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Home ＞ Activities ＞ Contribution to Climate Change Mitigation ＞

Reports of
CDM/JI Feasibility Studies ＞ Reports of CDM/JI Feasibility Studies

CDM/JI
Feasibility
 Feasibility
Studies

Title of Feasibility CDM Feasibility Study on Direct Reduction

Study (FS) Iron Production by Utilizing Coke Oven Gas
in Hebei Province, China

FY FY 2008

Main Implementing Mizuho Information & Research Institute, Inc.

Entity

FS Partner(s) Kyushu Electric Power Co.; and Beris Engineering &

Research Corporation

Location of Project China (Hebei Province)

Activity

Summary of FS Summary (PDF439KB)

Report

Description of Beris Engineering & Research Corporation has

Project Activity conducted technological development to utilize unused
coke oven gas (COG), with governmental policies to
promote energy efficiency and environment protection
in China. Specifically, COG is used as reducing agent
instead of coke for integrated blast furnace-converter
(BF-C) steelmaking, the most common production
approach in China's iron & steel industry. Direct
reduction iron (DRI), the iron produced with COG as
reducing agent, and also called as sponge iron, is used
as raw material for crude steel production in electric
furnace. This project is conducted in a new DRI plant
with 170,000 tons of annual production capacity, in
cooperation with a local company in Tangshan City,
Hebei Province, whose coke production is 120Mt/yr.
Sponge iron produced in the plant is transported to an
 electric furnace to be used as raw material for crude
steel production.
This technology, in addition to replacing reducing
agent from coke to COG, transforms steelmaking
approach itself from the conventional integrated BF-C
method to a more energy efficient one using direct
reduction furnace and electric furnace (DRF-EF). CO2
emissions from BF-C and DRF-EF are 1,818kgCO2/t-
crude steel and 1,099kgCO2/t-crude steel,
respectively, which reduces emissions by 719kgCO2/t-
crude steel, cutting more than 50%. The DRI plant in
this project is capable to produce approx. 150 kt-
crude steel, therefore, annual emission reduction is
estimated at approx. 110 kt-CO2/yr. This project is
planned to start for January 2010, taking into account
construction phase of the DRF.
This project is to produce crude steel from energy
efficient DRF-EF steelmaking approach by utilizing
COG. It will contribute to save coke resources and to
reduce energy consumption and pollutants emissions
in crude steel production processes, as well as for
China s sustainable development.

Targeted GHG CO2

Category of Others (Waste Gas Utilisation)

Project Activity

CDM/JI CDM

Duration of Project 2010 - 2030 / 2010 - 2019

Activity/ Crediting
Period

Baseline Scenario A new methodology is applied to this project. The

(including project is for CO2 emission reduction through
Methodology to be replacement of conventional integrated steelmaking
applied) with blast furnace and converter (BF-C), the common
approach for crude steel production in the area where
this project is implemented, to direct reduction
steelmaking with direct reduction furnace and electric
furnace.
Baseline emission is determined by calculating CO2
 emission intensity (per ton of crude steel production)
from integrated BF-C steelmaking which is multiplied
by crude steel production in the project case. For
obtaining the emission intensity, divide crude steel
production into processes of (1) coke oven, (2)
sintering furnace, (3) pellet production, (4) blast
furnace, and (5) converter; each of them multiplied by
CO2 emission per ton of crude steel production; and
then summed up.

Demonstration of Step 1: Identification of alternatives to the project

Additionality activity consistent with current laws and regulations
There is no approved methodology applicable to this
project. Alternative scenarios are prepared by
following the new methodology Methodology for
Project of Producing Crude Steel through direct
reduction approach using coke gas oven . Most
realistic and plausible alternative scenario regarding
COG utilization is utilization of COG for energy purpose
which is not included in the project boundary.
Meanwhile, the most realistic and plausible alternative
scenario for steelmaking is BF-C steelmaking using
coke. Both scenarios satisfy the current laws and
regulations.
Step 2: Investment analysis
In iron & steel industry in the host country, a threshold
for investment decision-making is either investment
recovery period within six years or IRR at 20% or
above, which is considered as a benchmark. In this
project, investment recovery period is 8.6 years and
IRR is 10.2 % if no profit is generated from selling CER,
not satisfying the benchmark. On the other hand,
considering profit from selling CER, investment
recovery is for 2.9 years and IRR at 33.5 %, improving
conditions for investment decision-making.
Step 3: Barrier analysis
No barrier analysis to be conducted, since Step 2 is
implemented.
Step 4: Common practice analysis
In the past or on-going cases, no activity similar to the
proposing project activity has been conducted.

Estimation of GHG Baseline emissions: 280,938tCO2/yr

Emission Project case emissions: 169,824tCO2/yr
Reductions GHG emission reductions: 111,114tCO2/yr

Monitoring Plan For calculation of the baseline emission, all value is

(including determined before the project starts (ex-ante).
Methodology to be Therefore, there is no monitoring item and variable for
applied) baseline case.
For project case, items to be monitored are (a) direct
reduction furnace in which pellet is directly reduced,
(b) variable regarding emission intensity in electric
furnace in which crude steel is produced with sponge
iron supplied from DRF, and (c) crude steel production.
These data are supposed to be monitored by project
operators.

Environmental Environmental impact analysis is essential for project

Impact Analysis implementation, and relevant measures are required to
be implemented for air environment, water
environment and noise. Among those, air environment
is placed an importance: SO2, NO2 and TSP is subject
to satisfy national standards in terms of outlet
concentration or air concentration within a certain area
from emission source. As long as satisfying such
standards, environmental impact of this project is at a
level not causing problems.

Issues and Tasks As described in investment analysis, this project is less

for Project attractive for investors if not registered as CDM. In
Materialisation contrast, due to its scale of emission reduction,
considerable benefit will be generated from CDM
registration. However, several issues were pointed out
for CDM registration and project implementation, while
impacts from recent economic crisis wouldn't be
neglected.
● For CDM registration: this project needs a new
methodology: it consumes certain time and money
until registration. Moreover, an issue remains if the
evidence would be enough strong to demonstrate
technology, the direct reduction approach using
COG, as there is no commercial example for this
case.
● For project implementation: This project includes
construction of a new DRF. Related departments
gave verbal responses that there would be no
problem in regulations. However, other risks still
 remain including delays in construction, etc.
● Impacts of economic crisis: Fall of demand is
concerned in iron & steel and then in coke. Attention
should be paid if the COG provider would keep
stable operation with their coke oven or if constant
sales of product from this project, crude steel, could
be maintained.

Co-benefits Effects Pollution prevention effect of this project is to

eliminate COG emission from coke production as in the
baseline, which leads to mitigate environmental
impacts. If assuming mitigation of external
environmental cost as co-benefit index, the mitigation
effect is estimated at approx. 343,000 yen/yr at
maximum. This result seems somewhat small in
absolute value, however, it should be in mind that this
value reflects the willingness-to-pay (WTP) in Japan for
damage avoidance of environmental burden. The
effects to mitigate air pollution in China should be
more highly evaluated.

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