INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No.: AC4171 Public Disclosure Authorized Date ISDS Prepared/Updated: 12/22/2009 I. BASIC INFORMATION A. Basic Project Data Country: China Project ID: P114069 Project Name: Shandong Energy Efficiency Project Task Team Leader: Gailius J. Draugelis Estimated Appraisal Date: May 24, 2010 Estimated Board Date: November 16, 2010 Managing Unit: EASCS Lending Instrument: Specific Investment Loan Public Disclosure Authorized Sector: District heating and energy efficiency services (100%) Theme: Climate change (100%) IBRD Amount (US$m.): 150.00 IDA Amount (US$m.): 0.00 GEF Amount (US$m.): 0.00 PCF Amount (US$m.): 0.00 Other financing amounts by source: Borrower 150.00 150.00 B. Project Objectives [from section 2 of PCN] Public Disclosure Authorized The objective of the proposed project (Shandong Energy Efficiency Project) is to scale up energy savings investments through Energy Service Companies (ESCOs) and through the support for a limited number of direct investments. The proposed project is part of a program (the #Program of Support#) to achieve energy savings through (a) investments in selected projects in Shandong Province and (b) strengthening suitable provincial level policies, institutional and financial mechanisms in Shandong, Shanxi and Jiangxi Provinces. This will be achieved by: (i) a GEF-financed capacity-building and technical assistance project, the GEF Provincial Energy Efficiency Scale Up Program (Project ID: P114182), implemented in Shandong, Shanxi and Jiangxi Provinces, and (ii) the investments planned as part of the proposed project, the Shandong Energy Efficiency Project (Project ID: 114069. Public Disclosure Authorized This ISDS focuses on the Shandong Energy Efficiency Project (SEEP). A separate ISDS has been prepared for the GEF Provincial Energy Efficiency Scale Up Project. However, section C below (#Project Description#) describes both projects, for easy reference and to emphasize that both projects are part of the same Program of Support. All other sections (including Section II -- #Safeguard policies that might apply# and #Environmental Category#) refer exclusively to the SEEP. C. Project Description [from section 3 of PCN] Investment Part of the Program of Support (the Proposed Shandong Energy Efficiency Project#SEEP ) indicative GEF grant financing, US$150 million, total estimated project cost US$300 million) (a) Scaling Up Support to Shandong Province#s Large-Scale Enterprise and Energy Service Companies (ESCOs). This component would support development and expand financing for a wide range of energy savings investments by providing a proposed IBRD loan of $50 million each to two leasing companies, the Shandong Rongshihua Leasing Company and the Guotai Leasing Company Ltd., both of which have special pilot leasing licenses from the Ministry of Commerce. A major focus of the component will be to develop and implement energy performance contracting (EPC) and risk allocation structures in more innovative ways through the use of financial leasing mechanisms to enlarge ESCO business scope and project size. An additional focus will be to expand the use of energy performance contracting in new market sectors. The Bank will focus its appraisal on the leasing companies themselves and their operating mechanisms, rather than appraise specific subprojects, and provide credit for subprojects meeting agreed criteria. The criteria will include satisfactory completion of screening and adoption of necessary impact mitigation measures concerning environmental, involuntary resettlement, and other Bank safeguard issues. Eligible subprojects under this program will need to achieve a reduction in energy consumption per unit of output, and result in energy savings that comprise at least 50% of total benefits of the subproject or equivalent simple payback on energy savings investments (to be determined by the project team). (b) Direct Investment Platform for Innovative Subprojects: The component will finance energy savings subprojects that have been screened by the Shadong Provincial Department of Finance (SPDF) and Shandong Development and Reform Commission (SDRC) using the following criteria: (i) consistent with Provincial and relevant municipal authorities# efforts to meet its energy savings targets; (ii) it follows relevant provincial industrial policies; (iii) subprojects have innovative aspects; (iv) minimize resettlement or other social or environmental adverse impacts. Subprojects that have been initially identified include: # Shandong/Feicheng Chemical Acid Co. Ltd.: conversion of waste CO2 gas of its parent company to usable fuel and by-products. [WB financing $10 million out of RMB 142.6 million, $20.5 million total investment]. Proposed investments would enable the fertilizer factory to capture waste gas (CO2) that is currently vented from the ammonium production process into the atmosphere and convert it to CO to be used the existing plant as raw gas feed for the production of formic acid, the main product of Feicheng Chemical Acid Co. Since no additional coal would be needed for this process, it would reduce CO2 emissions both by recovering CO2 that is currently vented and by eliminating coal currently used to produce CO. No land acquisition is anticipated. # Anqiu Shengyuan Biomass CHP Company # financing of new 30 MW biomass CHP plant to generate power and heat in Weifang County. [WB: $16 million out of a $34 million total investment]. The proposal includes (a) 2x15 MWe units (condensing extraction turbines, air cooled generators, boilers); (b) network of at least 3 km (distance from plant to heat load). Feedstock (171,400 tons per annum) of corn stalk, wheat stalk and wood chips will be organized at six collection points. # Jinan West Railway District Heating: -- Jinan municipality has indicated a potential interest in financing a greenfield district heating plant as part of its new high-speed railway station development. The initial scope of the project includes construction of a 3 x 70MW new boiler plant, network and substations to supply commercial and residential buildings. The Bank has indicated that this type of greenfield investment might be considered if the client accepts design changes that would increase system efficiency through use of variable flow technologies, smaller substations, metering and other heating supply system design modes that are compatible with ongoing district heating supply sector reform Selection of substitute subprojects under (b). There may be during the course of project preparation that some of the above projects would be replaced with new ones. The Bank will accept new subprojects if they can show i) that 50% of the benefits come from energy savings or equivalent simple payback on energy savings investments (to be determined by the project team); ii) that safeguards impacts are minimized; iii) readiness in relation to other subprojects in the Project; and iv) link up with key energy conservation programs developed by the Province. Technical Assistance Part of the Program of Support (The GEF Provincial Energy Efficiency Scale Up Project-Project ID: P114182) indicative GEF grant financing US$ 13.386 million The proposed GEF project objective is to achieve energy savings through strengthening suitable provincial level policies, institutional and financial mechanisms in Shandong, Shanxi and Jiangxi Provinces. The proposed GEF project will support technical assistance, capacity building, including international and domestic training/workshops, potentially a limited amount of software and equipment (i.e. for monitoring activities) and special studies to strengthen institutions, policy making, and financial mechanisms that would scale up adoption of energy efficiency practices, technology and programs. The proposed component is to be used as a vehicle to introduce new ideas, innovations and lessons from other provinces and from outside China into the large-scale, ongoing energy efficiency programs of the Provinces. Critically, the component is proposed to be implemented over a period of 5 years so as to focus attention beyond achieving the current 11th 5yr plan targets. Three subcomponents are proposed, each supported by 1/3rd and tailored to the priorities and requirements of each Province. The proposed component would, inter alia, focus on strengthening of institutional systems and implementation capacity development as well as moving toward creating incentives for energy efficiency investments such as through fiscal and pricing policies. D. Project location (if known) The proposed project (the Shangdon EE Project) will be located in Shandong Province. Direct investments shall be made in Feicheng and Anjiu municipalities. E. Borrower’s Institutional Capacity for Safeguard Policies [from PCN] Only one of the four companies in the proposed Project has had experience (through Energy Conservation project) with the World Bank safeguards procedures. During project preparation, the Bank Team safeguards specialists will evaluate the institutional capacity of the PMO, once established, and project sponsors for environmental assessment, involuntary resettlement(IR), and IR and environmental management supervision of the subprojects (implementation of safeguards framework procedures). If this capacity is deficient, technical assistance will be defined and incorporated into the project to strengthen this capacity accordingly. F. Environmental and Social Safeguards Specialists Mr Youxuan Zhu (EAPCO) Ms Xin Ren (EASCS) II. SAFEGUARD