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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: ICR00004681
IMPLEMENTATION COMPLETION AND RESULTS REPORT
TF013143
ON A
GRANT
FROM THE OZONE PROJECT TRUST FUND OF THE MULTILATERAL FUND FOR THE IMPLEMENTATION OF THE MONTREAL PROTOCOL
IN THE AMOUNT OF US$168.47 MILLION
TO THE
PEOPLE’S REPUBLIC OF CHINA
FOR THE
CHINA HCFC PHASE‐OUT PROJECT (P115561)
December 11, 2019
Environment, Natural Resources and Blue Economy Global Practice
East Asia and Pacific Region
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective June 28, 2019)
Currency Unit = Chinese Yuan (CNY)
CNY 6.8668 = US$1
FISCAL YEAR January 1 – December 31
ABBREVIATIONS AND ACRONYMS
CE Cost‐Effectiveness
CFC Chlorofluorocarbon
DDR Due Diligence Review
EEB Ecology and Environmental Bureau
EMF Environmental Management Framework
EMP Environmental Management Plan
ExCom Executive Committee
FECO Foreign Environmental Cooperation Center
FM Financial Management
GHG Greenhouse Gas
GWP Global Warming Potential
HC Hydrocarbon
HCFC Hydrochlorofluorocarbon
HFC Hydrofluorocarbon
HFO Hydrofluoroolefin
HPMP HCFC Phase‐out Management Plan
IA Implementing Agency
ICR Implementation Completion and Results Report
IFR Interim Financial Report
IPCC AR4 Intergovernmental Panel on Climate Change Fourth Assessment Report
ISA Implementation Support Agency
ISR Implementation Status and Results Report
M&E Monitoring and Evaluation
MEE Ministry of Ecology and Environment
MEP Ministry of Environmental Protection
MIS Management Information System
MLF Multilateral Fund
MP Montreal Protocol
MT Metric Tons
MTR Midterm Review
NDC Nationally Determined Contribution
NLG National Leading Group
NPV Net Present Value
ODP Ozone Depletion Potential
ODS Ozone‐depleting Substances
PAD Project Appraisal Document
PCR Project Completion Report
PDO Project Development Objective
PIM Project Implementation Manual
PMO Project Management Office
PTFE Polytetrafluoroethylene
PU Polyurethane
RPF Resettlement Policy Framework
SMEs Small and Medium Enterprises
TA Technical Assistance
UNDP United Nations Development Programme
UNEP United Nations Environment Programme
UNIDO United Nations Industrial Development Organization
XPS Extruded polystyrene
Regional Vice President: Victoria Kwakwa
Country Director: Martin Raiser
Sustainable Development Regional Director Benoit Bosquet
Global Practice Director: Karin Erika Kemper
Practice Manager: Ann Jeannette Glauber
Task Team Leader(s): Viraj Vithoontien
ICR Main Contributor: Ashraf El‐Arini
TABLE OF CONTENTS
DATA SHEET ............................................................................................................................ 1
I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ............................................................ 5
A. CONTEXT AT APPRAISAL ........................................................................................................... 5
B. SIGNIFICANT CHANGES DURING IMPLEMENTATION ............................................................... 14
II. OUTCOME ......................................................................................................................... 16
A. RELEVANCE OF PDOs .............................................................................................................. 16
B. ACHIEVEMENT OF PDOs (EFFICACY) ........................................................................................ 16
C. EFFICIENCY ............................................................................................................................. 20
D. JUSTIFICATION OF OVERALL OUTCOME RATING ..................................................................... 22
E. OTHER OUTCOMES AND IMPACTS .......................................................................................... 22
III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME .................................. 24
A. KEY FACTORS DURING PREPARATION..................................................................................... 24
B. KEY FACTORS DURING IMPLEMENTATION .............................................................................. 25
IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .... 27
A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................. 27
B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ..................................................... 30
C. BANK PERFORMANCE ............................................................................................................. 32
D. RISK TO DEVELOPMENT OUTCOME ........................................................................................ 34
V. LESSONS AND RECOMMENDATIONS ................................................................................. 36
ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ............................................................ 38
ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 52
ANNEX 3. PROJECT COST BY COMPONENT............................................................................. 55
ANNEX 4. EFFICIENCY ANALYSIS ............................................................................................ 56
ANNEX 5. RECIPIENT COMMENTS .......................................................................................... 58
ANNEX 6. SUPPORTING DOCUMENTS .................................................................................... 59
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DATA SHEET
BASIC INFORMATION Product Information
Project ID Project Name
P115561 China HCFC Phase‐Out Project
Country Financing Instrument
China Investment Project Financing
Original EA Category Revised EA Category
Partial Assessment (B) Partial Assessment (B)
Organizations
Borrower Implementing Agency
People's Republic of China FOREIGN ECONOMIC COOPERATION CENTER (FECO)
Project Development Objective (PDO) Original PDO
The project development objective is to reduce HCFC production and HCFC‐141b consumption in the polyurethane (PU) foam sector in order to contribute to the Government of China's endeavor to comply with its Montreal Protocol phase‐out obligations for HCFCs by 2015,as well as to reduce emissions of GHG from the production and PU foam sectors. PDO as stated in the legal agreement
The objective of the Project is to reduce HCFC production and HCFC‐141b consumption in the polyurethane (PU) foam sector in order to contribute to the Recipient's endeavor to comply with its Montreal Protocol phase‐out obligations for HCFCs by 2015, as well as to reduce emissions of GHG from the production and PU foam sectors.
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FINANCING
Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$)
World Bank Financing TF‐13143
168,474,150 168,474,150 168,462,524
Total 168,474,150 168,474,150 168,462,524
Non‐World Bank Financing 0 0 0
Borrower/Recipient 326,300,000 314,450,000 314,460,000
Total 326,300,000 314,450,000 314,460,000
Total Project Cost 494,774,150 482,924,150 482,922,524
KEY DATES
Approval Effectiveness MTR Review Original Closing Actual Closing
22‐Nov‐2012 04‐Jan‐2013 12‐Oct‐2015 31‐Dec‐2017 30‐Jun‐2019
RESTRUCTURING AND/OR ADDITIONAL FINANCING
Date(s) Amount Disbursed (US$M) Key Revisions
04‐Sep‐2013 19.43 Reallocation between Disbursement Categories
17‐Apr‐2015 89.30 Reallocation between Disbursement Categories
02‐Aug‐2016 145.86 Reallocation between Disbursement Categories
18‐Dec‐2017 166.10 Change in Loan Closing Date(s)
KEY RATINGS
Outcome Bank Performance M&E Quality
Satisfactory Satisfactory Substantial
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RATINGS OF PROJECT PERFORMANCE IN ISRs
No. Date ISR Archived DO Rating IP Rating Actual
Disbursements (US$M)
01 14‐Apr‐2013 Satisfactory Satisfactory 19.43
02 28‐Oct‐2013 Satisfactory Satisfactory 19.43
03 17‐May‐2014 Satisfactory Satisfactory 41.05
04 14‐Jan‐2015 Satisfactory Satisfactory 89.30
05 14‐Jun‐2015 Satisfactory Satisfactory 89.30
06 13‐Dec‐2015 Satisfactory Satisfactory 110.68
07 20‐Jun‐2016 Satisfactory Satisfactory 140.39
08 14‐Dec‐2016 Satisfactory Satisfactory 157.86
09 12‐Jun‐2017 Satisfactory Satisfactory 162.81
10 08‐Dec‐2017 Satisfactory Satisfactory 166.10
11 21‐Jun‐2018 Satisfactory Satisfactory 168.29
12 24‐Dec‐2018 Satisfactory Satisfactory 168.46
SECTORS AND THEMES
Sectors
Major Sector/Sector (%)
Industry, Trade and Services 100
Public Administration ‐ Industry, Trade and Services 9
Other Industry, Trade and Services 91
Themes
Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Private Sector Development 100
Jobs 100
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Environment and Natural Resource Management 100
Environmental Health and Pollution Management 93
Air quality management 31
Water Pollution 31
Soil Pollution 31
Environmental policies and institutions 7
ADM STAFF
Role At Approval At ICR
Vice President: Pamela Cox Victoria Kwakwa
Country Director: Klaus Rohland Martin Raiser
Director: John A. Roome Benoit Bosquet
Practice Manager/Manager: Mark R. Lundell Ann Jeannette Glauber
Project Team Leader: Viraj Vithoontien Viraj Vithoontien
ICR Co Author: Ashraf Bakry El‐Arini
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I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES
A. CONTEXT AT APPRAISAL
Context
1. The Montreal Protocol (MP) is a 1987 multilateral environmental agreement that established time‐bound targets to reduce the production and consumption of ozone‐depleting substances (ODS) including chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs), among others. In 2007, the parties to the protocol approved Decision XIX/6, which both accelerated the timetable for phasing out HCFCs and encouraged the selection of alternative substances that have low or zero global warming potential (GWP) to help minimize climate impacts. To achieve this, eligible Article 5 countries (developing countries) prepared HCFC Phase‐out Management Plans (HPMPs) and established consumption and production baselines with the support of implementing agencies (IAs) of the Multilateral Fund (MLF) for the Implementation of the Montreal Protocol.
2. The Government of China has been fully committed to the MP and has contributed significantly to shaping the MP as it evolved. China signed the Vienna Convention for the Protection of the Ozone Layer in September 1989,1 and in June 1991, China ratified the MP and its 1990 London Amendment.2 China set up an interministerial body, the National Leading Group (NLG) for Ozone Layer Protection, to manage its implementation of the Vienna Convention and the MP. The Ministry of Environmental Protection (MEP), which has since become the Ministry of Ecology and Environment (MEE), was empowered by the State Council to be the national lead agency for the implementation of the MP by China. MEE appointed the Foreign Environmental Cooperation Center (FECO), which has now become the Foreign Environmental Cooperation Center, to serve as a national focal point and implementing agency. It carried out its role and responsibilities as the national implementing agency under the overall guidance of the NLG. China’s Country Programme for Phasing Out ODS, initially approved in January 1993, laid down the framework for China to proceed with development and implementation of ODS phase‐out activities with financial support from the MLF.
3. Many individual phase‐out projects in sectors consuming and producing CFCs, halons, carbon tetrachloride, and methyl chloroform were funded by the MLF in China from 1992 to 1997. As experience in implementing ODS phase‐out activities accumulated, China launched the first sector plan in 1998 for phasing out production and consumption of halons. With a high degree of certainty on the funding from the MLF, China carried out a long‐term phase‐out policy and implementation plan. This led to an effective and timely phase‐out of halons in both the production and consumption sectors by 2010. Because of the effectiveness and early success of the halon sector plan, several sector plans for phasing out CFCs in both production and consumption sectors in China and other countries followed. The sector plan approach, which ensured permanent aggregate phase‐out, became the norm of MLF operations.
4. The World Bank has been engaged in ODS phase‐out activities in China since the early 1990s. The World Bank served as China’s partner in both the CFC Production Closure Sector Plan and the Foam
1 Source: https://treaties.un.org/pages/ViewDetails.aspx?src=TREATY&mtdsg_no=XXVII‐2&chapter=27&clang=_en. 2 Source: https://treaties.un.org/pages/ViewDetails.aspx?src=TREATY&mtdsg_no=XXVII‐2‐a&chapter=27&clang=_en.
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CFC Phase‐out Sector Plan under the ODS IV Phase Out Project (P039838). As CFCs are gases with high GWP, eliminating their production and consumption resulted in significant climate benefits: the ODS IV Phase Out Project covered seven production and consumption sector plans and achieved annual emission reductions equivalent to 329 million tons of carbon dioxide (tCO2e), which has a climate impact equivalent to closing 84.5 coal‐fired power plants per year.3 In some sectors, the MP allowed CFCs to be replaced with HCFCs as an intermediate step to quickly and economically reduce ozone depletion potential (ODP) and greenhouse gas (GHG) emissions, with phase‐out of the less damaging HCFC substances to be carried out in later rounds of MP projects.
5. With the complete phase‐out of CFCs and the phase‐out of HCFCs in developed countries, HCFC production and consumption became more critical to China than to any other country in the world in terms of raw materials consumed, sectors covered, volume produced, and economic value. In 2012, China produced around 85 percent of the global HCFC supply and was responsible for about half of the global HCFC consumed for manufacturing foam and refrigeration products, producing solvents and servicing existing equipment. HCFCs were also used in China as a feedstock for its large production of polytetrafluoroethylene (PTFE),4 among other substances. As developed countries phased out their HCFC consumption and production and moved to alternative technologies, China quickly became the dominant player in the global market for HCFC‐based products and components. Given this, the reduction of HCFC production and consumption was expected to have a significant global impact. The importance of HCFC production and HCFC‐based manufacturing to China’s overall economic health has also been indisputable. The annual revenue of the HCFC production sector (at the time of appraisal) was estimated to be US$1.4 billion, whereas the revenue from the HCFC consumption sector was estimated to be more than US$170 billion. Meeting the MP HCFC phase‐out obligations for developing countries, which started in 2013, was expected to be challenging in the face of high growth rates, the high cost of some alternatives, safety requirements that limit technologies to certain types of enterprises, and low availability of proven and cost‐effective alternative technologies in some HCFC applications. Although the economic burden of transition from HCFCs was expected to be felt across developing countries, it was expected to be more extensive in China where many industries and sectors along the supply chain were going to be affected.
6. Building on the achievements of earlier ODS phase‐out engagements, the Government of China approached its HCFC phase‐out obligations, as required by the MP and the MLF, in each of the major consumption sectors and the production sector concurrently, albeit in a gradual manner. This approach was captured in China’s HPMPs 5 for each sector that identified the measures required to control supply (HCFC producers) and consumption (production plus imports minus exports) of HCFCs at target levels. China was supported in HPMP implementation through funding approved by the MLF and technical assistance (TA) by the four MLF implementing agencies—the World Bank, United Nations Development Programme (UNDP), United Nations Industrial Development Organization (UNIDO), and United Nations Environment Programme (UNEP)—and bilateral agencies, on a sector‐by‐sector basis. For each HCFC‐consuming sector, 6 the HPMPs included a summary of HCFC consumption; relevant existing policy
3 Source: United States Environmental Protection Agency’s Greenhouse Gas Equivalencies Calculator. 4 PTFE, commonly referred to its brand name ‘Teflon’, is most often used as a coating material in nonstick cookware and in other applications in the chemical and steel industries, among others. 5 Source: Agreement between Executive Committee of Multilateral Fund to the Montreal Protocol and the Government of China on HCFC Phase‐out. 6 This included industrial and commercial refrigeration and air‐conditioning, XPS foam, PU foam, room air‐conditioning manufacturing and heat pump water heaters, and solvents.
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framework and state of alternative technologies in the sector; and a phase‐out strategy that included targets, summary of investment, policy support and TA activities, and their indicative costs; and the overall planned contribution of the sector HPMP to China’s MP compliance. For the production of HCFCs, the HPMP included an overview of HCFC production, a phase‐out strategy that included strategic targets, a phase‐out schedule that linked production control targets by substance with the domestic consumption phase‐out schedule and possible export market for HCFCs, projections on the costs of phasing‐out production and detailed phase‐out activities, including for investment, TA, and policy support. In aggregate, the total costs included for the first stage of HPMPs in China was US$382 million, with a commitment from the MLF to finance US$168 million (the balance would be financed by the private sector and/or government).
7. The World Bank was committed to supporting China’s efforts to achieve its first set of HCFC consumption and production targets. Because China is one of the few countries that is both a producer and a consumer of HCFCs, China and the World Bank both recognized that any strategy to reduce and eliminate HCFCs in the country must employ a balanced approach to supply and demand. Building on the World Bank’s long‐standing engagement and relationship in these sectors, and in line with Strategic Theme 1 ‘Supporting Greener Growth’ in the World Bank’s FY13–16 Country Partnership Strategy with China (Report Number 67566),7 the World Bank accepted the request to assist China in the preparation of a phased HCFC phase‐out program in the production sector and polyurethane (PU) foam consumption (supported by TA under the ODS IV Project), with the first phase beginning in 2012 to help China meet its 2013 and 2015 MP obligations (see table 1 for a summary of China’s MP obligations for phase‐out of HCFC production and consumption). The obligations under the MLF (reflected in the HPMP schedule in tables 2 and 3) for consumption and production were more aggressive than the treaty obligations in table 1. The actual amounts that were to be reduced under the project to achieve HPMP targets were greater than those reflected in the HPMP schedules, because in the period between the 2009–2010 baseline and the beginning of the project, production and consumption continued to rise. While HCFC consumption in the PU foam sector was expected to contribute 29 percent of the total allowable consumption in 2013, the total reduction in the sector by 2015 (as compared to the 2013 limit) was the most pronounced of any sector, with 50 percent of total reductions expected to come from reduction of HCFC‐141b consumption in PU foam. For the production sector, the project was expected to contribute to 100 percent of the initial phase‐out reduction obligation in production of HCFCs in China.
Table 1. MP Obligations for HCFC Phase‐out in China
MP Reduction Schedule for Production and Consumption of Annex C Substances under the MP
HCFC Production Limit (ODP tons)
HCFC Consumption Limit (ODP tons)
Baseline (2009–2010 average) 29,122 19,269
2013 ‐ Freeze at the baseline level 29,122 19,269
2015 ‐ 90% of the baseline 26,210 17,342
2020 ‐ 65% of the baseline 18,929 12,525
2025 ‐ 32.5% of the baseline 9,464 6,262
2030 ‐ 2.5% of the baseline 728 482
2040 ‐ No consumption — —
7 World Bank. 2012. China ‐ Country Partnership Strategy for the Period FY13–FY16 (English). Washington, DC: World Bank. http://documents.worldbank.org/curated/en/303351468242963292/China‐Country‐partnership‐strategy‐for‐the‐period‐FY13‐FY16.
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Table 2. Consumption Targets under China’s HPMP (in ODP tons)
2013 2014 2015
MP Schedule ‐ same as table 1 19,269.0 19,269.0 17,342.1
Maximum Allowable Consumption under Agreement with the Executive Committee (ExCom) to MLF (HPMP)
18,865.4 18,865.4 16,978.9
In the Industrial and Commercial Refrigeration and Air Conditioning sector (supported by UNDP)
2,402.8 2,402.8 2,162.5
In the Extruded polystyrene (XPS) foam sector (supported by UNIDO/Germany)
2,540.0 2,540.0 2,286.0
In the PU foam sector (supported by the World Bank) 5,392.2 5,392.2 4,449.6
In the room air‐conditioning manufacturing and heat pump water heaters sectors (supported by UNIDO/Italy)
4,108.5 4,108.5 3,697.7
In the solvent sector (supported by UNDP) 494.2 494.2 455.2
Table 3. Production Targets under China’s HPMP (in ODP tons)
2013 2014 2015 2016 2017 2018
MP Schedule (same as
table 1
29,122 29,122 26,210 26,210 26,210 26,210
Maximum Allowable
Production under
Agreement with ExCom
(HPMP) (ODP tons)
29,122 29,122 26,210 26,210 26,210 22,742
HCFC‐22 17,050 17,050 16,127 16,127 16,127 14,675
HCFC‐141b 10,113 10,113 8,252 8,252 8,252 6,854
HCFC‐142b 1,894 1,894 1,766 1,766 1,766 1,148
HCFC‐123 56 56 56 56 56 56
HCFC‐124 9 9 9 9 9 9
Theory of Change (Results Chain)8
8. The Stage I HCFC Phase‐Out Project was the first phase of the World Bank’s support for China’s long‐term HCFC phase‐out strategy. For the consumption sector, the strategy to achieve the required short‐term phase‐out goals for 2015 was to target HCFC‐141b consumption in three key subsectors: refrigerators and freezers, reefer containers, and small household appliances. The subsectors were prioritized within the HPMP as they were suitable for the early stages of phase‐out because of the availability of viable, low‐GWP alternatives in these subsectors as well as the relatively high number of
8 The Theory of Change has been derived from the Project Appraisal Document (PAD) in the absence of a theory of change developed at the appraisal.
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large enterprises with stronger capacity to safely manage the substitute blowing agent (cyclopentane, a hydrocarbon [HC]) that would enable more cost‐effective conversions. To support the phase‐out in the three subsectors, the plan consisted of a combination of enterprise conversions to no ODS, low‐GWP alternatives and support for policies, namely bans of HCFC‐141b in PU foam in the three subsectors, to achieve the phase‐out. By providing financing certainty for enterprises to convert their manufacturing processes, this was expected to allow the Government to announce its intention to ban the use of HCFC‐141b in the targeted subsectors in advance. While the three subsectors were targeted, other subsectors in the sector were also eligible to receive funding. The conversion and policy support were complemented by TA activities to enable sustainable phase‐out. For the production sector, the project aimed to support the reduction in supply of HCFCs through HCFC production quotas provided to producers to achieve agreed targets and receive commensurate financial compensation. A combination of policies, regulations, TA, and financial incentives aimed to support an effective and sustainable HCFC production phase‐out. To support the reduction in HCFC consumption, the project’s support to reducing the production of HCFC‐141b was expected to also ensure supply and demand were balanced. To ensure sustainability of the phase‐out supported by the project, further production and consumption reduction would be required to avoid any HCFC redirection to ban applications. Hence, a subsequent stage of the project was planned to be developed under Component 5. To achieve the objectives referenced above, the project’s design required two critical assumptions to be met: (a) low GWP alternatives were to be readily available for PU foam consumption and (b) all eligible enterprises had equal access to grant funds. The project was also contingent on timely delivery of grant funds from the MLF.
9. Given the relative global contribution of China’s HCFC production and consumption, associated reductions under the project were expected to contribute to addressing two key global public goods: ozone depletion and climate change. The project, together with parallel contributions from other sector phase‐outs and under subsequent phases, was expected to influence the global market for HCFCs and contribute to the longer‐term outcomes of reducing global use of ODS to support the ozone layer’s return to its 1970s condition by 2050, the main objective of the MP. The project was also expected to significantly reduce GHG emissions. HCFCs have a high‐GWP and the approach undertaken by the project in the consumption sector included a condition that the project would only finance conversion to cyclopentane and water‐blown technologies (which have low GWPs) compared to high GWP hydrofluorocarbons (HFCs) such as HFC‐245fa or HFC‐365mfc that have a higher GWP than HCFC‐141b.
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10. The project’s Theory of Change is presented graphically in figure 1.
Figure 1. Theory of Change Diagram
Project Development Objectives (PDOs)
11. The PDO was “to reduce HCFC production and HCFC‐141b consumption in the polyurethane (PU) foam sector in order to contribute to the Government of China’s endeavor to comply with its Montreal Protocol phase‐out obligations for HCFCs by 2015, as well as to reduce emissions of GHG from the production and PU foam sectors.”
Key Expected Outcomes and Outcome Indicators
12. The expected outcomes for the project were
Reduced HCFC production in order to contribute to the Government of China’s endeavor to comply with its Montreal Protocol phase‐out obligations for HCFCs by 2015;
Reduced HCFC 141‐b consumption in the PU Foam Sector in order to contribute to the Government of China’s endeavor to comply with its Montreal Protocol phase‐out obligations for HCFCs by 2015; and
Reduced GHG emissions from the production and PU foam sectors.
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13. The PDO‐level results indicators were
Production of HCFC‐141b, HCFC‐142b, and HCFC‐22 within Maximum Allowable Limits in 2013 and 2015;
Consumption of HCFC‐141b within Maximum Allowable Limits in 2013 and 2015;
Reduction of GHG Emissions in the Production Sector; and
Reduction of GHG Emissions in the PU Foam Sector.
Components
14. The project included the following components:
Component 1: Investment in HCFC‐141b Consumption Reduction in the PU Foam Sector (Total cost at appraisal: US$204.3 million; Actual total cost: US$105.9 million;9 Grant Financing at appraisal: US$63 million;10 Actual grant financing: US$63 million)
15. Component 1 was expected to provide financing to phase out 14,000 metric tons (MT) of HCFC‐141b consumption (equivalent to 1,540 ODP tons) in the PU foam sector to comply with the freeze target for 2013 and 17.5 percent reduction target for 2015 relative to the 2009–10 baseline. This included financing for conversion subprojects for PU foam manufacturing enterprises in the three target subsectors (refrigerators and freezer, reefer containers, and small household appliances), expected to account for 12,000 MT of reduction, and in select enterprises in other subsectors (for example, insulation pipes and panels, solar water heaters, and block foam), expected to account for 2,000 MT of reduction. For these subprojects, financial support was expected to be used to cover the cost of modification or acquisition of new foam production equipment and related accessories, trial production, raw materials, and technology transfer fees. The project was also expected to provide financing to support system houses to modify their production processes to provide HC pre‐blended polyol to enterprises that cannot adopt full‐scale HC technology. Eligible enterprises were those that were established before September 2007 (as per MLF Decision 60/44), and the funding level was expected to be dependent on the documented level of consumption of each enterprise as well as the percentage of developing country ownership of that enterprise.
9 The reduction in total costs from appraisal is attributed to the actual composition of the enterprises participating in the project (as compared to those that were expected at appraisal). Many enterprises outside of the targeted subsectors ended up phasing out HCFC‐141b under this project. These enterprises were larger HCFC consumers than the originally identified enterprises and therefore had lower per unit costs leading to a smaller total conversion cost. 10 In the PAD, this was included as US$56 million, but this did not include the US$7 million that was initially allocated to the production sector as an advance (the MLF had approved US$63 million for the PU foam consumption sector).
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Component 2: Investment in HCFC Production Reduction (Total cost at appraisal: US$260.4 million; Actual total cost: US$360.4 million; 11 Grant Financing at appraisal: US$7.0 million; 12 Actual Grant Financing: US$85 million13)
16. Component 2 was expected to provided financing support to HCFC producers to assist in the reduction of HCFC production to the level of 29,122 ODP tons in 2013 and 26,210 ODP tons in 2015, representing production reduction of 3,833 ODP tons from the 2010 level of 30,043 ODP tons. Financial compensation was intended to be made based on reduced production levels through agreed production quotas. This also was expected to include provision of support to establishing production capacity for new lower‐GWP alternatives. The funding was expected to be used to compensate HCFC producers for surrendering their production rights in part or in full to contribute to the national compliance of a production freeze and 10 percent production reduction in 2013 and 2015, respectively. As included in the Project Implementation Manual (PIM), a reverse auction mechanism was expected to be employed to elicit bids from enterprises for production reduction or closure (the maximum unit compensation level on a US$ per kg basis is capped at the funding available for each annual plan divided by the minimum amount of the surrendered production rights required to meet the specific targets.).
Component 3: Technical Assistance and Policy Support (Total cost at appraisal: US$16.35 million; Actual total cost: US$7.75 million; 14 Grant financing at appraisal: US$6.35 million; Actual grant financing: US$7.75 million15)
17. Component 3 was expected to provide TA and policy support across several activities that enabled a sustainable phase‐out of HCFC‐141b consumption in the PU foam sector and HCFC production.
18. For the PU foam sector, this was expected to include (a) contracting of an implementation support agent (ISA) to provide assistance to potential beneficiaries to prepare subproject proposals consistent with FECO’s and ExCom’s eligibility criteria, provide FECO with technical input regarding alternatives, and provide implementation support for each subproject; (b) contracting of accounting firms to confirm
11 The total cost of US$360.4 million is the projected lost profit borne by HCFC producers under the project. The value is the profit per metric ton (using 2010 figures) of each chemical multiplied by the actual phase‐out of each chemical under the project through 2030 (this is based on a methodology used based on guidelines from the Executive Committee of the MLF). This uses a benchmark social discount rate of 12 percent. The number is larger than the projected cost at appraisal as the reductions in HCFC‐22 production were much larger than anticipated at the time, which therefore increased the total expected lost profit borne by HCFC‐22 producers. 12 Given that the MLF approval for the production sector had not yet materialized at the time of appraisal, this represented an advance from the approved allocation of the consumption sector. However, a total amount of US$260.4 million was expected to be financed once the HPMP for the production sector was approved. 13 The expected grant amount of US$260.4 million was determined based on the ExCom’s established practice. The approved amount was agreed based on negotiations between the Executive Committee of the MLF and China taking into account the life expectancy of the production facilities and potential growth in alternative uses (feedstock uses) of these chemicals that are not controlled by the MP. The balance was expected to be financed by the private sector in China. 14 Due to the reduced grant funds approved for Component 3, the TA activities, particularly those related to capacity strengthening of local Ecology and Environmental Bureaus (EEBs), was scaled back to about six local EEBs in the provinces that have a large number of foam enterprises and HCFC producers. 15 The appraisal amount was based on TA activities for the consumption sector only. Additional resources were added in response to the additional policy actions required by the ExCom at the time the production sector HPMP was approved. For example, when phasing out the production of HCFCs, China had to minimize environmental impact, particularly on the minimization of HFC‐23 by‐product generation and emissions.
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baseline HCFC consumption to determine eligible funding level and to review expenditures incurred by subprojects before disbursement by FECO to the enterprises; (c) development of safety standards for handling of cyclopentane in the foam manufacturing process; (d) a technical study to assess the readiness of complete HCFC phase‐out in the three targeted subsectors to inform HCFC bans; (e) contracting of safety experts to audit fire safety measures implemented by relevant subprojects; (f) technical training to local EEBs on the MP, alternative technologies financed by the project, and monitoring enforcement of phase‐out and bans; (g) financial assistance to technical institutes to research and optimize formulations with non‐ODS and low‐GWP blowing agents; (h) technology workshops to disseminate the development of alternative technologies and government policy and plans for phasing out HCFCs in the foam sector; and (i) study tours for key industrial experts to learn more about HCFC phase‐out in the foam sector in developed countries and to have direct exchange of information with providers of new emerging technologies (such as methyl formate and hydrofluoroolefin [HFOs]).
19. For the production sector, this was expected to include (a) technical workshops to advise HCFC producers of the Government’s HCFC production reduction schedules and available financial support for production quota reduction and production closure; (b) technical training for HCFC producers, dealers, and feedstock users to conform with monitoring procedures for HCFC production, sales, feedstock applications, and data reporting requirements; (c) support to the technical committee to review environmental impact assessments and site clean‐up plans for HCFC production facilities opting for closure; (d) contracting of a consulting firm to conduct an investigation on the situation of the HCFC used as feedstock in China and to recommend measures to strengthen management of HCFCs feedstock use; (e) technical research and study to identify the challenges that HCFC producers may encounter on business development for the production of alternatives after HCFC phase‐out and to provide advice to manufacturers on the prospects of HCFC alternative development; and (f) a technical study for reducing HFC‐23 by‐product ratio and estimating its economic feasibility to provide advice and guidance for HCFC‐22 producers.
Component 4: Project Management (Total cost at appraisal: US$11.25 million; Actual total cost: US$8.4 million;16 Grant financing at appraisal: US$3.65 million;17 Actual grant financing: US$8.4 million)
20. Component 4 was expected to provide TA support to improve the capacity of FECO and the Project Management Office (PMO) to manage, supervise, coordinate, monitor, and evaluate the implementation of the project. This funding was expected to be made on a fee basis. The resources from the component were to be used to support management costs related to FECO’s management, disbursement, contract evaluations, utilities, and FECO staff who were working on the project.
16 Given that this component was fee based, the difference in actual total costs and the total cost estimated at appraisal is attributable to the change in total financing amount for project. 17 This amount did not yet include the amount expected for the production sector, given that the HPMP for production was not yet approved by the Executive Committee of the MLF.
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Component 5: Preparation of HCFC Phase‐out Activities Post 2015 (Total cost at appraisal: US$2.0 million; Actual total cost: US$0.47 million;18 Grant financing at appraisal: US$0 million; Actual grant financing: US$0.47 million)
21. Component 5 was expected to provide support for data collection of HCFC consumption in the foam sector for preparation of the Stage II PU foam sector plan. The component was also expected to finance data collection and plant assessments of current HCFC production trends of each HCFC production facility to determine the current market situation in both domestic and export markets for preparation of the Stage II HCFC production sector plan. In addition to setting the HCFC phase‐out strategy in consumption and production for Stage II to meet the 2020 MP obligations and set the stage for meeting the 2025 MP obligations, the component was expected to contribute to ensuring the sustainability of the phase‐out in HCFC‐141b consumption in PU foam and HCFC production in line with the 2015 obligation targets.
B. SIGNIFICANT CHANGES DURING IMPLEMENTATION
Revised PDOs and Outcome Targets
22. No changes.
Revised PDO Indicators
23. No changes.
Revised Components
24. The components were not revised.
Other Changes
25. There were four Level 2 restructurings under the project. The first restructuring, approved on September 4, 2013, was processed as a reallocation of proceeds to allocate the additional grant financing amount of US$95 million approved by the ExCom of the MLF. A second restructuring was approved on April 17, 2015, to increase the funding for the project from US$168 million to US$168.3 million. A third restructuring was approved on August 2, 2016, to reduce the allocation for Component 3 by US$3.35 million and reallocate this to Component 2 (US$3 million) and Component 1 (US$350,000). The fourth and final restructuring was approved on December 18, 2017, to extend the closing date by 18 months, from December 31, 2017, to June 30, 2019.
18 The actual cost of this component was less than anticipated as the ExCom’s requirements for project proposals of subsequent phases of HCFC phase‐out were less stringent than anticipated (compared to the first stage’s preparation). For example, China and the World Bank did not need to conduct technical audits to confirm the lost profit and conditions of the production facilities. The information from the first proposal was used. The financial information could be extracted from the annual verification reports prepared under Stage I.
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Rationale for Changes and Their Implication on the Original Theory of Change
26. The four Level 2 restructurings did not significantly affect the original theory of change. The first restructuring increased the allocation of MLF funds to the project in accordance with the original design (though not at expected levels), while the second and third restructurings made strategic adjustments to component costs as circumstances, costs, and priorities evolved during implementation (the disbursement categories subject to reallocation were aligned by component). Additional details by restructuring are the following:
The first restructuring addressed the funding gap for the production sector at appraisal. Following the ExCom’s approval of the production sector plan, the MLF released another US$95 million of the amount that was included in the appraisal design but still pending at initial project approval. This was to cover the implementation of the production sector and the related TA and project management activities that had already been approved in the PAD and Grant Agreement but for which a funding gap had existed (as only an initial funding of US$73 million was approved for the consumption sector by the ExCom after appraisal).
The second restructuring was a reallocation of commitment amounts between components to cover the costs of Component 5. This followed the ExCom’s approval of this funding in November 2014. During preparation, Component 5 was included in the project description in the PAD and Grant Agreement but there was no financing allocated as it had not yet been approved by the ExCom. The amount approved was lower than the originally envisaged amount of US$2 million, though this did not significantly affect or limit the implementation of the component since most information and understanding of the sectors and post‐2015 activities were obtained through the first two years’ implementation of Components 1 and 2 of the project.
The third restructuring was an amendment to the funding level for Component 5, concurred by the ExCom, from US$300,000 to US$470,000 to incorporate the additional approval of US$170,000 from the ExCom to support the preparation of the Stage II production sector plan. US$3 million was also reallocated from Component 3 to Component 2 to facilitate a reverse auction to provide incentives for additional HCFC producers to dismantle their idle HCFC production facilities. Four companies with a combined idle capacity of 20,500 tons per year won bids with a total contract value of US$2.6 million (US$400,000 lower than the budget). The additional amount of US$350,000 reallocated from Component 3 to Component 1 was committed to the PU foam subprojects.
The fourth restructuring was to extend the closing date by 18 months. Despite already meeting key PDO indicators, the project was extended to account for the significant share of conversion and production subprojects that were experiencing varying levels of delays due to the requirement that local EEBs and firefighting departments needed to inspect and certify completion of subprojects before enterprises could resume production. TA and policy support activities, which were crucial for ensuring sustainability of the complete phase‐out in the three targeted subsectors, were also lagging the original completion schedule. Although the 2015 reduction targets had already been met at the time of the fourth restructuring, achieving further reductions not only improved the project outcomes but also put China on a solid path toward achievement of phase‐out targets for 2020 and beyond.
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The ongoing TA and policy support carried out during the extension period included activities related to preparation of the Stage II project under Component 5 that would be necessary for China to sustainably maintain its HCFC consumption and production levels below its 2015 MP targets beyond the project period as well as for meeting China’s future MP targets (this was part of the original project design and essential to achieving longer‐term goals). The extension also allowed more continuity and a smoother transition to the Stage II project, which was approved in December 2018.19
27. A summary of total project costs is included in annex 3.
II. OUTCOME
A. RELEVANCE OF PDOs
Assessment of Relevance of PDOs and Rating Rating of PDO Relevance: Substantial
28. The project was the primary mechanism for China to achieve its HCFC phase‐out obligations under the MP as well as phase‐out commitments under China’s own regulations. Given that China is the largest producer and exporter of HCFCs globally (with China producing more than 80 percent of global HCFC supply), the project’s contribution to supporting the global reduction of ozone depleting substances was significant. Further, the GHG emission reductions associated with the phasing‐out of HCFC‐22 production also contributed toward China’s achievement of its international climate commitments, as articulated in its Nationally Determined Contribution (NDC), as explicitly referenced in priority area ‘Building Energy Efficient and Low‐Carbon Industrial System’ under the section on ‘Policies and Measures to Implement Enhanced Actions on Climate Change’.20 The project also contributed to Strategic Theme 1 ‘Supporting Green Growth’ in the World Bank’s Country Partnership Strategy for FY13–16, namely outcome (1.6) on ‘demonstrating pollution management’. The project also strongly aligns with engagement area 2 on ‘promoting greener growth’ of the new Country Partnership Framework for FY20‐25 (Report No. 117875‐CN).
B. ACHIEVEMENT OF PDOs (EFFICACY)
Rating of Efficacy: Substantial
29. The project achieved its PDO by supporting China to reduce its HCFC production and HCFC‐141b consumption in the PU foam sector, which enabled China to exceed and sustain its obligations under the MP. The project’s contributions to GHG emission reductions from these sectors were also significant. The efficacy is rated Substantial.
19 China HCFC Phaseout Project Stage II (P156397). 20 Source: China’s ‘Intended Nationally Determined Contribution’, submitted by the Government of China on June 30, 2015, to the United Nations Framework Convention on Climate Change (UNFCCC).
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Assessment of Achievement of Each Objective/Outcome
Outcome: Reduced HCFC Production in order to contribute to the Government of China’s endeavor to comply with its Montreal Protocol phase‐out obligations for HCFCs by 2015
30. The second PDO indicator measures China’s compliance with its MP obligations on the production of HCFCs. The verified production for controlled ODS uses in 2018 was 247,938.28 MT for HCFC‐22, 57,464.81 MT for HCFC‐141b, and 11,634.85 MT for HCFC‐142b, equivalent to 13,637 ODP tons, 6,321 ODP tons, and 756 ODP tons respectively, totaling 20,714 ODP tons. This amount is below the limit for these three chemicals of 26,210 ODP tons by 21 percent. The production level remained below the maximum allowable limit in 2014 and met the 2015 limit in 2015 and remained below it thereafter (see table 4 for a comparison of verified HCFC production with maximum allowable production by chemical in ODP tons).
Table 4: Comparison of Verified HCFC Production with Maximum Allowable Production by Chemical in ODP tons
Substance 2010 2013 2014 2015 2016 2017 2018
HCFC‐22
Max Allowable Production (MLF)
— 17,050.00 17,050.00 16,127.00 16,127.00 16,127.00 14,675.00
Actual Production
17,050.00 15,867.12 16,497.26 13,413.89 14,086.77 13,446.36 13,636.61
HCFC‐141b
Max Allowable Production (MLF)
— 10,113.00 10,113.00 8,252.00 8,252.00 8,252.00 6,854.00
Actual Production
10,858.21 9,586.90 9,560.24 7,246.45 7,278.19 7,076.79 6,321.13
HCFC‐142b
Max Allowable Production (MLF)
— 1,894.00 1,894.00 1,766.00 1,766.00 1,766.00 1,148.00
Actual Production
2,207.21 1,102.04 1,076.79 1,229.06 1,110.55 1,115.53 756.27
HCFC‐123
Max Allowable Production (MLF)
— 56.00 56.00 56.00 56.00 56.00 56.00
Actual Production
56.38 41.58 38.61 35.14 34.75 30.09 38.95
HCFC‐124
Max Allowable Production (MLF)
— 9.00 9.00 9.00 9.00 9.00 9.00
Actual Production
8.82 4.59 6.94 1.68 3.34 2.48 1.28
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Substance 2010 2013 2014 2015 2016 2017 2018
Total
Max Allowable Production (MLF)
— 29,122.00 29,122.00 26,210.00 26,210.00 26,210.00 22,742.00
Actual Production
30,180.62 26,602.23 27,179.84 21,926.22 22,513.60 21,671.25 20,754.24
31. The activities and related outputs most directly linked to achievement of this outcome are the investments in HCFC production reduction under Component 2 (primarily through a reverse auction mechanism) and TA and policy support activities under Component 3. A total of 21 phase‐out contracts were signed with HCFC producers in China: 4 contracts for closure of idle production lines, 12 contracts for quota reduction, and 5 contracts for production closure. These contracts were directly responsible for the reduction in production phase‐out referenced above. The 21 phase‐out contracts account for a 40 percent increase over the intermediate indicator target of 15 ‘phase‐out contracts signed with HCFC producers’. To ensure that the aggregated phase‐out of these contracts met the overall limit for each chemical in a given year, the project‐supported MEE put in place a production quota system starting in 2013 for each chemical as well as for each of the enterprises producing HCFCs. These results were verified based on an extensive independent verification process (see details in the M&E section).
Outcome: Reduced HCFC‐141b consumption in the PU Foam Sector in order to contribute to the Government of China’s endeavor to comply with its Montreal Protocol phase‐out obligations for HCFCs by 2015
32. The first PDO indicator measures China’s compliance with its MP obligations on the consumption of HCFC‐141b in the PU foam sector. The verified HCFC‐141b consumption for controlled uses in 2018 is 38,096.25 MT, equivalent to 4,191 ODP tons, which is below the limit of 4,450 ODP tons, indicating that the indicator was achieved by around 27 percent in 2018. Consumption remained below the maximum allowable consumption level in 2014 and met the 2015 limit (4,450 ODP tons) in 2015 and remained below it in 2016 and thereafter, indicating that the limit for the first PDO‐level indicator was met throughout project implementation (see table 5 for verified consumption by year).
Table 5. Verified Consumption of HCFC‐141b by Year
Baseline
(2009–
2010
Average)
2013 2014 2015 2016 2017 2018
HCFC‐141b
Consumption
(MT)
53,502 51,010 52,438 38,584 39,144 39,999 38,096
HCFC‐141b
Consumption
(ODP ton)
5885 5,611.1 5,768.2 4,244.2 4,305.8 4,400 4,191
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Baseline
(2009–
2010
Average)
2013 2014 2015 2016 2017 2018
Maximum
Allowable
Consumption
for HCFC‐
141b
(ODP ton)
n.a. 5,866.4 5,866.4 4,904.8 4,904.8 4,904.8 4,170
33. The activities and related outputs most directly linked to achievement of this objective are the investments in HCFC‐141b consumption reduction in the sector, under Component 1, and the policy measures supported under Component 3.
There were 58 investment subprojects in the PU Foam Sector. This consisted of 55 foam conversion subprojects and 3 subprojects for system houses (suppliers of raw materials for foam production) to channel technical and financial assistance to several smaller enterprises. These 58 investment subprojects directly contributed to a reduction in HCFC‐141b consumption of 12,989 MT (equivalent to around 1,430 ODP tons). The 58 subprojects indicate that the intermediate results indicator on ‘number of enterprises covered by contracts’ was only partially met (58 percent met; target was 100). This was due to lack of capacity of small foam enterprises to conform with the project processing requirements. To support conversions at these small enterprises, the system houses supported by the project provided technical support to their clients to provide new raw materials (that is, HC pre‐blended polyol and water‐blown polyol formulations). The lack of participation of these small enterprises did not significantly affect the achievement of the primary HCFC phase‐out target for PU foam as the participation of larger enterprises (with larger HCFC consumption) was more than originally anticipated.
TA and policy support activities under Component 3 contributed directly to the achievement of this objective. With support from the project, MEE put in place a quota system for HCFC consumption, covering the PU foam sector, starting in 2013, helping ensure that the consumption levels stayed below the maximum allowable consumption limits. In 2018, MEE issued a ban on the use of HCFC‐141b in the three targeted subsectors under the project: small electric appliances, reefer containers, and refrigeration and freezers. This accounted for the balance of the HCFC‐141b reduction in the PU foam sector, equivalent to about 3,900 MT. While the three non‐HCFC foam standards anticipated for refrigerators and freezers, reefer containers, and small household appliances were not adopted, the Chinese domestic refrigerator and electric water heater industries decided to adopt energy efficiency performance standards which combine electrical and insulation performance rather than developing a standalone standard focusing only on insulation performance. For reefer containers, the foam industry decided to adopt the international standard. The expected policy objectives of the originally envisaged standards were therefore accomplished through these policies. To ensure manufacturing and product safety, an industrial standard for safe
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handling of cyclopentane‐blown insulation foam was developed and has been adopted by the foam association.
34. These results were verified based on an extensive independent verification process (see details in the M&E section).
Outcome: Reduced GHG emissions from the production and PU foam sectors
35. The third and fourth PDO indicators measure GHG emission reductions associated with the reduced consumption of HCFC‐141b in the PU foam sector and reduced production of HCFCs, respectively. Based on the data aggregated from the Project Completion Reports (PCRs), the 58 foam conversion subprojects that have been completed account for 12,989 MT of the HCFC‐141b phased out. Combined with the ban prohibiting the use of HCFC‐141b as a blowing agent in the three targeted subsectors, an additional amount of HCFC‐141b of about 3,900 MT, previously consumed by enterprises that are not eligible for funding from the MLF, was also eliminated. As a result, the investment and policy measures financed by the project generated GHG emission reductions of more than 12.2 million tCO2e per year. Climate co‐benefits from reduced HCFC production based on the 2010 level are equivalent to 182.7 million tCO2eq per year. The largest contribution is from the rapid reduction of HCFC‐22 production, which alone accounts for more than 119 million tCO2eq per year. Contributions from HCFC‐141b and HCFC‐142b production reduction are 24.9 and 38.8 million tCO2 eq per year, respectively. The GHG emission reductions from the PU foam sector (12.2 million tCO2e per year) exceeded the target (11 million tCO2e per year) by 11 percent while the GHG emission reductions associated with reduced production (182.7 million tCO2e per year) was 190 percent more than the target (63 million tCO2e year) for the fourth PDO indicator.
Justification of Overall Efficacy Rating
36. The Substantial overall efficacy rating is justified by the fact that the project exceeded its targets for reduction of HCFC‐141b consumption and HCFC production. This allowed China to achieve the first two project‐level outcomes of reduced HCFC production and HCFC‐141b consumption in the PU foam sector to contribute to the Government of China’s endeavor to comply with its MP phase‐out obligations for HCFCs by 2015. Conversions to low and lower GWP alternatives supported by the project also allowed the project to achieve its third objective of reducing GHG emissions from the production and PU foam sectors. In addition, the project helped prepare the China HCFC Phaseout Project Stage II (P156397) and gave China a head start toward meeting its 2020 and 2025 MP obligations under that follow‐on project.
C. EFFICIENCY
Assessment of Efficiency and Rating
Rating of efficiency: Substantial
37. Cost‐effectiveness analysis. Project efficiency was assessed using a cost‐effectiveness (CE) analysis and the project was found to be cost‐effective for its achievement of outcomes. The CE method compared the cost of per kg of HCFC consumption phased out (US$ per kg HCFC) with the project cost at appraisal and MLF thresholds. The actual costs below include a small, prorated share of the costs from
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the TA and management components. Under the ExCom, CE is defined as the amount of MLF grant per unit weight of HCFC phased out in kg.
38. For HCFC‐141b consumption reduction in PU foam sector, with grant financing of US$72.8 million,21 the project phased out 16,889 MT of HCFC‐141b, resulting in a CE of US$4.31 per kg of HCFC‐141b, which is significantly lower than the established CE threshold by the MLF (at appraisal) of US$9.79 per kg for conversion of HCFC‐141b to low GWP technologies in the PU foam sector. When including the costs to beneficiary enterprises not covered by the grant, the CE is US$6.85 per kg of HCFC‐141b, which is lower than the CE threshold.
39. For the production sector, with grant financing for production reduction and closure of US$91.5 million,22 the project phased out 116,692 MT of HCFCs (includes HCFC‐22, HCFC‐141b, and HCFC‐142b), or 8,470 ODP tons, to meet the 2015 MP compliance targets. This resulted in a CE of US$0.78 per kg of HCFCs. In contrast, the expected MLF grant amount for the production sector at appraisal (US$ 260.4 million) was expected to reduce HCFC production by 47,226 MT of HCFCs (or approximately US$5.51 per kg of HCFCs). When accounting for the total conversion costs for the production sector (including the full estimated lost profits23 for the 15 years24 following the reduced production or closure associated with the project), the projected CE is US$3.09 per kg (based on a benchmark social discount rate of 12 percent). With a 6 percent discount rate, the CE is US$4.22 per kg, which is still lower than the projected CE at appraisal.
40. Benefit cost analysis for GHG emission reductions. An analysis found that the flow of benefits of avoided CO2e far outweighs the costs associated from the project. The World Bank’s ‘2017 Updated Guidance Note on Shadow Price of Carbon in Economic Analysis’ establishes a price range for use in valuation of carbon emissions and emission reductions in economic analysis of investment projects.
41. For the PU foam sector, the net present value (NPV) (using a benchmark social discount rate of 12 percent) of the GHG emission reductions (12.2 million tCO2e per year) through 2030 is US$3.4 billion to US$6.8 billion using the low and high shadow prices of carbon, respectively.25 See annex 5 for more detail on calculations.
42. For HCFC production reduction, the benefits accrued outweigh the costs significantly. The benefits are the value of the GHG emission reductions (182.7 million tCO2e per year) for the 15 years following the reduced production or closure associated with the project (2016–2030). The costs are the total lost profit associated with the reduced or eliminated production for the participating HCFC producers under the
21 Includes investment from grant financing under Component 1, foam portion of the TA component, and prorated cost from the project management component. 22 Includes investment from grant financing under Component 2, production portion of the TA component, and prorated cost from the project management component. 23 The total lost profit was calculated based on a survey conducted at appraisal of HCFC producers for estimated production costs and revenue for the different HCFCs under this project. The net revenue per MT of HCFC reduced per chemical was then multiplied by the total amount of HCFC production reduced under the project by chemical. The grant financing under Component 2 compensated for a portion of this lost profit (25 percent, based on a benchmark social discount rate of 12 percent). 24 It is assumed that by 2030, the global HCFC demand will be eliminated due to the complete phase‐out stipulated by the MP. 25 The costs include the total conversion costs. The difference in operating costs between the two technologies is not included as (a) they are difficult to project in a ‘without‐project’ scenario and (b) they are likely to converge to zero.
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project. The NPV estimates are between US$50.6 billion and US$102.1 billion (for low and high values of shadow price of carbon, respectively) using a discount rate of 12 percent (see annex 5 for more detail on calculations).
43. Administrative efficiency. The administrative efficiency is rated Substantial. While the closing date was extended due to delays caused by local fire protection bureaus and EEBs, FECO was able to develop and implement an interim approval process which was agreed to by both authorities and enabled the project to move forward toward achieving its PDO. The extension also did not have an impact on project management costs, as PMU costs were financed on a fee based on the total grant financing amount. Additionally, while only 58 enterprises of the 100 expected in the PU foam sector participated in the project, this did not have a significant effect on the achievement of the PDO‐level results indicators as the project attracted larger enterprises with capacity to implement the conversion projects to meet the subproject requirements and processing cycle, which allowed for a smaller number of enterprises to achieve a large amount of reduction.
44. The overall efficiency is rated Substantial.
D. JUSTIFICATION OF OVERALL OUTCOME RATING
45. The overall outcome rating is based on substantial relevance, substantial efficacy, and substantial efficiency. The overall rating is therefore Satisfactory.
E. OTHER OUTCOMES AND IMPACTS
Gender
46. This project was not gender‐tagged, and gender issues specific to the project were not identified in the PAD nor during project implementation.
Institutional Strengthening
47. This project has been a key instrument for strengthening government institutions to enable China to more efficiently reduce HCFC production and consumption and deliver on its commitments under the MP. The project was designed to secure the maximum funding under MLF rules to support the PMO (under FECO) in successful project execution for the phase‐out of HCFC‐141b consumption in PU foam and in reduced HCFC production. The project contributed to strengthen MEE, as the national coordination organization for the compliance with the MP, as well as FECO, which works on the daily management of international environmental cooperation. The PMO gained access to top‐level technical and MP knowledge from the World Bank team, including through a globally recognized foam sector consultant.
48. The project financed capacity‐building activities to six provincial EEBs on the new HCFC regulations including the three subsector ban. These are six provinces with the highest concentration of the PU foam industry. Local officials of these six provincial EEBs not only assist FECO to identify the remaining enterprises using HCFCs in the manufacturing of PU foam but also monitor those enterprises in the three subsectors and completed subprojects which the use of HCFCs has already been banned. This is
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critical to the sustainability of the HCFC consumption reduction achieved by the Stage I Project. TA activities under Component 3 also strengthened local EEBs’ capacity to enforce the monitoring and bans of the use of HCFCs. This included, through the project’s financing, of a series of trainings as well as partial financing for the registration of HCFC producers and users, allowing MEE to have a better control of both production quotas and domestic sale quotas which are the critical tools for ensuring China’s compliance with the MP.
Mobilizing Private Sector Financing
49. In the PU foam sector, a large portion of the conversion costs on the accompanying civil works were borne by the beneficiary enterprises. Based on the direct co‐financing of the new equipment, the beneficiary enterprises provided a total of US$43.3 million of counterpart funds (69 percent of the respective grant funding) to complete their conversions.
50. For HCFC producers, enterprises incurred the cost of foregone profit, not all of which was compensated by grant financing. Around 76 percent of the anticipated foregone profit was borne by the private sector (based on a benchmark social discount rate of 12 percent). While the grant financing’s compensation level may have been less than the foregone profit (which was not anticipated at appraisal), the calculated foregone profit was not disaggregated per enterprise to account for their individual circumstances. Some enterprises were less competitive and decided to take the lower compensation levels. For some enterprises, the production quota system changed the economics to an extent that it no longer made sense to produce HCFCs at a lower amount and therefore they reduced their production levels significantly or closed their production facilities.
Poverty Reduction and Shared Prosperity
51. The project contributed to creating enabling conditions that stimulate a transition to a greener economy. The project contributed to global public goods by reducing environmental and economic risks posed by depletion of the ozone layer and climate change and thus improved human well‐being and social equity. The project also supported China to select alternatives to HCFCs that not only minimized environmental impacts but also met other health, safety, and economic considerations.
52. The project strengthened the ability of small and medium enterprises (SMEs) to access markets. SMEs face financing, technical, and human resource bottlenecks in terms of changing to low GWP alternatives as most of these alternatives are flammable for which intensive capital investment and safety training are required. Under Component 1, those SMEs that are financially and technically capable of deploying full‐scale HC technology were supported by the project. Those that could not deploy could still adopt low‐GWP alternatives by using HC pre‐blended polyol provided by the system houses that were supported by the project. This option allows small enterprises to offer the same low‐GWP products with less capital investment. The project therefore helped equip these SMEs to keep pace with environmental standards in the export market. For example, as a result of the project, China can continue exporting commercial refrigerators to developed country markets where HCFC‐141b‐based insulation foam is banned.
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III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME
A. KEY FACTORS DURING PREPARATION
53. Overall, the project was well designed. The PDO of the project was clear and the ambition level of the project’s objectives was sensible as the project was the primary mechanism for China to implement its HCFC Stage I Phase‐Out Management Plan for the PU foam sector and for the production sector to meet its MP obligations. The design of the project was simple with clear boundaries between the two investment components, the TA and policy component to facilitate a sustainable phase‐out, a project management component, and a component focused on preparing for the next phase of HCFC phase‐out. The Results Framework was also adequately aligned to the PDO (more details provided on M&E section below).
54. The development of an overarching HCFC phase‐out strategy for PU foam consumption and for production, including HCFC phase‐out management plans for the first stage of phase‐out and indicative plans for future stages, was critical to set strategic directions of China’s phase‐out. To inform these, a survey of HCFC‐141b consumption in the PU foam sector was carried out by the China Plastics Processing Industry Association (CPPIA) with experts from FECO and Peking University. Based on the survey data and information, HCFC‐consuming subsectors in the PU foam sector were reviewed by the World Bank team and the PMO against their capacity, the state of specific alternative technologies and their respective performance and costs, and their overall impact on both the ozone layer and climate. Growth projections of HCFC‐141b supply, prepared in concert with the development of the production phase‐out plan, and demand were done to model possible scenarios for PU foam subsectors. For the production sector, the World Bank took part in a working group set up by FECO and including industrial associations to carry out an on‐site survey of all HCFC producing companies in China. The survey collected information for each producer including type of HCFC produced, HCFC production processes, production capacity, investment in production plants and equipment, actual HCFC production, raw material consumption, HCFC production cost and labor cost, and profit from the sales for HCFCs. This was essential for projecting growth projections of HCFC supply and for identifying the near‐term strategy for the first phase‐out of HCFC production to meet freeze level in 2013 and 10 percent reduction by 2015.
55. Designing the project with a combination of financial support to enterprises, policy development support, TA activities, strong independent verification, and stakeholder engagement enabled a sustainable phase‐out. The project provided certainty for financial support (via grant financing) in the sector. This elicited support from the private sector to move ahead with the ban on the use of HCFC‐141b in the targeted subsectors. To support this ban, the project also provided supporting measures by reducing the production of HCFC‐141b to support conversion activities (to ensure supply and demand are balanced). Funding released by the MLF was based on independent verification that annual HCFC reductions met agreed targets. Funding was based on verified consumption and production of HCFCs. The production verification covered both components, as monitoring of HCFC‐141b consumption was based on the limit on domestic sales for HCFC‐141b for domestic foam market production (this was also the case for other ODS not covered under this project). TA to foam enterprises and system houses as well as to HCFC producers was critical to ensure buy‐in of the phase‐out strategy in the respective sectors. The project also supported analyses on the potential impacts of policies banning HCFC‐141b consumption in the targeted subsectors, which informed the development of the reforms. The findings from the analysis were consulted, which helped secure industry buy‐in.
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56. The project design was flexible enough to ensure that reductions in HCFC‐141b consumption could be achieved despite delays in subgrant signing with enterprises in the three targeted subsectors. As HC technology had already been successfully adopted by enterprises in the three subsectors under the previous ODS IV Project and given that foam formulations and experiences were readily available, it was expected that the remaining enterprises in these subsectors would convert to HC early on under the project. However, there were delays in enticing these enterprises to participate in the project because of high up‐front investment costs associated with conversion to HC. As China still had to meet its consumption targets, the design of the project allowed for enterprises in any PU foam subsector to submit proposals and requests for MLF funding as long as they were willing to convert to HC, water/CO2‐based technology, or other non‐ODS and low‐GWP alternatives. The two subsectors that capitalized on this were pipe insulation (who could use water/CO2‐based technology) and panel producers (with larger annual consumption of HCFC‐141b that made it financially viable for conversion).
57. China anticipated that the approved grant financing level for the production sector may be lower than the appraised level. As introduced in the PIM before the ExCom’s approval of the grant, FECO designed and implemented a reverse auction system to enable a cost‐effective phase‐down of HCFC production. The reverse auction provided an opportunity for facilities that could close down or reduce their production capacity to come forward with proposals. The cost‐effective nature of this mechanism enabled a larger reduction of HCFC production than originally anticipated and generally led to inefficient facilities with lots of leakage and that are not as competitive or environmentally sound to leave the market first. Additionally, the different types of contracts offered to HCFC producers (production reduction, dismantling of idle capacity and closure), each with different compensation levels, facilitated producers to choose the appropriate option for their respective situations.
58. A demonstration subproject under the previous World Bank support on ODS phase‐out was essential to show the viability of pre‐blended HC as an alternative for PU foam manufacturing to ensure a strong readiness for implementation under this project. The possibility of using HC pre‐blended polyols instead of HC delivered in bulk to foam companies was important as it reduced the conversion cost by 30 percent to 40 percent of the cost of supply of HC in bulk. To develop and test the approach, in the ODS IV Project, FECO implemented a demonstration project that (a) developed the formulation and determined the key parameters for HC pre‐blended polyols, (b) developed safety guidelines for PU foam companies converting to HC pre‐blended polyols, and (c) converted a foam system house to enable the production and delivery of HC pre‐blended polyols to PU foam companies.
59. Government commitment and cooperation. The NLG for Implementation of the Montreal Protocol has been in place since 1993 and has proven to be effective for providing overall guidance and coordination of the overall ODS program in China. Before the project could move ahead with the production reductions or phase‐out in the PU foam sector, endorsement from all relevant ministries was required. Given that MEE is not always the agency with the mandate to issue relevant bans or other policy reforms, this required close coordination from the start of the project.
B. KEY FACTORS DURING IMPLEMENTATION
60. Adaptive management to maximize impact. For the production sector, following the midterm review (MTR), the World Bank team agreed with FECO to reallocate US$3 million in funds from Component 3 (Technical Assistance and Policy Support) to Component 2 (Investment in HCFC Production
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Reduction). This was used to hold a reverse auction for dismantling idle capacity of HCFC production capacity, which allowed for further production reductions (and associated GHG emission reductions).
61. Effective policy support to sustain HCFC‐141b phase‐out and HCFC production reductions. Support for the development and implementation of appropriate policy and regulatory measures has reinforced China’s ODS regulatory framework:
MEE issued the Circular on Strict Management of HCFC Production, Sale and Consumption on August 7, 2013. The tradable production quota system covered all the HCFC substances and HCFC producers for controlled use. Quota allocations have been updated on an annual basis to align with MP phase‐out requirements. The quota system on HCFC consumption was therefore applied to foam companies with annual consumption larger than 100 MT.
On January 23, 2018, MEE updated the Circular on the Management of Construction of Facilities Producing or Using ODS, indicating that any new establishment, retrofitting, or expansion of facilities for production or use of HCFCs in application as refrigerants, blowing agents, solvents, or chemical process agents is not allowed. For any new establishment, retrofitting, or expansion of facilities for production of HCFCs for feedstock use, enterprises are now required to submit their applications to local EEBs with documentation ensuring that the facility is only to be used for feedstock purposes and written commitments not to use HCFCs in any applications controlled by the MP. As part of the policy, a small fine between CNY 5,000 and CNY 20,000 is imposed if the enterprises do not report properly. For any HCFC production facilities that are to be moved to other places or to be transformed, the policy indicates that its production capacity should not be increased.
The ban on the use of HCFC‐141b in manufacturing in the priority subsectors (small electric appliances, reefer containers, and refrigeration and freezers) was issued by MEE on October 23, 2018. This will result in consumption phase‐out that will exceed the project’s original consumption phase‐out target.
62. The utilization of an implementation support agency (ISA) was critical for supporting FECO to identify potential beneficiaries under the project. The ISA supported the larger companies to comply with subproject preparation requirements through the whole subproject cycle. The ISA was not ideal for identifying smaller enterprises as their foam market network did not generally include these. Local EEBs helped mitigate this by identifying the smaller enterprises but the companies were not always able to participate in the project due to sometimes complex procedures in the subproject cycle. TA activities under Component 3 also helped build Government capacity by providing training on how to identify potential beneficiaries. The Government also used National Ozone Day and annual international PU foam conferences to help reach out to the foam industry directly (instead of solely relying on the ISA).
63. A number of challenges arose during implementation. There was an identified lack of capacity for small and medium PU foam enterprises to invest in full‐scale HC technology. This led to a more targeted support for system houses (including an increase in system houses supported) to provide these alternative products, which also informed the design of the Stage II project. There was also limited capacity of local fire protection bureaus to certify the new foam production lines, which led to the contracting of independent fire experts under the project to allow for certification to facilitate grant
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disbursement. Finally, the requirement from the ExCom26 for the phase‐out in the production sector to include other environment benefits and to give priority to closure led to the project not prescribing how many tons of specific HCFCs were to be phased out and that the final tonnage and types of HCFCs to be phased out would depend on offers from producers.
64. The MTR for the project was completed following a mission in October 2015 and noted that the project was making excellent progress toward meeting the PDO. In addition to the aforementioned second order restructuring to reallocate funds between components (from Component 3 to 2) and to increase funding for Component 5, the MTR recommended minor adjustments to intermediate results indicators to better reflect the project’s impact and progress. Among these suggestions included an adjustment to the intermediate indicators under Component 1—from ‘number of enterprises captured by contracts’ to ‘HCFC impact captured by signed contracts (ODP tons)’—and 2—from ‘number of phaseout contracts signed with HCFC producers’ to ‘HCFC production reduction captured by signed contracts (ODP tons)’— to better capture planned phase‐out as a result of activities under their respective components. The task team decided not to proceed with these changes because they would not strengthen the effectiveness of the monitoring system given that the project has already achieved the targeted phase‐out. The MTR also recommended that while efficacy in monitoring was deemed satisfactory in both PU foam consumption and production, the planned sophisticated web‐based management information system (MIS) needed to be developed to improve efficiency and reduce FECO’s workload as well as accelerate responsiveness. Despite this recommendation, there were considerable delays in developing the system27 and it was later decided that it was no longer necessary to have the system as the interim system that been used in the earlier ODS IV Project and was being utilized from the start of the project had been effective.
IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME
A. QUALITY OF MONITORING AND EVALUATION (M&E)
M&E Design
65. The design of the Results Framework as a means of demonstrating the theory of change and monitoring progress toward the objectives was largely appropriate. It was designed to reflect the key project results and outcomes in response to the country’s MP obligations and GHG emission reduction co‐benefits to be delivered under the project. The outcome indicators for consumption and production of HCFCs within maximum allowable limits and their associated GHG emission reductions were therefore sufficient for measuring progress against the PDO. Tracking of progress toward issuance and implementation of key policies and regulations, signing of subgrant agreements, and consumption verification reports were appropriate intermediate indicators to make sure the project stayed on track. The verification arrangements were strong, with independent third‐party verification of imports and subproject agreements structured to condition final payments on direct evidence and verification of completion of required conversion actions. While improvements to the intermediate results indicators
26 ExCom Decision 69/28 (e)(ix). 27 The final terms of reference for the system were not agreed upon (between FECO and other relevant government agencies) given the complexity of such a system, where all project data of various sectors, including financial information, were to be integrated into one platform.
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could have been made following the MTR, as referenced above, the task team did not pursue these changes as they did not have an impact on the quality of project implementation.
66. The design of the M&E systems was embedded in the project’s management, including the two PIMs (for HCFC‐141b consumption phase‐out and HCFC production reduction), the Tranche Implementation Reports and Plans and progress reporting to the MLF. Consolidated project progress reports (every six months) were provided by FECO to the World Bank team. Additionally, subproject completion reports, semiannual unaudited interim financial reports (IFRs) on use of funds, an annual HCFC consumption verification, and the annual financial audits of the project account were provided.
67. The PU foam consumption sector leveraged the existing subproject monitoring system that FECO had instituted under the ODS IV Project. The monitoring and management tool was able to track and report implementation and progress of aggregate HCFC phase‐out on an annual basis by integrating import/export data, registration licensing, and use data by sector. To ensure tight monitoring of the supply of HCFC‐based raw materials, system houses are required to report their consumption and sales to MEE (for those above 1,000 MT) and local EEBs (for the rest). Enterprises would have to report progress and request funding according to specific milestones as included in the PIM. Enterprises report on consumption levels on an annual basis during the conversion process. Once the subproject is complete, monitoring of sustainability is transferred to local EEBs as part of their regular inspection and compliance regime.
68. For the production sector, a systematic approach was designed for monitoring progress. For production or idle capacity, companies had to prepare environmental management plans (EMPs) and monitoring their implementation was the primary method for FECO to monitor closures. Further, the payment schedule was linked to contract signing, dismantling of the facility, and other intermediate steps with clear milestones. This facilitated monitoring and reporting on progress related to closures. For production reduction, monitoring was based on an agreed amount for reduced quota (through a quota reduction contract). Regular quarterly reporting, coupled with annual verification, ensured strong monitoring of these contracts.
69. Results tracking under the project benefited from the independent verification process put in place for both HCFC production and consumption. Production verification was undertaken by reviewing production logs of all HCFC producers and verifying the production quantity against their financial records of purchase of raw materials and financial records of sales. Consumption was verified by reviewing the financial records of domestic sales and exports provided by each producer against the export information of the Customs department. Through this verification system, consumption is determined by deducting the actual exported quantity from the production quantity, which is consistent with the consumption definition of the MP.
M&E Implementation
70. FECO effectively operated and maintained its monitoring system for data keeping and reporting, including the elements of the Results Framework and indicators that were key aspects of the M&E strategy for tracking progress toward achievement of the objectives. The verification reports on national HCFC consumption and production for 2013, 2014, 2015, 2016, and 2017 were submitted by FECO to the World Bank and then submitted to the ExCom through the World Bank on behalf of the
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Government. This ensured the use of the performance‐based implementation modality that required independent verification of results to release the funding tranches outlined in the Government’s agreement with the ExCom. Semiannually, FECO produced financial and technical reports as per World Bank requirements. The ExCom required annual progress reporting and submission of an implementation plan for the following year and the submission of the verification report confirming that all performance targets have been met. While the originally conceived MIS would have been beneficial, the monitoring and reporting system that was in place did an adequate job of generating the necessary reports.
71. FECO operated and maintained project‐related data without issues. The semiannual project progress reports submitted by FECO to the World Bank team each year during project implementation provided a satisfactory overview on project implementation progress and disbursement status, which effectively informed the PMO and the World Bank team of implementation issues and facilitated timely solutions. Monitoring and reporting was done in a timely and complete manner and the project data collection system in place was sufficient to monitor progress toward meeting the PDO results.
72. For the production sector, an online reporting platform was developed during project implementation so that producers could report quarterly on their monthly production levels. Before this system, enterprises submitted their quarterly reports manually and FECO had to consolidate this information into the progress report format required by the World Bank and ExCom. This progress reporting included financial data as well as technical data (on exports/imports, HCFCs for feedstock use, and so on). Each HCFC feedstock user was required to be registered as such in FECO and the list of registered users was posted online for public scrutiny. After being registered as a feedstock user, enterprises were required to report on the source of supply and amount purchased of HCFC and the quantity of the final product manufactured. FECO contracted a third party to conduct feedstock user verification of their consumption in 2013, 2014, and 2015. Based on this experience, this verification will be done under Stage II to cover feedstock consumption from 2016 to 2018 and later.
73. For the consumption sector, FECO has continued the approach which was effective under the ODS IV project. Whenever a company submitted a request for funding, FECO sent a team to check baseline and eligibility of the company to receive MLF grants. The company then submitted a proposal that was reviewed by the evaluation panel organized by FECO for subsequent approval or revision if required. Upon subproject completion, monitoring and inspection responsibility was transferred to local EEBs where the enterprises are situated. To ensure sustainability of the phase‐out, no new HCFC consumption quota registration is allowed for enterprises.
M&E Utilization
74. The M&E data were utilized at the international, national, and project levels. The data generated were used at the international level to report on MP compliance and at the national level to plan MP compliance. Embedding a performance‐based structure in the subproject‐specific HCFC agreement ensured the consistency of M&E quality at entry and during implementation. As China had fully operationalized the license and quota system with clear roles and responsibilities of involved ministries and HCFC importer/exporters, HCFC data have been carefully monitored and verified annually.
75. Given that the Stage I Project is multiyear and performance based, a specific PCR template for such projects was designed by the ExCom to collect information regarding the fate of ODS‐based
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equipment, the types of equipment procured, payments from grants, ODS and substitutes consumed, actual production after conversion, cost effectiveness, and ODS equipment disposal certification. The PCRs (covering the PU foam sector and production sector) for the Stage I HCFC Project are prepared by China and will be submitted to the ExCom. Information in these PCRs was used as input to this Implementation Completion and Results Report (ICR).
76. The M&E tools supported under the project at the Import/Export office also provided positive global spillover effects. Before any export could be made, exporters were required to provide names of importers in the importer countries to the Import/Export office, which then confirmed with other countries’ Ozone Units to ensure that their respective importers were properly registered and had sufficient import quotas. If the importers did not meet the required criteria, the Import/Export office did not issue export permits.
Justification of Overall Rating of Quality of M&E
Rating of M&E quality: Substantial
77. The overall rating of the quality of the M&E is Substantial, primarily due to the design of the project’s M&E system and its effective implementation.
B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE
Environmental and Social Safeguards
78. In general, the environmental and social safeguards performance of the project was satisfactory through project implementation. The project environmental assessment category was ‘B’ (partial assessment) and environmental and social risks were considered low at appraisal. The safeguards policies triggered were Environmental Assessment (OP/BP 4.01) and Involuntary Resettlement (OB/BP 4.12). Activities under the project were expected to have site‐specific, minor or moderate adverse environmental and social impacts. The environmental benefits of the project were expected to greatly outweigh the negative impacts, as the objective of the project was to phase out HCFCs, a group of chemicals which has both high ODP and GWP. The risk rating for environmental and social increased to Substantial from the original Low rating (in the January 2015 Implementation Status and Results Report [ISR]) due to additional risk related to planned closure of HCFC production enterprises, which was not originally part of project design. The enterprises subsequently submitted their environmental and social safeguards instruments, which were deemed satisfactory to the World Bank. The risk rating was downgraded to Moderate in the December 2017 ISR where it remained for the remainder of the project.
79. FECO prepared an Environmental Management Framework (EMF) (disclosed January 12, 2012, on FECO’s website) under the project for use by the PU foam enterprises and for HCFC production facilities during implementation. The EMF was prepared to account for the multiple subprojects as their locations were mostly not known before appraisal. The EMF was used to provide guidance to both beneficiary enterprises and FECO for the environmental management process and ensure that environmental management followed both Chinese environmental assessment laws and regulations and in accordance with World Bank environmental assessment policies and procedures as specified in OP/BP
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4.01. The EMF defined the contents, procedures, and institutional responsibilities for environmental management of the subprojects.
80. The project was expected to have limited adverse social impacts in terms of not only land acquisition and involuntary resettlement but also job changes or losses. At appraisal, it was not clear which specific enterprise would be relocated or expanded and would need additional land. A Resettlement Policy Framework (RPF) (disclosed January 12, 2012, on FECO’s website) was prepared based on surveys of a few dozen sample project enterprises to guide due diligence review (DDR) of prior resettlement and preparation of new land acquisition if needed for new sites. The beneficiary enterprises were expected to provide compensation following China’s Labor Law, training, new job assignments, and other kinds of assistance to workers who lost their jobs due to either the relocation or closure of HCFC enterprises.
81. There were no major issues on compliance with environmental and social safeguards. During project implementation, some enterprises decided to close their HCFC production facilities instead of maintaining their HCFC production or converting to other non‐HCFC production as originally planned. Environmental and social safeguards documents (for example, EMP, assessment, resettlement DDR, and employee compensation action plan) were prepared and locally disclosed by these enterprises in accordance with the World Bank’s safeguards policies. Under the project, there was no new land acquisition and therefore no resettlement action plan was needed. However, some production facilities and PU foam companies moved to industrial parks on land that was acquired before the project. A DDR was conducted by an independent social consultant and concluded that the land acquired complied with China’s regulations and that there were no legacy issues or complaints. All enterprises involving labor lay‐off because of the project developed the employee compensation action plan following China’s Labor Law and submitted to FECO for review.
82. An employee compensation action plan was prepared and implemented by those enterprises that closed or moved their facilities and were expected to result in layoffs. For the PU foam component, 55 of the 58 enterprises converted their processes in situ and did not result in any employee layoffs as the employees could change to other positions within the factory. Two of the three other enterprises relocated to other locations that were not far from the original sites and therefore did not have any layoff issues. The third enterprise relocated from Shanghai to Taicang City in Jiangsu Province (approximately 100 km away), which therefore required an employee compensation action plan to be prepared and submitted to FECO. Compensation packages for the 1,027 workers that were laid off followed Chinese labor laws. While a portion of the workers (<20 percent) were not originally satisfied with the compensation package and registered complaints with the labor authority, the Government held clarification meetings with these workers to explain the process and how the package was calculated. Following these meetings, less than 5 percent of these workers remained unsatisfied and appealed through the local judicial process to resolve the issue. The court deemed that the compensation package was lawfully calculated and offered. For the HCFC production reduction component, 12 companies reduced their production levels, five closed production lines, and four dismantled idle capacity. For those that reduced their production level, this accounted for a small amount of their total capacity and this did not result in labor retrenchment. For the five firms that closed production lines, three removed all production lines (including those that were not related to HCFC production) which led to layoffs of between 20 and 200 workers for each facility. For the other two, most employees were able to change to other non‐HCFC production lines after the factories closed the HCFC production lines. For all of these,
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employee compensation action plans were prepared and submitted for FECO’s review. All laid‐off employees accepted compensation packages in line with Chinese regulations. A third‐party consultant was hired by the enterprises to conduct a due diligence review and there were no pending complaints. For the idle capacity closures, given that there was no active production of HCFCs, there were no issues with employee layoffs.
83. World Bank environmental and social specialists formed part of the core team at identification, preparation, and implementation support missions. The World Bank task team has been working with the same clients since the 1990s and lessons from those experience were incorporated into project design and relevant safeguard documents. For example, potential types of subprojects and relevant safeguards requirements were adequately specified in the EMF and RPF prepared for the PU foam sector.
Fiduciary
84. Financial management (FM). Overall, FM performance of the project was Satisfactory throughout project implementation. The project had an adequate project FM system that provided, with reasonable assurance, accurate and timely information that the grant was being used for the intended purposes. The FM and disbursement arrangements were well prepared to accommodate MLF requirements on funds appropriation and the needs of fiduciary risk management. The project accounting and financial reporting were in line with the regulations issued by the Ministry of Finance and the requirements specified in the grant agreement. No significant FM issues were noted throughout the project implementation and the FM‐related weaknesses raised during FM supervision were resolved on time. The project audit reports were all with unqualified audit opinions. In addition, the withdrawal procedure and funds flow arrangement were appropriate. The grant proceeds were disbursed to the project in a timely manner.
85. Procurement. Procurement performance of the project was Satisfactory throughout project implementation. Procurement risk was rated Moderate during preparation and there were no major issues. FECO’s experience working on previous ODS projects in China was critical for ensuring that there were limited procurement‐related issues. The risk that was identified during preparation was primarily related to beneficiary enterprises’ procurement capacity. FECO’s contracting of an Implementation Support Agent (ISA) and the hiring of procurement agents by some enterprises were both important for addressing these risks. With this support, procurement followed Bank procedures adequately and no major issues related to procurement came up throughout implementation. Some delays occurred related to the procurement of consulting services for the TA component, but this was largely due to the identification of specific TA needs (which turned out to have evolved from the time when the project was prepared) rather than any issues related to procurement.
C. BANK PERFORMANCE
Quality at Entry
86. The World Bank’s close support in developing China’s HCFC Phase‐Out Strategy and HCFC Phase‐Out Management Plans for PU Foam and for Production, the fundamental basis of both the project design and the MLF’s agreement to provide financing, was critical to the approval, implementation, and success of the project. The World Bank preparation team, through its strong and diverse team composition, was able to provide international technical expertise to strengthen the quality of the
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underlying surveys for both HCFC‐141b consumption in the PU foam sector and for production. The World Bank’s experience in conducting the HCFC‐141b survey through the supply chains for the key raw materials in smaller HCFC‐141b consuming countries was replicated. The project was approved in time to align its activities with the general MP timeline for progressive sequencing of ODS phase‐out projects for different substances and the accelerated phase‐out schedule and yearly targets for HCFCs specifically. Preparation began during implementation of the China ODS IV Project in what was considered a satisfactory and well‐designed project, and many of the strengths and lessons of the project were carried over into the design of the HCFC Phase I project. The well‐established implementation arrangements and readiness of the project at approval helped it get off to a quick start, and it was able to build on and strengthen the overall HCFC quota and regulatory system that had already been established under the previous project with World Bank support and guidance. The environmental and social safeguards instruments prepared also built on experiences from the previous project and this ensured a high‐level of quality during preparation. On procurement, the World Bank team advised FECO on technical specifications for PU foam enterprises’ subprojects which helped ensure high‐quality technical requirements of the project.
Quality of Supervision
87. For the duration of project implementation, the World Bank team provided FECO with timely, consistent, and the best available ODS policy and technical advice. This was provided through 12 formal implementation support missions that were undertaken semiannually; technical visits for launch, completion, and training workshops; and timely communications by audio/video conferences and emails. This allowed first‐hand understanding of on‐ground implementation experiences, offered the opportunity to update the beneficiaries on MP policies and guidelines, and facilitated timely settlement of implementation issues. The World Bank team also organized a Regional ODS Workshop on an annual basis which brought together policy makers, industry representatives, experts, and World Bank staff working on MP projects throughout the region. This allowed China to learn from the experiences of other countries (who are mostly all consumers of HCFCs) as well as provide an update on project implementation.
88. For example, the World Bank’s policy advice enabled China to strengthen the monitoring of phase‐out to ensure sustainability. Through initial results from the independent verifications, the World Bank was able to identify shortcomings in the monitoring of HCFC exports, particularly those conducted by HCFC distributors. The World Bank team therefore advised FECO and the import/export office to change reporting procedures for exports by distributors by allowing more than one name of the original HCFC producer be included in the distributors’ export report since one export shipment of HCFC is supplied by more than one manufacturer. In addition, the lack of participation of small foam enterprises at the start of the project prompted the World Bank to advise China to address HCFC phase‐out in small foam enterprises through system houses. As a result, the project financed more system houses in provinces to ensure that smaller enterprises will get access to new alternatives.
89. Project implementation support was further strengthened through the involvement of a core MP policy and technical team. The World Bank team also ensured that guidance on financial management, procurement, and environmental and social safeguard issues were effectively addressed in the 58 PU foam enterprises funded under the project and for the 21 facilities that shut down, reduced their production capacity, or dismantled their idle capacity. Specific FM and procurement training were provided by World Bank specialists for the PMO staff and enterprises. The team monitored compliance
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with the World Bank’s fiduciary and safeguard policies, reviewed procurement and disbursement procedures, and financial audit reports. The World Bank team provided a strong quality review and assurance team to FECO, as evidenced through the review of almost all of the TORs for consulting services under the project. Twelve mission Aide Memoires and 12 ISRs were completed on time, providing a consistently current and clear view of the implementation status of the project’s components.
90. The World Bank’s decision to include two MLF‐funded projects under one World Bank project and one Grant Agreement helped avoid a piecemeal approach to supporting China to meet its MP compliance targets. This also allowed for supervision to take place at the same time and ensured that all performance targets were to be assessed together during implementation. While two sets of reporting requirements to the ExCom were still required, this also enabled a larger and more diversified supervision and implementation support team to be brought on board to support FECO.
91. To ensure high confidence in results related to HCFC production reduction, the World Bank also designed the procedures to enable a robust independent third‐party verification of implementation as specified under contracts with production facilities. The World Bank designed the verification procedures to ensure that they captured all the requirements of the ExCom, which were constantly evolving. On an annual basis, the verifier conducted a thorough analysis of HCFC sales for each company and consolidated data on exports, sales for feedstock use, and sales for ODS use. This was compared with the quarterly reports provided by the producers, and FECO has reported few discrepancies between the two sets of data. The World Bank reviewed the verification reports to ensure that all the ExCom requirements were addressed. The World Bank team also ensured that any recommended actions identified by the independent verification team be undertaken by FECO, the Import/Export Office, and MEE.
92. The World Bank team played an important role as an interlocutor with the ExCom on behalf of China. In line with the agreement between the MLF ExCom and the country, the total MLF financing for the project was agreed at approval but released in nine tranches (five for the foam sector and four for the production sector), based on a specific schedule and achievement of annual HCFC phase‐out targets as verified independently. The team oversaw the preparation of the project’s annual implementation plans, providing advice and inputs and submitting them on behalf of China to the ExCom for approval. The review and guidance provided for the annual implementation plans associated with each funding tranche ensured regular monitoring of performance and achievements.
93. The effective and timely implementation support from the World Bank team built trust and cemented the World Bank‐client relationship in MP operations, as witnessed by the fact that China’s HCFC Phase‐out Stage II has been approved by the MLF with the support of the World Bank and is under implementation.
Justification of Overall Rating of Bank Performance
94. The World Bank’s overall performance is rated Satisfactory.
D. RISK TO DEVELOPMENT OUTCOME
95. The issuance of the ban on HCFC‐141b in the three targeted subsectors by MEE was a key policy tool to sustain the project outcomes beyond its timeline. The closure of HCFC production facilities and
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dismantling of idle capacity also help ensure that enterprises do not continue to produce HCFCs beyond the timeline of this project. The destruction of HCFC‐consuming production facilities in the PU foam sector and phase‐in of new alternative technologies have contributed to make sure that HCFC consumption will not be reversed by legal or illegal market means. The implementation of a Stage II HCFC phase‐out also enables the World Bank to continue its strong supervision and implementation support in these same sectors to ensure sustainable phase‐out is met.
96. There are, however, risks to HCFC phase‐out for both the production of chemicals and their consumption in the PU foam sector. HCFC‐22, HCFC‐123, and HCFC‐142b are all also produced for feedstock use, and so a risk exists that these could be diverted to illegal production and sold for ODS use. The Stage I project is the first phase of this engagement through 2030, and under Stage II, annual verification will continue for all HCFC facilities, including those that have ODS and feedstock production integrated in the same facility. This will help mitigate the risk of diversion. For those facilities that only produce HCFCs for feedstock use, China will continue to ensure that these are not re‐directed for ODS use (as was done under Stage I). The monitoring and compliance regime at the local level (by local EEBs) is also crucial for monitoring compliance of facilities after the completion of their closures. Their capacity for doing so will be strengthened under the Stage II project. The demand for HCFCs (such as HCFC‐22 and HCFC‐142b) is also likely to go down as more countries phase out the consumption of these chemicals. This would also likely serve as a disincentive for producers. Currently, the production level is lower than the quotas provided to each producer so there is a low likelihood that there would be any illegal production in the near term. Once the production quotas are reduced significantly as part of the MP compliance schedule, this will likely require close implementation support as part of Stage II and Stage III. For consumption of HCFCs in the PU foam sector, there is a risk of illegal production of products with HCFC‐141b for SMEs as alternatives are currently more expensive and generally do not perform quite as well. There is therefore a need to ensure continued balance of supply and demand to prevent any adverse incentives. Under Stage II, FECO is closely monitoring the prices as a key indicator for illegal production (if there is a spike in price, there is a higher risk for illegal production). The data are available on a monthly basis from the chemical industry association.
97. Given that raw materials for producing HCFCs are abundant in China, it is likely that illegal production and consumption may take place in the future if alternatives are more expensive and/or do not have adequate supply. Hence, capacity of the local EEBs to continue their monitoring functions after project completion is critical to project sustainability. Significant efforts to strengthen the capacity of local EEBs have been carried out since the ODS IV project, Stage I HCFC Phase‐out Project, and will be further strengthened in the subsequent stages of the HCFC Phase‐out Project. Moreover, FECO and MEE will work closely and collect intelligence from relevant industry associations. These practices have been proven to be reasonably successful as they are effective in identifying any illegal CFC and HCFC production facilities and users. Thus far, illegal production and consumption was only found in small‐scale operations.
98. Recent studies in Nature28 pointing to potential illegal CFC‐11 production in China highlight the need to ensure sustainability of the achieved phase‐out. This relies on continuing commitment of the Government to monitor and enforce its regulations to ban production and consumption of banned
28 Montzka, et al. 2018. “An Unexpected and Persistent Increase in Global Emissions of Ozone‐depleting CFC‐11.” Nature 557:413–417; Rigby, et al. 2019. “Increase in CFC‐11 Emissions from Eastern China Based on Atmospheric Observations. Nature 569:546–550.
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chemicals. In this regard, the State Council of China passed the Ozone Depleting Substances (ODS) Management Regulations in 2010 prohibiting production and consumption of ODS without approvals from the Government. The regulation also stipulates a substantial financial penalty on any violators. Between 2013 and the first half of 2018, local EEBs identified 16 cases of illegal production, of which 14 cases were CFC‐11 production facilities that were identified before 2014. These illegal cases involved small production facilities located in old warehouses and in remote areas. In addition, China also monitored production of carbon tetrachloride, a raw material which is also a controlled substance under the ODS management regulations, to ensure that it will not be diverted to illegal CFC production. Since the Nature reports were released, China has been working closely with the MP community to identify the source of CFC‐11 emissions in China. The inspection campaign was conducted between August and October 2018 for which more than 1,000 foam enterprises and production facilities were visited by local EEBs. Thus far, only a few cases of illegal production and consumption were identified, far less than what has been suggested by the reports. To assist the global community to identify any sources of illegal production and use of banned ODS, China proposes to establish a network of CFC, HCFC, and HFC monitoring stations in several provinces in China. The monitoring stations are expected to be put into operation in 2022. This will allow the scientific community to be able to conclude with high accuracy whether there is significant emission of banned CFC from East Asia.
V. LESSONS AND RECOMMENDATIONS
99. Enhancing the roles of local EEBs on the management and monitoring of ODS phase‐out is essential for achieving fair and sustainable phase‐out targets. Involvement of competent local EEBs in the management and monitoring of HCFCs’ phase‐out has strengthened China’s capacity to monitor the use of HCFC‐141b in the consumption sector. Under Stage I, local EEBs have already started registering foam enterprises consuming HCFC‐141b. Local EEBs’ expanded involvement, particularly in the enforcement area, in Stage II of HCFC Phase‐Out is important to ensure no illegal use of HCFC‐141b.
100. Project management and the implementation system established to support PU foam sector conversions have proven to be effective and compatible with business practices of larger enterprises. Stage I implementation showed the importance of having a strong PMO that led project development and has good knowledge of and contact with the HCFC production industry. Subproject execution and the implementation approach of using an implementation support agency (ISA) have proven to be effective. Given that more SMEs will be involved in subsequent stages, the subproject execution and implementation modality under Stage I will need to be refined and streamlined to manage the additional flow of grants to many enterprises within the project duration.
101. Participation of system houses in supplying cyclopentane pre‐blended polyol as a solution to smaller foam enterprises has proven to be effective in increasing access of alternative technology to SMEs, lowering cost of conversions, reducing safety risks, and furthering market penetration of cyclopentane technology. In addition, through the public‐private partnership between FECO and system houses, TA and technology transfer to a larger number of smaller foam enterprises through the existing market network have become viable. As a result, it is recommended that system houses be used as conduits for channeling financing and TA through SMEs. For example, FECO should expand the scope of the system house subproject under Stage II by including technology transfer and production trials at SMEs as part of their subprojects.
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102. While the production quota system implemented in partnership between MEE and FECO has worked extremely well, restrictions in annual quota trading between producers to April and November form the main reason for reductions beyond that mandated by the MP and MLF. Producers, who generally require flexibility in the latter part of a year to adjust to international market demand, could not transfer and receive unused quotas for production in the limited window of time. To prevent more artificial restrictions to HCFC production and, as a result, pressure to produce and trade illegally, the timing of the latter quota trading date should revisited. This was especially an issue toward the end of the year where some producers had remaining production quotas while others had orders but no quotas. Regular meetings between the Import/Export Office and production and consumption sectors could help ensure supply and demand are in check and fully utilized.
103. The somewhat complicated chain of custody from HCFC production to dealer to final export destination or local market requires an effective monitoring and verification methodology. Given that the methodology applied in the Stage I project provided a high level of certainty on the final figure of total HCFC exported annually, it will be used in subsequent stages to account for and confirm China’s annual production and consumption levels according to the MP definition.
.
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ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS A. RESULTS INDICATORS A.1 PDO Indicators
Objective/Outcome: Reduced HCFC Production
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Production of HCFC 141B, HCFC 142B and HCFC 22 within maximum allowable limits in 2013 and 2015
Text 29,122 ODP tons 26,210 ODP tons 20,714 ODP tons
12‐Nov‐2012 30‐Dec‐2016 01‐Oct‐2019
Comments (achievements against targets): Summary: The target has been exceeded by 21%. The verified production for controlled ODS uses in 2018 was equivalent to 247,938.28 MT for HCFC‐22, 57,464.81 MT for HCFC‐141b, and 11,634.85 MT for HCFC‐142b, equivalent to 13,637 ODP tons, 6,321 ODP tons, and 756 ODP tons respectively, totaling 20,714 ODP tons. This allowed China to comply with its Montreal Protocol obligations.
Data source: HCFC production verification reports: production for ODS use and feedstock and sales records.
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Quality of data: High, production quota system is monitored annually by FECO, WB team has conducted annual independent verifications
Main activities that contributed to the achievements: Component 2: this was achieved through performance‐based contracts with HCFC producers for production reduction, facility closures, or idle capacity reduction. Under these contracts, HCFC producers produced HCFCs in accordance with the annual production quotas granted by MEE. This was also supported by TA and by support to policies and regulations at the national, provincial and sector levels (under Component 3)
Objective/Outcome: Reduced HCFC 141‐b consumption in the PU Foam Sector
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Consumption of HCFC141B within Maximum Allowable Limits in 2013 and 2015
Text 5,393 ODP tons 4,450 ODP tons 4,191 ODP tons
12‐Nov‐2012 30‐Dec‐2016 01‐Oct‐2019
Comments (achievements against targets): Summary: Target exceeded by 27 percent. HCFC‐141b phase‐out in PU foam (under Component 1 has been successfully completed under the project. The target was met in 2015 and stayed below maximum allowable consumption levels since (as confirmed by the independent verifications of both consumption and production). This allowed China to comply with its Montreal Protocol obligations.
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Data source: 2017 HCFC production verification reports, export and import data from Export/Import Office, and HCFC consumption in other sectors.
Quality of data: High, WB team conducted random consumption verifications.
Main activities that contributed to the achievements: Component 1: This includes introduction of zero ODP and low GWP alternative technologies to HCFC‐141b to support (1) phase‐out of about HCFC‐141b in three subsectors: (i) reefers and containers; (ii) refrigeration and freezers; and (iii) small household appliances. (2) select enterprises in other subsector to meet the overall reduction target. (3) foam system houses to modify their production process, in order to provide hydrocarbon pre‐blended polyol to enterprises that cannot adopt full‐scale hydrocarbon technology. This was also supported by TA and by support to policies and regulations at the national, provincial and sector levels (under Component 3).
Objective/Outcome: Reduced GHG Emissions from the Production and PU Foam Sectors
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Reduction of GHG from the Production Sector
Text N/A 63 million tCO2 (tonnes of CO2 equivalent)
182.7 million tCO2 (tonnes of CO2 equivalent)
01‐Jan‐2010 30‐Dec‐2016 01‐Oct‐2019
Comments (achievements against targets):
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Summary: The target has been exceeded by 190%. Climate co‐benefits from reduced HCFC production based on 2010 level are equivalent to 182.7 million tCO2eq per year. The largest contribution is from the rapid reduction of HCFC‐22 production, which alone accounts for more than 119 million tCO2eq per year. Contributions from HCFC‐141b and HCFC‐142b production reduction are 24.9 and 38.8 million tCO2 eq per year, respectively
Data source: Production reduction of all HCFCs (from 2018 verification report) multiplied by GWPs [from Intergovernmental Panel on Climate Change Fourth Assessment Report (IPCC AR4)] of respective HCFCs.
Quality of data: High, production quota system is monitored annually by FECO, WB team has conducted annual independent verifications. GWP conversion factor internationally accepted.
Main activities that contributed to the achievements: Same as Indicator on HCFC production.
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Reduction of GHG Emission from the PU Foam Sector
Text N/A 11 million tCO2e (tonnes of CO2 equivalent)
12.2 million tCO2e (tonnes of CO2 equivalent)
02‐Jan‐2012 30‐Dec‐2016 01‐Oct‐2019
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Comments (achievements against targets): Summary: The target has been exceeded by 11 percent.. For the 58 foam conversion subprojects that have been completed, these account for 12,989 MT of the HCFC‐141b phased out. Combined with the ban prohibiting the use of HCFC‐141b as a blowing agent in the three targeted subsectors, an additional amount of HCFC‐141b of about 3,900 MT previously consumed by enterprises that are not eligible for funding from the Multilateral Fund, was also eliminated. The investment and policy measures financed by the project generated GHG emission reductions of more than 12.2 million tons of CO2e per year
Data source: HCFC‐141b consumption reduction (from the aggregated amount included in PCRs and 2018 HCFC production and consumption verification report) multiplied by GWP of HCFC‐141b (from IPCC AR4).
Quality of data: High, consumption reduction of HCFC‐141b is confirmed via consumption verifications by WB team. GWP conversion factor internationally accepted.
Main activities that contributed to the achievements: Same as HCFC 141‐b consumption indicator.
A.2 Intermediate Results Indicators
Component: Component 1: Investment in HCFC‐141b Consumption Reduction in the PU Foam Sector
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Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Number of enterprises covered by contracts
Number 0.00 100.00 58.00
12‐Nov‐2012 30‐Dec‐2016 01‐Oct‐2018
Comments (achievements against targets): Summary: The target has been 58% achieved. This was due to lack of capacity of small foam enterprises to conform with the project processing requirements. To support conversions at these small enterprises, the system houses supported by the project provided technical support to their clients to provide new raw materials (i.e., hydrocarbon pre‐blended polyol and water‐blown polyol formulations) to this group of foam enterprises. The lack of participation of these small enterprises did not significantly affect the achievement of the primary HCFC phase‐out target for PU foam as the participation of larger enterprises (with larger HCFC consumption) was more than originally anticipated.
Data source: FECO monitoring system and semi‐annual progress reports
Quality of data: High, contracts are signed by FECO.
Main activities that contributed to the achievements: Component 1 and 3: To sign a contract with FECO, enterprises were required to submit a project implementation plan delineating the baseline equipment, HCFC‐141b consumption, proof of ownership, established date, and list of new equipment items required for conversion, costs of new raw materials and technology transfer fees, and others. Training workshops were conducted to inform foam
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enterprises of the objectives of the project. Consultants also supported FECO to participate in sub‐project verification, evaluate sub‐project implementation plans, and take part in the commissioning process.
Component: Component 2: Investment in HCFC Production Reduction
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Number of phaseout contracts signed with HCFC producer
Number 0.00 15.00 21.00
12‐Nov‐2012 30‐Dec‐2016 01‐Oct‐2018
Comments (achievements against targets): Summary: The target has been exceeded by 40%. There was a total of 21 phaseout contracts signed with HCFC producers in China: four contracts for idle production line closure, 12 for quota reduction, and 5 for production closure.
Data source: FECO monitoring system and semi‐annual progress reports
Quality of data: High, the contracts are signed by FECO.
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Main activities that contributed to the achievements: Component 2 and 3: Contracts were used to compensate HCFC producers for surrendering their production rights in part or in full in order to contribute to the national compliance with the production freeze and 10% production reduction in 2013 and 2015, respectively. The funding level for each enterprise was determined on the basis of the production rights surrendered and the pre‐determined compensation level on a US$ per kg basis. Workshops were organized to inform HCFC producers on annual production reduction targets, the implementation rules of the production quota system, and the annual on‐site monitoring and verification rules of HCFC production. The workshops were also used to list the reporting requirements, distribute forms and collect feedback from the HCFC producers.
Component: Component 3: Technical Assistance and Policy Support
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Implementation of key policies and regulations
Text n/a Production quota system, Ban of the use of HCFC‐141b in targeted subsectors and new non‐HCFC foam product standards all in place
For the production sector, quotas have been established for each of the 28 enterprises.
Regulation quotas for 2018 have been issued for the consumption and production sectors.
12‐Nov‐2012 30‐Dec‐2016 01‐Oct‐2018
Comments (achievements against targets):
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Summary: The indicator has been partially achieved. MEE put in place a production quota system starting in 2013 for each of the enterprises producing HCFCs and a quota system for HCFC consumption, covering the PU foam sector, starting in 2013. In 2018, MEE issued a ban on the use of HCFC‐141b in the three targeted sub‐sectors under the project: small electric appliances, reefer containers, and refrigeration and freezers. The three non‐HCFC foam standards anticipated for refrigerators and freezers, reefer containers, and small household appliances were not adopted as the Chinese domestic refrigerator and electric water heater industry industries decided to adopt energy efficiency performance standards which combine electrical and insulation performance rather than developing a standalone standard focusing only on insulation performance. For reefer containers, the foam industry decided to adopt the international standard. To ensure manufacturing and product safety, a national standard for safe handling of cyclopentane‐blown insulation foam was developed for and have been submitted to the standard body committee for review and final approval.
Data source: FECO monitoring system and semi‐annual progress reports
Quality of data: High, policies and regulations are adopted by the GoC.
Main activities that contributed to the achievements: Component 3: The phase‐out of both HCFC production and HCFC‐141b consumption were supported by policies and regulations at the national, provincial and sector levels. The objectives of the phase‐out policies and regulations were to: (i) ensure that HCFC production is curbed in accordance with Montreal Protocol requirements; (ii) support timely phase‐out of HCFC‐141b in the PU foam sector in order to contribute to China’s overall HCFC consumption reduction; (iii) provide incentives for enterprises to reduce their production and consumption of HCFCs and to adopt environmentally benign alternative technologies; and (iv) encourage adoption of low cost, technically suitable alternatives to replace HCFCs. The project support MEE, FECO, and other relevant agencies by providing overall policy guidance pertaining to the aforementioned objectives. For the PU foam sector, a consultant was hired to carry out an impact study on how a ban on the use of HCFC‐141b would affect industry in the three targeted foam subsectors.
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Component: Component 4: Project Management
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Compliance with project reporting requirements
Percentage 0.00 100.00 100.00
12‐Nov‐2012 30‐Dec‐2016 01‐Jun‐2018
Comments (achievements against targets): Fully achieved (100%). All reporting requirements have been met. There are three levels of reporting for the project: At the overall program level, the Bank conducted independent verifications of maximum allowable production and consumption levels of all HCFCs listed in Annex C in 2017. The verification report covering production and consumption of all HCFCs for 2017 has been submitted to the ExCom. At project level, the Bank has confirmed achievement of HCFC‐141b consumption levels in the PU foam sector. The verification report will be submitted to the ExCom in coordination with UNDP (the lead MLF Implementing Agency of the overall China HPMP) as per the agreed reporting cycle stipulated in the ExCom agreement. FECO has submitted to the Bank with: (i) semi‐annual progress reports on project activities; (ii) semi‐annual interim financial reports (IFRs); (iii) annual work programs; and, (iv) audited annual financial reports of the project account. The Bank has reviewed these reports and submitted them to the MLF. At sub‐project level, sub‐project appraisal reports and completion reports were prepared by enterprises on a rolling basis. In addition, reporting as required by the MLF progress reporting cycle, and under multi‐year agreement projects, and others as required by the ExCom have been carried out.
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Project Progress reports prepared
Percentage 0.00 100.00 100.00
12‐Nov‐2012 30‐Dec‐2016 01‐Oct‐2018
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Comments (achievements against targets): Fully achieved (100%). All semi‐annual progress reports were submitted on time and the Bank team found them satisfactory in quality.
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B. KEY OUTPUTS BY COMPONENT
PDO: The Project Development Objective (PDO) is to reduce HCFC production and HCFC‐141b consumption in the polyurethane (PU) foam sector in order to contribute to the Government of China’s endeavor to comply with its Montreal Protocol phase‐out obligations for HCFCs by 2015, as well as to reduce emissions of GHG from the production and PU foam sectors. Outcomes:
Compliance with the Agreement with the ExCom29 on the Reduction of HCFC‐141b in the PU Foam Sector
Compliance with Montreal Protocol obligations for reduced HCFC production
Reduced emissions of GHGs from the PU foam and production sectors
Outcome Indicators
1 Consumption of HCFC‐141b within Maximum Allowable Limits in 2013 and 2015 2. Production of HCFC‐141b, HCFC‐142b and HCFC‐22 within maximum allowable limits in 2013 and 2015 3. Reduction of GHG Emission from the PU Foam Sector 4. Reduction of GHG from the Production Sector
Intermediate Results Indicators
1. Number of enterprises covered by contracts (Component 1) 2. Number of phaseout contracts signed with HCFC producer (Component 2) 3. Implementation of key policies and regulations (Component 3) 4. Compliance with project reporting requirements (Component 4) 5. Project progress reports prepared (Component 5)
Key Outputs by Component
Component 1: Investment in HCFC‐141b Consumption Phase‐out 1. Conversion to zero‐ODP and low GWP alternatives in 58 enterprises (As of 2018 Progress Report to ExCom: 41 converted to HC (primarily cyclopentane); 17 to water‐blown technology). The financing for incremental capital costs supported foaming equipment, safety equipment, and technical support and safety audits. Project financing also offset part of incremental operating costs for first year of operation. 2. Support to 3 foam system houses to (a) develop and market cyclopentane pre‐blended polyol (to address financial, safety, and technical issues and to reduce the conversion costs and safety risks of foam enterprises that are primarily SMEs) and (b) provide technical support for downstream enterprises
29 The HCFC‐141b phase‐out supported in the PU foam sector under this project consists of a portion of the 2015 MP obligation limit for consumption whereas the project’s support to production reduction contributes the entirety of China’s MP obligations for HCFC production through the 2015 limit.
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Component 2: Investment in HCFC Production Reduction 1. Part of the cost (that is, foregone profit) of production reduction in accordance with HCFC production obligations for 21 HCFC Producers: 12 for quota reduction, 5 for production closure, and 4 for dismantling idle capacity (enabling China to freeze production at average level of 2009–2010 by 2013 and to achieve a 10% reduction from the 2009–2010 level by 2015). This includes buying back ODS production quotas (in their entirety, in the case of closure; or in part, in case of production reduction) from HCFC producers so that the remaining ODS production quotas are within the ODS production and consumption limits given by the ExCom agreement. Component 3: Technical Assistance and Policy Support Technical Assistance for PU Foam Sector 1. ISA to provide assistance to potential beneficiaries to prepare subproject proposals consistent with FECO’s and ExCom’s eligible criteria; provide FECO with technical input regarding alternatives; follow up implementation of each subproject. 2. Financial experts ‐ to confirm baseline HCFC consumption to determine the eligible funding level; to review expenditures incurred by subprojects before issuing disbursement by FECO to enterprise. 3. Technical study to assess the readiness of complete HCFC phase‐out in the three targeted subsectors ‐ an industrial survey targeting the three subsectors was carried out to determine technical and financial adverse impact. This study was used as a basis for making final recommendations to establish HCFC bans in three targeted subsectors in early 2018. 4. Two safety experts ‐ to audit fire safety measures implemented by relevant subprojects. This service was required to supplement the work of the local fire protection bureaus. 5. Technical training on MP and alternative technologies financed by the project to six local EEBs ‐ to strengthen capacity of local EEBs in monitoring enforcement of HCFC phase‐out and bans. 6. Technology development ‐ to provide financial assistance to three technical institutes to research and optimize the formulations and technologies with non‐ODS and low‐GWP blowing agents. This led to the development of studies on non‐HCFC alternative technologies for spray foam and insulation panels as well as a study on the stabilizer for improving the quality of HC‐borne and waterborne blowing foam technologies. 7. Five technology workshops ‐ to disseminate new alternative technologies and the Government’s policy and action plans to phase out HCFC in the foam sector. 8. Two study tours ‐ for key industrial experts to learn more about HCFC phase‐out in the foam sector in developed countries as well as to have direct exchange of information with providers of new emerging technologies (such as methyl formate and HFOs).
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Policy Support for PU Foam Sector 1. Draft safety standards for handling of cyclopentane in the foam manufacturing process 2. Regulation quotas for HCFC‐141b consumption for 2013, 2014, 2015, 2016, and 2017 3. Bans on the use of HCFC‐141b in the three targeted PU foam subsectors (small electric appliances, reefer containers, and refrigeration and freezers) in 2018 Technical Assistance for Production Sector 1. Three technical workshops ‐ to advise HCFC producers of the Government’s HCFC production reduction schedules and available financial support for production quota reduction and production closure 2. 11 technical training workshops for staff from HCFC producers to conform to monitoring procedures for HCFC production and data reporting requirements to conform to the World Bank’s annual HCFC production verification 3. Two technical experts to review environment impact assessment and site clean‐up plans for those HCFC production facilities opting for production closure 4. An investigation about the HCFC used as feedstock in China and recommendations for strengthening management of HCFCs for feedstock use 5. A technical study to identify the challenges that HCFC producers may encounter on business development especially on alternatives production after HCFC phase‐out and to provide advice to manufacturers on the prospects of HCFC alternative development 6. A technical study for reducing HFC‐23 by‐product ratio and estimating its economic feasibility to provide advice and guidance for HCFC‐22 producers Policy Support for Production Sector 1. Production quotas in 2013, 2014, 2015, 2016, and 2017 for each of the HCFC production enterprises 2. Regulation on Management of Establishment of ODS production and consumption facilities issued in 2018 (replacing the circular issued in 2008) Component 4: Project Management 1. ISA to support FECO’s management, disbursement, contract evaluations, and equipment support for project management implementation Component 5: Preparation of HCFC Phase‐Out Activities Post 2015 1. Data collection for HCFC consumption in foam sector (to inform preparation of Stage II PU foam sector plan) 2. Data collection and plant assessment of current HCFC production trends of each HCFC production facility (to determine current market situation in both domestic and export markets)
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ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION
A. TASK TEAM MEMBERS
Name Role
Preparation
Viraj Vithoontien Senior Environmental Specialist, Task Team Leader
Bernardita Ledesma Operations Analyst
Erik Pedersen Consultant
Thanavat Junchaya Senior Environmental Engineer
Fang Zhang Financial Management Specialist
Feng Ji Environmental Specialist
Fnu Hanny Program Assistant
Zijing Niu Program Assistant
Guoping Yu Senior Procurement Specialist
Meixiang Zhou Social Development Specialist
Dafei Huang Climate Change Specialist
Carter Brandon Lead Environmental Specialist
Junxue Chu Senior Finance Officer
Syed Ahmed Lead Counsel
Yuan Tao Counsel
Qing Wang Senior Environmental Specialist
Mary‐Ellen Foley Operations Officer
Tijen Arin Senior Environmental Economist
Supervision/ICR
Viraj Vithoontien Lead Environmental Specialist, Task Team Leader
Guoping Yu Procurement Specialist
Fang Zhang Financial Management Specialist
Erik Pedersen Team Member
Thanavat Junchaya Team Member
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Mary‐Ellen Foley Team Member
Laurent Granier Team Member
Feng Ji Environmental Specialist
Fnu Hanny Team Member
Xieli Bai Team Member
Jie Pan Team Member
Shuang Zhou Social Specialist
Kai Shang Social Specialist
Aruth Phraerungrueang Team Member
Ashraf El‐Arini ICR Main Contributor
B. STAFF TIME AND COST
Stage of Project Cycle Staff Time and Cost
No. of staff weeks US$ (including travel and consultant costs)
Preparation
FY09 9.058 42,495.02
FY10 27.922 199,400.90
FY11 34.169 175,620.93
FY12 31.650 223,999.36
FY13 16.738 119,592.03
Total 119.54 761,108.24 Supervision/ICR
FY09 0 0.00
FY13 23.700 143,422.48
FY14 23.730 282,536.13
FY15 39.391 505,900.02
FY16 21.222 357,321.04
FY17 16.812 345,426.85
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FY18 34.194 495,354.28
FY19 35.228 634,673.73
FY20 0 14,541.52
Total 194.28 2,779,176.05
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ANNEX 3. PROJECT COST BY COMPONENT
Components Amount at Approval
(US$, millions) Actual at Project
Closing (US$, millions) Percentage of Approval (%)
1 ‐ Investment in HCFC‐141b Consumption Reduction in the PU Foam Sector
204.30 105.90 51.8
2 ‐ Investment in HCFC Production Reduction
260.40 360.40 138.4
3 ‐ Technical Assistance and Policy Support 16.35 7.75 47.4
4 ‐ Project Management 11.25 8.40 74.7
5 ‐ Preparation of HCFC Phase‐out Activities Post 2015
2.00 0.47 23.7
Total 494.30 482.92 97.7
Note: Component 1: The reduction in total costs from appraisal is attributed to the actual composition of the enterprises participating in the project (compared to those that were expected at appraisal). Many enterprises outside of the targeted subsectors ended up phasing out HCFC‐141b under this project. These enterprises had lower conversion costs than the originally identified enterprises under the targeted subsectors.
Component 2: The total cost of US$360.4 million is the projected lost profit borne by HCFC producers under the project. The value is the profit per metric ton (using 2010 figures) of each chemical multiplied by the actual phase‐out of each chemical under the project through 2030. This uses a benchmark social discount rate of 12 percent. The number is larger than the projected cost at appraisal as the reductions in HCFC‐22 production were much larger than anticipated at the time, which therefore increased the total expected lost profit borne by HCFC‐22 producers.
Component 3: Due to the reduced grant funds approved for Component 3, the TA activities, particularly those related to capacity strengthening of local EEBs was scaled back to about six local EEBs in the provinces that have a large number of foam enterprises and HCFC producers.
Component 4: Given that this component was fee based, the difference in actual total costs and the total cost estimated at appraisal is attributable to the change in total financing amount for project.
Component 5: The actual cost of this component was less than anticipated as the ExCom’s requirements for project proposals of subsequent phases of HCFC phase‐out were less stringent than anticipated (compared to the Stage I preparation). For example, China and the World Bank did not need to conduct technical audits to confirm the lost profit and conditions of the production facilities. The information from the first proposal was used. The financial information could be extracted from the annual verification reports prepared under Stage I.
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ANNEX 4. EFFICIENCY ANALYSIS
1. CE analysis. In the context of ODS projects, efficiency can be defined in terms of measuring the economic outputs from converting ODS to low or zero ODP and low GWP alternatives. Efficiency analysis can also investigate whether and how the project adopted the most efficient process to achieve the desired results, by comparing it to alternative approaches. Given that the project modality used a multiyear, performance‐based funding model, under which disbursement of funds was made against verifiable sustained reduction of ODS phase‐out targets in each sector, project efficiency was assessed by comparing the cost of per kg ODP phased out (US$ per kg ODP), with the cost of project at approval and with the MLF’s thresholds.
2. This method of analysis is consistent with how efficiency is assessed based on the CE of phase‐out activities under the ExCom. CE is defined as the amount of MLF grant per unit weight of HCFC phased out in kg.
3. With grant financing (including investment, relevant TA/policy, and project management costs) for reduction of HCFC‐141b consumption in PU foam of US$72.8 million, the project phased out 16,889 MT of HCFC‐141b, resulting in a CE of US$4.31 per kg of HCFC‐141b, which is significantly lower than the average established CE threshold by the MLF (at appraisal) of US$9.79 per kg for conversion of HCFC‐141b to low GWP technologies in the PU foam sector. When including the costs to beneficiary enterprises not covered by the grant, the CE is US$6.85 per kg of HCFC‐141b, which is lower than the CE threshold.
4. For the production sector, with grant financing for production reduction and closure of US$91.5 million,30 the project phased out 116,692 MT of HCFCs (includes HCFC‐22, HCFC‐141b, and HCFC‐142b) or 8,470 ODP tons to meet the 2015 MP compliance targets. This resulted in a CE of US$0.78 per kg of HCFCs. In contrast, the expected MLF grant amount for the production sector at appraisal (US$260.4 million) was expected to reduce HCFC production by 47,226 MT of HCFCs (or approximately US$5.51 per kg of HCFCs). When accounting for the total conversion costs for the production sector (including the full estimated lost profits31 for the 15 years32 following the reduced production or closure associated with the project), the projected CE is US$3.09 per kg (based on a discount rate of 12 percent). With a 6 percent discount rate, the CE is US$4.22 per kg, which is still lower than the projected CE at appraisal.
5. The presented analysis only reflects one measure of efficiency (conversion costs) without trying to capture the external environmental and social benefits of both ozone layer protection and climate change mitigation. In addition, if the efficiency analysis would be able to also factor in the hidden costs and benefits of environmental and social impacts from reduced exposure to ODS depletion (for which viable data are missing), the efficiency of this project would be even higher.
30 Includes investment from grant financing under Component 2, production portion of the TA component, and prorated cost from project management component. 31 The total lost profit was calculated based on a survey conducted at appraisal of HCFC producers for estimated production costs and revenue for the different HCFCs under this project. The net revenue per MT of HCFC reduced per chemical was then multiplied by the total amount of HCFCs’ production reduced under the project by chemical. The grant financing under Component 2 compensated for a portion of this lost profit (24 percent, based on a benchmark social discount rate of 12 percent). 32 It is assumed that by 2030, the global HCFC demand will be eliminated due to the complete phase‐out stipulated by the MP.
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6. Benefit cost analysis for GHG emission reductions. Given the GHG emission reductions benefits of the project, an analysis found that the flow of benefits of avoided CO2e far outweigh the costs associated from the project. The World Bank’s ‘2017 Updated Guidance Note on Shadow Price of Carbon in Economic Analysis’ establishes a price range for use in valuation of carbon emissions and emission reductions in economic analysis of investment projects.
7. For the PU foam sector, the annual benefit (using the 2019 social value of carbon figures) of the GHG emission reductions from HCFC‐141b consumption reduction in PU foam (12.2 million tCO2e per year) at completion would be around US$478 million to US$955 million, respectively. By contrast, the total cost of GHG reductions achieved in the PU foam sector under the China HCFC Phase‐Out Project (Stage I) was only US$105.9 million (or US$8.68 per ton CO2e). The costs are therefore only 11–22 percent of the shadow price range for GHG emission reductions associated with reduced consumption of HCFC‐141b. The net present value (NPV) (using a benchmark social discount rate of 12 percent) of the GHG emission reductions (12.2 million tons of CO2e per year) through 2030 is US$3.4 billion to US$6.8 billion using the low and high shadow prices of carbon, respectively.33 With a 6 percent discount rate, the NPV is US$4.9 billion to US$9.9 billion.34
8. For HCFC production reduction, the benefits accrued associated with GHG emission reductions outweigh the costs significantly. The benefits are the value of the GHG emission reductions (182.7 million tons of CO2e per year) for the 15 years following the reduced production or closure associated with the project (2016–2030). The analysis uses the recommended low and high shadow prices of carbon for this time frame from the 2017 Guidance Note. The costs are the total lost profit associated with the reduced or eliminated production for the participating HCFC producers under the project.35 The NPV estimates are between US$50.6 billion and US$102.1 billion (for low and high values of shadow price of carbon, respectively) using a social discount rate of 12 percent. Table 4.1 includes the summary of the analysis, including the NPVs.
Table 4.1. Summary of Benefits, Costs, and NPV of GHG Emission Reductions for HCFC Production Reductions (under low and high shadow value of carbon ranges) (US$, billions)
Net Benefits (Value of GHG Emission Reductions
Net Costs (Foregone Profit)
NPV
Discount Rate 12% 6% 12% 6% 12% 6%
Low Range of Shadow Value of Carbon
51.0 74.4 0.36 0.51
50.6 73.9
High Range of Shadow Value of Carbon
102.4 149.1 102.1 148.6
33 The analysis uses the recommended low and high shadow prices of carbon for this time frame from the 2017 Guidance Note. 34 The costs include the total conversion costs. The difference in operating costs between the two technologies is not included as (a) they are difficult to project in a without‐project scenario and (b) they are likely to converge to zero. 35 The total lost profit was calculated based on a survey conducted at appraisal of HCFC producers for estimated production costs and revenue for the different HCFCs under this project. The net revenue per MT of HCFC reduced per chemical was then multiplied by the total amount of HCFCs’ production reduced under the project by chemical. The grant financing under Component 2 compensated for a portion of this lost profit (24 percent, based on a benchmark social discount rate of 12 percent).
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ANNEX 5. RECIPIENT COMMENTS
From FECO (December 2019)
1. As the largest developing country and major producer and consumer of HCFCs, China faced remarkable challenges to freeze the production and consumption to the baseline level by 2013 and reduce 10 percent of the baseline level by 2015. The World Bank’s China HCFC Phase‐out Project (P115561), which involves production sector and PU foam sector plan, was critical for China to meet the phase‐out targets in 2013 and 2015. The success of the sector plans indicates the efficiency and efficacy of the World Bank’s project management capacity. Through the overall project, financial, procurement, environmental, and social safeguard management from the World Bank and regular verifications conducted by the task team and assigned experts, the sector plans were completed in a cost‐effective and transparent way, with significant environmental and development benefits.
2. The cooperation between China and the World Bank while implementing the project has proved the efficiency of the sector plan modality in HCFCs’ phase‐out. The sector plans encouraged and supported qualified enterprises in the industry to actively participate in the phase‐out plan and provided the flexibility and autonomy to the implementation of subprojects and overall targets. It also created a fair and transparent market atmosphere, reduced the cost of phase‐out activities, and ensured sustainable phase‐out by introducing effective performance supervision and management. Meanwhile, financial support for TA activities such as research and promotion of alternative technologies has been provided by the implementation of the sector plans. It has significantly promoted the continuous optimization and improvement of alternative transformation schemes and provided technical support for the industry's green and sustainable development.
3. The World Bank has also provided remarkable assistance in coordinating the ExCom and China. During Stage I, China has actively communicated with members of the ExCom, the MLF Secretariat and relevant international institutions and established a good cooperative relationship with help from the World Bank. In addition, the World Bank has established a platform for information exchange and multilateral communications by organizing regional workshops. Through the workshops, PMOs from China received advanced management experiences and would gradually establish and improve the management system based on the gained knowledge. It also provided sufficient technical support for the specific implementation of international cooperation in the environmental protection field. As a major HCFC producing, using, and exporting country, China also took the opportunity of regional workshops to actively share China’s compliance management experience and technological research progress with other countries, providing other developing countries with low‐carbon and environmentally friendly alternative technologies.
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ANNEX 6. SUPPORTING DOCUMENTS
China’s ‘Intended Nationally Determined Contribution’, submitted by the Government of China on June 30, 2015, to the UNFCCC.
World Bank. 2012. China ‐ Country Partnership Strategy for the Period FY13‐FY16 (English). Washington, DC: World Bank. http://documents.worldbank.org/curated/en/303351468242963292/China‐Country‐partnership‐strategy‐for‐the‐period‐FY13‐FY16.
World Bank. 2017. Shadow Price of Carbon in Economic Analysis: Guidance Note. Washington, DC: World Bank. http://pubdocs.worldbank.org/en/911381516303509498/2017‐Shadow‐Price‐of‐Carbon‐Guidance‐Note‐FINAL‐CLEARED.pdf.
World Bank. 2019. China ‐ Country Partnership Framework for the Period FY2020‐2025 (English). Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/902781575573489712/China‐Country‐Partnership‐Framework‐for‐the‐Period‐FY2020‐2025
World Bank. Disclosable Version of the ISRs ‐ China HCFC Phase‐Out Project (Stage I) ‐ P115561 ‐ Sequence No: 1–12 (English). Washington, DC: World Bank Group. http://projects.worldbank.org/P115561/china‐hcfc‐phase‐out‐project‐stage?lang=en.