A leading Cambodian rice exporter is planning a $3.5 million renewable energy project that will earn credits under the global carbon-dioxide reduction scheme of the Kyoto Protocol.
Pending approval by the Phnom Penh municipal government, Angkor Rice will begin construction of the Angkor BioCogen (ABC) power plant in early 2006, with operations expected to begin by mid-2007,
The plant will produce clean energy by using rice husks to fuel a biomass generator. As a waste product of its milling operations, Angkor Rice is left with about 26,000 metric tons of rice husk each year. Energy produced by the plant would be used by the company and surrounding villages in Kandal province.
Adisom Chieu, the managing director of Angkor Rice’s ABC venture, said he hopes the company will be the first in Cambodia to benefit from the financial incentives of the Clean Development Mechanism (CDM).
CDM is part of an effort to reduce greenhouse gas emissions by allowing developed nations to achieve part of their carbon-dioxide reduction obligations set out by the Kyoto Protocol through projects in developing countries.
“CDM is making this project possible,” Chieu said. “Although the money we will earn from selling carbon credits to other countries only equals 3 to 5 percent of the projected revenue, it makes the venture economically viable.”
Under the Kyoto Protocol, signatory countries must limit carbon-dioxide emissions caused by the burning of fossil fuels. Because Cambodia already has low carbon-dioxide levels, it can afford to sell off carbon credits to developing countries, while still adhering to Kyoto Protocol standards.
A country earns carbon credits by reducing emissions into the atmosphere. One credit is equivalent to the reduction of one metric ton of carbon, which translates to between $5 and $10 depending on the company buying the credit.
Arul Joe Mathias, a biomass and CDM advisor for the EC-ASEAN COGEN Programme and also for the ABC project, is enthusiastic about the new power plant.
Mathias estimates that Angkor Rice will produce approximately 40,000 carbon credits per year, which the company can sell, potentially earning between $200,000 and $400,000 annually.
He has already been contacted by several multinational organizations that want to finance the environmentally friendly power plant and expects more interest as the project develops.
“People always say that Cambodia is not a good country to do business, but I think it is one of the best countries to do business [in energy],” said Mathias, who was worked with more than 100 CDM projects in the region. “The cost of energy in Cambodia is three times higher than in Thailand. That makes your investment three times more profitable.”
The Climate Change office within the Ministry of Environment has been working for two years to set up guidelines for CDM investment in Cambodia.
“CDM and carbon credits are a great way to get investment in developing countries for projects that reduce greenhouse emission,” said Bridget McIntosh, the CDM advisor at the Climate Change office.
McIntosh said the key to Cambodia benefiting from CDM is implementing projects that can improve long-term, sustainable development in Cambodia.
Suitable projects would use indigenous fuel sources and reduce local pollution.
For Angkor Rice, the project will not only earn them carbon credits and extra cash, but will also reduce the amount of waste material they produce and help the local community.
If the rice husks left over after milling were allowed to decay naturally, they would release methane – an environmentally destructive greenhouse gas – after four to five years.
By burning the rice husks, Angkor Rice will produce 1.5 megawatts (MW) of energy per day, which will power their rice mill and still leave 0.5 MW to supply to 19 local villages.
The existing supplier has already agreed to distribute the extra electricity, and the price will be reduced from the current 1,800 riel per kilowatt to 900 riel.