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WRI assessed the extent to which the Xiangyang project achieved “3E”– environmental, energy, and economic—benefits, i.e. detoxification, stabilization, reduction, and resource recovery of sludge. Below are the key findings:

• Environmental benefits:
  • Nutrient recovery: Through struvite sediments, 96% nitrogen and 99% phosphorous can be recovered.
  • Greenhouse Gas Emission Reduction: During the 21-year contracted period of operation of the Xiangyang project, 1) an estimate of 2.3 million metric tons of sludge and kitchen waste will be disposed with emitting only 13,000 metric tons of carbon dioxide equivalent (CO₂e) through co-digestion approach; 2) the co-digestion process will reduce 98% and 95% of greenhouse gas emissions compared to incineration and landfill; 3) the biochar produced during the treatment process will be used as a soil enhancement in planting of 4.54 million saplings in total; the mature trees that grow from these saplings will eventually accumulatively sequester an additional 15.75 million metric tons of CO₂e.
• Energy benefits: Through thermal hydrolysis and anaerobic digestion, the Xiangyang project will produce 45.4 million m³ of natural gas (NG) during the 21 years of operation. This amount of NG can be compressed to produce compressed natural gas (CNG) and replace about 60,000 m³ of gasoline, resulting in an additional reduction of 140,000 metric tons of CO₂e emissions.
• Economic benefits: The project received both political support from the municipal government, and financial support in the form of low-interest loans from an international financial organization, KfW Bankengruppe of Germany, as well as a Chinese policy bank-the Export-Import Bank of China. This “government-bank-enterprise” partnership was key in establishing long-term contractual agreements that ensured a harmonization of interests between all parties.

Other key findings:

• The Xiangyang project successfully achieved pollutant reduction, resource recovery, near-zero carbon emissions from sludge treatment, and renewable energy generation in the city.

The project successfully recovered and reutilized the nutrients in sludge, and avoided the pollution to water bodies. More important, the Xiangyang project grasped the opportunity to capture bio-energy (biogas) recovery from sludge and kitchen waste, helping cities moving towards clean energy, significantly reducing the GHG emission associated with sludge and kitchen waste treatment and contributing to the low-carbon development target of cities.

• A market-oriented perspective for the design of sludge treatment is vital to the economic success.

The Xiangyang project demonstrates the importance of designing a complete value chain for sludge (and other organic waste) treatment that considers the needs of the market. The specific technology for Xiangyang was therefore selected with great consideration for the market potential of the treatment’s recovered products, CNG and biochar. The presence of potential markets for these products ensures a sustainable flow of capital.

• Support from the government, financial sector, and private sector through a public-private partnership (PPP) enabled the alignment of incentives necessary to achieve a complex set of development objectives.

The successful implementation of a build-operate-own (BOO) contracting arrangement underscored the importance of cooperation between the local government and the private sector. The pairing of the public and private sectors of the model ensures the availability of concessional financing to bridge the viability gap that is likely to emerge during the initial investment phase. Ideally, global climate and other international financial funds will target the mitigation of global externalities, by methods such as capturing methane and other GHGs. The availability of financial incentives will induce the private sector to enter into and promote a circular economy for the stabilization of sludge and the reclamation of sludge byproducts. This, in turn, will help enhance the viability of such projects, and help drive costs down via competition and innovation, making the market even more attractive for private capital investment.