fbpx 47051-002: Chemical Industry Energy Efficiency and Emission Reduction Project | Asian Development Bank

China, People's Republic of: Chemical Industry Energy Efficiency and Emission Reduction Project

Sovereign (Public) Project | 47051-002 Status: Active

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 Details

Project Officer
Xinjian Liu East Asia Department Request for information
  • China, People's Republic of
  • Loan
  • Energy
Project Name Chemical Industry Energy Efficiency and Emission Reduction Project
Project Number 47051-002
Country China, People's Republic of
Project Status Active
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3308-PRC: Chemical Industry Energy Efficiency and Emission Reduction Project
Ordinary capital resources US$ 100.00 million
Loan: Chemical Industry Energy Efficiency and Emission Reduction Project
Commercial Bank - Domestic US$ 81.73 million
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
Project Outcome
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.
Implementation Progress
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
Safeguard Categories
Environment FI
Involuntary Resettlement FI
Indigenous Peoples FI
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.
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services

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
Executing Agencies
China National Chemical Corporation Group
[email protected]
62, Beisihuan Xilu, Haidian District,
Beijing 100080
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

Loan 3308-PRC

Approval Signing Date Effectivity Date Closing
Original Revised Actual
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%
Counterpart 63.28 Cumulative Disbursements
Cofinancing 81.73 30 Oct 2015 52.00 0.00 52%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating - - - Satisfactory - -

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

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Evaluation Documents See also: Independent Evaluation

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Related Publications

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Tender Title Type Status Posting Date Deadline
Project Implementation Specialist Individual - Consulting Closed 27 Jul 2018 09 Aug 2018
Environment Monitoring Specialist Individual - Consulting Closed 27 Jul 2018 09 Aug 2018

Contracts Awarded

No contracts awarded for this project were found