39252

Project Information Document (PID)

Country Name China
Project Name China Shandong Minhe Poultry Manure Biogas Project

Region East Asia and Pacific

Sector Environment (100%)

Project P102567

Borrower Not applicable

Implementation Agency Project sponsors

Environment Category B (proposed)

Date PID Prepared February 6, 2007

Projected Appraisal Date May 30, 2007

Projected Board Date N/A

1. Country and sector background

China approved the Kyoto Protocol under the UN Framework Convention on Climate Change in August 2002, and joined the emerging market for carbon credits (Emission Reductions, or ERs) under the Protocol’s Clean Development Mechanism (CDM) which promotes a market mechanism for such credits. Starting with the endorsement of three carbon finance (CF) project proposals in September 2003, China issued its final approval procedures for CDM projects in October 2005, and has now emerged as the world’s largest and most dominant supplier of ERs.

The rapid growth of China’s economy in recent decades has led to scaling-up of highly intensive operations in the agricultural sector, including livestock and poultry. As a result, large volumes of manure and wastewater have generated negative affects on the environment, and are associated with odors, contamination of water and soils, and production of greenhouse gas emissions (GHGs). At the same time, the Chinese Government is actively pursuing development of a low-carbon economy by targeting energy intensity of GDP to be reduced by 20% during the 11th Plan period; this target is expected to be met by promoting ten key energy conservation project areas, including bio-energy. This project would address both these sets of issues.

2. Objective

The project objective is to enable a Carbon Finance transaction that will support the efforts of a large poultry producer in China to produce and sell ERs under the CDM. This objective will be measurable, and will result in an annual delivery of ERs. It will be achieved by the adoption of superior Animal Waste Management systems (AWMS)

3. Rationale for Bank involvement

1.  The Carbon Finance Business (CFB) of the World Bank was established to test market-based ER purchase transactions for mitigating climate change, in turn opening up a significant new source of financing for projects in developing countries. The Bank, as trustee of various Carbon Funds, carries out market-based ER purchase transactions through the CDM. With extensive prior experience of developing Carbon Finance (CF) projects in China, the Bank is well positioned to facilitate the ER transaction for the Shandong Poultry Waste Biogas Project, which will reduce CO2 emissions in the agricultural sector. The project objectives are consistent with the Country Partnership Strategy (2006-2010), which supports protection of the global commons by participating in the CDM, using pilot projects that introduce new technologies.

4. Description

The project will enable biogas capture for power generation, and conversion of residues into organic fertilizer.

The project will demonstrate the potential of local and global environmental benefits generated from the agriculture sector by replacing uncovered anaerobic lagoons with low GHG AMWS practices with moderate temperature (20°to 45°C.) anaerobic digesters. The project will have 3 components: (i) converting the management of waste at chicken farms from the high-GHG current practice of uncovered anaerobic lagoons to low GHG AMMS practices by use of digestors, (ii) the capture of biogas for power generation, and (iii) the conversion of residues into organic fertilizer.

The biogas capture will result in an annual delivery of ERs from an Emissions Reduction Purchase Agreement (ERPA). No Bank lending is involved. As a trustee of the Community Development Carbon Fund that it manages, the Bank will purchase ERs for ten years from the project sponsors.

5. Financing

The ER purchase will not finance any components of the project, which will be managed by the participating enterprises.

6. Implementation

a. Project sponsors

The project sponsors will carry out the instillation of the low GHG AMMS facilities that will deliver the ERs and manage these operations for the duration of the ERPA.

b. Government:

The role of the Government in the implementation of the project consists of the following:

(i) Oversight of CDM projects under the Kyoto Protocol and setting the rules and mechanisms allowing both public and private entities to participate in the market for ERs, in accordance with established mechanisms and individual negotiations; and

(ii) The regulatory responsibilities of the environmental and agricultural agencies with jurisdiction in the province.

7. Sustainability

The emerging carbon market and the underlying principle of payments based on ERs, provides a strong incentive to participating enterprises to continue operations. Sustainability of the project is likely because of a) the growing demand for agricultural products in China, b) the national government’s support for consolidation of intensive animal operations, and desire to develop a pipeline of similar projects in order to achieve local and global emission reductions, and c) the use of proven technology that has been successfully applied for years in other countries.

8. Lessons learned from past operations in the country/sector

The project will build upon the experience of working on other global environmental protocols, and the capacity created in China in this respect. More than one dozen projects have already been successfully developed or are being developed in the Bank’s China portfolio. This preparation will also benefit from the experience and consultations with other CF projects that are being developed or implemented elsewhere in the Bank.

9. Program of targeted intervention (PTI) no or yes?

Not applicable

10. Environment Aspects (including any public consultation).

This is a “Category B” project. No acquisition of land is envisaged. As the project involves animal waste transport and storage, an EA will be undertaken, and an Environmental Impact Assessment and Social Assessment will be carried out before the purchase agreement is approved. A community benefits plan will be developed under the Community Development Carbon Fund instrument to address additional social benefits.

11. Contact Point:

Task Manager

Neeraj Prasad

The World Bank

1818 H Street, N.W.

Washington, D.C. 20433

Telephone: 202-458-5893

For information on project related documents contact:

The Infoshop

The World Bank

1818 H. Street, N.W.

Washington, D.C. 20433

Telephone: (202) 458-5454

Fax: (202) 522-1500

Web: htty://www.worldbank.org/infoshop

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Note: This is information on an evolving project. Certain components may undergo modifications in the final project.