2005 Steering Committee Meeting
World Bank - Italian Trust Fund for Environmental Protection in China
Beijing, China
17November 2005
Meeting Minutes
The 2005 meeting of the Steering Committee (SC) was held in Beijing, China on November17, 2005 from 10:30 to 2:00 pm. The meeting was attended by SC members and observers from the ChinaMinistry of Finance (MOF), the National Development and Reform Commission (NDRC), the State Environment Protection Administration (SEPA), the Italian Ministry for Environment and Territory (IMET), the Sino-Italian Cooperation Office (SICO), and the World Bank (WB). The list of participants is provided in Annex 1. TheAgenda of the SC meeting is provided in Annex 2.
Session 1
Opening Remarks
Ms. Liu Xuhong (NDRC), Mr. Zhuang Guotai (SEPA), Dr. Corrado Clini (IMET), and Ms. Teresa Serra (WB) gave short opening remarks.
In her opening remarks, Ms. Liu Xuhong, Deputy Director General, Foreign Capital Utilization Department, NDRC, acknowledged the great importance of the Italian Trust Fund (TF) to Chinese environmental protection and its relevance to the Chinese strategic development goal of building a “resource-saving and environmentally-friendly society” during the 11th Five-year Plan period (2006-2010), which was officially announced two months ago. Ms. Liu expressed three hopes on the TF:
1)To make use of the TF on the most appropriate programs through careful and reasonable project selection, and by integration with on-going WB financed projects for maximumoutcomes and benefits;
2)To reduce unnecessary processing steps to improve efficiency through effective communication and cooperation among parties involved; and
3)To gain more funds for environmental protection in China.
Mr. Zhuang Guotai, Deputy Director General, Foreign Economic Cooperation Office, SEPA,expressed SEPA’s satisfaction with the progress of the two TF projects implemented by SEPA (i.e., Green National Accounting and Circular Economy Policy Research) over the past year with the support of the Italian TF and the WB, and to good partnerships with other Chinese institutions. Referring to a Chinese saying, “a good start is half success”, Mr. Zhuang was optimistic on the success of the TF-financed projects. Meanwhile, he hoped that future projects would be screened and selected on the basis of more in-depth discussion.
In his opening remarks, Dr. Corrado Clini, Director General, IMET,focused onthe need to ensure greater efficiency in processing TF activities. While showing a positive attitude towards providing financial support for environmental protection in China, he raised some concerns with regard to meeting the expectations of IMET on linkage of TF projects to the on-going Sino-Italian Cooperation Program (SICP). He suggested that the TF should be used to facilitate the projects within the framework of bilateral cooperation, which had a wide coverage and had achieved success so far.
Ms. Teresa Serra, EASES Director, WB, indicated the importance of the partnership between the IMET, WB, and Chinese institutions. She noted the the first year of activity of the TF had been a learning process for all partners, but had overall gotten off to a good start. She noted the timeliness of the studies that were financed by the TF and their convergence with the priorities that were emerging in the context of China’s 11th Five Year Plan, with its focus on sustainable development, efficient resource use and the concept “circular economy”. She was very impressed by the serious commitment and fruitful progress made by the Chinese counterparts so far. She noted also that the TF-financed projects in Chinashouldseek good alignment with other priority programs in China, building synergies and avoiding duplication with the Italian bilateral program and other ongoing programs.
Session 2
Progress Report of the Trust Fund
Mr. Jian Xie, task manager on behalf of the TF Secretariat, gave a brief report on the progress of the Trust Fund activities.
Overview:
1)TF projects funded in the first tranche comprise(a) four policy studies -- onGreen National Accounting Study (implemented bySEPA), National Climate Change Program (implemented by NDRC), and Circular Economy Policy (by SEPA) and Legislation (by NPC) – (b)co-financing of the Heilongjiang Dairy Project, and (c) a Project Development Component. A summary presentation can be found in Annex 3.
2)The study program reflected the priorities of theChinese government. The commitment of Chinese counterparts is strong. For instance, the circular economy legislation has been put on the 2007 legislative agenda of the National People’s Congress. SEPA, in close collaboration with the National Statistical Bureau (NSB) is conducting the green accounting pilot project and plans to release environmentally-adjusted GDP indicators next year. Based on the climate change study, NDRC will submit the China National Climate Change Program White Paper to the State Council for review in 2006.
3)Despite some delay in GOC’s countersigning of the grant agreement for the climate change study), all studies are now advancing well and are catching up with their original schedules. Consultants are in position, inception workshops have been held and the inception reports have been completed.
4)Preparation of the co-financed component of the Heilongjiang Diary Project (HDP) was completed at the end of 2004 but the signing of grant agreement is behind schedule due to the delay in negotiation and final processing of the component’s parent WB-loan.
5)The TF disbursement rate is low at this moment due to the delay of the HDP co-financing component and the payment schedule of studies. It is expected to speed up in the first half of 2006.
6)There is high interest of Chinese institutions in additional grants in the second tranche.
Implementation status of the four policy studies:
1)Green National Accounting Study: The project leading group (LG) is headed by SEPA’s Vice Minister Pan Yue and has the participation of the National StatisticsBureau (NSB). Four case studies, two at provincial level and two at city level, have been identified. Main tasks includedata collection, international experience sharing, environmental accounting frameworkand methodology development. Both the local consultant team and international consultants have been contracted. The inception workshop was held on July 13th, 2005 and the inception report has been finalized.The first international workshop was scheduled for (and was held on) November 24-25, 2005 in Beijing. SEPA is planning to release environmentally adjusted GDP at the provincial level next year.
2)Circular Economy Legislation Study: The project LG is headed by Mr. Mao Rubai, Chairman of the Environment and Natural Resource Committee of NPC and consists of vice ministers from NDPC, SEPA and MOST.The local consultant team and international consultants have been contracted. The inception workshop was held onJuly 4, 2005 and the inception report has been finalized.Drafting of the CE Law has been formally listed as a part of the 2007 legislation agenda of NPC. The Italian TF provides a timely support to the task. The annual CE forum organized by NPC, NDRC, SEPA and MOST was held on November 5-6 in Xiamen. An international forum on environmental legislation and sustainable with a focus on CE was scheduled for (and was held on) November 20-23, 2005 in Beijing.
3)Circular Economy Policy Study: The establishment of the LG is still pending on the final decision of SEPA management. The Local consultant team and an international consultant have been contracted. The inception workshop was delayed due to unavailability of senior SEPA officials but was finally held on September 27, 2005. The inception report has been finalized. The project workshop and training were scheduled for (and were held on) November 21-22, 2005.
4)National Climate Change Program Study: The project LG is being established.For component 1, National Climate Change Program, the local consultant team has been contracted but hiring international consultants is still in process. For component 2, Local Outreach, four candidate provinces and research teams for each have been identified. The inception workshop was held on September 16, 2005 and the inception report will be finalized shortly. Three seminars have been held in November 2005.
Status of the co-financed WB project component:
The co-financing component for the Heilongjiang Dairy Project (HDP) has been fully prepared. However processing of the loan component of the project had suffered a considerable delay. Negotiations were scheduled for end-Novemeber (and have since been successfully held). Presentation of the project, including the co-financing component, to the Bank’s Board of Executive Directors was scheduled for February 2006.
Preliminary proposal for the second tranche of the TF, including project development:
Six funding proposals were submitted by the Chinese agencies for the second tranche of the TF --: (1) Xi’an sustainable transport and air quality management (AQM); (2) Energy efficiency and air emission reduction in the railway sector; (3) Urban AQM strategy; (4) Eco-compensation mechanism; (5) National strategic planning for circular economy promotion; and (6) Circular economy pilot project. A brief description of each proposal was circulated in advance of the SC meeting.
Sessions 3 and 4
Review of the TF Program ProgressandDiscussion on Strategic Priority and the Future Plan of the TF Program
In a combined session, SC members and other meeting participants discussed progress in current activities, strategic priorities and future plans for the TF.
IMET
Dr. Corrado Clini and Mr. Massimo Martinelli suggested that projects for the second tranche be linked to bilateral cooperation projects between Italy and China on the basis of careful screening of the proposals. Dr. Clini commented on the following:
1)The Xi’an transportation project and the eco-compensation mechanism proposala could be integrated with on-going projects jointly implemented by IMET and SEPA. The projects should be more focused (AQM was a very broad concept); it should draw on the priorities that have already been identified by SEPA through previous work done with Italian consultants. A technical meeting should be held to identify priorities and actions.
2)The railway sector project should also be more tightly focused (“energy efficiency”was too broad a concept). The project could draw on lessons and approaches being used in the case of the ongoing, Italian-supported, Tibetan railway project. A technical review meeting should be held with IMET and MOST (Ministry of Science and Technology) to revisit the project proposal.
3)In the case of the CE projects, Chinacould also learn more about the Italian experience. A consultation mechanism should be established between WB experts and SICP, so as to make better use of international experts who are currently working in China.
4)Regarding the HDP, Dr. Clini raised some questions regarding the approach and technology choices adopted by the project and suggested that Italian experts be closely involved. The list of domestic and international experts that would be providing assistance to the Chinese team should be finalized by February of 2006 to improve efficiency. He also suggested that a technical meeting be held before the start of the project.
NDRC
On behalf of NDRC, Ms. Jiang Xiaofei expressed several hopes on project selection for the second tranche:
1)To improve efficiency and benefits of using TF, it would be best to link the project selectionto the WB lending program.
2)While agreeing on IMET’s focus in Chinaon climate change and air quality management, the TF should not narrowly coverair pollutionand climate change and it should be expanded into other priority areas according to China’s development strategy. For example, CE is a strategic priority of China at the current stage.
3)For the second tranche, priority should be given to provinces that have not been funded before to achieve nationwide influence.
4)The size of TF is limited in face of China’s many needs. Further financial support is requested.
5)Although it is good to involve more national partners, the number of agencies involved should not be too big because that might decrease the efficiency of project preparation.
6)More meetings are preferable for better communication between parties.
MOF
On behalf of MOF, Mr.Yang Yingming extended thanks to the Italian Government and the WB for their support to environmental protection in China. In reviewing the progress of ongoing activities, he thought that the projects were doing well and hadmade a good start that suggested future efficiency in processing and success in project implementation. He suggested that MOF be involved in the LGs of the studies to facilitate cooperation and complementarity among different agencies because MOF is financing many projects across China. He also emphasized the importance of monitoring and evaluation to ensure the good quality of the TF projects.
Regarding priorities and future plans of the TF program, Mr. Yang made the following suggestions:
1)To facilitate more effective cooperation among Chinese government agencies, IMET and WB, the parties should pursue a convergence of their policy priorities and expertise. In terms of convergence of policy priorities, Chinaconsiders cooperation in AQM very important and would be a relevant priority for the TF.
2)The TF should be used to help improve local capacity of environmental management. So far, most of the financial support has gone to central government agencies. But in the past several years, China has experienced a dramatic decentralization process. That means local authorities are playing a more and more important role in many areas. He encouraged the TF to provide more support for strengthening local capacity of environmental management and legal enforcement.
3)In selecting projects, large impact could result from linking TF activities with the WB lending program. This would reduce the cost of selecting priority projects and would ensure that resources are available for supervision, monitoring and evaluation of the TF components. Except for the national railway projects, all the other World Bank lending projects are local projects and quite a few of them are related to climate change. Other WB projects, not included in the current preliminary list, should be explored. For example, the WB Liaoning Urban Environment Project has a large component on transportation and heating system. Another example is the Coal Bed Methane Development Project in ShanxiProvince, which has one-third of the coal reserves in China. These projects are good candidates for support by the TF.
4)Regarding the newly proposed CE pilot projects, there are three approaches to be considered in selecting the pilot -- industrial approach, sectoral approach, and regional approach. If the sectoral and/or regional approaches are followed, it is easy to find candidate projects in the WB pipeline in China.
5)The proposal from the Ministry of Railway is of particular interest given the size of the railway sector in China. The TF’s support could be a good start for MOR to develop a sector-wide environmental management program in line with the circular economy approach.
SEPA
On behalf of SEPA, Mr. Zhuang Guotai reviewed the progress of project of the first tranche and made suggestions on future plan of second tranche. In his review, Mr. Zhuang made the following points:
1)To build a sound project management mechanism, it is necessary to systematically review and evaluate the projects of the first tranche to learn about the strengths of the TF.
2)To identify convergent areas within the broader background of environmental problems in China and bring about scale effects, the TF should be careful ans systematic in selecting and implementing projects and continue to provide funds.
3)To build a closer relation between TF projects and bilateral projects, the TF team and SICP, as well as the experts of all sides,could be involved through technical coordination meetings. A better communication mechanism should be set up between SICP and the WB.
Regarding projects of the next tranche, Mr. Zhuang suggested that a project of sustainable rural development be added because it is one of priorities of Chinaand many rural projects are related to climate change. For example, the urbanization of rural areas would have impact on GHG emission (e.g., farmland and vegetation decreasing, energy structure change in rural areas). (Prior to the meeting, SEPA distributed a draft Proposal of Study and Demonstration on Priority for Rural Environmental Protection Action).
IMET
Responding to Ms. Jiang Xiaofei’s suggestions on extending the coverage of the TF projects to more areas, Dr. Clini explained that IMET’s vision is to work with China to design and implement technical programs for protecting local and global environment. Focal areas include climate change, sustainable agriculture, water resource management, irrigation and so on. He emphasized that the TF projects in the next tranche should reflect thisfocus. IMET’s interest in providing funds to match WB loansis contingent on the identification of components being focused on the above-mentioned areas.
Responding to Mr. Zhuang Guotai’s suggestion that a project of rural development be added for the second tranche, Dr. Clini thought the HLJ Dairy Project would contribute to sustainable agriculture if it was done on a sound technical basis. He also mentioned that IMET had worked with SEPA on such projects in Inner Mongolia and Chongmin, Shanghai.
WB
Ms. Teresa Serra, Mr. Jian Xie, Mr. Andres Liebenthal and Ms. Madga Lovei, responded to thecomments of others and expressed their views on the current workings, priorities and future plans of the TF:
1)On the scope of ongoing studies: The current program was extremely ambitious. As pointed out by many commentators in the Technical Workshop held on November 16 to review the activities of the TF, it was important that the studies be selective , realistic and practical as they move ahead.
2)On creating synergies across studies and with ongoing activites: The Bank noted that there are currently many activities taking place in Chinasponsored by different institutions. This was evident in the Technical Workshop held on November 16 to review the activities of the TF. It was important for the Chinese agencies to coordinate among themselves and with these ongoing activities.
3)On creating synergies between TF projects and SICP: The concern of the Italian Government is very reasonable. The TF Secretariat has been maintaining good contact with SICP, however a greater coordination with the bilateral program can be pursued in preparation of the second round proposals. The idea of a Technical Meeting at the beginning of 2006 to review the SICP program in detail and to explore areas of complementarities with ongoing first tranche activities and proposals for the second tranche was well received. In preparation for this meeting, the Bank requested that IMET and SICP provide more information on bilateral activities to the other partners.