Yokohama, Japan - JGC Corporation and its partners, Marubeni Corporation, and Daioh Construction Co., Ltd. have reached an agreement with The Zhejiang Juha Co., Ltd (hereinafter referred to as Juha), a chemical products manufacturing company in Zhejiang province, China. The agreement involves the establishment of a CDM (Clean Development Mechanism) project in a joint effort to help reduce GHG (Greenhouse gas) emissions.
In terms of volume, this CDM project is among the world’s largest involving GHG emission reductions. It also represents the first undertaking by Japanese companies to develop and establish such a project in China.

1. Overview of the Business

The operator of the Juha CDM project is the JMD GHG Reduction Co., Ltd (hereafter referred to as JMD, see Note 1) which was jointly established by JGC, Marubeni and Daioh, with JGC in a leadership role.
JMD will be involved in the recovery and decomposition of the GHG, HFC23, emitted by Juha’s HCFC production plant in Chuchou city, Zhejiang, China. Through the operation of this process, JMD will earn emissions credits.
JMD and Juha signed the CDM agreement on August 11 in Hangzhou city, Zhejiang, China.

The Juha CDM project will be capable of bringing about huge reductions in GHG emissions, equivalent to a total of 40 million tons of CO2, which is by far the world’s largest reduction in terms of volume in a single project of HFC23 decomposition.

2. CDM Business Scheme

Under the Juha CDM project agreement, JMD is to provide Juha with HFC23 decomposition technologies, as well as complete funding for the construction of the decomposition and related facilities. Juha is to construct and operate the decomposition facilities. While JMD will earn the emissions credits obtained from the decomposition, which the company can then offer to users of emissions credits in Japan.
Responsibilities among the investing partners are divided. Development and management of the Juha CDM project will be carried out by JGC; emissions credits sales will be handled by JGC and Marubeni; while Daioh is to provide the HFC23 decomposition technologies (see Note 3, The Juha CDM Business Scheme).
Most of the profits earned by the Juha CDM project are to be used to fund environment-related projects carried out by the Chinese government.

3. Significance of the Juha CDM Project, and its Business Schedule

As part of the Kyoto Protocol adopted in 1997, Japan became committed to reducing its collective emissions of GHG by 6% below1990 levels during the five-year period (the initial commitment period) spanning the years from 2008 through 2012. Based on 2003 statistics, the emissions in 2010 are projected to have increased by 6% or more over those levels. Therefore, to achieve its commitment, Japan has to reduce its emissions by 12% or more by the year 2010.
However, further reduction is not easy in Japan because severe energy-saving measures have been already fully implemented. Thus, Japan faces the challenge of obtaining over 20 million tons per year of emissions credits through CDM projects in developing countries.
On the other hand, the emissions credits of the Juha CDM project are expected to be the largest amount ever earned by any individual CDM project, either planned or in actual operation. Consequently, the Juha CDM project will contribute greatly toward achieving the goal set for Japan in the Kyoto Protocol. Also, the Juha CDM project is the first CDM project involving cooperation between Japan and China. China is a strong prospective host country for CDM projects. All things considered, the Juha CDM business holds significant promise.
The Juha CDM project must gain the approval of the Japanese and Chinese governments, as well as undergoing an examination and registration by the UN. Construction of facilities is expected to start by the end of this year, with the decomposing of the GHG, HFC, beginning by early 2007.

4. Development of the Juha CDM Project, and Each Company’s Commitment to GHG Reduction Efforts

Using its accumulated engineering technologies and project management capabilities garnered through numerous large-scale oil refining and natural gas projects overseas, and under its corporate philosophy, "Engineering for the Quality of Human Life," JGC has been active in environment protection businesses ranging from the efficient use of energy to the development of new types of clean energy. As for global warming issues, JGC set up a GHG reduction initiative team in 2002 to focus on greenhouse gas reduction-related businesses. Since then, the team has covered a lot of ground. It constructed the information infrastructures necessary for developing CDM projects, developed CDM project software tools, explored potential projects, and conducted feasibility studies. In the development of CDM activities, JGC is working on a number of projects including flare gas recovery and utilization in oil and gas fields in the Middle East, CO2 underground storage at LNG plants in Southeast Asia, and the decomposition of non-CO2 GHGs (e.g. N2O and fluorocarbons) in Asia and Eastern Europe.
During 2003, JGC began development of the Juha CDM project. JGC has since worked diligently on the project conducting feasibility studies and research on the CDM business in China, creating a basic scheme for implementing the business, conducting technological verification, sending CDM related information to the organizations concerned, and lobbying the Chinese and Japanese governments. The signing of the agreement on the Juha CDM business marks the first CDM project for JGC, and this has brought great joy to our company, which encourages as a corporate philosophy contributions to environmental protection. With this successful development, using its excellent marketing ability and engineering technologies, JGC adds to its catalog of environmental protection projects which already include CO2 underground storage and flare gas recovery. JGC is committed to fostering project developments which help attain the goals of GHG reduction.

Marubeni Corporation established its Environment Business Committee in 2004. One of the subcommittees, the Emission Credit Committee, focuses exclusively on emissions trading businesses. In addition, Marubeni set up the Emission Credit Business Team in April 2005 to focus on emissions trading. The company aims to operate an emissions credits-related, one-stop-shop type of business.
Meanwhile, for the electricity and manufacturing industries, Marubeni has been promoting renewable energy projects (geothermal power, wind power ) since the 1990s, along with starting electric power consolidation businesses (sales of electricity and green notes) in the UK. Furthermore, the company is promoting various CDM/JI projects including the Juha CDM project. Other projects include wind power in S. Korea and methane gas reduction in the mining fields of Central Asia. And, it is now studying the feasibility of power generation in metropolitan areas, as well as regional general development businesses in association with GHG reduction.
Marubeni Corporation is committed to the active development of emissions trading businesses utilizing its abilities as a general trading company in an alliance between the CDM/JI projects development department and the emissions credit business team.

Daioh Construction Co., Ltd. is a mid-sized general contractor with interests throughout Japan, and with offices in Kochi and Tokyo. The company is active in the GHG reduction business. It sells fluorocarbon decomposition equipment and provides fluorocarbon decomposition services using its proprietary super-heated steam decomposition technology. Daioh established a wind power business division in 1999, becoming the first wind power engineering contractor in the domestic construction industry. Since then, it has constructed a total of 53 wind power farms around Japan.
Daioh feels great satisfaction in knowing its proprietary technologies are contributing toward the reduction of GHG--the largest environmental challenge in human history--through the Juha CDM project. Daioh is committed in its efforts toward finding solutions for environmental problems.

The Zhejiang Juha Co., Ltd is the largest manufacturer of fluorine products in China. It was established by merging the Great Group companies in 1998 as a core member company of the group, and the same year it listed its stock on the Shanghai Stock Exchange in China. The company has approximately 8,000 employees.
Its major products are chemical raw materials (chloral alkali and carbon chemical products) for HFC, fluorine resins, fluorine fine chemicals, and fluorine chemical products. The products are shipped not only domestically but also to over 30 countries.
Faced with the threat of serious environmental problems, the company is taking measures to assure environmental protection and harmony between mankind and nature in keeping with its growth strategy, "for blue skies, clean water, and happiness for society."
The Zhejiang Juha Co.,Ltd feels considerable pleasure in the knowledge that the CDM project between Japan and China will be carried out at one of its HCFC production plants, and that through the Juha CDM project it can contribute toward reducing GHG in China and the world.

Note 1) Overview of JMD Greenhouse Gases Reduction Co., Ltd

Note 2) HFC２３ Decomposition Technology

The HFC23 decomposition technology was developed by Daioh Construction Co., Ltd and Tohoku Electric Power Co., Inc. The technology uses the super-heated steam reaction method patented by Daioh and Tohoku Electric Power Co., Inc. The technology has superior decomposing abilities with fluorocarbons and other flame resistant compounds. The technology design incorporates simplicity, a high level of safety, and a high level of energy saving. The equipment is manufactured and sold by Daioh, which has sold over 30 decomposing systems in Japan. The Daioh equipment holds a dominant share in the fluorocarbon decomposition specialty equipment market.

Note 3) The Overall CDM Business Scheme