Public Disclosure Copy The World Bank Implementation Status & Results Report China HCFC Phaseout Project Stage II (P156397) China HCFC Phaseout Project Stage II (P156397) EAST ASIA AND PACIFIC | China | Environment, Natural Resources & the Blue Economy Global Practice | Montreal Protocol | Investment Project Financing | FY 2019 | Seq No: 7 | ARCHIVED on 01-Aug-2022 | ISR50958 | Implementing Agencies: Ministry of Ecology and Environment, Foreign Economic Cooperation Office, People's Republic of China Key Dates Key Project Dates Bank Approval Date: 14-Dec-2018 Effectiveness Date: 06-Mar-2019 Planned Mid Term Review Date: 18-Jan-2022 Actual Mid-Term Review Date: 18-Jan-2022 Original Closing Date: 31-Dec-2027 Revised Closing Date: 31-Dec-2027 pdoTable Project Development Objective (PDO) Project Development Objective (from Project Appraisal Document) The project development objective is to reduce HCFC production and consumption, as well as to avoid and reduce the use of high global warming controlled substances in the consumption sector and the emissions of greenhouse gases from the production sector. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Investment in the Reduction of the Consumption of Controlled Substances:(Cost $229.04 M) Investment in the Reduction of the Production of Controlled Substances:(Cost $303.93 M) Technical Assistance and Policy Support:(Cost $12.26 M) Project Management:(Cost $27.56 M) Preparation of Phase-out and Emissions Reduction Activities:(Cost $0.60 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Moderately Satisfactory Overall Risk Rating Low Low Implementation Status and Key Decisions The project continues to make good progress in meeting the Project Development Objective (PDO) with a high disbursement rate of funds released to date by the donor, the Multilateral Fund (MLF), and with verified achievement of the 2020 annual HCFC consumption and production targets (65% of China’s baseline in accordance with the Montreal Protocol and MLF reduction schedule). The World Bank and the Ministry of Ecology and Environment (MEE)/Foreign Economic Cooperation Office of the MEE (FECO) conducted a mid- term review for the project in January 2022. This follows the agreement in December 2019, between the Executive Committee of the Multilateral 8/1/2022 Page 1 of 6 Public Disclosure Copy The World Bank Implementation Status & Results Report China HCFC Phaseout Project Stage II (P156397) Fund and China, to reduce the overall funding for this project (along with funding for other HCFC phase-out projects implemented by other agencies). At the same time, China affirmed its commitment to meeting the Montreal Protocol schedule for HCFC production and consumption reduction, and related agreements with ExCom. Therefore, the PDO and main PDO indicator targets – that consumption and production of covered HCFCs be within allowable limits – remain relevant and valid in spite of the reduction in funding. With the increased importance of policy, regulations and enforcement to meet Montreal Protocol targets, the role of MEE and of local and provincial authorities is of even greater importance. Officially reported consumption through China’s country program updates in the polyurethane foam sector in 2020 was slightly below the maximum allowable limit of 26,960 metric tons, at 26,176.41. Independent verification conducted by the World Bank also confirmed China’s compliance with the Montreal Protocol and MLF maximum allowable production schedule during the 2019-2020 period, with production of HCFCs in 2020 at 16,123 ODP MT, below the 18,929 ODP MT production limit (65% of baseline). Independent verification of China's consumption and production for 2021 is underway. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance Low Low Low Macroeconomic Moderate Moderate Moderate Sector Strategies and Policies Moderate Low Low Technical Design of Project or Program Substantial Moderate Moderate Institutional Capacity for Implementation and Moderate Low Low Sustainability Fiduciary Moderate Moderate Moderate Environment and Social Moderate Moderate Moderate Stakeholders Moderate Low Low Other -- Moderate Moderate Overall Moderate Low Low Results PDO Indicators by Objectives / Outcomes Reduce HCFC prod./consump. as well as avoid/reduce use of high global warming controlled substances IN01126308 ►Consumption of HCFC-141b within the allowable limits in 2020 and 2025 (ODP Tones/year) (Tons/year, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 3,774.50 2,965.60 2,879.41 0.00 Date 31-Dec-2018 01-Nov-2021 31-Jan-2022 31-Dec-2026 Value is the 2021 consumption which is below allowable limit under the Montreal Protocol. The baseline year and value for this indicator were revised after approval at time of filing the first ISR. The Comments: 2018 allowable consumption of HCFC-141b in the foam sector is used as the baseline, instead of the 2017 allowable consumption because the Project became effective at the end of December 2018. This revision was made to better capture the actual impact of the Project. 8/1/2022 Page 2 of 6 Public Disclosure Copy The World Bank Implementation Status & Results Report China HCFC Phaseout Project Stage II (P156397) The end- target is to be reached December 31, 2026 in line with the HCFC Phase-out Management Plan (HPMP). IN01126309 ►Production of HCFCs (HCFC-141b, HCFC-142b, HCFC-22, HCFC-123 and HCFC-124) within the allowable limits in 2020 and 2025 (ODP Tones/year) (Tons/year, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 22,742.00 16,103.41 16,123.06 8,292.00 Date 31-Dec-2018 01-Nov-2021 31-Jan-2022 31-Dec-2026 Value is the 2021 production which is below allowable limit under the Montreal Protocol. The baseline year for this indicator was revised after approval at time of filing the first ISR. The 2018 allowable HCFC production is used as the baseline because the Project became effective at the end of December 2018. This revision was made to better capture the actual impact of the Project and to align Comments: with the Agreement with ExCom. The end-target was revised to reflect the actual Agreement between ExCom and China approved by ExCom. The end-target is to be reached December 31, 2026 in line with the HCFC Production Phase-out Management Plan (HPPMP). IN01126310 ►Reduction of GHG emissions in the PU foam sector (Tons/year, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 5,335,340.00 601,996.00 3,000,000.00 Date 31-Dec-2018 01-Nov-2021 31-Jan-2022 31-Dec-2026 The approach and methodology to estimate GHG emissions reduction from the foam sector was reviewed at MTR, as described in Annex IV of this Aide-Memoire. The reduction is conservatively estimated based on the completed signed subprojects only: eight of eleven subprojects are completed, representing phaseout of 830.34 metric tons of HCFC-141b. The Global Warming Potential of the alternatives Comments: (cyclopentane, water-blown technology and HFOs) are considered negligible so that the tCO2e is 830.34 * 725 = 601,996 The end-target is to be reached December 31, 2026 in line with the HCFC Phase-out Management Plan (HPMP). IN01126406 ►Reduction of GHG emissions in the production sector (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 108.9 million tCO2 108.58 million tCO2 Value 0.00 296.94 million tCO2e equivalent equivalent Date 31-Dec-2018 01-Nov-2021 31-Jan-2022 31-Dec-2026 Target was set following approval of the HPPMP by ExCom as the GWP-weighed difference between allowable production in 2018 minus allowable production in 2026 (’296.94 million tCO2e – rounded to 290 million t CO2e). The verified total production for controlled use in 2020 (last verified consumption at time of the MTR) was 67,856.31 MT lower than the 2018 production level. By multiplying GWP of respective Comments: HCFCs (HCFC-22, HCFC-141b, HCFC-142b, HCFC-123 and HCFC-124), the total GHG emission reduction is 108.58 million tCO2 equivalent. The end-target is to be reached December 31, 2026 in line with the HCFC Production Phase-out Management Plan (HPPMP). Intermediate Results Indicators by Components Investment in the Reduction of the Consumption of Controlled Substances IN01126407 ►Reduction by contracts signed in the PU foam sector (in ODP ton) (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 8/1/2022 Page 3 of 6 Public Disclosure Copy The World Bank Implementation Status & Results Report China HCFC Phaseout Project Stage II (P156397) Value 0.00 91.30 91.34 3,630.00 Date 31-Dec-2018 01-Nov-2021 31-Jan-2022 31-Dec-2026 11 consumption sector subgrants have been signed for the combined phaseout of 1,189.17 MT of HCFC- 141b, ie. 130.81 ODP tons. At MTR 8 subgrants are complete, representing phaseout of 830.34 MT, equivalent to 91.34 ODP tons. As part of the upcoming restructuring proposed by the MTR and pending formal request from the client, the End Target is proposed to be revised downwards (to 1,400 ODP MT, Comments: tbc). The end-target is to be reached December 31, 2026 in line with the HCFC Phase-out Management Plan (HPMP). Investment in the Reduction of the Production of Controlled Subtances IN01126409 ►Reduction by signed contracts in the production sector (in ODP ton) (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 814.25 814.25 TBD Date 30-Nov-2018 01-Nov-2021 31-Jan-2022 31-Dec-2026 The total production reduction based on the production quota reduction contract is 16,210 MT (equivalent to 814.25 ODP tons: 7,019 MT of HCFC-22; 836 MT of HCFC-141b; and 5,173 MT of HCFC-142b). The End Target was reviewed at MTR based on the Agreement approved by ExCom, and is set at 3,600 ODP ton based on expected closure contracts with three HCFC-141b producers that have no capacity for Comments: feedstock, to be reflected through restructuring. The end-target is to be reached December 31, 2026 in line with the HCFC Production Phase-out Management Plan (HPPMP). Project Management IN01126408 ►Timely submission of semi-annual reports by FECO (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No Yes Yes Yes Date 01-Jan-2018 14-Nov-2021 26-Jan-2022 31-Dec-2027 The semi-annual progress reports for the production and consumption sectors for the period ending December 2021 were submitted to the Bank on time. The audited financial report for the calendar year Comments: 2020 and the interim unaudited financial report for the period ending December 2021 were also submitted on time. IN01126410 ►Timely submission of implementation progress reports to the MLF (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No Yes Yes Yes Date 31-Dec-2018 14-Nov-2021 26-Jan-2022 31-Dec-2026 The implementation progress report for 2020 updated to June 2021 was submitted to the ExCom in Comments: September 2021, on a timely manner. Performance-Based Conditions 8/1/2022 Page 4 of 6 Public Disclosure Copy The World Bank Implementation Status & Results Report China HCFC Phaseout Project Stage II (P156397) Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P156397 TF-A9046 Effective USD 164.47 164.47 0.00 34.11 130.36 21% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P156397 TF-A9046 Effective 08-Jan-2019 08-Jan-2019 06-Mar-2019 31-Dec-2027 31-Dec-2027 Cumulative Disbursements Restructuring History There has been no restructuring to date. 8/1/2022 Page 5 of 6 Public Disclosure Copy The World Bank Implementation Status & Results Report China HCFC Phaseout Project Stage II (P156397) Related Project(s) There are no related projects. 8/1/2022 Page 6 of 6