PROJECT INFORMATION DOCUMENT (PID)
APPRAISAL STAGE
Report No.:59866
(The report # is automatically generated by IDU and should not be changed)
Project Name
Region
Country
Sector
Lending Instrument
Project ID
Borrower(s)
Implementing Agency
Environmental Screening
Category
Date PID Prepared
Estimated Date of Appraisal
Completion
Estimated Date of Board
Approval
Decision
I.
Brazil: N2O Emission Reduction Project
Latin America and the Caribbean
Brazil
Environment
Trust Fund / Carbon Finance
P125006
Rhodia Group
Rhodia Group
{ }A {X}B { }C { }FI
February 7, 2011
February 17, 2011
N/A
{Insert the following} Project authorized to proceed to
negotiations upon agreement on any pending conditions
and/or assessments. {the text is automatically generated
after PID is filed}.
Country Context
In 2008, Brazil had total greenhouse gas (GHG) emissions of approximately 1.4 billion tons
of CO2e per year, including land use change and forestry emissions of roughly 550 million
tons per year1.
Brazil remains strongly committed to reducing its GHG emissions. In December 2008,
President Lula launched the National Plan on Climate Change (PNMC)2, which amongst
other measures calls for a 70% reduction in deforestation by 2017. The PNMC is based on
work of the Interministerial Committee on Climate Change and its Executive Group, in
collaboration with the Brazilian Forum on Climate Change and civil society organizations. In
December 2009, the Brazilian Parliament adopted law 12.187 instituting the PNMC and
setting a voluntary national GHG abatement target of between 36 and 38.9% of its business
as usual (BAU) projected emissions by 20203, which equates to a reduction of 974 million to
1.05 billion tons of CO2e.
1
World Bank, Brazil Low-Carbon Country Case Study, 2010
Plano Nacional sobre Mudança do Clima - (last visited Nov 16th 2010)
3
Appendix II – Nationally Appropriate Mitigation Actions of Developing Country Parties http://unfccc.int/files/meetings/application/pdf/brazilcphaccord_app2.pdf (last visited Nov 16th 2010)
2
Brazil’s GHG emissions profile is rather unique. Close to 85% of all electricity generated in
Brazil comes from hydropower4. Despite the increasing trend of other electricity sources and
the socioeconomic and environmental constraints of hydropower projects in general,
hydropower will continue to be the main source of electric power in Brazil for the
foreseeable future according to the National Agency for Electric Energy (ANEEL) 5.
Transportation is not a major source of GHG emissions in Brazil, due to ethanol substituting
40% of gasoline fuel6. The energy and transport sectors in Brazil are, thus, widely based on
low-carbon alternatives and current efforts to keep the energy matrix clean must be
acknowledged.
While Brazil’s energy and transportation sectors do not represent major sources of GHGs contrary to what is normally found in developing countries - the industrial sector plays a
significant role with its high fossil fuel consumption and its associated emissions,
particularly of Nitrous Oxide (N2O). As per Brazil’s last GHG inventory, N2O represents
25% of the total GHG emissions excluding land use change and forestry. Reducing
industrial gas emissions should thus be considered a priority target to reduce overall
emissions while continuing to grow in a sustainable manner.
II.
Sectoral and Institutional Context
The proposed project targets the abatement of N2O in the chemical sector of Brazil. N2O is
generated as a by-product of the adipic acid production process and is emitted in the waste
gas stream. N2O is a powerful greenhouse gas with a global warming potential (GWP) that is
about 300 times greater than the GWP of CO2. N2O emissions are covered under the Kyoto
Protocol’s basket of six regulated GHGs.
The main use for adipic acid is as a component of nylon, and thus, adipic acid production
trends are closely correlated with nylon consumption trends. Rising demand for engineering
plastics has sparked expansion in existing adipic acid capacity in North America and Western
Europe, as well as new facilities in the Asia-Pacific region. Economic drivers for adipic acid
production include new housing starts and nylon engineering resins in the automotive and
electronics industries7. Worldwide, only a few adipic acid plants exist. The U.S. is a major
producer with three companies in four locations accounting for approximately 40% of
worldwide production. Other producing countries include Brazil, Canada, China, France,
Germany, Italy, Japan, Korea, Singapore, Ukraine, and the United Kingdom. Most of these
countries have only one adipic acid plant.
In 1990, adipic acid production was the largest source of industrial N2O emissions. As of
1999, industrial sources report that almost all major adipic acid producers have implemented
N2O abatement technologies. As a result, nitric acid production is currently believed to be
4
Brazil Low Carbon Study - http://siteresources.worldbank.org/BRAZILEXTN/Resources/3223401277832245764/LowCarbon_Fulldoc.pdf (last visited Nov 16th 2010)
5
http://www.aneel.gov.br/aplicacoes/atlas/energia_hidraulica/energia_hidraulica.htm (last visited (Nov 16th 2010)
6
Brazil Low Carbon Study - http://siteresources.worldbank.org/BRAZILEXTN/Resources/3223401277832245764/LowCarbon_Fulldoc.pdf (last visited Nov 16th 2010)
7
N2O Emissions from Adipic Acid and Nitric Acid Production - http://www.ipccnggip.iges.or.jp/public/gp/bgp/3_2_Adipic_Acid_Nitric_Acid_Production.pdf (last visited Nov 16th 2010)
the largest industrial source of N2O emissions8. Global emissions of N2O accounted for
9.4% of total global emissions (in 2000) and N2O ranks as the third most emitted gas
amongst the six gases regulated under the Kyoto Protocol9.
III.
Project Development Objective
The development objective of the proposed project is to reduce emissions of N2O, a powerful
greenhouse gas, which would, in the absence of the project, have been emitted into the
atmosphere contributing to the damaging effects of climate change.
IV.
Project Description
The French chemical company Rhodia Group owns an adipic acid production plant in
Paulinia, state of São Paulo, Brazil. The adipic acid plant in Paulinia was constructed in 1965
and expanded in 1996 and 2001.
As a consequence of the incentives created by the Clean Development Mechanism (CDM),
Rhodia Group installed a N2O collection and thermal decomposition process equipment to
the operating adipic acid plant in 2006, which did not imply the expansion of the already
existing facility in Paulinia. Before that the project had been registered under the Clean
Development Mechanism (CDM) in December 200510. The thermal decomposition
installation reduces GHG emissions compared to a baseline situation in which N2O would be
released to the atmosphere in the waste gas stream. The difference of the baseline and the
scenario with installed N2O oxidizer results in approximately 42 million tCO2e (i.e.,
Certified Emission Reductions, or CERs in short) for the first crediting period between 2007
and 2013. Verifications as required by CDM regulations are being conducted on a regular
basis and around 600,000 ERs are currently being issued every month. Over three dozen
verifications and issuances of the project have been completed by the CDM Executive Board
so far.
A license to operate was provided by Brazilian authorities in 2005 and has been recently
renewed till 2013. No complaints have surfaced on the project in the five years that it has
been operating. The World Bank’s Spanish Carbon Fund commitment to purchase ERs will
end on December 31, 2013 and the Emission Reductions Purchase Agreement (ERPA) will
define this date as the closing date of the project, clearly identifying the Bank’s supervision
period.
V.
Financing
{Same as in AUS}
Source: Spanish Carbon Fund
Borrower/Recipient Rhodia Group
8
N2O Emissions from Adipic Acid and Nitric Acid Production - http://www.ipccnggip.iges.or.jp/public/gp/bgp/3_2_Adipic_Acid_Nitric_Acid_Production.pdf (last visited Nov 16th 2010)
9
World Resources Institute - http://cait.wri.org/cait.php?page=gases (last visited Nov 16th 2010)
10
UNFCCC: Project 0116 : N2O Emission Reduction in Paulínia, SP, Brazil
http://cdm.unfccc.int/Projects/DB/DNV-CUK1130160031.78/view (last visited Nov 16th 2010)
IBRD N/A
IDA N/A
Others (specify) N/A
VI.
Implementation
The implementation of the project will be undertaken by Rhodia Energy Services. This arm
of the Rhodia Group is responsible for managing Rhodia’s GHG emission reduction projects
for the sale of CO2 certificates11.
The Project has been registered under the UNFCCC and has gone through the required
review processes by an accredited third party auditor (CDM validation, CDM verification).
In addition, the project developer, Orbeo (a joint venture between Rhodia Group and the
French bank Société Générale) applies due diligence checks that are compliant with the
Equator Principles12 adopted by Société Générale for all their financing activities. Rhodia
Group is also ranked high in the Dow Jones Sustainability Index1314, the leading nonfinancial global index of the most efficient companies in the area of social and environmental
responsibility. Furthermore, the project activity meets all the environmental requirements of
the Environmental Agency of the Brazilian state of São Paulo (CETESB) and all permits to
operate have been obtained properly.
The Rhodia site in Paulinia is ISO 9001:2000 certified, covering the adipic acid plant and the
N2O decomposition unit. The Quality Management System of the Rhodia site is also ISO
14000 certified.
An audit conducted for due diligence purposes did not identify any technical or legal nonconformity that could jeopardize the environmental, social or legal compliance of the N2O
Project, and its associated facilities, according to applicable legislation and the World Bank’s
Safeguards. During December 2010 and January 2011, an independent consulting company
was hired to assess the proposed project’s compliance with all applicable federal and state
environmental laws and regulations, as well as applicable World Bank Group Environment,
Health, and Safety standards, in particular, the WBG Industry Sector Guidelines for
Petroleum-based Polymers Manufacturing. The audit also concluded that the localized
deviations identified in the associated facilities are minor and consistent with the local
environment assimilative capacity of the plant conditions.
11
http://www.rhodia.com/en/binaries/9229_CMD_EnergyServices.pdf (last visited Nov 16th 2010)
http://www.equator-principles.com/
13
http://www.rhodia.com/en/news_center/news_releases/DJSI_World_190910.tcm
14
http://www.rhodia.com/en/binaries/Rhodia_performance_overview_DJSI_2008.pdf
12
VII.
Safeguard Policies (including public consultation)
{Same as in last approved ISDS}
Safeguard Policies Triggered by the Project
Environmental Assessment (OP/BP 4.01)
Natural Habitats (OP/BP 4.04)
Pest Management (OP 4.09)
Physical Cultural Resources (OP/BP 4.11)
Involuntary Resettlement (OP/BP 4.12)
Indigenous Peoples (OP/BP 4.10)
Forests (OP/BP 4.36)
Safety of Dams (OP/BP 4.37)
Projects in Disputed Areas (OP/BP 7.60)*
Projects on International Waterways (OP/BP 7.50)
VIII.
Yes
No
X
X
X
X
X
X
X
X
X
X
Contact point at World Bank and Borrower
World Bank {Same as TTL information in AUS}
Contact: Sebastian Martin Scholz
Title: Environmental Economist
Tel: +1-202-458-4117
Email: sscholz@worldbank.org
Borrower/Client/Recipient
Contact: Philippe Rosier
Title: President, Rhodia Energy
Tel: +33 1 53 56 61 01
Email: philippe.rosier@eu.rhodia.com
Implementing Agencies
Contact: Pascal Siegwart
Title: CO2 Operations Director, Rhodia Energy
Tel: +33 1 53 56 61 32
Email: Pascal.SIEGWART@EU.RHODIA.COM
Contact: Elder Martini
Title: Rhodia Energy Brazil Director
Tel: +55 (11) 3741-7370
Email: Elder.MARTINI@BR.RHODIA.COM
IX.
For more information contact:
*
By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the
disputed areas
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