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Why CDM?

Study Report for the PhD course-031112: Sustainable Energy Systems Green House Gas (GHG) Mitigation Opportunities through Clean Development Mechanism (CDM) in China Division of Energy Engineering Lulea University of Technology. Why CDM?

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Why CDM?

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  1. Study Report for the PhD course-031112: Sustainable Energy SystemsGreen House Gas (GHG) Mitigation Opportunitiesthrough Clean Development Mechanism (CDM) in ChinaDivision of Energy EngineeringLulea University of Technology

  2. Why CDM? • CDM allows Annex I countries (like Sweden) to invest in low-cost abatement opportunities in developing countries and receive credit for the resulting emissions reductions. • CDM can support sustainable development initiatives within developing countries. • CDM can enhance clean technology transfer to developing countries.

  3. The CDM market is in it infancy, supply outstrips demand, and Kyoto Ratification Risk is still restraining the market The market value of CERs is likely to remain low in the short-to-medium term due to several factors Currently several key buyers are in the market, World Bank PCF, Dutch CERUPT, Dutch Rabobank, Danish Government, Spanish CDM fund, others e.g. Japan, ADB, Germany, CAMCO Linking directive of EU-ETS could establish an important market The CDM Market

  4. Overview of CDM projects • Top three are gas capture, fuel switching and renewables projects Source: http://www.cdmwatch.org, accurate as of September 25th 2003, publicly available PDDs

  5. Overview of CDM projects China • China has 2 out of 53 projects and ranks 15th in terms of CERs Source: http://www.cdmwatch.org, accurate as of September 25th 2003, publicly available PDDs

  6. Overview of CDM projects • Japan, PCF and Dutch have been the most active buyers to date Source: http://www.cdmwatch.org, accurate as of September 25th 2003, publicly available PDDs

  7. The World Emission of Carbon Dioxide

  8. The World Emissionof Carbon Dioxide

  9. Car Fleet grew from 1 million to 2 million during 1998 to 2003 in Beijing

  10. CO2 Emission Forecast in China • BAU means “business as usual” • Revised estimate assumes unreported coal use of 100 MTCE and petroleum consumption of 15 MTCE in 2000 • Research Team of China Climate Change Country Study (CCCS). 1999. • China Climate Change CountryStudy. Beijing: Tsinghua University Press. • China State Science and Technology Commission. 1999. Asia Least Cost Greenhouse Gas Abatement Strategy (ALGAS): China.

  11. Coal makes 68% of China’s energy supply

  12. Coal-Fire Power generation is one main resource of CO2/SO2 emission

  13. Heavy dependency on Coal brought serious environmental damage

  14. Comparison of Energy Intensity between China and Developed Countries Source: EU (2003)

  15. Comparison of Carbon Intensity among China, Sweden and other Countries World Carbon Dioxide Emissions from the Consumption and Flaring of Fossil Fuels per Thousand Dollars of Gross Domestic Product, 1980-2001 (Metric Tons Carbon Equivalent per Thousand 1995 U.S. Dollars using Market Exchange Rates) Source: IEA,2002

  16. Chinese industry has great potential for energy efficiency improvement

  17. Small Coal Fire Boiler has great potential of low-cost option on EE

  18. China total coal comsuption 1.206 GT/yr (2000), 40% for industrial boilers/furnaces: industrial boilers: 500,000; industrial furnaces: 160,000 average size: 1.5 MWth, efficiency about 60% imprvement of efficiency 60% to 70% (cheap retrofit, 1-5 USD/tCO2)  reduce 94 Mt CO2 /yr (total Swedish emision is about 55 MtCO2/yr) CO2 reduction: an example of retrofit of industrial coal fired boiler by efficinecy improvement and/or co-firing with biomass

  19. Efficiency of Motors and Pumps can be improved significantly There are about 40 million industrial pumps and fans, with total capacity of approximately 85 GW.

  20. Paper and Pulp Industry can learn a lot from Sweden

  21. Energy can be saved by better energy management

  22. Financial Internal Rates of Return for Selected Energy Efficiency Investments in China “China, Issues and options in Greenhouse gas Emissions Control”, World Bank, December 1994

  23. Case Studies: CDM Potential of Electric Power Sector and Energy-intensive industries

  24. Targeted sectors Power Generation Iron & Steel Paper & Pulp Cement Oil Refinery and Chemicals Reason Major CO2 emitters

  25. Process of analysis Study and select CDM model plant and technology Calculate Baseline emissions (existing emissions) Estimate CO2 reduction of model plant Estimate CO2 reduction potential in China Calculate CO2 reduction costs Estimate CO2 reduction potential in China corresponding to various cost

  26. Collection of basic data of all power plants in North China (power plants in North China) Classification of power plants Group 1： 50 MW units replace outdated ones with advanced technology Group 2： 100，200 MW units Modification Group 3： 300 MW units Fuel switching The above 3 groups account for 75% of total capacity in North China Selection of model units/technologies, collection of detailed data, thereafter implementation ofsite survey Price of fuel (gas price is about 8 times higher than coal, which is 237RMB/tonne） CDM potential in electric power plants（Keio & Tsinghua U.）

  27. Calculate baseline emissions “Existing actual emissions” are used as baseline Estimate CO2 emission reductions of model units by applying state-of-the-art technologies Apply model units’ reduction to all others units Estimation of CO2 reductions

  28. Other energy intensive industries(Iron & steel)

  29. Cement state-of-the-art technology - Replacement of small vertical kiln with fluidized bed kiln -Replacement of wet-process kiln with suspension preheater -Waste heat power generation -Utilization of combustible waste as fuel -Utilization of steel slag for cement material Oil refinery and chemical industry state-of-the-art technology -Oil refinery (Gasification of oil residue and power generation) -Ethylene (Gas turbine installation and utilization of exhaust gas for cracking furnace) -Chemical fertilizer (Coal gasification combined power generation) -Clor-alkali (Replacement of diaphragm process with ion-exchange membrane process Paper state-of-the-art technology -Replacement of main motors/main auxiliary motors with variable speed motors -Installation of closed type dryer hood and waste heat recovery equipment for dryer and other remodeling Other energy intensive industries (Cement, Chemicals and Paper)

  30. Comparison of CDM reduction potential by industry Reduction Potential (thousand ton-CO /year) 2 0 10000 20000 30000 40000 50000 60000 70000 80000 total 73429 Power Plant 27879 45550 300MW Steel Industry 5744 Paper Industry 783 Cement Industry 13275 Oil Refinery and 8625 Chemical Industry Paper industry ： Reduction potential is 394～1172 thousand ton-CO2. 783 thousand ton-CO2 showed above is average.

  31. Oil Refinery and Chemical Industrｙ Steel Industry Cement Industry Power Plant Comparison of CDM reduction potential by technology Reduction Potential (thousand ton-CO2/year)

  32. Cost estimation methodology － (Baseline emission) (Emission after CDM project) = --- (Numerator means saved fuel) (Denominator means CO2 reduction in year i) (Carbon reduction cost per ton) SBi: revenue, EBi: fuel cost, MBi: maintenance cost of Baseline case SCi: revenue, ECi: fuel cost , MCi: maintenance cost of CDM case I0: initial investmentcost of the project

  33. Reduction potential and cost(1)

  34. Reduction potential and cost(2)

  35. Reduction potential and cost(3)

  36. Reduction potential and cost(4)

  37. Reduction potential and cost(5)

  38. Marginal Cost Curve of CDM in China

  39. Oil Refinery and Chemical Industrｙ Steel Industry Cement Industry Power Plant Reduction Potential corresponding to credit prices CO2 Reduction Potential (thousand ton-CO2/year) （8.3） （19.4） （28.3） （61.4） （1.6） （0.5） （21.1） （45.0） （55.9） （8.9） （25.0） （-2.9） （-20.4） （-19.8） （-4.7） （24.7）

  40. Potential CO2 emission reduction in five major sectors is around 100 Mt (Physical potential) Among them, power generation sector is the largest (especially at 300 MW units) When considering cost, picture changes drastically Very few commercially viable projects exist (at zero cost, total reduction will be only 10 Mt, at $4.5, still 16 Mt even under our baseline emission figures) Fuel switching projects in power sector will not be feasible due to high cost of natural gas Public funding is essential for promotion of CDM projects in China Tentative Conclusion

  41. China represents a large GHG reduction potential at various costs High growth rate of China makes clean technology transfer financially and technically viable, CDM will enhance this process Clean Technology Transfer through CDM is a win-win solution for both Sweden and China, with CDM, Sweden is able to transfer its advanced energy efficiency and renewable energy technology to China, e.g. biomass energy, cogeneration etc. Opportunities shall be provided for Swedish industry to understand Chinese energy market and promote the potential cooperation between two countries. Implications to Sweden-China Clean Technology Transfer through CDM

  42. Thanks for your attention! ANY QUESTIONS for me???

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