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Climate Change Report
Chapter 2 - Market Profile of Climate Change Mitigation Technologies and Services

Globally, energy production and use are the predominant sources of carbon dioxide (CO 2 ) emissions, the
most important greenhouse gas (GHG). The combustion of fossil fuels accounts for about 60 to 90 percent
of current net anthropogenic emissions of CO 2 — the most significant of the GHGs. The major options for
reducing CO 2 emissions fall into three categories:
1. Increasing the efficiency of energy supply and end-use technologies;
2. Shifting energy supply away from high CO 2 -emitting fuels; and
3. Changing use patterns to conserve energy.

This chapter describes principal climate change mitigation-related technologies and services, as well as
related developing country market characteristics and opportunities in four areas:
 Energy supply sector, including conventional energy supply and renewables;
 Manufacturing sector, including five main energy-intensive industries;
 Commercial and residential sectors (the discussion of these two sectors is combined due to the similarity
of GHG-reducing technologies); and

 Transportation sector.

Energy Supply Sector

The electric power sector is often the largest contributor to GHG emissions. Power generation will continue
to grow in developing countries as they struggle to meet their development needs. However, advances in
technology offer developing nations a number of options to expand their energy supply while avoiding the
more pollution- and energy-intensive development paths that industrialized countries have pursued. Exports
of these technologies constitute a major market opportunity for U.S. suppliers. There are five basic ways to
reduce CO 2 emissions from electricity generation:
1. Switching to fossil fuels with a lower carbon content per energy unit (e.g., coal to natural gas);
2. Improving power plant technology and combustion efficiency;
3. Improving electricity transmission and distribution efficiency;
4. Introducing renewable energy sources; and
5. Reducing demand for electricity.

Fuel Switching

Fuel switching from coal or oil to natural gas is one of the most attractive options to reduce GHG emissions.
Natural gas produces about half the CO 2 per unit of fuel compared to coal (see table 1), and can replace coal
directly at relatively low cost. In the repowered unit, the old combustion technology is replaced with any of
the new, advanced technologies.
Table 1 - Carbon Content of Different Fuels
Carbon Content (kg C/10 9 J)*
Wood (dry poplar)
Bituminous Coal
Heating Oil
Crude Oil
Natural Gas
Electricity (U.S. average)
* To convert carbon to CO 2 , multiply by 3.667
Source: U.S. Congress, 1991.

Coal plants do not need to be completely repowered to achieve some of the benefits of fuel switching. One
option is to change coal-fired plants to natural gas co-fired or intermittently fired plants, i.e., plants that use
both coal and natural gas simultaneously or sequentially to heat the boilers. Since the boiler technology
remains essentially unchanged, a co-fired boiler is almost as efficient as a purely coal-fired one but emits
significantly less carbon dioxide: burning 50 percent natural gas would lower net CO 2 emissions by 20–25

Fuel switching creates a market for more efficient generating technologies operating on natural gas (including
energy-efficient boilers) that are described in section 2.1.2.

Power Plant Technology and Efficiency Improvements

This section focuses on efficient coal combustion technologies, advanced natural gas combustion technologies,
and cogeneration. Oil is also used in power generation in developing countries (primarily where natural gas is

not available), but it produces significantly higher CO 2 emissions than natural gas. Since the combustion
technologies for both fuels are similar, oil-fired generation processes are not specifically addressed in this

Coal Combustion Improvements. Despite its adverse impact on the environment, coal use in the developing
world is projected to double over the next 30 years. It is rising particularly rapidly in countries like China and
India, where coal is the primary source of commercial energy. As a result, clean-coal technologies will become
much more important in developing nations, especially for electricity generation.

 Coal Beneficiation. The purpose of coal beneficiation (cleaning) is to remove impurities such as ash-forming
minerals and sulfur to improve the combustion characteristics of the coal. The only coal cleaning technology
that is currently commercially available is physical beneficiation. Beneficiation increases heat content of the
product coal, thereby lowering the amount of carbon dioxide emitted per kWh of electricity generated.

 Fluidized Bed Combustion. In atmospheric fluidized bed combustion (AFBC), a mixture of solid fuel,
granulated limestone sorbent, and inert bed material such as sand or ash are suspended (fluidized) by an
upward flow of air. The suspension provides for better fuel mixing and heat transfer and keeps the combustion
temperatures low, thereby increasing process efficiency. Pressurized fluidized bed combustion (PFBC) further
enhances the efficiency rate through more efficient steam production and leads to CO 2 emission reduction of
about 12 percent against a conventional coal-fired power plant. Fluidized bed combustion is increasingly
being used in China and India. This technology works especially well in these countries because it tolerates
the quality of their coal resources much better than conventional coal boilers.

 Integrated Gas Combined Cycle. In the Integrated-Gas-Combined-Cycle (IGCC) technology, coal is first
fed to a gasifier where it is partially oxidized to form a raw fuel gas. The raw gas is cleaned and then fired
in a gas turbine to generate electricity, as described in the next paragraph. IGCC is one of the few
technologies that significantly increases power plant efficiency and leads to substantial (up to 22 percent)
CO 2 reductions. Because of its high cost and early stage of development, IGCC is an unlikely choice of
technology for developing countries in the short term. However, IGCC is the clean coal technology that
holds the greatest long-term promise for developing countries with coal reserves.

Advanced Natural Gas Combustion Technologies. Among the most promising of the new technologies for
electricity generation are natural gas-fired turbines, whose advantages relative to conventional coal-fired power plants

include low capital costs, low emissions, and high efficiency.

 Gas Combined Cycle. The combined-cycle unit combined a conventional gas turbine and a steam
turbine. The steam turbine utilizes waste heat from the gas turbine that, in a simple cycle, would have
been emitted to the atmosphere. The additional electricity increases the overall system efficiency.
Combined cycle generation is ideal for retrofit applications, as either existing combustion turbines
or steam turbines can be converted into a combined cycle plant by adding a missing cycle.

 Fuel Cells. Fuel cells convert the chemical energy contained in fuel directly into electricity and heat,
without intermediate steps like combustion, conversion of heat to steam, to mechanical energy, and
finally to electricity. Such a conversion dramatically increases power generation efficiency and reduces
CO 2 emissions by 25–30 percent.

Cogeneration. In combined heat and power (CHP) systems, in addition to the electric power generated, some
or all the heat can be used in the form of steam, hot water, or hot gases. CHP systems can reach thermal

efficiencies of over 80 percent. Small CHP systems convert about 20 percent of the fuel input into electric
power and about 55–60 percent into useful heat. In larger systems, the electric power output may be as high
as 40 percent of the fuel input. Potential applications are district heating and cooling and process heat for
industrial purposes. The high efficiency of CHP systems have an enormous potential for fuel savings
and resulting GHG mitigation.

Market Characteristics. The market for efficient generation technologies is largely driven by the availability
and prices for different types of fuels. For example, countries with abundant coal reserves (e.g., China, India,

and South Africa) are certain to continue using it for power generation. The regulatory pressure to reduce the
environmental impacts of coal-fired generation plants drives the market for clean coal technologies, particularly
for circulating fluidized bed (CFB) boilers.

On the other hand, countries that have access to cheap natural gas (e.g., countries of Central and Eastern Europe,
and Indonesia) are already switching from coal to gas and have an increasing demand for efficient gas-burning
technologies. Energy-efficient boilers allow utilities to meet the generation needs at a lower cost.

Privatization and restructuring of the energy sector creates an incentive for utilities to seek ways to increase
generation efficiency. Utilities in countries with higher fuel prices will be more inclined to adopt efficient
technologies. In addition, electric utilities in developing countries are likely to actively participate in the Clean
Development Mechanism projects as they are likely to achieve substantial GHG emission reductions at relatively
low costs.

Opportunities. Fluidized bed combustion technology for coal-fired plants (in Asia, South Africa, and, to a
lesser extent, Eastern Europe) and combined cycle technology for gas-fired plants (in the Middle East, Latin
America, and Eastern Europe) have the largest developing country market among all GHG-mitigation
technologies in the power sector. Utility-size energy-efficient boilers are in demand for both technologies,
especially in places where existing boiler equipment is generally old and inefficient, such as China and
Eastern Europe. Latin America is the smallest regional market for conventional power generation technologies
due to the region's great dependence on hydropower generation.

Electricity Transmission and Distribution Improvements

During transmission and distribution of electricity, a certain amount of power is lost in the process. In
industrial countries, power transmission and distribution (T&D) systems generally have losses that are in
the range of 5–10 percent. In developing countries, T&D losses commonly exceed 20 percent. The losses
may be associated with a lack of financial resources to expand and maintain the systems, chronically
overloaded systems, inadequate billing and collection infrastructure, and theft. Loss reductions can be
achieved through system rehabilitation projects, use of capacitors and synchronous condensers to correct
power system factors, rigorous loss reduction programs, improved billing and collection practices, and

increased theft protection. Reducing T&D losses helps avoid adding new generating capacity and, therefore,
contributes to GHG mitigation.

Market Characteristics and Opportunities. Methods for reducing technical T&D losses are straightforward
and do not require any advanced technologies. The market for relevant control equipment is driven almost
entirely by the utilities’ interest in improving their bottom line. Deregulation and privatization of the power
sector play a major role in expanding this market segment. Potential opportunities for T&D improvements
exist throughout the developing world, particularly in countries with large power grids.

Renewable Energy

The use of renewable energy sources is an important option for mitigating climate change since it results in no
or relatively low emissions of greenhouse gases. Renewable energy supplies encompass a broad range of
resources, and numerous technologies can be used to tap those resources. Although many of these
technologies are still under development, most have entered commercial markets around the world at some
level. Some, such as hydropower and biomass technologies, have achieved sizeable market penetration, while
the application of others (e.g., photovoltaics) is still relatively limited. In the near term, renewables will be most
successful in competing for off-grid customers and other distributed applications where system costs for
generation, transmission, and distribution are high. Table 2 lists the principal renewable energy technologies
and their key uses.
Table 2 - Renewable Energy Technology Market Opportunities

Power Generation
Solar Thermal
Passive/Active Heating
WindWind Turbine
BiomassDirect Combustion
Anaerobic Digestion
GeothermalDry/Flash Steam
Binary Cycle
Heat Pump
Direct Use
Pumped Storage
Solar energy can be used to provide light, heat, steam, hot water, and even air conditioning for buildings
and industry. Photovoltaic (PV) devices convert the energy contained in sunlight into electricity-using

modules composed of multiple PV cells. The current PV market worldwide is small but growing rapidly.
PV systems are often used to generate electricity in remote rural areas. For example, 15,000–20,000 systems
have been installed in Mexico under the government's rural development program (Sathaye and Meyers, 1995).

Solar thermal technologies collect solar energy to create a high-temperature heat source that can be converted
into electricity. These technologies are currently in the demonstration phase, their likely application in the

near term being village power. Solar thermal technologies can also be used to supply energy for general
industrial processing needs or for specialty purposes, such as the detoxification of hazardous wastes.
Solar building technologies include active and passive heating and cooling systems that absorb incident solar
energy and convert it into heat. Significant numbers of solar water heaters are found in many developing
countries, e.g., China, Turkey, and Kenya. Other low-technology solar applications, such as cookers, kilns,

and crop dryers, are being successfully used in China, India and a few other countries.

Wind technologies convert the energy of wind into rotating shaft power that can be directly used for
mechanical energy needs (e.g., milling or water pumping) or converted into electricity. Two major types of
turbines exist and are defined based on the axis of blade rotation: horizontal-axis (which currently dominate
commercial markets) and vertical-axis turbines. Well over 20,000 electricity-generating wind turbines (and a
large number of wind-powered water pumps) have been installed worldwide as the price of wind energy
continues to fall. In areas with good winds, wind energy has proven to be the most cost-competitive
renewable power generating technology. It can also be used successfully in remote areas.

Biomass energy includes all energy materials derived from biological sources, including wood waste,
agricultural residue, food industry waste, municipal solid waste, etc. Biomass energy applications contribute
to climate change mitigation by sequestering carbon, by substituting for fossil fuels, and by substituting for
wood use from existing forests. The ability to utilize existing residue streams to produce low-cost energy
offers attractive opportunities for biomass use. The most common use of biomass is direct combustion for
residential space heating and cooking. In India, for example, the consumption of biomass energy in the
residential sector roughly equals the annual consumption of commercial energy sources. Biomass-based

cogeneration in the industrial sector (e.g., the pulp and paper and sugar refining industries) currently provides
the largest share of biomass-derived electricity.

Using municipal solid waste (MSW) as a source of biomass energy has a significant long-term potential.
MSW landfills around the world account for up to 18 percent of all emissions of methane, a very potent
greenhouse gas. Between 50 and 85 percent of the landfill gas generated can be recovered by modern
technologies. Using landfill gas as an energy source for electricity generation and cogeneration offsets the
costs of recovering the gas. Several landfill gas recovery and use projects have been undertaken in India,
Pakistan, and Brazil.

Incineration of MSW is increasingly used in developed countries to reduce quantities of landfilled wastes,
often combined with energy recovery from the combustion process. The costs of incineration are justified
based on the increasing costs of landfilling. In developing countries, however, there is a much lower potential
for using waste incineration as an energy source since the wastes are often too moist for economically viable

Geothermal Energy. Geothermal energy is currently being used in various locations around the world to
produce electricity at costs competitive with conventional sources (by using dry steam, flash steam, or binary
conversion technologies) and to provide energy directly for space heating, food and industrial processing,
refrigeration, and aquaculture. Geothermal electric technologies are currently being used in several developing
countries, including Mexico, the Philippines, and Indonesia.

Hydropower. Hydroelectric power is the largest nonfossil source of electricity in the world. Almost 15
percent of the world's electrical energy comes from hydropower plants operating in over 80 countries, with
China, Brazil, India, Indonesia, Congo (former Zaire), and Colombia having the greatest potential among

developing nations. The market for conventional large-scale hydro-power systems may be shrinking due to
their high capital costs and considerable negative environmental and social impacts. On the other hand, there
is a growing market for mini-hydro facilities (30 MW or less in size) that offer affordable opportunities for
distributed or remote power generation with minor environmental impacts, low operating costs, and high
reliability. Both China and India have active micro hydro programs, and considerable potential for micro
hydro energy application exists in other developing countries.

Market Characteristics. With the exception of hydroelectric power, renewable energy technologies have
had a hard time penetrating the energy sectors of developing nations, despite numerous demonstration

projects over the last 25 years. There are several reasons for that, including the lack of commitment on the
part of energy planners, technical failures attributable to limited capabilities for local maintenance, and the
cost of many new technologies, especially relative to current oil prices. As renewable energy technologies
move from the demonstration to the mature commercial phase, thereby reducing their costs, and governments
adopt programs to support renewable energy development, the market is expected to expand significantly.

Opportunities. The above descriptions of specific renewable energy technologies contain some examples of
their current use. The countries with existing renewable energy programs and related infrastructure will

continue to be the most important markets for renewable energy technologies. Geographically, the demand is
concentrated in areas where certain types of renewable energy sources are economically viable, and where
there is a lack of access to the centralized power grid.

Consulting Services in the Energy Supply Sector

There is a market for consulting services to national governments in developing and implementing GHG
mitigation policies, including environmental regulations to control GHG emissions from power plants, energy
supply technology standards, energy price controls, fiscal incentives for renewable energy, etc. There is also
a growing need in countries around the world for assistance in carrying out power sector reforms, which
expand the market for energy-efficient technologies.

The other type of consulting services in this market segment is energy system planning for utilities. Relevant
services may include designing transition strategies that integrate renewable and conventional technology

options (e.g., co-firing of biomass and coal), identifying areas for efficiency improvements, feasibility studies,
providing training for energy system operators as part of installation of innovative technologies, etc.

Manufacturing Sector

The opportunities for GHG mitigation in industry are somewhat different from those in other sectors. The
greatest increases in the efficiency of energy and materials use often come not from direct efforts to reduce
consumption but rather from improved product quality and lower production costs. Although shortage of
capital is a problem in many cases, the market for GHG-reducing technologies is expected to grow as industry
continues to invest in modern production processes. Energy-efficient technologies considered in this section
include industrial process controls, energy-efficient industrial motors, cogeneration, and boilers. This section
also discusses process improvements in key target industries and industrial energy efficiency consulting

Industrial Process Controls

Process controls have a wide range of applications and can be found in nearly all industrial sectors, especially
in energy-intensive industries such as refineries, metalworks, cement manufacturing, etc. Process controls are
commonly used in a number of industrial processes, including:

 Evaporation and drying: Process controls can reduce wasted energy by eliminating over-drying, optimizing
the air flow for drying, and recycling exhaust air. Drying and evaporation processes are found primarily in

textile manufacturing, food processing, chemical industry, and paper manufacturing.
 Combustion: A poor air-to-fuel ratio in the combustion process results in wasted energy. Process controls

manage the air and fuel flow for an optimal combustion process.
 Compression: Compressors are a major source of industrial electricity consumption. Air or other gases are

compressed for instrument or process use, to provide refrigeration, or to transport gases. Process controls help
manage the air flow and pressure for optimal compression.

District heating (widespread in China and Eastern Europe) is an attractive market niche for process controls
outside of the industrial market. Controls can be applied at the point of generation, distribution, or heat

consumption to achieve efficiency improvements of up to 30 percent. There are manual and automatic control
systems. The advantage of an automatic control system is the continuous monitoring of process conditions
and the ability to automatically initiate the necessary changes to ensure process optimization. However, they
are more expensive and require regular calibration and maintenance.

The leading international manufacturers of process controls are Honeywell (a U.S. company which makes
one-third of the automatic control systems sold world-wide), ABB (Switzerland), Siemens (Germany),

General Electric (United States), Siebe (United States), and Landis & Gyr (Switzerland). Yokogawa (Japan) is
also a major player, especially in Asia.

Market Characteristics. The process control market alone accounted for 20 percent of the world's energy
efficiency market in 1996. The large market share of process controls is a result of a great demand for them in

energy-intensive industries (e.g., cement and steel manufacturing) that are common in many developing
countries. Process controls can result in improved product quality for manufacturers, an increasingly
important consideration for developing country companies trying to expand both domestic and export
markets. Industry privatization and modernization initiatives also boost the market for process controls. In
addition, the cost of process control technology has fallen dramatically in recent years, making it more
affordable for many customers in developing countries.

Opportunities. More and more developing countries are using process controls. The total market value for
process controls was estimated at $1.9 billion in 1996, although the market is expected to grow only moderately
over the next two decades. Almost the entire market demand is met through imports. The biggest regional
market for process controls is Asia (about $1 billion), followed by Latin America ($500 million). The most
promising country markets include South Korea, China, Taiwan, and Singapore. South Korea is quite
advanced in its use of process controls. Chinese companies are installing basic process controls on newer
machines, while Indian manufacturers are often installing used machines with very advanced automation


Industrial Motors and Adjustable Speed Drivers

Motors are commonly used for three general purposes: for powering pumps, fans, and compressors, and for
materials processing and handling. Motors usually account for 65–70 percent of electricity consumption in

industrial facilities. Since the majority of industrial motors operate continuously, energy-efficient motors can
greatly improve the energy efficiency of an industrial facility. An energy-efficient motor is typically 2–10 percent
more efficient than a standard motor.

Many motor-driven processes require some control over the motor's speed, start-up, and torque. This problem
is solved by using adjustable speed drivers (ASDs). ASDs have multiple applications: process speed control,
energy savings, and soft-starting to reduce wear and tear on motors and other system components.

There are about 45 major manufacturers of industrial motors worldwide, although U.S. and European
manufacturers dominate the market for energy-efficient motors. Top motor manufacturers include General Electric
(United States), Siemens (Germany), Toshiba (Japan), and Westinghouse (United States). ABB (Switzerland) and

Fuji (Japan) are leaders in the production of ASDs.

Market Characteristics. In developing countries, the lack of investment capital often makes the high initial cost
of energy-efficient motors relative to conventional motors is often the biggest market barrier. Many industries

are unaware of the benefits of energy-efficient motors and the fact that capital costs are likely to be offset by
energy savings over the life of the motor.

Opportunities. Despite significant obstacles to the use of energy-efficient motors in developing countries, the
market for them in 1996 exceeded $800 million, of which about $500 million was in Asia (Hagler Bailly, 1997).

ASDs are a fairly new technology in the market but the demand for them will grow rapidly in conjunction with
motor use in industrial, commercial, and residential sectors where variable load applications are common. The
largest market for both motors and ASDs is expected to remain in Asia, but the East European market for ASDs
is also expanding fast as capital constraints begin to ease in the region.


Cogeneration is a process where waste heat from the production of electricity or mechanical power is utilized
as a low-temperature heat source within the plant. The low-temperature heat source may be exhaust from an

internal combustion engine, a gas turbine power plant, or low-pressure steam from a steam turbine. Facilities
requiring heat and electricity that are in operation for most of the day and night (e.g., chemical industries,
refrigeration plants, oil refineries, power plants, and large commercial and residential buildings) are excellent
candidates for cogeneration systems. Such systems are much more economical than standby generators often
used in developing countries to guard against common irregular voltages and power blackouts. Cogeneration
may even allow the industrial plant to sell the excess electricity to the grid for a profit, provided there are laws
in place that encourage private power production in the country.

Market Characteristics. Cogeneration can only be used in regions that have a need for waste heat.
Developing countries located in warm climates do not generally have a market for it. Laws and regulations
that encourage private sector power production, thereby increasing the cost advantages of cogeneration,
are also a crucial market factor.

Opportunities. The market for cogeneration equipment in developing countries was estimated at $750 million
in 1996 (Hagler Bailly, 1997). The largest markets in absolute terms are in China, Brazil, and Thailand. Growth
over the next two decades is expected to be slow to moderate, except in specific countries such as Turkey,
India, Russia, Argentina, Brazil, and Venezuela. The cogeneration market is virtually nonexistent in Africa and
the Middle East.

Boiler Efficiency

Boilers, which produce steam, have two principal applications: to fuel steam turbines in power generation and
to create thermal energy for industrial processes. The three common types of boilers are conventional steam
boilers, circulating fluidized bed (CFB) boilers, and waste heat recovery boilers. A system using waste heat
recovery boilers can achieve efficiencies of up to 50 percent, compared with less than 40 percent for
conventional and CFB boilers.

The world's largest boiler manufacturers include ABB Combustion Engineering (Switzerland),
Babcock & Wilcox Power Generation Group (United States), Deutsche Babcock (Germany), Foster Wheeler
Energy Corporation (United States), Mitsubishi Heavy Industries (Japan), and Mitsui-Babcock Energy

Market Characteristics. Industrial sector privatization and increased global competition force companies to
seek ways to improve operational efficiency. The pulp and paper, petrochemical, sugar, chemical, food
processing, and textile industries represent the most important markets for energy-efficient industrial boilers.

Opportunities. The combined market for industrial and utility boilers was an estimated $337 million in 1996, of
which more than half was in Asia (Hagler Bailly, 1997). China has the largest boiler market in the world. Eastern
Europe and the Middle East also represented a significant share of the market.

Process Improvements in Key Target Industries

The five biggest energy consumers in the manufacturing sector are the pulp and paper, chemicals, petroleum,
primary metals, and cement industries. Collectively, these industries account for over three-quarters of
industry's energy use. Each of these industrial sectors represents a good potential market for GHG mitigation

Pulp and Paper Industry. Pulp, paper, and paperboard mills account for about 12 percent of total manufacturing
energy use in the United States. This percentage is often even higher in developing countries. The primary energy

sources used in the pulp and paper industry are thermal energy in the form of steam and mechanical energy
converted from electricity. The thermal energy accounts for about 70–80 percent of the total primary energy

and is mainly used in pulping and drying processes.

The pulp and paper industry has a high potential for application of cogeneration due to it high demand for
process steam. Utilization of process waste (bark, woodchips, and black liquor) for energy production is
another major means of improving energy efficiency. In the United States, for example, biomass fuels meet
more than half of the pulp and paper industry's energy requirements. There are also opportunities for waste
heat recovery in the drying process by using heat pumps, absorption heat transformers, and
ejecto-compressors. The regular energy conservation practices such as insulation maintenance of steam
lines, excess air control, checking of steam leakage, etc., can contribute substantially to energy conservation,
since the pulp and paper industry consumes a large amount of steam. Application of thermal upgrading systems
can offer significant energy savings, especially in large mills. Energy efficiency equipment opportunities in the
pulp and paper industry are the biggest in Asia and Latin America.

Chemical Industry. The chemical industry is the most complex of the main energy-intensive sectors. It produces
a wide range of intermediate and final goods, including agricultural chemicals, plastics, and paints. Therefore, the
purposes for which energy is used in the chemical industry are varied: the use of energy as feedstocks accounts

for a large portion of consumption; large quantities of energy are also expended on process heat, steam heat,
mechanical drive, and electrolysis. The three main opportunities for increased energy efficiency through new
technologies and/or process modifications are cogeneration, waste heat recovery, and product integration
(whereby intermediate products such as ethylene are produced in petroleum refining complexes).

Petroleum Industry. The petroleum industry is the largest energy user among manufacturing industries.
However, about 50 percent of energy consumption in refining is for nonfuel purposes. Energy costs for heat
and power account only for about 3 percent of production costs, partly because the industry relies substantially
on waste fuels (refinery gas) generated during the refining process.

Major investments in efficiency improvements in refineries are likely to be directed at steam systems, including
reducing leaks, renovating steam traps, using low-pressure steam that used to be vented, etc. State-of-the-art
technologies for key production processes can reduce energy consumption by up to 60 percent. In addition,

there is a market for boilers that cogenerate electricity and steam, thereby allowing refineries to meet their
medium-pressure steam needs more efficiently. The largest markets for energy-efficient technologies in the
petroleum industry are likely to be in the Middle East, Indonesia, Mexico, and Venezuela, all of which have
established petroleum sectors. Several countries of the former Soviet Union also have market potential in the
petroleum technology sector.

Primary Metals. The primary metals industry is the biggest industrial user of both coal and electricity and is a
leading emitter of carbon dioxide. Steel and aluminum manufacturing account for most energy used in metallurgy.
Energy accounts for one-fourth of production costs for primary aluminum. The biggest energy savings can be
achieved by introducing process improvements in aluminum smelting.

Steel production involves many energy-intensive processes, most requiring large amounts of process heat.
There is a substantial market for waste heat recovery technologies in steel-making processes, as well as

co-generation. The recovery of waste heat offers the greatest energy savings since the temperature level of the
steel production process is very high. Direct steelmaking (re-placing coke oven and blast furnace technologies
with electric arc furnaces) can cut energy use by half. Energy can also be saved by using a range of process
modifications such as continuous casting, external desulfurization, continuous scrap charging, oxygen enrichment
of combustion air in furnaces, etc.

There is also potential for significant reductions in energy use in the near future through the recycling of primary
metals. For example, production of aluminum from scrap requires about 90 percent less energy than production

from bauxite ore. Production of steel from scrap consumes about 40–50 percent less energy than production from
iron ore.

Cement Industry. The two most energy-intensive phases in cement manufacturing are clinker production and
grinding. The clinker production process consumes mainly thermal energy in the form of coal, oil, or gas, while

grinding uses mainly electrical energy. Since the cement industry is an energy-intensive high-temperature process,
the energy efficiency measures should concentrate on recovering waste heat from various exhaust streams. The
modification and replacement of subprocess by adapting advanced technologies (e.g., reduction of water content
of slurry, installation of a dual firing system, changes in the clinker grinding system, etc.) can save significant
amounts of energy.

There are extensive opportunities for the conversion from the wet to the dry process which leads to better
energy efficiency and increased clinker output. In most industrialized countries, the wet process has been

completely eliminated. Cogeneration is also an attractive option in connection with the conversion to the
dry process.

Industrial Energy Efficiency Consulting Services

The greatest opportunities for energy efficiency consulting services in industry lie in helping facilities identify
the potential for and implement energy efficiency improvements, and establish good housekeeping practices.
The services may include energy efficiency audits, training programs for operators of energy-intensive

equipment, designing systematic maintenance programs, and specifying and installing relevant process

Another market for consulting services is in helping government agencies, electric utilities, or organizations
with a specific mandate to promote energy conservation to design and implement energy efficiency programs.
For example, governments need assistance in developing equipment efficiency standards, and regulations for
utilities to encourage industrial demand-side management programs and purchase of cogenerated electricity,
as well as designing financial incentives and information programs.

Commercial and Residential Sectors

Cost-effective reductions in energy use (and associated CO 2 emissions) in commercial and residential
buildings can be achieved through greater use of energy-efficient equipment, improved insulation, and better
operations and management practices.

There are also opportunities for reducing emissions of chlorofluorocarbons (CFCs) — important greenhouse
gases, as well as ozone-depleting substances — from insulation, air conditioners, and refrigerators.


Lighting accounts for over 25 percent of CO 2 emissions in the commercial and residential sectors. It offers,
perhaps, the single largest and most cost-effective opportunity for reducing energy use in these sectors.

Fluorescent (tubes and compact fluorescent lamps CFLs) and incandescent lamps enjoy the most widespread
use in the commercial and residential sectors. Fluorescent lamps generate less heat than incandescent lamps
during operation and are much more energy-efficient. Replacing incandescent with fluorescent bulbs can
reduce energy use by up to 75 percent.

Incandescent bulbs account for the majority of lamps used in the residential sector. This statement is true for
both developed and developing countries. Energy-efficient incandescent bulbs have only limited use. The

demand for CFLs in developing countries has increased in recent years, although it is still much lower than in
industrial nations. Fluorescent lighting dominates the commercial market. In commercial buildings, fluorescent
tubes are the product of choice. However, as is the case with incandescent bulbs, the most energy-efficient
fluorescent bulbs are not widely used.

The world's largest lighting manufacturers are Osram GmbH (Germany), GE Lighting (United States), and
Philips Lighting (Netherlands). Each company has a global presence with international operations in strategic

Market Characteristics. Energy-efficient lighting is one of the largest market segments in the energy efficiency
market. The size of this market is due mainly to the sheer volume of sales. Many energy efficiency and demand

side management (DSM) programs have already been implemented to target lighting in developing countries. This
trend will most likely continue in the future, creating promising markets for energy-efficient lighting in the process.
Lighting is fairly easy to market because of wide-spread understanding and appreciation of its uses and the
collection of products and systems it represents. Market penetration rates of energy-efficient lighting vary

considerably from country to country, but overall, energy-efficient lighting is more widely used than other energy
efficient products.

Opportunities. Lighting is expected to expand to become the largest market segment in the overall energy
efficiency market in developing countries. In 1996, the developing country market for energy-efficient lighting
was estimated at $1.6 billion, with Asia accounting for 64 percent of the total. The largest country markets are
expected to be China, Singapore, Taiwan, Poland, and Hungary (Hagler Bailly, 1997).

China offers a large market for energy-efficient lighting primarily due to building expansion and construction, as
well as the lighting market of Hong Kong, which became part of China in 1997. The Taiwanese Government is
conducting an aggressive campaign to promote the adoption of energy-efficient lighting. In Eastern Europe,

energy-efficient lighting currently comprises 10 percent of the lighting market. However, lighting manufacturers
in Poland, Hungary, Mexico, and a few other countries market their energy-efficient products as a counterweight
to the government's increase in energy prices.

Building Controls and HVAC

Building controls, also referred to as energy management systems, manage a building's energy-related systems
to obtain the most economical and effective comfort levels. Building controls can be generally broken down into
two categories: timers and controls. The major difference between timers and controls is that timers rely on
pre-determined functions and do not maintain a feedback loop to monitor conditions. Controls, on the other hand,
measure existing conditions compared to preset values and make adjustments accordingly. Building controls can
significantly reduce energy consumption.

Timers can be mechanical, electromechanical, and electronic. The latter two types are most commonly used.
Timers are simpler to install, operate, and maintain and are cheaper than controls. However, since timers

cannot react to changing environments, their applications are limited. The most important of these
applications are the switching of heating, ventilation, and air-conditioning (HVAC) equipment, lights, electric
motors, and electric heaters.

Controls are used for more complex tasks, such as maintaining a constant temperature (thermostat), adjusting
lights based on illumination level (photocells) and occupancy levels (occupancy sensors to detect
unoccupied rooms), and controlling energy flows throughout an entire building (direct digital controls and
energy management systems).

Improved HVAC equipment is important in reducing energy use in buildings. The best new, energy-efficient
HVAC equipment uses 30 to 90 percent less energy than existing stock.

The major manufacturers of building controls and HVAC systems are Carrier (United States), Honeywell
(United States), Johnson Controls (USA), Landis & Gyr (Switzerland), McQuay International (United States),
Siebe Environmental Controls (United States), and ABB (Switzerland).

Market Characteristics. Market growth for building controls and HVAC systems parallels construction
activity. The market for this equipment is expected to benefit from the construction boom in Asia. At the
same time, there is a significant market for retrofit building controls, particularly in Eastern Europe. The most
important barrier in this market segment is the lack of personnel with experience in building controls and
knowledge of the energy savings potential of the system.

Opportunities. The energy-efficient HVAC equipment market in developing countries was estimated at about
$1.2 billion (1996). Import statistics already show high sales of HVAC equipment in many developing countries,
with South Korea, Saudi Arabia, Iran, Russia, Mexico, and China being the most promising country markets
(Hagler Bailly, 1997). However, the portion of the market that is energy-efficient is small, and only moderate
growth is expected in the future. Although the share of non-CFC air conditioners is even smaller, they
constitute a potential market driven by country commitments to reduce the use of ozone-depleting

The annual market for building controls systems is approximately $600 million. The most promising markets
for building controls are in Asia and, to a lesser extent, in Eastern Europe.

Building Envelope

Building envelope technologies define buildings’ heating, cooling, and lighting loads and are essential
contributors to energy conservation in the commercial and residential sectors. The main building envelope
components are insulation and glazed windows.

Building insulation resists the flow of heat which aids in reducing the amount of energy needed to maintain a
constant temperature inside a building. The comfort level of a building is also improved with insulation in
several ways: reduced drafts, warmer floors, and uniform temperatures. The global fiberglass insulation market

is dominated by two firms: Owens-Corning (United States) and Saint-Gobain (France). In addition, there are
also a number of local participants in the insulation industry.

Windows can be a major source of heat loss in the winter and heat gain in the summer; therefore, they present
significant opportunities to improve the energy efficiency level of a building. Different combinations of frame

style, frame material, and glazing can lead to different levels of energy efficiency. The global window market is
characterized by multiple manufacturers of a variety of frame types. Aluminum window makers presently dominate
business in 95 countries around the globe. Manufacturers of energy-efficient wood windows include such U.S.

firms as Marvin, Andersen, Pella, WeatherShield, Pozzi, and Hurd.

Market Characteristics. The demand for building envelope technologies is expected to grow as more countries
are beginning to adopt building energy codes to improve building efficiency that places a premium on the use of
higher quality energy efficient products. Countries with mandatory codes for some or all building types include
China, South Korea, the Philippines, Thailand, South Africa, Saudi Arabia, Hungary, and the Czech Republic.

The commercial segment offers the greatest potential for sales of both insulation and windows due to the
commercial construction boom in developing countries which assures a minimum level of demand for building
envelope technologies. Many of the new construction projects are sponsored by multinational corporations that
demand high-quality materials and equipment. Commercial construction practices in the developing world are

generally similar to those in developed countries, further facilitating access to this market.

The current residential market segment is limited. The additional costs of installing insulation, coupled with the
general lack of awareness of the cooling benefits of insulation, contribute to the low demand. In addition, insulation

materials made for Western-style homes are often not suitable for housing units found in Latin America, Asia,
and Eastern Europe. The market for energy-efficient windows is relatively nascent in developing countries’
residential sector.

Opportunities. Building envelope technologies represent a large segment of the energy efficiency market. In
1996, the market was an estimated $1.7 billion (Hagler Bailly, 1997). The building envelope market is largest in
Asia, reflecting large construction markets that exist in many Asian countries. Although Asia dominates in terms

of absolute size, Eastern Europe represents a fast growing market. The top country markets for this technology are
South Korea, Brazil, China, and Russia. The majority of demand for energy-efficient windows exists in Asia and
Latin America.

Household Appliances

Most consumers in developing countries own or can afford to buy a limited range of household appliances.
Although the full range of major household appliances are sold, refrigerators dominate overall appliance sales.

Clothes washers, stoves, and room air conditioners are also popular. Energy savings can amount to at least
30 percent as a result of replacing the existing appliances with more efficient models.

There are six firms that account for the majority of the global efficient household appliance market, including
Siemens (Germany), Electrolux (Sweden), Whirlpool, General Electric, Maytag, and Raytheon (all U.S. companies).
In total, they manufacture about 35 brand name appliances. Although local companies with small distribution
and low costs still maintain a significant role in the markets of developing countries, their role may diminish
as the multinational companies begin to enter these markets.

Market Characteristics. High penetration rates of appliances are a key factor in the rapid growth of developing
country markets. As household incomes grow, so does the demand for household appliances. However, sales of
energy-efficient appliances still lag behind sales of standard appliances as price remains a critical factor in

purchasing decisions.
A significant market barrier for energy-efficient appliances is the absence of efficiency standards and labeling
programs in developing countries. Asia and Latin America have made the greatest strides toward developing

such standards. China, South Korea, and Taiwan all have minimum efficiency standards for refrigerators, while
Taiwan and China have standards for clothes washers.

Opportunities. The market for energy-efficient household appliances in developing countries was estimated at
$680 million for 1996. Asia, the largest regional market, accounts for more than 62 percent of the total (Hagler

Bailly, 1997). Latin America, Eastern Europe, and Africa/Middle East trail far behind. The market growth
energy-efficient appliances will be more or less dependent on increases in disposable incomes. The exception
will be those countries that introduce minimum efficiency standards for appliances, which will force lower quality,
cheaper models out of the market.

There is also a small market for non-CFC-using refrigerators which is expected to expand as developing countries
sign and implement the Montreal Protocol on ozone-depleting substances.

Consulting Services in the Commercial and Residential Sectors

There are three principal types of clients for energy efficiency consulting services in the commercial and
residential sectors:
 Government agencies. They may need the following services: developing minimum efficiency standards
for appliances and other equipment, building codes, energy efficiency policies and incentive programs,
and information programs promoting energy conservation in homes and commercial buildings.
 Electric utilities. Consulting companies can help electric utilities design and implement DSM programs
in the commercial and residential sectors.
 Private companies. Those that want to improve efficiency of their commercial buildings. These clients need

assistance in conducting energy efficiency audits of buildings and implementing audit recommendations.

The market for energy efficiency consulting services geographically follows the market for relevant products.
It is expected to be greatest in Asia (particularly in China, South Korea, Taiwan, Singapore, Thailand, and the
Philippines), followed by Latin America and Eastern Europe.

Transportation Sector

The transportation sector is a major source of GHG emissions worldwide. For example, in the United States, it
accounted for about 32 percent of CO 2 emissions in 1990. Motor vehicles are expected to be the fastest growing

source of U.S. GHG emissions through the year 2000 (U.S. DOT, 1998 — see Bibliography). There are three primary means
to reduce GHG emissions from motor vehicle travel:

1. Reduce vehicle travel;
2. Increase fuel economy; and
3. Switch to fuels with a lower life-cycle carbon content. (Life-cycle carbon emissions refer to the amount of

carbon emitted through fuel combustion and all the upstream processes, including fuel extraction, processing,
distribution, etc.)

The transportation sector in developing countries currently provides limited but growing opportunities for both
equipment exports (cleaner vehicles, parts, other equipment) and consulting services (primarily in transportation

management systems).

Improved Vehicle Technical Efficiency

Improving the efficiency of conventional vehicles is a means to reduce fuel consumption. Some vehicles
consume less fuel per mile than others under equivalent driving conditions due to physical attributes of the
vehicle — size, weight, and technology. Vehicle redesign to improve fuel economy must address the components
of energy use and loss. Vehicles would use less fuel if engine efficiency increased, if lower weight and better tires gave less tire drag,
if vehicle aerodynamics were improved, and if lower weight or regenerative braking saved some braking loss. The
following are the key technology improvements that may be employed to improve technical efficiency:

 Engine technologies. Engine improvements (e.g., boosting and idle off) enhance the vehicle's mechanical
efficiency. Energy savings are possible in four-stroke gasoline engines through a variety of technological
improvements, such as overhead camshafts, variable engine control, and reduced engine friction. Two-stroke

engines offer potential fuel economy improvements of 15–20 percent over four-stroke engines of comparable
power. Diesel direct-injection engines offer a 25–40 percent fuel economy improvement over similar
spark-ignition engines. However, this translates into a smaller carbon emissions reduction (10–20 percent) since
diesel fuel has a higher carbon content per gallon than gasoline.
 Transmissions. Transmission improvements augment fuel economy since an optimal synchronization of
the transmission with the engine is required to maximize the amount of time an engine operates near
peak efficiency. Such improvements may include continuously variable transmission, electronic transmission
control, and adding gears.
 Load reduction. Reducing vehicle load lessens the engine's power-producing requirements and the
transmission's power-transmitting requirements. Load reduction may be achieved through the vehicle's
weight reduction, reduced rolling resistance, improved aerodynamics, and reduced accessory loads
(e.g., improved air conditioner efficiency).
 Market Characteristics and Opportunities: The market for improved vehicle technologies geographically
coincides with the markets of multinational vehicle manufacturers. Most developing countries do not exercise

direct control over the design of the vehicles they import or assemble (vehicles manufactured or assembled by
most countries use designs if not components, supplied by multinational vehicle producers). Domestic policies
can influence the mix of imported vehicles or their components to increase the vehicles’ fuel economy.
However, vehicle prices remain a critical factor in most developing country markets.

Clean-Fuel Vehicles

All fuels have unique carbon contents that reflect the amount of carbon emitted per unit of energy consumed
during combustion. The use of low-carbon fuels offers an opportunity to reduce GHG emissions without relying

on substantial reductions in transportation demand. A variety of fuels not derived from crude oil are considered
alternative or “clean” fuels: methanol, natural gas, liquid petroleum gas, ethanol, hydrogen, and electricity.
Compressed natural gas (CNG) produces the lowest level of CO 2 emissions (however, it produces significantly
more methane, a much more powerful greenhouse gas). Almost all the CNG-fueled light-duty vehicles in the world
have been retrofits from gasoline-fueled vehicles. The use of some other alternative fuels requires major vehicle
redesign, including battery electric vehicles, hybrid (battery/combustion engine ) vehicles, and fuel cell vehicles.
When examined over the full fuel cycle (including fuel production, fuel distribution, feedstock transport, methane
leaks, and production and assembly of vehicles), the GHG emission benefits of many alternative fuels appear to be
minimal (U.S. DOT, 1998).

Market Characteristics and Opportunities. The size of the market for clean-fuel vehicles depends primarily on
the local price differential between gasoline and alternative fuels and the existence of a commercial infrastructure
for alternative fuels. Currently, neither of these factors are favorable in developing countries. Therefore, the
market for clean-fuel vehicles will be very small in the near future. It is generally limited to government
procurement of such vehicles for use in cities with severe air pollution problems (e.g., Cairo, Sao Paulo, and

Consulting Services: Transportation Management Systems

Traffic congestion results in higher fuel consumption and increased rates of pollutant emissions. Reductions
in fuel consumption occur with the elimination of trips, reduction in trip length, or the replacement of vehicle

trips on alternative modes that consume less energy. Transport management options are mostly directed at
promoting the use of public transport instead of private cars. Consulting services may be provided to local
governments in developing countries in:
 Designing travel pricing mechanisms, including road pricing and vehicle miles traveled or similar fees;
 Planning for alternative modes of transportation, including public transit, bicycling, and ride-sharing;
 Improving parking management aimed at reducing vehicle travel by increasing the user costs associated
with parking; and
 Developing land use planning measures to shape spatial development patterns to encourage less vehicle
travel and fuel consumption.

Market Characteristics and Opportunities: The market for consulting services in transportation management
systems is driven primarily by multinational donor projects aiming at improving air quality in major metropolitan

areas in developing countries. These services need to be tailored to each urban center individually to account
for a wide range of local factors, such as physical infrastructure, characteristics of the urban transport system,
and transport demand.

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