Promoting Industrial Water Efficiency in China

November 13, 2013

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China is Facing Serious Water Scarcity

Only 2,000 m3 of freshwater resources available per person

• Close to UN “stressed” levels Water supply-demand gap

at 50 billion cubic meters• Risk for economic growth

Untreated wastewater causing increasing pollution

• Adds to water supply problem Chinese government

focusing on “supply” solutions

• South-North Diversion Project • Seawater desalination

Water Availability in China is Unevenly Distributed

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Industrial Water Demand Continues to Grow…

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Water Tariffs are Rising….But Still Cheap

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What other “valuable” resource can you buy for 30 US cents per ton?

IFC Program: Demand Side Water Management

Business Case

Market Awarenes

s

Access to

Finance

Help private sector address business risks, reduce costs, and grow

sustainably

Beyond simple modifications to projects with significant developmental impact

Beyond consultant audits to facilitate project financing via IFC partner banks

Work with industry associations, NGOs, and government stakeholders to leverage impact

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Challenges in Promoting Water Efficiency

Energy Efficiency (EE) Strong business case due to relatively high energy prices Strong Chinese government support for energy security

reasons Mandatory reduction targets and financial incentives Global interest because of direct linkage to GHG

reductions EE modifications typically do not require process

modifications

Water Efficiency (WE) Weak business case because of very low water tariffs Weak or inconsistent local enforcement for wastewater No single central agency responsible for water issues in

China Water scarcity considered a regional or local issue WE typically requires plant-specific technical solutions8

Conducted Sector Screening

Textile Dyeing & Printing

Pulp & Paper

Chemicals

Pharmaceuticals

Dairy Processing

Food and beverage

Semiconductors

Metal plating/finishing

Petrochemicals

Power plants

Iron & Steel

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Focus on sectors that are water AND energy intensive AND under regulatory pressure

Better Business Case Better Replication/Scale

Dropped sectors mostly dominated by SOEs in China

Petrochemicals Iron & Steel

Evaluated industries that are inherently water intensive

Physical/Regulatory risks Reputational Risks

First Sector Targeted: Textile Dyeing & Printing

• Economically significant for China USD 254 billion in textile exports 50% of global fiber production 2,500 dyeing and finishing (wet processing) mills

• Uses a lot of water, energy, and chemicals 8 billion tons freshwater per year 50 million tons coal equivalent (TCE) per year No.2 in chemical oxygen demand (COD) and No.3 in

wastewater discharge among 39 industries

• Focus for global brands, NGOs, regulators Rising labor costs forcing attention on WE/EE Supply Chain Sustainability

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Dyeing and Printing uses up to 200 tons of water per ton of fabric

Case Study: Fabric Dyeing & Finishing Mill in Guangdong

• IFC developed cost-effective projects

Improve metering, replace inefficient dyeing machines, recycle hot wastewater etc.

• Estimated developmental impact Save 0.54 million m3/yr water Save 16,830 MWh/yr energy Avoid 5,340 ton/yr GHG emissions

• Facilitating financing via IFC partner bank

6 million RMB loan at 3-yr tenure; consistent with payback period

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IFC Program Results .. The First Year

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Demonstrating Business Case for WE Projects

Firm level advisory and audits at 22 textile facilities Developed 47 cost effective projects with payback

from 6 months to < 4 years Could save 15 million m3/yr water and 300,000

ton/yr GHGs if all projects implemented

Promoting Water-Efficiency Financing

Total investment needs 200 million RMB and operational cost savings about 70 million RMB

Bank of Beijing evaluating proposals worth 55 million RMB

IFC evaluating direct investment in clean technology equipment/chemical vendors

The Bottom Line….Connecting the Drops

• Water stress in China is real• Climate change impacts could further impact

water availability and impede economic growth

• Industries need to act now to manage operational and regulatory risks

• Many water efficiency projects do make good business sense especially if they also save energy

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