Becoming Eco-Industrial Parks?

Two Case Studies of Shanghai Industrial Parks

Research Directors: Ernest Lowe, Indigo Development and Zhu Dajian, Tongji University Institute for Sustainable Development

Project Manager: Zang Mandan

Planning for the Transformation of Shanghai Caohejing Hi-Tech Park

into an Eco-Industrial ParkErnest Lowe, Qiu Shoufeng and Zang Mandan with research support from Chen Hua

Shanghai Chemical Industry Park’s Plan to Become an Eco-Industrial Park

Implementing the Circular EconomyErnest Lowe, Huang Xiaofen, Zang Mandan, and Zhu Huan

Completed under a grant from the Yale University Center for Industrial Ecology

Tongji University access info

Indigo Development access info

Becoming Eco-Industrial Parks? Two cases in Shanghai

Table of contents

Table of contents______________________________________________________2

Introduction to Eco-Industrial Parks in China______________________________3

What is an “eco-industrial park”?____________________________________________3

The Circular Economy and EIPs_____________________________________________7

General References____________________________________________________9

Appendix: Guidelines for Chinese EIPs from State EPA________________________11

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Becoming Eco-Industrial Parks? Two cases in Shanghai

Introduction to Eco-Industrial Parks in ChinaIn May, 2004, the Shanghai municipal government decided that two of its industrial parks should begin the process of becoming eco-industrial parks (EIP): Shanghai Caohejing Hi-Tech Park (SCHTP); and Shanghai Chemical Industry Park (SCIP). SCHTP is a fully developed park while SCIP is still under construction. This report includes initial case studies of these two projects, reporting on their organization, plans for the transition to EIP, and elements of eco-parks already in place. Both papers conclude with an evaluation and recommendations.

We will set a context for the case studies by summarizing the standard definition of “eco-industrial park”, China’s adaptation of that, and the Circular Economy initiative which is the context for EIP development in China.

China has become one of the world leaders in the movement to transform standard industrial parks into eco-industrial parks (EIP) and to develop new ones. There are dozens of sites that are candidates for approval and thirteen or more sites approved by the State Environmental Protection Administration (SEPA, the national EPA.). In addition, many other industrial parks and zones are prematurely claiming that they are EIPs already.

A major driver for this effort to develop EIPs is China’s Circular Economy (CE) initiative. The theory and practice for this movement was developed by SEPA and is being implemented by the National Development and Reform Commission and its local and provincial offices. Cleaner production and eco-industrial parks and networks are two primary strategies for achieving the CE’s multi-factor improvements in resource efficiency and reduction of emissions.

What is an “eco-industrial park”?

The now commonly accepted international definition of “eco-industrial park” is based on the one initially created by an Indigo Development team in 1992 and then expanded for the US-Environmental Protection Agency in 1995 (Lowe, Moran and Warren 1995). This definition was refined in an Asian Development Bank publication in 2001 as follows” (Lowe 2001).

“An eco-industrial park or estate is a community of manufacturing and service businesses located together on a common property. Member businesses seek enhanced environmental, economic, and social performance through collaboration in managing environmental and resource issues. By working together, the community of businesses seeks a collective benefit that is greater than the sum of individual benefits each company would realize by only optimizing its individual performance.

“The goal of an EIP is to improve the economic performance of the participating companies while minimizing their environmental impacts.

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Becoming Eco-Industrial Parks? Two cases in Shanghai

Components of this approach include green design of park infrastructure and plants (new or retrofitted); cleaner production, pollution prevention; energy efficiency; and inter-company partnering. An EIP also seeks benefits for neighboring communities to assure that the net impact of its development is positive.” (Italics indicate clarifying ideas added for the ADB version of the EIP Handbook.)

This definition is now accepted broadly by researchers in the field of eco-industrial development such as Marian Chertow at Yale University (Chertow 2004) and Ray Cote at Dalhousie, University, Canada (Cote 2004), as well as the United Nations Environmental Program (UNEP 2001), the Asian Eco-Industrial Estate Network (Eco-Industrial Estate Asia Network. 2001 and 2004), and the European Environmental Agency web-based glossary of environmental terminology. (European Environmental Agency no date)

However, other academics and consultants have proposed alternative definitions of the term, “eco-industrial park”, which are based on the more limited objective of by-product utilization within networks of companies (a pattern often called “industrial symbiosis”).

“Industrial ecology . . . emphasizes the development of eco-industrial parks in which there is material and energy cycling, and "webs" of firms that mimic the activities of producers, consumers, scavengers, and decomposers in a natural ecosystem. In an "industrial ecosystem", the waste of one firm essentially becomes an input into the production process of another firm. These waste exchanges result in cost savings and revenues for the firms, which are now able to not only cut down on waste disposal and material costs but also generate revenue by selling their waste as a commodity.” (Peck and Ierfino 2003)

“An eco-industrial park (EIP) is a community of companies, located in a single region, that exchange and make use of each other’s by-products or energy.” (Desrochers 2002)

This narrow understanding of the nature and potential of eco-industrial parks fails to include many of the benefits of this innovation in industrial resource management. It appears to be popular because it is a simpler concept that can be modeled and communicated relatively easily. For this reason it can be a valuable first step toward becoming a full EIP. One scholar has written a book outlining fifteen possible industrial complexes with hypothetical flows of by-products between companies. (Nemerow 1995.) These complexes usually depend upon one major anchor company with large by-product outputs. (The Guitang Group’s sugar refinery anchored complex in southern China is similar to one of Nemerow’s hypothetical complexes.) However, business realities often limit realizing such exchanges.

As Chinese government agencies, academics, and development zones started planning responses to the Circular Economy initiative in 2002, many chose this narrow definition of EIP. For instance, a SEPA guidelines document released in late 2003 begins,

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Becoming Eco-Industrial Parks? Two cases in Shanghai

“Eco industrial park is a new industrial conformation, which is designed and built according to the idea of Circular Economy and the theory of industrial ecology. Through trade, different plants or companies are connected to form a complex, which can share the resources and exchange products. In another word, the products or waste of one company can become the raw material or resources of another company.” (SEPA 2003)

Fortunately these SEPA guidelines go on to include a more complete model of what an EIP is. However, many industrial parks and development zones are not going beyond the simple definition. This is unfortunate, as achieving the ambitious goals of the Circular Economy calls for a much more comprehensive approach. See appendix for summary of SEPA Guidelines for EIPs.

There are outstanding examples of the effectiveness of the company to company by-product exchange strategy, but it may only be feasible in a broader eco-industrial network or region. In China the Guangxi Guitang Group is a notable example of using sugar production by-products, first within a single city-owned company, and then in a broader network including other sugar producers in the city of Guitang (Guangxi Autonomous Zone in the southwest) and the farmers growing cane. This success was possible because the first investments in infrastructure and plants were all within a single corporate group, not between separate firms.

From this single-company, an eco-industrial network has evolved, including other sugar producers and the farmers growing the sugar cane. SEPA has approved it as Guigang National Eco-Industry (Sugar Refinery) Demo-Park, although it is not literally an industrial park. Guigang City and the Group have created a regional industrial symbiosis and exchange (SEPA 2004). Shanghai Chemical Industry Park, drawing upon centuries of by-product utilization among petrochemical plants, is a good example of an EIP with plans to achieve this sort of industrial symbiosis within its boundaries and potentially in its region. SCIP’s plan includes many other strategies for EIP development.

There are serious limits to company to company exchanges within a single industrial park achieving the resource efficiency goals of the Circular Economy:

Often plants located together in an industrial park or development zone are clustered by industry and may generate very similar by-products. A cluster of electronics firms will find relatively few ways to use each other’s secondary product outputs. (This is the situation one of our cases, Shanghai Caohejing Hi-Tech Park.)

Even when there are diverse by-products available, firms have limited time to negotiate the transactions required for one plant to use another’s un-marketed products. The cost of reaching a deal (and minimizing the risks) may be greater than the value of the material, water, or energy utilized.

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Becoming Eco-Industrial Parks? Two cases in Shanghai

The investment in negotiation of deals results in a focus on the higher volume and higher value by-products and avoids dealing with many resource flows of lower value or volume.

By-product exchange is an end-of-pipe solution that may diminish efforts to redesign process or product design to eliminate the by-product in the first place.

Therefore, it is important to maintain the more systemic definition of the eco-industrial park, in which firm to firm exchange is one of many possible features of an EIP. In order to achieve the Circular Economy goals of multiplied efficiency of resource use, the commonly accepted definition of EIP offers many more strategies than the by-product focused definition.

EIP strategies include:

Site development preserving its natural features and utilizing natural water treatment/storage and indigenous plants as far as possible.

Design and construction of the infrastructure, buildings, and industrial processes following high performance resource efficiency standards and utilizing renewable energy and materials.

Recruitment of companies committed to high resource efficiency and low pollution, including ones that support major industries in achieving these goals through the services and products they offer.

Management to support the financial, environmental, and social success of the EIP and its companies, with participation of all park departments and all resident companies.

Strong linkage to surrounding communities through economic development, social and environmental programs.

See table, Strategies for designing an Eco-Industrial Park (EIP), in the Eco-Industrial Park Handbook for depth discussion of all aspects of EIP development. (Lowe 2001 chapter 1 and Lowe and Geng 2003 chapter 2)

While development of company to company resource exchange within an EIP may be feasible to a greater or lesser extent, an EIP can also include firms that support manufacturing and service plants in the park and throughout the region in achieving Circular Economy goals through Cleaner Production as well as eco-chains. This EIP-based CE support system would include

Skills in resource efficient eco-design of products and industrial processes;

Services and products to improve efficiency of energy, water, and materials use;

Brokering of by-product exchanges among plants across an industrial region; and

Resource recovery companies collecting, processing, and reusing industrial wastes. (See next section for detail.)

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Becoming Eco-Industrial Parks? Two cases in Shanghai

The Resource Recovery Industrial Cluster may often be as important as plant to plant exchange networks in achieving a high level of efficiency in regional resource use. This cluster includes:

Niche collectors to separate and preserve the value of materials.

Recycling firms to manage processing and distribution.

Manufacturing firms to utilize recycled materials.

Reuse firms to sell used equipment, materials & products.

Re-manufacturing firms to rehabilitate used equipment.

Composting firms to process biomaterials for nutrients.

Energy companies to generate fuel or power from biomass.

A firm that supports companies in creating by-product exchanges and eco-industrial networks and integrates their efforts into the larger system.

An eco-industrial park can benefit its whole community by hosting such a cluster of resource recovery companies, as well as other firms promoting Cleaner Production and design for environment, to increase efficiency and productivity of major companies and government facilities. Eco-industrial parks should be designed to support implementation of this whole system.

The Circular Economy and EIPs

China’s rapid industrialization in the last decades has engendered serious problems of depletion of natural resources, degradation of major ecosystems, and pollution extending far beyond its borders. (Economy 2004, Yardley,2004) Projections by the State EPA have persuaded key officials that continuing this unsustainable model of development is simply not possible. The resources are not available to provide a growing population with higher standards in a Western lifestyle of consumption. The challenge for the Chinese government and people is to create an alternative to Western economic development models.

The State Environmental Protection Administration of China (SEPA), and the China Council for International Co-operation for Environment and Development (CCICED), have directed the attention of the top leaders of China, at both national and local levels, to a hard reality: the development target set by the government will not be achieved unless alternative models of economic development are identified and applied.

This ambitious development target is to raise the majority of China’s population into “the all-round well-being society”. This means that by 2050 a larger population of 1.8 billion would reach a per capita GDP of US$ 4000 per year, five times the current level. Some researchers estimate that this increase could occur within the next 30

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Becoming Eco-Industrial Parks? Two cases in Shanghai

years. This demands a tremendous increase in production and multiplies pressure on natural resources and the environment.

Research by the State Environmental Protection Administration indicates that China’s economy will need to achieve at least a seven-fold increase in efficiency of resource use to achieve the goals set for 2050, while maintaining environmental quality. The CCICED states that an increase as much ten-fold will be required (Lei and Qian 2003). However, these targets are not yet shared broadly and much more modest levels of improvement are discussed in public. For instance, Jiang Weixin, Vice Minister of the National Development and Reform Commission, proposes that “by 2010, consumption of every ton of energy and 15 important resources such as iron ore and non-ferrous metals should bring 30 percent more output than that in 2003. Every 10 thousand GDP should cost less energy by 17 percent.” (People Daily 2005)

The need for the parallel objective of reducing pollution is directly experienced in the provinces, cities, and countryside. Five decades of aggressive industrialization has seriously degraded all natural resources. The Natural Capital accounts for current and future generations show the massive debits of polluted rivers, cleared mountains, depleted soil, and mine sites full of toxic materials.

To meet the needs for development while restoring the health of ecosystems, China’s leaders are seeking a development path different from the industrialization model of the West and its present pattern of over-consumption. Their conclusion is to adopt elements of the Japanese and German Recycling Economy approaches and set higher goals than either.

The Circular Economy approach to efficiency of resource-use integrates cleaner production and industrial ecology in a broader system encompassing industrial firms, networks or chains of firms, eco-industrial parks, and regional infrastructure to support resource optimization. State owned and private enterprises, government and private infrastructure, and consumers all have a role in achieving the CE. The three basic levels of action are:

At the individual firm level, managers must seek much higher efficiency through the three Rs of CP, reduce consumption of resources and emission of pollutants and waste, reuse resources, and recycle by-products. (Sustainable product and process design is important in German and Japanese recycling economy plans but is just emerging as a component of the Chinese CE concept.)

The second level is to reuse and recycle resources within industrial parks and clustered or chained industries, so that resources will circulate fully in the local production system. (The Chinese use the term “eco-chains” for by-product exchanges.)

The third level is to integrate different production and consumption systems in a region so the resources circulate among industries and urban systems. This level requires development of municipal or regional by-product collection, storage, processing, and distribution systems. (Zhao and Lowe, 2004)

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Becoming Eco-Industrial Parks? Two cases in Shanghai

Efforts at all three levels include development of resource recovery and cleaner production enterprises and public facilities to support realization of the CE concept. This adds a strong economic development dimension through investment in new ventures and job creation. So the CE opens opportunities for both domestic and foreign enterprises.

A logical extension of the third regional level of action would be integrating management of flows among urban, suburban, and rural resource recovery systems. An example would be bio-refineries utilizing discarded biomass from rural and urban sources. Such refineries would operate with a range of technologies for converting these resources into bio-energy, bio-fuel, and bio-materials. They could be the anchor for an EIP focused on resource recovery and cleaner production companies.

Thus the transformation of industrial parks into eco-industrial parks is a critical component of the CE strategy. This has a number of implications for the teams working on the transition at parks, such as the two in the current Shanghai-based studies covered by this report:

Develop a holistic vision of your site functioning as a fully realized EIP, with broad participation of resident companies and industry associations, as well as all departments of the park’s management. This long-term thinking enables you to set the high objectives the Circular Economy initiative demands and design the programs to achieve them.

Open clear channels of communication from your eco-industrial park effort to the company level and to the regional level of CE action. Companies in your park may find uses for their by-products in companies outside it. So your team’s participation in regional efforts to build a CE infrastructure for by-product management is important. You may find new recruitment candidates in the companies and municipal operations that are part of this infrastructure.

Emphasize business opportunities opened for your industrial park’s industries by satisfying the needs of companies in your site and its region to meet CE objectives. This supports promotion of the EIP transition as a business development opportunity, not necessarily a new cost.

China’s movement toward a more Circular Economy has created a unique context for the development of eco-industrial parks. This concept is both demanding and rewarding. Achieving its objectives will make China’s industries more competitive, less polluting, and more socially beneficial.

General ReferencesCCICED. 2003. Strategy and Mechanism Study for Promotion of Circular Economy and Cleaner Production in China. Working Report of China Council for International Cooperation on Environment and Development, Task Force of Circular Economy & Cleaner Production. September 18, 2003.

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Chertow, Marian. 2004. Industrial Symbiosis and Eco-Industrial Parks. Yale University School of Forestry & Environmental Studies. Presentation delivered by Reid Lifset at Partnership for the Future: 2nd Annual Conference and Workshop for Eco-Industrial Development, Eco-Industrial Estates Asia Network, Bangkok, Thailand March 11-12, 2004..

Côté, Raymond. 2004. The Industrial Park as an Ecosystem. Industrial Ecology Research Group, Dalhousie University, Nova Scotia, Canada: http://www.mgmt.dal.ca/sres/research/rInpark.htm.Desrochers, Pierre. 2001. Eco-Industrial Parks, the Case for Private Planning. The Independent Review, v.V, n.3, Winter 2001.

Elizabeth C. Economy. 2004. “China's Environmental Challenges.” Congressional Testimony: Subcommittee on Asia and the Pacific, US Congress, House International Affairs Committee, September 22, 2004. From Council on Foreign Relations: http://www.cfr.org/pub7391/elizabeth_c_economy/congressional_testimony_chinas_environmental_challenges.php

Economy, Elizabeth. 2004. The River Runs Black: The Environmental Challenge to China's Future. Cornell University Press, Ithica. NY

Lowe, Ernest A. 2001. Eco-Industrial Handbook for Asian Developing Countries. Prepared for the Environment Department, Asian Development Bank. (available at www.indigodev.com/Handbook.html )

Lowe, Ernest A. and Geng Yong. 2003. Industrial Ecology and Eco-Industrial Parks Handbook. Chinese edition published by Chemical Industries Press, Beijing.

Lowe, Ernest. 2003. Report to the Dalian Development Zone On the Eco-Planning Process. (in support of the Zone’s response to the Liaoning Province Circular Economy Plan. http://www.indigodev.com/DDZReport.html

Lowe, Ernest. 2004a. The System for Achieving a More Circular Economy. Paper prepared for the Policy Research Center for Environment and Economy, State Environmental Protection Bureau, Indigo Development, Oakland, CA. Revised and augmented as this web page: www.indigodev.com/Circular1.html

Lowe, Ernest. 2004b. Defining Eco-Industrial Parks: the Global Context and China. Prepared for the Policy Research Center for Environment and Economy, State Environmental Protection Administration, China http://www.indigodev.com/Defining_EIP.html

Lowe, Ernest. 2004c. An Eco-Industrial Park (EIP) strategy to support moving toward the Circular Economy. http://www.indigodev.com/CE_EIP.html

Lowe, Ernest 2005c. Interview of Ni Qianlong, Vice Director, Shanghai Develoment and Reform Commission.

Nemerow, Nelson. 1995. Zero Pollution for Industry: Waste Minimization Through Industrial Complexes. John Wiley & Sons. New York.

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Peck, Steven & Ierfino, Laura. 2003. Eco-Industrial Parks: An Industrial Development Strategy For the 21stCentury http://www.peck.ca/nua/ies/ies03.html

People's Daily Online. 2005. “China drafts vision 2010 for cyclical economy”, Beijing. May 26, 2005.

Shi Lei, Qian Yi. 2003. Strategy and Mechanism Study for Promotion of Circular Economy in China. (manuscript received Dec 6, 2003) Department of Environmental Science and Engineering, Tsinghua University, Beijing, 100084. This summarizes recommendations of the CCICED Task Force on Cleaner Production and Circular Economy.

Shi Lei, Chen Jining, Zhang Tianzhu, Qian Yi. 2003. Circular Economy: International Experiences and China’s Experimentation. Department of Environmental Science and Engineering, Tsinghua University, Beijing, 100084. (Manuscript received Dec 6, 2003)

State Environmental Protection Administration. 2003. Guideline for eco-industry park planning. These guidelines were formulated by China’s State Environmental Protection Administration for guidance and evaluation of EIP projects. The document is dated 2003-12-31 and is available in Chinese at http://www.sepa.gov.cn/eic/650217096101232640/20040419/1048824.shtml An English translation is available at www.indigodev.com/sepa_eip_guidelines.html

Yardley, Jim. 2004. Bad Air and Water, and a Bully Pulpit in China, NY Times September 25, 2004. An article on the environmental issues raised by Pan Yue, Vice-Minister of the State Environmental Protection Administration.

Zhao Wei, Ernest Lowe. 2003. The Circular Economy in China: An Introduction. Prepared for the Professional Association for China’s Environment Circular Economy Forum.

Zhu Dajian. 2003. Circular Economy Theory and a Comprehensive Fairly-Well-off Society. School of Economics and Management, Tongji University, Shanghai 200092, China

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Appendix: Guidelines for Chinese EIPs from State EPA

SEPA’s Definition: Ecological industry demonstration parks（hereafter referred to as “park”）are a new type of industrial park designed according to the requirement of clean production, the concept of circular economy and ecological industry principles. By means of material and energy recycling, it connects different types of plants and enterprises into a symbiotic association in which resources are shared and by-products are interchanged. The waste or byproducts of one plant may become raw materials or energy resource of another. Trying to simulate the natural ecological system and establish the circulation mechanism of "producer –consumer—decomposer"，this system seeks to obtain closed material circulation, multilevel utilization and the minimum output of waste.

Download guidelines in Chinese: State Environmental Protection Administration web site: at http://www.sepa.gov.cn/eic/650217096101232640/20040419/1048824.shtml

Download guidelines in English: www.indigodev.com/sepa_eip_guidelines.html

Table of Contents

I. Characteristics and Types of Ecological Industry Demonstration Parks___________21. Objectives___________________________________________________________________22. The parks have the following main characteristics:___________________________________2

II. Fundamentals and Guiding Principles of Park Planning.______________________31. Guiding Principles_____________________________________________________________32. Fundamentals_________________________________________________________________3

III. Park Planning Procedure________________________________________________4

IV. Park planning methods and techniques.____________________________________51. For different types of ecological industrial parks，the planning method in common is:_______52. Substance integration:__________________________________________________________53. Aqueous system integration:_____________________________________________________54.Energy integration:_____________________________________________________________65. Technology integration_________________________________________________________66. Information-sharing:___________________________________________________________67. Facility sharing:_______________________________________________________________6

V. The indicator system of the park’s construction and development.______________71. Indicator of economic development:_______________________________________________72. Characteristic indicator of ecological industry (e.g. whether there is mature ecological industry chain);________________________________________________________________________73. Ecology & environment protection indicators：_____________________________________74. Green management indicator：___________________________________________________7

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5. Business incubator in the ecological industrial park.__________________________________7

VII. The drafting of ecological park plans:_____________________________________81. Abstract_____________________________________________________________________82. Necessity and advantages of park construction_______________________________________84. Overall designing of the park____________________________________________________85. Analysis of industry metabolism in the park_________________________________________96. Construction projects in the park__________________________________________________97. Investment and benefit analysis__________________________________________________98. Organizations and supporting mechanism__________________________________________9

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