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    Brazil: "PLANTAR" Project: Sustainable Fuelwood and Charcoal Production and Substitution of Coke in Pig Iron Production

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    Khin Aung Shwe
    This document summarizes a proposed project by Plantar S/A, a Brazilian company, to produce sustainable charcoal from eucalyptus plantations for use in pig iron production. The project has four main components: 1) Establishing eucalyptus plantations on pastureland to sequester carbon; 2) Improving charcoal production technology to reduce methane emissions; 3) Substituting charcoal for imported coal/coke in pig iron production; and 4) Restoring native forest areas. The project would generate over 12 million tons of emissions reductions over 21 years. Key risks addressed in validation include potential leakage of pig iron production and eligibility of replanted forest lands for carbon credits. The Pro

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    Brazil: "PLANTAR" Project: Sustainable Fuelwood and Charcoal Production and Substitution of Coke in Pig Iron Production

    Uploaded by

    Khin Aung Shwe
    87 views33 pages
    This document summarizes a proposed project by Plantar S/A, a Brazilian company, to produce sustainable charcoal from eucalyptus plantations for use in pig iron production. The project has four main components: 1) Establishing eucalyptus plantations on pastureland to sequester carbon; 2) Improving charcoal production technology to reduce methane emissions; 3) Substituting charcoal for imported coal/coke in pig iron production; and 4) Restoring native forest areas. The project would generate over 12 million tons of emissions reductions over 21 years. Key risks addressed in validation include potential leakage of pig iron production and eligibility of replanted forest lands for carbon credits. The Pro

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    CHARCOAL STEEL

    Original Title

    PlantarProjecNGOPresDelhiOct23

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    This document summarizes a proposed project by Plantar S/A, a Brazilian company, to produce sustainable charcoal from eucalyptus plantations for use in pig iron production. The project has four main components: 1) Establishing eucalyptus plantations on pastureland to sequester carbon; 2) Improving charcoal production technology to reduce methane emissions; 3) Substituting charcoal for imported coal/coke in pig iron production; and 4) Restoring native forest areas. The project would generate over 12 million tons of emissions reductions over 21 years. Key risks addressed in validation include potential leakage of pig iron production and eligibility of replanted forest lands for carbon credits. The Pro

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    87 views33 pages

    Brazil: "PLANTAR" Project: Sustainable Fuelwood and Charcoal Production and Substitution of Coke in Pig Iron Production

    Uploaded by

    Khin Aung Shwe
    This document summarizes a proposed project by Plantar S/A, a Brazilian company, to produce sustainable charcoal from eucalyptus plantations for use in pig iron production. The project has four main components: 1) Establishing eucalyptus plantations on pastureland to sequester carbon; 2) Improving charcoal production technology to reduce methane emissions; 3) Substituting charcoal for imported coal/coke in pig iron production; and 4) Restoring native forest areas. The project would generate over 12 million tons of emissions reductions over 21 years. Key risks addressed in validation include potential leakage of pig iron production and eligibility of replanted forest lands for carbon credits. The Pro

    Copyright:

    © All Rights Reserved
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    Download as ppt, pdf, or txt
    of 33

    Brazil: PLANTAR Project

    Sustainable Fuelwood and Charcoal


    Production and Substitution of Coke in
    Pig Iron Production

    Sao Paulo
    November 21, 2002

    PROJECT SPONSOR
    The Plantar S/A is privately held family company
    founded in 1967.
    Silviculture: Forest services - plantation &
    seedling production
    supporting 25,000 ha/yr (>400,000 ha so far)
    Charcoal production: Charcoal from sustainable
    harvested sources for lump charcoal export market
    and for Pig Iron production
    Pig iron production: 180,000 t/yr
    < 1% of countrys foundry pig iron production, but
    represents 4% of the independent producers using

    SECTOR BACKGROUND

    Without
    carbon
    finance,
    plantation,
    charcoal
    based pig
    iron
    production
    cannot
    survive and
    their
    market
    share will
    be taken
    over.

    Steel producers
    (coal based)

    Pig iron producers


    Foundry pig iron

    Pig iron export

    25,212,570 t

    2,665,000 t

    Coal based
    industries
    18,833,000 t

    Charcoal based
    Charcoal based
    integrated
    independent producers
    1,617,000 t

    Indigenous forest

    4,762,570 t

    Plantation

    EMISSION REDUCTIONS BY COAL


    SUBSTITUTION

    IMPORTED COKE

    from CHINA,
    POLAND, JAPAN

    Project Objective:
    To make sustainable charcoal production a
    viable alternative to coke in pig iron production
    Project: Four Components
    Sustainably managed Eucalyptus plantations (FSC
    certified) on land that was pasture in 1989: 23,100
    ha (3,300 ha x 7 years); Project lifetime 21 years (3
    harvesting cycles of Eucalyptus)
    Restoration Forestry: Reforestation of pasture land
    with native Cerado forest: 478 ha
    Improved Charcoal production: (reducing methane
    and local pollution)
    Charcoal displacing Coal/Coke in Pig iron production
    and produced for lump charcoal market in Europe

    Project Financing
    Required Investment for Core Proposal
    Entire investment (for newly established
    plantation): US$38.8 million
    PCF contribution at $3.50/tCO2e = $5.3 million
    Other carbon finance potential = ~$10-20 million

    Financial Structure and IRR


    Plantar Equity: $33.9 million injected over seven
    years
    Debt financing: $4.9 million up front
    IRR without Carbon finance, 12.5%; with CF, 20.7%

    Project ERs
    Category of ERs

    ERs (t/CO2) by source over project


    life

    Substitution of
    Coke in Blast
    Furnace

    7,903,262

    Sequestration in
    Plantations and
    Forest Ecosystem
    Rehabilitation

    4,545,398

    Methane Emissions
    Reductions

    437,325

    Totals

    12,885,985

    Component 1: Sequestration
    ERs

    23 100 ha of Eucalyptus Plantations


    Based on Advanced Clones

    CARBON STORED IN THE PLANTATION


    Carbon Accumulation Dynamics in one Hectare of Forest
    60.00

    Accumulated Carbon (t/ha)

    50.00
    40.00
    30.00
    20.00
    10.00
    0.00
    0

    10 11 12 13 14 15 16 17 18 19 20 21

    Forest Age (years)


    C- Stemwood

    C-Leaves

    C-Rootses

    C-total

    Biodiversity and Land


    Management Certifiable
    Benefits

    Production and Conservation Landscape


    4600ha of set-aside managed for restoration of
    Cerado dry forest no carbon credit
    478 ha of additional restoration forest for carbon
    credit
    Biodiversity, soil and water quality baseline
    validated with monitoring protocol

    Forestry Stewardship Council (FSC)


    certification in place for existing plantations
    Must be obtained and maintained for future
    plantations

    Biodiversity Asset Certified and bundled


    with Carbon

    Component 2:
    Carbonization ERs

    Reduction of Methane Emissions from Charcoal


    Production
    0.4 million CERs

    Traditional
    Brazilian
    Brick
    Beehive Kiln
    used in
    about 90%
    of Brazilian
    charcoal
    operations
    Efficiency:
    about 4m3
    wood for

    Improved Brazilian Brick Kiln: < 2m3 wood


    to 1m3 charcoal
    (The baseline for charcoal production)

    The Projects Charcoal Production


    Flares Methane with automatic spark ignition
    device, collects tars/oils in smoke minimizes

    Social and Health Benefit


    Certified
    Charcoal Worker Respiratory Health
    Monitoring protocol established and validated

    Certification of good labor practices


    and no use of child labor
    ABRINQ independent certification standard in
    place
    To be maintained under carbon purchase
    contract

    Component 3: Industrial
    ERs

    Substitution of Charcoal in Pig Iron Production


    7.9 million CERs

    Environmental Standards for


    Plant Emissions
    Minas Gerais State licence in place
    that plant is is operating under loal
    environmental requirements
    Upgraded charcoal dust filtration
    system installed to mitigate health
    hazard
    ISO 14000 certification process in
    train for approval by mid-2003

    Component 4: Cerrado Forest

    Restore native Cerrado forest to enhance


    biodiversity
    ~ 80,000 CERs

    Brazil Plantar Project in Overview


    Environmentally
    sustainable
    industry
    Certified
    Outcomes:
    Biodiversity
    restored in native
    forests. Worker
    heath improves
    Use of imported
    coal-coke in pig
    iron and forest loss

    Cost: $38.8
    million

    Energy: lower cost


    sustainable charcoal
    replacing imported coal

    PCF Project
    $5.3mm
    from PCF;
    ~$10-20mm
    from other
    carbon sales

    Outcomes:
    small pig iron
    sector survives,
    rural
    employment
    increases

    Baseline Project
    Biodiversity Impact: end of small pig
    iron producers, loss of rural
    loss, land
    degradation employment, out migration

    Baseline\MVP Approach for


    Plantar
    Fuel-Switching Component
    Scenario analysis based on historical trends
    Investment constraints (most plausible approach
    cannot be financed without carbon)
    Monitor industry wide production to detect leakage

    Charcoal Production Emissions Reductions


    Historical and current charcoal-making technology
    Control group of 10 peers in pig iron industry;
    included in MP for revalidation (>50% rule)

    Cerrado Rehabilitation
    Scenario analysis based on historical trends:
    deforestation
    Investment analysis (if needed)

    Issues in Validation
    Final Validation Opinion issued. Preliminary
    only with respect to CoP9 rules on A/R sinks
    Key issues were:
    1. Eligibility of end-of-life plantation lands for
    CERs
    2. Leakage of deforesting pig iron industry
    to other Brazilian states to avoid charcoal
    raw material resource crunch
    3. Emissions Coefficients for Pig Iron
    Coal/Coke baseline
    4. Double-counting of methane emissions
    from charcoal kilns

    Plantar: Issues in Validation


    Eligibility of sequestration reductions from
    replanting end-of-life eucalyptus plantations
    Issue: DNV claimed that it was conservative and
    reasonable to assume that Parties would make
    eligible at CoP9 only those ERs from land that was
    pasture in Dec 1989
    Response: Plantar had to commit to buy all new
    land that can be proven to be pasture in December
    1989
    Response: To avoid leakage, Plantar had to
    assume all former end-of-life plantations were
    deforested and deduct these losses from
    sequestration on new pasture land;
    Response: To further avoid leakage, Plantar must
    monitor the former land-owners to assure that they

    Plantar: Issues in Validation


    Coefficients for displacement of coal/coke
    emissions by climate-neutral charcoal from
    plantations during pig iron production.
    Issue: DNV proposed either use of IPCC
    default values which were ~20% lower
    than claimed or detailed proof of proposed
    coefficients
    Response: Detailed engineering process
    analysis new was commissioned and
    agreed with DNV. DNV proposed
    submitting the process to IPCC to create
    new default value for this process

    Plantar: Issues in Validation


    Claiming Methane Emissions Reductions from flaring
    methane in exhaust gases from charcoal
    production after charcoal is produced from new
    plantations
    Issue: DNV noted that such ERs could not be
    claimed after 2008 when new plantations were
    converted to charcoal as it would be doublecounting baseline emissions as per agreed carbon
    emissions coefficient.
    Response: Plantar/PCF agreed. Claims eliminated
    for charcoal produced for pig iron production and
    claimed only for lump charcoal trade production
    Response: Plantar agreed to continue flaring
    methane after 2008 in pig iron charcoal kilns

    Plantar: Issues in Validation


    Leakage of small scale blast furnace operations
    from Minas Gerais to Carajas State as
    plantation estate declined due to lack of
    replanting in Minas Gerais (baseline case).
    Issue: DNV claimed that such leakage may
    occur despite impending shortage of native
    forest in Carajas and lack of investment
    capital for new blast furnace construction.
    Response: Plantar will maintain detailed
    record of pig iron production from plantation
    and native charcoal sources in Minas Gerais
    and Carajas, with and without benefit of
    carbon finance

    Emission Reduction Purchase


    Agreement
    PCF Purchase
    - 1.51 million ERs at cost of $5.3
    million
    - Or $3.50 per tonne CO2e
    - PCF purchase planned for 20042008
    - Replacement CERs planned for
    2008-2012
    - PCF purchase enables Sponsor to
    secure $4.9 million loan to
    enable planting

    Brazil Biomass/Pig Iron Project

    Cash Flows ($000)

    6000
    4000

    Loan
    Disbursement
    PCF Payments

    2000
    0
    -2000

    Loan
    Amortization

    -4000
    Year

    ER payments are used to amortize commercial loan.

    PCF Emissions Reduction


    Purchase Options

    Sequestration ERs
    Carbonization ERs

    OPTION 1

    OPTION 2

    2002-2008

    2002-2012

    1,300,402

    1,300,402

    213,884

    274,389
    1,239,897

    Industrial ERs
    TOTAL ERs

    1,514,286
    $3.50 per tonne CO2e

    1,514,286

    OPTION 1: PCF Emissions Reduction


    Purchase
    800

    Carbonization and Industrial CERs


    Assuming Set-aside

    700
    600
    500
    400
    300
    200
    100
    0
    Carbonization

    Sequestration

    Industrial

    OPTION 2: PCF Emissions Reduction


    Purchase
    Carbonization and Industrial CERs
    Replace Sequestration RMUs
    800
    600
    400
    200
    0
    Carbonization

    Sequestration

    Industrial

    Emission Reduction Purchase


    Agreement
    Allocation of Kyoto Protocol Risk
    -

    Brazil has ratified Protocol

    Seller covers eligibility risk of


    sequestration reductions with
    obligation to substitute with
    Carbonization and Industrial ERs

    Host Country to issue Letter of


    Approval within 180 days of entry into
    force

    Management of Project Performance Risk


    MarketERPA paying on delivery of
    early sequestration ERs and
    carbonization CERs makes project
    feasible (early cash flow).
    Environmental-- Sponsor to
    maintain quality assurance
    program, continue to qualify for
    forestry certification, and operate
    in conformance with local
    environmental regulations and
    World Bank safeguard policies
    Social--sponsor to maintain

    Conditions of Default and


    Remedies
    Kyoto
    Failure to secure and plant land that
    was pasture in 1989
    Environmental and Social
    Failure to:
    - maintain FSC certification and
    certify new land
    - maintain Abrinq certification
    - comply with MP, permits,
    environmental and social law

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