âComprehensive Utilization of Resourcesâ in China - ACS Publications

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Policy Analysis

Greening Industrial Production through Waste Recovery: “Comprehensive Utilization of Resources” in China Junming Zhu, and Marian R. Chertow Environ. Sci. Technol., Just Accepted Manuscript • DOI: 10.1021/acs.est.5b05098 • Publication Date (Web): 20 Jan 2016 Downloaded from http://pubs.acs.org on January 24, 2016

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Environmental Science & Technology

Greening Industrial Production through Waste Recovery: “Comprehensive Utilization of Resources” in China Junming Zhu*,1,2, Marian R. Chertow*,1 1. Center for Industrial Ecology, School of Forestry and Environmental Studies, Yale University 2. School of Public Policy and Management, Tsinghua University

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Abstract.

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Using nonhazardous wastes as inputs to production creates environmental benefits by

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avoiding disposal impacts, mitigating manufacturing impacts, and conserving virgin

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resources. China has incentivized reuse since the 1980s through the “Comprehensive

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Utilization of Resources (CUR)” policy. To test whether and to what extent

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environmental benefits are generated, 862 instances in Jiangsu, China are analyzed,

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representing eight industrial sectors and 25 products that qualified for tax relief through

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CUR. Benefits are determined by comparing life cycle inventories for the same product

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from both standard and CUR-certified production, adjusted for any difference in the use

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phase. More than 50 million tonnes of solid wastes were reused, equivalent to 51% of the

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provincial industrial total. Benefits included reduction of 161 petajoules of energy, 23

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million tonnes of CO2 equivalent, 75,000 tonnes of SO2 equivalent, 33,000 tonnes of

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NOX, and 28,000 tonnes of PM10 equivalent, which were 2.5%-7.3% of the provincial

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industrial consumption and emissions. The benefits vary substantially across industries,

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among products within the same industry, and when comparing alternative processes for

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the same waste. In this first assessment of CUR, results show that CUR has established a

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firm foundation for a circular economy, but also suggest additional opportunities to refine

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incentives under CUR to increase environmental gain. *

Corresponding authors: Junming Zhu, email [email protected]; Marian Chertow, email [email protected], phone 203-432-6197.

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ACS Paragon Plus Environment


TOC Art

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Introduction

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Industrial production generates substantial quantities of wastewater, solid materials, by-

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products, and waste gases. Efforts to reuse nonhazardous wastes have gathered increasing

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attention, arising from both resource sharing among proximate firms as instances of local

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industrial symbiosis1, 2 and on larger scales across a region or country.3, 4 Quantification

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of reuse benefits indicates that taking waste back into industrial production as a feedstock

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not only preempts waste disposal and virgin resource extraction, but also makes the

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manufacturing processes cleaner with reduced energy consumption and fewer emissions.3,

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5-8

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such as bans on landfilling certain types of waste, landfill taxes, and incineration taxes in

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European countries9 and investment subsidies for recycling projects in Japan.10

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From an environmental economics perspective, however, policy instruments that focus on

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promoting recycling and reuse in general will not achieve social optima if they include

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only part of the process – such as at the end of life stage – but omit the production stage

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benefits of waste reuse. While instruments such as landfill charges or resource taxes can

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discourage disposal and encourage reuse, they do not currently differentiate between

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alternative reuse processes, meaning that waste is not routinely directed to the process

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that generates the greatest environmental benefits.11 Rather, we propose that production

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from waste inputs should be recognized as a clean alternative and given incentives based

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on the intensity of pollution mitigation through waste recovery relative to the baseline

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production. A two-part instrument of a tax for pollution and a subsidy for clean

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alternatives is preferred in many situations at least in theory.12, 13 In practice, however,

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whether and to what extent different industrial processes are recognized for the degree to

To make reuse and recycling viable, a variety of policy instruments have been used,

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which they use waste by-products needs further refining and should depend on the

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benefits of reuse relative to the cost of acquiring information and enforcing the policies.

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In other words, additional costs for refined policy design and enforcement would be well

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justified if additional benefits from differential waste reuse were large enough.

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To contribute to the discussion and policy-making for nonhazardous industrial waste

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management, this article evaluates a variety of industries and processes that benefit from

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using wastes as feedstocks. A comprehensive dataset of individual waste reuse activities

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was collected based on information from 755 firms and 862 reuse processes in China’s

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Jiangsu Province in 2011. These firms belonged to eight major industrial sectors. Because

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of their use of waste inputs, they were certified by the government and third-party

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organizations for tax relief under the “Comprehensive Utilization of Resources” (CUR)

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policy in China. To quantify the benefits, 25 representative products are selected. For

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each product, two life cycle inventories (LCIs) are built, one based on an analysis of

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standard production processes and the other based on processes featuring reuse with

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CUR-certified inputs. A comparison is made for alternative LCIs of the same product,

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after adjusting for any difference in product function and quality that may affect use

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phase inventories.

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The total amount of CUR-certified wastes reused is quite significant as analyzed here

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with more than 50 million tonnes in 2011 (Table 1), equivalent to 51% of total industrial

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solid waste generated in Jiangsu province.14 The total benefits in energy saving and

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emissions reduction are equivalent to 2.5% of energy consumption of the entire industrial

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sector in Jiangsu Province, 3% of its CO2 emissions, 7.3% of SO2 emissions, 2.8% of

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NOX emissions, and 5.8% of particulate matter emissions. The energy saving alone was

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equivalent to 40% of total non-hydro renewable power generation in all of China, or

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more than twice as much of all the nuclear and renewable power generation combined in

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Jiangsu in the same year. The scale and type of benefits, however, are greatly

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heterogeneous across industries and across processes and products within an industry.

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The same waste is also associated with different scales and types of benefits when used in

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different manufacturing processes.

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With more than three billion tonnes of industrial solid waste generated in China

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annually,15 the CUR policy and waste reuse in general have played a substantial role in

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the reduction of energy consumption and pollution emissions of Chinese industrial

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production. The benefits are important to the whole country, too, because the industrial

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sector is the major contributor of energy use and air pollution in China (figure 1). In

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particular, it supports China’s pursuit of a “Circular Economy16, 17” that improves

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resource productivity and sustainable development by reducing, reusing, and recycling

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across the whole society. Because of heterogeneity in scale and type of benefits in

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different reuse processes, however, greater environmental benefits can be achieved from

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more refined incentive schemes proposed here that direct waste streams to the processes

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of greatest environmental benefits.

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Figure 1. Analysis of the overall industrial contribution to total energy consumption and pollution emissions in China and in Jiangsu in 2012. Sources: National Bureau of Statistics of China,18 Ministry of Environmental Protection of China,19 and Jiangsu Statistical Bureau.14 82 83

Comprehensive Utilization of Resources in Jiangsu, China

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Quantification of environmental benefits in different industries and processes is made

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possible by the CUR policy in China, which offers comprehensive coverage and unique

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incentive schemes for industrial waste reuse. Although little known and not discussed in

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the environmental policy literature, the CUR policy has been in effect since the 1980s20

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as a means of encouraging the use of mining and industrial waste in production processes

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for resource conservation. Types of waste and reuse products covered by the policy have

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been updated every few years and the list has grown over time. Currently, the CUR

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policy works as a tax credit program for waste reusing firms, implemented by the

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Ministry of Finance, the State Administration of Taxation, and the National Development

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and Reform Commission.

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The program consists of one catalog that specifies qualified wastes, products from reuse,

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and associated levels of value-added tax return;21 one catalog that specifies wastes,

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products, and associated levels of corporate income tax deductible;22 and one regulation

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that specifies procedures for firms to be certified under CUR to receive tax relief.23

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Depending on the type of waste used, firms may enjoy up to 100% value-added tax

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rebates. Firms qualifying for corporate income tax relief enjoy a 90% taxable base, so

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that those with low profit would not pay any tax. Each firm that applies for CUR tax

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returns or deductibles has to: 1) use waste beyond certain percentages and produce

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specific products according to either of the catalogs, 2) comply with industrial policies

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and environmental standards, 3) be reviewed and certified by government agencies and

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third party examiners, 4) have its CUR information publicly noticed. The CUR process

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leads to high quality documentation and availability of waste reuse information for

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individual firms.

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Although CUR is promoted as a national policy, it is more popularly adopted in several

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well-developed regions. CUR activities in Jiangsu Province are selected for further

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analysis as the province is well recognized for meeting CUR objectives and because of

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the quality of documented reuse information. The reuse rate of industrial solid waste in

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the Jiangsu Province is above 90%,14 among the highest in the country, while the national

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average is 60%.15 The province has the largest industrial economy among all Chinese

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provinces, and accounts for 13% of national industrial output.18, 24 Its industrial structure

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is generally well balanced: except for a relatively smaller mining industry, most of the

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manufacturing industries produce greater than 5% of the national share of output. The

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two-digit manufacturing sector of waste recycling and reuse in Jiangsu represents 13% of

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the national share, and is 0.3% of the provincial industrial output.18, 24 Table 1. List of reuse quantity and output by waste and product categories. Products

Source of reused waste

Chemical & petrochemical basic chemicals fiber products rubber & tire other petrochemicals Metals Construction materials cement, mortar concrete products bricks, blocks gypsum, wallboard other construction Wood board

Quantity 1000 tonnes

Processes

Output Profit million RMB

waste water, gas, battery used fiber used tire used plastics, food refuse

863 277 68 88

32 7 9 6

791 1999 222 407

84 32 15 18

waste electronics, slag, catalyst, battery, chemicals

709

12

874

115

FA, MT, FGD waste, slag FA, MT, slag FA, RS, MT FGD waste FA, RS, MT

19961 11777 8304 1262 7775

152 238 287 28 30

13741 3905 1098 961 482

993 145 49 116 222

forest residue

3314

47

2964

217

waste heat, forest residue food refuse

65 21

7 4

78 130

28 -6

wastewater

4061

3

26

7

Energy & fuel heat biodiesel Reclaimed water

Total 58545 862 27678 2035 Note: Quantities of used tires and waste gas were reported in pieces and volume originally, and converted to weight in this table; the quantity of waste used for heat generation contains only forest residues, not waste heat. FA – fly ash, MT – mine tailings, FGD – flue gas desulfurization, RS – river and lake sediments.

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Documentation of CUR in Jiangsu includes, for each reuse process in each firm, the type

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and quantity of waste used, the percentage of waste in each feedstock, the type and

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quantity of product, equipment used, monetary output and profit. In total, 755 firms and

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their 862 reuse processes were certified for CUR in 2011 (table 1). They used as

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feedstock four million tonnes of wastewater, one million tonnes of waste gas, 667

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terajoules of waste heat, and 54 million tonnes of solid materials, which was equivalent to

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51% of total industrial solid waste generated in the province. These processes generated

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28 billion RMB of output and two billion RMB of profit. Most of the CUR firms were

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“regular” industrial producers rather than part of the two-digit manufacturing sector of

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waste recycling and reuse. In contrast, CUR activities of these industrial producers were

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characterized by five times more firms, a similar level of output, twice as much profit,

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and likely more waste recycling relative to the formal recycling sector.24

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These production activities belong to eight two-digit industrial sectors according to the

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Chinese Standard Industrial Classification System. They are further aggregated into five

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industries for better illustration:

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1) chemical and petrochemical products,

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2) metals,

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3) construction materials,

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4) wood board products,

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5) energy and fuel.

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The majority of reuse certified by CUR was in the construction materials industry,

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including production of cement, concrete, and gypsum board (Table 1). Popular waste

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feedstocks used in the industry as substitutes for primary production inputs included fly

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ash, coal mine refuse, other mine tailings, river and lake sediments, as well as residues

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from flue-gas desulfurization (FGD). Chemical and petrochemical manufacturing

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featured more diverse products, including basic chemicals, chemical gas, fibers, plastics,

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and rubber. Petrochemical products were mainly produced from recycling and

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remanufacturing of the same products, while chemical products were mainly derived

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from different waste inputs. Metals were recycled from various products containing

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ferrous, precious, and other non-ferrous metals. Manufacture of wood board and

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production of energy and fuel used residues from forest and agricultural production,

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industrial heat, and food. In summary, waste represented 35-75% of feedstock in

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construction materials and almost 100% by volume in the other processes reported in

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Table 1.

152 153

Quantifying Environmental Benefits of Waste Reuse

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To estimate both the aggregate benefits from waste reuse and the particular benefits for

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individual industries and processes, representative industrial processes are selected and

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evaluated using life cycle assessment (LCA). The results are then projected to all the

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processes for aggregation and cross-industry comparison. While detailed methods and

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data sources are provided as supporting information, this section explains the general

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strategies, methods, and data sources.

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A total of 25 generic processes are selected, from among the popular wastes and products

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in CUR activities, owing to their representativeness, generalizability to other reuse

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processes and also data availability. They include two types of wood board, five chemical

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and petrochemical products, ten construction products, five metals, and three energy/fuel

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products. The benefits of waste reuse in each process are determined by comparing its

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life cycle inventory (LCI) with the LCI of the average of standard processes that produce

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the same product. The main focus is on the entire upstream life cycle, but the downstream

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differences are taken into account when the products from a CUR process and its regular

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counterpart are different in function, quality or durability, and cause different emission

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inventories in the use phase.

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Because our focus is on the extent to which alternative industrial processes are improved

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by using waste inputs and also on the policy for more efficient reuse, avoided waste

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disposal is not included as part of the benefits. This also reflects intensive CUR activities

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and overall reuse rate of more than 90% in Jiangsu – when a given waste is not used by

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one process, it is likely reused by an alternative one rather than disposed. When reuse is

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less popular, it can be promoted by more common policy instruments, such as disposal

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charges, instead of complicated incentive schemes discussed in this article.

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Several steps have been taken to ensure that the comparison of alternative LCIs

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reasonably reflects the actual reuse benefits based on the reuse processes in practice and

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baseline production levels. First, 24 CUR firms were visited, and detailed interviews

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were conducted to understand changes to the production processes before and after using

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waste, substitutability of waste for original input materials, and any change in product

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function and quality. When possible, each firm’s production and emissions inventory was

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collected. Second, replicative inventories were collected from environmental impact

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assessments, cleaner production audits, or project evaluation reports for individual firms

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with the same reuse process, mainly by searching in online document repositories as a

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means of triangulating industry data. Inventories from multiple firms provide better

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representativeness. Searches were also conducted to identify and evaluate alternative

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processes for the same product not qualified for CUR. Third, product standards, industrial

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cleaner production standards, and the LCA literature on waste reuse provided additional

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information to make the inventories more complete or applicable in different cases.

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Stricter standards are selected as baselines to guarantee that benefits come from reuse

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rather than sampling bias. Fourth, when information was still limited, the substitutability

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of waste for virgin materials or fuel could be calculated according to materials and energy

194

balances and common conversion ratios used in industry.

195

In addition, energy related emissions in Jiangsu are explicitly modeled and used in other

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inventories. The inventory of electricity generation of the east grid containing Jiangsu is

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built based on the methods from Cai and colleagues25 and Henriksson and colleagues.26

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The inventory takes into account statistics for the composition of electricity generation,

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fuel source and the pollution control devices installed in each one of the more than 1000

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power plants in the east grid area in 2011. Emission factors for heat boilers and from

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burning other fuels are set up according to energy statistics, cleaner production standards,

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and greenhouse gas (GHG) protocols for China.27 Finally, the LCI database Ecoinvent

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3.128 is used for background inventories and when information from other sources is

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limited.

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The generic LCIs take the average waste reuse level from all of the CUR-designated

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processes with the same waste inputs and products, and can be directly applied to all of

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them. Other processes are estimated according to generic processes identified with the

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same products and similar waste inputs, keeping environmental benefits per unit of waste

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reuse the same. A few remaining processes with different products are estimated based on

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the overall average of the generic processes in the same industry, keeping environmental

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benefits per unit of physical output unchanged.

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Results from inventory analysis are classified and characterized into five categories for

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impact assessment: energy consumption, SO2 emissions, NOx emissions, GHG emissions,

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and particulate emissions. The first three are major indicators from China’s national

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policies,29 while the latter two relate to issues of broad public exposure – climate change

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and haze. By focusing on the five categories, benefits of waste reuse are linked to major

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environmental issues in China.

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Results

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Aggregate benefits of industrial waste reuse. The benefits from all of the CUR

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activities relative to average production of the same products are given in figure 2. All

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CUR activities led to benefits in all five categories. In total, 161 petajoules of energy was

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saved, and emissions of 23 million tonnes of CO2 equivalent, 75,000 tonnes of SO2

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equivalent, 33,000 tonnes of NOX, and 28,000 tonnes of PM10 equivalent were avoided.

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The mitigation was equivalent to 2.5% of total energy consumption, 3% of GHGs

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emissions, 7.3% of SO2, 2.8% NOX, and 5.8% particulates emissions by the entire

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industrial sector in Jiangsu in 2011.

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Total GHG emissions include CO2, CH4, and N2O, and are calculated based on provincial

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statistics and emission factors from fuel combustion and cement production, while the

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others are directly from the statistical yearbook. Because the industrial sector contributed

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to 77%-97% of energy consumption and air pollution within the province (figure 1), the

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benefits were significant for the whole society. To contextualize the total amount of

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energy saved through Jiangsu’s CUR in 2011, we find that it is equivalent to 40% of the

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total non-hydro renewable electricity generation in all of China. From a Jiangsu Province

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perspective, energy saved amounts to more than twice as much as the combined

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electricity generation from nuclear and all renewables in the province. Most of the

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mitigation was achieved in the construction materials sector, because it engaged of the

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most CUR firms and wastes. CUR in the metal industry also had a strong contribution to

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SO2 and particulate reductions, although the scale of waste reuse in the industry was

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relatively small.

161 PJ

Energy

Chemical

Metals

Construction

Wood

23 Mt

GHGs

Energy 75 Kt

SO₂ 33 Kt

NOₓ Particulate matter

28 Kt

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Figure 2. Energy savings and emission reductions from waste reuse relative to the industrial total energy consumption and emissions in Jiangsu. Benefits from individual firms are aggregated into five industrial sectors: chemical and petrochemical products, metals, construction materials, wood board products, and supply of fuel and energy. The absolute amount of reduction is shown on the right side of each bar. 241 242

Extent of benefits across industries. To see how much an average production process in

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each industry can mitigate its environmental impacts through use of waste inputs, the

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aggregate benefits in each industry are divided by the industry’s output (figure 3).

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Monetary output is used to enable comparison across the industry sectors. In general,

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using waste as a substitute for primary production inputs generated larger environmental

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benefits in manufacture of metals and supply of energy and fuel, and smaller benefits in

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manufacture of wood products. Specifically, waste reuse made different industries

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cleaner in different dimensions. Higher energy saving was achieved in chemical and

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petrochemical manufacturing and in supply of fuel and energy. GHGs and NOX

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mitigation was achieved to the greatest extent in supply of energy and fuel and

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production of construction materials. Reduction of SO2 and particulate was most

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significant in metals production, and to a lesser extent in fuel and energy supply. Such

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differences reflect the pollution profile of regular production. For example, petrochemical

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products rely heavily on petroleum, and metal production is associated with high

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emissions of SO2 and particulates. Potential benefits are therefore higher in energy saving

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in petrochemicals and in reduction of SO2 and particulate emissions in metals.

Figure 3. Environmental benefits per output in five industries when using waste as inputs. 258 259

Extent of benefits across products. We take a closer look at different products within

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the same industry to compare environmental benefits of waste reuse in production. As

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similar products within the same industry or similar industries are compared, benefits are

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measured on the basis of the same weight of products produced. Figure 4a compares

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chemical products and petroleum products (figure 4a). The differences in waste reuse

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benefits were not any smaller within an industry than between industries. The

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environmental impacts of producing man-made fibers and tires were greatly reduced by

266

using waste inputs, while the reduction of emissions in producing sulfur and diesel was

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much smaller. Like the varying types of benefits across industries observed above,

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differences in benefits across products may also reflect the differences in environmental

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impacts of the original production processes. One tonne of fiber or tire production is

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associated with much higher inputs and emissions than one tonne of sulfur or biodiesel

271

production, which are usually co-produced along with other major products. Therefore,

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potential benefits of reuse are larger in the former than in the latter.

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The same patterns are observed among products of construction materials (figure 4b).

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Being most intensive in energy consumption and carbon emissions, manufacture of

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cement realized the greatest benefits from using waste inputs. Mortar and concrete

276

products contained only a small percentage of cement. The benefits of waste reuse in

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producing these products were therefore proportionally smaller. Compared to the

278

variation across industries, benefits in producing products of the same industry featured

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much smaller differences in the composition of waste reuse benefits, because production

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and emission inventories were much more similar within an industry than across

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industries.

282

The contrast between petrochemical and construction industries is shown both in figure

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4a and 4b and in figure 3, with output measured in alternative ways. Comparing the two

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ways of measuring output reveals that the differences in benefits per output are much

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greater when output is measured in weight (figure 4) than in monetary terms (figure 3).

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Figure 4a and 4b are in scales of more than 20 times difference, while in figure 3 benefits

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from the two industries are three times different at most. While physical output may

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better associate with quantities of waste reuse, a higher monetary output of a

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manufacturing good often associates with higher total inputs, more complicated

290

processes, and, often, higher environmental impacts. As noted above, waste reuse usually

291

leads to more benefits in industries and products with higher environmental impacts

292

because there is more potential for improvement. Therefore, estimated benefits vary

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relatively more closely with monetary output than with physical weight.

294 295

Same product, different waste inputs. Two types of products in figure 4b – concrete

296

products and fired bricks – illustrate the same production with the use of alternative waste

297

inputs. While the production process is unchanged, concrete products are manufactured

298

with much less environmental impact when using fly ash than using mine tailings as an

299

input. This is because fly ash can substitute partially for cement in concrete, and mine

300

tailings only substitute for coarse and fine aggregate, i.e. usually gravel and sand. The

301

upstream production of cement has a high environmental footprint, as it is associated with

302

much more energy use and emissions than production of aggregate. Similarly, fired

303

bricks are produced with much less environmental impact using coal gangue than using

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fly ash or river and lake sediments, because coal gangue better replaces the part of the

305

brick production with high environmental impacts – coal use in a firing kiln. While the

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majority of the three types of wastes – coal gangue, fly ash, and sediments – serve as

307

substitutes for clay, coal gangue has greater heating value and can replace all of the coal

308

use. Fly ash and river sediments have much less heating value and replace only part of

309

the coal use.

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Biodiesel (food refuse)

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a CO₂ eq (kg)

CO₂ (waste gas)

SO₂ eq (g) NOₓ (g)

Sulfur (waste gas)

PM₁₀ eq (g)

Polyester fiber (used fiber) Retreaded tire (used tire) Polyethylene film (used film) 0

2000 4000 6000 8000 10000 12000 14000 16000 18000

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b

Cement (fly ash) Mortar (fly ash) Concrete (fly ash)

CO₂ eq (kg)

Concrete (mine tailings)

SO₂ eq (g) NOₓ (g)

AAC block (fly ash)

PM₁₀ eq (g)

Fired brick (fly ash) Fired brick (sediment) Fired brick (coal refuse) Fly ash brick (fly ash) Gypsum (FGD residue) 0

100

200

300

400

500

600

700

Figure 4. Avoided emissions in production of one tonne of (a) petroleum, chemical, and petrochemical products and (b) construction products with waste as inputs. Waste used in each product is shown in parenthesis. 310 311

Same waste, different products. Fly ash and residues from forestry and agriculture are

312

examples of waste that can be used in alternative processes to produce different products.

313

The benefits based on one tonne of waste reused for each different end use are measured

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and profiled in figure 5. The reuse processes with the largest benefits are scaled to 100% 19



315

in both illustrations so a comparison across processes can be quickly visualized. Fly ash,

316

for example, can be used as a waste input in six products of construction materials,

317

among which cement production benefits most environmentally. On average fly ash

318

accounts for 35% of material inputs in cement production, much smaller than 60% in

319

concrete products and 70% in bricks. But fly ash replaces cement clinker, the most

320

environmentally intensive component associated with heavy coal consumption and

321

carbon emissions during heating in a kiln; fly ash content also reduces electricity

322

consumption in grinding for cement production. In contrast, when used in mortar and

323

autoclaved aerated concrete (AAC) blocks, only a small portion of fly ash serves as a

324

substitute for cement, and the rest substitutes for gravel or sand, which have much less

325

environmental impact in upstream production. Other concrete products contain even a

326

smaller portion of cement than mortar and AAC blocks, and benefit less from using fly

327

ash. When used in fired bricks, the benefits of fly ash mainly come from its heating value

328

to replace coal use, which, however, is much smaller than the avoided coal use when fly

329

ash replaces cement clinker.

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Energy a

Cement Mortar PM₁₀ eq

CO₂ eq

Concrete AAC block Fired brick

NOₓ

Fly ash brick

SO₂ eq

Energy b

CO₂ eq

PM₁₀ eq

Heat MDF

NOₓ

SO₂ eq

Particle board

Figure 5. Avoided energy consumption and emissions by using the same waste in different processes: (a) one tonne of fly ash used in production of cement, mortar, concrete, autoclaved aerated concrete (AAC) blocks, fired bricks, and fly ash bricks; (b) one tonne of forest and agricultural residues used in production of heat, medium-density fiberboard (MDF), and particle board. The process with the largest reuse benefits is scaled to 100% thus constituting the boundary of each pentagon.

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330

Another example of alternative reuse methods creating different benefits is forest and

331

agricultural residues. In wood board production, a portion of the residues is used as

332

feedstock to replace wood chips and particles, and the rest – mainly barks that are

333

unqualified as feedstock – is used as fuel. Environmental benefits are smaller in

334

production of particle board, and larger in production of medium-density board (MDF),

335

because there is a higher portion of unqualified feedstock in MDF production that is used

336

for fuel and replaces coal. The largest benefits, however, come from use of residues

337

solely as fuel in heat boilers to generate heat or steam. According to the IPCC, reduction

338

of GHG emissions from biomass is mainly contributed by accounting for land use change

339

instead of direct CO2 emissions in the energy sector.30, 31 While this GHG reduction can

340

be argued against, with the presence of wood board production as a means of long-term

341

storage of carbon, other reduction in SO2, NOX, and particulates from using residues in

342

heat boilers is still substantial, because most heat boilers in Jiangsu and China in general

343

are coal-fired with high emissions of pollutants. When cleaner energy is used, however,

344

research shows that wood board production is the preferred reuse method.32

345

To show more clearly that the type of reuse process affects overall benefits substantially,

346

a scenario is explored where all the fly ash used in brick, mortar, and concrete is diverted

347

to cement production, and all forestry and agricultural residues used in wood board

348

manufacturing are diverted to heat generation. The overall benefits of energy saving and

349

emissions reduction from this counterfactual scenario is compared to the actual benefits

350

of CUR shown in figure 2. With no increase in any waste reuse in CUR, but simply

351

redirecting the two waste streams to processes of higher reuse benefits, the overall

352

benefits would increase by 28-37% (figure 6). As part of the construction materials

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353

sector, increased benefits are moderate in cement production, because many firms in the

354

industry are already actively involved in using waste, with 38% of total production

355

certified for CUR. Using fly ash currently used in other CUR activities would only lead

356

to an addition of 9% of cement production qualified for CUR. Energy GHGs

Chemical

Metals

Construction

Wood

Energy

SO₂ NOₓ Particulate matter 0%

2%

4%

6%

8%

10%

Figure 6. Contributions to industrial energy savings and emissions reduction from current CUR production (upper in each category, as in Figure 2) and a reshuffling scenario (lower in each category) where fly ash and forestry and agricultural residues in other reuse processes are diverted to cement production and heat generation, respectively. 357

In contrast, heat generation, as part of the energy sector, contributes a much higher level

358

of benefits by using residues currently used in wood board manufacturing. While the heat

359

generated from residues would increase by 50 times in the scenario, the total amount of

360

heat would still be less than 10% of total heat generation in Jiangsu, suggesting even

361

more potential benefits if additional residues currently omitted from CUR certification

362

were to be included.

363

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364

Discussion

365

The strictly certified CUR activities that put nonhazardous waste back into industrial

366

production reduce energy use and pollution emissions from the industrial sector in

367

Jiangsu by 2.5% to more than 7%. Because the industrial sector accounts for nearly 80%

368

of provincial energy use and NOX emissions, and 90% or more of SO2 and particulate

369

emissions (figure 1), the reduction is nontrivial to the whole province, too. While some

370

research argues that for some products remanufacturing may not save energy when the

371

use phase is included,33 results here show differently, although relative energy saving is

372

smaller than relative reduction in pollution emissions. While a high-level baseline is

373

selected to avoid overestimation of waste reuse benefits, the results are still superior.

374

There are several possible reasons: business activities covered in this research are already

375

in practice and, therefore, tested by the market; many products are associated with

376

improvement in functions or at least no functional changes in the use phase; the CUR

377

policy strictly requires that firms certified for tax relief cannot have environmental

378

performance and product quality be compromised when using waste. Considering that

379

CUR is not equally well implemented in many other places with plenty of waste sources

380

and potential users, and that only part of the universe of reuse possibilities is covered by

381

the CUR, there is more potential to make Chinese industrial production greener by

382

encouraging waste reuse.

383

The current policy incentives for CUR are to rebate a portion or all of the value-added tax

384

and increase deductibles from the corporate income tax base, both of which associate

385

with firms’ monetary output. While it may seem more reasonable to tie incentives to

386

physical quantities of waste reused to encourage more reuse, our results indicate that

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387

environmental benefits from reuse generally correlate better with monetary output than

388

with physical output, which is proportional to reuse quantity. There is far less difference

389

in the degree of benefits per monetary output across industries, while benefits per

390

physical output differ by orders of magnitude (figure 4). Therefore, unless much more

391

refined reuse incentives can be developed based on waste quantities, tax relief generally

392

works better as an instrument than quantity-based incentives for promoting

393

environmental benefits through reuse.

394

The development of a more refined incentive scheme for waste reuse, however, seems

395

necessary: with all kinds of measurement used, there is always great variation in reuse

396

benefits across industries and processes. Particularly, alternative reuse methods for the

397

same waste and alternative waste inputs used in the same product can generate

398

substantially different environmental benefits. The scenario in figure 6 can increase the

399

overall benefits of CUR by 30% simply by redirecting two waste streams – fly ash and

400

residues from forest and agriculture – to the processes with highest reuse benefits. Under

401

the current structure, however, the tax incentives per tonne of waste reuse are much

402

closer because their outputs and profits per tonne of waste are close. Similarly, the

403

incentives for producing the same product depend on monetary output and profit, rather

404

than what kind of waste is used. Reuse benefits, on the other hand, are generally

405

determined by the type of waste and reuse method, as shown by the results. Although we

406

indicate the need for more targeted policy making, the current results cannot sufficiently

407

support the development of a more refined incentive scheme with this work alone.

408

Further research is needed to measure the monetary value of the environmental benefits,

409

which is usually contextualized locally, to evaluate the increased administrative cost, and

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410

to explore firms’ long-term strategies toward the incentives. Going forward, then, China’s

411

CUR policy should continue to consider additional industrial products and processes with

412

more attention given to how best to target the environmental gains stimulated by these

413

financial incentives. This paper begins this process.

414 415

Acknowledgements

416

The authors wish to thank the Energy Saving and Comprehensive Utilization Division at

417

the Jiangsu Economic and Information Technology Commission for providing the CUR

418

data, and also the respondents from both CUR firms and regulatory agencies for

419

participating in interviews. This research has benefited from helpful comments of Reid

420

Lifset, Philip Nuss, Daqian Jiang, Miriam Diamond, three anonymous reviewers, and

421

participants of the International Society for Industrial Ecology 2015 Conference at the

422

University of Surrey, UK. The authors appreciate the support of the National Science

423

Foundation in writing the paper through its Partnerships for International Research and

424

Education Program 1243535.

425 426

References

427 428 429 430 431 432 433 434 435 436 437

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