The proposed project, Heilongjiang Chemical N2O Abatement Project, is developed by the Heilongjiang Chemical Group Co., Ltd. (hereinafter called “Heilongjiang Chemical”) and Mitsui & The sole purpose of the project is to reduce the current levels of N2O emissions at Heilongjiang Chemical’s nitric acid production plant.

Heilongjiang Chemical has started its operation in 1983. The main products of Heilongjiang Chemical are cokes (Annual production: 260,000ton/yr), ammonium nitrate (Annual production: 130,000ton/yr) and urea (Annual production: 800,000ton/yr). At Heilongjiang Chemical, the nitric acid has been manufactured as intermediate product in the ammonium nitrate production process. The amount of nitric acid production was approximately 88,000 ton 100% HNO3/yr in fiscal 2006 and over 44,000 Nm3/hr flue gas is emitted from the nitric acid production plant (medium pressure type)

Undesired side reaction in the course of nitric acid production yields nitrous oxide (N2O), nitrogen and water. N2O is not a toxic substance and therefore not regulated in China. N2O has been and will be continuously released to atmosphere without any recovery or any specific treatment at the targeted facility of the targeted plant at present.

To reduce N2O, which is a potent greenhouse gas with a Global Warming Potential (GWP) of 3101, the Project will install the secondary N2O abatement catalyst technology in Heilongjiang Chemical. It is expected that the secondary catalyst will decompose more than 80% of the N2O. The project transfers a new technology to China that is not even common industrial practice in Annex 1 countries. Also, the Project will enhance skills of employees to operate both the N2O abatement catalyst and the Automated Monitoring System (AMS) according to EU standards2. The financial benefits from the sale of Certified Emission Reductions (“CERs”) will be used toffset the capital and operating costs of the project to provide for Heilongjiang Chemical’s continued operation throughout the crediting period. Also, the project activity will contribute a part of CER revenues to the funds of China Clean Development Mechanism, which will be used for the

relevant activities of climate change and make contribution to the sustainable development of China in accordance with the stipulation of “Measures for Operation and Management of Clean Development Mechanism Projects in China,” which is current in force.