JOINT IMPLEMENTATION PROJECT DESIGN DOCUMENT FORM Version 01 - in effect as of: 15 June 2006 CONTENTS

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1 Joint Implementation Supervisory Committeepage 1 JOINT IMPLEMENTATION PROJECT DESIGN DOCUMENT FORM Version 01 - in effect as of: 15 June 2006 CONTENTS A. General description of the project B. Baseline C. Duration of the project / crediting period D. Monitoring plan E. Estimation of greenhouse gas emission reductions F. Environmental impacts G. Stakeholders comments Annexes Annex 1: Contact information on project participants Annex 2: Baseline information Annex 3: Monitoring plan

2 Joint Implementation Supervisory Committeepage 2 SECTION A. General description of the project A.1. Title of the project: YARA Rostock N 2 O abatement project at plant 2.02 Version: 15 September 2009 (Version #3) A.2. Description of the project: The sole purpose of the proposed project activity is to significantly reduce current levels of N 2 O emissions from the production of nitric acid at YARA s second nitric acid plant ( plant 2.02 ) at Poppendorf (near Rostock), Germany. At that site, YARA also operates one other nitric acid plant named plant 2.01 that will be part of separate JI project activity not covered by this PDD. The plant 2.02 nitric acid plant was designed by Grand Paroisse. Commercial nitric acid production started in It is a 3.5 /13 bar dual pressure plant with a proven maximum daily production output of 1,600 metric tonnes of HNO 3 (100% conc.) per day 1. Due to highly efficient operational management practices, YARA Rostock can run the plant for campaign durations longer than a year. Depending on whether or not the plant is shut down for maintenance purposes or exchange of the primary catalyst gauze, the plant can be operated for a full 365 days per year resulting in a maximum annual production output of 584,000 thno 3. To produce nitric acid, ammonia (NH 3 ) is reacted with air over precious metal normally a platinumrhodium-palladium (Pt-Rh-Pd) alloy catalyst gauze pack in the ammonia oxidation reactor of the nitric acid plant. The main product of this reaction is NO, which is metastable at the conditions present in the ammonia oxidation reactor and therefore it reacts with the available oxygen to form NO 2, which is later absorbed in water to form HNO 3 nitric acid. Simultaneously, undesired side reactions yield nitrous oxide (N 2 O), nitrogen and water. N 2 O is a potent greenhouse gas with a Global Warming Potential (GWP) of The project activity involves the installation of a new N 2 O abatement technology: a pelleted catalyst that will be installed inside the ammonia oxidation reactor, underneath the precious metal gauzes. It is expected that this catalyst will reduce approximately 85% of current N 2 O emissions on average over its lifetime. The plant used to emit of 8.1 kgn 2 O / thno 3 on average over a full 3 campaign (of up to 18 months duration) before the N 2 O abatement catalyst has been installed. Without such technology the continued operation of the plant would entail the emission of more than 1,200,000 tco 2 e annually 4. YARA Rostock decided to install the abatement catalyst system in October 2008 during a scheduled shut down of the plant, after initial meetings with the German Emissions Trading Authority (the Designated National Focal Point for Germany, Deutsche Emissionshandelsstelle DEHSt) had indicated that approval for the intended JI project activity could be expected with a high degree of certainty 5. If the outcome had been less promising, YARA Rostock would not have installed the N 2 O abatement system before October 2010, when a regulatory limit will come in force. In consequence, until end of September 2010, the operation without catalyst is considered the baseline scenario 6. 1 All nitric acid amounts are provided in metric tonnes of 100% concentrated HNO 3, unless otherwise indicated. 2 IPCC Second Assessment Report (1995); applicable according to UNFCCC-decision 2/CP.3, paragraph 3. 3 N 2 O concentration in the stack has been measured since May 2007 showing an average concentration of 8.1 kgn 2 O/tHNO 3 approximately. However, the plant s baseline emissions value as used for assessing ERU production is based on the first four months of a campaign only ( to ) of emissions data monitored and recorded before catalyst installation. See sections A.4, B.1 and E for more detailed information. 4 This statement is based on the very conservative assumption of a yearly production of 496,800 thno3 (1,380 t/day for 360 days / year). 5 An initial Letter of Endorsement had already been obtained when the catalyst was installed; see section A.5 for details. 6 See section B.1 for detailed information.

3 Joint Implementation Supervisory Committeepage 3 For tracking the N 2 O emission levels, YARA Rostock will install and operate an Automated Monitoring System according to EU standards 7. YARA Rostock adheres to ISO 9001 / management standards 8 and will implement procedures for monitoring, regular calibrations and QA/QC in line with the requirements of these standards. A.3. Project participants: Name of Party involved (*) ((host) indicates a host Party) Germany (host) Norway Germany Private and/or public entity(ies) project participants (*) (as applicable) YARA Rostock Branch office of YARA GmbH & Co.KG (Germany) YARA International ASA, Oslo (Norway) N.serve Environmental Services GmbH (Germany) Kindly indicate if the Party involved wishes to be considered as project participant (Yes/No) No No No This JI Project will be developed as a party verified activity ( track 1 ) in accordance with UNFCCC decision 9/CMP.1, paragraph 23 by the host country Germany. A.4. Technical description of the project: A.4.1. Location of the project: Germany A Host Party(ies): A Region/State/Province etc.: Mecklenburg Vorpommern A City/Town/Community etc.: Poppendorf (near Rostock) A Detail of physical location, including information allowing the unique identification of the project (maximum one page): The project plant is part of a combined production complex that also contains a second production unit named plant The picture below illustrates the location of both plants. The coloured marks are set at the stack of the respective plants. The burners are located inside the long, north-south situated, building just west of the stacks. 7 See sections A.4.3 and D.1 for detailed information. 8 See YARA internal notice of May 2007, published on the company website under

4 Joint Implementation Supervisory Committeepage 4 Figure 1: Location of YARA Rostock plants 2.01 and 2.02 Plant absorption towers: 54 08'10.25'' N, 12 18'43.05'' E (plant 2.01 green) 54 08'09.75'' N, 12 18'43.05'' E (plant 2.02 yellow) This PDD only covers the project activity at plant 2.02; the project activity planned for plant 2.01 will be documented in a separate PDD. A.4.2. Technology(ies) to be employed, or measures, operations or actions to be implemented by the project: The main parts of the plant as currently set up are the ammonia burner inside which the ammonia oxidation reaction takes place, the absorption tower where the gas mix from the burner is led through water in order to form nitric acid and the stack through which the off-gasses are vented into the atmosphere. The precious metal gauze pack i.e. the primary catalyst required for the actual production of nitric acid have been manufactured by KAR Rasmussen located in Norway for a number of years. The design, composi-

5 Joint Implementation Supervisory Committeepage 5 tion and weight of these gauze packs previously used for standard plant operation 9 will remain unchanged for the duration of the project activity. The project activity entails the operation of - N 2 O abatement technology (until recently only applied on industrial trial level within the European Union) inserted into the ammonia oxidation reactor after slight modifications to its interior structure; and - Specialised monitoring equipment to be installed at the stack (detailed information on the AMS is contained in section D.1). Catalyst Technology A number of N 2 O abatement technologies have become commercially available in the past 3 years after several years of research, development and industrial testing. Since end of 2006, several CDM project activities employing various kinds of N 2 O abatement catalysts have been registered with the CDM EB. But these activities are naturally limited to plants located in developing nations. Due to lack of incentives for voluntary reductions before 2008 and the absence of legal limits on industrial N 2 O emissions in nearly all the European Union member states, the vast majority of EU based plant operators have so far not invested in N 2 O abatement devices. YARA International ASA (Norway) is a noteworthy exception to this general rule, because the company conducted long term industrial trial runs of its selfdeveloped catalyst system YARA58 Y 1 in various plants in France since However, these trials have been completed recently. Until now, the catalyst system could only be marketed successfully under the auspices of the CDM. The plants operated by YARA Rostock have not been part of the catalyst industrial trial programme. Thus, the proposed JI project activity has entailed a first time installation of secondary catalyst technology at the plant. Figure 2: Installation of secondary catalyst 9 See the relevant tables in section B.6.2 below for more specific information.

6 Joint Implementation Supervisory Committeepage 6 YARA Rostock has installed the YARA 58 Y 1 catalyst system consisting of an additional base metal catalyst that is positioned below the standard precious metal gauze pack. This technology has been implemented inside the plant 2.02 ammonia burner. Operation with catalyst installed has started in October A secondary catalyst reduces N 2 O levels in the gas mix resulting from the primary ammonia oxidation reaction. A wide range of metals (e.g. Cu, Fe, Mn, Co and Ni) have shown to be of varied effectiveness in N 2 O abatement catalysts. The YARA 58 Y 1 abatement catalyst is made of cylindrical pellets containing cobalt as an active ingredient. The abatement efficiency has been shown to be more than 80% in the following reaction: 2 N 2 O 2N 2 + O 2 If operated properly, the secondary catalyst system may significantly reduce N 2 O emissions for up to three years, before the catalyst material needs to be replaced. The YARA 58 Y 1 abatement catalyst has been proven by industrial testing not to affect plant production levels 10. Also, only traces of the catalyst material at concentrations of parts per billion could be found in the nitric acid product 11. No additional heat or other energy input is required, because the temperature levels present inside the ammonia oxidation reactor suffice to ensure the catalyst s optimum abatement efficiency. There are no additional greenhouse gases or other emissions generated by the reactions at the N 2 O abatement catalyst. Basket modifications and Heat Shield design Most nitric acid plants have some sort of basket structure that gives structural support to the precious metal gauzes. The ammonia oxidation reaction in YARA s 2.02 nitric acid plant normally operates at temperatures between 850 and 880ºC, which causes the basket assembly to expand compared to when the plant is not operational (i.e. during installation of the catalyst). This effect increases the basket diameter by 1 to 1.5%. The ammonia oxidation reactor of plant 2.02 has a diameter of 4850 mm that expands by 40 to 60 mm when in operation. The pelleted ceramic abatement catalyst does not expand in the same fashion and therefore a gap at the perimeter of the catalyst may occur under normal operation which would significantly reduce the efficiency of the abatement catalyst. To counter this occurrence, the baskets which support the catalyst installation and the gauze pack will have to be modified 12 to provide containment of the pelleted bed in a manner which will prevent preferential gas flow at the circumference and to optimise the N 2 O abatement efficiency of the catalyst. N 2 O abatement catalyst installation The secondary catalyst itself can be installed during a routine plant shut-down and gauze change. The pellets are poured into the (modified) support basket / perforated plate arrangement and levelled. The gauze pack is then installed above the levelled catalyst pellets. After the end of its useful life, the catalyst will be refined, recycled or disposed of according to EU regulations, hence fulfilling sustainability standards. 10 See the European IPPC Bureau publication Integrated Pollution Prevention and Control; Reference Document on Best Available Techniques for the Manufacture of Large Volume Inorganic Chemicals Ammonia, Acids and Fertilizers (August 2007), page 152 therein. This source states that NO yields for the ammonia oxidation reaction remain unchanged when operating secondary N 2 O abatement catalysts. 11 This has been proven in industrial testing. The underlying information is commercially sensitive and will be made available to the DOE mandated with the determination procedure upon request. General information on this question is contained in the European IPPC Bureau publication Integrated Pollution Prevention and Control; Reference Document on Best Available Techniques for the Manufacture of Large Volume Inorganic Chemicals Ammonia, Acids and Fertilizers (August 2007), page 152 therein (available for downloading under 12 The modifications required to prevent preferential gas flow are of commercially sensitive nature. The AIE representative will be allowed to verify this information during the on-site visit.

7 Joint Implementation Supervisory Committeepage 7 YARA s nitric acid plant 2.02 operates at a pressure of around 3.5 bars inside the ammonia oxidation reactor. Through the introduction of the secondary catalyst into the ammonia reactor, a slight pressure drop ( P) can occur. This P may lead to a slight reduction in ammonia conversion efficiency and hence a very small reduction in nitric acid output. So far, no significant loss of production could be observed since the catalyst is being operated. Technology operation and safety issues As mentioned before, the secondary abatement technology has been tested in several industrial trials and has proven to be a reliable and environmentally safe method of reducing N 2 O. The installation of the secondary catalyst is done according to YARA internal procedures. The catalyst itself needs no further maintenance after installation. The catalyst and the AMS will be operated, maintained and supervised by the employees of YARA Rostock according to supplier specifications, the European standard EN and YARA internal procedures 13.Due to the long-term catalyst development phase, there is expert know-how readily available within the YARA group. Therefore, YARA Rostock is very confident that the effective operation of the catalyst technology, the operation of the monitoring system and the data collection, storage and processing can be managed in accordance with the JI requirements. Adherence to the applicable standards will be ensured by training sessions for the YARA employees involved. A.4.3. Brief explanation of how the anthropogenic emissions of greenhouse gases by sources are to be reduced by the proposed JI project, including why the emission reductions would not occur in the absence of the proposed project, taking into account national and/or sectoral policies and circumstances: Without JI participation, present emission levels as assessed in accordance with AM0034 as applied in the context of this JI project as baseline emissions 14 would have remained unchanged until end of September 2010, because o there is no legal requirement for YARA Rostock to reduce the emissions of its plant before that date; o Implementing N 2 O reducing catalyst technology requires significant investments, may result in some technical difficulties with regard to the plant s operation, potentially even causing a reduction in production output; and o Implementing N 2 O catalyst technology does not yield any other benefits besides potential revenues from ERU sales. be reduced to a level below 2.5 kgn 2 O/tHNO 3 (understood as an absolute limit to plant emissions at any time during operation, not just merely an maximum permitted average 15 ) from October 2010 onwards, because only from 1 st October 2010 German TA Luft requires this value to be maintained as a maximum emissions level permissible. More detail on these assumptions will be provided in section B.1 below. The Project Participants are well aware of the fact that 5 III ProMechG only allows ERUs to be allocated for emission reductions achieved between 1 st January 2008 and 31 st December Accordingly, the application for the Letter of Approval (LoA) will be limited to this period of time only. However, the Determination opinion of the Accredited Independent Entity (AIE) shall span a full ten year crediting period so that additional auditing costs can be avoided in case the time limitation of 5 III ProMechG should be lifted at any time. 13 See section D.3 below. 14 See section B.4 below for detailed information. 15 The reasoning behind this assumption is explained in section B.2 below (see step 1b of the baseline identification procedure). The assumption shall not be interpreted as any form of indication on what appropriate average emissions level will be appropriate during the project s operation.

8 Joint Implementation Supervisory Committeepage 8 The N 2 O catalyst system presently in place has been installed in October 2008, because YARA Rostock had already received the initial Letter of Endorsement from the German Emissions Trading Authority (DEHSt) at that time and was confident that final permission would be granted 16. If YARA Rostock had decided to delay the installation and wait for the completion of the approval procedures, the project could not have started until more than a year later. A Estimated amount of emission reductions over the crediting period: Due to the specific context of the project activity, the baseline emission level cannot be provided just as one value. For the reasons described in the table Deviations from AM0034 in section B.1 below, a differentiation between the factual baseline emissions level and the assumed calculated baseline emissions level must be made. The following paragraphs describe the factual emission reductions achievable by the project activity. However, the question about how many ERUs will be awarded to the Project Participants will not be answerable based on factual emission reductions, if and in so far as (i) presently applicable regulatory limits such as TA Luft have an influence on the baseline scenario identified (see sections A.4.3 and more detailed B.1) or (ii) factual baseline emissions are in accordance with AM0034 replaced by a regulatory emissions factor (EF reg ) that is binding for the plant s operation. ERU production estimates are contained in section E.6 below. Factual emission reductions achievable by the proposed project activity will be dependent on the amounts of nitric acid produced. In accordance with AM0034, emission reductions are determined pro unit of product measured in metric tonnes of 100% concentrated nitric acid produced. YARA Rostock has budgeted for the following production amounts for the plant: Year Budgeted production (thno 3 ) , , , ,000 Following years 540,000 Table: Budgeted nitric acid production Based on these production figures, one can make assumptions on how much N 2 O would be emitted into the atmosphere without employing catalyst technology. The EF BL -value established as outlined in section B.4 below suggests that 7 kgn 2 O 17 are emitted per metric tonne of 100% concentrated nitric acid. This level corresponds to the assumed calculated baseline emissions level during the first four months of the baseline campaign, a procedure that will be completed in time for the first verification. Besides the known fact that the project activity has been started on 1 st October 2008, the following assumptions apply to the estimation of the emission reductions: YARA Rostock produces the amounts of nitric acid according to the production budget provided above, each year s production being equally distributed throughout the period; 16 See section A.5 below for more detailed information on the administrative procedures. 17 This is an assumption only; the baseline emissions value as established following AM0034 (as amended to the project specific context, see section B.1) will become available later on during the determination procedure.

9 Joint Implementation Supervisory Committeepage 9 The AM0034-specific 18 baseline emissions level is 7 kgn 2 O/tHNO 3 ; Factual emissions from the plant without catalyst are 8.1 kgn 2 O/tHNO 3 ; The secondary catalyst employed performs with an expected abatement efficiency of 85% throughout the project s lifetime (resulting of project emissions of kgn 2 O/tHNO 3, i.e. project emissions being 85% less than the factual emission level which is assumed to be 8.1 kgn 2 O/tHNO 3, because using the amended AM0034-baseline value of 7 kgn 2 O/tHNO 3 as a basis would be less conservative); For the purpose of this estimation, the AMS uncertainty (UNC) is neglected 19 ; Crediting period Years Emission reductions (tn 2 O) Estimated Emission Reductions [tco 2 e] 1 2, , , , , , , ,271 5* ,102 (until 31 st December) Total estimated Emission Reductions (until end 2012) 4,023,829 Annual average of estimated reductions (until end 2012) 946,783 Table (part A): Emission reductions until 2012 Crediting period Years Emission reductions (tn 2 O) Estimated Emission Reductions [tco 2 e] 5* 2, ,192 (from 1 st January 2013 onwards) 6 3, , , , , , , , , ,922 Total number of crediting years 10 Total estimated Emission Reductions 9,376,632 Annual average of estimated reductions over total crediting period 937,663 Table (part B): Emission reductions from 2013 onwards 18 As amended for the project specific context; see section B.1 below. 19 Because the amended AM0034-baseline value is based on an assumption, resulting on the emission reductions per thno 3 and the N 2 O abatement efficiency being merely assumed as well, the effect applying the UNC correction to the project emissions level would be meaningless for this estimation. However, the UNC correction will be applied when calculating emission reductions for the purpose of assessing the amount of ERUs awardable for any Verification Period.

10 Joint Implementation Supervisory Committeepage 10 * Due to the likely inclusion of N 2O emissions emanating from nitric acid production into the EU ETS from 1 st January 2013 onwards, the project may not be eligible to earn ERUs after that time or continuing the project under the JI may not be economically viable. Also, from 2013 onwards a GWP of 298 for N 2O as defined by the IPCC Third Assessment Report will be applied. This is why this PDD differentiates in between prospective emission reductions achieved until 31 st December 2012 and emissions reductions generated from 1 st January 2013 onwards. However, if one aims to assess the amount of ERUs the project activity may be entitled to, regulatory limits lower than the measured baseline established must be taken into account. If the regulatory emissions limit set is not expressed in tn 2 O/tHNO 3 but is using another unit, the mandatory limit must be converted into tn 2 O/tHNO The scenario outlined by the above table does not yet take into account the reductions required by the German TA Luft standard from October 2010 onwards. In consequence, two further assumptions will have to be made in order to include the mentioned legal implications of TA Luft relevant for forecasting the future emissions from the plant in case a JI project would not be undertaken: From October 2010 onwards, N 2 O emission levels from the plant have to be kept below 800 mgn 2 O/m³ of daily average at all times during operation. The TA Luft maximum daily average level of 800 mgn 2 O/m³ is assumed to correspond with a maximum emissions factor of 2.5 kgn 2 O/tHNO 3 and an average emissions factor of 2.0 kgn 2 O/tHNO 3 21, for estimation of Emission reductions from October 2010 onwards, the latter is applied. Until end to September 2010, the EF BL -value is being applied as no mandatory legal limit exists for the period of project operation up to that time. The following table illustrates the prospective emissions from the plant if a catalyst system is being operated with the above assumed efficiency of 85% and TA Luft is being complied with from October 2010 onwards: Crediting period Years Emission reductions (tn 2 O) Estimated Emission Reductions [tco 2 e] 1 2, , , , , ,983 5* ,852 (until 31 st December) Total estimated Emission Reductions (until end 2012) 2,157,242 Annual average of estimated reductions (until end 2012) 507,586 Table (part A): Emission reductions until 2012 (including TA Luft) Crediting period Years Emission reductions (tn 2 O) 5* (from 1 st January 2013 onwards) Estimated Emission Reductions [tco 2 e] , , See AM0034 (ver03.2), page See footnote 14.

11 Joint Implementation Supervisory Committeepage , , , ,322 Total number of crediting years 10 Total estimated Emission Reductions 2,883,594 Annual average of estimated reductions over total crediting period 288,359 Table (part B): Emission reductions from 2013 onwards (including TA Luft) * Due to the likely inclusion of N 2O emissions emanating from nitric acid production into the EU ETS from 1 st January 2013 onwards, the project may not be eligible to earn ERUs after that time or continuing the project under the JI may not be economically viable. Also, from 2013 onwards a GWP of 298 for N 2O as defined by the IPCC Third Assessment Report will be applied. This is why this PDD differentiates in between prospective emission reductions achieved until 31 st December 2012 and emissions reductions generated from 1 st January 2013 onwards. In the Letter of Endorsement (LoE) for this JI project, The German Emissions Trading Authority (DEHSt) has stated that emission reductions should be calculated assuming baseline emissions of 2.5 kgn 2 O/tHNO 3 maximum ( Benchmark Factor ) for the period until the TA Luft limit applies 22. Taking this into account, the emission reduction projections would be as follows: Crediting period Years Emission reductions (tn 2 O) Estimated Emission Reductions [tco 2 e] , , , ,983 5* ,852 Total estimated Emission Reductions Annual average of estimated reductions (until end 2012) 707, ,386 Table (part A): Emission reductions until 2012 (including TA Luft) 22 See section A.5 (last paragraph) for information on under what circumstances this benchmark must be applied.

12 Joint Implementation Supervisory Committeepage 12 Crediting period Years Emission reductions (tn 2 O) Table (part B): Emission reductions from 2013 onwards (including TA Luft) Estimated Emission Reductions [tco 2 e] , , , , , ,322 Total number of crediting years Total estimated Emission Reductions Annual average of estimated reductions over crediting period * Due to the likely inclusion of N 2O emissions emanating from nitric acid production into the EU ETS from 1 st January 2013 onwards, the project may not be eligible to earn ERUs after that time or continuing the project under the JI may not be economically viable. Also, from 2013 onwards a GWP of 298 for N 2O as defined by the IPCC Third Assessment Report will be applied. 10 1,433, ,349 However, it is has not yet been fully clarified whether such Benchmark Factor will apply to the project activity or not. Also, it will only apply to plants that participate in the JI and undertake a project activity; it is not a limit generally applicable to nitric acid production in Germany. Accordingly, it is not interpreted as influencing the baseline scenario, because YARA Rostock would not need to adhere to this limit if no JI projects were undertaken at the Rostock plants. Thus, there is no influence on the business-as-usual scenario. However, if and when a Benchmark Factor becomes finally binding and is applicable to the proposed project activity, the baseline and emission reduction calculations will have to take this into account. Therefore, this PDD contains calculations both for a baseline scenario using 7.0kg as an appropriate and conservative EF BL as well as an hypothetical baseline based on a possible Benchmark Factor of 2.5kg. The project proponents understand that the determining Independent Entity may choose to base its final determination only on an assumed Benchmark Factor of 2.5kg. However, the project proponents also reserve the right to request the re-examination of such determination opinion either in a repeat of the determination or as part of a verification, to allow for the application of an EFBL of 7.0kg as the applicable EF BL for the period until October The calculation of emission reductions based on an EF BL of 7.0kg is expressly included in this PDD in order to allow the project proponents to claim ERUs from that EF BL should any Benchmark Factor applied by the DFP later found to be inappropriate. In such scenario the project proponents reserve the right to claim ERUs for reductions made from an EF BL which would have yet to be approved by a subsequent re-determination or verification. Further details and their implications on the project s operation will be dealt with in sections A.5 and E. below. A.5. Project approval by the Parties involved:

13 Joint Implementation Supervisory Committeepage 13 The Project Participants had applied for a Letter of Endorsement from the German DFP, the German Emissions Trading Authority in German the Deutsche Emissionshandelsstelle (DEHSt) on 13 th June The DEHSt has issued two written statements, jointly containing the desired Letter of Endorsement. The initial Letter of Endorsement issued by the DEHSt under 8 th October 2008 had in principle expressed full support for the proposed project. However, the decision on the reference case emissions applicable for calculating the number of ERUs freely awardable for emission reductions achieved had been left open in this statement. The reference case benchmark emissions factor has been specified by an additional letter dated 9 th December According to German law ( 5 IX in connection with 3 VI 2 ProMechG) this statement of the DEHSt is not binding. A final decision about the modalities of the JI project will be taken in the project approval procedure that will be initiated upon the submission of the PDD and the AIE s Determination Report. Concerning the aforementioned 2.5 kgn 2 O/tHNO 3 benchmark set by the German Emissions Trading Authority (DEHSt), this measure will be subject to a juridical verification launched in a comparable JI project application currently processed by the DEHSt. A detailed legal opinion regarding the legal basis for the application of such a benchmark factor has been obtained by N.serve from a leading specialised law firm 23. According to this opinion, the applicability of such benchmark is questionable and may be overthrown should such case be brought to court. If and when a project proponent of a comparable JI project brings forth such court case, the applicability of the Benchmark Factor proposed by DEHSt maybe affected. For the purposes of this PDD both the likely Benchmark Factor of 2.5kg as well as the appropriate EF BL of 7.0kg was used to calculate the emission reductions. Assuming that the Benchmark Factor is legally overturned and thus not finally applicable to this project activity, the project proponents may seek the approval of 7.0kg as the appropriate EF BL and, subject to a potential re-evaluation of the EF BL by a determining or verifying AIE, claim ERUs based on such EF BL. SECTION B. Baseline B.1. Description and justification of the baseline chosen: Regulatory framework The regulatory framework for implementing JI projects in Germany is influenced by several acts of law. The fundamental framework is provided by the Kyoto Protocol to the United Nations Framework Convention on Climate Change ( UNFCCC ) and subsequent decisions by UNFCCC-entities, most importantly the decisions of the Conference of the UNFCCC Parties serving as the Meeting of Parties to the Kyoto Protocol ( CMP ) and the Joint Implementation Supervisory Committee ( JI SC ). In addition, there is the European Union legislation adapting the Kyoto JI framework for application in its member states such as the Emissions Trading Directive 24, the Linking Directive 25 and various JI relevant deci- 23 The legal opinion has been made available to the IE for inspection /87/EC, published in the internet under /101/EC, published in the internet under

14 Joint Implementation Supervisory Committeepage 14 sions by EU bodies 26. Besides acts of law of direct relevance, there also are Directives that have an indirect influence on JI implementation such as the IPPC Directive 27. EU Directives do not entail direct consequences on private entities located in the EU member states. In order to be enforceable on member state level, they generally have to be transformed into national legislation by the respective member state. These national transformation acts as well as other national legislation are the third layer of the regulatory framework relevant for JI project implementation. In Germany, the transformation laws most relevant are the Project-Mechanismen-Gesetz ( ProMechG ) and the Treibhausgasemissionshandelsgesetz ( TEHG ) 28. Of indirect relevance are the Bundes-Immissionsschutzgesetz ( BImSchG ) and various administrative guidelines issued thereunder such as the Technische Anleitung zur Reinhaltung der Luft ( TA Luft ). Illustration: Three layers of jurisdiction relevant for the implementation and subsequent operation of N 2O nitric acid JI projects in Germany The JI SC has specified that JI project proponents may choose between two options when implementing JI projects: they may either (i) use a multi project emission factor (ii) or establish a project specific baseline 29. Due to the significant variances typically observable in different nitric acid plants, it would not be appropriate to derive a multi-project emission factor. Instead, the project proponents apply a project specific emission factor by establishing a baseline in accordance with appendix B of the JI guidelines 30. Although using AM0034 Catalytic reduction of N 2 O inside the ammonia burner of nitric acid plants (Version 03.2) as a basis 31, the project proponents have chosen to amend this methodology and establish a project specific baseline in order to appropriately account for the significantly different context of the proposed project activity in comparison to the circumstances usually applicable in a CDM project Such as the Double Counting decision 2006/780/EC, published in the internet under /1/EC, published in the internet under 28 Both laws are to be found in the internet under 29 The requirements for this approach are outlined in the 4 th JI SC Meeting Report, Annex 6 Guidance in the Criteria for Baseline Setting and Monitoring (Version 01), section B; paragraphs 18 ff. (see the internet under for reference). 30 UNFCCC decision 9/CMP.1, Annex B; published under 31 AM0034 has been authored by N.serve and was approved by the CDM EB in July The approach chosen is in line with 4 th JI SC Meeting Report, Annex 6 Guidance in the Criteria for Baseline Setting and Monitoring (Version 01), section B; paragraphs 20 (b); (see the internet under for reference).

15 Joint Implementation Supervisory Committeepage 15 Explanation and Justification for deviations from AM0034 The following aspects of AM0034 are either not applied or applied in a modified manner: Project Implementation Aspect Scope of the methodology Applicability criteria Baseline Scenario Identification and Assessment of Additionality Adjustment in JI project specific context The methodology is applied to a plant with two ammonia burners feeding into one absorption tower. Applicability criteria have been in part modified or deleted. Adapted to project context relevant in the host country. Explanation / Justification AM0034 assumes a plant set-up comprising one burner only feeding into one absorption tower, all plant off gasses being emitted through one single stack. At YARA Rostock, each plant has two burners instead of merely one. Because the primary catalyst gauzes in both ammonia burners are exchanged simultaneously, emission patterns throughout a campaign are comparable to those of a one burner plant. In fact, the perfectly synchronised operation of both burners practiced by YARA ensures that emission levels throughout a campaign (i.e. a primary catalyst gauze s lifetime before it is exchanged) develop as in a one burner plant. (a) limitation to existing production capacity This criterion has been eliminated, because the danger that ERU subsidies may trigger additional HNO 3 -production beyond business as usual is not justifiable. Production costs are far higher than the pro rata ERU-revenues earnable per production unit. (b) no effect on HNO 3 production Eliminated, because there is no justification for this criterion. N 2 O abatement does not affect nitric acid production. (c) no NSCR installed This criterion has been eliminated, because NSCR could in principle be used for N 2 O abatement within a JI context. (d) no other GHG emissions This criterion does not address a question of applicability as such. If other GHG emissions occur, this question has to be addressed by designing the monitoring plan so that it includes these non-n 2 O emissions. (e) continuous N 2 O measurement possible This criterion does not address a question of applicability as such. If monitoring is not possible / is complicated, a more appropriate and differentiating discussion can take place within the discussion of the monitoring aspects associated with the project. The following baseline scenarios must be included in the identification discussion: - In case regulatory limits apply that influence baseline emissions, these are only regarded as relevant for the baseline scenario identification, if they were already existent at the time where the Crediting Period started. This is also the case, if such regulation is already existent when the Crediting Period started, but comes into force only at a later time (like TA Luft). If, however, a regulatory limit only comes into existence after the Crediting Period will have started, this shall not be treated as directly affecting the baseline scenario, but shall be dealt with by taking it into account as an AM0034 regulatory emissions factor (EF reg, see page 8 of AM0034, ver03.2) instead. - In cases where regulatory limits apply (be it by directly determining the baseline scenario identification process or as EF reg -value applied during the course of the project), catalyst operation without optimisation of abatement performance must be discussed. - Barrier analysis must be undertaken taking into account the host country situation and the wider European Union context. - Regardless of which technology is employed, the Investment Analysis can be undertaken using a Simple Cost approach, because operating N 2 O abatement technology does not yield any other benefits besides revenues from ERUs awarded for demonstrated emission reductions.

16 Joint Implementation Supervisory Committeepage 16 NCSG NCSG measurements for Baseline based on reduced sampling frequency - Step 5 of the AM0028 baseline scenario identification procedure (to which AM0034 refers) is not required for this JI project, because the project proponents are not applying for a renewable Crediting Period. AM0034 requires monitoring baseline emission levels using an EN certified AMS and a recording frequency of 2 seconds. For the Baseline period the calculation of the average NCSG result is based on daily emission measurements achieved with a continuous monitoring system. The plausibility of the datasets obtained during this time will be checked against operational parameters of the plant and also by comparison to the data achieved with the new analyser setup. This evaluation of plausibility will be made available to the verifying DOE during the first Verification of the project. VSG VSG calculation for Baseline and for the first part of the first project campaign with operational parameters of the production plant and reduced sampling frequency AM0034 requires monitoring baseline emission levels using an EN certified AMS and a recording frequency of 2 seconds. For the Baseline period the calculation of the average VSG result is based on calculations with operational parameters of the production plant. The recording frequency of these parameters is 4 hours. The plausibility of the datasets obtained during this time will be checked against operational parameters of the plant and also by comparison to the data achieved with the new analyser setup. This evaluation of plausibility will be made available to the verifying DOE during the first Verification of the project. TSG and PSG Recording frequency for NCSG, VSG, TSG and PSG Recording frequency for OPh, OTh, AFR and AIFR Baseline Campaign Length Crediting Period starting date TSG and PSG measurements for Baseline and for the first part of the first project campaign Recording frequency Recording frequency Project proponents may apply data sets of the first four months of a baseline campaign for establishing EF BL instead of using a complete campaign. Crediting Period starts with catalyst installation, which may already have taken place before the Final Determination AM0034 requires monitoring and recording of TSG and PSG results with a recording frequency of 2 seconds. For the Baseline period and for the first part of the first project campaign the VSG result is based on calculations with operational parameters of the production plant. For this period of time TSG and PSG results are not needed for normalization of the flow measurement and therefore these datasets are not available for that period. AM0034 requires monitoring and recording of NCSG, VSG, TSG and PSG results with a recording frequency of 2 seconds. The existing data logging system for emission monitoring at YARA Rostock has a recording frequency of 5 sec. Due to the stable plant operations with little fluctuations this recording frequency is sufficient the project purposes of documentation of N2O emissions. AM0034 requires and recording of OPh, OTh, AFR and AIFR every hour. At YARA Rostock, the results for OPh, OTh and AIFR are monitored continuously and recorded every four hours. The results for AFR are monitored continuously and recorded every hour. This recording frequency is sufficient due to the stable plant operation and represents the common practice at the YARA Rostock plant. AM0034 does not require a minimum length for a baseline campaign and an AM0034 CDM-project could in theory effectively cap the campaign at any time. Thus, instead of measuring a full campaign, data collected during the first four months of a baseline campaign can be used (unless the CL normal - value the average production of nitric acid over the last five historic campaigns before the baseline campaign as established in accordance with AM0034 demands an even shorter baseline campaign which must then be adhered to). This practice is conservative, because N 2 O emission levels increase over time the longer a primary catalyst gauze pack is used. A shortened campaign section will result in a lower average EF BL figure than the full campaign. A project s implementation may have already undertaken before the Determination procedures with the AIE have been initiated. However, if it can be clearly demonstrated that the project was initiated on the assumption of being able to use ERU revenues for financing the catalyst technology, then starting the project s operation before having received the host country Letter of Ap-

17 Joint Implementation Supervisory Committeepage 17 Monitoring Periods based on campaigns EFmin EFma,n Table: Deviations from AM0034 of the project. A prerequisite for this is that project proponents had already applied for a Letter of Endorsement or other non-binding permission for the intended project activity. A Verification can be undertaken for any part of a project campaign during which the quantity of nitric acid produced is at least equal to that produced during the period serving as the basis for assessing the EF BL -value. The establishment of a minimum project emission factor is not necessary The establishment of a moving average emission factor is not necessary proval (LoA) cannot be interpreted as a sign of non-additionality. If this procedure were not permitted, project proponents would in many cases be forced to install the N 2 O catalyst long after having received the LoA. This is because the N 2 O catalyst system can only be implemented during a scheduled plant shut down, which would not necessarily coincide with the issuance of the LoA. Most plants located in the European Union are operated for very long campaigns (up to one and a half years) and any extra shut down entails a loss of production, a deterioration of the primary catalyst gauzes and requires additional energy when restarting the plant. Under AM0034, emission reductions are assessed by comparing project campaign emissions to those of the baseline campaign. Due to the modification of not requiring full baseline campaigns as a basis for assessing EF BL, the value obtained is a conservative representation for the underlying hypothetical baseline emissions for any part of a project campaign of equal length (measured in tonnes of nitric acid produced). Due to the modification of not requiring full baseline campaigns as a basis for assessing EFBL, the value obtained is a conservative representation for the underlying hypothetical baseline emissions for any part of a project campaign of equal length (measured in tonnes of nitric acid produced). Therefore, the establishment of EFmin is not necessary. Due to the modification of not requiring full baseline campaigns as a basis for assessing EFBL, the value obtained is a conservative representation for the underlying hypothetical baseline emissions for any part of a project campaign of equal length (measured in tonnes of nitric acid produced). Therefore, the establishment of EFma,n is not necessary. Applicability of AM0034 taking into account the above modifications The methodology is applicable to project activities intending to use secondary N 2 O abatement at a nitric acid plant. Plant 2.02 consists of two ammonia burners feeding into one absorption tower, the off-gasses of which are emitted through one stack. The ammonia oxidation reactors of each plant are operated synchronously, i.e. the primary catalyst gauzes are used for identical spans of time and always exchanged at the same shut-down. In fact, it would not be possible to run a plant with one ammonia burner only, because the ammonia flow to both burners can only be regulated for both burners jointly. In consequence, the mode of plant operation is in fact identical to the standard set up (one reactor, leading into one absorption tower and on to one stack) with regard to JI project implementation. Secondary N 2 O catalyst systems have been inserted into both ammonia reactors during the last shut down; the abatement systems have been installed underneath the primary catalyst gauzes. This corresponds to the defined scope of the methodology. Also, the project activity does not lead to the shut down of any N 2 O abatement devices already installed. At the time of the project start, there was no N 2 O abatement technology in place. Moreover, the project activity will not increase NO X emissions. The secondary catalyst technology to be installed has no effect on NO X emission levels. This has been scrutinised in industrial testing over extended industrial process application 33. In addition, the regular and compulsory NO X tests conducted by YARA under 33 See the European IPPC Bureau publication Integrated Pollution Prevention and Control; Reference Document on Best Available Techniques for the Manufacture of Large Volume Inorganic Chemicals Ammonia, Acids and Fertilizers (Au-

18 Joint Implementation Supervisory Committeepage 18 the supervision of the responsible local environmental authority would reveal any changes in NO X emission levels. Any changes in applicable NO X -limits will be taken into account by YARA Rostock. For the reasons provided in the following section B.2 (see heading NO X regulation) below, an impact on the baseline scenario is not very likely. B.2. Description of how the anthropogenic emissions of greenhouse gases by sources are reduced below those that would have occurred in the absence of the JI project: Identification of the baseline scenario The approved baseline methodology AM0034 (Version 03.2) refers to AM0028 (Version 04.2) with regard to the identification of the baseline scenario. These methodologies were adapted to the JI specific context as described in section B.1 above. Furthermore, the following steps are based on the Combined Tool to identify the baseline scenario and demonstrate additionality (Version 02.2) 34 Step 1a Identification of alternative scenarios to the project activity 1.1 Assessment of the present situation At the time of the intended starting date of the JI project activity, no N 2 O abatement technology had been installed in the plant. Therefore, all scenario alternatives dealing with continuing the operation of already installed N 2 O abatement catalysts do not apply in the context of this project. 1.2 Most realistic scenario if no JI revenues for N 2 O reductions achieved are available The realistically feasible scenario alternatives are: Status quo: The continuation of the current situation, without installing any N 2 O abatement technology in the plant Modified Status quo: The continuation of the current situation without installing any N 2 O abatement technology in the plant before October 2010; only from then onwards an N 2 O catalyst system will be installed to meet the requirements of TA Luft 35 Installation of Non-Selective Catalytic Reduction (NSCR) De-NOx system Installation of an N2O destruction or abatement technology: o Tertiary measure for N2O destruction o Primary or secondary measures for N2O destruction or abatement In principle, none of these scenario alternatives are ex ante unrealistic or technically unfeasible. Scenario alternatives such as changing to another production method or using the N 2 O emitted for other purposes that have to be dealt with under AM0034 are not taken into perspective here, because they are no realistic alternative given the present plant layout and the general procedures of nitric acid production. gust 2007), page 124 f. therein. This source states that NO yields for the ammonia oxidation reaction remain unchanged when operating secondary N 2 O abatement catalysts. 34 AM_Tool_02, provided by the CDM EB in its 28 th Meeting; published on the UNFCCC web site under 35 TA Luft is binding for installed production capacity 8 years after its coming into force; it came into on the first day of the third month after its publication which was 30 th July In consequence, the coming into force of the TA Luft was 1 st October 2002, making it binding for installed capacity from 1 st October 2010 onwards.