Barriers to Promoting Energy Efficient and Environmentally Friendly Technologies to SMIs in Asia -...

8/9/2019 Barriers to Promoting Energy Efficient and Environmentally Friendly Technologies to SMIs in Asia - AIT, Thailand

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BARRIERSTO PROMOTING ENERGY EFFICIENT AND

ENVIRONMENTALLY FRIENDLY TECHNOLOGIES TO SMIs IN ASIA


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Barriers

S. Kumar

C. Visvanathan

Sizhen Peng

R. Rudramoorthy

Alice B. Herrera

Gamini SenanayakeLy Dinh Son

to Promoting Energy Efficient and

Environmentally Sound Technologies

to SMIs in Asia


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Barriersto Promoting Energy Efficient and

Environmentally Sound Technologies

to SMIs in Asia

PUBLISHED BY

School of Environment, Resources and DevelopmentAsian Institute of Technology

PO Box 4, Klong LuangPathum Thani 12120ThailandFax: (66) 2 524 5439Email: [email protected] and [email protected]

DISCLAIMER

Neither the Swedish International Development Cooperation Agency (Sida) nor the AsianInstitute of Technology (AIT) and its partners, the National Research Institutes of thestudy countries, make any warranty, expressed or implied, or assume any legal liability forthe accuracy or completeness of any information, apparatus, products, or represents that itsuse would not infringe privately owned rights. Reference herein to any trademark ormanufacturers or otherwise does not constitute or imply its endorsement, recommendation,or favoring by Sida or AIT.

ISBN: 974-8208-60-5600 copies

Printed in ThailandAsian Institute of Technology, 2005


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Project Team

Principal Investigators

Dr. S. Kumar, Professor, Energy Field of Study, School of Environment, Resources andDevelopment, Asian Institute of Technology, Thailand ([email protected])

Dr. C. Visvanathan, Professor, Environmental Engineering and Management Field of Study,School of Environment, Resources and Development, Asian Institute of Technology, Thailand ([email protected])

National Research Institute (NRI) Team Leaders

Dr. Sizhen, Peng, Director, Center for Environmentally Sound Technology Transfer,Administrative Center for Chinas Agenda 21, Beijing, China ([email protected])

Dr. R. Rudramoorthy, Professor, Energy Engineering Department, PSG College ofTechnology and Industrial Institute, Coimbatore, India ([email protected])

Dr. Alice B. Herrera, Fuel and Energy Division, Industrial Technology Development Institute,

Department of Science and Technology, Metro Manila, Philippines ([email protected])

Mr. Gamini Senanayake, Director, Industrial Services Bureau of North Western Province,Kurunegala, Sri Lanka ([email protected])

Mr. Ly Dinh Son, Director, Consulting Center for Cooperative Promotion and CapacityBuilding, Hanoi, Vietnam ([email protected])

Research Staff

Mr. Aruna Manipura (March 2002 - December 2003)Ms. Priya Ambashankar (December 2003 - August 2004)Mr. Prajapati Shapkota (September 2003 - November 2004)Mr. Prantik Bordoloi (Since May 2004)

Research Fellows

Mr. I.S.B.P. Ratnakumara (June 2004)Mr. Oscarlito Malvar (June 2004)

Mr. R. Kannan (March - May 2005)


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Preface

The Asian Regional Research Programme on

Energy, Environment and Climate(ARRPEEC) funded by SwedishInternational Development Cooperation Agency (Sida) and coordinated by AsianInstitute of Technology (AIT), is aimed atpolicy-oriented research in selected areas ofenergy, environment and climate change.Other objectives include capacitymobilization and enhancement of theparticipating research institutions and linkageof the project activities with national,regional and global initiatives for reducinggreenhouse gases and other hazardousemissions. Small and Medium ScaleIndustries in Asia (SMI in Asia) project isone of the regional research projects under ARRPEEC and involves the followingresearch institutions: Center forEnvironmentally Sound Technology

Transfer, China; PSG College of Technologyand Industrial Institute, India; IndustrialServices Bureau of North Western Province,Sri Lanka; Industrial TechnologyDevelopment Institute, Philippines; andConsulting Center for CooperativePromotion and Capacity Building, Vietnam.

Phase I of ARRPEEC focused on the

assessment, adoption and propagation ofenergy efficient and environmentally soundtechnologies (E3STs) among the selecteddeveloping countries, (China, India,Philippines and Sri Lanka) and a crosscountry analysis was made on large industrysectors representing steel, cement and pulp& paper.

In phase II, the focus was narrowed down toSMIs in participating countries, with the

addition of Vietnam. Phase II analyzed the

energy and environmental issues of thedesiccated coconut, tea, foundry & metalcasting, textile, and brick, tile & ceramicsectors and studied the policy issues topromote E3STs concerning the above sectorsin these participating countries.

The current phase, as a continuation fromPhase II, addressed the following issues forthe same sectors as in Phase II:

Estimation of the greenhouse gas (GHG)emissions in selected SMIs

Study and prioritization of barriers thatinhibit the promotion of E3STs in SMIs

Techno-economic evaluation of E3STsavailable for mitigating GHG emissions,improving energy efficiency and abatingenvironmental pollution

This report discusses the availability, degreeof impedance, and provides a comparisonof barriers inhibiting the promotion ofE3STs for the selected sectors based on thestudies carried out in the study countries.Ranking the barriers from the perspective ofindustry personnel and policy personnel has

been done and recommendations are madeto incorporate the mechanisms to removethese barriers while formulating nationalpolicies for promoting the use of E3STs inSMIs.

Documentary research indicates that noprevious studies had been carried out with aspecific focus on SMIs and E3STs. Therefore,this report will act as a start up documentfor providing the impetus to further remove


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barriers that inhibit the promotion of

environmentally sound energy technologies.

We would like to acknowledge the supportof Mr. Aruna Manipura, Ms. Priya Ambashankar, Mr. Prajapati Shapkota andMr. Prantik Bordoloi, Research Associatesof SMI Asia Project of the School ofEnvironment Resources and Developmentof the Asian Institute of Technology,Thailand; and Research Fellows Mr. I.S.B.P.Ratnakumara, Mr. Oscarlito Malvar and Mr.R. Kannan, who contributed to this study.

The financial support of the sponsor, SwedishInternational Development Cooperation Agency (Sida), is gratefully acknowledged.We would like to thank Dr. Gity Behravan,Senior Research Advisor, Sida, withoutwhose support and guidance this study could

not have been carried out.

S. KumarC. VisvanathanSizhen PengR. RudramoorthyAlice B. HerreraGamini SenanayakeLy Dinh Son

September 2005


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Executive Summary

The contribution of SMIs to the national

economies of the selected countries issignificant. The energy and environmentalperformance of SMIs, however, is poor. SMIscontribute 7-9% to the national GHGinventories in the study countries, in additionto significant environmental pollution from wastewater and solid wastes. Because theyface a number of barriers, the use of energyefficient and environmentally sound

technologies (E3STs) is limited to a fewdemonstration projects.

This report presents the results of a studycarried out to identify the barriers faced bySMIs for E3ST application and theirprioritization. This is expected to assist policymakers develop mechanisms for the removalof these barriers by formulation of suitablepolicies focused on SMIs.

Views regarding the barriers to promoteE3STs vary amongst the SMI stakeholdersi.e., policy makers, SMI management,representatives from financial institutionsand technocrats. The study has found thatthe most significant barriers are financial andpolicy barriers. The degree of significancevaries from country to country.

The most significant barrier in India, Sri Lankaand the Philippines is the high cost of E3STs;in China it is the lack of financial incentives;and in Vietnam it is the managements fearof the high cost of production due to E3STs.In none of the countries is the non-availability or the lack of technical ormanagerial skill seen as a major barrier for

adoption of E3STs.

In China, the lack of financial and fiscal

incentives such as tax exemptions orsubsidies for installation of E3STs is animportant barrier. Weak enforcement ofenvironmental regulation is also an importantbarrier.

In India, the high capital cost of E3STs andpoor returns are identified as importantbarriers. SMI management appears to be

satisfied with their current processes andtechnologies and are wary of adopting newtechnologies. Their investment priority is forexpansion of production capacity rather thanimproving technologies.

In the Philippines, high capital cost of E3STsand difficulties in accessing finance areidentified as important barriers.Managements priorities are towards

expansion of production capacity andincreasing market share rather thanimplementing E3STs.

In Sri Lanka, high capital cost of E3STs,difficulties in accessing finance and poorreturns on capital are identified as majorbarriers. Lack of information and non-availability of E3STs and service are also

important barriers.

In Vietnam, management is deeplyconcerned that adoption of E3STs wouldincur additional costs and undermine theircompetitiveness in the marketplace. Lack ofinformation on E3STs is identified as thesecond most important barrier although non-availability is not seen to be a barrier. Lack

of enforcement of regulations is alsoidentified as an important barrier.


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The following broad recommendations are

suggested:

Re-evaluation of existing energy andenvironmental policies, impacts andconstraints in promoting E3STs in allsectors.

Integration of energy and environment,financial and technical policies, so thatthey are constructive in application,

monitoring and enforcement. Assess the introduction of market-basedinstruments backed by fiscal policiesacross sectors.

Include financial institutions in existingand future capacity building programmeson E3STs.

Develop mechanisms to carry availablefinances to lower level strata of theindustry sector.

Enrolment of public support into theenergy and environmental dialogue tostrengthen the enforcement andacceptance of innovative policies topromote E3STs in the SMI sector.


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Table of Contents

Project Team ................................................................................................................................. IIIPreface ............................................................................................................................................. IV

Executive Summary ...................................................................................................................... VI

Chapter 1 Introduction ................................................................................................................. 11.1 Background ................................................................................................................................ 11.2 Status of the Study Sectors ..................................................................................................... 21.2.1 Foundry & metal castiing ..................................................................................................... 31.2.2 Texttile sector ........................................................................................................................ 41.2.3 Brick, tile & ceramic sector ................................................................................................. 51.2.4 Tea production sector ........................................................................................................... 7

1.2.5 Desiccated coconut sector ................................................................................................... 71.3 Rationale and Objectives ........................................................................................................ 81.4 Organization of the Report .................................................................................................... 9

Chapter 2 An Overview Of Barriers ........................................................................ 11

2.1 Barriers to Promoting E3STs in the Study Countries ...................................................... 112.1.1 China ..................................................................................................................................... 112.1.2 India ....................................................................................................................................... 122.1.3. Philippines ........................................................................................................................... 132.1.4 Sri Lanka ............................................................................................................................... 132.1.5 Vietnam ................................................................................................................................. 142.2 Types of Barriers .................................................................................................................... 142.2.1 Managerial barriers .............................................................................................................. 142.2.2 Human resource barriers .................................................................................................... 162.2.3 Technical barriers ................................................................................................................ 162.2.4 Financial barriers ................................................................................................................. 162.2.5 Market barriers ..................................................................................................................... 172.2.6 Regulatory barriers .............................................................................................................. 172.2.7 Information barriers ............................................................................................................ 18

2.2.8 Research and development ................................................................................................ 182.3 Earlier Studies on Barriers Inhibiting Adoption of E3STs ............................................. 192.4 Summary ................................................................................................................................... 21

Chapter 3 Study Approach & Activities ................................................................... 25

3.1 Identification and Finalization of the Barriers .................................................................. 253.2 Tools for Prioritization of Barriers ...................................................................................... 253.3 Procedure of the Study .......................................................................................................... 293.4 Allocation of Weights for Judgments .................................................................................. 32

3.5 Consolidation of Responses ................................................................................................. 333.6 Summary ................................................................................................................................... 33


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Chapter 4 Results & Discussion .............................................................................. 35

4.1 Overall Assessment ................................................................................................................ 35

4.2 Assessment of Barriers by Policy Personnel ...................................................................... 374.3 Sector Specific Overall Ranking of Barriers ...................................................................... 374.4 Country Specific Factors ....................................................................................................... 424.5 Enhancement of Energy and Environment Performance by Removal of Barriers .... 454.6 Incorporation of Barrier Removal in National Policy Implementation ......................... 474.6.1 Policy Framework ................................................................................................................ 474.6.2 Regulations and Standards ................................................................................................. 504.6.3 Financing E3STs ................................................................................................................. 504.6.4. Strategies/Drivers .............................................................................................................. 55

4.7 Summary ................................................................................................................................... 55

Chapter 5 Conclusions ............................................................................................. 57

5.1 Prioritized Barriers .................................................................................................................. 575.2 Recommendations .................................................................................................................. 59

References .................................................................................................................. 61

Appendix A: Sample Questionnaire used in Ranking of Barriers ......................................... 65Appendix B: Weights and Ranking of Barriers for each Study Sector and Country .......... 69


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AHP Analytical Hierarchy Process

AIT Asian Institute of Technology APCTT Asian and Pacific Center for Transfer of TechnologyAPEC Asia Pacific Economic CooperationARRPEEC Asian Regional Research Program in Energy, Environment and ClimateAWPLR Average Weighted Prime Lending RateBOD Biochemical Oxygen DemandCDM Clean Development MechanismsCP Cleaner ProductionDC Desiccated Coconut

DNA Designated National AuthorityDOE Department of Energy E3ST Energy Efficient and Environmentally Sound TechnologyECP Endless Chain PressureEMB Energy Management BureauFBD Fluidized Bed DryerFRP Fiber Reinforced PlasticsGEF Global Environment Facility GERIAP Greenhouse Gas Emission Reduction from Industry in Asia and PacificGHG Greenhouse Gases

ISB Industrial Services BureauLPG Liquefied Petroleum GasMBI Market Based InstrumentsMCDM Multi-criteria Decision MakingNDB National Development BankNRI National Research InstituteSETC State Economic and Trade CommissionSIDBI Small Industry Development Bank of IndiaSLR Sri Lanka Currency, Rupees

SMI Small and Medium Scale IndustriesTERI The Energy and Resources InstituteTVE Town and Village EnterprisesUNIDO United Nations Industrial Development OrganizationUPASI United Planters Association of Southern IndiaUSAID United States Agency for International DevelopmentVND Vietnamese Currency, Dong

List of Abbreviations


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Introduction

1Chapter 1

INTRODUCTION

Box 1.1 Asian Regional Research

Programme in Energy, Environment and

Climate

The Asian Regional Research Programme in

Energy, Environment and Climate (ARRPEEC)

is a regional network involving 22 national

research institutes (NRIs) from seven Asian

countries. ARRPEEC is funded by the Swedish

International Development Cooperation Agency

(Sida) and coordinated by the Asian Institute

of Technology (AIT), Thailand.

The main objectives of ARRPEEC are:

Production of high quality policy oriented

outputs in the selected areas of energy,

environment and climate research.

Capacity mobilization and enhancement at

NRI level through project level joint activitiesand fellowships.

Linkage of project level activities in the

participating countries with national,

regional and global initiatives for reducing

GHG and other hazardous emissions.

Dissemination of results among policy

personnel with a view to creating an impact

on policy making.

ARRPEEC carried out research on the power,

industrial technologies, urban transport andbiomass sectors and focused on policy

aspects of GHG mitigation emissions and

pollution reduction. The first and second

phases of ARRPEEC started in 1995 and 1999

and the third phase began in 2002.

More information on ARRPEEC and its

activities are available at www.arrpeec.ait.ac.th

Chapter 1

1.1 Background

Small and medium scale industries (SMIs) are

a significant sub-sector of the industrial

economy in Asia and play an important role

in national economies in terms of

contribution to Gross Domestic Product(GDP) and employment creation. They are

found in all major manufacturing sectors.

Usually they employ traditional, labour

intensive and inefficient technologies and are

not very much concerned about the impact

of their energy use (Visvanathan and Kumar,

1999; Kumar et al., 2005; Thiruchelvam et

al., 2003). Despite this lack of concern, there

have been no significant efforts undertakento address SMI energy-environment issues.

The Small and Medium Scale Industries in

Asia: Energy, Environment and Climate

Interrelations (SMI in Asia) is one of four

components of the Asian Regional Research

Programme in Energy, Environment and

Climate (ARRPEEC) to address the energy-

environment issues of SMIs (Box 1.1).

The industry sector study of ARRPEEC

Phase I addressed the status of technologies

in energy intensive and environmentally

polluting industries in Asia. It also assessed

the impacts and the pollution mitigation

potential of energy efficient and

environmentally sound technologies (E3STs)

in large-scale industries in China, India, Sri

Lanka and the Philippines. ARRPEEC PhaseII concentrated on Small and Medium Scale

Industries (SMIs) in Asia and carried out

cross-country evaluations on energy andenvironment issues with a focus on processes


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Barriers to Promoting E3STs to SMIs in Asia

2 Chapter 1

in five SMI sectors: foundry and metal

casting, textile, desiccated coconut, brick, tile

& ceramic and tea processing. The study

countries were China, India, the Philippines,

Vietnam and Sri Lanka. The project activitieswere focused on capacity building, analyzing

and benchmarking energy use patterns of

selected SMI sectors, and identification of

E3STs for SMIs (AIT, 2002a; 2002b; 2002c).

In the current phase (ARRPEEC III), the SMI

in Asia Project continuing from Phase II

addressed the following issues:

Greenhouse gas emission estimation in

selected SMIs,

Study and prioritization of barriers that

inhibit the promotion of E3STs in SMIs,

and

Techno-economic evaluation of E3STs

available for mitigating GHG emissions,

improving energy efficiency and abating

environmental pollution.

As an outcome of the project, the GHG

emissions from the selected SMI sectors and

their mitigation potentials were estimated

and reported elsewhere (Kumar et al., 2005).

This document presents the results of the

research carried out to study the barriers

inhibiting the adoption of E3STs in SMIs.Overviews of the energy and environmental

status in the study countries relevant to the

selected SMI sectors are presented. This

report discusses previous studies in barrier

analysis and the details of the methodology

adopted in this study and the activities carried

out. The barriers were prioritized based on

inputs from policy makers, SMI management,

representatives from financial institutions andtechnocrats. Based on the activities carried

out, the results of the prioritization are

presented and recommendations suggested.

1.2 Status of the Study Sectors

The selected SMI sectors were foundry &

metal casting, textiles, desiccated coconut,

tea processing and brick, tile & ceramics in

China, India, Philippines, Sri Lanka and

Vietnam (Table 1.1). These sectors were

selected based on their importance in the

study countries. A brief summary of theirindustrial status in the countries and the

relevant energy and environment issues is

presented below.

1.2.1 Foundry & metal castiing

Foundry & metal casting is one of the oldest

industries in the world and is an important

base for the manufacturing world. Technology improvements in the foundry

sector have led to improved product quality,

efficient use of resources and reduction in

environmental pollution. Variations in

technology use and production costs make

the foundry industry diverse from one country

to another.

Foundry & metal casting industries in Chinaand India consist of both large and small-


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Introduction

3Chapter 1

scale industries. There has been a steady

increase in the production of foundry

products over the years in these two

countries, while in the Philippines there is a

decrease due to increasing costs ofproduction. Table 1.2 summarizes the state

of the sector in the study countries. In India,

the sector contribution to GDP is estimated

at 0.4%. The foundry & metal casting sector

in China and India is still dominated by

ferrous casting with almost 80% dedicated

to cast iron products and the remaining 20%

shared by cast steel and non-ferrous products.

In the Philippines, about 50-60% are castiron (Gray iron products), while 40-50% are

cast steel and non-ferrous products.

Foundries are highly energy intensive

processes and pollute significantly ifinefficient technologies are used. In India

and China the main fuels are coke, coal, oil,

natural gas and electricity, while in the

Philippines LPG is used.

The melting furnace is the main equipment

in a foundry. Cupola furnaces and electric

induction furnaces are the most common.

Cupolas are widely used mainly because theyare cheap and a variety of metal, including

scrap, can be melted and used. The main

disadvantages of this type of furnace include

the low capacity of the system and the

environmental pollution caused by dust and

slag produced during operation.

The foundry industry mainly contributes to

air pollution. The degree may vary with the

type of resource and raw material use and

the technology adopted. The use of low-

grade fuel, especially coal with high sulfur

content, is the main reason for air pollution.The amount and quality of emission also

depends on the type of cupola used. Small-

scale foundries do not have the capacity to

employ soot or ash recovery equipment or

use better fuel with efficient combustion

technologies.

In India, air pollution problems are the main

concern though there is also significantinorganic solid waste. Chinese foundries have

problems meeting national standards for dust

emission, waste residue and noise. In the

Philippines, emissions of dust and harmful

gases with bad odors are the main problems.

CO2

emission in Chinas foundry sector was

estimated to be about 16.69 million tonnes

in 2000. For India and the Philippines it was

about 1.6 and 0.24 million tonnes of CO2respectively (Kumar et al., 2005).

Medium scale foundry in India


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4 Chapter 1

1.2.2 Texttile sectorIntroduction of E3STs such as replacing

conventional cupolas with cokeless cupolas

or converting them to burn natural gas (Box

1.2) will help reduce energy consumption,

thereby making the sector more competitive

while reducing GHG emissions.

The textile process consists of several unit

operations and involves a large amount of

machinery of varying scale and uses both

electrical and thermal energy. The Indiantextile industry is characterized by its

innovativeness and growth in terms of the

technology and scale. India produces and

exports a substantial amount of the worlds

textile requirements. The Indian textile

industry encompasses both large enterprises

and SMIs. Table 1.3 shows the details of the

textile sector in the study countries.

The textile industry is energy intensive.

Energy accounts for nearly 20% of the total

production cost. The Indian textile sector

consumes about 9-10% of the industrial

energy use in India. Thermal and electrical

energy demands are met by using coal,

firewood and electricity.

The main environmental issues for the textile

industry are emissions from energy use and

water pollution, of which the latter is

significant. The textile industry uses water

as the principal medium in removing

impurities, applying dyes and finishing agents,

and steam production. The effluents from

textile processes have a high level of

biochemical oxygen demand (BOD), high

dissolved solids and high temperature. When

released to ground or common water channels

without proper treatment, they damage water

Box 1.2 Selected technologies available

for improvement of energy and

environmental performance

Foundry sector

Replacement of main frequency induction

furnace, medium frequency furnace

Replacement of cupola furnaces with

electric induction furnaces

Conversion to natural gas from coal

Brick and tile sector

Autoclave aerated concrete block instead

of clay brick

Insulation of inner walls with ceramic fiber

Replacement of traditional kilns with vertical

continuous kilns

Tea sector

In-house power generation Two-stage motors for withering troughs

Replacement of indirect oil fired heater with

direct oil fired heater

Desiccated coconut sector

Flash steam recovery in dryer

Use of dual fuel boilers

Use of energy efficient motors for processing

& materials handling units

Textile sector Installation of photocells for speed frame

Installation of soft starter cum energy saver

in simplex frame

Use of FRP (fiber reinforced plastic) fan

blades for humidification fans in weaving

Source: Kumaret al., 2005


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Introduction

5Chapter 1

quality, kill or damage fish and living

organisms and make water sources unusable.

The other aspect is air pollution from the

combustion of fossil fuels. The total CO2

emission from textile industries in India in

the year 2000 was about 18.12 million tonnes(Kumar et al., 2005).

Lack of modernization of textile mills

through the introduction of E3STs has been

the main reason for continued pollution in

the sector. Installation of energy efficient

pneumatic fans in spinning mills,

implementation of soft-flow dyeing, and use

of equipment for recovery of chemicalsotherwise discharged as effluents are some

of the technology options for improvement

of energy and environmental performance.

1.2.3 Brick, tile & ceramic sector

The brick, tile & ceramic sector by definition

includes manufacture of all clay products,

including bricks, roofing tiles and small-scale

ceramic manufacture. The brick, tile &

ceramic sector is considered a cottage

industry and uses traditional technologies.

The roofing tile industry, even though it still

uses traditional technologies, is no longer

considered under cottage industry status.

Only brick and roofing tile manufacture are

discussed here. Table 1.4 shows details of

the brick, tile & ceramic sector.

The Chinese brick-making industry is mainly

under Town and Village Enterprises (TVEs).

The total number of enterprises involved has

been declining steadily over the years. About

77% of the total brick production is solid clay

bricks and the rest hollow bricks. In thePhilippines, the brick, tile & ceramic sector

has its base in the traditional manufacture of

terra cotta products and pottery by small-

scale and cottage type operations.

In India, about 65-70% of the bricks are

made in the northern and eastern plains. In

Vietnam, the brick industry is widely

dispersed in four key economic regions in the

northern part of the country. Sri Lankan tile

manufacturing is centered in the western part

of the country and the total monetary value

of tile production was around SLR 600

million (US$ 6 million) in 2000.

The major energy source in China, India and

Vietnam is coal. In Sri Lanka it is firewood

and in the Philippines LPG is used in ceramicSpeed frame of a textile mill in India


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6 Chapter 1

Stacking bricks in a continuous fired tunnel kiln in

Vietnam

Box 1.3 Improvement of energy efficiency

in the brick industry

The brick industry is flexible in energy sourcing

and brick makers prefer certain fuels (notably

fuelwood and coal). However, these are not

always available at competitive prices and

hence they use lower grade fuels. Little is

known about specific energy consumption in

different kilns among brick makers or

technology providers. Hence, possibilities to

improve the energy efficiency by relatively

simple measures are disregarded. The newly

developed kilns appear to be attractive and offer

larger production capacity, but often require

higher investments. The better technologies

offer better energy efficiencies and less

pollution.

Energy Statistics of commonly used brick kilns

Source: FAO, 1993

tile production. The Indian brick industry

consumes about 20 million tonnes of coal

(TERI, 2003). Sri Lanka consumes around

40 m3 of fuel wood per batch (i.e. 15,000

tiles). The average, production is 3-4 batches

per month.

The main pollution issues from brick and tile

production are GHG emissions and the

destruction of agricultural land due to clay

extraction. Most of the brick and tile kilns

are inefficient in combustion and hence emit

high amounts of GHG. The use of coal in

China, Vietnam and India creates significant

pollution. In 2000, the total CO2 emissionsfrom the SMI brick, tile & ceramic sector was

about 197, 35, 1.8 and 0.04 million tonnes

of CO2

in China, India, Vietnam and Sri

Lanka, respectively (Kumar et al., 2005).

The destruction of agricultural land is a

serious environmental impact of this industry

in all countries. Production of 5 million solid

clay bricks needs around 12,000 m3 of clay,

rendering the land unusable for agricultural

purposes for a long time after extraction. This

is in addition to soil erosion, localized

pollution and reduced aesthetic value of

natural woodlands.

The type of kilns used has an effect on the

energy efficiency and level of pollution (Box

1.3). Brick production uses only 25% of the

heat supplied to the kiln while the rest is lostin exhaust and losses due to imperfect

burning, radiation and convection from the

kiln walls. Some heat loss in the flue gas could

be recovered and used for drying.

The industry represents a substantial

component of SMIs. If technology can be

introduced to increase energy efficiency, the

savings in money, resources and reducedpollution will be substantial.

Capacity ('000 bricks)Kiln type

Per firing Per day

Specific energy

consumption(MJ/kg)

Investment

(US$ '000)

Clamp kiln 5 - 1,000 2.0 - 8.0

Scove kiln 5 - 100 2.0 - 8.0

Scotch kiln 5 - 40 2.0 - 8.0 < 5

Downdraft kiln 10 - 40 2.0 - 6.0 < 20

Hoffman kiln 2 - 24 1.5 - 2.8 > 80

Bull's Trench kiln 10 - 48 1.5 - 2.8 > 7

High Draught kiln 20 - 40 1.2 - 1.8 > 15

Tunnel kiln 50 - 150 1.2 - 2.5 > 1,000

Vertical Shaft Brick kiln 4 - 30 0.8 - 0.9 > 4


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8 Chapter 1

Sri Lankan DC industry generates an

estimated 0.5 million cubic meters of

wastewater annually with around 10 tonnes

of suspended solids and 3,850 tonnes of

BOD.

1.3 Rationale and Objectives

E3STs address the energy and environmental

concerns of industries, but many barriers

prohibit their adoption. Due to scarcity of

resources (funds, labour and time), all the

barriers cannot be addressed simultaneously,

hence, priority must be given to the most

serious and pervasive barriers.

Though general studies on the various

barriers inhibiting the promotion of E3STs

are available, prioritization of barriers from

the perspective of SMIs, technocrats and

policy makers would provide an important

basis for introducing E3STs and thus lead to

energy efficiency, reduced pollution and

GHG emissions. By prioritizing the barriers

in terms of their importance, appropriate

strategies and action plans can be developed

to use the limited resources. This approach

will be beneficial to SMIs and will yield

positive impacts that could be translated to

a bigger scale as energy savings and emission

reductions at the national level (Box 1.4).

The main objectives of the study are:

To identify the prominent barriersinhibiting the promotion of E3STs in the

SMI sectors in the study countries

To prioritize these barriers according tothe views of the stakeholders, and

To disseminate the outcomes amongpolicy makers and other stakeholders for

necessary action in formulation ofenvironmentally friendly policies.

Box 1.4 Institutional intervention to

promote E3STs in SMIs through

identification and prioritization of barriers

Case study: Firozabad glass industry cluster

in India

To save the famous Taj Mahal, situated close

to Firozabad, the Indian Supreme Court passed

a landmark judgment and directed 292 specified

industries using coke/coal as fuel to switch over

to natural gas, relocate outside the zone, or

shut down.

Through detailed diagnostic studies carried out

in various SMI clusters in 1995, it was found

that there is tremendous scope for increasing

energy efficiency in the glass industry cluster.The cluster accounts for roughly 70% of the

total glass production in the small-scale sector.

A new design focused on the pot and muffle

furnaces in view of their high share of coal use

(48% for pot furnaces and 27% for muffle

furnaces), very low operating efficiency and

inability of the segment to mobilize support for

technology upgrades.

The demonstration pot furnace using natural gaswas commissioned in February 2000. The

specific energy consumption was found to be

2,460 kcal/kg of glass, a reduction of nearly 60

per cent while meeting environmental standards.

Natural-gas fired TERI furnace

Source: TERI, 2000


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Introduction

9Chapter 1

Fig 1.1 Organization of report

The study used Analytical Hierarchy Process

(AHP), a multi-criteria decision tool, for

prioritizing barriers. Once the barriers are

prioritized, issues that lie within the

enterprise or factory level, industry level and

national level can be segregated and targetedfor elimination or mitigation by factory

owners, SMI associations or policy makers

as appropriate.

1.4 Organization of the Report

The report is organized in five chapters with

the structure shown in Figure 1.1. The

objectives are organized for clarity within the

structure of the report.


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An Overview of Barriers

11Chapter 2

This chapter describes the various barriers

that inhibit the promotion of E3STs and their

significance from the viewpoint of SMI

stakeholders. This initial assessment ofbarriers has been consolidated using similar

studies done elsewhere.

2.1 Barriers to Promoting E3STs in theStudy Countries

Despite their significant contribution to

economic development in the Asian region,SMIs are energy inefficient and cause

environmental pollution. Under these

circumstances, E3STs provide sustainable,

adoptable and affordable technology

solutions that will conserve energy, mitigate

pollution and reduce unfavorable impacts on

climate. Application of E3STs in industries

ensures that energy resources are used more

efficiently, eco-efficiency is improved and theenvironment is preserved and is therefore an

important means of achieving the dual goals

of energy conservation and emission

prevention and reduction. Many developed

countries have adopted cleaner production

technologies and gained the economic

benefits. However, E3STs are not widely

adopted in developing countries outside of

large industries that can easily adopt themand benefit financially. SMIs are still hesitant

AN OVERVIEW

OF BARRIERS

Chapter 2

to adopt E3STs due to their reluctance to

change and other barriers. To promote the

dissemination of E3STs, the barriers in

adopting them were identified. They includelack of awareness, education and training on

E3STs; financial and economic factors; lack

of coordination and slackness; and lack of

infrastructure (Thiruchelvam et al., 2003).

The following sections provide an overview

of the barriers inhibiting the promotion of

E3STs in the study countries. The key

elements and diversity of the environmentalissues in relation to energy and environmental

performance vary from one country to

another.

2.1.1 China

As one of the fastest growing economies in

the world, China experiences the ill effects

of rapid development in the most obviousway. The environmental pollution in China

has been unprecedented, especially in the

industrial areas, and the Chinese government

has given a high priority to abating

environmental pollution due to

industrialization (Jonathan, 1999).

Increased employment requirements

focused more on workers skills andphysical abilities than on their ability to


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12 Chapter 2

Box 2.1 Growth of consumption of energy

and GHG emissions in India

Indias high concentration of pollution is notdue to the absence of a sound environmentallegal regime, but due to lack of environmentalenforcement at the local level. Regulatoryreforms aimed at improving the air pollutionproblem in cities such as New Delhi have beendifficult to implement.

The brick and tile industry finds it difficult

to access new technologies and market

information and still operates in a

traditional way.

cope with the consequences of poor

environmental management. Managerial

staff lack capacity to educate workers

because they themselves have a low

awareness of E3STs and their positive

impacts. Chinese SMIs lack capacity in identifying,

assessing, introducing and applying

E3STs at factory level. Even when capital

is available it is often accompanied by

introduction of obsolete process

technologies and inefficient equipment

that pollutes the environment.

Lack of experience and resources,

including capital, is the main reason fordifficulties in technology transfer options.

2.1.2 India

The Indian economy is growing rapidly and

pollution has increased, fueled by industrial

production (Box 2.1).

The industrial value chain consists of cottage

level manufacturing, subcontracting by SMIs,

and outsourcing by medium to large

companies. However, the SMI sector still

uses outdated technologies although some

larger manufacturers have upgraded their

technologies and improved their efficiencies.

The SMI sector in India is grappling with

problems of outdated management

practices and use of inefficient and

polluting processing technologies. Many

employees are not skilled or technically

competent to operate and maintain

advanced energy saving technologies.

The foundry sector in India generates

heavy environmental pollution and wastes

resources and energy because of outdated

technologies and equipment.


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13Chapter 2

High cost of equipment for E3ST

application is an impediment, as most of

these items are imported. This raises the

issue of technology transfer related to

E3ST technologies such as locally

manufacturing these technologies. Theobstacle here is the lack of competent

technical service providers.

Policy level barriers come from either not

having a mechanism for SMIs for adopting

better technologies or having an equal

policy for all industries irrespective of

2.1.3. Philippines

The SMI sector in the Philippines lacks

awareness of energy and environmental

issues. At enterprise level, lack of collateral has

been a major obstacle in obtaining

finances from banks for implementation

of E3STs. Due to a lack of financial

records and collateral requirements,

assessing credit risk is difficult for lenders.

The tedious procedures for

documentation, processing and reporting

requirements are also obstacles forprocuring funds. Lack of expertise to

appraise E3STs is a barrier for lending

institutions.

The use of E3ST initiatives as a political

tool by pressure groups that claim that

these initiatives are trade barriers retard

investment in E3STs. Industries succumb

to these pressure groups because of their

limited knowledge and understanding.

2.1.4 Sri Lanka

SMIs in Sri Lanka are faced with unfavorable

conditions locally and from high competition

from neighboring countries. Increasing cost

of inputs and insufficient economies of scale

have decreased their profit margins.

Reasons for not implementing E3STs are

primarily cost oriented. Additional capital

deployment, increased operational costs

and non-realization of net financial-gains

from E3STs are some of the important

reasons. Even the implemented E3STs or

those proposed to be implemented are

more or less compliance driven rather

than needs driven.

Box 2.2 Non-enforcement of regulations is

a barrier to promoting E3STs

Sri Lanka

The Sri Lankan Desiccated Coconut sectorfaces the continuing problem of treatingwastewater. Some research institutions havedeveloped solutions for treatment, but theseare not adopted widely. Further development

and promotion of available methodologies isnot progressing since the factory owners donot consider them a necessity. Measures likeE3STs can only be developed or marketed ifthere is a strong need at industry level.

Philippines

The Department of Energy and EnvironmentalManagement Bureau (EMB) are two keyinstitutions, which oversee the energy andenvironment sector in the Philippines. DOE hasno regulatory power and activities are mainlylimited to raising awareness and informationdissemination. They cannot force a companyto be energy efficient. EMB is theenvironmental regulatory agency, which carriesout monitoring and enforces environmentallaws. Due to the wide scope of EMB, it cannotcomprehensively conduct monitoring andenforcement activities on all industries. SMIsalso pose difficulties for the enforcementagency due to their fragmented nature and

large number.


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14 Chapter 2

their size or sector. These perceived

anomalies at policy level prevent SMIs

from taking action in implementation of

E3STs (Box 2.2).

2.1.5 Vietnam

The Vietnamese economy is in a transition

from central control to a market economy.

Still, the government owns most of the

enterprises, although private investments are

picking up. Government enterprises mostly

use outdated technologies. During the period

of a centrally controlled economy, the

principle had been to build the largest possiblefactories with the aim of providing

employment. Revamping these enterprises

will be a major task in terms of technology

and investment.

Enforcement of environmental

regulations has had a low profile and is

one of the reasons that SMIs, both existing

and new, are reluctant to invest in E3STs. Cost of new technologies and difficulties

in obtaining finances are barriers in

Vietnam for the promotion of E3STs.

During this transition from centralized to

market economy, many industrial sectors

resist introducing E3STs. However, the

brick sector has been an exception (Box

2.3).

2.2 Types of Barriers

Barriers can mainly be categorized as market,

technical, financial, management,

environmental, information and regulatory.

These categorizations also have perspectives

at enterprise, industry or national levels.

Hence, a fundamental categorization of

barriers that inhibits the promotion of E3STs

could be illustrated as follows (Table 2.1),

with some examples at each level.

The following sections describe these barrier

categories specific to the promotion of

E3STs through examples.

2.2.1 Managerial barriers

Promotion of E3STs in SMI sub-sectors faces

many barriers due to management at the

enterprise level. Specific examples of these

managerial barriers are as follows:

Resistance to Change. SMIs inherently resist

change. Any alteration to achieve a (positive)

Box 2.3 Lack of government assistance is

a barrier to promoting E3STs

An assessment on the Vertical Shaft Brick Kiln(VSBK) Technology in Vietnam focused on its

technology status, performance andgovernment policy in promoting it. Some of thefindings of the study are highlighted below:

In the short span of two years about 100new VSBKs were added. The technologyseems to have become firmly establishedin the country. This has been a noteworthyachievement given the history of slow andoften-difficult introduction in several othercountries.

VSBK is the most efficient kiln among thedifferent types of brick kilns used inVietnam, with a specific energyconsumption of 0.85-1.1 MJ/kg of fired brick.Stack emissions from VSBK are lowercompared to other kilns.

VSBKs are replicating very quickly in differentlocations in Vietnam, but at the central level,there is no clear policy to support thetechnology.

Source: TERI, 2003


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15Chapter 2

change is often perceived as a disruption of

the present status. This is common for both

managerial staff and employees. In such a

situation, efforts to adopt E3STs are not

likely to be well received. In the case of non-

compliance of standards, SMIs may prefer

to pay the penalties rather than to adopt

cleaner production technologies.

Inadequacies in Internal Management. SMIs, in

trying to achieve cost advantages, tend to

hire managers or staff who may not have the

capacity to appreciate the complexities of the

global or national environmental aspects


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16 Chapter 2

related to the business they are engaged in.

These inadequacies hinder the adoption of

E3STs in SMIs.

2.2.2 Human resource barriers

Lack of technical education and training of

SMI employees on E3STs make its promotion

and implementation difficult. These are the

human resource barriers, a primary example

of which is:

Inadequate Education of Employees. E3STs

and their benefits are sometimes beyond

the understanding of employees of SMIsbecause they represent a new concept in

energy and environmental performance.

Their understanding is important for

proper installation and functioning of

E3STs at factory level. Poor understanding

of the functionalities of E3STs will

increase costs, hamper the achievement

of desired results and disrupt production.

2.2.3 Technical barriers

Availability and cost of E3STs constitute

technical barriers. These barriers affect the

sustainability of E3STs in relation to their

adoption in SMIs.

Limited Availability of Technology. SMI sectors

are diverse and in most cases are processoriented where solid wastes, effluents and

emissions are generated as part of the process.

SMIs have not kept up with technical

innovations, such as the use of Information

Technology (IT), for better resource control

and Cleaner Production (CP) for better

environmental control.

Cost of Technology. Upgrading using E3STs is

sometimes costly, especially the initial

investment. Environmental technologies

undergo substantial research and enterprise

level prototyping is required, and these add

to costs. For SMIs, it is not merely the cost

of new technologies that matter but also the

cost of retrofitting, as these enterprises have

already invested in equipment and

technologies that are not E3STs. Box 2.4

gives an example of how high cost associated

with import of technologies is a barrier to

the promotion of E3STs in Sri Lanka.

2.2.4 Financial barriers

Financial barriers constitute a principal barrier

faced in promoting E3STs. Some financial

barriers are as follows:

Limited Access to Funding. Both development

banks and commercial banks offer funding

for the implementation of E3STs under

various schemes. Although sources of credit

and finance are available, few SMIs use thesefacilities because either they are unaware of

them or are unable to fulfill the criteria of

the lending organizations. SMIs often have

no reliable financial records and have

difficulties with security and collateral

requirements. Hence, from the lenders point

of view, assessing an SMIs credit risk is

difficult, considering the long payback

periods related to E3STs.

Procedural Setbacks. Even SMIs that can

establish their creditworthiness need to

follow tedious procedures. This is more

common when interest rates are low. SMIs

do not feel comfortable with these delays and

they do not want to obtain commercial loans

at high interest rates, which would offset the

enterprise finances.


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17Chapter 2

Box 2.4 High cost associated with import

of technologies is a barrier to promoting

E3STs

To meet rising demand, raw steel is imported

into Sri Lanka. Due to the limited supply offinished products, the effect of value additionis very important in Sri Lanka where finishedproducts are nearly four times the price of rawmaterial. Thus, steel fabrication factories inSri Lanka get maximum benefit from increasedproductivity rather than from energyconservation. Initial investment is high in SriLanka due to the:

necessity to import all equipment andtechnologies for making improvements

time required for improvements to beimplemented

high cost of borrowing capital

Source: UNEP, 2002

Conventional Appraisal Criteria. Lending

institutions operate on a risk minimization

approach and often they prefer collateral to

cash flow. Under such circumstances, E3STprojects do not always produce acceptable

appraisal results. The lack of technical

competencies of staff to appreciate the

broader economic and environmental

impacts of E3STs results in lending

institutions relying entirely on financial

factors.

2.2.5 Market barriers

Limited markets for products manufactured

with E3STs and also limited demand for

E3STs act as a barrier for adoption. Primary

market barriers are:

Limited Market for E3STs. The market size is

a barrier for the promotion of E3STs. Being

specialized applications, E3STs need to becustomized for each enterprise at factory

level, in either scale or added features. This

makes it difficult for some E3ST application

providers to design and manufacture

equipment in a way that makes it possible to

reap the benefits of economies of scale.

Emphasis on Green Products. The importance

or requirements customers place on products

manufactured using E3STs have an impact

on SMIs adopting E3STs. If a particular SMI

caters to green product markets, they have

to adopt E3STs. But often, green products

give more importance to product features

than to processing techniques.

2.2.6 Regulatory barriers

Regulatory policies and their enforcement at

the national level constitute some major

barriers to promoting E3STs. Some examples

are as follows:

Inconsistent Enforcement of Laws and Policies.

Inconsistent enforcement of laws reduces

the credibility of both the environmental laws

and the agencies responsible for

enforcement. The result is that SMIs - and

other polluters - disregard the need for

compliance. From the promoters point of

view, without a strong regulatory requirement,

E3STs may not have a place in the market.

Capacity of the Regulating Agencies. Regulating

agencies, policy makers, environmental

pressure groups and the government need to

advise and assist SMIs by promoting E3STs.

Enforcement and penalizing defaulters have

not addressed the promotion and adoption

of E3STs. Field level staff and regulatory

personnel are not technically knowledgeable

enough to advise on the improvement of

processes or equipment to reduce waste,


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18 Chapter 2

Box 2.5 Lack of institutional coordination

and implementation as barrier

Coordination among agencies anddepartments is important in implementingpolicies. Lack of coordination may lead tohaphazard solutions.

In the case of acid processing firms in Calcutta,India, inefficient operations resulted in indoor

and outdoor pollution. Due to lack ofcoordination between energy and environmentdepartments, the proposed solution ofconstructing a central effluent treatment plantwas not beneficial and did not yield resultssince the solution did not address the mainsource of pollution inefficiency in processflow, work practices and poor knowledge ofhealth and safety. Authorities disregarded thecore issues and addressed peripheral issuesdue to lack of expertise (Das Gupta, 1998).

In contrast, in one of the textile clusters inTirupur, South India where there are about 750dyeing and bleaching units in operation, theunits have joined through association andconstructed common wastewater treatmentfacilities. There are now eight commonwastewater treatment plants operatingsuccessfully in the cluster.

effluents and emissions (Box 2.5). This is not

a conducive situation for promotion of

E3STs from the policy or national

perspective.

2.2.7 Information barriers

The inability of SMIs to access information

on E3STs and their applicability is a primary

inhibitor. Information barriers include:

Limited Access to Information. Lack of technical

understanding of energy and environmental

issues in SMIs leads to distortion and

misinterpretation of facts with the result that

the best option may not be chosen. One of

the main reasons for this lack of technical

understanding is due to limited access to

information on E3STs and SMIs inability

to evaluate the best options available. Non-

availability of sector specific norms and

benchmarks make it difficult, not only for

SMIs but also for advisors, to compare in-

plant situations with desired situations that

could be achieved by the adaptation of

E3STs.

Inadequate Communication. Information on the

non-professional perspective from the use of

E3STs is an important criterion for

promotion. An issue like greenhouse gas

emissions endangering society cannot be well

understood unless it is translated intofinancial terms such as reduced fuel costs,

or benefit terms such as increased incentives,

financial or social.

2.2.8 Research and development

Barriers to the promotion of E3STs also arise

from inefficiency in disseminating

information from research and developmentactivities carried out at universities and

research institutions.

Lack of Dissemination. Research institutions

and universities conduct research on

industrial pollution, publicise their studies in

various forms and come up with solutions

including E3STs. But dissemination of these

findings to the appropriate industries is at a

very low scale. Without dissemination,

technology providers, E3ST developers and

SMIs have no way of knowing about work

done in the area.


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19Chapter 2

Figure 2.1Response for adopting technologies in SMEs

The ADB (2003) study reveals that the

primary barriers inhibiting the adoption of

technologies by SMIs were financial,

followed by technological barriers. Figure 2.1

further elaborates the survey results.

Table 2.2 summarizes previous studies on

bariers that used more conventionaltechniques for assessment of inhibitors. Since

these previous studies are used as a baseline

or cross-country comparison at various

levels, the techniques used are more

conventional than scientific and involved

mainly the beneficiaries of the policies, i.e.

industrialists. Involvement of the policy

level, made only through discussion, had not

been prominent. None of the studies were

sector specific and they did not address

sustainability issues in detail.

Some studies (UNEP, 1989; UNIDO, 1999)

focused on cleaner production (CP) rather

than E3STs. These studies emphasized

energy conservation and resource

consumption reduction and environmental

technologies in general, but they were not

specific to industry or SMIs and addressed

technological aspects rather than policy

options. Even though there are no specificstudies with regard to the promotion of

E3STs or barriers hindering them, the barriers

for the promotion of CP (Box 2.6), energy

efficiencies and SMI promotion also fall in

line with the barriers for E3STs. The barriers

that have been discussed in these studies can

be classified under the various barrier

categories described in section 2.2.

Vine (2005) has shown that lack of

government policy, subsidized energy cost

and unfavorable tax regimes are barriers for

promoting energy efficiency through energy

service companies (ESCO) which are

expected to play an important role in

promoting energy efficiency.

2.3 Earlier Studies on Barriers InhibitingAdoption of E3STs

In the past decades, more attention has been

given to SMIs as a catalyst to improveeconomies. The scope of earlier studies

indicates that they have focused more on

business promotion or overall

competitiveness of SMIs. The introduction

of technologies (not only energy efficient

technologies) is one key area these studies

addressed. These served as a baseline for

further elaboration at policy level not only

for SMIs but also for larger industries as well.


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21Chapter 2

Box 2.6 Barriers for promotion of CP

technologies

UNEP training material for the promotion ofCleaner Production shows that political and

regulatory barriers contribute to the non-adoption of CP technologies. The studyconcludes that addressing these issuesthrough training and awareness will promoteapplication of CP.

Source: Huisingh, 2002

Furthermore, previous studies did not focus

on sustainable technology adoption by SMIs

as a policy option for mitigating GHGemissions, or address issues related to energy

efficiency or environmental pollution. They

were not oriented towards SMI needs for

fulfilling the broader goal of GHG mitigation

through either technical options or policy

options at national level.

For this study, barriers are grouped under four

broad categories as follows:

Managerial and Organizational Barriers. Barriers

related to internal management, operational

requirements, capacities of human resources

and attitudinal issues. The type of industry

and ownership governs these parameters and

they have an effect on the adoption of E3STs

(Box 2.7).

Financial and Economic Barriers. Barriers related

to availability of finance, affordability of

finance, cost/benefit from investments,

attitudes of managers and lenders on

investing in technology. This is relevant also

in the context of developed countries (Box2.8).

Technical and Information Barriers. Barriers

related to the existence and appropriateness

of technology, availability of information of

procuring, evaluation and adoption, technical

competence in assessing needs, and additional

requirements needed for implementation.

Policy and Market Barriers. Barriers related togovernment recognition and acceptance of

E3STs, policy options and directions for

adaptations, mechanisms of enforcement,

and public opinion about products that

address environmental concerns.

2.4 Summary

Barriers for the promotion of energy

efficiency and reducing pollution in all

industrial sectors appear to have much in

common. In the overall industry sector, larger

companies have the resources and the

expertise to invest in E3STs and have

benefited financially, socially and

environmentally.

Though some achievements have been seen

in the SMI sector in Asia, it has dealt with

barriers related to development and business

expansion rather than the adoption of E3STs.

Increasing competition in global markets and

declining government support have lowered

the priority given to implementation of

E3STs. The most prominent barriers arefinancial, technical, managerial and policy


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23Chapter 2

Box 2.8 Barriers to promoting E3STs in the EU and the USA

EU Action Plan to Boost Environmental Technologies

The European Commission has released an action plan to help new environmental technologies

overcome barriers to their development such as difficulty in access to capital. The action planincludes the launch of technology platforms, establishing environmental performance targets forproducts and services and making the most of funding schemes and public and private procurement.(Royal Institute of Chartered Surveyors, News item 06 February 2004)

Barriers to Integrating Energy & Environmental Approaches, USA

While there are numerous benefits associated with integrating energy and environmentalapproaches, states and localities are still faced with a number of challenges when transitioningfrom single-agency, single-pollutant strategies to more collaborative multiple-agency, multiple-pollutant solutions. Some of these barriers include:

Jurisdictional boundaries that separate energy, environmental and public utility agencies; Regulatory provisions in energy, air and utility statutes that purposely or inadvertently impede

integrated, innovative approaches; Political impediments imposed by partisan or interest group actions; Resource and time limitations facing state and local energy, environmental and public utility

agencies that already have too much on their plates; Large scale, scope and complexity of issues that can be daunting if not examined in smaller,

focused pieces; and Rapidly changing power situation that has unpredictable impacts on the focus for other energy

and environmental issues in states and local communities.

These impediments, while presenting varying degrees of challenge, do not necessarily representpermanent barriers to success. (Extract from Whitepaper on Taking Steps Toward IntegratedApproaches on Energy and Environmental Issues for State and Local Policy-Makers. Availablefrom Energy, Environment & Transportation Clearing House, http://www.eandeclearinghouse.com(Accessed 20 June, 2004)


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Study Approach & Activities

25Chapter 3

This chapter elaborates the approach and

methodology adopted in this study. It

provides a description of the study

methodology, tools used, rationale for

selection of tools, composition of the

stakeholders in each study country and the

potential for replication of the methodology

for similar studies. Figure 3.1 illustrates the

overall framework of the study, which is

described in the following sections.

An initial list of barriers was developed in

each country based on discussions with the

stakeholders of SMIs and from the literature

(Chapter 2). During the discussions, SMI

management, policy makers and other

stakeholders highlighted the major barriers

inhibiting the adoption of E3STs. This was

found to complement the findings of Phase

I and II of the ARRPEEC Programme

industry sector projects.

The list of barriers was identified and

finalized through consultation workshops

attended by the major stakeholders. The final

list of barriers was grouped into four major

categories: management and organizational,financial and economic, technical and

information, and policy and market barriers,

with sub-categories as depicted in Table 3.1.

3.2 Tools for Prioritization of Barriers

For the identified barriers, each stakeholderattaches his or her own relative importance.

STUDY

APPROACH &

ACTIVITIES

Chapter 3

3.1 Identification and Finalization of the

Barriers

Figure 3.1 Framework of Research Methodology


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B arriers to Promoting E3STs to SMIs in Asia

26 Chapter 3


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27Chapter 3


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28 Chapter 3

Therefore, the priority varies among the

stakeholders and also among the industrial

sectors. To achieve a common prioritization,

a conventional criteria-ranking method based

on point allocation, percentage weighting or

qualitative ranking could not be used, andso for this study a Multi-criteria Decision

Making (MCDM) methodology was used.

The benefits of using an MCDM model are

that it (Denis, 2003):

provides a formal decision process and

focuses on key issues and uncertainties

helps identify non-critical issues and

provides immediate feedback helps identify and evaluate tradeoffs and

benefits

bui lds consensus and encourages

accountability

MCDMs are used for a variety of applications,

such as strategic and programme planning,

resource allocation, technology selection and

prioritization and consensus building. Several

MCDM tools are used as decision support

tools and a sample list is given in Box 3.1.

The MCDM method employed for this study

was the Analytic Hierarchy Process (AHP)

introduced by Saaty (1980), which is a

pairwise comparison method. It provides a

proven, effective means to deal with complex

decision-making and can assist with

identifying and weighing selection criteria and

expediting the decision-making process. It isa powerful and flexible decision-making

methodology to help set priorities and make

the best decision when both qualitative and

quantitative aspects of a decision need to be

considered (Saaty, 1999). By reducing

Source: http://www.evergladesplan.org/

Box 3.1 Multi-criteria decision tools

The following list gives an overview on the various MCDM tools:

Curriculum assessment: http://fie.engrng.pitt.edu/fie98/papers/1370.pdf

Portfolio management: http://www.sbaer.uca.edu/Research/1999/WDSI/99wds230.htm

Sub contractor evaluation: http://fire.nist.gov/bfrlpubs/build02/PDF/b02143.pdf

Product, process, environment matching:http://www.environmental-center.com/magazine/inderscience/ijetm/art5.pdf

A Selected List of Multi-criteria Decision Tools


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29Chapter 3

complex decision problems to a series of one-

on-one comparisons (pairwise) and then

synthesizing the results, AHP not only helps

decision-makers arrive at the best decision,

but also provides a clear rationale for arrivingat that decision (Liberatore and Nydick,

2003). Research on the application of AHP

techniques for decision-making specific to

renewable energy and energy efficiency is

available. For example, Pohekar and

Ramachandran (2004) have provided an

extensive review of the application of AHP

techniques in the energy sector.

In the AHP methodology, the stakeholders

determine their preference between two

barriers and specify their relative importance

with respect to their contribution to the

desired objective. Stakeholders indicated the

relative importance for each barrier using a

ra t ing sca le (Tab le 3 .2 ) . The AHP

methodolog y provides an indication of the

inconsistency of the comparison as well. Theinconsistency level indicates the degree of

understanding of the issues by the respondent

and how that understanding (or lack of

understanding) contributes to the final

judgment. If the inconsistency is more than

0.1 (i.e. consistency ratio of greater than 10%)

it is suggested to revisit the problem and

revise the judgments (Merit Decisions; Saaty,

1999).

3.3 Procedure of the Study

A hierarchy structure based on AHP was

developed to prioritize the barriers inhibiting

the promotion of E3STs in SMIs (Box 3.2).Based on the hierarchy structure, the listed

barriers (Table 3.1) were transformed into a

questionnaire (Appendix A) which was

completed by the stakeholders (managers/

owners of SMIs, technicians, bank managers,

personnel from industrial associations, policy

personnel, etc.) in the five countries. The

questions were framed in such a way as to

extract responses based on a pairwisecomparison of all the barriers. To complete

the questionnaire, the stakeholders used one

of the three rating scales shown in Table 3.2.

For example, if barrier A is more important

than barrier B for non-implementation of

E3STs, the stakeholder could rate (i) 7 or (ii)

very strong or (iii) 175 for A versus B.

To complete the questionnaires, workshops were organized for stakeholders. The

workshop agenda included an introduction

to the SMI in Asia project, the purpose of

the study, guidelines to complete the

questionnaires, and the expected outcomes

of the exercise.

Policy makers in the Philippines engaged in

filling in the questionnaire


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30 Chapter 3

The workshops were also helpful for

discussing barriers with stakeholder groups.

Other methods used to complete the

questionnaire included:

One-on-one interviews with managers

(India, Sri Lanka)

F ac si mi le a nd d ir ec t ma i li ng o f

questionnaires to stakeholders, who were

identified and selected through the list of

institutional clients (Philippines) and

Box 3.2 Hierarchy model for prioritization

After the identification and finalization of the prominent barriers that hinder the promotion of E3STs,

a tree-hierarchy based on AHP methodology can be structured to facilitate the prioritization process

(figure below). The tree is segmented into four levels: the top level is the overall barriers inhibiting

the promotion of E3STs; the second level has the four barrier categories; the third level includesfive specific sub-barriers under each barrier category, 20 in total, and the last level is the final goal

of this studyprioritization of the barriers inhibiting E3ST promotion in SMIs.

* For details on specific barriers refer to Table 3.1.

Adapted from Peng et al., 2005

AHP methodology workshop for desiccatedcoconut millers in Sri Lanka


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31Chapter 3

The stakeholders in the technical category

included managers and technicians of SMIs,

energy auditing consultants, and technical

project appraisers of financial institutions.

The financial category stakeholders were

managers or representatives of banks, fund-

ing agencies and financial institutions. Policy

personnel were from Ministries, statutory

boards and industrial associations.

mailing lists of participants of earlier

events (China)

Interviews with experts from selected sec-

tors (Vietnam)

Workshops to obtain the views of policy

makers (Philippines, Vietnam and SriLanka)

In the workshops, the stakeholders were

provided with details to familiarize them with

the study objectives and methodology and

the AHP approach in particular. The

participants were also given presentations on

the use of AHP to explain the complex

nature of the pairwise comparisons with anexample based on a comparison of cars

(Liberatore and Nydick, 2003).

Considering the diverse nature of the stake-

holder group, their responses were grouped

into four categories: managerial, technical,

financial and policy personnel. Table 3.3

shows the number of responses in each cat-

egory in each country.

The managerial category stakeholders were

owners or senior management of SMIs who

take decisions on implementation of E3STs.

Box 3.3 Expert Choice software

Expert Choice is intuitive, graphically based

and structured in a user-friendly fashion to for

conceptual and analytical thinkers, novices

and category experts. Because the criteria are

presented in a hierarchical structure, decision-makers are able to drill down to their level of

expertise and apply judgments to the

objectives deemed important to achieving their

goals. At the end of the process, decision-

makers are fully cognizant of how and why

the decision was made, with results that are

meaningful, easy to communicate, and

actionable.

The software automates the decision-making

process by enabling organizations to structureand justify decisions. Expert Choice helps

groups to structure their objectives into a

decision model, prioritize using pairwise

comparisons, and justify decisions using

graphical reports and sensitivity analyses.

With Expert Choice, organizations can focus

on the strategic value of alternatives rather than

making decisions over table conversations. It

can be used to: predict likely outcomes, plan

projected and desired futures, facilitate group

decision-making, exercise control overchanges in the decision-making system,

allocate resources, select alternatives, do cost/

benefit comparisons, evaluate employees and

allocate wage increases.

Source: http://www.expertchoice.com


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Figure 3.2 Sample output of pairwise comparison

response/judgment of the stakeholders. Ex-

pert Choice, a multi-criteria software pack-

age was used (Box 3.3). The rating given by

the stakeholders for each pair of barrier

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