CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-PDD) Version 02 - in effect as of: 1 July 2004) CONTENTS

Transcription

1 CDM Executive Board page 1 CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-PDD) Version 02 - in effect as of: 1 July 2004) CONTENTS A. General description of project activity B. Application of a baseline methodology C. Duration of the project activity / Crediting period D. Application of a monitoring methodology and plan E. Estimation of GHG emissions by sources F. Environmental impacts G. Stakeholders comments Annexes Annex 1: Contact information on participants in the project activity Annex 2: Information regarding public funding Annex 3: Baseline information Annex 4: Monitoring plan

2 CDM Executive Board page 2 SECTION A. General description of project activity A.1 Title of the project activity: Pansan coal mine methane utilisation and destruction A.2. Description of the project activity: Coal Mine Methane (CMM) is released when mining coal seams. In China, only about 64% of gassy mines capture gas before it enters the ventilation air. Out of an estimated total potential capture of 4.6 billion m 3 only 0.5bm 3 (11%) is used, mainly for domestic purposes. 1 CMM that is not captured or that is captured but not used is vented to the atmosphere, a standard procedure in coal mines throughout the world. The project at Pansan consists of three main activities replacing the current system of venting the drained coal mine methane gas: 1. CMM utilisation by households; 2. CMM utilisation for power generation; 3. CMM destruction by flaring. The first activity of the Pansan project is to establish a CMM utilisation scheme for households who are currently using coal. Approximately 4,000 households will be connected to the CMM network which is under construction. It may be decided at a later stage to increase the number of connections, possibly by an additional 4,000 households. At present, CMM is delivered to some 400 households, mainly miners families, close to the mine. The second activity is to install an electricity generating plant fuelled by the CMM. The 4.8MWe installed capacity will supply part of the mine s energy demand and reduce power consumption from the grid by approximately a quarter, displacing coal-fired power. The engines require CMM with concentrations exceeding 30%. Waste heat from the engines will be used to displace the CMM-fired mine boiler. Thirdly and finally, any CMM exceeding demand from households and generator or CMM of low quality, which is unsuitable for power generation or domestic utilisation, would be flared. The primary purpose of flaring of CMM is to destroy the high-gwp gas methane. However, for safety reasons CMM with methane concentrations below 25% cannot be flared and will have to be vented. In total, the project would reduce greenhouse gas emissions annually by just over 170,000 tonnes of CO 2 equivalent (tco 2 e) compared to the baseline, on average. Over the ten-year crediting time the total emission reductions are 1.78 million tco 2 e. This value is corrected for combustion efficiencies in each of the utilisation/destruction installations. This also takes into account projected increases in coal production, and improvements in CMM capture over time. 1 Creedy D and Garner.K. Methane control technology for improved gas use in coal mines. Report No. COAL R257 DTI/Pub URN 04/1019.

3 CDM Executive Board page 3 The local environmental benefits of this project include reduced coal usage by households leading to health improvements, reduced coal-fired power plant emissions due to displacement by onsite CMMfired power generation, and reduced methane venting displaced by flaring. Households locally will benefit from the access to CMM through a supply grid, also reducing lorry movements for coal deliveries to these households. There will be a direct reduction of greenhouse gas emissions to the atmosphere through the productive use and destruction of the coal mine methane which is currently vented and the displacement of coal use by households and power plant. This project will only claim emission reductions for the CMM destroyed and emissions offset by the power generation. A.3. Project participants: The People s Republic of China approved the Kyoto Protocol on 30 August Project company: Huainan Coal Mining Group Buyer of the emission reductions: ICECAP CMM and CDM project consultants (not project participants): IT Power Ltd. Wardell Armstrong China Coal Information Institute (CCII) A.4. Technical description of the project activity: A.4.1. Location of the project activity: A Host Party(ies): The People s Republic of China Anhui province A A Pansan, near Huainan Region/State/Province etc.: City/Town/Community etc: A Detail of physical location, including information allowing the unique identification of this project activity (maximum one page):

4 CDM Executive Board page 4 The Pansan mine is located in a rural area, approximately 8 km north-west of the city of Huainan, near the town of Pansan. The area around Huainan is an important coal mining region in China, and the Huainan Coal Mining Group, one of the largest coal companies in China, owns several mines in the area. The Pansan mine covers an area of about 46.6 acres (about 19 hectares). The project site is also located at the mine s main buildings. A.4.2. Category(ies) of project activity: A number of sectoral scopes, using UNFCCC nomenclature, are applicable to this project activity: 10: fugitive emissions from fuels (solid, oil and gas) 8: mining/mineral production 1: energy industries (renewable / non-renewable sources) 3: energy demand The principle category of the project activity, coal mine methane utilisation and destruction, is number 10: fugitive emissions from fuels (solid, oil and gas). A.4.3. Technology to be employed by the project activity: The practise of CMM capture and utilisation or destruction is not widespread and the technology for utilisation and flaring is not easily available in China. The project consultants and mine operator are considering the technology needs for each of the project components. The separate components of the project are: CMM capture system: The existing CMM capture system would be upgraded, using state-of-the-art domestic technology. System for CMM utilisation by households: A supply grid is currently under construction to supply the nearby town, initially connecting some 4,000 households. As part of the system a gas storage facility (30,000 m 3 ) has been built, to stabilise short-term supply and quality. Standard domestic technology is being used. System for CMM utilisation for electricity generation: A completely new system would be put in place, consisting of 4 state-of-the-art 1.2 MWe Chinese gas engines. Tenders for the supply of these engines have been invited, and HCMG has selected the manufacturer. Waste heat from the engines will be used to replace CMM-fired mine boilers. System for CMM destruction: If the quality of the CMM captured is too low for electricity generation and utilisation by households, or supply exceeds demand and storage capacity, but still exceeds 25% methane concentration, the CMM is no longer vented, but flared. A state-of-the-art flaring system will be incorporated in the project. Manufacturers will be invited to tender upon approval of this project as a CDM project. Technology transfer is taking place through the following actions: Partnership of HCMG with the project CMM and CDM consultants: Wardell Armstrong and IT Power, respectively. Partnership between the UK-based consultants and CCII. Involvement of local engineers in the design and management of the overall system, and monitoring systems.

5 CDM Executive Board page 5 Utilisation of state-of-the-art flaring equipment. A.4.4. Brief explanation of how the anthropogenic emissions of anthropogenic greenhouse gas (GHGs) by sources are to be reduced by the proposed CDM project activity, including why the emission reductions would not occur in the absence of the proposed project activity, taking into account national and/or sectoral policies and circumstances: Coal Mine Methane (CMM) is released when mining coal seams. In gassy mines with a high concentration of methane, the CMM release poses an operational threat and the methane has to be drained for safe operation of the mine. In China, gassy mines are required by law to drain CMM to permit safe working of the coal. Pansan mine is a gassy mine and drains the coal mine methane using cross-measures boreholes and superadjacent roadways above the mined out area, and pre drainage boreholes in advance of mining. Currently, most of the drained gas is vented. Drainage of gas in underground coal mines has been practised in China since the 1950s. Now, as a result of environmental concerns, coal mines are now encouraged to use the gas where practicable, but it is not mandatory and there are relatively few schemes due to financing and technological limitations. The gas is therefore routinely vented at most mines. Existing CMM projects in China have involved supplying mine gas to household consumers, industrial concerns and small-scale gas-fired power generation schemes with some CMM used in colliery boilers. Household use predominates and there are few power generation schemes due to the high capital cost of the plant and the low price of electricity. The exception is a large power generation project being developed at Jincheng in Shanxi Province as a demonstration project. This CMM project based at Sihe mine will use an ADB loan to develop a 120MWe power plant to generate electricity for local distribution. Additional gas may need to be collected from neighbouring mines to ensure the generation plant runs at capacity. The geological situation is unique and few if any other schemes of such magnitude are likely to be built elsewhere in China. There have been some relatively short-lived CMM power generation schemes at coal mines which have failed due to lack of finance, technical support and maintenance. CDM will enable such barriers to be overcome. Pansan would be the first CMM application which includes flaring of CMM in China. Very few such installations exist in the world. However, there are good opportunities for utilisation, and experience does exist in other countries, mainly Annex I countries. The project will be implemented at an existing operating coal mine, thus the actual situation with regards to the CMM is taken as the baseline. Without the project being approved as a CDM project, the current practise would be expected to continue for the 10-year crediting time of the project, as no new investments would be required and scarce financial resources could be directed towards investments in the coal production system of the mine itself. Implementation of the project would lead to utilisation of much of the CMM and flaring of any excess or low-quality gas, destroying over 90% of the CMM. As part of the project (1) the capture system would be improved, increasing safety for miners and reducing uncontrolled methane releases; (2) supply of CMM

6 CDM Executive Board page 6 to a large number of households for cooking (and heating) would displace coal use and decrease health risks from coal usage in households; (3) CMM would be utilised for electricity generation, displacing power from coal-fired power plants; (4) waste heat from the engines will be used to replace CMM-fired mine boilers; and (5) excess CMM or low-quality gas would be flared rather than vented. Flaring of gas is rare in coal mining countries throughout the world. Standard practise has been to vent any drained and unused gas for safety reasons. However, modern monitoring and control technology allows CMM to be safely flared to a minimum concentration of around 25%, This technology is in routine use at a number of UK coal mines, with three units operational and installations planned at a further six mines the investment has been triggered by a national carbon trading scheme. Similar CMM flaring technology has been demonstrated in other Annex 1 countries. A flare is a burner system which allows for a high efficiency gas combustion system, the technology initially being developed for the waste industry. The use of a thick ceramic insulation tiles within the flare stack ensures the flame temperature is retained, usually in excess of 0.3 seconds, optimising the combustion process and ensuring complete combustion. Emission reductions in this project are achieved through the destruction of high-gwp methane to CO 2 by flaring and utilisation, and offsetting emissions from power plant and household coal-use. Further reductions are achieved from reduced fuel use for coal deliveries in town, and potential use of waste heat from the power plant for heating of the mining shafts and miners showers. Emission reductions will only be claimed for the destruction of methane to CO 2 through utilisation or flaring and offset grid emissions from power generation. A Estimated amount of emission reductions over the chosen crediting period: The total estimated emission reductions are approximately 1.78 million tco 2 e over the ten-year crediting time, taking into account projected coal production increases and improvements in CMM capture A.4.5. Public funding of the project activity: No public funding for this CDM project has been provided from Annex I Parties. SECTION B. Application of a baseline methodology B.1. Title and reference of the approved baseline methodology applied to the project activity: There is currently no baseline methodology available for coal mine methane utilisation projects. A new baseline methodology is therefore proposed. Approach 48(b) emissions from a technology that represents an economically attractive course of action, taking into account barriers to investment is chosen for this baseline. The title of the proposed baseline methodology is Baseline methodology for coal mine methane (CMM) utilisation and destruction at a working coal mine. B.1.1. activity: Justification of the choice of the methodology and why it is applicable to the project

7 CDM Executive Board page 7 The proposed project involves new investments in an already-existing and operating mine where most of the drained coal mine methane is vented in common with standard practise at coal mines elsewhere, both in China and across the world. There is no indication that regulations regarding captured CMM are likely to change during the crediting life of the project. The use of this methodology is justified because: Without the incentive that the CDM presents, the economically attractive course of action would involve continued venting of CMM which involves no investment costs at all. There is a requirement by law to drain coal mine methane from gassy working mines such as Pansan, for operational safety reasons, but no statutory requirement to capture, utilise or destroy the CMM. Comprehensive utilisation of CMM is rare in the country; Pansan would be one of the few mines incorporating both household utilisation and CMM for power generation. Destruction of CMM exceeding the amounts utilised is rare in the country, Pansan would be the first mine in China to incorporate flaring of CMM. The CMM power generating capacity is small. The CDM project does not directly result in any change in coal production levels. Actual or historical emissions, approach 48(a), would not properly take into account any changes in CMM releases from the mine. The releases from the mine are heavily dependent on the evolution of the mining process: new coal faces may have different gas contents, and coal production changes will impact on the volume of gas emitted. Additionally, historical data of CMM emissions in proposed project activities are unlikely to be verifiably accurate. Prior to implementation of a CDM project, accurate measurements of CMM flows were not relevant, for safety reasons only changes in gas flow and concentrations needed to be monitored. Average emissions from similar projects, approach 48(c), would not be appropriate because the CMM releases are very specific for each mine. The destruction element of the project activity proposed is one of the first in China and among the first globally. Approach 48(b), therefore, is the most appropriate approach for this new baseline methodology, as it does not rely on non-existent or inaccurate historical data, or non-existent or too few similar projects. Instead, the approach would use accurate measurements of CMM actually destroyed, using newly installed technology that would not have been installed as the economically most attractive course of action. B.2. Description of how the methodology is applied in the context of the project activity: The baseline methodology for coal mine methane utilisation and destruction at a working coal mine is applied to the Pansan coal mine methane utilisation and destruction project in the following three steps: 1. Confirmation of applicability and additionality test; 2. Description of the baseline; 3. Determination of the emission reductions. Step 1(a) Confirmation of applicability

8 CDM Executive Board page 8 This methodology is applicable to coal mine methane utilisation and destruction project activities at a working coal mine, where the baseline is the partial or total atmospheric release of the gas and the project activities. The methodology also strongly recommends the installation of flaring equipment. Applicability of this baseline methodology can be confirmed using the following questions: Q1. Is this project being implemented at a working coal mine? Yes. Pansan is a working coal mine with a coal production currently just over 3 million tonnes per annum. Coal production is projected to increase significantly in line with government development plans. In line with coal production, CMM volumes will increase as well. Q2. Is the baseline partial or total atmospheric release of the CMM? Yes. At the Pansan mine CMM is currently largely vented. A small proportion is distributed to households, about 400, who live very close to the mine. Another quantity is currently used in the mine boiler. However, in total this utilisation is less than 5% of the CMM captured, the remainder is vented to the atmosphere. Q3. Does the project include CMM utilisation and destruction equipment? Yes. The Pansan project includes the following utilisation and destruction installations: Gas supply grid for gas distribution to some 4,000 households in the neighbouring town of Pansan some 4km from the mine, including a gas storage of 30,000 m 3 Power plant which will have four 1.2MWe CMM-fired engines, adding up to 4.8MWe total capacity. Additionally, the waste heat from the plant will be used to replace the ageing mine boilers Flares which are designed to destroy CMM of lower quality, and any CMM volumes exceeding the needs for power and households Q4. Are flares going to be installed as part of the project? Yes. Flares will be installed as part of the project, and will be ordered upon approval of this project under the CDM. Ample CMM should be available for the flares to be in operation during most of the year. Q5. Is the CMM released used for energy production? Yes. CMM of high enough quality will be used for supplying households and for power generation, both utilising the energy content of CMM. Electricity production will be used by the mine, and will satisfy approximately one quarter of the average electricity demand of the mine. Gas supply will provide households in the town of Pansan with a more convenient and cleaner energy source for cooking (and heating) that will be less harmful and will offset coal use. Step 1(b) Additionality test The additionality test for coal mine methane utilisation and destruction project activities at a working coal mine comprises three assessments. The project is additional if the amount of methane destroyed/utilised is greater than the amount of methane destroyed/utilised in the baseline scenario. A number of questions are formulated to guide the additionality test. Assessment of legal requirements A CMM utilisation and destruction project is not additional if it complies with any existing or expected legislation requiring such utilisation or destruction. This does not include legal and safety requirements

9 CDM Executive Board page 9 to drain CMM from gassy mines. The assessment of legal requirements can be confirmed using the following questions: Q6. Is there any legislation or regulation existing or expected in the foreseeable future requiring CMM drainage at this mine? Yes. Pansan is a gassy mine and requires drainage for safety reasons. Legislation prescribes methane drainage for all mines classified as gassy or outburst prone. Methane control measures, including gas drainage, must ensure methane concentrations inside the mine do not exceed from 1% to 1.5% depending on location to reduce danger of explosions. Q7. Is there any requirement existing or expected in the foreseeable future to utilise or destroy CMM released from the mine? No. There is no requirement for coal mines to utilise CMM drained and there is no requirement expected in the foreseeable future for mines to capture and utilise CMM according to CCII, the China Coal Information Institute which is linked to government. 2 However, the government of China now encourage planning for utilisation of CMM, where demand exists, but this is not mandatory and there are relatively few utilisation schemes across China. HCMG has had to ask for special dispensation to allow flaring to be included in the project activity. Assessment of economic attractive course of action Q8. Does the economic or financial analysis show that the proposed CDM project activity has higher cost or lower IRR than one of the other scenarios? Yes. The lowest cost scenario is clearly not to change its current practice. Without the additional costs related to this project activity, the mine could have concentrated investment solely in increasing coal production capacity. HCMG s future production plans, which have now been approved by the government, include greatly increased production both at its existing mines and by constructing new mines. Due to poor performance of previous attempts at CMM utilisation, financing such schemes can be a problem. The financial analysis carried out by Wardell Armstrong showed that there is insufficient gas of the right quality to meet the mine s proposed methane utilisation of 3 million m 3 domestic and 12 million m 3 power generation. Neither is there the capacity to use this gas. Nevertheless, these data were entered into the financial model yielding an internal rate of return (IRR) of 17% before tax and interest and a payback period of 5 years. Under ideal circumstances this would represent a reasonable investment for the mine. A best case scenario, based on the actual volumes of methane available and assuming that low gas concentrations can be raised, would allow for about 3 million m 3 domestic consumption and 7 million m 3 used in power generation. (Analysis of actual data indicates that the total available volume of methane at 30% or higher is only 9.16 million m 3 ). An IRR of 0.6% before tax and interest, and payback in year 10 means the scheme would make a loss. 2 China Coal Information Institute grew out the former China Coal Scientific and Technical Information Institute that was set up in It is directly affiliated to the State Administration of Coal Industry (formerly the Ministry of Coal Industry).

10 CDM Executive Board page 10 Entering realistic methane consumption data forecasts, based on data from other schemes 3, of 0.9 million m 3 domestic consumption and 7 million m 3 in power generation, results in a substantial loss. The utilisation scheme as originally designed is therefore not commercially viable without income from the CDM. Without regulations to destroy methane captured, no economic incentive exists to install a flaring system. CDM financing is critical to the CMM scheme and a flaring system is a necessary addition to ensure sufficient methane is destroyed. In particular it allows methane in the concentration range 25-30% to be combusted. Assessment of barriers and common industry practice Q9. Do barriers exist that would have prevented the project from being implemented despite its IRR? Yes. A number of barriers exist that would have prevented this project from being implemented. Investment barrier: The project is too small to attract international finance without the additional CER revenue. Expansion of production capacity is the first priority for the mining group in order to meet its ambitious production plans. Technological barrier: Power generation from CMM has low market share and involves risks due to the performance and management uncertainty. This is also a new area of business for the mining group carrying higher risk for HCMG. Flaring technology would never have been considered, as insufficient information was available before the start of this project. Other barriers (1): Current practice of monitoring CMM flows is sufficient for safety reasons, but does not accurately measure flows, volumes or concentrations of CMM, or allow their standardisation. The relevant information for safety reasons is change in flow or concentration. If any of the monitored parameters change beyond expected, something is wrong and action has to be taken. However, the existing monitoring practice is insufficient for accurate measurements that are required for CDM purposes. This project therefore includes the training of operatives in measurement and calibration. Other barriers (2): Investment of managerial resources for the CMM utilisation and destruction project has been very significant. Without the prospective CER revenue and international exposure due to this CDM project, this resource would have been directed elsewhere. Q10. Is this project different from common practice in the host country? Yes. The Pansan mine would be the first project in China, and only one of few projects around the world, to include flaring of excess CMM and low-quality CMM. The mine has had to ask for special dispensation to install flares at a mine site. Even the more familiar utilisation options of gas supply to households and power generation are not widespread in China. Where CMM is used, with a few exceptions, this is generally supplied to miners households and local small-scale industry. At Pansan, there are currently some 400 households supplied with CMM, as well as the mine boiler. However, the project would expand the supply network to the local town supplying some 4,000, and in future maybe 10,000, households. 4 Recent experience with power generation based on CMM has not been very positive. The Pansan CMMfired engines would be one of relatively few schemes in China. 3 Calculated by Wardell Armstrong from 4 other CMM utilisation schemes in China: Tiefa, Yangquan, Songzao, and Hegang. 4 Plans exist for the supply network to be expanded further in the future, but this would depend on the successful operation of the current scheme, planning agreement, and support from the local government.

11 CDM Executive Board page 11 Step 2: Description of the baseline The baseline is the atmospheric release of the coal mine methane gas, as the most economically attractive course of action. The baseline includes the consideration that some of the methane drained is currently captured and utilised. The first part of this methodology calculates the CMM releases and emissions without the project activity. Please note that CMM is not of biological origin, unlike landfill gas, and CO 2 emissions from utilisation and/or destruction need to be taken into account. However, any CO 2 contained in the CMM itself will be emitted with and without the project, and will not be taken into account further. The second part of the baseline with respect to CMM utilisation for energy production, where emission reductions are claimed, for this project only electricity generation, follows approved methodology AMS- I.D. Note that CO 2 emissions from the burning of CMM have already been taken into account under the first part of the baseline, and the energy production can thus be considered to be from a zero-emission source. Ex-ante projections for future CMM emissions of the coal mine are made for reference purposes, but emission reductions will be determined (ex-post) by metering the actual methane flow once the project activity is operational. A small part of the CMM would have been combusted during the year in the absence of the project activity, through existing utilisation equipment. The baseline is the atmospheric release of the amount of methane actually drained (MM_drained) minus the CMM that would have been destroyed in the absence of the project activity. The amount that would have been destroyed (MD_bau) could be a given absolute quantity, or share of the total amount. At Pansan, the MD_bau is made up from the CMM supply to the existing 400 households connected (H_bau), and the mine boiler. The mine boiler, which will be displaced by waste heat from the power plant, currently uses about 0.9 m 3 /min, which is 473,000 m 3 pure methane per year. The volumes supplied to the households currently connected is not yet monitored. As part of the project, HCMG will install gas meters. At an average of 217 m 3 /year 5 these 400 households consume 86,800 m 3 /year. This figure will be used for the ex-ante calculations of emissions and emission reductions. However, these 400 households represent about 10% of the total number of households to be connected initially. Ex-post, this amount will be calculated from the share of the number of households connected. To be more conservative, the number of households connected at the start of the year would be used (H_connected). The methane emissions released in the baseline (MD_released) [tch 4 pure] is thus: MD_released = MM_drained MD_bau (1) With MD_bau = MD_bau_mineboiler + MD_bau_households And MD_bau households = H_bau / H_connected * MD_gassupply 5 Calculated by Wardell Armstrong from 4 other CMM utilisation schemes in China: Tiefa, Yangquan, Songzao, and Hegang.

12 CDM Executive Board page 12 The greenhouse gas emissions from the methane in the baseline (EM_baseline) [tco 2 e] is made up of two parts. First the CO 2 emissions from the destruction of methane in the baseline scenario (EM_bau). Secondly, the methane not destroyed/combusted in the baseline (EM_released). EM_baseline = EM_bau + EM_released (2) The approved Global Warming Potential value for methane (GWP_CH4) for the first commitment period is 21. The amount of CO 2 emissions resulting from the destruction of methane [tco 2 e] is equal to the amount of methane destroyed multiplied by the CO 2 emissions factor for methane (CEF_CH4). Given molecular weights and the chemical reaction when methane is combusted, each tonne of methane results in 44/16 tonnes of CO 2 ; thus the CO 2 emissions factor for methane is EM_bau = MD_bau * CEF_CH4 (3) (with CEF_CH4 = 2.75) EM_released = MD_released * GWP_CH4 (4) (with GWP_CH4 = 21) Using the above formulae, the baseline emissions from the coal mine methane (EM_baseline) can now be written as: EM_baseline = MD_bau * CEF_CH4 + (MM_drained MD_bau) * GWP_CH4 or EM_baseline = MM_drained * GWP_CH4 MD_bau * (GWP_CH4 CEF_CH4) (5) The second part of the baseline scenario includes the emissions offset by energy utilisation in the project (EE_baseline) [tco 2 e]. For the Pansan project, only the emissions offset from electricity generation (EG) [MWh] will be claimed. Any internal energy usage by the energy utilisation installations is netted out in the emission reduction calculations. The CO 2 emission factor (CEF_electricity) [tco 2 e/mwh] is derived from AM0005. It is calculated as a combined margin (CM), consisting of the combination of operating margin (OM) and build margin (BM) factors according to the three steps described in this approved methodology. These data will be derived and calculated annually from the China Electric Power Yearbook (CEPY), for the East China Power Grid. CEF_electricity = w_om * CEF_OM + w_bm * CEF_BM (6) With OM and BM weighted equally by default (w_om = w_bm = 0.5). The Operating Margin CO 2 emission factor CEF_OM is defined as the generation-weighted average emissions per electricity unit of all generating sources serving the system, excluding zero- or lowoperating cost power plants (hydro, geothermal, wind, low-cost biomass, nuclear and solar generation), based on the latest year statistics data and are derived from the following equation: CEF_OM = TEM / TGEN = ( Fi * COEFi) / ( GENj) (7) Where TEM and TGEN is the total GHG emissions and electricity generation supplied to the grid by the power plants connected to the grid excluding zero- or low-operating cost sources. Fi and COEFi are the

13 CDM Executive Board page 13 fuel consumption and associated carbon coefficient of the fossil fuel i consumed in the grid. GENj is the electricity generation at the plant j connected to the grid excluding zero- or low-operating cost sources. The Build Margin emission factor CEF_BM is given as the generation-weighted average emission factor of the selected representative set of recent power plants represented by the 5 most recent plants or the most 20% of the generating units built. CEF_BM = ( Fi * COEFi) / ( GENk) (8) The summation over i and k is for the fuels and electricity generation of the plants mentioned above. If the project participant can demonstrate a more accurate sampling method (to the Operational Entity), such a sample can be applied to this part of the methodology. If the grid imports or exports electricity from/to other grids, the associated correction is needed unless such correction is demonstrated to be conservative or negligible. Imports and exports from the East China Power Grid are small relative to the total generation on the grid. Interconnected grids also have very similar emission factors. Therefore, for the ex-ante calculation of the CEF_electricity and emission reductions of the project, imports and exports are ignored, as the impact of any correction would be negligible. However, import and export volumes for the East China Power Grid will be monitored, and corrections will be made if net imports or exports exceed 5%. Data to calculate CEF_electricity are presented in Section E.4. EE_baseline = (EG_project EG_bau) * CEF_electricity (9) Please note that EG_project is the net generation of electricity, taking into account the own electricity demand from the installations (power plant, gas supply, and control centre). The total greenhouse gas emissions in the baseline (DE_baseline) [tco 2 e] are equivalent to the emissions from the methane (formula 5) plus the emissions from energy use (formula 9). DE_baseline = EM_baseline + EE_baseline (10) Step 3: Determination of the emission reductions The greenhouse gas emission reduction achieved by the project activity during a given year is the difference between the amount of methane actually destroyed/combusted during the year and the amount of methane destroyed/combusted in the baseline, times the Global Warming Potential of methane, and corrected for the resulting CO 2 emissions from the methane destruction. Additionally, the emissions reductions from electricity generation are also claimed. The total reductions need to be corrected for any emissions from internal energy use of the project, and any emissions from energy inputs and losses in the CMM supply grid, power generator and monitoring system are taken into account in the calculations above. The methane destroyed by the project activity (MD_project) [tch 4 pure] during a year is determined by monitoring the quantity of CMM destroyed/combusted in each of the installations. Ex-ante projections for future CMM emissions of the coal mine are made for reference purposes and are presented here. However, emission reductions will be determined (ex-post) by metering the actual quantity of methane captured and destroyed once the project activity is operational.

14 CDM Executive Board page 14 MD_project = MD_flared + MD_electricity + MD_gassupply (11) The monitoring equipment will measure gas flows in m 3, concentrations of methane, pressure and temperature. This data will allow computation of each of these amounts in tch 4 pure. MM_iSTP = Volume_iSTP * Concentration_i * Density (12) With: MM_iSTP = Methane measured at point i at standard temperature and pressure in tch 4. Volume_iSTP = CMM volume at point i at standard temperature and pressure in m 3 CMM. Concentration_i = Concentration of methane in the CMM mix in %. Density = Density of methane (pure) at standard temperature and pressure, tch 4 /m 3 CH 4. The CO 2 emissions resulting from the destruction/combustion of methane by the project (EM_project) [tco 2 e] is equal to the amount of methane destroyed/combusted multiplied by the CO 2 emissions factor for methane. Given molecular weights and the chemical reaction when methane is combusted, each tonne of methane results in 44/16 tonnes of CO 2 ; thus the CO 2 emissions factor for methane is equal to EM_project = MD_project * CEF_CH4 (13) (with CEF_CH4 = 2.75) A second part of the project emissions are those related to any internal energy use for the elements of the project (EE_project) [tco 2 e], such as supply grid pressure and pumping, power generation plant and monitoring equipment. However, energy production should be larger than internal energy use, and thus production may be netted out to take account of internal energy use. EE_project therefore should be zero. The direct emissions from the project (DE_project) [tco 2 e] are equivalent to the emissions from the methane (formula 9), plus the emissions from energy use, and emissions of any methane not destroyed and other corrections (EM_adjust). DE_project = EM_project + EE_project + EM_adjust (14) Calculation of losses and corrections Some CMM leakage will occur as a result of losses in the CMM system, and incomplete destruction/combustion in flaring, power generation and CMM utilisation by households. Additionally, some methane drained may be of a concentration that is close to the explosive range for a methane-air mixture, and thus too low for utilisation. Venting CMM in these circumstances cannot be avoided for safety reasons. Such losses must be taken into account in the calculations and the following steps are therefore required for accurate estimation of the project emissions. Losses due to incomplete destruction/combustion of CMM take place at each installation. The methane measured at each of these installations, therefore, has to be corrected for incomplete destruction using an efficiency factor. In the case of flaring, the methane measured (MM_flare) is corrected by the flare efficiency (FE) [%], giving the following formulae for the methane actually destroyed (MD_flare): MD_flare = MM_flare * FE (15)

15 CDM Executive Board page 15 The FE is determined by manufacturers details and occasional measurements. The flare efficiency of state of the art flares such as those that will be installed at Pansan is over 99%. The flare efficiency used as default to be conservative is therefore 99%. The efficiency will be confirmed by quarterly measurements of exhaust gasses (monthly if unstable). Similarly, for electricity generation, methane measured (MM_electricity) is corrected by the combustion efficiency (CE_electricity). Exhaust emissions have been measured by the manufacturer over the E2 test cycle 6, and the default value is taken as 99%. The efficiency of combustion will be confirmed by annual measurements of exhaust gases. 7 The most conservative amount (i.e. lowest) calculated is used. In the case of CMM supply through a gas grid, losses may occur at two stages: first in the grid, second at combustion at the end user. The overall gas supply efficiency (CE_gassupply) [%] is calculated from the efficiency of the grid and of the end-consumer combustion. These efficiencies are estimated using IPCC national reference values for grid supplied gas and gas grid efficiency. The default value from the IPCC data is 98.5%. Regular measurements of leakage from the gas grid also need to be carried out. Whichever leakage rate is higher (more conservative) is chosen. CE_gassupply = CE_grid * CE_endusers (16) As stated above, venting of CMM is still likely to be required from a safety perspective, and the amounts of methane vented will be monitored directly (MM_vent). Because the CMM system is small and compact, directly centred around the working coal mine, any methane leakage from the system is negligibly small. However, any difference between the amount actually drained and the amounts measured in all of the installations together (MM_project) will be assumed to be losses. Total methane not destroyed/combusted (MM_notdestroyed) is: MM_notdestroyed = MM_drained MD_project (17) Total CO 2 equivalent emissions of MM_notdestroyed is: EM_notdestroyed = MM_notdestroyed * GWP_CH4 (18) In all of these situations it is important to monitor the composition of CMM, which consists of mainly of methane and CO 2, but may also contain and other gases. Non-methane hydrocarbons (NMHC) such as ethane and propane are mostly contained in CMM. These NMHC have short lifetimes in the atmosphere and do not contribute to radiative forcing. However, they are classified as volatile organic compounds (VOC) which may contribute to smog formation. No emission reductions can be claimed for the destruction of these NMHC, but they may contribute to higher energy yields in case of utilisation. Using this monitoring data the CO 2 emissions factor from NMHC for the CMM (CEF_NMHC) can be 6 ISO 8178 Reciprocating internal combustion engines and exhaust emission measurements; ISO ISO 8178 Part 2, ISO 1996.

16 CDM Executive Board page 16 calculated. Any CO 2 emitted from the combustion of these NMHC is added to the project emissions to be more conservative, and can be calculated as follows: EM_NMHC = MD_project * CEF_NMHC (19) This, of course, also applies to any CMM destroyed in the baseline. However, at Pansan the concentrations of ethane and higher alkanes in CMM samples analysed at an accredited laboratory were less than 0.02% and therefore this correction is negligible, unless the annual samples show a significantly increased concentration of NMHC in future years. The total emissions from losses in the system, methane not destroyed, and CO 2 emissions from NMHC combusted can be calculated as follows: EM_adjust = EM_notdestroyed + EM_NMHC (20) Total project emissions With no leakage other than the flare and combustion efficiencies corrected for in the formulae above, EE_project netted out by the energy production of the project, overall emissions of the project are: DE_project = MM_drained * GWP_CH4 (MM_flare * FE + MM_electricity * CE_electricity + MM_gassupply * CE_gassupply) * (GWP_CH4 CEF_CH4 CEF_NMHC) (21) Total emission reductions The greenhouse gas emission reductions (ER) achieved by the project activity during a given year is the difference between the total greenhouse gas emissions in the baseline in that year (DE_baseline) and the direct emissions of the project in that year (DE_project). With EE_project netted out this results in: ER = DE_baseline DE_project = (EM_baseline EM_project EM_adjust) + EE_baseline (22) Using the formulae above the first part of the formula above, the ER due to the methane destruction (ER_EM) [tco 2 e], can be expressed as: ER_EM = (MD_flare + MD_electricity + MD_gassupply MD_bau) * (GWP_CH4 CEF_CH4 CEF_NMHC) (23) With internal energy use netted out, and because the project does not claim emission reductions associated with offset coal use by households, the ER due to the energy displacement (ER_EE) [tco 2 e], can be expressed as: ER_EE = (EG_project EG_bau) * CEF_electricity (24) Ex-ante emission reduction estimates are made (in Section E) by projecting the future CMM emissions of the coal mine. These estimates are for reference purposes only, since emission reductions will be determined (ex-post) by metering the actual quantity of methane captured and destroyed once the project activity is operational. The projections need to take into account variability of quantity and quality (methane concentration) of CMM flow during the year.

17 CDM Executive Board page 17 B.3. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered CDM project activity: CMM is routinely drained at gassy mines for safety reasons, including at Pansan. Most of this CMM is vented but a small proportion is supplied to households close to the mine, mostly representing a benefit to employees of the mining company in question. Any such utilisation is likely to be displacing coal use. Pansan is one of relatively few CMM utilisation schemes for electricity generation purposes in China under consideration or construction. Few CMM power generation schemes are in existence across the world relative to the number of gassy mines. Pansan would be the first system which includes flaring of CMM in China. Very few such CMM flaring installations exist in the world due to the lack of a financing mechanism to justify them. The emissions trading scheme in the UK has been successful in promoting the adoption of this approach and proving the technology. Implementation of the project would lead to utilisation of most of the CMM and flaring of any excess or low-quality gas. As part of the project (1) the capture system would be improved, increasing safety for miners and reducing uncontrolled methane releases; (2) supply of CMM to a larger number of households for cooking (and heating) would displace coal use and decrease health risks from coal usage in households; (3) CMM would be utilised for electricity generation, displacing power from coal-fired power plants; (4) waste heat from the engines will be used to replace CMM-fired mine boilers; and (5) excess CMM or low-quality gas would be flared rather than vented. Emission reductions in this project are achieved primarily through the destruction of high-gwp methane to CO 2 by flaring and utilisation. Further significant reductions are achieved by offsetting emissions from power plant and household coal-use. Additionally, reductions are achieved from reduced fuel use for coal deliveries in town, and use of waste heat from the power plant for heating of the mining shafts and miners showers. Emission reductions will only be claimed for the destruction of methane through utilisation or flaring, and offset grid emissions from power generation. No reductions will be claimed for emissions offset by the use of the gas supplied to households, transport emissions related to the coal deliveries. In the baseline scenario, CMM is supplied to a small number of households, and to the mine boiler. After implementation of the project only the additional CMM usage (above that in the baseline scenario) will be claimed for emission reduction, while the mine boiler will be replaced by waste heat from the engines. B.4. Description of how the definition of the project boundary related to the baseline methodology selected is applied to the project activity: As the baseline methodology prescribes, the project boundary encloses the coal mine methane utilisation and destruction plant. Installations within the project boundary include flares, storage tank, power generator (and waste heat usage replacing mine boilers), and gas supply trunk pipelines. Not included within the project boundary is the gas drainage pumping station, as this is an integral and necessary part of the mine, and is required for operational safety reasons. The operation of the gas drainage pumping station is driven by the requirements for the mine and is not impacted by the implementation of the project. While utilisation of the CMM by an end user for thermal energy purposes may be an important part of a coal mine methane utilisation and destruction project, it would not be appropriate to include the entire

18 CDM Executive Board page 18 gas distribution grid within the project boundary. Reference values of leakage from gas distribution grids in the host country can serve as appropriate estimates. However, the supply grid and trunk pipelines must be run efficiently and with low leakage. The conversion efficiency of CMM into CO 2 by the end users for thermal energy uses can also be estimated. Any energy usage or emissions resulting from the installations in the project boundary, including the gas distribution grid, must be taken into account as project emissions. Figure B.4.1: Pansan project boundary From mine Vent M FE Flare O Measurements: Extraction plant M = monitor flow, concentration, pressure and temperature AV = automatic control valve to vent at low methane concentration O = mining operations flow and concentration monitoring FE = flare efficiency AV CMM Gas holder M M Power plant Gas supply Note: the flare is connected in the system before the gas holder, so that low-quality gas can be flared without diluting gas for the utilisation options; methane concentration, therefore, have to be taken at at least two point: before and after the gas holder. B.5. Details of baseline information, including the date of completion of the baseline study and the name of person (s)/entity (ies) determining the baseline: Detailed information regarding the baseline study is included in Annex 3. The baseline study was carried out by IT Power, Wardell Armstrong and the China Coal Information Institute as consultants to the project company, HCMG. None of these consultants are project participants. This baseline study was completed 26/10/2004. The baseline study was led by Mr Christiaan Vrolijk, who is not a project participant. His contact details are given in the table below.

19 CDM Executive Board page 19 Organisation IT Power Ltd Building Grove House Street Lutyens Close Place Chineham Region Hampshire Postcode RG24 8AG Country UK Telephone +44 (0) FAX +44 (0) URL Represented by Title Mr Last name Vrolijk First name Christiaan Direct FAX +44 (0) Direct tel +44 (0) Personal SECTION C. Duration of the project activity / Crediting period C.1 Duration of the project activity: C.1.1. Starting date of the project activity: The first elements which are part of the CDM project, such as the installation of the gas holder, foundations for the power generation station, and the start of laying the gas truck pipelines, have started from early The engines should be in place by the end of C.1.2. Expected operational lifetime of the project activity: 20 years C.2 Choice of the crediting period and related information: C.2.1. Renewable crediting period Not chosen Not chosen C C Starting date of the first crediting period: Length of the first crediting period:

20 CDM Executive Board page 20 C.2.2. Fixed crediting period: 01/01/ years C C Starting date: Length: SECTION D. Application of a monitoring methodology and plan D.1. Name and reference of approved monitoring methodology applied to the project activity: There is currently no monitoring methodology available for coal mine methane utilisation projects. A new monitoring methodology is therefore proposed. The title of the proposed methodology is monitoring methodology for coal mine methane (CMM) utilisation and destruction at a working coal mine, which should be used in conjunction with the baseline methodology proposed in section B. This methodology chooses option 2 below, in section D.2.2. D.2. Justification of the choice of the methodology and why it is applicable to the project activity: The proposed project involves new investments in an already-existing and operating mine where its current practise of venting the drained coal mine methane is standard practise at coal mines across the country and across the world. There is no indication that regulations regarding captured CMM are likely to change during the crediting life of the project. The use of this methodology is justified because: Without the incentive that the CDM presents, the economically attractive course of action would involve continued venting of CMM which requires no investment costs at all. There is a requirement by law to drain coal mine methane from gassy working mines such as Pansan, for operational safety reasons, but no requirement to capture, utilise or destroy the CMM. Too little of the CMM available for capture in China is captured and used; Pansan would be among the few mines incorporating household utilisation and for power generation from CMM. Destruction of CMM exceeding the amounts utilised is rare in the country; Pansan would be the first mine in China to incorporate flaring of CMM. The CMM power generating capacity is small. The CDM project does not directly result in any change in coal production levels.

21 CDM Executive Board page 21 D Option 1: Monitoring of the emissions in the project scenario and the baseline scenario Not applicable. Option 2 is chosen. D Data to be collected in order to monitor emissions from the project activity, and how this data will be archived: ID number (Please use numbers to ease crossreferencing to D.3) N/a Data variable Source of data Data unit Measured (m), calculated (c) or estimated (e) Recording frequency Proportion of data to be monitored How will the data be archived? (electronic/ paper) Comment equ.) Not applicable D Description of formulae used to estimate project emissions (for each gas, source, formulae/algorithm, emissions units of CO 2 D Relevant data necessary for determining the baseline of anthropogenic emissions by sources of GHGs within the project boundary and how such data will be collected and archived : ID number (Please use numbers to ease crossreferencing to table D.3) N/a Data variable Source of data Data unit Measured (m), calculated (c), estimated (e), Recording frequency Proportion of data to be monitored How will the data be archived? (electronic/ paper) Comment

22 CDM Executive Board page 22 CO 2 equ.) Not applicable D Description of formulae used to estimate baseline emissions (for each gas, source, formulae/algorithm, emissions units of D Option 2: Direct monitoring of emission reductions from the project activity (values should be consistent with those in section E). This monitoring methodology follows option 2. Data collected to monitor the emissions from the project activity are given below. D Data to be collected in order to monitor emissions from the project activity, and how this data will be archived: ID number (Please use numbers to ease crossreferencing to table D.3) Data variable 1 Volume drained CMM 2 Methane concentr ation drained 3 NMHC concentr ation 4 MM_drai ned 5 Volume CMM to flare Source of data Flow meter Gas detector Data unit Cubic metres Measured (m), calculated (c), estimated (e), m Recording frequency continuou s % m continuou s Proportion of data to be monitored How will the data be archived? (electronic/ paper) Comment 100% Electronic Flow meter will automatically record volumes at standard temperature and pressure 100% Electronic May have to be corrected for presence of NMHC Sample % m annually 100% Electronic NMHC content unlikely to change Calculated Flow meter tch4 pure Cubic metres c m continuou s continuou s 100% Electronic Calculated from 1,2 and 3 100% Electronic Flow meter will automatically record volumes at standard temperature and pressure

23 CDM Executive Board page 23 6 MM_flar e 7 Methane concentr ation after gas holder 8 Volume CMM to generator 9 MM_elec tricity 10 Volume CMM to gas supply 11 MM_gass upply 12 CEF_NM HC 13 FE, determin ed by operating hours (1) and methane content in exhaust gas (2) Calculated tch4 pure Gas detector Flow meter Cubic metres Calculated tch4 pure Flow meter Cubic metres Calculated tch4 pure Calculated tco2e/ tch4 pure Meter/samp le c continuou % m continuou m continuou c continuou m continuou c continuou s s s s s s 100% Electronic Calculated from 5,2 and 3 100% Electronic May have to be corrected for presence of NMHC 100% Electronic Flow meter will automatically record volumes at standard temperature and pressure 100% Electronic Calculated from 8, 7 and 3 100% Electronic Flow meter will automatically record volumes at standard temperature and pressure 100% Electronic Calculated from 10, 7 and 3 c annually 100% Electronic The CO2 emissions from burning NMHC in CMM. Calculated from 3 % m/c (1) continuou sly (2) quarterly, monthly if unstable 100% Electronic (1) Continuous measurement of operating time of the flare (2) periodic measurement of methane content of flare exhaust gas 99% taken as default maximum efficiency from manufacturers publication most conservative of default and measurement taken

24 CDM Executive Board page CE_elect ricity, determin ed by operating hours (1) and methane content in exhaust gas (2) Meter/samp le 15 CE_grid Sample/IP CC 16 CE_gass upply % m/c (1) continuou sly (2) quarterly, monthly if unstable 100% Electronic (1) Continuous measurement of operating time of the generator (2) periodic measurement of methane content of generator exhaust gas 99% taken as a conservative default derived from manufacturers tests most conservative of default and measurement taken % m annually 100% Electronic Annual measurement of gas grid losses. Most conservative of measured percentage and IPCC reference value will be used. Calculated % c annually 100% Electronic Calculated from 17 and IPCC reference value for gas use by end consumers 17 Net electricit y generatio n in the project 18 CEF_ele ctricity Measured MWh m continuou sly Official statistics tco2e/ MWh Default set at 98.5% calculated from IPCC reference values most conservative of default and measurements taken 100% Electronic Electricity generated by the project, minus internal use (EG_project-EG_use) c annually 100% Electronic Calculated from the latest national or regional grid statistics

25 CDM Executive Board page Number of househol ds connecte d to the gas supply grid (at the start of the year) Company records/pre vious annual verification report e annually 100% Electronic Every year the number of households connected needs to be monitored. The number of households connected at the start of the year will be taken as the baseline, to be more conservative. Data for thermal energy use do not have to be collected for the CDM project activity as no emission reductions are claimed for this part of the project. However, it needs to be confirmed that waste heat is delivered to replace the CMM-fired mine boiler that was in operation before the implementation of the CDM project activity. No data have to be collected to calculate emission reductions achieved from offsetting coal use from the CMM supply to households, as these reductions are not claimed. D Description of formulae used to calculate project emissions (for each gas, source, formulae/algorithm, emissions units of CO2 equ.): Emissions from the project include all CO2 from the destruction (through flare or utilisation for energy production or gas supply) of the methane in the CMM, and any methane not destroyed. Please note that CMM is not of (recent) biological origin, unlike landfill gas, and CO2 emissions from utilisation and/or destruction need to be taken into account. Any internal energy use for supply grid pressure and pumping, the power generation plant and for monitoring has to be subtracted from the energy volumes generated. The monitoring equipment will measure the flow, temperature and pressure, and automatically present the volume of CMM at standard temperature and pressure (STP). The amount of pure methane flow can then directly be calculated by multiplying the CMM flow and methane concentration. If there is a significant concentration of NMHC the methane concentration monitoring may need to be corrected for their presence. Mass of methane can be calculated from the flow by multiplying with the standard methane density. MM_iSTP = Volume_iSTP * Concentration_i * Density (25)

26 CDM Executive Board page 26 MM_iSTP = Methane measured at point i at standard temperature and pressure in tch4. Volume_iSTP = CMM volume at point i at standard temperature and pressure in m3 CMM. Concentration_i = Concentration of methane in the CMM mix in %. Density = Density of methane (pure) at standard temperature and pressure, tch4/m3ch4 At the various utilisation and destruction installations it will be necessary to adjust the inputs measured for combustion efficiency to calculate the amounts actually destroyed. This is done by multiplying the input and the combustion efficiency. MD_i = MM_i * CE_i (26) MD_i = Methane actually destroyed/combusted in installation i in tch4. MM_i = Methane input measured into installation i in tch4. CE_i = Combustion efficiency of installation i. The calculation of the project emissions is described below in four steps. (1) The methane destroyed by the project activity (MD_project) [tch 4 pure] during a year is determined by monitoring the quantity of CMM actually destroyed/combusted in each of the installations. Ex-ante projections for future CMM emissions of the coal mine are made for reference purposes and are presented in the relevant sections of the PDD. However, emission reductions will be determined (ex-post) by metering the actual quantity of methane captured and destroyed once the project activity is operational. MD_project = MD_flared + MD_electricity + MD_gassupply (27) The monitoring equipment will measure gas flows in m 3, concentrations of methane, pressure and temperature. This data will allow computation of each of these amounts in tch 4 pure. (2) The CO 2 emissions resulting from the destruction/combustion of methane by the project (EM_project) [tco 2 e] is equal to the amount of methane destroyed/combusted multiplied by the CO 2 emissions factor for methane. Given molecular weights and the chemical reaction when methane is combusted, each tonne of methane results in 44/16 tonnes of CO 2 ; thus the CO 2 emissions factor for methane is equal to EM_project = MD_project * CEF_CH4 (28) (with CEF_CH4 = 2.75)

27 CDM Executive Board page 27 (3) A second part of the project emissions are those related to any internal energy use for the elements of the project (EE_project) [tco 2 e], such as supply grid pressure and pumping, power generation plant and monitoring equipment. However, energy production is larger than internal energy use, and thus production will be netted out to take account of internal energy use. EE_project therefore is zero. (4) The direct emissions from the project (DE_project) [tco 2 e] are equivalent to the emissions from the methane (formula 28), plus the emissions from energy use (being netted out), and emissions of any methane not destroyed and other corrections (EM_adjust). DE_project = EM_project + EE_project + EM_adjust (29) Calculation of losses and corrections Some CMM leakage will occur as a result of losses in the CMM system, and incomplete destruction/combustion in flaring, and power generation. Additionally, some methane drained may be of a concentration that is close to the explosive range for a methane-air mixture, and thus too low for utilisation. Venting CMM in these circumstances cannot be avoided for safety reasons. Such losses must be taken into account in the calculations and the following steps are therefore required for accurate estimation of the project emissions. Losses due to incomplete destruction/combustion of CMM take place at each installation. The methane measured at each of these installations, therefore, has to be corrected for incomplete destruction following formula 26. Combustion efficiencies at the flares, power generation and gas supply are therefore measured or conservatively estimated. For CMM supply through a gas grid, losses may occur at two stages: firstly in the grid, secondly at combustion at the end user. The overall gas supply efficiency (CE_gassupply) [%] is calculated from the efficiency of the grid and of the end-consumer combustion. These efficiencies are estimated using IPCC national reference values for grid supplied gas and gas grid efficiency. Regular measurements of leakage from the gas grid also need to be carried out. Whichever leakage rate is higher (more conservative) is chosen. CE_gassupply = CE_grid * CE_endusers (30) As stated above, venting of CMM is still likely to be required from a safety perspective. However, because the CMM system is small and compact, directly centred around the working coal mine, any methane leakage from the system is negligibly small. However, any difference between the amount actually drained and the amounts destroyed (i.e. already corrected for losses) in all utilisation and destruction installations together (MD_project) will be assumed to be losses. Total methane not destroyed/combusted (MM_notdestroyed) is thus: MM_notdestroyed = MM_drained MD_project (31) In all of these situations it is important to monitor the composition of CMM, which consists of mainly of methane and CO 2, but may also contain and other gases. Non-methane hydrocarbons (NMHC) such as ethane and propane are mostly contained in CMM. These NMHC have short lifetimes in the atmosphere

28 CDM Executive Board page 28 and do not contribute to radiative forcing. However, they are classified as volatile organic compounds (VOC) which may contribute to smog formation. No emission reductions can be claimed for the destruction of these NMHC, but they may contribute to higher energy yields in case of utilisation. Using this monitoring data the CO 2 emissions factor from NMHC for the CMM (CEF_NMHC) can be calculated. Any CO 2 emitted from the combustion of these NMHC is added to the project emissions to be more conservative, and can be calculated as follows: EM_NMHC = MD_project * CEF_NMHC (32) This, of course, also applies to any CMM destroyed in the baseline. At Pansan the concentrations of alkanes heavier than methane (ethane, propane etc) in the CMM are negligible so the above term will be practically zero. Total project emissions With no leakage other than the flare and combustion efficiencies corrected for in the formulae above, EE_project netted out by the energy production of the project, overall emissions of the project are described by formula 11. This can now also be expressed as: DE_project = MM_drained * GWP_CH4 (MM_flare * FE + MM_electricity * CE_electricity + MM_gassupply * CE_gassupply) * (GWP_CH4 CEF_CH4 CEF_NMHC) (33) D.2.3. Treatment of leakage in the monitoring plan D If applicable, please describe the data and information that will be collected in order to monitor leakage effects of the project activity ID number Data Source of Measured (m), Recording Proportion How will the data Comment Data (Please use variable data calculated (c) frequency of data to be archived? unit numbers to or estimated (e) be (electronic/ ease crossreferencing to table D.3) monitored paper) N/a

29 CDM Executive Board page 29 D Description of formulae used to estimate leakage (for each gas, source, formulae/algorithm, emissions units of CO2 equ.) No significant change in anthropogenic emissions by sources of greenhouse gases outside the project boundary is identified that is not already part of the baseline. The baseline includes the energy displaced from utilisation of the energy content of CMM; however, the project developer may decide not to claim all such displacement. Any energy displacement, which may or may not be claimed, is likely to be small compared to the overall energy market in which the project is developed, and will not lead to significant changes of anthropogenic emissions outside the project boundary. A small source of emissions not accounted for in the baseline or project emissions is transport. In the baseline scenario energy may be generated from coal, which is displaced in the project scenario by CMM utilisation. Any emissions from transport fuel required for distribution of the coal in the baseline scenario have not been counted, while the energy required for the operation of the CMM supply grid is included in the calculations. The gas drainage pumping station is not included within the project boundary. This equipment is an integral and necessary part of the mine, and is required for operational safety reasons (and often by law). The operation of the gas drainage pumping station is driven by the requirements for the mine and is not impacted by the implementation of the project. Therefore, no leakage occurs as a result of the CMM utilisation and destruction project. However, the successful implementation of the CDM project activity and a royalty payment for high quality and quantity gas may result in an incentive for the mine to improve its methane drainage system and help pay for it. Such improved drainage would improve the safety of the coal mining operation, and may result in higher coal production. However, improved drainage and safety in coal mines is one of the sustainable development goals of the Chinese government within the mining sector. Additionally, it could be argued that production from gassy mines is best concentrated at mines with effective capture and methane destruction. Any methane losses and internal energy usage of the project activity are taken into account in the project emissions calculations. D.2.4. Description of formulae used to estimate emission reductions for the project activity (for each gas, source, formulae/algorithm, emissions units of CO2 equ.) The greenhouse gas emission reduction (ER) achieved by the project activity during a given year is the difference between the total greenhouse gas emissions in the baseline in that year (DE_baseline) and the direct emissions of the project in that year (DE_project). ER = DE_baseline DE_project = (EM_baseline EM_project EM_adjust) + (EE_baseline EE_project) (34) Using the formulae above the first part of the formula above, the ER due to the methane destruction (ER_EM) [tco2e], can be expressed as:

30 CDM Executive Board page 30 ER_EM = (MD_flare + MD_electricity + MD_thermalenergy + MD_gassupply MD_bau) * (GWP_CH4 CEF_CH4 CEF_NMHC) (35) Using the formulae above the second part of formula 34, the ER due to the energy displacement (ER_EE) [tco 2 e], can be expressed as: ER_EE = (EG_project EG_bau EG_use) * CEF_electricity + (ET_project ET_bau ET_use) * CEF_thermalenergy + (GS_project GS_bau GS_use) * CEF_gassupply (36) This is simplified if energy production figures for project and baseline are given net of any internal energy use. Ex-ante emission reduction estimates are made by projecting the future CMM emissions of the coal mine. These estimates are for reference purposes only, since emission reductions will be determined (ex-post) by metering the actual quantity of methane captured and destroyed once the project activity is operational. The projections need to take into account variability of quantity and quality (methane concentration) of CMM flow during the year. D.3. Quality control (QC) and quality assurance (QA) procedures are being undertaken for data monitored Data (Indicate table and ID number e.g ; 3.2.) All derived from Table B , 221.5, 221.8, Uncertainty level of data (High/Medium/Low) Low Explain QA/QC procedures planned for these data, or why such procedures are not necessary. Flow meters will be subject to regular maintenance and testing regime to ensure accuracy 221.2, Low Gas detector will be subject to regular maintenance and testing regime to ensure accuracy Low Samples are analysed offsite in laboratory , , , Low Meters for measuring operating hours will be subject to regular maintenance and testing regime to ensure accuracy. Samples are analysed offsite in laboratory Low Meters will be subject to regular maintenance and testing regime to ensure accuracy D.4 Please describe the operational and management structure that the project operator will implement in order to monitor emission reductions and any leakage effects, generated by the project activity

31 CDM Executive Board page 31 HCMG has established a dedicated control centre from where all data are monitored. Staff at the control centre will prepare a daily report on the operations of the CMM utilisation project activity. This daily report will record data readings, any accidents, failures, and availability of installations. Initially, monitoring equipment will be calibrated monthly to capture any possible problems. However, after an initial period of 1 year calibration may be done half yearly subject to manufacturers recommendations. Results of the calibrations are also reported in the daily reports. D.5 Name of person/entity determining the monitoring methodology: The monitoring methodology was carried out by IT Power, Wardell Armstrong and the China Coal Information Institute as consultants to the project company, HCMG. This study was completed 26/10/2004. The monitoring methodology study was led by Mr Christiaan Vrolijk. His contact details are given in the table below. Organisation IT Power Ltd Building The Manor House Street Lutyens Close Place Chineham Region Hampshire Postcode RG24 8AG Country UK Telephone +44 (0) FAX +44 (0) itpower@itpower.co.uk URL Represented by Title Mr Last name Vrolijk First name Christiaan Direct FAX +44 (0) Direct tel +44 (0) Personal christiaan.vrolijk@itpower.co.uk

32 CDM Executive Board page 32 SECTION E. Estimation of GHG emissions by sources E.1. Estimate of GHG emissions by sources: GHG emissions arise from all the seams disturbed by mining. The gas resource therefore depends on the volume of coal in the mining area and its gas content. The GHG sources will comprise all coal seams disturbed by the mining activities of Pansan s three longwalls during the CDM project period. The project period is significantly shorter than the overall 80-year design life of the mine. The monitoring methodology follows option 2: direct monitoring of the emission reductions from the project activity and involves measuring drained gas flows utilised and flared. The estimated volume of CMM drained in the first year of operation as a CDM project is 11.6 million m 3. The estimated volumes for gas supply and electricity generation are 0.9 million m 3 and 7 million m 3 respectively. These estimates are below the design levels of utilisation, but are considered more realistic as the volume of CMM with methane concentrations above 25% is limited, and methane flow is variable as well. Table E.1.1 and E.1.2 show the variability of the CMM at Pansan over the last 18 months. Table E.1.1: Distribution of methane concentration values Methane purity Time at or above methane purity level 25% 91% 30% 79% 35% 62% 40% 51% 45% 24% 50% 8% Note: average methane concentration is 37.8%; standard deviation is 8.9. The minimum purity of CMM for the power generation equipment at 30% occurs 79% of the time. However, 91% of the time, methane purity is sufficient for flaring (over 25%). Table E.1.2: Distribution of pure methane flow Methane flow (m3/min) Methane flow (million m3/year) Time at or above methane flow levels Note: average methane flow is 22.1 m 3 /min (i.e million m 3 /year); standard deviation is 8.6. Given the projected coal production increases, CMM is also projected to increase over time. Table E.1.3 presents the assumptions for the ex-ante emission reduction calculations for the 10-year crediting time of the project. In the first year the total volume is equal to the average over the last 18 months: 11.6 million m 3 /year. Then coal production volumes increase by 20% over two years. After 5 years a further increase

33 CDM Executive Board page 33 in coal production may be expected, as well as improved CMM management leading to a greater share of CMM above 25%. Table E.1.3: Projected CMM flow and utilisation levels (million m 3 /year pure CH 4 ) Year Total flow Usable Usable flow Electricity Gas supply Flare Total used % * % % % % % % % % % Note: * Flares will only be installed during Using formula 21, the project emissions can now be calculated. Table E.1.4 gives the total CO 2 - equivalent emissions of the methane not destroyed, including from incomplete combustion at the various installations, the CO 2 emissions from the utilisation and destruction, and the overall project emissions. (The NMHC concentration at Pansan is negligible, and emissions related to this are considered zero.) Table E.1.4: Project emissions estimate (tco 2 e) Year Methane not destroyed Methane destroyed Total ,952 15,408 72, ,102 22,651 41, ,006 24,917 45, ,006 24,917 45, ,006 24,917 45, ,498 28,012 46, ,498 28,012 46, ,498 28,012 46, ,498 28,012 46, ,498 28,012 46,510 Total 231, , ,432 E.2. Estimated leakage: No significant change in anthropogenic emissions by sources of greenhouse gases outside the project boundary is identified that is not already part of the baseline. The baseline includes the energy displaced from utilisation of the energy content of CMM; however, the project developer may decide not to claim all such displacement. Any energy displacement, which may or may not be claimed, is likely to be small compared to the overall energy market in which the project is developed, and will not lead to significant changes of anthropogenic emissions outside the project boundary.

34 CDM Executive Board page 34 In order to be conservative, greenhouse gas emissions reduced from displacing coal use by the households in the town of Pansan and the transport emissions related to the distribution of this coal are not claimed. Any potential losses from incomplete combustion in the flares and engines has been accounted for in the baseline. Also in the baseline is the current volume of CMM supplied to and therefore destroyed by households and the mine boiler. Emission reductions achieved from the utilisation of the waste heat from the engines to displace the mine boilers will not be claimed. E.3. The sum of E.1 and E.2 representing the project activity emissions: With no leakage other than the flare and combustion efficiencies corrected for, and any internal energy usage netted out by the energy production of the project, overall emissions of the project are described in Table E.1.4. E.4. Estimated anthropogenic emissions by sources of greenhouse gases of the baseline: The total greenhouse gas emissions in the baseline (DE_baseline) [tco 2 e] are equivalent to the emissions from the methane (both the methane vented and that destroyed in the baseline scenario) plus the emissions from energy use, as described in the formulae above (Section B.3). The total methane flow is given above in Table E.1.3. The methane destroyed in the baseline scenario (MD_bau), is equal to the methane currently used by the mine boilers, and that supplied to the currently connected households. For the ex-ante estimates, these are taken as 473,000 and 86,800 m 3 /year respectively. The household supply is corrected for the actual consumption of households on the grid (see formula 1). The total net electricity generation is estimated to be 20,600 MWh per year. The CEF_electricity is calculated from current operating margin in the East Chine Power Grid (Table E.4.1), the emissions coefficient of the technologies (Table E.4.2), and the build margin in the same electricity grid (calculated as the newly installed capacity since 1999, representing just over 20%) (Table E.4.3.). Table E.4.1: 2002 operating mix in the East China Power Grid (GWh) Source Generation Excluded sources Included generation Hydro 44,000 Yes Coal 467,015 No 467,015 Nuclear 5,612 Yes Gas 0 No 0 Other (wind) 163 Yes Total 516, ,015 Source: China Electric Power Yearbook 2003, page 585. Table E.4.2: 2002 emissions coefficients for power plant in the East Chine Power Grid Source Coal consumption (g/kwh) Coal carbon content (tco2e/tcoal) CO2 emissions rate (tco2/mwh) Coal Source: China Electric Power Yearbook 2003, page 591. Table E.4.3: build margin in the East China Power Grid

35 CDM Executive Board page 35 Source 1999 capacity (MW) 2002 capacity (MW) Additions (MW) Emissions factor (tco2e/mwh) Weighted average emissions factor (tco2e/mwh) Hydro 11, , , Coal 73, , , Nuclear 300 1,678 1, Gas Other (wind) Total/change 85, , , Source: China Electric Power Yearbook 2003, pages 572 and 584. Thus CEF_electricity is now 0.50 * * = tco 2 e/mwh. Total baseline emissions can now be calculated. Table E.4.4 gives the total CO 2 -equivalent emissions of the methane not destroyed, the CO 2 emissions from the utilisation in the baseline scenario and the emissions associated with the electricity generation. (The NMHC concentration at Pansan is negligible, and emissions related to this are considered zero.) Table E.4.4: Baseline emissions estimate (tco 2 e) Year Methane not destroyed Methane destroyed Offset electricity emissions Total ,103 17, , ,103 17, , ,855 1,103 17, , ,855 1,103 17, , ,855 1,103 17, , ,983 1,103 17, , ,983 1,103 17, , ,983 1,103 17, , ,983 1,103 17, , ,983 1,103 17, ,390 Total 2,078,310 11, ,040 2,262,385 E.5. Difference between E.4 and E.3 representing the emission reductions of the project activity: The greenhouse gas emission reduction (ER) achieved by the project activity during a given year is the difference between the total greenhouse gas emissions in the baseline in that year (DE_baseline) and the direct emissions of the project in that year (DE_project). ER = DE_baseline DE_project = (EM_baseline EM_project EM_adjust) + (EE_baseline EE_project) (36) Using the formulae above the first part of the formula above, the ER due to the methane destruction (ER_EM) [tco 2 e], can be expressed as: ER_EM = (MD_flare + MD_electricity + MD_gassupply MD_bau) * (GWP_CH4 CEF_CH4 CEF_NMHC) (37)

36 CDM Executive Board page 36 Using the formulae above the second part of formula 28, the ER due to the energy displacement (ER_EE) [tco 2 e], can be expressed as: ER_EE = (EG_project EG_bau) * CEF_electricity (38) This is simplified if energy production figures for project and baseline are given net of any internal energy use. Ex-ante emission reduction estimates are made by projecting the future CMM emissions of the coal mine. These estimates are for reference purposes only, since emission reductions will be determined (ex-post) by metering the actual quantity of methane captured and destroyed once the project activity is operational. The projections need to take into account variability of quantity and quality (methane concentration) of CMM flow during the year. E.6. Table providing values obtained when applying formulae above: Year DE_baseline DE_project ER of which ER_EE ,593 72, ,233 17, ,055 41, ,302 17, ,262 45, ,339 17, ,262 45, ,339 17, ,262 45, ,339 17, ,390 46, ,880 17, ,390 46, ,880 17, ,390 46, ,880 17, ,390 46, ,880 17, ,390 46, ,880 17,304 Total 2,262, ,432 1,777, ,040 SECTION F. Environmental impacts F.1. Documentation on the analysis of the environmental impacts, including transboundary impacts: An environmental and social impact assessment has been carried out as required by Chinese law. The impact assessment report is available at the offices of HCMG. Environmental and social benefits are: Better air quality in the area Limitation of the impact of the pipeline, which is designed and constructed to regulations of the municipality Noise minimisation during construction Condensing water of the power plant will be reused Air pollution is monitored and minimised Leakage damage is minimised

37 CDM Executive Board page 37 Any waste water not utilised is treated to comply with local government regulation Within 3 months of completion, the environmental department will check the scheme and issue the final approval. No transboundary impacts have been identified in the report. Environmental Impact Analysis Environmental Factors Construction Period Operation Period Negative Impact Positive Impact Comprehensive Impact Negative Impact Positive Impact Comprehensive Impact Natura Surface l Enviro Water Air Quality nment Sonic Environment Social Municipal -3-3 Enviro nment Road Transportati -3-3 on Energy Conservation Economy Employment Living standar d Public Sanitation Living Environment Notes: Number in the table represents degree of impact, 3>2>1, blank means no impact. + means positive impact, - means negative impact. Benefit and Costs Analysis of Environment 1. Investment for environmental protection for Pansan mine is around RMB30 million, which includes RMB117,300 for pollution treatment costs. The total cost covers a period of 20 years. 2. The environment will benefit from the utilisation of gas in the project with a value of around RMB12.6 million annually. 3. CH 4 emission reduction as calculated in the methodology, reduce the GHG effect. F.2. If environmental impacts are considered significant by the project participants or the host Party, please provide conclusions and all references to support documentation of an environmental impact assessment undertaken in accordance with the procedures as required by the host Party: The project is relatively small and has no significant negative environmental impacts. The environmental and social benefits are listed above. The project has received full approval from the Anhui Environmental Protection Bureau, including full approval for the construction of flares as part of the CDM project.

38 CDM Executive Board page 38 Figure F.2.1: Approval letter for flare SECTION G. Stakeholders comments G.1. Brief description how comments by local stakeholders have been invited and compiled: A survey was carried out among the community. The questionnaire was designed and distributed among government organisations, government officials, political consulting commission, labour unions, village committee, villagers and retired workers, etc. The age range is questionnaires were send out and returned 335. G.2. Summary of the comments received: Responses to the survey were mostly supportive (97% supported the project). However, a number of issues were raised, including worries about environmental and water pollution, and accidents and leaks. Respondents also asked for the work to be carried out quickly and safely. G.3. Report on how due account was taken of any comments received: The CMM utilisation project reduces environmental and water pollution compared to the current situation. The whole project (including some work at other mines) will also be covered by emission limits set by the local environmental bureau: 0.5t SO2/y; 32t COD/y.