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TO PROMOTING ENERGY EFFICIENT AND ENVIRONMENTALLY FRIENDLY TECHNOLOGIES TO SMIs IN ASIA
Barriers 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
Barriers to Promoting Energy Efficient and Environmentally Sound Technologies to SMIs in Asia
PUBLISHED BY School of Environment, Resources and Development Asian Institute of Technology PO Box 4, Klong Luang Pathum Thani 12120 Thailand Fax: (66) 2 524 5439 Email: firstname.lastname@example.org and email@example.com
DISCLAIMER 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
Principal Investigators Dr. S. Kumar, Professor, Energy Field of Study, School of Environment, Resources and Development, Asian Institute of Technology, Thailand (firstname.lastname@example.org) Dr. C. Visvanathan, Professor, Environmental Engineering and Management Field of Study, School of Environment, Resources and Development, Asian Institute of Technology, Thailand (email@example.com) 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 (firstname.lastname@example.org) Dr. R. Rudramoorthy, Professor, Energy Engineering Department, PSG College of Technology and Industrial Institute, Coimbatore, India (email@example.com) Dr. Alice B. Herrera, Fuel and Energy Division, Industrial Technology Development Institute, Department of Science and Technology, Metro Manila, Philippines (firstname.lastname@example.org) Mr. Gamini Senanayake, Director, Industrial Services Bureau of North Western Province, Kurunegala, Sri Lanka (email@example.com) Mr. Ly Dinh Son, Director, Consulting Center for Cooperative Promotion and Capacity Building, Hanoi, Vietnam (firstname.lastname@example.org) 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 Energ y, Environment and Climate (ARRPEEC) funded by Swedish International Development Cooperation Agency (Sida) and coordinated by Asian Institute of Technology (AIT), is aimed at policy-oriented research in selected areas of energy, environment and climate change. Other objectives include capacity mobilization and enhancement of the participating research institutions and linkage of the project activities with national, regional and global initiatives for reducing greenhouse gases and other hazardous emissions. Small and Medium Scale Industries in Asia (SMI in Asia) project is one of the regional research projects under ARRPEEC and involves the following research institutions: Center for Environmentally Sound Technolog y Transfer, China; PSG College of Technology and Industrial Institute, India; Industrial Services Bureau of North Western Province, Sri Lanka; Industrial Technolog y Development Institute, Philippines; and Consulting Center for Cooperative Promotion and Capacity Building, Vietnam. Phase I of ARRPEEC focused on the assessment, adoption and propagation of energy efficient and environmentally sound technologies (E3STs) among the selected developing countries, (China, India, Philippines and Sri Lanka) and a cross country analysis was made on large industry sectors representing steel, cement and pulp & paper. In phase II, the focus was narrowed down to SMIs in participating countries, with the addition of Vietnam. Phase II analyzed the energy and environmental issues of the desiccated coconut, tea, foundry & metal casting, textile, and brick, tile & ceramic sectors and studied the policy issues to promote E3STs concerning the above sectors in these participating countries. The current phase, as a continuation from Phase II, addressed the following issues for the same sectors as in Phase II: • Estimation of the greenhouse gas (GHG) emissions in selected SMIs • Study and prioritization of barriers that inhibit the promotion of E3STs in SMIs • Techno-economic evaluation of E3STs available for mitigating GHG emissions, improving energy efficiency and abating environmental pollution This report discusses the availability, degree of impedance, and provides a comparison of barriers inhibiting the promotion of E3STs for the selected sectors based on the studies carried out in the study countries. Ranking the barriers from the perspective of industry personnel and policy personnel has been done and recommendations are made to incorporate the mechanisms to remove these barriers while formulating national policies for promoting the use of E3STs in SMIs. Documentary research indicates that no previous studies had been carried out with a specific focus on SMIs and E3STs. Therefore, this report will act as a start up document 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
The contribution of SMIs to the national economies of the selected countries is significant. The energy and environmental performance of SMIs, however, is poor. SMIs contribute 7-9% to the national GHG inventories in the study countries, in addition to significant environmental pollution from wastewater and solid wastes. Because they face a number of barriers, the use of energy efficient and environmentally sound technologies (E3STs) is limited to a few demonstration projects. This report presents the results of a study carried out to identify the barriers faced by SMIs for E3ST application and their prioritization. This is expected to assist policy makers develop mechanisms for the removal of these barriers by formulation of suitable policies focused on SMIs. Views regarding the barriers to promote E3STs vary amongst the SMI stakeholders i.e., policy makers, SMI management, representatives from financial institutions and technocrats. The study has found that the most significant barriers are financial and policy barriers. The degree of significance varies from country to country. The most significant barrier in India, Sri Lanka and the Philippines is the high cost of E3STs; in China it is the lack of financial incentives; and in Vietnam it is the management’s fear of the high cost of production due to E3STs. In none of the countries is the nonavailability or the lack of technical or managerial skill seen as a major barrier for adoption of E3STs. In China, the lack of financial and fiscal incentives such as tax exemptions or subsidies for installation of E3STs is an important barrier. Weak enforcement of environmental regulation is also an important barrier. In India, the high capital cost of E3STs and poor returns are identified as important barriers. SMI management appears to be satisfied with their current processes and technologies and are wary of adopting new technologies. Their investment priority is for expansion of production capacity rather than improving technologies. In the Philippines, high capital cost of E3STs and difficulties in accessing finance are identified as important barriers. Management’s priorities are towards expansion of production capacity and increasing market share rather than implementing E3STs. In Sri Lanka, high capital cost of E3STs, difficulties in accessing finance and poor returns on capital are identified as major barriers. Lack of information and nonavailability of E3STs and service are also important barriers. In Vietnam, management is deeply concerned that adoption of E3STs would incur additional costs and undermine their competitiveness in the marketplace. Lack of information on E3STs is identified as the second most important barrier although nonavailability is not seen to be a barrier. Lack of enforcement of regulations is also identified as an important barrier.
The following broad recommendations are suggested:
• Re-evaluation of existing energy and
environmental policies, impacts and constraints in promoting E3STs in all sectors. 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
Box 1.1 Asian Regional Research Programme in Energy, Environment and Climate The Asian Regional Research Programme in Energy, Environment and Climate (ARRPEEC) is a regional network involving 22 national research institutes (NRIs) from seven Asian countries. ARRPEEC is funded by the Swedish International Development Cooperation Agency (Sida) and coordinated by the Asian Institute of Technology (AIT), Thailand. The main objectives of ARRPEEC are:
Small and medium scale industries (SMIs) are a significant sub-sector of the industrial economy in Asia and play an important role in national economies in terms of contribution to Gross Domestic Product (GDP) and employment creation. They are found in all major manufacturing sectors. Usually they employ traditional, labour intensive and inefficient technologies and are not very much concerned about the impact of their energy use (Visvanathan and Kumar, 1999; Kumar et al., 2005; Thiruchelvam et al., 2003). Despite this lack of concern, there have been no significant efforts undertaken to address SMI energy-environment issues. The Small and Medium Scale Industries in Asia: Energy, Environment and Climate Interrelations (SMI in Asia) is one of four components of the Asian Regional Research Programme in Energy, Environment and Climate (ARRPEEC) to address the energyenvironment issues of SMIs (Box 1.1).
Production of high quality policy oriented outputs in the selected areas of energy, environment and climate research. Capacity mobilization 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 of results among policy personnel with a view to creating an impact on policy making.
The industry sector study of ARRPEEC Phase I addressed the status of technologies in energy intensive and environmentally polluting industries in Asia. It also assessed the impacts and the pollution mitigation potential of energ y efficient and More information on ARRPEEC and its activities are available at www.arrpeec.ait.ac.th 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
ARRPEEC carried out research on the power, industrial technologies, urban transport and biomass sectors and focused on policy aspects of GHG mitigation emissions and pollution reduction. The first and second phases of ARRPEEC started in 1995 and 1999 and the third phase began in 2002.
Barriers to Promoting E3STs to SMIs in Asia in five SMI sectors: foundry and metal casting, textile, desiccated coconut, brick, tile & 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 and benchmarking energy use patterns of selected SMI sectors, and identification of E3STs for SMIs (AIT, 2002a; 2002b; 2002c). In the current phase (ARRPEEC III), the SMI in Asia Project continuing from Phase II addressed the following issues: • Greenhouse gas emission estimation in selected SMIs, • Study and prioritization of barriers that inhibit the promotion of E3STs in SMIs, and • 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 This document presents the results of the research carried out to study the barriers inhibiting the adoption of E3STs in SMIs. Overviews of the energy and environmental status in the study countries relevant to the selected SMI sectors are presented. This report discusses previous studies in barrier analysis and the details of the methodology adopted in this study and the activities carried out. The barriers were prioritized based on inputs from policy makers, SMI management, representatives from financial institutions and technocrats. Based on the activities carried Foundry & metal castiing Foundry & metal casting is one of the oldest industries in the world and is an important base for the manufacturing world. Technology improvements in the foundry sector have led to improved product quality, efficient use of resources and reduction in environmental pollution. Variations in technology use and production costs make the foundry industry diverse from one country to another. Foundry & metal casting industries in China and India consist of both large and smallout, the results of the prioritization are presented and recommendations suggested.
1.2 Status of the Study Sectors
The selected SMI sectors were foundry & metal casting, textiles, desiccated coconut, tea processing and brick, tile & ceramics in China, India, Philippines, Sri Lanka and Vietnam (Table 1.1). These sectors were selected based on their importance in the study countries. A brief summary of their industrial status in the countries and the relevant energy and environment issues is presented below.
Introduction scale industries. There has been a steady increase in the production of foundry products over the years in these two countries, while in the Philippines there is a decrease due to increasing costs of 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. scrap, can be melted and used. The main disadvantages of this type of furnace include the low capacity of the system and the environmental pollution caused by dust and slag produced during operation.
Medium scale foundry in India
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 lowgrade 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. Smallscale foundries do not have the capacity to employ soot or ash recovery equipment or use better fuel with efficient combustion technologies. In India, air pollution problems are the main concern though there is also significant inorganic solid waste. Chinese foundries have problems meeting national standards for dust emission, waste residue and noise. In the Philippines, emissions of dust and harmful gases with bad odors are the main problems. CO2 emission in China’s foundry sector was estimated to be about 16.69 million tonnes in 2000. For India and the Philippines it was about 1.6 and 0.24 million tonnes of CO2 respectively (Kumar et al., 2005).
Foundries are highly energy intensive processes and pollute significantly if inefficient technologies are used. In India and China the main fuels are coke, coal, oil, natural gas and electricity, while in the Philippines LPG is used. The melting furnace is the main equipment in a foundry. Cupola furnaces and electric induction furnaces are the most common. Cupolas are widely used mainly because they are cheap and a variety of metal, including
Barriers to Promoting E3STs to SMIs in Asia Introduction of E3STs such as replacing conventional cupolas with cokeless cupolas or converting them to burn natural gas (Box 1.2) will help reduce energy consumption, thereby making the sector more competitive while reducing GHG emissions.
Box 1.2 Selected technologies available for improvement of energy and environmental performance Foundry sector • Replacement of main frequency induction furnace, medium frequency furnace • Replacement of cupola furnaces with electric induction furnaces • Conversion to natural gas from coal Brick and tile sector • Autoclave aerated concrete block instead of clay brick • Insulation of inner walls with ceramic fiber • Replacement of traditional kilns with vertical continuous kilns 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 Textile sector • Installation of photocells for speed frame • Installation of soft starter cum energy saver in simplex frame • Use of FRP (fiber reinforced plastic) fan blades for humidification fans in weaving Source: Kumar et al., 2005
1.2.2 Texttile sector The textile process consists of several unit operations and involves a large amount of machinery of varying scale and uses both electrical and thermal energy. The Indian textile industry is characterized by its innovativeness and growth in terms of the technology and scale. India produces and exports a substantial amount of the world’s textile requirements. The Indian textile industry encompasses both large enterprises and SMIs. Table 1.3 shows the details of the textile sector in the study countries. The textile industry is energy intensive. Energy accounts for nearly 20% of the total production cost. The Indian textile sector consumes about 9-10% of the industrial energy use in India. Thermal and electrical energy demands are met by using coal, firewood and electricity.
The main environmental issues for the textile industry are emissions from energy use and water pollution, of which the latter is significant. The textile industry uses water as the principal medium in removing impurities, applying dyes and finishing agents, and steam production. The effluents from 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
Introduction quality, kill or damage fish and living organisms and make water sources unusable. The other aspect is air pollution from the combustion of fossil fuels. The total CO2 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. 1.2.3 Brick, tile & ceramic sector The brick, tile & ceramic sector by definition includes manufacture of all clay products, including bricks, roofing tiles and small-scale ceramic manufacture. The brick, tile & ceramic sector is considered a cottage industry and uses traditional technologies. The Chinese brick-making industry is mainly under Town and Village Enterprises (TVEs). The total number of enterprises involved has been declining steadily over the years. About 77% of the total brick production is solid clay bricks and the rest hollow bricks. In the Philippines, the brick, tile & ceramic sector has its base in the traditional manufacture of terra cotta products and pottery by smallscale and cottage type operations. considered under cottage industry status. Only brick and roofing tile manufacture are discussed here. Table 1.4 shows details of the brick, tile & ceramic sector.
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
Barriers to Promoting E3STs to SMIs in Asia tile production. The Indian brick industry consumes about 20 million tonnes of coal (TERI, 2003). Sri Lanka consumes around 40 m3 of fuel wood per batch (i.e. 15,000 tiles). The average, production is 3-4 batches per month. natural woodlands.
The type of kilns used has an effect on the energy efficiency and level of pollution (Box 1.3). Brick production uses only 25% of the 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 pollution. Energy Statistics of commonly used brick kilns
Stacking bricks in a continuous fired tunnel kiln in Vietnam
The destruction of agricultural land is a serious environmental impact of this industry in all countries. Production of 5 million solid clay bricks needs around 12,000 m3 of clay, rendering the land unusable for agricultural purposes for a long time after extraction. This is in addition to soil erosion, localized pollution and reduced aesthetic value of
Capacity ('000 bricks) Per firing Per day
Specific energy consumption (MJ/kg) 2.0 - 8.0 2.0 - 8.0 2.0 - 8.0 2.0 - 6.0
Investment (US$ '000)
Clamp kiln Scove kiln Scotch kiln Downdraft kiln Hoffman kiln Bull's Trench kiln High Draught kiln Tunnel kiln Vertical Shaft Brick kiln
5 - 1,000 5 - 100 5 - 40 10 - 40 2 - 24 10 - 48 20 - 40 50 - 150 4 - 30
<5 < 20 > 80 >7 > 15 > 1,000 >4
1.5 - 2.8 1.5 - 2.8 1.2 - 1.8 1.2 - 2.5 0.8 - 0.9
Source: FAO, 1993
Introduction 1.2.4 Tea production sector India is the largest producer and consumer of tea in the world. Sri Lanka is the largest exporter of black tea. Export is an important source of foreign exchange and an employment generator (Table 1.5). Sri Lankan tea factories still use Endless Chain Pressure dryers (ECP) with 32% efficiency. However, Fluidized Bed Dryers (FBD) can provide 49% efficiency. Changing dryers from ECP to FBD in the entire sector would reduce energy consumption and GHG 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 belongs to the SMI sector while in the Philippines they are classified as medium to large industries in terms of production. A summary of DC sector statistics for these countries is shown in Table 1.6.
Energy is required for tea processing during drying (ther mal energy) and withering (electrical energy). The thermal energy requirements are supplied by coal, fuel oil or firewood. Electrical energy is most often 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 of electricity (estimates based on data from UPASI Tea Research Foundation, India, 2002).
The environmental concerns in the tea processing sector are related to emissions. For drying, thermal energy is required and this is obtained by using fuel wood or coal in India 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
Electrical energy is used by processing equipment. Of the electrical energy consumption, 60% is used for drying and about 30% is used for size reduction. Of the thermal energy, over 65% is consumed in the drying operation. The average specific thermal energy consumption is 23 MJ/kg and the specific electrical energy consumption is 1 kWh/kg (AIT, 2002b).
Barriers to Promoting E3STs to SMIs in Asia Sri Lankan DC industry generates an estimated 0.5 million cubic meters of wastewater annually with around 10 tonnes of suspended solids and 3,850 tonnes of BOD.
Box 1.4 Institutional intervention to promote E3STs in SMIs through identification and prioritization of barriers Case study: Firozabad glass industry cluster in India To save the famous Taj Mahal, situated close to Firozabad, the Indian Supreme Court passed a landmark judgment and directed 292 specified industries using coke/coal as fuel to switch over to natural gas, relocate outside the zone, or shut down. Through detailed diagnostic studies carried out in various SMI clusters in 1995, it was found that there is tremendous scope for increasing energy efficiency in the glass industry cluster. The cluster accounts for roughly 70% of the total glass production in the small-scale sector. A new design focused on the pot and muffle furnaces in view of their high share of coal use (48% for pot furnaces and 27% for muffle furnaces), very low operating efficiency and inability of the segment to mobilize support for technology upgrades. The demonstration pot furnace using natural gas was commissioned in February 2000. The specific energy consumption was found to be 2,460 kcal/kg of glass, a reduction of nearly 60 per cent while meeting environmental standards.
1.3 Rationale and Objectives
E3STs address the energy and environmental concerns of industries, but many barriers prohibit their adoption. Due to scarcity of resources (funds, labour and time), all the barriers cannot be addressed simultaneously, hence, priority must be given to the most serious and pervasive barriers. Though general studies on the various barriers inhibiting the promotion of E3STs are available, prioritization of barriers from the perspective of SMIs, technocrats and policy makers would provide an important basis for introducing E3STs and thus lead to energy efficiency, reduced pollution and GHG emissions. By prioritizing the barriers in terms of their importance, appropriate strategies and action plans can be developed to use the limited resources. This approach 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 • To prioritize these barriers according to the views of the stakeholders, and • To disseminate the outcomes among policy makers and other stakeholders for necessary action in formulation of environmentally friendly policies.
Natural-gas fired TERI furnace Source: TERI, 2000
Introduction 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
An Overview of Barriers
AN OVERVIEW OF BARRIERS
to adopt E3STs due to their reluctance to change and other barriers. To promote the dissemination of E3STs, the barriers in adopting them were identified. They include lack of awareness, education and training on E3STs; financial and economic factors; lack of coordination and slackness; and lack of infrastructure (Thiruchelvam et al., 2003). The following sections provide an overview of the barriers inhibiting the promotion of E3STs in the study countries. The key elements and diversity of the environmental issues in relation to energy and environmental performance vary from one country to another. 2.1.1 China As one of the fastest growing economies in the world, China experiences the ill effects of rapid development in the most obvious way. The environmental pollution in China has been unprecedented, especially in the industrial areas, and the Chinese government has given a high priority to abating environmental pollution due to industrialization (Jonathan, 1999). • Increased employment requirements focused more on workers’ skills and physical abilities than on their ability to Chapter 2 11
This chapter describes the various barriers that inhibit the promotion of E3STs and their significance from the viewpoint of SMI stakeholders. This initial assessment of barriers has been consolidated using similar studies done elsewhere.
2.1 Barriers to Promoting E3STs in the Study Countries
Despite their significant contribution to economic development in the Asian region, SMIs are energ y inefficient and cause environmental pollution. Under these circumstances, E3STs provide sustainable, adoptable and affordable technology solutions that will conserve energy, mitigate pollution and reduce unfavorable impacts on climate. Application of E3STs in industries ensures that energy resources are used more efficiently, eco-efficiency is improved and the environment is preserved and is therefore an important means of achieving the dual goals of energy conservation and emission prevention and reduction. Many developed countries have adopted cleaner production technologies and gained the economic benefits. However, E3STs are not widely adopted in developing countries outside of large industries that can easily adopt them and benefit financially. SMIs are still hesitant
Barriers to Promoting E3STs to SMIs in Asia cope with the consequences of poor environmental management. Managerial staff lack capacity to educate workers because they themselves have a low awareness of E3STs and their positive impacts. • Chinese SMIs lack capacity in identifying, assessing, introducing and applying E3STs at factory level. Even when capital is available it is often accompanied by introduction of obsolete process technologies and inefficient equipment that pollutes the environment. • Lack of experience and resources, including capital, is the main reason for 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. • The brick and tile industry finds it difficult to access new technologies and market infor mation and still operates in a traditional way.
Box 2.1 Growth of consumption of energy and GHG emissions in India India’s high concentration of pollution is not due to the absence of a sound environmental legal regime, but due to lack of environmental enforcement at the local level. Regulatory reforms aimed at improving the air pollution problem in cities such as New Delhi have been difficult to implement.
An Overview of Barriers 2.1.3. Philippines The SMI sector in the Philippines lacks awareness of energy and environmental issues. • At enterprise level, lack of collateral has been a major obstacle in obtaining finances from banks for implementation of E3STs. Due to a lack of financial records and collateral requirements, assessing credit risk is difficult for lenders. The tedious procedures for documentation, processing and reporting requirements are also obstacles for procuring funds. Lack of expertise to appraise E3STs is a barrier for lending institutions. • The use of E3ST initiatives as a political tool by pressure groups that claim that these initiatives are trade barriers retard investment in E3STs. Industries succumb to these pressure groups because of their limited knowledge and understanding. 2.1.4 Sri Lanka SMIs in Sri Lanka are faced with unfavorable conditions locally and from high competition from neighboring countries. Increasing cost of inputs and insufficient economies of scale have decreased their profit margins. • Reasons for not implementing E3STs are primarily cost oriented. Additional capital deployment, increased operational costs and non-realization of net financial-gains from E3STs are some of the important reasons. Even the implemented E3STs or those proposed to be implemented are more or less compliance driven rather than needs driven. • High cost of equipment for E3ST application is an impediment, as most of these items are imported. This raises the issue of technology transfer related to E3ST technologies such as locally manufacturing these technologies. The obstacle here is the lack of competent technical service providers. • Policy level barriers come from either not having a mechanism for SMIs for adopting better technologies or having an equal policy for all industries irrespective of
Box 2.2 Non-enforcement of regulations is a barrier to promoting E3STs Sri Lanka The Sri Lankan Desiccated Coconut sector faces the continuing problem of treating wastewater. Some research institutions have developed solutions for treatment, but these are not adopted widely. Further development and promotion of available methodologies is not progressing since the factory owners do not consider them a necessity. Measures like E3STs can only be developed or marketed if there is a strong need at industry level. Philippines The Department of Energy and Environmental Management Bureau (EMB) are two key institutions, which oversee the energy and environment sector in the Philippines. DOE has no regulatory power and activities are mainly limited to raising awareness and information dissemination. They cannot force a company to be energy efficient. EMB is the environmental regulatory agency, which carries out monitoring and enforces environmental laws. Due to the wide scope of EMB, it cannot comprehensively conduct monitoring and enforcement activities on all industries. SMIs also pose difficulties for the enforcement agency due to their fragmented nature and large number.
Barriers to Promoting E3STs to SMIs in Asia their size or sector. These perceived anomalies at policy level prevent SMIs from taking action in implementation of E3STs (Box 2.2). 2.1.5 Vietnam The Vietnamese economy is in a transition from central control to a market economy. Still, the government owns most of the enterprises, although private investments are picking up. Government enterprises mostly use outdated technologies. During the period of a centrally controlled economy, the principle had been to build the largest possible factories with the aim of providing employment. Revamping these enterprises will be a major task in terms of technology and investment. • Enforcement of environmental regulations has had a low profile and is one of the reasons that SMIs, both existing and new, are reluctant to invest in E3STs. • Cost of new technologies and difficulties in obtaining finances are barriers in Vietnam for the promotion of E3STs. • During this transition from centralized to market economy, many industrial sectors resist introducing E3STs. However, the brick sector has been an exception (Box 2.3).
Box 2.3 Lack of government assistance is a barrier to promoting E3STs An assessment on the Vertical Shaft Brick Kiln (VSBK) Technology in Vietnam focused on its technology status, performance and government policy in promoting it. Some of the findings of the study are highlighted below:
• In the short span of two years about 100
new VSBKs were added. The technology seems to have become firmly established in the country. This has been a noteworthy achievement given the history of slow and often-difficult introduction in several other countries. VSBK is the most efficient kiln among the different types of brick kilns used in Vietnam, with a specific energy consumption of 0.85-1.1 MJ/kg of fired brick. Stack emissions from VSBK are lower compared to other kilns.
VSBKs are replicating very quickly in different locations in Vietnam, but at the central level, there is no clear policy to support the technology. Source: TERI, 2003
barriers that inhibits the promotion of E3STs could be illustrated as follows (Table 2.1), with some examples at each level. The following sections describe these barrier categories specific to the promotion of E3STs through examples. 2.2.1 Managerial barriers
2.2 Types of Barriers
Barriers can mainly be categorized as market, technical, financial, management, environmental, information and regulatory. These categorizations also have perspectives at enterprise, industry or national levels. Hence, a fundamental categorization of
Promotion of E3STs in SMI sub-sectors faces many barriers due to management at the enterprise level. Specific examples of these managerial barriers are as follows:
Resistance to Change. SMIs inherently resist change. Any alteration to achieve a (positive)
An Overview of Barriers
change is often perceived as a disruption of the present status. This is common for both managerial staff and employees. In such a situation, efforts to adopt E3STs are not likely to be well received. In the case of noncompliance of standards, SMIs may prefer to pay the penalties rather than to adopt
cleaner production technologies. Inadequacies in Internal Management. SMIs, in trying to achieve cost advantages, tend to hire managers or staff who may not have the capacity to appreciate the complexities of the global or national environmental aspects
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 undergo substantial research and enterprise E3STs in SMIs. 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 with import of technologies is a barrier to of which is: 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 facilities because either they are unaware of 2.2.3 Technical barriers 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 requirements. Hence, from the lenders point adoption in SMIs. 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 they do not want to obtain commercial loans environmental control. at high interest rates, which would offset the Cost of Technology. Upgrading using E3STs is enterprise finances.
An Overview of Barriers
Box 2.4 High cost associated with import of technologies is a barrier to promoting E3STs To meet rising demand, raw steel is imported into Sri Lanka. Due to the limited supply of finished products, the effect of value addition is very important in Sri Lanka where finished products are nearly four times the price of raw material. Thus, steel fabrication factories in Sri Lanka get maximum benefit from increased productivity rather than from energy conservation. Initial investment is high in Sri Lanka due to the: • • • necessity to import all equipment and technologies for making improvements time required for improvements to be implemented high cost of borrowing capital
level, in either scale or added features. This makes it difficult for some E3ST application providers to design and manufacture equipment in a way that makes it possible to reap the benefits of economies of scale. Emphasis on Green Products. The importance or requirements customers place on products manufactured using E3STs have an impact on SMIs adopting E3STs. If a particular SMI caters to green product markets, they have to adopt E3STs. But often, green products give more importance to product features than to processing techniques. 2.2.6 Regulatory barriers
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 view, without a strong regulatory requirement, factors. E3STs may not have a place in the market.
Source: UNEP, 2002
2.2.5 Market barriers Limited markets for products manufactured with E3STs and also limited demand for E3STs act as a barrier for adoption. Primary market barriers are: Limited Market for E3STs. The market size is a barrier for the promotion of E3STs. Being specialized applications, E3STs need to be customized for each enterprise at factory
Capacity of the Regulating Agencies. Regulating agencies, policy makers, environmental pressure groups and the government need to advise and assist SMIs by promoting E3STs. Enforcement and penalizing defaulters have not addressed the promotion and adoption of E3STs. Field level staff and regulatory personnel are not technically knowledgeable enough to advise on the improvement of processes or equipment to reduce waste,
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 various forms and come up with solutions 2.2.7 Information barriers 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 constructing a central effluent treatment plant E3STs. Inadequate Communication. Information on the non-professional perspective from the use of E3STs is an important criterion for promotion. An issue like greenhouse gas emissions endangering society cannot be well understood unless it is translated into financial terms such as reduced fuel costs, or benefit terms such as increased incentives, financial or social. 2.2.8 Research and development 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
was not beneficial and did not yield results since the solution did not address the main source of pollution — inefficiency in process flow, work practices and poor knowledge of health and safety. Authorities disregarded the core issues and addressed peripheral issues due to lack of expertise (Das Gupta, 1998).
In contrast, in one of the textile clusters in Tirupur, South India where there are about 750 dyeing and bleaching units in operation, the units have joined through association and constructed common wastewater treatment facilities. There are now eight common wastewater treatment plants operating successfully in the cluster.
An Overview of Barriers
2.3 Earlier Studies on Barriers Inhibiting Adoption of E3STs
level, made only through discussion, had not 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 that have been discussed in these studies can further elaborates the survey results. 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 these previous studies are used as a baseline or cross-country comparison at various levels, the techniques used are more conventional than scientific and involved mainly the beneficiaries of the policies, i.e. industrialists. Involvement of the policy Vine (2005) has shown that lack of government policy, subsidized energy cost and unfavorable tax regimes are barriers for promoting energy efficiency through energy ser vice companies (ESCO) which are expected to play an important role in promoting energy efficiency.
Figure 2.1 Response for adopting technologies in SMEs
Barriers to Promoting E3STs to SMIs in Asia
To overcome barriers in improving energy efficiency, Gruber and Brand (1991) recommended a set of activities. These include the motivation of company managers, improved energy consultation, the use of the multiplier function of associations, and stronger engagement from the
government and the utilities. Su et al. (2004) concluded that four major barriers, namely, technology, information, training and policy, should be addressed to promote energy efficiency in the Chinese foundry sector.
An Overview of Barriers
Box 2.6 Barriers for promotion of CP technologies UNEP training material for the promotion of Cleaner Production shows that political and regulatory barriers contribute to the nonadoption of CP technologies. The study concludes that addressing these issues through training and awareness will promote application of CP.
to availability of finance, affordability of finance, cost/benefit from investments, attitudes of managers and lenders on investing in technology. This is relevant also in the context of developed countries (Box 2.8). 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, and public opinion about products that address environmental concerns.
Source: Huisingh, 2002
Furthermore, previous studies did not focus on sustainable technology adoption by SMIs as a policy option for mitigating GHG emissions, or address issues related to energy efficiency or environmental pollution. They were not oriented towards SMI needs for fulfilling the broader goal of GHG mitigation through either technical options or policy options at national level.
Barriers for the promotion of energ y efficiency and reducing pollution in all industrial sectors appear to have much in common. In the overall industry sector, larger companies have the resources and the 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
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
Source: Wang, 2002a
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.
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.
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, multiplepollutant 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 • Political impediments imposed by partisan or interest group actions; • Resource and time limitations facing state and local energy, environmental and public utility • Large scale, scope and complexity of issues that can be daunting if not examined in smaller, • 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, http://www.eandeclearinghouse.com (Accessed 20 June, 2004) focused pieces; and agencies that already have too much on their plates; integrated, innovative approaches;
Study Approach & Activities
STUDY APPROACH & ACTIVITIES
3.1 Identification and Finalization of the Barriers
This chapter elaborates the approach and methodology adopted in this study. It provides a description of the study methodology, tools used, rationale for selection of tools, composition of the stakeholders in each study country and the potential for replication of the methodology for similar studies. Figure 3.1 illustrates the overall framework of the study, which is described in the following sections. An initial list of barriers was developed in each country based on discussions with the stakeholders of SMIs and from the literature (Chapter 2). During the discussions, SMI management, policy makers and other stakeholders highlighted the major barriers inhibiting the adoption of E3STs. This was found to complement the findings of Phase I and II of the ARRPEEC Programme 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
Figure 3.1 Framework of Research Methodology
For the identified barriers, each stakeholder attaches his or her own relative importance.
B arriers to Promoting E3STs to SMIs in Asia
Study Approach & Activities
B arriers to Promoting E3STs to SMIs in Asia Therefore, the priority varies among the stakeholders and also among the industrial sectors. To achieve a common prioritization, a conventional criteria-ranking method based on point allocation, percentage weighting or qualitative ranking could not be used, and so for this study a Multi-criteria Decision Making (MCDM) methodology was used. The benefits of using an MCDM model are that it (Denis, 2003): • • • • MCDMs are used for a variety of applications, such as strategic and programme planning, resource allocation, technology selection and prioritization and consensus building. Several MCDM tools are used as decision support tools and a sample list is given in Box 3.1.
The MCDM method employed for this study was the Analytic Hierarchy Process (AHP) 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
Source: http://www.evergladesplan.org/ The following list gives an overview on the various MCDM tools: Curriculum assessment: http://fie.engrng.pitt.edu/fie98/papers/1370.pdf Portfolio management: http://www.sbaer.uca.edu/Research/1999/WDSI/99wds230.htm Sub contractor evaluation: http://fire.nist.gov/bfrlpubs/build02/PDF/b02143.pdf Product, process, environment matching: http://www.environmental-center.com/magazine/inderscience/ijetm/art5.pdf
Study Approach & Activities complex decision problems to a series of oneon-one comparisons (pairwise) and then synthesizing the results, AHP not only helps decision-makers arrive at the best decision, but also provides a clear rationale for arriving at that decision (Liberatore and Nydick, 2003). Research on the application of AHP techniques for decision-making specific to renewable energy and energy efficiency is available. For example, Pohekar and Ramachandran (2004) have provided an extensive review of the application of AHP techniques in the energy sector. In the AHP methodology, the stakeholders determine their preference between two barriers and specify their relative importance with respect to their contribution to the desired objective. Stakeholders indicated the relative importance for each barrier using a r a t i n g s c a l e ( Ta b l e 3 . 2 ) . T h e A H P methodolog y provides an indication of the inconsistency of the comparison as well. The inconsistency level indicates the degree of understanding of the issues by the respondent and how that understanding (or lack of understanding) contributes to the final judgment. If the inconsistency is more than 0.1 (i.e. consistency ratio of greater than 10%) it is suggested to revisit the problem and revise the judgments (Merit Decisions; Saaty, 1999).
3.3 Procedure of the Study
A hierarchy structure based on AHP was developed to prioritize the barriers inhibiting the promotion of E3STs in SMIs (Box 3.2). Based on the hierarchy structure, the listed barriers (Table 3.1) were transformed into a questionnaire (Appendix A) which was completed by the stakeholders (managers/ owners of SMIs, technicians, bank managers, personnel from industrial associations, policy personnel, etc.) in the five countries. The questions were framed in such a way as to extract responses based on a pairwise comparison of all the barriers. To complete the questionnaire, the stakeholders used one of the three rating scales shown in Table 3.2. For example, if barrier ‘A’ is more important than barrier ‘B’ for non-implementation of E3STs, the stakeholder could rate (i) 7 or (ii) very strong or (iii) 175 for A versus B. To complete the questionnaires, workshops were organized for stakeholders. The workshop agenda included an introduction to the SMI in Asia project, the purpose of the study, guidelines to complete the questionnaires, and the expected outcomes of the exercise.
Policy makers in the Philippines engaged in filling in the questionnaire
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 institutional clients (Philippines) and
AHP methodology workshop for desiccated coconut millers in Sri Lanka
Study Approach & Activities mailing lists of participants of earlier events (China) • Interviews with experts from selected sectors (Vietnam) • Workshops to obtain the views of policy makers (Philippines, Vietnam and Sri Lanka) In the workshops, the stakeholders were provided with details to familiarize them with the study objectives and methodology and the AHP approach in particular. The participants were also given presentations on the use of AHP to explain the complex nature of the pairwise comparisons with an example based on a comparison of cars (Liberatore and Nydick, 2003). Considering the diverse nature of the stakeholder group, their responses were grouped into four categories: managerial, technical, financial and policy personnel. Table 3.3 shows the number of responses in each category in each country.
Box 3.3 Expert Choice software Expert Choice is intuitive, graphically based and structured in a user-friendly fashion to for conceptual and analytical thinkers, novices and category experts. Because the criteria are presented in a hierarchical structure, decisionmakers are able to drill down to their level of expertise and apply judgments to the objectives deemed important to achieving their goals. At the end of the process, decisionmakers are fully cognizant of how and why the decision was made, with results that are meaningful, easy to communicate, and actionable. The software automates the decision-making process by enabling organizations to structure and justify decisions. Expert Choice helps groups to structure their objectives into a decision model, prioritize using pairwise comparisons, and justify decisions using graphical reports and sensitivity analyses. With Expert Choice, organizations can focus on the strategic value of alternatives rather than making decisions over table conversations. It can be used to: predict likely outcomes, plan projected and desired futures, facilitate group decision-making, exercise control over changes in the decision-making system, allocate resources, select alternatives, do cost/ benefit comparisons, evaluate employees and allocate wage increases. Source: http://www.expertchoice.com
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, funding 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.
B arriers to Promoting E3STs to SMIs in Asia
3.4 Allocation of Weights for Judgments
The next step in the methodology (Figure 3.1) was the allocation of weights to the response/judgment of the stakeholders. Expert Choice, a multi-criteria software package was used (Box 3.3). The rating given by the stakeholders for each pair of barriers was entered into the logical matrix provided in the software. The software facilitates this by displaying a sliding scale so that any type of
rating score can be entered, and delivers weights for each barrier by converting the pairwise rating score based on a matrix algebra algorithm (explained in Appendix B). The weight is indicative of the significance of the criteria against other criteria. The sum of all the weights adds to unity. It also displays their inconsistency ratio. Figure 3.2 shows a typical output from the analyzed questionnaire.
Figure 3.2 Sample output of pairwise comparison
Study Approach & Activities
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 exposure to AHP. The simplified approach, quickness in processing results and versatility of the methodology shows its potential for replication in other sectors.
3.5 Consolidation of Responses
As the final step in the process, Step 4 (Figure 3.1), for the four main categories of barriers 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.
Results & Discussion
RESULTS & DISCUSSION
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 into account twenty barriers under four major categories (Table 3.1). In the case of China, an additional four barriers (given in italics) that were not considered by other countries were included. • In India, the Philippines and Vietnam, the management and organization barrier was ranked second. • China and Sri Lanka ranked the managerial and organizational barrier as the least important, while in India, the Philippines and Vietnam, the policy and market barrier was ranked as the least important. • In all five countries, the technology and information barrier was not found to be a significant inhibitor to the promotion of E3STs. The obser vations highlight only the significance (or lack of it) and the findings from the observations are discussed in later sections. Table 4.2 shows the overall ranking of all 20 barriers. It indicates the relative ranking of the barriers by all stakeholders. For the purpose of the analysis and findings, only extreme ranking ends are discussed, i.e. the three most and least important barriers for a Chapter 4 35
4.1 Overall Assessment
An overall assessment of the four major categories of barriers in terms of their importance in inhibiting the promotion of E3STs is given in Table 4.1. This was obtained by considering the preferences of all stakeholders and shows the overall perspective of the stakeholders on the major categorization of barriers. • In all the countries studied except China, financial barriers were ranked as the major inhibitor for the promotion of E3STs. In China, policy and market barriers were ranked first and financial barriers were ranked second.
Barriers to Promoting E3STs to SMIs in Asia
Results & Discussion information barriers are considered to be particular country. In the detailed ranking 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 and economic barriers are decisive and in bold. Exceptions are also noted. factors like high capital cost, difficulty in • The stakeholders consider that high initial assessing finance, poor returns and tendency to invest in short term projects capital cost is the major barrier in Sri are contributive. Lanka, India, the Philippines and Vietnam. 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 least to the promotion of E3STs, while financial related barriers are of secondary nature. Sri Lankan, Indian and the Philippines • The most prominent barriers in China are policy makers think that lack of government assistance, self-regulation and the lapses in enforcement of regulations 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
Barriers to Promoting E3STs to SMIs in Asia
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
Barriers to Promoting E3STs to SMIs in Asia
Results & Discussion
Barriers to Promoting E3STs to SMIs in Asia • In China and India, the managerial and organizational barrier is the least important. In the three countries, infrastructure requirements, training, nonavailability of technologies and weak public awareness are not prominent. Inadequate management capacity is one of the most insignificant. • The financial and economic barrier is the most prominent barrier in India and the Philippines, whereas in China, the policy and market barrier is the most important. High initial capital cost, poor returns and increased cost of production are some of the most significant barriers in the foundry sector. • The policy and market barrier is significant for non-adoption of E3STs, and in some countries and sectors this could be the major barrier. • The technical and information barrier together with the management and organizational barrier do not pose a significant barrier for the promotion of E3STs. However, they cannot be disregarded as insignificant. As evident from sections 4.1 to 4.3, the different stakeholders in the study countries have differing opinions on the role of barriers inhibiting the promotion of E3STs. Box 4.1 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 how relevant the E3ST needs of the SMIs promotion of E3STs. • 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 intervention for the specific factors. These with existing technologies. factors were rated by the project team in the Based on observations from Tables 4.4-4.7, study countries based on their experiences and in consultation with national experts. according to industry personnel, • The financial and economic barrier is the most significant barrier inhibiting the promotion of E3STs in SMIs. The country specific factors also contribute to the findings mentioned in the earlier sections. An overview shows that:
Results & Discussion
Barriers to Promoting E3STs to SMIs in Asia
Results & Discussion
Box 4.1 Perspectives of different stakeholder groups in China The perspectives of the three stakeholders regarding the barriers are shown in the figure. There seems to be a common consensus among the different stakeholder groups in China that external barriers (policy & market and financial & economic barriers) are much more important for adoption of E3STs than internal barriers (technical & information, management & organizational barriers). All stakeholders believe that awareness of energy and environmental performance of E3STs in the management level and the technological operational hurdles are not the most prominent barriers for the adoption of E3STs. Although the differences between the stakeholders are not significant, the three different stakeholder groups assigned considerably different weights for each of the barrier categories. For example, the technical stakeholders gave the highest weight to the policy and management barriers (0.419), while the management and policy stakeholders ranked them second (0.320 and 0.311, respectively). This might mean that the technical stakeholders are expecting policy and market factors to play a greater role than the other two stakeholders are in the promotion of E3STs. It can be seen that management stakeholder opinions were the nearest to the overall result. Hence, while formulating policies for promoting E3STs, the views of different stakeholders should be considered.
• Environment regulations are in place, but enforcement is inadequate. • Commercial availability of E3STs is low even with a high level of development in the engineering sector and a moderate level of research and development activities. • Financial markets are developed or in the process of development. However, need for collateral is still emphasized. • Strong supporting institutional frameworks exist for industry and environmental affairs, but outreach to SMIs is poor. • Information flow to SMIs is still in the development stage.
4.5 Enhancement of Energy and Environment Performance by Removal of Barriers
The removal of prominent barriers for implementing E3STs, i.e. financial barriers and policy barriers, will help SMIs adopt the technology options available. Equipment suppliers can make use of the increased market to develop and market efficient technologies. It is not only policy interventions that will promote the adoption of E3STs as means to 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 options will be as much as 45% to 84%.
Source: Peng et al., 2005
Barriers to Promoting E3STs to SMIs in Asia
Results & Discussion For example, in Vietnam, application of technology options for the brick and tile industry provides the best GHG emission reduction potential of more than 40% (Box 4.2). aspects will enlarge the scope of these policies beyond monitoring and enforcement. This will require a more proactive and collective approach from all industrialists, 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 annual production of 7.2 billion pieces (2000):
4.6 Incorporation of Barrier Removal in 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 put in place pertinent environmental regulations. The following section highlights key issues in the policy framework, regulation and financial aspects that will help in the promotion of E3STs in SMIs.
Fuel switching options in the DC sector could reduce 7.5% of the GHG emissions for Sri Lanka and 21% for the tea sector in India. The GHG savings for the textile sector in India from fuel switching will be a remarkable 25.4%. But technology options are costly in terms of new investments and retrofitting (Box 4.3). This is where a sound policy framework backed by fiscal, energy and environmental policies can create a conducive climate for SMIs to seek and invest in E3STs. Assessment of the benefits of adopting E3STs, not only from the financial and economic viewpoint, but also from social
4.6.1 Policy Framework
Key economic policy issues aimed at energy and environmental perfor mance improvement by adopting E3STs include energy pricing, market-based instruments and financing. Energy Pricing Policy Power purchased from electric utilities
Barriers to Promoting E3STs to SMIs in Asia contributes significantly to the cost of production for SMIs. If industries tend to conserve energy by reducing their demand for electricity, the utility company will consume less fuel and reduce pollution. This is increasingly being promoted in developed countries. In Japan there has been a sustained reduction in the use of energy in the past few years (Matsuo, 2004). However, due to insufficient installed power capacity in developing countries, industries seek alternative power generation sources. For example, industries commonly invest in diesel generators (USAID, 1999). Diesel is usually subsidized in many countries. Therefore, unless energy pricing policy encourages use of cleaner fuels and alternative power sources with a focus on energy saving methods (E3STs), industries will continue to use energy resources that are least expensive irrespective of environmental damage. If attractive policies are in place, industries could invest in cleaner electricity generation such as wind power. Market-Based Instruments Market-based instruments (MBIs) can be defined as proxies for market signals in the form of changes to relative prices or a financial transfer (Andersen, 1998). They are aimed at forcing producers and consumers to take into account the pollution implications. At the same time, MBIs allow them the freedom to choose and adapt their activities and enable them to consider and apply least cost solutions. Market-based instruments (MBI) impose fees and provide incentives to achieve the same objective as regulatory policies. The various types of market-based instruments include user charges, emission charges or taxes, deposit-refund systems, subsidies, emission reduction credits and tradable permits. The most common is the “polluter pays” emissions fee system. Market-based instruments are most likely to be successful when: • Decision-makers are aware of the lobbying asymmetry between polluters and tax-payers so exemptions can be avoided. Although opponents to MBIs argue about competitiveness as a reason for exemptions, these exemptions are often provided for the largest polluters. • The level of the tax or charge is high enough to accurately reflect external costs but not too low to provide adequate incentives for polluters. The revenue could be ear-marked to support polluters’ technical adaptations. • There are no free allocations of tradable permits; these have negative affects on the cost-effectiveness and fairness of the instrument. • MBIs are not introduced to replace direct regulations. Charges are used not to replace regulations but to supplement them. Regulations should be kept in place as ‘safety-nets’. By way of example, the Laguna Lake Development Authority in the Philippines charges fees on effluent discharge into the lake or tributary streams. For reducing pollution, industries are rewarded by lower fees and fewer penalties. This approach has contributed to measurable improvements in the quality of Laguna Lake (USAID, 1999). China has introduced MBIs to curtail pollution. However, the mechanism did not achieve its objectives due to a low fee structure and lack of incentives. Polluters will pay low fees but avoid investments, as observed in Vietnam. In India and Sri Lanka, MBIs are yet to be implemented.
Results & Discussion Financing E3STs Investing in E3STs is a new approach for both industry and financial institutions. Industries are either not familiar with or lack the capacity to make cost-benefit analyses and preparation of bankable documents. Bankers are unaccustomed to appraising credit request proposals for E3STs. As financial institutions are isolated from policy issues related to energ y and environment, a working partnership between policy makers and financial institutions will be useful for exchanging experiences, purposes and objectives. Though many financing schemes and institutions designed to assist SMIs are available, their effectiveness in attracting SMIs to invest in E3STs is low. The Countryside Loan Fund of the Land Bank of the Philippines, the Small Industrial Development Bank of India (SIDBI) and the National Development Bank (NDB) of Sri Lanka target SMIs to adopt environmentally friendly technologies through provision of concessional loans. SIDBI was set up as a wholly-owned subsidiary of the Industrial Development Bank of India (IBDI) in April 1990. SIDBI is the principal financial institution for promotion, financing and development of industry in the small-scale sector and co-ordinates the functions of institutions engaged in similar activities. The NDB Bank in Sri Lanka acts as the administrative body for the implementation of a credit line provided by the Overseas Economic Cooperation Fund (OECF) of Japan for the promotion of energy savings and pollution control projects for industrial enterprises in Sri Lanka. This loan scheme is known as the Environmentally Friendly Solution Funds (e-friends). Box 4.4 describes the e-friend scheme. Financing issues as a barrier to E3ST promotion is further discussed in Section 4.6.3.
Box 4.4 Environmentally friendly solution funds (e-friends) by NDB Bank in Sri Lanka Any financially viable enterprise in operation or scheduled to commence operation at the time of the loan application is eligible for assistance under the e-friends scheme of the NDB. An enterprise seeking to implement a pollution control project should be able to conform to the regulations of the National Environmental Act. An enterprise implementing an energy savings project should justify the savings achieved. Any industry in any sector is eligible for this loan, which is mainly for acquiring equipment that contributes to reductions in energy consumption, end-of-pipe treatments and lower waste production, equipment that substantially improves the safety of the workplace, and relocation of highly polluting industries to industrial estates equipped with waste treatment plans. The principal terms and conditions of the loan are given below. Under the credit component Loan Amount: Up to 100% of the project cost subject to a maximum of Rs. 20 million. Equipment that, in addition to pollution control results in a substantial increase in profitability, will be eligible for a loan covering 70% of the cost. Payment period: Maximum of 10 years Interest rate: 8.5% (revised biannually) Security: Usually a mortgage over the project assets Grace period: Up to a maximum of 24 months Under the technical assistance component Up to 75% of the project cost subject to a maximum of Rs 750,000. Technical assistance loans available to cover consultancy costs directly related to the project and implemented under the e-friends loan scheme. Payment period: Maximum of 5 years Interest rate: Interest free Security: Usually a mortgage over the project assets Grace period: Up to a maximum of 12 months Source: Environmental Unit, National Development Bank, Sri Lanka
Barriers to Promoting E3STs to SMIs in Asia 4.6.2 Regulations and Standards Cost savings alone may not always be sufficient to persuade industries to implement E3STs. Some regulations may be necessary to motivate industries to take action. Environmental laws and regulations supported by applicable standards and government’s capacity and willingness to enforce them for the benefit of the broader public are pivotal factors for successful implementation (USAID, 1999). Monitoring and enforcement Monitoring and enforcement of environmental regulations are not observed in most instances because of insufficient resources and overlap of purviews. There are several agencies and institutions that overlook different sections of the industry in the context of energy and environment. They have insufficient resources and there are some ambiguities of pur view in implementation. The industries are therefore not clear or aware of the type of activities to be undertaken. Even though MBIs are implemented in China, lower pollution fees and lack of enforcement have made them ineffective. Variations and exemptions The availability of exemptions is a negative incentive for adopting E3STs. An empirical study done in China (Wang, 2002b ) concludes that privately owned enterprises have less bargaining power with the authorities than state owned enterprises in relation to pollution charges, and hence exemptions are possible for state enterprises, i.e. a low priority for pollution abatement. But, at present, the law on promotion of Cleaner Production encompasses all sectors. The enactment of the law forbidding the use of clay bricks by 2005 is applicable to all provincial capitals in China and will be extended to other cities as well. Thus, strict enforcement without variations and exemptions delivers results. In other cases, SMIs need support to comply with regulations. This may require technical as well as financial support. The case of the foundry sector in India (Box 4.5) shows that measures to reduce pollution through improved energy efficiency need to be demonstrated to potential users for widespread implementation. Lobbying power of the public to assist enforcement Creation and strengthening of public environmental councils as a means of pressuring industry is not new. In Europe, pubic interest bodies exist for looking at environmental issues and for other public services as well. The Carbon Trust forum in the UK1 provides subscribers, industrialists and the general public with energy saving advice and information on technology while acting as an energy watchdog. This kind of pressure group helps push regulatory authorities beyond enforcement and offer public recognition measures like eco-labelling and industry coding schemes. These are often voluntary mechanisms that drive industries to surpass the standards and seek public acceptance as a competitive advantage (Box 4.6). Existence of such pressure groups will move the monitoring and enforcement of environmental regulations closer towards the pubic interest rather than policy or penalty oriented measures. 4.6.3 Financing E3STs As the most significant barrier inhibiting the promotion of E3STs, financial and economic barriers obstruct innovation and create unwillingness to adopt E3STs and be part of a broader environmental agenda in pollution prevention. Key considerations of
Results & Discussion
Box 4.5 Stringent environmental controls result in development and adoption of better technology The Indian foundry sector has over 6000 cupolabased foundry units located mostly in clusters. The energy intensity of these units is high as shown by the charged coke percentage. After strict imposition of emission standards, most small-scale foundry units found it extremely difficult to comply, primarily due to the lack of availability of ready-made gas cleaning systems. To address this issue, a demonstration plant was commissioned in August 1998 by TERI. The cupola they developed is an intermittent type and is used for production of ingot moulds. The demonstration cupola was 33% more energy efficient with a coke saving of nearly 65%. The degree of abatement in stack emissions was also substantial and emission of suspended particulate matter was reduced by two-thirds. A second unit was installed in 2001 and saved 45% on coke, produced higher metal temperature and fewer casting rejects. Reduction in Suspended Particle Matter
industrialists, lenders and policy makers towards financing E3STs are as follows: Techno-economic assessment The high cost of E3STs is one of the financial barriers to implementing E3STs. From the policy makers’ point of view, it is important to identify whether the high cost is due to its technical features or due to costs added during transactions. If the former, then policy options should focus on financing instruments; whereas if it is the latter, policy interventions should be through fiscal policies such as import guarantees, duty waivers, reduced or no taxes, and incentives for implementation of E3STs. If the capital cost is high due to the high transaction cost of lending organizations, interventions of a different sort are required. The specialized nature of E3STs raises the issue of adaptability. Sustainability of a technolog y in a developing economy depends on its 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 Philippines operates a credit window
Source: TERI, 1999
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 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 scale. Industry compliance at the start of the Programme
Results & Discussion
Box 4.7 Adaptability of technology in developing countries One primary objective of importing technology is for improving the industrial development base to achieve technological advancement. However, many such efforts by developing countries have failed because imported technologies are not suitable. A number of indices that decision-makers can use are available to assess the suitability of a technology and its likely sustainability over the long term. By identifying and examining sustainability factors in relation to the technoeconomic level of development, the promotion of appropriate technologies can be greatly enhanced with supportive policies. The figure below illustrates the underlying factors that promote the adaptability of specialized technologies.
Policy interventions will be needed to secure investment through fiscal policies tied to performance-based energy and environment policies. For instance, financial schemes could be linked to parameters of MBIs. Industries earn credits or subsidies through energy savings or pollution prevention and these could be exchanged for reduced interest rates for investments made in E3STs. A new approach is needed in appraising E3STs which includes the evaluation of environmental and social benefits within its full life cycle. Banks in study countries are a good platform for launching for these efforts considering the factors listed in Table 4.8. Availability and access to funds 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 finances through rural banks might have shown better results (PECC, 2003). In the context of SMIs, the above observations are an important indication that SMI financing facility disbursements should be directed towards lending institutions closer to the SMIs. Together with state support, SIDBI in India, Bank Rakyat in Indonesia and Land Bank of Philippines have developed mechanisms to make finances available to SMIs (PECC, 2003).
Source: Dunmade, 2002
scheme to facilitate SMIs. If the technology is appropriate and provides the desired results it is only a case of proper financial and technical appraisal. The decision of financing can be left to the financial institutions if industry provides assurances regarding technology sustainability.
Barriers to Promoting E3STs to SMIs in Asia
Box 4.8 Small Industry Development Bank of India (SIDBI) Technology Upgrading Programme (TUP) of SIDBI The competitiveness of the products of smallscale industrial units depends to a large extent on their productivity levels, price factors and quality characteristics. SIDBI’s technology upgrading and modernization programme (TUP) is aimed at improving the technical capabilities and competitiveness of SSI units in clusters by introducing commercially proven technologies which will result in significant improvement in quality, productivity, cost reduction, saving of energy and raw materials, and reduction in the level of pollution. SIDBI provides support and co-ordinates the services of consultants, and backs up their efforts for arranging financial assistance, through banks or State Financial Corporations (SFCs) under its refinance assistance schemes. The Bank also provides direct financial assistance through its Technology Development and Modernization Fund scheme. Regular follow-up and monitoring is undertaken by SIDBI and implementing agencies are suitably compensated by way of professional fees for undertaking an assignment. TUP has been launched by SIDBI in more than 25 clusters, which range from the seafood processing industry (Coastal Kerala) to the brass and bell metal industry (Hajo, Assam) and from the scientific instrument industry (Ambala, Haryana) to artisan-based blacksmith units (Mylliem, Meghalaya). Impact assessment studies in selected clusters have revealed that:
• Earnings of artisans has gone up from
Box 4.9 Sustainable Guarantee Facility (SGF) for energy efficiency and renewable energy projects in Sri Lanka The Sri Lankan Government is in the process if establishing a Sustainable Guarantee Facility (SGF) aimed at improving access to finance for energy projects in Sri Lanka. The SGF is expected to be operational in 2005. The South Asian Regional Initiative for Energy and Nexant, Inc., on behalf of the United States Agency for International Development (USAID) is providing SGF for energy investments in Sri Lanka. The Energy Conservation Fund (ECF) of Sri Lanka is to provide repayment guarantees to Participating Financial Institutions (PFI) for loans made, and is targeted to non-conventional/renewable energy and energy efficiency projects. It is to overcome the major barrier faced by energy efficiency projects, namely the lack of collateral, by providing a comprehensive repayment guarantee that will act as a collateral substitute. PFIs that provide funds to the projects will have the option of requesting repayment guarantees. The total guarantee from the SGF for a particular project will not exceed 75% of the total loan offered. SGF as a general principle seeks to support projects:
• which demonstrate the economic and
Rs. 30 to Rs. 75 in the brass and bell metal industry of Hajo, Assam. • Fuel savings of Rs. 20,000 per month per unit were achieved by the foundry units of Howrah, West Bengal. • Annual savings of Rs. 2.3 million were achieved by the units manufacturing bicycle and bicycle parts in Ludhiana. Source: www.sidbi.com
productivity advantages of energy efficiency and non-conventional energy investments, • display technical viability of nonconventional renewable energy systems and have a high probability of replication in the future, • that are using technology that is proven in terms of its feasibility and effectiveness, and • that have a clear payback period and are financially capable of repaying the principal and interest amount of the project loan.
Source: Energy Conservation Fund of Sri Lanka
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 4.7 Summary to reduce environmental damage. • 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. 2001). 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).
Conclusions & Recommendations
SMIs are an important sub-sector of Asian developing economies and will play a crucial role in the years to come. Whilst their current level of technology use is traditional and inefficient and causes unnecessary energy consumption and emissions, there have been no significant efforts undertaken to address their energy-environmental issues. Therefore, SMIs need attention in technology upgrading. Adoption of energ y efficient and environmentally sound technologies (E3STs) is one of the major actions that can be taken to improve their energy-efficiency to reduce emissions and cost, thereby improving their competitive position in the world market. However, the adoption of E3STs is hampered by financial, technical, managerial and other barriers. Having prioritized the important barriers through a more participative approach, this study serves as a platform for further action by SMI stakeholders, policy makers in particular. The study provides scientifically supported information on key areas that need to be addressed for the promotion of E3STs in the SMI sector.
5.1 Prioritized Barriers
The following section presents the important barriers in general and for each country. General
The most important barrier is the high capital cost of E3STs in India, Sri Lanka and the 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 nonfor 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.
Barriers t o Promoting E3STs to SMIs in Asia In China Policy and market related barriers are by far the most important in hindering the adoption of E3STs. Under this category, lack of financial and fiscal incentives such as tax exemptions or subsidies for installation are the main barriers. At the same time, weak enforcement of environmental regulation is also an important barrier for non-adoption of E3STs. Financial and economic barriers are the second most important. High capital cost of E3STs and their poor returns are particular barriers under this category. Although technical and information or management and organizational barriers are not significant, lack of information on E3STs and management’s investment priority for the expansion of production facilities hinders adoption. Neither lack of technical skills nor the infrastructure to incorporate E3STs in existing facilities are reasons for non-adoption of E3STs in China. In India Financial and economic barriers are the most important barriers hindering the adoption of E3STs in India, particularly high capital costs and poor returns. The fear of increasing cost of production due to implementation is another important barrier. Management and organizational barriers are the second most important. SMI management staff are satisfied with their current processes and technologies and afraid of adopting any changes in technology. At the same time, their investment priority is for expansion of production capacity rather than improving technologies. Lack of public awareness or demand for green products or non-availability of E3STs is not considered a barrier. In the Philippines Financial and economic barriers are the most important barrier to adoption of E3STs in the Philippines, of which high capital costs and difficulties in accessing financing are identified as the most important. Management attitudes towards E3STs is an important barrier as their priorities are towards expansion of production capacity and increasing market share rather than implementing E3STs. However, management’s technical or managerial capacity is not a hindrance. In Sri Lanka Financial and economic barriers are the most important in Sri Lanka. These include high capital cost of E3STs, difficulties in accessing financing and poor returns on capital. At the same time, fear of increased production cost due to adoption of E3STs is also one reason for non-adoption. Policy and market related barriers are the second most important in Sri Lanka, particularly low demand for green products. Lack of information, non-availability and service are also important barriers in Sri Lanka.
Conclusions & Recommendations In Vietnam In the Vietnamese SMI sector, management is concerned that adoption of E3STs will incur additional costs and under mine competitiveness in the marketplace. This is found to be the major barrier in Vietnam. High capital cost is also a factor. Lack of information is identified as the second most important barrier. Nonavailability is not seen to be a barrier. Lack of enforcement of regulation is also identified as an important barrier. These barriers could be addressed by a single window system, wherein an individual technology board or institution with sufficient resources could assess the technology and finance the projects. This would avoid the ambiguity of the present system with a separate technology evaluation and financial assessment. Credit mechanisms and funds flow to banks and other financing agencies should be tailormade so that they can provide financial assistance to SMIs in the most flexible and least-cost manner. This would overcome barriers to E3ST adoption due to nonavailability or difficulties in accessing finance. Guarantee funds or similar mechanisms to minimize the perceived risk and to ease the strict collateral requirements of lending organizations are recommended. Participation of financial institutions should be encouraged in developing energy and environmental policies or financial mechanisms for the promotion of E3STs. They can share their experiences and evaluation practices from the lenders perspective. Lending institutions should: • go beyond traditional evaluation approaches and adopt changes in their ter ms and conditions for financial assistance, and • enhance their existing financial instruments with more performancebased attributes derived from marketbased instruments so that financial instruments are environmentally and investor friendly.
Addressing all the barriers may not be possible in a single step and so a step-by-step approach should be taken, starting from the immediate concerns to the least important barriers. Such a task is not easy, given the different prevailing economic environments of the participating countries. Nonetheless, immediate measures should be taken, otherwise the less significant barriers of today may become more significant tomorrow. Policy makers should be urged to formulate appropriate policy measures based on these findings. Some broad recommendations are given below. In general, SMIs suffer primarily from financial and technological barriers. The present financial system does not put sufficient emphasis on the soundness of technology and merely concentrates on monetary returns, whereas technology evaluation concentrates only on technological feasibility without financial consideration.
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 SMIs. 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 .
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Gruber E. and Brand M. (1991). Promoting energy conservation in small and medium-sized companies, Energy Policy, 19(3), 279-287. Helby P. (2001). EKO-Energi - a public voluntary programme targeted at Swedish firms with ambitious environmental goals. Journal of Cleaner Production, Volume 10, Issue 2, April 2002, 143-151. Huisingh D. (2002). Technical Background Papers, http://www.unep.org/unep/regoffs/roap/nettlap/Products/TrainingMaterials/CleanerProduction/PartIII1.html (Accessed on June 2004). Jonathan S. (1999). Status Report on energy and environment, policy and programmes in China, Environmental Energy Technologies Division, Berkeley National Laboratory. Kumar S., Visvanathan C., Peng S., Rudramoorthy R., Herrera A.B., Senanayake G., Son L.D., (2005). Greenhouse Gas Emission from Small and Medium Scale Industries in Asia, Asian Institute of Technology. Liberatore M.J. and Nydick R.L. (2003). Decision Technology Modeling, Software and Applications, John Wiley & Sons, Inc. Matsuo N. (2004). Issues mapping for CDM: An Asian Perspective, IGES-URC Regional Workshop in Asia on Capacity Development for the Clean Development Mechanism. 24-26 March, 2004, Siem Reap, Cambodia. PECC (2003). Financing Small and Medium Enterprises: Challenges and Options, Pacific Economic Cooperation Council. Available from www.pecc.org/finance/papers/FF-financingsmes(2003).pdf (Accessed on June 2004). Peng S., Liu Y., Shi H. and Ping Z. (2005). Studies on Barriers for Promotion of Clean Technology in SMEs of China, Chinese Journal of Population, Resources and Environment, Vol. 3, No. 1. Pohekar S.D. and Ramachandran M. (2004). Application of multi-criteria decision making to sustainable energy planning - A review, Renewable and Sustainable Energy Reviews, 8(4), 365381. Saaty T. (1980). The analytic hierarchy process: Planning, priority setting, resource allocation, McGraw-Hill International. Saaty T. (1999). Decision Making for Leaders – The Analytic Hierarchy Process for Decisions in a Complex World (1999/2000 edition), University of Pittsburgh. Sathaye J., Gadgil A. and Mukhopadhyay M. (1999). Role of Development Banks in Market Transformation: India Case Studies (LBNL-43191), Lawrence Berkeley National Laboratory. Available from http://ies.lbl.gov/iespubs/43191.pdf (Accessed on June 2004). SETC (2000). An Introduction to Cleaner Production, State Economic and Trade Commission, Chinese Inquisition Press, Beijing, 39-43, ISBN 7-80086-668-8/D.669. Singapore Environment Council (2005). Green Label. Available from http://www.sec.org.sg/ greenlabel_htm/greenlable_frameset.htm (Accessed on March 2005).
SPRU (2000). Barriers to Energy Efficiency to Public and Private Organizations: Final Report to the European Commission, SPRU (Science and Technology Policy Research), University of Sussex. Su M., Deng J. and He J. (2004). Energy efficiency and CO2 abatement in China township and village foundries, International Journal of Global Energy Issues, 21(1/2) 69-78. TERI (1999). Improving the energy performance of small scale foundries, The Energy and Resources Institute. Available from http://www.teriin.org/case/foundry.htm (Accessed on June 2004). TERI (2000). Experience in small-scale glass industry in Firozabad, The Energy and Resources Institute. Available from http://www.teriin.org/case/glass.htm (Accessed on June 2004). TERI (2002). Resource utilization improvements in brick industry, The Energy and Resources Institute. Available from http://www.teriin.org/case/brick.htm (Accessed on June 2004). TERI (2003). Vertical Shaft Brick Kiln Technology in Vietnam (Report No. 2003CR41), The Energy and Resources Institute. Available from http://www.teriin.org/reports/rep197/rep197.htm (Accessed on June 2004). Thiruchelvam M., Kumar S. and Visvanathan C. (2003). Policy options to promote energy efficient and environmentally sound technologies in small- and medium-scale industries Energy Policy, 31(10), 977-987. UNCTAD (1999). Providing sustainable financial and non-financial services for SME development, Expert Meeting on Sustainable Financial and Non-Financial Services for SME Development, Geneva, 2-4 June 1999. Available from http://r0.unctad.org/en/special/c3em7ag.htm#items (Accessed on June 2004). UNEP (1989). Cleaner Production Assessment in Industries - Barriers for Cleaner Production from the Perspective of Industries, United National Environmental Programme. Available from http://www.uneptie.org/pc/cp/understanding_cp/cp_industries.htm (Accessed on June 2004). UNEP (2002). Review of Greenhouse Gas Emissions & Target Sector Information, Greenhouse Gas Emission Reduction from Industry in Asia and Pacific (GERIAP), UNEP, June 2002. Available from http://www.geriap.org/, (Accessed on June 2004). UNIDO (1999). Energy Conservation and GHG Emissions Reduction in Chinese TVEs, UNIDO Project Documents. Available from http://www.unido.org (Accessed on June 2004). UNIDO (2003). EGM on Industrial Energy Efficiency, Co-generation and Climate Change Mitigation: Conclusions & Recommendations, UNIDO. Available from http://www.unido.org (Accessed on June 2004). USAID (1999). Reducing urban and industrial pollution in the Philippines, Center for Development Information and Evaluation (CDIE), USAID. Available from www.dec.org/usaid_eval (Accessed on June 2004). Vine E. (2005). An international survey of the energy service company (ESCO) industry, Energy Policy, 33(5), 691-704.
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APPENDIX A: SAMPLE QUESTIONNAIRE USED IN RANKING OF BARRIERS
Name of Company (Optional) ______________________ Name (Optional) ____________________ Designation / Type of Work _________________ Address (Optional) _____________________________ Contact number (Optional) ______________________ Email (Optional) _______________________________ Directions: 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: Sample
Barriers to Promoting E3STs to SMIs in Asia
Barriers to Promoting E3STs to SMIs in Asia
APPENDIX B: WEIGHTS AND RANKING OF BARRIERS FOR EACH STUDY SECTOR AND COUNTRY
Ranking the barriers Step 1 All the barriers are first listed and categorized into four major barrier categories. Table 3.1 explains the barrier categories and the individual barriers. The Analytical Hierarchy Process (AHP) was used to rank the barriers. A hierarchy structure (shown below) was developed for ranking the barriers.
First, a weight for each of the individual barriers within a particular barrier category is established. For this, pairwise comparisons are done for each barrier within a particular barrier category. The scale used for pairwise comparisons is described in Table 3.2. After the pairwise comparisons are completed, which results in a comparison matrix, there is a need for mathematical evaluation to deduce weights for each barrier. The weights can be determined by normalizing the pairwise comparison matrix. For example, the pairwise comparison matrix between the barriers under the barrier category Management and Organizational Barriers can be represented as follows:
The barriers (Table 3.1) were transformed 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 each of the individual barriers needs to be established in terms of its contribution to inhibiting the promotion of E3STs.
Based on the above pairwise comparison matrix, the weight for the barrier, B1.i , can be determined by the formula
where WB1.i = Weight for barrier B1.i B1.i 1.j = Pairwise comparison result of barrier B1.i and B1.j Similarly, the weights for barriers of the other three barrier categories can also be found.
Barriers to Promoting E3STs to SMIs in Asia Next, the weight for each barrier category in terms of its contribution to inhibiting the promotion of E3STs is established. A pairwise comparison is done again for each barrier category. The scale used for pairwise comparisons is described in Table 3.2. The pairwise comparisons result in a comparison matrix, which is then normalized for determining the weights for each barrier category. The pairwise comparison matrix between the barrier categories can be represented as follows: Step 3 The overall weight of the individual barriers can now be found by
OWB i. j = WBi * WBi. j
where, WBi = Weight of barrier category Bi (i varies from 1-4, the four major barrier categories) WBi.j = Weight of individual barrier 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 formula
The overall weights are consolidated for multiple responses and ranking is obtained based on stakeholder categories.
where, 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.
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.
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:
Appendix B1: Weights and Rankings of Barriers for China
Barriers to Promoting E3STs to SMIs in Asia
Appendix B2: Weights and Rankings of Barriers for India
Appendix B3: Weights and Rankings of Barriers for Philippines
Barriers to Promoting E3STs to SMIs in Asia
Appendix B4: Weights and Rankings of Barriers for Sri Lanka
Appendix B5: Rankings of Barriers for Vietnam
ARRPEEC 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. 2. 3. 4. Biomass Energy in Asia: Assessment and Strategy Formulation Small and Medium Scale Industries in Asia: Energy, Environment and Climate Interrelation (SMIs in Asia) Strategies for Promotion of Energy Efficient and Cleaner Technologies in the Urban Transport System 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 www.arrpeec.ait.ac.th 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 www.serd.ait.ac.th/smi2/smi/roadmap
TO PROMOTING ENERGY EFFICIENT AND ENVIRONMENTALLY FRIENDLY TECHNOLOGIES TO SMIs IN ASIA
S. Kumar C. Visvanathan Sizhen Peng R. Rudramoorthy Alice B. Herrera Gamini Senanayake Ly Dinh Son
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