Reducing local pollution: This PCF project shows how global and local benefits can complement each otherthrough carbon finance.
Svishtov is a venerable port town on the Bulgarian side of a quiet stretch of the Danube River where it forms the border with Romania. Among the many commercial and manufacturing sites in the area of Svishtov is Svilosa, a site constructed during the late-1960s to be Bulgaria’s largest pulp plant for the production of synthetic fibers. Bulgaria was one of the former economic zone’s centers for wood processing, from saw milling to all ranges of wood products. Timber was shipped from all over the Soviet Union and Central and Eastern Europe to Bulgaria. Svilosa was built as one of Bulgaria’s major industrial plants, situated on the Danube, with its own port, its own electricity-generating plant, and a staff of thousands of people.
Today, Svilosa is a private company employing about 2,200 people. Its main products are block and sheet cellulose--55,000 tons per year--which are used to manufacture paper. More than 85% of the company's revenues are generated through exports. The company uses locally produced wood to manufacture the cellulose.
Because fossil fuels from the Soviet Union were plentiful and relatively low-cost, Svilosa (along with most other wood industries in Bulgaria) was designed to use fossil fuels to run its heating and power plant for factory production. At the end of the production process, it dumped enormous waste piles of sawdust, wood chips, and bark in stockpiles that have accumulated over decades.
The environmental costs of such activity are now evident in many ways. For one, Svilosa sits next to hundreds of thousands of tons of stockpiled wood waste. Damaging greenhouse gases like methane are emitted in large quantities from these dumps annually--methane from rotting wood residues has a global warming potential 21 times higher than carbon dioxide. In addition, Svilosa's heating plant still burns fossil fuels, emitting yet more greenhouse gases
The economic costs are also apparent. Without the subsidies of the Soviet-era economy, coal prices have increased since 1989. Svilosa currently spends US$8.3 million per year on imported coal--yet it is sitting next to an amount of biomass that could power much of its factory production.
Conversion from coal to biomass as a fuel at Svilosa has been proposed for a number of years. But the big job of upgrading the power and heating plant with modern biomass boilers and other equipment needed to burn biomass wastes requires long-term investment finance and access to new technology--exactly the things which are fundamental problems in the economies in transition. Lack of finance and technical capacity have been the primary barriers to realizing the benefits from fuel switching from fossil fuels to biomass waste.
The solution, in this case, is Joint Implementation under the Kyoto Protocol for the Svilosa Biomass Project. Through the project, the PCF will purchase a minimum of 500,000 tons of emission reductions of carbon dioxide equivalent from the displacement of coal by biomass. Svilosa will install a modern boiler to use the wood waste from the factory, in that way replacing imported coal. Since the project will contribute towards less use of coal in the plant, there will also be local environmental benefits –a) an improvement of air quality due to reduction of pollutants (SO2, NOx, CO, and particulates); and b) a reduction in the volume of ash generated in the plant, reducing the environmental hazards linked with safe ash disposal.
The Emission Reductions Purchase Agreement was signed on September 24, 2003, by Svilosa, as the project developer, and the PCF Trustee in the presence of two Bulgarian state ministers. The wood waste generated in the plant will be burned in a 13-megawatt biomass boiler to supply heat to the plant, which in turn will reduce the use of coal in the combined heat and power plant currently used to supply heat to Svilosa. The biomass boiler is currently being built and is expected to be operational towards the end of 2003, generating its first emission reductions in early 2004. Svilosa is financing the US$2.5 million boiler entirely from its own resources.
This project is the first Joint Implementation project in Bulgaria. It shows how emission reductions generated and sold under the Joint Implementation mechanism of the Kyoto Protocol can catalyse improvements in environmental performance in an important industry in the forestry and wood-processing sector. Practices in this sector also have important ramifications for forest carbon management in Bulgaria and other economies in transition in Central and Eastern Europe and in Central Asia.