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Validation Report Reference Number: PCV: PRC 2010-40 Project Number: 33441 Loan Number: 1890 September 2010 People’s Republic of China: Acid Rain Control and Environmental Improvement Project Independent Evaluation Department ABBREVIATIONS ADB – Asian Development Bank ADF – Asian Development Fund APG – Anhui Provincial Government ATC – Anhui Tongdu Copper CNM – Chizhou Nonferrous Metals Group EI-ARD – environmental improvement and acid rain damage EIRR – economic internal rate of return FIRR – financial internal rate of return HWC – Huangshan Water Company IED – Independent Evaluation Department JTC – Jiuhua Tourism Company Group 3 m – cubic meter M&E – monitoring and evaluation OCR – ordinary capital resources PCR – project completion report PMO – project management office PRC – People's Republic of China RRP – report and recommendation of the President SO2 – sulfur dioxide TA – technical assistance TCG – Tongling Yaxing Coking Gas TSP – total suspended particulates WSC – Wuhu Shanjiang Chemicals NOTE In this report, “$” refers to US dollars. Key Words people’s republic of china, prc, adb, asian development bank, acid rain, environment, ecological areas, so2, lessons, independent evaluation department, performance evaluation Director H. Hettige, Independent Evaluation Division 2, Independent Evaluation Department (IED) Team leader K. Mohit, Evaluation Specialist, Independent Evaluation Division 2, IED Team members O. Nuestro, Evaluation Officer, Independent Evaluation Division 2, IED C. Roldan, Assistant Operations Evaluation Analyst, Independent Evaluation Division 2, IED In preparing any evaluation report, or by making any designation of or reference to a particular territory or geographic area in this document, the Independent Evaluation Department does not intend to make any judgments as to the legal or other status of any territory or area. PROJECT COMPLETION REPORT VALIDATION A. Basic Project Data PCR Validation Date: September 2010 Project Number: 33441 Approved Actual Loan Number: 1890 Project Name: Acid Rain Control and Environmental Total Project Costs 325.00 277.28 Improvement Project ($ million): Country: People’s Republic of China Loan/Grant ($ million): 147.00 112.40 Sector: Multisector Total Cofinancing 0.00 0.00 ($ million): ADB Financing ADF: 0.00 Borrower ($ million): 178.00 152.30 ($ million): OCR: 147.00 Beneficiaries ($ million): 0.00 0.00 (112.35 net of cancellations) Cofinanciers: None Others ($ million): 0.00 12.60 Approval Date: 19 Dec 2001 Effectiveness Date: 10 Jul 2002 11 Jul 2002 Signing Date: 11 Apr 2002 Closing Date: 30 Jun 2006 19 Aug 2008 Project Officers: Name: Location: From To S.F. Wong ADB headquarters 2004 2008 D. Millison ADB headquarters 2003 2004 P. Abeygunawardena ADB headquarters 2001 2003 Validator: Clifford Brown, Consultant Director: H. Hettige, IED2 Quality Control K. Mohit, Evaluation Specialist, IED2 Reviewers: O. Nuestro, Evaluation Officer, IED2 B. Project Description (summarized from the report and recommendation of the President) (i) Rationale. As reported in the report and recommendation of the President (RRP), 1 rapid economic development in the People’s Republic of China (PRC) has brought with it environmental degradation. Industrial enterprises in the Yangtze River Valley of Anhui are among the largest emitters of sulfur dioxide (SO2), the prime cause of acid rain, in the PRC. The Yangtze Valley is home to 17 million people and also home to the ecological areas of the Huangshan and Jiuhua mountains. Incidents of acid rain potentially have serious impacts for public health, the biophysical environment, and economic development. The government has provided the legal basis for acid rain control in the PRC with the 1995 Amendment of Air Pollution Prevention and Control Law. The Anhui Provincial Government (APG), which was designated as the executing agency for this project, has been developing a provincial acid rain control strategy and has identified subprojects to fit into this strategy. The project, as designed at the time of appraisal, adopted a number of these subprojects and has become an integral part of the provincial acid rain control plan. It was consistent with the Asian Development Bank's (ADB’s) operational strategy to support measures for environmental improvement and natural resource management in the PRC. (ii) Impact. As envisaged at appraisal, due to reduced pollution levels (particularly acid rain), the project was expected to have a significant positive impact on the health and social well-being of the people living and working in the project area. Agricultural and forestry productivity and water quality were expected to improve, and material damage reduced. Environmental improvement subprojects would upgrade and expand project facilities in the Huangshan and Jiuhua ecological areas. Health and welfare improvements and investment in the subprojects were expected to improve the regional economy. Adverse effects of project construction and operation on the surrounding environment would be minimized with little negative impact on the communities. 1 Parts of this validation report are paraphrased and/or copied from the RRP (Asian Development Bank [ADB]. 2001. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the People's Republic of China for the Acid Rain Control and Environmental Improvement Project. Manila) and project completion report (ADB. 2009. Project Completion Report: Acid Rain Control and Environmental Improvement Project for the People's Republic of China. Manila), as appropriate. 2 (iii) Objectives or expected outcomes. (a) Objectives. The main objective of the project was to improve ambient air quality and reduce acid rain to improve the environment in the Yangtze River Valley in Anhui Province. Broader associated objectives included updating legislation for stronger enforcement of environmental regulations, improving environmental monitoring, providing new incentives to industry to reduce pollution, continuing market reforms, introducing technology modernization, creating sustainable industry management policy, and creating an energy policy promoting alternate resources and non-fossil-fuel energy supplies. (b) Expected outcomes. Expected outcomes included overall improved ambient air, soil, and water quality in the project area; reduced acid rain frequency by 50% and improved rain pH levels; reduced air pollution in urban areas to meet national standards; improved wastewater and solid-waste treatment (by rehabilitating environmental damage); institutionally strengthened government agencies; and improved corporate governance and operations management in industrial enterprises. (iv) Components and/or outputs. (a) Components. At appraisal, the project had three main components: (1) six cleaner production subprojects undertaken by industrial enterprises, (2) three environmental improvement and acid rain damage (EI-ARD) rehabilitation subprojects in ecologically protected areas (Huangshan and Jiuhua mountains), and (3) one institutional strengthening component to be undertaken by provincial and local environmental agencies and subproject enterprises. (b) Outputs. Although the scope of work was well defined at the time of appraisal, there were three major changes initiated by the enterprises and APG during implementation, which resulted in a reduction in the number of cleaner production subprojects from six to four and a reduction in the number of EI-ARD rehabilitation subprojects from three to two. ADB approved these changes as they did not alter the basic objectives of the project. Following the major changes, the project outputs became: 1. Four cleaner production enterprises: - Anhui Tongdu Copper (ATC) subproject to upgrade the 65,000 tons (t) per year smelter and blast furnace system for producing blister copper and the 15,000 t/year system for electrolytic copper, and install a double conversion and double absorption process to replace the current single conversion and single absorption process. This subproject was expected to result in a 38% (14,890 t/year) reduction in SO2 emission in Tongling City, where the subproject was located. - Chizhou Nonferrous Metals (CNM) Group subproject to upgrade the 20,000 t/year main process line for producing electrolytic copper with a more efficient system, capture SO2 emissions for conversion to high-quality sulfuric acid, and relocate the process lines away from a residential area to a new industrial zone. The subproject was expected to reduce SO2 emission in the city of Chizou by 59% (6,040 t/year) and eliminate the threat posed by toxic metal emissions. - Wuhu Shanjiang Chemicals (WSC) subproject to upgrade the caustic soda production line from the diaphragm process (35,000 t/year) to the ion-membrane process (30,000 t/year); construct a cogeneration station to supply electricity and process heat in the Wuhu Industrial Development Zone and demolish 29 small boilers; and relocate a dyestuff processing facility to reduce water pollution. It was designed to reduce SO2 by 20% (4,533 t/year) in Wuhu City. - Tongling Yaxing Coking Gas (TCG) subproject included constructing a new coal gasification plant in an industrial zone, introducing technology to expand gas production capacity to 307 million cubic meters (m3) per year and coke production capacity to 700,000 t/year, using cleaner production technology to control or eliminate highly polluting products and processes, and closing the existing plant. It was designed to reduce SO2 by 3,361 t/year at the subproject design
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