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March 31, 2009

First ODA-backed Private Sector Project Registered as CDM
-Coconut Shell Charcoaling and Power Generation Project Funded by Sri Lankan Environmentally Friendly Solutions Fund-

  • 1. The Coconut Shell Charcoaling and Power Generation Project was registered as a Clean Development Mechanism (CDM)[1] on March 28 by the United Nations' CDM Executive Board. This Project is being implemented by Recogen Limited using finance from the Environmentally Friendly Solutions Fund (E-FRIENDS)[2] that JICA supports with a Japanese ODA loan. This Project is the first case that a private company's environmental project financed by Japanese ODA loan has been approved as a CDM.
  • 2. Recogen Limited is a company based in Sri Lanka that produces charcoal from coconut shells. Producing coconut charcoal is a local traditional practice, which is customarily made in a small, outdoor open pit using a steam baking process. Recogen Limited spent many years developing its mechanized process where coconut shells are burned in specially sealed equipment inside a plant. This technology will be employed in the Coconut Shell Charcoaling and Power Generation Project, thereby preventing methane and other volatile gases conventionally created in the manufacturing process from being dispersed into the air. Additionally, those gases will be collected and combusted to generate steam and produce 5.8 megawatts of electricity. This Project will thus decrease greenhouse gases through both the recovery of methane and the production of electricity. It is estimated that about 430 thousand tons of CO2 emission will be reduced by this Project over the crediting period from April 1, 2009 to March 31, 2019.

    Conventional Method and New Technology

  • 3. Out of about one billion rupees required by Recogen Limited to adopt the new technology under this Project, JICA has financed 100 million rupees through E-FRIENDS financing scheme. E-FRIENDS provides loans to private companies via Participating Credit Institutions, in order to support private companies' medium and long-term investment in environment improvement activities including the introduction of anti-pollution technologies. E-FRIENDS also finances the expenses for consulting services and training, which is required by private companies to obtain technological and environmental support to implement environmental improvement activities.[3] Including this Project, E-FRIENDS has provided some seven billion rupees for approximately 800 projects.
  • 4. In the past, JICA has provided support both to the first large-scale CDM project in the world financed with ODA[4] as well as the first CDM project in the railroad sector.[5] This has contributed to the improvement of the distribution of CDM projects in terms of geography and the fields of implementation. It is expected that the registration of this Project will encourage additional environmental improvement activities in the private sector of developing countries in cooperation with JICA, as well as will facilitate such private companies to form and implement CDM projects. JICA's course of action will be to make continuous effort to achieve sustainable development of developing countries, which is a shared objective of ODA and CDM, through the implementation of ODA.
  • [1] The Clean Development Mechanism (CDM) is one of the three Kyoto Mechanisms for advanced nations and those transitioning to a market economy to carry out projects that reduce greenhouse gases in developing countries. The amount of greenhouse gases reduction is given to the implementing country as a credit. The CDM thus provides a framework for nations to achieve their reduction targets as well as contributing to sustainable development in developing countries.
  • [2] E-FRIENDS encourages companies to make capital investments that improve the environment and improve the ability of participating financial institutions to carry out assessments. The aim of E-FRIENDS is to alleviate and prevent pollution in Sri Lanka to improve the state of the environment. For the Coconut Shell Charcoaling and Power Generation Project, two agreements were signed for Japanese ODA loans, in 1998 and 2004, reaching a total of 7.97 billion yen in assistance.
  • [3] The financing framework is shown in the below diagram.

    financing framework

  • [4] The Zafarana Wind Power Plant Project registered in June 2007.
  • [5] The Delhi Mass Rapid Transport System Project (Installation of Low Green House Gases (GHG) emitting rolling stock cars in metro system), registered in January 2008.
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