Green Stocks Phase I Report - Cement Industry.pdf

CEMENT INDUSTRY RESPONSIBLE INVESTMENT IN THE CEMENT INDUSTRY STILL A LONG WAY TO GO The Institute of Public and Environmental Affairs Lvse Jiangnan Green Hunan Syntao 06-18-2013 Green Stocks – Phase I Report 1 Authors The Institute of Public and Environmental Affairs Lvse Jiangnan Public Environmental Concerned Center Green Hunan SynTao Partner Organizations Friends of Nature Nature University Envirofriends Nanjing Greenstone Chongqing Two River Volunteer Service Development Centre Green Anhui Many thanks to the SEE Foundation, Energy Foundation and other foundations for their continued support. Translation Accuracy Disclaimer This document has been translated by IPE for the purposes of reference only. Due to the difficulties of translation slight differences may exist. If any questions arise related to the accuracy of the ination contained in this translation, please refer to the Chinese version of the document which is the official version of the document. Any discrepancies or differences created in the translation are not binding and have no legal effect for compliance or enforcement purposes. 2 Contents 1. Foreword ............................................................................................................................... 4 2. Background ............................................................................................................................ 7 2.1 Massive Industrial Emissions ........................................................................................... 7 2.1.1 Hazy Conditions Intensifying .................................................................................... 7 2.1.2 Massive Volume of Industrial Emissions .................................................................. 7 2.1.3 Responsibility for the Management of Industrial Emissions is clearly defined ........ 9 2.2 Large Air Emission Volumes from the Cement Industry have had a big Impact on the Environment ........................................................................................................................ 10 2.2.1 Production in the Cement Industry is on a Massive Scale ..................................... 10 2.2.2 Pollutant emissions from main production steps in the cement Industry ............. 11 2.2.3 Major Air Pollutants Released by the Cement Industry ......................................... 13 2.2.3.1 Huge Discharge of Particulate Matter PM ........................................................ 13 2.2.3.2 Large Volume of NOx Discharge .......................................................................... 14 2.2.3.3 Enormous emissions of Greenhouse Gases GHGs ............................................ 15 2.2.3.4 The Cement Industry is a Major Industrial Source of Heavy Metals in China ..... 15 2.2.3.5 Energy Intensive and a Big Consumer of Coal ..................................................... 16 2.2.3.6 Quarry Exploitation and Damage to Ecosystems ................................................ 18 3. Target and ology ..................................................................................................... 19 3.1 Using Green Investment to Drive Green Production ................................................... 19 3.1.1 International Experiences ....................................................................................... 20 3.1.1.2 International Case Studies ................................................................................... 21 3.1.2 Conditions in China ................................................................................................. 22 3.2 ology ................................................................................................................. 29 4. Green Invest Tools have been developed ........................................................................... 31 4.1 Green Stocks Website ................................................................................................... 31 4.2 Green Stocks uation Tool ....................................................................................... 32 4.2.1 Listed Companies uation Chart uation Criteria Explained ....................... 32 4.2.2 Investor uation Chart uation Criteria Explained....................................... 35 5. Findings............................................................................................................................. 38 3 5.1 Green Stocks - Cement Industry Investigation Process ................................................. 38 5.2 Common Environmental Violations at Listed Companies in the Cement Industry ....... 38 5.2.1 Environmental Records for 17 Listed Cement Companies ..................................... 39 5.2.2 Key Cases ................................................................................................................ 44 5.3 Responses from listed companies and investors to cement industry pollution issues . 55 5.3.1 Most Listed Companies take an evasive Position towards Pollution Issues .......... 55 5.3.2 Most of the Investors have not provided adequate responses ............................. 60 6. Recommendations ............................................................................................................... 63 Appendix I ........................................................................................................................ 64 Appendix II ....................................................................................................................... 65 4 1. Foreword Over the past few years China’s air pollution problems have become increasingly serious and many regions have experienced smog on a large scale that has persisted for long periods of time. This has had a huge impact on residents’ quality of life and health, and has attracted a huge amount of attention from the general public. The key to this problem remains to be that emissions discharge is still well in exceedance of environmental capacity. Energy intensive industries like thermal power production and steel and cement production are the largest sources of pollution emissions. For these capital-intensive enterprises, Green investment can be used to push for pollution control. A number of environmental NGOs have spent two years in cooperation with specialized institutions to develop a tool for Green Investment. During the press release for the report, the IPE officially launched the “Green Stocks Database” on the IPE website Simply by typing in the name or ticker symbol of a listed company, investors can find the environmental supervision records of its subsidiaries and affiliates. Due to its significant impact on the environment, the cement industry has been chosen as the first industry to be tackled under the Green Stocks project. China produces more than half of the world’s cement, the manufacturing of which consumes a large amount of fuel and electricity. This is required for processes such as grinding and high temperature calcinations. During these processes pollutants such as particle matter PM are also released. Dust emissions from the cement industry account for approximately 30 of total national industrial dust emissions, and NOx emissions account for 10-12 of total national NOx emissions. These contribute directly to the ation of hazy conditions. Furthermore, the cement industry is also a source of greenhouse gasses and mercury. The investigation found that many cement companies have pollution issues. Cement companies with pollution problems included industry leading listed companies that have violation records for frequently exceeding discharge limits. A search on the Green Stocks website found more than 170 environmental supervision records for 17 listed cement companies. A more in-depth on-site investigation by Lvse Jiangnan, Green Hunan and IPE, uncovered some pollution issues affecting the environment and residents near to affiliates of Tianshan Cement Company and Nanfang South Cement Company. The environmental NGOs contacted 17 listed companies to in them of the aforementioned pollution problems. However, it was regretful that out of the 17 companies, 16 of them took an evasive stance towards their environmental violation problems. China National Building Materials Group Corporation CNBM,3323.HK, in holding of CUCC and South Cement, stated that, “If you NGOs have not received a reply to the letter it is probably because the company felt the contents of the letter was of no interest.” Jilin Yatai Group 600881.SH claimed that, “It was not 5 clear how a reply should be given.” BBMG Corporation 601992.SH, 2009.HK replied saying, “If we feel it’s necessary we will follow up and contact you.” To date, the only company that has responded showing a willingness to follow up has been Lafarge SA FR0000120537. Other listed companies such as Tangshan Jidong Cement Co., Ltd. 000401.SZ, Anhui Conch Cement Company Limited 600585.SH, 914.HK and Huaxin Cement Co., Ltd. 600801.SH did not respond at all to inquiries about their records for emissions discharge in breach of regulatory standards. The environmental NGOs also attempted to contact domestic and foreign investors in these companies, but the results have been disappointing. Amongst those large scale mutual fund companies in China, Borsera Funds, which invests heavily in Anhui Conch Cement and Huaxin Cement, replied stating that the investment services provided by the fund to its client has only one goal and that is to make a profit for the client. Harvest Funds confirmed that they had received the letter but made no follow up. Franklin Templeton Sealand Fund Management Co., Ltd. did not give any kind of response. Amongst the investors there was no shortage of big name foreign cement companies and well known international investment institutions. Their responses can be split into different groups. JP Morgan and Merril Lynch International, as well as Germany’s Heidelberg Cement and Switzerland’s Holcim did not respond at all. A number of other foreign investors responded proactively. Both T. Rowe Price and KKR Clinker calcination rawmix is fed through the preheater or precalciner system before entering the kiln for calcination until partially molten. During the process the rawmix turns into a material called clinker or calcium silicate - cement’s primary constituent; Cement Grinding the clinker, together with gypsum or sometimes mixed-compounds and additives, are ground together to make cement. Pollutant Release Cement production goes through multiple production line operations to turn raw materials into cement. These not only include physical crushing and milling, but also the process of heating and chemical reactions to break down raw materials. Every process releases different amounts of PM both fugitive and controlled, and the kiln releases 70 of the controlled PM emission and nearly all of the total air pollutants SO2, NOx, Fluoride etc.. ? Bulk Cement transfer station and the production of Cement products Process The bulk cement transfer station is where cement products are warehoused. Main equipment includes ship un-loaders, air supported conveyor belts, elevators, silos and bulk packing machines. The production of cement products include 1 ready-mixed concrete and mortar 2 precast concrete excluding the on-site mixing of cement. Pollutant Release Silos in the distribution center usually have dust collectors mounted on top bottom, usually as a single bag dust collector. Discharge ports and transfer points install dust collectors to collect dust for separate or collective treatment. Major pollution release is at the and output of the silo, which requires dust filters and collectors i.e. bag collectors. Other emission points include the hopper, mixer and transfer belt. Water spray is required to control the dust for the production processes. 13 2.2.3 Major Air Pollutants Released by the Cement Industry 2.2.3.1 Huge Discharge of Particulate Matter PM It is estimated that PM emissions from the cement industry account for 15-20 of total PM emissions in China. Statistics from the MEP show that the cement industry releases 30 of China’s national industrial dust emissions.9 An article from the Cement Guide for New Epoch states that, 10 “According to a rough calculation based on the national dust emission standard of 50mg/Nm3 per kiln, one clinker production line with a capacity of 5000 t/day will release 750kg of dust per day. When this continues day after day, year after year, it can have a massive impact on the environment. In particular, microscopic dust particles cause the most serious damage to the human respiratory system.” Wu Shangan, secretary of the Bag Filter Committee of China Association of Environmental Protection Industry, has stated that, “PM2.5 discharge from the cement industry accounts for a substantial percentage of total national PM2.5 discharge. In other words, PM2.5 emissions are likely to be high under normal production conditions.” Atmospheric emissions from the cement industry can be characterized by their source in the cement production processes. There are thermal processes and “cold state” operations, both of which produce emissions of PM. Table 4-1 Classification of emissions from cement plants Emission source Production Equipment Facilities Emission Pollutants under classification of GB4915 Thermal process Combustion Kiln Chimney Dust, air pollutants Kiln it can penetrate deep into the lungs and cause serious harm. From there particles can enter the bloodstream and affect the whole of the body. The sources of PM2.5 can be split into natural sources and man-made sources. Man-made sources include primary and secondary particulate matter. Primary particulate matter includes direct pollution source emissions like coal soot, industrial dust, vehicle exhaust, construction and road dust. Secondary particulate matter is ed when complex chemical reactions happen with atmospheric pollutants like sulfur oxide, nitrogen oxide, ammonia and volatile organic compounds. This is the main source of PM2.5 in the atmosphere. 2.2.3.2 Large Volume of NOx Discharge NOx emissions from the cement industry accounts for 10-12 of total national NOx emissions, which makes cement production the third largest emission source for NOx after thermal power plants and vehicles. NOx is a primary air pollutant and has a direct impact on the ation of hazy conditions. Furthermore, another notorious pollutant that troubles big cities – ozone – is also ed via complex photochemical reactions of NOx and VOCs present in the atmosphere. 15 2.2.3.3 Enormous emissions of Greenhouse Gases GHGs The cement industry is second to only the power industry when it comes to national CO2 emissions, accounting for approximately 11