Evaluating the feasibility of a carbon reducing project : a case study in the mining industry

Abstract

Today, global warming is commonly known due to the major impact on the earth’s weather conditions. The increase in the average temperature of the lower atmosphere is causing a drastic change in weather conditions. Human intervention is the main cause of global warming and the latter will be limited if greenhouse gas (GHGs) emissions are reduced by individuals and companies in all countries around the world. Carbon dioxide (CO2) is one of the biggest contributors of GHGs and, therefore, a number of measures were implemented to reduce CO2 emissions. In 1997, the Kyoto Protocol was signed by the Annex 1 countries, of which South Africa is not part, under the United Nations Framework Convention on Climate Change (UNFCCC) to reduce GHG emissions. It is not only the responsibility of the Annex 1 countries to stabilise global warming, but all countries have to contribute to the reduction of GHG emissions. Enabling countries to meet these reduction targets, they implemented the following measures: carbon tax, Energy Service Companies (ESCOs) and carbon credits. Carbon tax has been implemented in many countries over the last decade with different levels of success. Carbon tax will be implemented in South Africa during 2013/2014. ESCOs have been implemented to assist companies with the implementation of energy saving projects. These projects will assist in reducing carbon emissions and meeting the set targets and it will also assist in reducing the effect of carbon tax. Clean Development Mechanism (CDM) projects are implemented under the UNFCCC for companies that want to register carbon reduction projects. If the projects meet the CDM registration criteria, the project can be registered as a CDM project and it has the ability to earn tradable carbon credits. These credits can be traded on national or international carbon trading markets. This study considered a combination of all the measures a company can implement to improve energy efficiency and thereby reducing GHG emissions. An evaluation of the feasibility of a carbon reduction project, the ‘Vaal River compressed air energy efficiency improvement project’ of AngloGold Ashanti (AGA) was performed to determine whether the project can be registered as a CDM project. It was concluded that AGA will be able to register the project as a CDM project and earn tradable carbon credits. Furthermore, it is recommended that AGA makes use of the option to finance the carbon reducing project by using external funding provided by EDF (the French equivalent of South Africa’s Eskom).