The Asian Development Bank is helping People’s Republic of China cut toxic emissions and power consumption at plants of the China National Chemical Corporation—the country’s largest producer of energy-intensive plastics products. The project is funding the testing of a mercury-free catalyst for PVC production at one plant and an energy efficiency system at another, which will cut power use and greenhouse gas emissions.
|Project Name||Chemical Industry Energy Efficiency and Emission Reduction Project|
|Country||China, People's Republic of
|Project Type / Modality of Assistance||Loan
|Source of Funding / Amount||
|Strategic Agendas||Environmentally sustainable growth
Inclusive economic growth
|Drivers of Change||Governance and capacity development
Private sector development
|Sector / Subsector||
Energy / Energy efficiency and conservation
|Gender Equity and Mainstreaming||No gender elements|
|Description||The proposed Chemical Industry Energy Efficiency and Emission Reduction Project will support demonstration of innovative technologies to improve energy efficiency and reduce emissions of pollutants from various plants belonging to the China National Chemical Corporation Group (ChemChina). Building up on the lessons learned from previous successful Asian Development Bank (ADB) loans in Anhui, Guangdong, Shandong, and Hebei provinces, this project proposes for the first time to directly cooperate with a large state-owned enterprise (SOE) to support industry-specific measures. It will also develop an innovative financing structure to leverage commercial cofinancing and mainstream energy service company (ESCO) participation from the beginning of project implementation. The innovative financing structure will be developed and firmed up during the early stage of the project preparatory technical assistance (PPTA) implementation.|
|Project Rationale and Linkage to Country/Regional Strategy||
Energy efficiency investments are essential to curb demand growth and reduce carbon dioxide emissions. The International Energy Agency projects that energy efficiency improvements could account for 70% of the reduction in global energy demand in 2035. However, without demonstrating best available technologies, stronger policies and more innovative financing mechanisms, the agency warns that more than half of the economic potential may remain untapped. The People's Republic of China (PRC) is the world's largest energy consumer accounting for nearly 20% of global energy consumption. Its rapid energy consumption growth over the past 20 years was and continues to be mainly driven by industrial energy demand growth, which accounted for 71% of the total energy consumption in 2010. The chemical industry is among the PRC's (i) largest industrial energy users, and (ii) most energy-intensive industries. It alone consumed 361.2 million ton of coal equivalent (tce) in 2010, accounting for about 16% of industrial energy use. Compared to the PRC's average energy intensity of 1.034 tce per CNY10,000 of gross domestic product, ChemChina's energy intensity was 2.66 in 2010.
During the Eleventh Five-Year-Plan, 2006 2010, the PRC successfully targeted energy-intensive industries to realize energy savings and emission reduction through (i) mandating energy savings target on 1,000 key energy consuming plants, (ii) subsidizing energy efficiency investments, (iii) strengthening capacity of banks and ESCOs by multiple multilateral and bilateral cooperation projects, and (iv) undertaking other complementary administrative measures. These policy measures were continued, further strengthened and expanded to 10,000 key industries in the Twelfth Five-Year Plan, 2011 2015. However, important market barriers still remain in energy-intensive industries such as chemical industry, which continues to slow down or prevent investment in large-scale, innovative technology energy efficiency and emission reduction retrofits through the market. These barriers include (i) limited market-based incentives to implement such projects; (ii) lack of knowledge by enterprises about the best available technologies, combined with their focus on capacity expansion; (iii) inadequate capacity in commercial banks in evaluating risks and benefits of such retrofit projects combined with the projects' insufficient collateral value; and (iv) the underdevelopment of the industry-specific ESCO that can plan and implement such projects. To address these barriers and to enhance the overall impact of the proposed project, it is essential to develop and test new and innovative solutions to financing such projects and strengthen the ESCO model.
The project is directly relevant to achieve the objectives of the PRC's 12th plan for energy saving and emission reduction which targets to reduce (i) energy intensity by 16%, (ii) carbon intensity by 17%, and (iii) sulfur dioxide by 8% and nitrogen oxides by 10% from 2010 levels by 2015. It has a particular good fit with major tasks emphasized in the 12th plan of (i) strengthening industrial energy saving, and (ii) advancing emission reduction of major pollutants in key industries. The project is also consistent with the ADB's country partnership strategy, 2011 2015 for the PRC, which is closely aligned to the 12th plan priorities to support environmentally sustainable growth by demonstrating cutting-edge energy efficiency technologies.
The proposed first two subprojects include (i) demonstration of a new technology by Dezhou Shihua Chemical Co., Ltd. (DSC) to retrofit its polyvinyl chloride (PVC) production facility to reduce energy consumption by 40% and eliminate the use of mercury as a catalyst; and (ii) retrofitting the caustic soda production chain of Haohua Yuhang Chemical Co. Ltd. (HYC) with the current state-of-the-art technology that will consume 30% less energy. As per the International Energy Agency, caustic soda and PVC production consumes about two-thirds of total primary energy in the chemical industry worldwide. By targeting these two energy-intensive production processes, the project aims for larger impact on energy efficiency and emission reductions in chemical industry in the PRC. Similarly, by mainstreaming ESCO in the project's structure, the project will address a key barrier that has so far prevented industry-specific ESCO participation in energy efficiency retrofits in energy-intensive industries in the PRC. If proven successful, it may unleash ESCO model across energy-intensive industries.
|Impact||Environmental sustainability of the PRC's chemical industry enhanced|
|Description of Outcome||Energy efficiency in and emissions from PVC and fluoropolymer production within ChemChina reduced|
|Progress Toward Outcome||The overall project implementation is on track.|
|Description of Project Outputs||
More efficient and less hazardous PVC technology at commercial scale at DSC plant demonstrated
Energy efficiency and greenhouse gas abatement measures at CGY plant implemented
|Status of Implementation Progress (Outputs, Activities, and Issues)||
DSC Subproject. The DSC subproject will be implemented in three phases: (i) 200,000 tons per annum vinyl-chloride monomer (VCM) production chain using energy efficient, mercury-free technology (phase 1), (ii) 200,000 tons per annum PVC production chain (phase 2), and (iii) 200,000 tons per annum VCM production chain using energy efficient, mercury-free technology (phase 3). Civil works for phase 1 and phase 2 were completed, and the construction of polymerization and VCM phase I equipment installation and process piping are underway. Phase 1 and phase 2 are expected to be put into trial operation in November 2019. Procurement and construction of phase 3 will be started in 2020 and is expected be completed by early 2021. The subproject will utilize $80 million of ADB loan proceeds, of which ADB has disbursed $35 million. Further WAs of $12 million for the subproject are expected to be submitted to ADB by November 2019.
CGY Subproject. The subproject comprises 3 subcomponents: (i) Plasma cracking HFC-23 for CO2 emission reduction retrofit; (ii) Organic fluorine production energy efficiency optimization and retrofit; and (iii) Fluoropolymer drying system EE retrofit. Subcomponent 1: was fully completed in June 2016 and has been put in operation since completion. As of 30 June 2019, the plasma incineration plant has incinerated 3,172 tons of fluoroform (HFC-23) to avoid emissions of 37.11 Mt CO2e. Subcomponent 2: All 30 water pumps have been installed and commissioned as part of the technical renovation of efficient and energy-saving water pumps; the overall framework design for the energy control system platform was completed; the main civil works of the energy control center building was completed; renovation of evaporative cooling system, phase-out of energy-intensive electromechanical equipment and equipment installation for renovation of vacuum pump system are ongoing. The bidding and contract execution for the energy-saving technical renovation project for -35 No. 1 system of the refrigeration team 5 was completed; and the subcomponent is expected to be completed by 2020. Subcomponent 3: the procurement started in August 2018, and renovation of 2500t/a PTFE drying system is expected to be completed by 2019. The subcomponent will utilize $20 million of ADB loan proceeds, of which $10 million was disbursed. Further WAs of $5 million for the subproject will be submitted to ADB by November 2019.
|Geographical Location||Nation-wide, Dezhou, Zigong Shi|
|Summary of Environmental and Social Aspects|
|Environmental Aspects||The Project has been classified by ADB as environment category _FI._ The CGY and DSC subprojects have been classified by ADB as environment category A.|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design|
|During Project Implementation|
The PPTA will be implemented in two parts. Part 1 will focus on the (i) development of an innovative ESCO financing mechanism, and (ii) energy audit and environmental impact assessment (EIA). A review of ChemChina and chemical industry energy efficiency and emission reduction market assessment and barrier analysis will also be undertaken during part 1. Since these activities are independent activities, four individual consultants (2 international for a total of 6.5 person-months and 2 national for a total of 7 person-months) will be recruited in accordance with ADB's Guidelines on the Use of Consultants (2010, as amended from time to time). The energy efficiency finance experts will work closely with ChemChina, NDRC, and ADB to develop the financing mechanism. The international environment expert will be supported by a national technical expert to prepare the energy audit and the EIA.
Part 2 will be undertaken by a consulting firm, which will prepare the technical, economic, and financial due diligence of the subprojects to be undertaken. It will also provide capacity strengthening and project implementation support and capacity development measures to the project management office and other stakeholders, if needed. The detailed tasks to be undertaken by the consulting firm will be firmed up towards the end of the part 1. The consulting firm will be recruited in accordance with ADB's Guidelines on the Use of Consultants (2010, as amended from time to time) through quality- and cost-based selection method (with a quality-cost ratio of 80:20) following the simplified technical proposal.
|Responsible ADB Officer||Xinjian Liu|
|Responsible ADB Department||East Asia Department|
|Responsible ADB Division||PRC Resident Mission|
China National Chemical Corporation Group
62, Beisihuan Xilu, Haidian District,
|Concept Clearance||17 Jun 2013|
|Fact Finding||16 Mar 2015 to 27 Mar 2015|
|MRM||04 Jun 2015|
|Approval||03 Nov 2015|
|Last Review Mission||-|
|Last PDS Update||16 Sep 2019|
|Approval||Signing Date||Effectivity Date||Closing|
|30 Oct 2015||29 Jan 2016||14 Jun 2016||31 Aug 2021||-||-|
|Financing Plan||Loan Utilization|
|Total (Amount in US$ million)||Date||ADB||Others||Net Percentage|
|Project Cost||245.01||Cumulative Contract Awards|
|ADB||100.00||30 Oct 2015||0.00||0.00||0%|
|Cofinancing||81.73||30 Oct 2015||52.00||0.00||52%|
|Status of Covenants|
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
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Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.
Evaluation Documents See also: Independent Evaluation
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ADB to Help PRC Cut Energy Use, Phase Out Mercury in Chemical IndustryADB has approved a $100 million loan that will help the PRC take a major step forward in its drive to reduce energy consumption, phase out mercury use, and cut greenhouse gas and toxic emissions in its chemical industry.
No contracts awarded for this project were found
|Title||Document Type||Document Date|
|Chemical Industry Energy Efficiency and Emission Reduction Project: Procurement Plan||Procurement Plans||Jun 2018|