-sectors faces
Barriers can mainly be categorized as market, many barriers due to management at the
technical, financial, management, enterprise level. Specific examples of these
environmental, information and regulatory. managerial barriers are as follows:
These categorizations also have perspectives
at enterprise, industry or national levels. Resistance to Change. SMIs inherently resist
Hence, a fundamental categorization of change. Any alteration to achieve a (positive)

14 Chapter 2
An Overview of Barriers

change is often perceived as a disruption of cleaner production technologies.
the present status. This is common for both
managerial staff and employees. In such a Inadequacies in Internal Management. SMIs, in
situation, efforts to adopt E3STs are not trying to achieve cost advantages, tend to
likely to be well received. In the case of non- hire managers or staff who may not have the
compliance of standards, SMIs may prefer capacity to appreciate the complexities of the
to pay the penalties rather than to adopt global or national environmental aspects

Chapter 2 15
Barriers to Promoting E3STs to SMIs in Asia

related to the business they are engaged in. sometimes costly, especially the initial
These inadequacies hinder the adoption of investment. Environmental technologies
E3STs in SMIs. undergo substantial research and enterprise
level prototyping is required, and these add
2.2.2 Human resource barriers to costs. For SMIs, it is not merely the cost
of new technologies that matter but also the
Lack of technical education and training of cost of retrofitting, as these enterprises have
SMI employees on E3STs make its promotion already invested in equipment and
and implementation difficult. These are the technologies that are not E3STs. Box 2.4
human resource barriers, a primary example gives an example of how high cost associated
of which is: with import of technologies is a barrier to
the promotion of E3STs in Sri Lanka.
• Inadequate Education of Employees. E3STs
and their benefits are sometimes beyond 2.2.4 Financial barriers
the understanding of employees of SMIs
because they represent a new concept in Financial barriers constitute a principal barrier
energy and environmental performance. faced in promoting E3STs. Some financial
Their understanding is important for barriers are as follows:
proper installation and functioning of
E3STs at factory level. Poor understanding Limited Access to Funding. Both development
of the functionalities of E3STs will banks and commercial banks offer funding
increase costs, hamper the achievement for the implementation of E3STs under
of desired results and disrupt production. various schemes. Although sources of credit
and finance are available, few SMIs use these
2.2.3 Technical barriers facilities because either they are unaware of
them or are unable to fulfill the criteria of
Availability and cost of E3STs constitute the lending organizations. SMIs often have
technical barriers. These barriers affect the no reliable financial records and have
sustainability of E3STs in relation to their difficulties with security and collateral
adoption in SMIs. requirements. Hence, from the lenders point
of view, assessing an SMI’s credit risk is
Limited Availability of Technology. SMI sectors difficult, considering the long payback
are diverse and in most cases are process periods related to E3STs.
oriented where solid wastes, effluents and
emissions are generated as part of the process. Procedural Setbacks. Even SMIs that can
SMIs have not kept up with technical establish their creditworthiness need to
innovations, such as the use of Information follow tedious procedures. This is more
Technology (IT), for better resource control common when interest rates are low. SMIs
and Cleaner Production (CP) for better do not feel comfortable with these delays and
environmental control. they do not want to obtain commercial loans
at high interest rates, which would offset the
Cost of Technology. Upgrading using E3STs is enterprise finances.

16 Chapter 2
An Overview of Barriers

Box 2.4 High cost associated with import
level, in either scale or added features. This
of technologies is a barrier to promoting makes it difficult for some E3ST application
E3STs providers to design and manufacture
equipment in a way that makes it possible to
To meet rising demand, raw steel is imported
into Sri Lanka. Due to the limited supply of
reap the benefits of economies of scale.
finished products, the effect of value addition
is very important in Sri Lanka where finished Emphasis on Green Products. The importance
products are nearly four times the price of raw or requirements customers place on products
material. Thus, steel fabrication factories in
Sri Lanka get maximum benefit from increased
manufactured using E3STs have an impact
productivity rather than from energy on SMIs adopting E3STs. If a particular SMI
conservation. Initial investment is high in Sri caters to green product markets, they have
Lanka due to the: to adopt E3STs. But often, green products
• necessity to import all equipment and
give more importance to product features
technologies for making improvements than to processing techniques.
• time required for improvements to be
• high cost of borrowing capital 2.2.6 Regulatory barriers

Source: UNEP, 2002 Regulatory policies and their enforcement at
the national level constitute some major
Conventional Appraisal Criteria. Lending barriers to promoting E3STs. Some examples
institutions operate on a risk minimization are as follows:
approach and often they prefer collateral to
cash flow. Under such circumstances, E3ST Inconsistent Enforcement of Laws and Policies.
projects do not always produce acceptable Inconsistent enforcement of laws reduces
appraisal results. The lack of technical the credibility of both the environmental laws
competencies of staff to appreciate the and the agencies responsible for
broader economic and environmental enforcement. The result is that SMIs - and
impacts of E3STs results in lending other polluters - disregard the need for
institutions relying entirely on financial compliance. From the promoter’s point of
factors. view, without a strong regulatory requirement,
E3STs may not have a place in the market.
2.2.5 Market barriers
Capacity of the Regulating Agencies. Regulating
Limited markets for products manufactured agencies, policy makers, environmental
with E3STs and also limited demand for pressure groups and the government need to
E3STs act as a barrier for adoption. Primary advise and assist SMIs by promoting E3STs.
market barriers are: Enforcement and penalizing defaulters have
not addressed the promotion and adoption
Limited Market for E3STs. The market size is of E3STs. Field level staff and regulatory
a barrier for the promotion of E3STs. Being personnel are not technically knowledgeable
specialized applications, E3STs need to be enough to advise on the improvement of
customized for each enterprise at factory processes or equipment to reduce waste,

Chapter 2 17
Barriers to Promoting E3STs to SMIs in Asia

effluents and emissions (Box 2.5). This is not research institutions.
a conducive situation for promotion of
E3STs from the policy or national Lack of Dissemination. Research institutions
perspective. and universities conduct research on
industrial pollution, publicise their studies in
2.2.7 Information barriers various forms and come up with solutions
including E3STs. But dissemination of these
The inability of SMIs to access information findings to the appropriate industries is at a
on E3STs and their applicability is a primary very low scale. Without dissemination,
inhibitor. Information barriers include: technology providers, E3ST developers and
SMIs have no way of knowing about work
Limited Access to Information. Lack of technical done in the area.
understanding of energy and environmental
issues in SMIs leads to distortion and
misinterpretation of facts with the result that
Box 2.5 Lack of institutional coordination
the best option may not be chosen. One of and implementation as barrier
the main reasons for this lack of technical
understanding is due to limited access to Coordination among agencies and
information on E3STs and SMIs’ inability departments is important in implementing
policies. Lack of coordination may lead to
to evaluate the best options available. Non- haphazard solutions.
availability of sector specific norms and
benchmarks make it difficult, not only for In the case of acid processing firms in Calcutta,
SMIs but also for advisors, to compare in- India, inefficient operations resulted in indoor
and outdoor pollution. Due to lack of
plant situations with desired situations that coordination between energy and environment
could be achieved by the adaptation of departments, the proposed solution of
E3STs. constructing a central effluent treatment plant
was not beneficial and did not yield results
Inadequate Communication. Information on the since the solution did not address the main
non-professional perspective from the use of source of pollution — inefficiency in process
E3STs is an important criterion for flow, work practices and poor knowledge of
health and safety. Authorities disregarded the
promotion. An issue like greenhouse gas core issues and addressed peripheral issues
emissions endangering society cannot be well due to lack of expertise (Das Gupta, 1998).
understood unless it is translated into
financial terms such as reduced fuel costs, In contrast, in one of the textile clusters in
Tirupur, South India where there are about 750
or benefit terms such as increased incentives, dyeing and bleaching units in operation, the
financial or social. units have joined through association and
constructed common wastewater treatment
2.2.8 Research and development facilities. There are now eight common
wastewater treatment plants operating
successfully in the cluster.
Barriers to the promotion of E3STs also arise
from inefficiency in disseminating
information from research and development
activities carried out at universities and

18 Chapter 2
An Overview of Barriers

2.3 Earlier Studies on Barriers Inhibiting level, made only through discussion, had not
Adoption of E3STs been prominent. None of the studies were
sector specific and they did not address
In the past decades, more attention has been sustainability issues in detail.
given to SMIs as a catalyst to improve
economies. The scope of earlier studies Some studies (UNEP, 1989; UNIDO, 1999)
indicates that they have focused more on focused on cleaner production (CP) rather
business promotion or overall than E3STs. These studies emphasized
competitiveness of SMIs. The introduction energy conser vation and resource
of technologies (not only energy efficient consumption reduction and environmental
technologies) is one key area these studies technologies in general, but they were not
addressed. These served as a baseline for specific to industry or SMIs and addressed
further elaboration at policy level not only technological aspects rather than policy
for SMIs but also for larger industries as well. options. Even though there are no specific
studies with regard to the promotion of
The ADB (2003) study reveals that the E3STs or barriers hindering them, the barriers
primary barriers inhibiting the adoption of for the promotion of CP (Box 2.6), energy
technologies by SMIs were financial, efficiencies and SMI promotion also fall in
followed by technological barriers. Figure 2.1 line with the barriers for E3STs. The barriers
further elaborates the survey results. that have been discussed in these studies can
be classified under the various barrier
Table 2.2 summarizes previous studies on categories described in section 2.2.
bariers that used more conventional
techniques for assessment of inhibitors. Since Vine (2005) has shown that lack of
these previous studies are used as a baseline government policy, subsidized energy cost
or cross-country comparison at various and unfavorable tax regimes are barriers for
levels, the techniques used are more promoting energy efficiency through energy
conventional than scientific and involved ser vice companies (ESCO) which are
mainly the beneficiaries of the policies, i.e. expected to play an important role in
industrialists. Involvement of the policy promoting energy efficiency.

Figure 2.1 Response for adopting technologies in SMEs

Chapter 2 19
Barriers to Promoting E3STs to SMIs in Asia

To overcome barriers in improving energy government and the utilities. Su et al. (2004)
efficiency, Gruber and Brand (1991) concluded that four major barriers, namely,
recommended a set of activities. These technology, information, training and policy,
include the motivation of company should be addressed to promote energy
managers, improved energy consultation, the efficiency in the Chinese foundry sector.
use of the multiplier function of associations,
and stronger engagement from the

20 Chapter 2
An Overview of Barriers

Box 2.6 Barriers for promotion of CP to availability of finance, affordability of
technologies finance, cost/benefit from investments,
attitudes of managers and lenders on
UNEP training material for the promotion of
Cleaner Production shows that political and investing in technology. This is relevant also
regulatory barriers contribute to the non- in the context of developed countries (Box
adoption of CP technologies. The study 2.8).
concludes that addressing these issues
through training and awareness will promote
application of CP. Technical and Information Barriers. Barriers
related to the existence and appropriateness
of technology, availability of information of
procuring, evaluation and adoption, technical
competence in assessing needs, and additional
requirements needed for implementation.
Policy and Market Barriers. Barriers related to
government recognition and acceptance of
E3STs, policy options and directions for
adaptations, mechanisms of enforcement,
Source: Huisingh, 2002 and public opinion about products that
address environmental concerns.

Furthermore, previous studies did not focus
on sustainable technology adoption by SMIs 2.4 Summary
as a policy option for mitigating GHG
emissions, or address issues related to energy Barriers for the promotion of energ y
efficiency or environmental pollution. They efficiency and reducing pollution in all
were not oriented towards SMI needs for industrial sectors appear to have much in
fulfilling the broader goal of GHG mitigation common. In the overall industry sector, larger
through either technical options or policy companies have the resources and the
options at national level. expertise to invest in E3STs and have
benefited financially, socially and
For this study, barriers are grouped under four environmentally.
broad categories as follows:
Though some achievements have been seen
Managerial and Organizational Barriers. Barriers in the SMI sector in Asia, it has dealt with
related to internal management, operational barriers related to development and business
requirements, capacities of human resources expansion rather than the adoption of E3STs.
and attitudinal issues. The type of industry
and ownership governs these parameters and Increasing competition in global markets and
they have an effect on the adoption of E3STs declining government support have lowered
(Box 2.7). the priority given to implementation of
E3STs. The most prominent barriers are
Financial and Economic Barriers. Barriers related financial, technical, managerial and policy

Chapter 2 21
Barriers to Promoting E3STs to SMIs in Asia

Box 2.7 The effect on adopting E3STs by the type of ownership of enterprise

A study carried out by the Department of Agricultural and Resource Economics, University of
California for the World Bank in 2002 on Industrial Ownership and Environmental Performance in
Chinese Enterprises, highlights the following findings.

The table shows that application of environmental mitigation measures is effective when the state
has less control over enterprises. The study concludes that ownership affects industrial
environmental performance. Economic efficiency, production and pollution abatement technology,
willingness to internalize environmental externality, and bargaining power with government and
communities in environmental enforcement were identified as the major reasons why firms with
different types of ownership perform differently in terms of pollution.

The study also found that the pollution charge instrument was effective in terms of providing
incentives for pollution reduction. Citizen complaints are found to have a strong positive role in
pushing polluters to reduce pollution discharges. This shows the great potential to use community
pressure approaches to promote industrial pollution control in China.

Pollution Intensity by Ownership of Enterprises in China

Note: The number of firms by
ownership is shown in the
parentheses. (10,000 Yuan = 1,200
US$, approx.)
TSS: Total Suspended Solids,
COD: Chemical Oxygen Demand,
SO2: Sulfur Dioxide, TSP: Total
Suspended Particles.
Source: Wang, 2002a

related. The studies of UNIDO (2003) and
Huisingh (2002) reinforce these observations.

Considering the diverse nature of the barriers
and the necessary measures needed to
overcome them, they have been grouped into
four categories: managerial and
organizational; financial; technical; and
policy and market barriers. They were
prioritized based on inputs from stakeholders
and are described in the next chapters.

22 Chapter 2
An Overview of Barriers

Box 2.8 Barriers to promoting E3STs in the EU and the USA

EU Action Plan to Boost Environmental Technologies

The European Commission has released an action plan to help new environmental technologies
overcome barriers to their development such as difficulty in access to capital. The action plan
includes the launch of ‘technology platforms’, establishing environmental performance targets for
products and services and making the most of funding schemes and public and private procurement.
(Royal Institute of Chartered Surveyors, News item 06 February 2004)

Barriers to Integrating Energy & Environmental Approaches, USA

While there are numerous benefits associated with integrating energy and environmental
approaches, states and localities are still faced with a number of challenges when transitioning
from single-agency, single-pollutant strategies to more collaborative multiple-agency, multiple-
pollutant solutions. Some of these barriers include:

• Jurisdictional boundaries that separate energy, environmental and public utility agencies;
• Regulatory provisions in energy, air and utility statutes that purposely or inadvertently impede
integrated, innovative approaches;
• Political impediments imposed by partisan or interest group actions;
• Resource and time limitations facing state and local energy, environmental and public utility
agencies that already have too much on their plates;
• Large scale, scope and complexity of issues that can be daunting if not examined in smaller,
focused pieces; and
• Rapidly changing power situation that has unpredictable impacts on the focus for other energy
and environmental issues in states and local communities.

These impediments, while presenting varying degrees of challenge, do not necessarily represent
permanent barriers to success. (Extract from Whitepaper on Taking Steps Toward Integrated
Approaches on Energy and Environmental Issues for State and Local Policy-Makers. Available
from Energy, Environment & Transportation Clearing House,
(Accessed 20 June, 2004)

Chapter 2 23
Study Approach & Activities

Chapter 3
3.1 Identification and Finalization of the

This chapter elaborates the approach and An initial list of barriers was developed in
methodology adopted in this study. It each country based on discussions with the
provides a description of the study stakeholders of SMIs and from the literature
methodology, tools used, rationale for (Chapter 2). During the discussions, SMI
selection of tools, composition of the management, policy makers and other
stakeholders in each study country and the stakeholders highlighted the major barriers
potential for replication of the methodology inhibiting the adoption of E3STs. This was
for similar studies. Figure 3.1 illustrates the found to complement the findings of Phase
overall framework of the study, which is I and II of the ARRPEEC Programme
described in the following sections. industry sector projects.

The list of barriers was identified and
finalized through consultation workshops
attended by the major stakeholders. The final
list of barriers was grouped into four major
categories: management and organizational,
financial and economic, technical and
information, and policy and market barriers,
with sub-categories as depicted in Table 3.1.

3.2 Tools for Prioritization of Barriers

For the identified barriers, each stakeholder
Figure 3.1 Framework of Research Methodology
attaches his or her own relative importance.

Chapter 3 25
B arriers to Promoting E3STs to SMIs in Asia

26 Chapter 3
Study Approach & Activities

Chapter 3 27
B arriers to Promoting E3STs to SMIs in Asia
Therefore, the priority varies among the MCDMs are used for a variety of applications,
stakeholders and also among the industrial such as strategic and programme planning,
sectors. To achieve a common prioritization, resource allocation, technology selection and
a conventional criteria-ranking method based prioritization and consensus building. Several
on point allocation, percentage weighting or MCDM tools are used as decision support
qualitative ranking could not be used, and tools and a sample list is given in Box 3.1.
so for this study a Multi-criteria Decision
Making (MCDM) methodology was used. The MCDM method employed for this study
The benefits of using an MCDM model are was the Analytic Hierarchy Process (AHP)
that it (Denis, 2003): introduced by Saaty (1980), which is a
pairwise comparison method. It provides a
• provides a formal decision process and proven, effective means to deal with complex
focuses on key issues and uncertainties decision-making and can assist with
• helps identify non-critical issues and identifying and weighing selection criteria and
provides immediate feedback expediting the decision-making process. It is
• helps identify and evaluate tradeoffs and a powerful and flexible decision-making
benefits methodology to help set priorities and make
• builds consensus and encourages the best decision when both qualitative and
accountability quantitative aspects of a decision need to be
considered (Saaty, 1999). By reducing

Box 3.1 Multi-criteria decision tools
A Selected List of Multi-criteria Decision Tools


The following list gives an overview on the various MCDM tools:

Curriculum assessment:

Portfolio management:

Sub contractor evaluation:

Product, process, environment matching:

28 Chapter 3
Study Approach & Activities

complex decision problems to a series of one- 3.3 Procedure of the Study
on-one comparisons (pairwise) and then
synthesizing the results, AHP not only helps A hierarchy structure based on AHP was
decision-makers arrive at the best decision, developed to prioritize the barriers inhibiting
but also provides a clear rationale for arriving the promotion of E3STs in SMIs (Box 3.2).
at that decision (Liberatore and Nydick, Based on the hierarchy structure, the listed
2003). Research on the application of AHP barriers (Table 3.1) were transformed into a
techniques for decision-making specific to questionnaire (Appendix A) which was
renewable energy and energy efficiency is completed by the stakeholders (managers/
available. For example, Pohekar and owners of SMIs, technicians, bank managers,
Ramachandran (2004) have provided an personnel from industrial associations, policy
extensive review of the application of AHP personnel, etc.) in the five countries. The
techniques in the energy sector. questions were framed in such a way as to
extract responses based on a pairwise
In the AHP methodology, the stakeholders comparison of all the barriers. To complete
determine their preference between two the questionnaire, the stakeholders used one
barriers and specify their relative importance of the three rating scales shown in Table 3.2.
with respect to their contribution to the For example, if barrier ‘A’ is more important
desired objective. Stakeholders indicated the than barrier ‘B’ for non-implementation of
relative importance for each barrier using a E3STs, the stakeholder could rate (i) 7 or (ii)
r a t i n g s c a l e ( Ta b l e 3 . 2 ) . T h e A H P very strong or (iii) 175 for A versus B.
methodolog y provides an indication of the
inconsistency of the comparison as well. The To complete the questionnaires, workshops
inconsistency level indicates the degree of were organized for stakeholders. The
understanding of the issues by the respondent workshop agenda included an introduction
and how that understanding (or lack of to the SMI in Asia project, the purpose of
understanding) contributes to the final the study, guidelines to complete the
judgment. If the inconsistency is more than questionnaires, and the expected outcomes
0.1 (i.e. consistency ratio of greater than 10%) of the exercise.
it is suggested to revisit the problem and
revise the judgments (Merit Decisions; Saaty,

Policy makers in the Philippines engaged in
filling in the questionnaire

Chapter 3 29
B arriers to Promoting E3STs to SMIs in Asia

Box 3.2 Hierarchy model for prioritization

After the identification and finalization of the prominent barriers that hinder the promotion of E3STs,
a tree-hierarchy based on AHP methodology can be structured to facilitate the prioritization process
(figure below). The tree is segmented into four levels: the top level is the overall barriers inhibiting
the promotion of E3STs; the second level has the four barrier categories; the third level includes
five specific sub-barriers under each barrier category, 20 in total, and the last level is the final goal
of this study—prioritization of the barriers inhibiting E3ST promotion in SMIs.

* For details on specific barriers refer to Table 3.1.

Adapted from Peng et al., 2005

The workshops were also helpful for
discussing barriers with stakeholder groups.
Other methods used to complete the
questionnaire included:

• One-on-one interviews with managers
(India, Sri Lanka)
• Facsimile and direct mailing of
questionnaires to stakeholders, who were
identified and selected through the list of
AHP methodology workshop for desiccated
institutional clients (Philippines) and
coconut millers in Sri Lanka

30 Chapter 3
Study Approach & Activities
mailing lists of participants of earlier  software
Box 3.3 Expert Choice
events (China)
Expert Choice is intuitive, graphically based
• Interviews with experts from selected sec-
and structured in a user-friendly fashion to for
tors (Vietnam) conceptual and analytical thinkers, novices
• Workshops to obtain the views of policy and category experts. Because the criteria are
makers (Philippines, Vietnam and Sri presented in a hierarchical structure, decision-
makers are able to drill down to their level of
expertise and apply judgments to the
objectives deemed important to achieving their
In the workshops, the stakeholders were goals. At the end of the process, decision-
provided with details to familiarize them with makers are fully cognizant of how and why
the decision was made, with results that are
the study objectives and methodology and
meaningful, easy to communicate, and
the AHP approach in particular. The actionable.
participants were also given presentations on
the use of AHP to explain the complex The software automates the decision-making
process by enabling organizations to structure
nature of the pairwise comparisons with an
and justify decisions. Expert Choice helps
example based on a comparison of cars groups to structure their objectives into a
(Liberatore and Nydick, 2003). decision model, prioritize using pairwise
comparisons, and justify decisions using
graphical reports and sensitivity analyses.
Considering the diverse nature of the stake-
With Expert Choice, organizations can focus
holder group, their responses were grouped on the strategic value of alternatives rather than
into four categories: managerial, technical, making decisions over table conversations. It
financial and policy personnel. Table 3.3 can be used to: predict likely outcomes, plan
projected and desired futures, facilitate group
shows the number of responses in each cat-
decision-making, exercise control over
egory in each country. changes in the decision-making system,
allocate resources, select alternatives, do cost/
benefit comparisons, evaluate employees and
allocate wage increases.


The stakeholders in the technical category
included managers and technicians of SMIs,
energy auditing consultants, and technical
project appraisers of financial institutions.
The financial category stakeholders were
managers or representatives of banks, fund-
ing agencies and financial institutions. Policy
The managerial category stakeholders were personnel were from Ministries, statutory
owners or senior management of SMIs who boards and industrial associations.
take decisions on implementation of E3STs.

Chapter 3 31
B arriers to Promoting E3STs to SMIs in Asia

3.4 Allocation of Weights for Judgments rating score can be entered, and delivers
weights for each barrier by converting the
The next step in the methodology (Figure 3.1) pairwise rating score based on a matrix
was the allocation of weights to the algebra algorithm (explained in Appendix B).
response/judgment of the stakeholders. Ex- The weight is indicative of the significance
pert Choice, a multi-criteria software pack- of the criteria against other criteria. The sum
age was used (Box 3.3). The rating given by of all the weights adds to unity. It also displays
the stakeholders for each pair of barriers was their inconsistency ratio. Figure 3.2 shows a
entered into the logical matrix provided in typical output from the analyzed
the software. The software facilitates this by questionnaire.
displaying a sliding scale so that any type of

Figure 3.2 Sample output of pairwise comparison

32 Chapter 3
Study Approach & Activities

3.6 Summary

A methodology for prioritization of barriers
for the promotion of E3STs has been
established based on a pairwise comparison
using an AHP approach with participation
from major stakeholders of the SMI sectors.
A significant outcome was the use of AHP
at a lower level of the industry and in
industrial sectors where traditional thinking
prevails. For many policy makers who
participated in this study, this was their first
3.5 Consolidation of Responses exposure to AHP. The simplified approach,
quickness in processing results and versatility
As the final step in the process, Step 4 (Figure of the methodology shows its potential for
3.1), for the four main categories of barriers replication in other sectors.
and their twenty sub-categories, pairwise
comparisons were made and all the
stakeholders’ responses were weighted by the
software. The weighted results were
tabulated for each barrier, corresponding to
stakeholder categories and the sectors, and
the average weights were obtained. Based on
these averaged weights, the barriers were
ranked for each sector and for each study
country representing each stakeholder group
(See Appendix B for all weights and ranks).
The availability of the summarized responses
is shown in Table 3.4. The ranking results
are presented and discussed in Chapter 4.

Chapter 3 33
Results & Discussion

Chapter 4
This chapter presents the results of the study
(Step 4 of Fig 3.1). The AHP provided a
weight for each criterion (barrier) and for each
stakeholder. The study countries
consolidated all responses for each study
sector according to stakeholder category. The
rankings were based on the responses for each
sector and stakeholder group depending on
the averaged weights.

As discussed in Chapter 3, the study took • In India, the Philippines and Vietnam, the
into account twenty barriers under four major management and organization barrier was
categories (Table 3.1). In the case of China, ranked second.
an additional four barriers (given in italics) that • China and Sri Lanka ranked the
were not considered by other countries were managerial and organizational barrier as
included. the least important, while in India, the
Philippines and Vietnam, the policy and
market barrier was ranked as the least
4.1 Overall Assessment important.
• In all five countries, the technology and
An overall assessment of the four major information barrier was not found to be a
categories of barriers in terms of their significant inhibitor to the promotion of
importance in inhibiting the promotion of E3STs.
E3STs is given in Table 4.1. This was
obtained by considering the preferences of The obser vations highlight only the
all stakeholders and shows the overall significance (or lack of it) and the findings
perspective of the stakeholders on the major from the observations are discussed in later
categorization of barriers. sections.

• In all the countries studied except China, Table 4.2 shows the overall ranking of all 20
financial barriers were ranked as the major barriers. It indicates the relative ranking of
inhibitor for the promotion of E3STs. In the barriers by all stakeholders. For the
China, policy and market barriers were purpose of the analysis and findings, only
ranked first and financial barriers were extreme ranking ends are discussed, i.e. the
ranked second. three most and least important barriers for a

Chapter 4 35
Barriers to Promoting E3STs to SMIs in Asia

36 Chapter 4
Results & Discussion
particular country. In the detailed ranking information barriers are considered to be
tables, the top-most three barriers, i.e. ranks insignificant except in the Philippines.
of 1, 2 and 3, and the three least important
barriers, i.e. ranks of 18, 19 and 20, are shown • All policy personnel agree that financial
in bold. Exceptions are also noted. and economic barriers are decisive and
factors like high capital cost, difficulty in
• The stakeholders consider that high initial assessing finance, poor returns and
capital cost is the major barrier in Sri tendency to invest in short term projects
Lanka, India, the Philippines and Vietnam. are contributive.
Other financial related barriers are also • Policy personnel in China and Sri Lanka
ranked high in these countries. In China, believe that technical barriers contribute
financial related barriers are of secondary least to the promotion of E3STs, while
nature. Sri Lankan, Indian and the Philippines
• The most prominent barriers in China are policy makers think that lack of
the lapses in enforcement of regulations government assistance, self-regulation and
and lack of government benefits, both weak public pressures do not inhibit
being related to policy issues that inhibit promotion.
the promotion of E3STs. • In China and Vietnam, government
• In general, the least important barriers are assistance and enforcement are key
the managerial issues. Sri Lanka, India and elements for promotion of E3STs.
the Philippines show a common consensus
on weak public pressure, self-regulation,
and inadequate management capacity, 4.3 Sector Specific Overall Ranking of
while in China a similar observation was Barriers
made. Lack of technical training at the
shop floor level is not considered a barrier. To compare the views of the different
• The barriers in Vietnam show a wide stakeholder groups, sector specific rankings
variance over the major categories. for each selected sector were performed.
Tables 4.4 - 4.7 show the most and least
significant rankings for each study sector by
4.2 Assessment of Barriers by Policy sector personnel. From the views of industry
Personnel personnel,

An analysis was done to ascertain the views • The financial and economic barrier is the
of policy makers towards the barriers. These most important one inhibiting the
policy personnel are involved in the industry adoption of E3STs in all countries except
sector or particular SMI sectors. Table 4.3 China, where the policy and market barrier
shows the responses of the policy makers. was ranked as most important.
• Responses vary for the least important
• The policy personnel in China, India, the barriers but the management and
Philippines and Vietnam believe that the organizational barrier was the common
financial barrier is prominent, while in Sri least rank. The market and policy barrier
Lanka it is the policy barrier. In all was also considered a low priority in the
countries, these barriers are considered Philippines and India.
significant, while technical and

Chapter 4 37
Barriers to Promoting E3STs to SMIs in Asia

38 Chapter 4
Results & Discussion

Table 4.5 gives the ranking for all the barriers significant barriers.
by industry personnel of the brick and tile • In Sri Lanka, India, and the Philippines,
sector. The following observations can be the least important is the management and
made: policy barrier, while in China and Vietnam
it is the technical barrier.
• Industry stakeholders in the brick and tile • One important obser vation is that
sector of Sri Lanka, India and the industrialists in the brick and tile sector
Philippines agree that high initial cost, of all the study countries except India
poor returns from E3STs, difficulty of more or less agree that inadequate
accessing finance and increased cost of management capacity is not a barrier.
production are significant barriers, while
in China, though these are important, Table 4.6 gives the ranking by industry
weakness in enforcement of regulations personnel in the foundry and metal casting
and lack of government assistance are

Chapter 4 39
Barriers to Promoting E3STs to SMIs in Asia

40 Chapter 4
Results & Discussion

Chapter 4 41
Barriers to Promoting E3STs to SMIs in Asia
• In China and India, the managerial and • The policy and market barrier is significant
organizational barrier is the least for non-adoption of E3STs, and in some
important. In the three countries, countries and sectors this could be the
infrastructure requirements, training, non- major barrier.
availability of technologies and weak • The technical and information barrier
public awareness are not prominent. together with the management and
Inadequate management capacity is one organizational barrier do not pose a
of the most insignificant. significant barrier for the promotion of
• The financial and economic barrier is the E3STs. However, they cannot be
most prominent barrier in India and the disregarded as insignificant.
Philippines, whereas in China, the policy
and market barrier is the most important. As evident from sections 4.1 to 4.3, the
High initial capital cost, poor returns and different stakeholders in the study countries
increased cost of production are some of have differing opinions on the role of barriers
the most significant barriers in the foundry inhibiting the promotion of E3STs. Box 4.1
sector. presents a case study from China.

Table 4.7 gives the rankings for all the barriers
by industry personnel in the tea processing, 4.4 Country Specific Factors
desiccated coconut and the textile sectors.
The results obtained with respect to ranking
• In the tea and textile sectors in India and in specified sectors for study countries are
the tea and DC sectors in Sri Lanka, the based on the views of industry and policy
most important barrier is financial and personnel. The analysis of these results,
economic. The sub-barriers are high initial based on observations of how rankings
cost, difficulty in accessing finance, poor compare, however, need not be limited to
returns, and increased cost of production their views. Country specific factors, such as
with the adoption of E3STs. macro economic conditions, level of
• Even though not ranked as prominent, technology development, capabilities of
poor financial returns from E3STs and supporting institutions and government
management desire for short term intervention also have an effect and need to
investment are important barriers to the be considered. It is important to focus on
promotion of E3STs. how relevant the E3ST needs of the SMIs
• The managerial and policy barrier was the are in the above context. Table 4.8 highlights
least significant, particularly lack of self- country specific situations with regard to the
regulation at factory level, inadequate external environment. The scale in Table
management capacity and satisfaction 4.8 indicates the level of availability or
with existing technologies. intervention for the specific factors. These
factors were rated by the project team in the
Based on observations from Tables 4.4-4.7, study countries based on their experiences
according to industry personnel, and in consultation with national experts.

• The financial and economic barrier is the The country specific factors also contribute
most significant barrier inhibiting the to the findings mentioned in the earlier
promotion of E3STs in SMIs. sections. An overview shows that:

42 Chapter 4
Results & Discussion

Chapter 4 43
Barriers to Promoting E3STs to SMIs in Asia

44 Chapter 4
Results & Discussion

Box 4.1 Perspectives of different • Environment regulations are in place, but
stakeholder groups in China enforcement is inadequate.
• Commercial availability of E3STs is low
The perspectives of the three stakeholders even with a high level of development in
regarding the barriers are shown in the figure. the engineering sector and a moderate
There seems to be a common consensus
level of research and development
among the different stakeholder groups in China
that external barriers (policy & market and activities.
financial & economic barriers) are much more • Financial markets are developed or in the
important for adoption of E3STs than internal process of development. However, need
barriers (technical & information, management for collateral is still emphasized.
& organizational barriers). All stakeholders • Strong supporting institutional
believe that awareness of energy and
frameworks exist for industry and
environmental performance of E3STs in the
management level and the technological environmental affairs, but outreach to
operational hurdles are not the most prominent SMIs is poor.
barriers for the adoption of E3STs. • Information flow to SMIs is still in the
development stage.
Although the differences between the
stakeholders are not significant, the three
different stakeholder groups assigned
considerably different weights for each of the 4.5 Enhancement of Energy and
barrier categories. For example, the technical Environment Performance by Removal of
stakeholders gave the highest weight to the Barriers
policy and management barriers (0.419), while
the management and policy stakeholders
ranked them second (0.320 and 0.311,
The removal of prominent barriers for
respectively). This might mean that the implementing E3STs, i.e. financial barriers
technical stakeholders are expecting policy and policy barriers, will help SMIs adopt the
and market factors to play a greater role than technology options available. Equipment
the other two stakeholders are in the promotion suppliers can make use of the increased
of E3STs. market to develop and market efficient
It can be seen that management stakeholder
opinions were the nearest to the overall result.
Hence, while formulating policies for promoting It is not only policy interventions that will
E3STs, the views of different stakeholders promote the adoption of E3STs as means to
should be considered. reducing GHG emissions. Through good
operation and maintenance practices,
adoption of E3STs and fuel substitution,
SMIs will increase energy efficiency and
reduce environmental emissions. A study has
been carried out under the SMI in Asia project
to estimate GHG emissions and mitigation
options for SMI sectors (Kumar et al., 2005).
A summary on estimated CO2 mitigation
potentials is given in Table 4.9. The
incremental reductions in GHG emissions by
adopting technology options and policy
Source: Peng et al., 2005 options will be as much as 45% to 84%.

Chapter 4 45
Barriers to Promoting E3STs to SMIs in Asia

46 Chapter 4
Results & Discussion
For example, in Vietnam, application of aspects will enlarge the scope of these
technology options for the brick and tile policies beyond monitoring and enforcement.
industry provides the best GHG emission This will require a more proactive and
reduction potential of more than 40% (Box collective approach from all industrialists,
4.2). financial organizations, technology providers,
policy makers and the general public in
By switching to low carbon fuels such as formulating policies for removal of barriers
furnace oil and natural gas, the foundry sector for the promotion of E3STs.
can also effect significant reductions in GHG
emissions. In the brick and tile sector,
replacement of traditional kilns with vertical Box 4.3 Low investment, quick returns
continuous kilns, application of ceramic Many E3STs have provided quick returns as
wool insulation on the walls of traditional shown in the textile industry (India) and the
tile kilns and use of process monitoring ceramic tile industry (Sri Lanka)
devices will lead to lower emissions.

Box 4.2 Adoption of technology options
in the brick & tile industry

Shown below is a comparison of fuel and
corresponding CO2 reduction by replacement
of traditional Clamp kilns with continuous
Vertical Shaft Brick Kilns in Vietnam for an
4.6 Incorporation of Barrier Removal in
annual production of 7.2 billion pieces (2000): National Policy Implementation

The global GHG emission reduction
requirements, increased awareness of
sustainability issues and growing public
pressure for establishment of a pollution free
environment are encouraging governments to
Fuel switching options in the DC sector put in place pertinent environmental
could reduce 7.5% of the GHG emissions regulations. The following section highlights
for Sri Lanka and 21% for the tea sector in key issues in the policy framework, regulation
India. The GHG savings for the textile sector and financial aspects that will help in the
in India from fuel switching will be a promotion of E3STs in SMIs.
remarkable 25.4%.
4.6.1 Policy Framework
But technology options are costly in terms
of new investments and retrofitting (Box Key economic policy issues aimed at energy
4.3). This is where a sound policy framework and environmental perfor mance
backed by fiscal, energy and environmental improvement by adopting E3STs include
policies can create a conducive climate for energy pricing, market-based instruments and
SMIs to seek and invest in E3STs. financing.
Assessment of the benefits of adopting
E3STs, not only from the financial and Energy Pricing Policy
economic viewpoint, but also from social Power purchased from electric utilities

Chapter 4 47
Barriers to Promoting E3STs to SMIs in Asia
contributes significantly to the cost of most common is the “polluter pays” emissions
production for SMIs. If industries tend to fee system.
conserve energy by reducing their demand
for electricity, the utility company will Market-based instruments are most likely to
consume less fuel and reduce pollution. This be successful when:
is increasingly being promoted in developed
countries. In Japan there has been a sustained • Decision-makers are aware of the
reduction in the use of energy in the past lobbying asymmetry between polluters and
few years (Matsuo, 2004). tax-payers so exemptions can be avoided.
Although opponents to MBIs argue about
However, due to insufficient installed power competitiveness as a reason for
capacity in developing countries, industries exemptions, these exemptions are often
seek alternative power generation sources. provided for the largest polluters.
For example, industries commonly invest in • The level of the tax or charge is high
diesel generators (USAID, 1999). Diesel is enough to accurately reflect external costs
usually subsidized in many countries. but not too low to provide adequate
Therefore, unless energy pricing policy incentives for polluters. The revenue
encourages use of cleaner fuels and could be ear-marked to support polluters’
alternative power sources with a focus on technical adaptations.
energy saving methods (E3STs), industries • There are no free allocations of tradable
will continue to use energy resources that are permits; these have negative affects on the
least expensive irrespective of environmental cost-effectiveness and fairness of the
damage. If attractive policies are in place, instrument.
industries could invest in cleaner electricity • MBIs are not introduced to replace direct
generation such as wind power. regulations. Charges are used not to
replace regulations but to supplement
Market-Based Instruments them. Regulations should be kept in place
Market-based instruments (MBIs) can be as ‘safety-nets’.
defined as proxies for market signals in the
form of changes to relative prices or a By way of example, the Laguna Lake
financial transfer (Andersen, 1998). They are Development Authority in the Philippines
aimed at forcing producers and consumers charges fees on effluent discharge into the
to take into account the pollution lake or tributary streams. For reducing
implications. At the same time, MBIs allow pollution, industries are rewarded by lower
them the freedom to choose and adapt their fees and fewer penalties. This approach has
activities and enable them to consider and contributed to measurable improvements in
apply least cost solutions. the quality of Laguna Lake (USAID, 1999).

Market-based instruments (MBI) impose fees China has introduced MBIs to curtail
and provide incentives to achieve the same pollution. However, the mechanism did not
objective as regulatory policies. The various achieve its objectives due to a low fee
types of market-based instruments include structure and lack of incentives. Polluters will
user charges, emission charges or taxes, pay low fees but avoid investments, as
deposit-refund systems, subsidies, emission observed in Vietnam. In India and Sri Lanka,
reduction credits and tradable permits. The MBIs are yet to be implemented.

48 Chapter 4
Results & Discussion
Financing E3STs Box 4.4 Environmentally friendly solution
Investing in E3STs is a new approach for both funds (e-friends) by NDB Bank in Sri Lanka
industry and financial institutions. Industries
are either not familiar with or lack the capacity Any financially viable enterprise in operation
to make cost-benefit analyses and or scheduled to commence operation at the
preparation of bankable documents. Bankers time of the loan application is eligible for
assistance under the e-friends scheme of the
are unaccustomed to appraising credit request NDB. An enterprise seeking to implement a
proposals for E3STs. As financial institutions pollution control project should be able to
are isolated from policy issues related to conform to the regulations of the National
energ y and environment, a working Environmental Act. An enterprise implementing
partnership between policy makers and an energy savings project should justify the
financial institutions will be useful for savings achieved.
exchanging experiences, purposes and Any industry in any sector is eligible for this
objectives. loan, which is mainly for acquiring equipment
that contributes to reductions in energy
Though many financing schemes and consumption, end-of-pipe treatments and lower
institutions designed to assist SMIs are waste production, equipment that substantially
available, their effectiveness in attracting improves the safety of the workplace, and
relocation of highly polluting industries to
SMIs to invest in E3STs is low. The industrial estates equipped with waste
Countryside Loan Fund of the Land Bank treatment plans. The principal terms and
of the Philippines, the Small Industrial conditions of the loan are given below.
Development Bank of India (SIDBI) and the
National Development Bank (NDB) of Sri Under the credit component
Lanka target SMIs to adopt environmentally Loan Amount: Up to 100% of the project cost
subject to a maximum of Rs. 20 million.
friendly technologies through provision of Equipment that, in addition to pollution control
concessional loans. SIDBI was set up as a results in a substantial increase in profitability,
wholly-owned subsidiary of the Industrial will be eligible for a loan covering 70% of the
Development Bank of India (IBDI) in April cost.
1990. SIDBI is the principal financial Payment period: Maximum of 10 years
institution for promotion, financing and Interest rate: 8.5% (revised biannually)
Security: Usually a mortgage over the project
development of industry in the small-scale assets
sector and co-ordinates the functions of Grace period: Up to a maximum of 24 months
institutions engaged in similar activities. The
NDB Bank in Sri Lanka acts as the Under the technical assistance component
administrative body for the implementation Up to 75% of the project cost subject to a
of a credit line provided by the Overseas maximum of Rs 750,000. Technical assistance
loans available to cover consultancy costs
Economic Cooperation Fund (OECF) of directly related to the project and implemented
Japan for the promotion of energy savings under the e-friends loan scheme.
and pollution control projects for industrial Payment period: Maximum of 5 years
enterprises in Sri Lanka. This loan scheme is Interest rate: Interest free
known as the Environmentally Friendly Security: Usually a mortgage over the project
Solution Funds (e-friends). Box 4.4 describes assets
Grace period: Up to a maximum of 12 months
the e-friend scheme. Financing issues as a
barrier to E3ST promotion is further Source: Environmental Unit, National
discussed in Section 4.6.3. Development Bank, Sri Lanka

Chapter 4 49
Barriers to Promoting E3STs to SMIs in Asia
4.6.2 Regulations and Standards extended to other cities as well. Thus, strict
enforcement without variations and
Cost savings alone may not always be exemptions delivers results. In other cases,
sufficient to persuade industries to implement SMIs need support to comply with
E3STs. Some regulations may be necessary regulations. This may require technical as
to motivate industries to take action. well as financial support. The case of the
Environmental laws and regulations foundry sector in India (Box 4.5) shows that
supported by applicable standards and measures to reduce pollution through
government’s capacity and willingness to improved energy efficiency need to be
enforce them for the benefit of the broader demonstrated to potential users for
public are pivotal factors for successful widespread implementation.
implementation (USAID, 1999).
Lobbying power of the public to assist enforcement
Monitoring and enforcement Creation and strengthening of public
Monitoring and enforcement of environmental councils as a means of
environmental regulations are not observed pressuring industry is not new. In Europe,
in most instances because of insufficient pubic interest bodies exist for looking at
resources and overlap of purviews. There are environmental issues and for other public
several agencies and institutions that services as well. The Carbon Trust forum in
overlook different sections of the industry the UK1 provides subscribers, industrialists
in the context of energy and environment. and the general public with energy saving
They have insufficient resources and there advice and information on technology while
are some ambiguities of pur view in acting as an energy watchdog.
implementation. The industries are therefore
not clear or aware of the type of activities to This kind of pressure group helps push
be undertaken. Even though MBIs are regulatory authorities beyond enforcement
implemented in China, lower pollution fees and offer public recognition measures like
and lack of enforcement have made them eco-labelling and industry coding schemes.
ineffective. These are often voluntary mechanisms that
drive industries to surpass the standards and
Variations and exemptions seek public acceptance as a competitive
The availability of exemptions is a negative advantage (Box 4.6). Existence of such
incentive for adopting E3STs. An empirical pressure groups will move the monitoring and
study done in China (Wang, 2002b ) enforcement of environmental regulations
concludes that privately owned enterprises closer towards the pubic interest rather than
have less bargaining power with the policy or penalty oriented measures.
authorities than state owned enterprises in
relation to pollution charges, and hence 4.6.3 Financing E3STs
exemptions are possible for state enterprises,
i.e. a low priority for pollution abatement. As the most significant barrier inhibiting the
But, at present, the law on promotion of promotion of E3STs, financial and economic
Cleaner Production encompasses all sectors. barriers obstruct innovation and create
The enactment of the law forbidding the use unwillingness to adopt E3STs and be part of
of clay bricks by 2005 is applicable to all a broader environmental agenda in pollution
provincial capitals in China and will be prevention. Key considerations of

50 Chapter 4
Results & Discussion

Box 4.5 Stringent environmental controls
industrialists, lenders and policy makers
result in development and adoption of towards financing E3STs are as follows:
better technology
Techno-economic assessment
The Indian foundry sector has over 6000 cupola- The high cost of E3STs is one of the
based foundry units located mostly in clusters. financial barriers to implementing E3STs.
The energy intensity of these units is high as
shown by the charged coke percentage. After
From the policy makers’ point of view, it is
strict imposition of emission standards, most important to identify whether the high cost
small-scale foundry units found it extremely is due to its technical features or due to
difficult to comply, primarily due to the lack of costs added during transactions. If the
availability of ready-made gas cleaning former, then policy options should focus on
systems. financing instruments; whereas if it is the
To address this issue, a demonstration plant
latter, policy interventions should be
was commissioned in August 1998 by TERI. through fiscal policies such as import
The cupola they developed is an intermittent guarantees, duty waivers, reduced or no
type and is used for production of ingot moulds. taxes, and incentives for implementation of
The demonstration cupola was 33% more E3STs. If the capital cost is high due to
energy efficient with a coke saving of nearly the high transaction cost of lending
65%. The degree of abatement in stack
emissions was also substantial and emission
organizations, interventions of a different
of suspended particulate matter was reduced sort are required. The specialized nature of
by two-thirds. A second unit was installed in E3STs raises the issue of adaptability.
2001 and saved 45% on coke, produced higher Sustainability of a technolog y in a
metal temperature and fewer casting rejects. developing economy depends on its
Reduction in Suspended Particle Matter adaptability to the society and adaptability
is deter mined by the complex
interrelationships of various factors
(Dunmade, 2002; Box 4.7). Careful
evaluation of a technology in terms of its
contributions will ensure that only
sustainable technologies are acquired.

Financial instruments
Introduction of financial instruments
supported by fiscal policies and energy and
environment policies will encourage
financing institutions to come-up with
attractive financial packages particularly
targeted for SMIs. Difficulty in accessing
financing is often not from the lack of
money but from difficulties associated with
the process. To support SMIs, lending
institutions like SIDBI in India have come
up with appropriate methods (Box 4.8). In
the Philippines, the Development Bank of
Source: TERI, 1999 Philippines operates a credit window

Chapter 4 51
Barriers to Promoting E3STs to SMIs in Asia

Box 4.6 Eco labeling / industry coding as a catalyst for adopting E3STs

The Singapore Green Labeling Scheme

Singapore’s Green Label scheme was launched in May 1992
by the Ministry of the Environment, with the objective to raise
the environmental consciousness of consumers and to promote
“green” consumerism. It also encourages manufacturers to
design, manufacture and supply environmentally friendly
products. The Singapore Environment Council (SEC) has
administered the scheme since June 1999. The criteria for the
award of the Green Label is set by an advisory committee of
representatives from government, private sector organizations,
academic institutions and statutory boards and an industry
review by responsive manufactures who formulate and agree
on standard criteria and inputs from the Global Ecolabelling Network (GEN) and affiliated members
on standards creation and agreements between international eco-labels. Once criteria are set for
a particular category of products, manufacturers, importers and retailers of that product may apply
for the Green Label by submitting an application along with supporting evidence. The scheme is
voluntary and fully backed by the public.

Source: Singapore Environment Council, 2005 Industry compliance at the start of the
Going public on polluters in Indonesia

The Program for Pollution Control, Evaluation and
Rating (PROPER PROKASIH) is a landmark
initiative in Indonesia. It assigns environmental
performance ratings to industries which are then
announced to the public. The main objectives of
this program are to increase compliance with
environmental regulations, promote adoption of
clean technologies, create incentives for polluters
to strengthen their in-house environmental
management capabilities, and to prepare
companies for ISO 14000 certification.

The introduction of PROPER PROKASIH has
sent a strong signal to polluters who have come
under greater pressure to change their
complacent attitudes towards pollution control.
The program has received extensive coverage in
the local and international media, and groups
ranging from citizens to senior enterprise managers have become aware of the ratings of individual
factories. In the six months since the publication of the ratings, about ten polluters succeeded in
improving their rating to the next scale. Half of the Black plants improved their rating to the next

52 Chapter 4
Results & Discussion
Policy interventions will be needed to secure
Box 4.7 Adaptability of technology in
investment through fiscal policies tied to
developing countries
performance-based energy and environment
One primary objective of importing technology policies. For instance, financial schemes could
is for improving the industrial development base be linked to parameters of MBIs. Industries
to achieve technological advancement. earn credits or subsidies through energy
However, many such efforts by developing savings or pollution prevention and these
countries have failed because imported
could be exchanged for reduced interest rates
technologies are not suitable. A number of
indices that decision-makers can use are for investments made in E3STs. A new
available to assess the suitability of a approach is needed in appraising E3STs
technology and its likely sustainability over the which includes the evaluation of
long term. By identifying and examining environmental and social benefits within its
sustainability factors in relation to the techno- full life cycle. Banks in study countries are a
economic level of development, the promotion
good platform for launching for these efforts
of appropriate technologies can be greatly
enhanced with supportive policies. The figure considering the factors listed in Table 4.8.
below illustrates the underlying factors that
promote the adaptability of specialized Availability and access to funds
technologies. Making finances available at a level below
commercial financial institutions will help
SMIs obtain finances more easily. This is a
lesson learnt and frequently disseminated by
SMI development agencies (UNCTAD,
1999). Even though there are moderate
successes in SMI development through
financial assistance (Box 4.9), the
achievements are not significant. One of the
reasons for the failure of financial assistance
in making SMIs grow is cited as the
indifference of the financial institutions
towards the SMI sector. It was noted by
development agencies that availability of
Source: Dunmade, 2002 finances through rural banks might have
shown better results (PECC, 2003).

scheme to facilitate SMIs. If the technology In the context of SMIs, the above
is appropriate and provides the desired observations are an important indication that
results it is only a case of proper financial SMI financing facility disbursements should
and technical appraisal. The decision of be directed towards lending institutions
financing can be left to the financial closer to the SMIs. Together with state
institutions if industry provides assurances support, SIDBI in India, Bank Rakyat in
regarding technology sustainability. Indonesia and Land Bank of Philippines have
developed mechanisms to make finances
available to SMIs (PECC, 2003).

Chapter 4 53
Barriers to Promoting E3STs to SMIs in Asia

Box 4.8 Small Industry Development Box 4.9 Sustainable Guarantee Facility
Bank of India (SIDBI) (SGF) for energy efficiency and
renewable energy projects in Sri Lanka
Technology Upgrading Programme (TUP)
of SIDBI The Sri Lankan Government is in the process
if establishing a Sustainable Guarantee
The competitiveness of the products of small- Facility (SGF) aimed at improving access to
scale industrial units depends to a large extent finance for energy projects in Sri Lanka. The
on their productivity levels, price factors and SGF is expected to be operational in 2005.
quality characteristics. SIDBI’s technology The South Asian Regional Initiative for Energy
upgrading and modernization programme and Nexant, Inc., on behalf of the United States
(TUP) is aimed at improving the technical Agency for International Development (USAID)
capabilities and competitiveness of SSI units is providing SGF for energy investments in Sri
in clusters by introducing commercially proven Lanka. The Energy Conservation Fund (ECF)
technologies which will result in significant of Sri Lanka is to provide repayment
improvement in quality, productivity, cost guarantees to Participating Financial
reduction, saving of energy and raw materials, Institutions (PFI) for loans made, and is
and reduction in the level of pollution. targeted to non-conventional/renewable energy
SIDBI provides support and co-ordinates the and energy efficiency projects. It is to overcome
services of consultants, and backs up their the major barrier faced by energy efficiency
efforts for arranging financial assistance, projects, namely the lack of collateral, by
through banks or State Financial Corporations providing a comprehensive repayment
(SFCs) under its refinance assistance guarantee that will act as a collateral substitute.
schemes. The Bank also provides direct PFIs that provide funds to the projects will have
financial assistance through its Technology the option of requesting repayment guarantees.
Development and Modernization Fund The total guarantee from the SGF for a
scheme. Regular follow-up and monitoring is particular project will not exceed 75% of the
undertaken by SIDBI and implementing total loan offered.
agencies are suitably compensated by way
of professional fees for undertaking an SGF as a general principle seeks to support
assignment. projects:
TUP has been launched by SIDBI in more than • which demonstrate the economic and
25 clusters, which range from the seafood productivity advantages of energy
processing industry (Coastal Kerala) to the efficiency and non-conventional energy
brass and bell metal industry (Hajo, Assam) investments,
and from the scientific instrument industry • display technical viability of non-
(Ambala, Haryana) to artisan-based conventional renewable energy systems
blacksmith units (Mylliem, Meghalaya). and have a high probability of replication
Impact assessment studies in selected in the future,
clusters have revealed that: • that are using technology that is proven
in terms of its feasibility and
• Earnings of artisans has gone up from effectiveness, and
Rs. 30 to Rs. 75 in the brass and bell • that have a clear payback period and are
metal industry of Hajo, Assam. financially capable of repaying the
• Fuel savings of Rs. 20,000 per month per principal and interest amount of the
unit were achieved by the foundry units of project loan.
Howrah, West Bengal.
• Annual savings of Rs. 2.3 million were
achieved by the units manufacturing
bicycle and bicycle parts in Ludhiana. Source: Energy Conservation Fund of Sri

54 Chapter 4
Results & Discussion
4.6.4. Strategies/Drivers

Three broad categories of environmental
policy instruments have evolved over the past
two decades (Andersen, 1998), namely:

• Regulatory instruments whereby public
authorities mandate the environmental
perfor mance to be achieved or the Figure 4.1 Convergence of Policy, Regulations
technologies to be used by industries. and Public Acceptance for improvement of
• Economic instruments whereby firms or environmental performance (Helby, 2001).
consumers are given financial incentives
to reduce environmental damage. 4.7 Summary
• Voluntary approaches whereby firms make
commitments to improve their Four categories of barriers — management
environmental performance beyond what and organizational barriers, financial and
the law strictly demands. economic barriers, technical and information
barriers, and policy and market barriers —
The framework within which an industry were prioritized using a multi-criteria
operates is illustrated in Figure 4.1 in the decision-making tool based on inputs from
context of these instruments. Industries stakeholders. The most significant barrier in
approach environmental challenges in India, Sri Lanka and the Philippines is the
different ways. Some see these as costly and high cost of E3STs; in China it is the lack of
choose to ignore them as much as possible, financial incentives; and in Vietnam it is
i.e. environmental rearguards. Others see management’s fear of the high cost of
superior environmental performance as a production due to E3STs. In none of the
competitive advantage that will put them countries is the non-availability of E3STs or
ahead of others, i.e. environment vanguards. the lack of technical or managerial skill seen
as a major barrier for adoption of E3STs. The
Environmental policies tend to address these barriers were also prioritized based on specific
groups in different ways. The rearguard feels stakeholder groups (policy and industry
the weight of regulations, enforcement and personnel) and SMI sectors. Key issues in
taxes, while the vanguard is stimulated by policy frameworks and regulatory and
policies that raise public awareness, labelling financial aspects that will help in the
schemes and industry coding that promotion of E3STs in SMIs were also
differentiates them from the rest (Helby, described with examples.

Policy framework backed by appropriate
energy and environmental policies, market
measures and financial instruments will push
SMIs to adopt E3STs to achieve compliance
(rearguards) and motivate them to go beyond
compliance and achieve public acceptance
and recognition (vanguards).

Chapter 4 55
Conclusions & Recommendations

Chapter 5

SMIs are an important sub-sector of Asian Having prioritized the important barriers
developing economies and will play a crucial through a more participative approach, this
role in the years to come. Whilst their current study serves as a platform for further action
level of technology use is traditional and by SMI stakeholders, policy makers in
inefficient and causes unnecessary energy particular. The study provides scientifically
consumption and emissions, there have been supported information on key areas that need
no significant efforts undertaken to address to be addressed for the promotion of E3STs
their energy-environmental issues. Therefore, in the SMI sector.
SMIs need attention in technology upgrading.
5.1 Prioritized Barriers
Adoption of energ y efficient and
environmentally sound technologies (E3STs) The following section presents the important
is one of the major actions that can be taken barriers in general and for each country.
to improve their energy-efficiency to reduce
emissions and cost, thereby improving their General
competitive position in the world market.
However, the adoption of E3STs is The most important barrier is the high capital
hampered by financial, technical, managerial cost of E3STs in India, Sri Lanka and the
and other barriers. Philippines; lack of financial incentives from
the government in China; and management
The five Asian countries in this study already fears of higher costs of production due to
have sufficient policy frameworks to improve E3STs in Vietnam.
the energy and environmental performance
in the SMI sectors considered in this study. In China and Vietnam, lack of enforcement
What has been lacking is the convergence of of regulations is also an important barrier
mechanisms for a direction that achieves the whereas they are not considered significant
purpose that these policies are meant to in other countries. Inadequate information on
serve. Case studies show that focused efforts E3STs is the second ranked barrier in
with appropriate strategies can bring results. Vietnam but in other countries it is not so
Therefore, to develop appropriate strategies significant. In none of the countries was non-
for overcoming them, barriers have been availability of E3STs or lack of technical or
prioritized based on inputs from stakeholders managerial skill seen as a barrier for adoption.
including policy makers, SMI management
and financial institutions.

Chapter 5 57
Barriers t o Promoting E3STs to SMIs in Asia
In China and technologies and afraid of adopting any
changes in technology. At the same time,
Policy and market related barriers are by far their investment priority is for expansion of
the most important in hindering the adoption production capacity rather than improving
of E3STs. Under this category, lack of technologies. Lack of public awareness or
financial and fiscal incentives such as tax demand for green products or non-availability
exemptions or subsidies for installation are of E3STs is not considered a barrier.
the main barriers. At the same time, weak
enforcement of environmental regulation is In the Philippines
also an important barrier for non-adoption
of E3STs. Financial and economic barriers are the most
important barrier to adoption of E3STs in
Financial and economic barriers are the the Philippines, of which high capital costs
second most important. High capital cost of and difficulties in accessing financing are
E3STs and their poor returns are particular identified as the most important.
barriers under this category. Although
technical and information or management and Management attitudes towards E3STs is an
organizational barriers are not significant, important barrier as their priorities are
lack of information on E3STs and towards expansion of production capacity
management’s investment priority for the and increasing market share rather than
expansion of production facilities hinders implementing E3STs. However,
adoption. management’s technical or managerial
capacity is not a hindrance.
Neither lack of technical skills nor the
infrastructure to incorporate E3STs in In Sri Lanka
existing facilities are reasons for non-adoption
of E3STs in China. Financial and economic barriers are the most
important in Sri Lanka. These include high
In India capital cost of E3STs, difficulties in
accessing financing and poor returns on
Financial and economic barriers are the most capital. At the same time, fear of increased
important barriers hindering the adoption of production cost due to adoption of E3STs
E3STs in India, particularly high capital costs is also one reason for non-adoption.
and poor returns. The fear of increasing cost
of production due to implementation is Policy and market related barriers are the
another important barrier. second most important in Sri Lanka,
particularly low demand for green products.
Management and organizational barriers are Lack of information, non-availability and
the second most important. SMI management service are also important barriers in Sri
staff are satisfied with their current processes Lanka.

58 Chapter 5
Conclusions & Recommendations
In Vietnam
These barriers could be addressed by a single
In the Vietnamese SMI sector, management window system, wherein an individual
is concerned that adoption of E3STs will technology board or institution with
incur additional costs and under mine sufficient resources could assess the
competitiveness in the marketplace. This is technology and finance the projects. This
found to be the major barrier in Vietnam. would avoid the ambiguity of the present
High capital cost is also a factor. system with a separate technology evaluation
and financial assessment.
Lack of information is identified as the
second most important barrier. Non- Credit mechanisms and funds flow to banks
availability is not seen to be a barrier. Lack and other financing agencies should be tailor-
of enforcement of regulation is also made so that they can provide financial
identified as an important barrier. assistance to SMIs in the most flexible and
least-cost manner. This would overcome
5.2 Recommendations barriers to E3ST adoption due to non-
availability or difficulties in accessing
Addressing all the barriers may not be finance. Guarantee funds or similar
possible in a single step and so a step-by-step mechanisms to minimize the perceived risk
approach should be taken, starting from the and to ease the strict collateral requirements
immediate concerns to the least important of lending organizations are recommended.
barriers. Such a task is not easy, given the
different prevailing economic environments Participation of financial institutions should
of the participating countries. Nonetheless, be encouraged in developing energy and
immediate measures should be taken, environmental policies or financial
otherwise the less significant barriers of today mechanisms for the promotion of E3STs.
may become more significant tomorrow. They can share their experiences and
Policy makers should be urged to formulate evaluation practices from the lenders
appropriate policy measures based on these perspective. Lending institutions should:
findings. Some broad recommendations are
given below. • go beyond traditional evaluation
approaches and adopt changes in their
In general, SMIs suffer primarily from ter ms and conditions for financial
financial and technological barriers. The assistance, and
present financial system does not put • enhance their existing financial
sufficient emphasis on the soundness of instruments with more performance-
technology and merely concentrates on based attributes derived from market-
monetary returns, whereas technology based instruments so that financial
evaluation concentrates only on technological instruments are environmentally and
feasibility without financial consideration. investor friendly.

Chapter 5 59
Barriers t o Promoting E3STs to SMIs in Asia

Revising financing schemes for acquiring and
emloying E3STs should be encouraged. A
carful review of existing and proposed
finncial instruments and mechanisms needs
to be done. In this respect, building capacity
of banking staff to understand the unique
nature of SMIs and E3STs is essential for
their promotion. Sharing experiences among
lending institutions, study countries and
regional economies would help to build the
confidence needed by lenders in financing

Energy service companies (ESCO) are
playing an increasing role in promoting
E3STs in large industries and the commercial
sector. Similarly, their involvement in SMIs
can also promote E3STs by providing
necessary guarantees regarding their
performance. Thus, financial institutions and
SMIs could reduce their financial risk .

60 Chapter 5

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Appendix A


Name of Company (Optional) ______________________
Name (Optional) ____________________ Designation / Type of Work _________________
Address (Optional) _____________________________
Contact number (Optional) ______________________
Email (Optional) _______________________________


The aim of this questionnaire is to solicit your response by ranking the barriers in the promotion of
Energy Efficient and Environmentally Friendly Technologies in the tea manufacturing industry. The
questionnaire is divided into four major classifications. Each classification has at least 5 questions.
Please analyze the barriers and rank them comparatively as given below:


Appendix 65
Barriers to Promoting E3STs to SMIs in Asia

66 Appendix
Appendix A

Appendix 67
Barriers to Promoting E3STs to SMIs in Asia

68 Appendix
Appendix B

APPENDIX B: WEIGHTS AND RANKING First, a weight for each of the individual
barriers within a particular barrier category
is established. For this, pairwise comparisons
AND COUNTRY are done for each barrier within a particular
barrier category. The scale used for pairwise
Ranking the barriers comparisons is described in Table 3.2.

Step 1 After the pairwise comparisons are
completed, which results in a comparison
All the barriers are first listed and categorized matrix, there is a need for mathematical
into four major barrier categories. Table 3.1 evaluation to deduce weights for each barrier.
explains the barrier categories and the The weights can be determined by
individual barriers. normalizing the pairwise comparison matrix.
For example, the pairwise comparison matrix
The Analytical Hierarchy Process (AHP) was between the barriers under the barrier
used to rank the barriers. A hierarchy category Management and Organizational
structure (shown below) was developed for Barriers can be represented as follows:
ranking the barriers.

Based on the above pairwise comparison
matrix, the weight for the barrier, B1.i , can be
The barriers (Table 3.1) were transformed
determined by the formula
into a questionnaire, (Appendix A).
Responses to the questionnaire were
obtained from stakeholders in all the selected
five countries.

Step 2
To rank the barriers, an overall weight for WB1.i = Weight for barrier B1.i
each of the individual barriers needs to be B1.i 1.j = Pairwise comparison result of
established in terms of its contribution to barrier B1.i and B1.j
inhibiting the promotion of E3STs.
Similarly, the weights for barriers of the other
three barrier categories can also be found.

Appendix 69
Barriers to Promoting E3STs to SMIs in Asia
Next, the weight for each barrier category in Step 3
terms of its contribution to inhibiting the
promotion of E3STs is established. A The overall weight of the individual barriers
pairwise comparison is done again for each can now be found by
barrier category. The scale used for pairwise
comparisons is described in Table 3.2. The OWB i. j = WBi * WBi. j
pairwise comparisons result in a comparison
matrix, which is then normalized for
determining the weights for each barrier where,
category. WBi = Weight of barrier category Bi
(i varies from 1-4, the four
The pairwise comparison matrix between the major barrier categories)
barrier categories can be represented as WBi.j = Weight of individual barrier
follows: Bi.j (j varies from 1-5, the five
individual barriers within
each barrier categories)

Thus, the individual barriers for this sample
response can then be obtained. Based on the
overall weights of all the barriers, the
individual barriers can now be ranked.
Based on the above matrix, the weight for
the barrier category Bi can be determined by The overall weights are consolidated for
the formula multiple responses and ranking is obtained
based on stakeholder categories.

WBi = Weight for barrier category Bi
bij = Pairwise comparison result of
barrier category Bi and Bj

A ranking of the overall barrier categories
can also be done based on the weights of the
barrier categories.

70 Appendix
Appendix B
An Illustration

For a single stakeholder’s response to the questionnaire, the results can be obtained as
shown in the following table for the four categories of barriers.

Appendix 71
Barriers to Promoting E3STs to SMIs in Asia
The overall weight of the individual barriers as well as their ranking for this one completed
questionnaire is as follows:

72 Appendix
Appendix B

Appendix B1: Weights and Rankings of Barriers for China

Appendix 73
Barriers to Promoting E3STs to SMIs in Asia

Appendix B2: Weights and Rankings of Barriers for India

74 Appendix
Appendix B

Appendix B3: Weights and Rankings of Barriers for Philippines

Appendix 75
Barriers to Promoting E3STs to SMIs in Asia

Appendix B4: Weights and Rankings of Barriers for Sri Lanka

76 Appendix
Appendix B

Appendix B5: Rankings of Barriers for Vietnam

Appendix 77

The Asian Regional Research Programme in Energy, Environment and Climate (ARRPEEC) is organised
as a regional network involving 22 national research institutes from China, India, Indonesia, Philippines,
Sri Lanka, Thailand and Vietnam. ARRPEEC is funded by the Swedish International Development
Cooperation Agency (Sida) and coordinated by the Asian Institute of Technology. The first and second
phases of ARRPEEC started in 1995 and 1999.

ARRPEEC’s third phase began in 2002 and involves four regional research projects:

1. Biomass Energy in Asia: Assessment and Strategy Formulation
2. Small and Medium Scale Industries in Asia: Energy, Environment and Climate Interrelation
(SMIs in Asia)
3. Strategies for Promotion of Energy Efficient and Cleaner Technologies in the Urban
Transport System
4. Strategies for Promotion of Energy Efficient and Cleaner Technologies in the Power Sector.

The broad objectives of ARRPEEC are:
• Production of high quality policy oriented outputs in the selected areas of energy,
environment and climate research.
• Capacity mobilisation and enhancement at NRI level through project level joint activities
and fellowships.
• Linkage of project level activities in the participating countries with national, regional and
global initiatives for reducing GHG and other hazardous emissions.
• Dissemination results of the programme among policy personnel with a view to creating
an impact on policy making.

Details regarding ARRPEEC and its publications are available at

SMIs in Asia
Small and Medium scale Industries in Asia (SMIs in Asia) is one of the projects under ARRPEEC. It was
aimed at studying five SMI sectors :- brick/tiles/ceramic, desiccated coconut, foundry, tea and textiles -
in China, India, Philippines, Sri Lanka and Vietnam with the following objectives:

· Greenhouse gas emission estimation
· Review of barriers inhibiting adoption of energy efficient and environmentally sound
technologies (E3STs)
· Techno economic assessment of E3STs

The participating institutions of SMIs in Asia project are

• Asian Institute of Technology, Thailand
• Center for Environmentally Sound Technology Transfer, Beijing, China
• PSG College of Technology and Industrial Institute, Coimbatore, India
• Industrial Technology Development Institute, Metro Manila, Philippines
• Industrial Services Bureau of North Western Province, Kurunegala, Sri Lanka
• Consulting Center for Cooperative Promotion and Capacity Building, Hanoi, Vietnam
Learn more about SMIs in Asia projects and publications at

S. Kumar C. Visvanathan Sizhen Peng R. Rudramoorthy Alice B. Herrera Gamini Senanayake Ly Dinh Son