Greenhouse gas emission and business carbon reporting obligations

By | April 24, 2014

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  1. Research methodology and data collecting:

As stated above, the sector chosen for this research is cement manufacturing and the primary data collected was from Lafarge Malayan Cement (LMC). Lafarge Malayan Cement is the market leader in the Malaysian cement industry; incorporated in 1950 with its first cement plant built in Rawang in 1953. Lafargeis the world leader in building materials, with top-ranking positions in all of its businesses: Cement, Aggregates & Concrete and Gypsum. With 76,000 employees in 78 countries, Lafarge posted sales of Euros 16.2 billion in 2010. Lafarge was ranked 6th in the “Carbon Disclosure Project” and entered the global “Dow Jones Sustainability Index” in 2010 in recognition of its sustainable development actions.  With the world’s leading building materials research facility, Lafarge places innovation at the heart of its priorities, working for sustainable construction and architectural creativity.

The interview took placed at Rawang Lafarge cement factory on 1st Oct 2011 with the interviewee being Mr. Nagesrao Krishana – Operating Manager of  Rawang Lafarge cement factory regarding the subject of greenhouse gases emissions and environmental related issues.

 

 

  1. Findings

Question a: Do you think your business has significant impact/risk on the greenhouse gas emission?

The answer for this question is ‘yes’ since the cement manufacturing sector produced approximately 5% of Malaysia’s carbon dioxide emission. However, Mr. Nagesrao Krishana indicated that bearing such risk is necessary since cement is the primary component of any construction and the development of economy.

Question b: How do you rate the risk involved with Greenhouse Gas emissions? High, Medium or Low?

The risk for Greenhouse gases emissions was made well aware at Lafarge Malayan Cement and was stressed not only in the company’s public relation but also taken into action despite the lack of government regulation. In 2010, LMC was the first cement company in Malaysia to have two products awarded the Green Label certification by the Singapore Environment council; these two products – Mascrete LH and Phoenix – are manufactured using pulverized fuel ash, a by-product of coal fired power stations. The company was also honored with ‘technology innovation award for sustainable production of cement’ by Frost & Sullivan Green Excellence Awards on 9th June 2010, for demonstrating its firm commitment to a continuous focus on reducing the dependency on finite resources and resolving to reduce the impact of climate change and overall ecological footprint.

Since 2006, Lafarge has been committed to sustainable development for many years pursuing a strategy that combines industrial know-how with performance, value creation, respect for employees and local cultures, environmental protection and the conservation of the natural resources and energy. The company has reduced 11% the amount of its CO2 emissions in 2006 and kept on tract to keeping its commitment of reducing worldwide CO2 emissions by 20%. On April 7, 2006, the Executive Board of the CDM (Clean Development Mechanism) project, which is under the auspices of the United Nations, validated its project to substitute biomass energy sources for fossil fuels. In Rawang and Kanthan cement plants, 5 % of the thermal energy used in cement manufacturing since 2000 has come from palm kernel shells. Thanks to these biomasses, which are a waste product of the oil palm industry, the plants can reduce CO2 emissions by more than 60,000 tonnes per year! This is the equivalent of planting four million trees a year. This technique also preserves fossil fuels and offers advantages to the environment by avoiding the disposal of the waste product and the local economy by reducing Malaysia’s dependence on coal imports.

Question c: How do you assess climate policy, do you have a separate department and personnel to be responsible for the climate policy?

Currently, climate policies of LMC were handled via corporate social responsibility channel as a voluntary commitment. However, LMC is gladly to organize such department if the Malaysian law requires.

Currently, Rawang Lafarge cement factory and other LMC’s factories in Malaysia are using continuous emission monitoring systems (CEMS) that was required by the Department of Environment Malaysia. The standard in used is the Malaysian Clean Air Regulation which governs the acceptable amount of dust, SO2, NOx and CO in one normal cubic meter (Nm3). This system can also monitor the amount of CO2 emitted; however, the Malaysian Clean Air Regulation has yet to standardize the concentration of CO2.

The evaluation and data collection was audited by Alam Hijau Integrasi (M) Sdn.Bhd – a third party that was assigned to ensure the integrity of the CEMS system.

The emission standards regulated by the Department of Environment are as follow

Question e: Does your business include Greenhouse Gas intensive goods and services?

The answer for this questions is ‘yes’. The process of manufacturing cement requires significant amount of inputs of fuel, coal and electricity. Figure E1 indicated the simplified flowchart of the cement manufacturing process at LMC.

Figure E1: simplified/non technical cement manufacturing process

During these 14 steps, petroleum was used for vehicles in the mining process and transportation; coal and electricity were used in crushing, grinding, heating and transporting. In fact, LMC is one of the largest client of Tenaga Nasional Berhad Malaysia with millions MYR electricity monthly bills for Rawang factory alone. Hence, LMC’s products are classified as greenhouse gases intensive goods.

Question f: Do you continuously assess the current and emerging carbon reporting obligations in Malaysia and in the countries you operate and could you specify them?

The legal department of LMC is continuously communicating with Department of Environment and updating the Malaysian government’s regulation of carbon reporting obligation. However, currently these regulations are still in pending.

The latest Clean Development Mechanism project carried out at LMC was the above said substitution of a percentage of imported coal with a biomass alternative, Palm Kernel Shells (PKS), in the cement manufacturing process. PKS are a waste product of Malaysia’s palm oil industry. PKS now account for over 5% of energy used in the heating process of the plants’ kilns during the production of cement.

Question g: In your opinion is there continuous and faster progress in carbon reporting regulation in Malaysia?

The Malaysian government is putting efforts into completing the first drafts of regulations that govern the emission of greenhouse gases whose vital component is carbon reporting. Several countries are now enforcing regulations on this matter; however, the method of carbon reporting differs between countries due to the unfinished negotiations at UNFCCC.

 

 

Question h:  Is there appropriate and ample guidelines for effective Carbon Reporting?

Enterprise Carbon Accounting (ECA) is an effective accounting process used to measure the amount of carbon dioxide equivalent. This footprint provides a comprehensive approach to carbon accounting. It includes process of calculating, managing, reporting, reducing and trading carbon emission.

Question i: What is role of Accounting Standards Board (both National and International) in effective Carbon Reporting?

For the time being, there are no accounting standards from either the Financial Accounting Boards (FASB) or the International Accounting Standards Board (IASB) on accounting for emission and carbon. As the emission of carbon meet the definition of liability under the Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), thus they need to be constantly measured and recorded.

Question j: Which Guidelines you use/may want to use for Carbon Reporting?

As the Kyoto Protocol is easy to use, it may be suitable to be used in my company.


 

Question k: In your view, what is the policy option best exercisable/practicable among the following (i. Emission reporting, ii. Carbon Development Mechanism (CMD), iii. Carbon Emission pricing, iv. Emission trading scheme, v. Trade barriers, vi. Carbon tax) and why?

Currently, the Malaysian government is implementing some pilot projects of Clean Development Mechanism; such as the above said substitution of imported coal with palm kernel shell at LMC. LMC is also investing in finding new production methods that reduce carbon emission and products with lesser carbon footprint such as Mascrete LH and Phoenix. Companies and governments around the globe are focusing on developing environment friendly productions and businesses. Hence, Clean Development Mechanism (CMD) has more potential to be practicable.

On the other hand, for the rest to be feasible, carbon emission reporting must be effective since it provides vital data inputs for other activities.

 

 

References

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Environmental Quality Act 1974, 1974. Laws of Malaysia [Online]. Available at:        http://www.doe.gov.my/v2/files/legislation/a0127.pdf [Accessed on 8 October 2011].

 

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