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: 5 | ARCHIVED on 28-May-2021 | ISR44927 | Implementing Agencies: People's Republic of China, Ministry of Ecology and Environment, Foreign Economic Cooperation Office Key Dates Key Project Dates Bank Approval Date: 14-Dec-2018 Effectiveness Date: 06-Mar-2019 Planned Mid Term Review Date: 01-Jul-2021 Actual Mid-Term Review Date: 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 is making good progress towards meeting its development objective to support China in reducing HCFC production and consumption, in line with the reduction schedule under the Montreal Protocol on Substances that deplete the Ozone Layers, and with the overall production and consumption reduction schedule specific to this Project. 5/28/2021 Page 1 of 6 Public Disclosure Copy The World Bank Implementation Status & Results Report China HCFC Phaseout Project Stage II (P156397) Based on preliminary information/data, the 2020 total production of HCFC for applications controlled by the Montreal Protocol has been reduced to 16,103 ODP tons (equivalent to 251,078 metric tons). This is below the allowable limit of 22,742 ODP tons for 2020 and well on the way toward the 2024 limit of 18,929 ODP tons. Pending the independent verification of production and consumption data for 2020, the consumption of HCFC-141b in the PU foam sector during the 2020 calendar year is estimated to be below the maximum allowable limit of 2,965.6 ODP tons (equivalent to 26,960 metric tons). Of the total US$32.1 million that has been released to China by the Multilateral Fund Executive Committee (ExCom), US$26.48 million (or 82%) has been withdrawn by FECO to the project designated account (DA) for conversion contracts and technical assistance activities in the foam sector, as well as production quota reduction and production closure contracts. The ExCom has agreed to reduce the overall funding allocated to China for this project (along with funding for other OCFC phase-out projects implemented by other agencies). The Bank team has been working with the PMU at the Foreign Environmental Cooperation Center of the Ministry of Ecology and Environment to revise the project approach accordingly, by placing a greater emphasis on technical assistance and policy support in lieu of direct reduction of ozone depleting substances. After some delay, the revised plans for the foam sector and production were approved by ExCom in July 2020 and April 2021, respectively. Pending a formal request from the Government of China, these changes will be reflected through a restructuring of the project, which is expected before the end of calendar year 2021. 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 Low 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 IN00935320 ►Consumption of HCFC-141b within the allowable limits in 2020 and 2025 (ODP Tones/year) (Tones/year, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 3,774.50 3,771.92 2,965.60 0.00 Date 31-Dec-2018 16-Sep-2020 08-Apr-2021 31-Dec-2027 5/28/2021 Page 2 of 6 Public Disclosure Copy The World Bank Implementation Status & Results Report China HCFC Phaseout Project Stage II (P156397) Absent of a 2020 production verification or data from MEE/FECO which is pending, the consumption of HCFC-141b in the PU foam sector during the 2020 calendar year is estimated to be not more than the maximum allowable limit of 2,965.6 ODP tons (equivalent to 26,960 MT). The 2020 consumption, along with that of 2019, is expected to be verified in 2021 under a modified methodology due to travel restrictions associated with the COVID-19 pandemic. Comments: The baseline for this indicator was revised. The 2018 allowable consumption of HCFC-141b in the foam sector is used as the baseline, instead of the 2017 consumption data because the Project became effective at the end of December 2018. This revision was made to better capture the actual impact of the Project. IN00935481 ►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) (Tones/year, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 22,742.00 20,561.18 16,103.41 8,292.00 Date 31-Dec-2018 16-Sep-2020 08-Apr-2021 31-Dec-2027 Based on preliminary information provided by HCFC producers to MEE/FECO, the 2020 total production of HCFC for applications controlled by the Montreal Protocol has reduced to 16,103.41 ODP tons (equivalent to 251,078.24 MT). This is below the allowable limit of 22,742 ODP tons for 2020 and well on the way toward the 2024 limit of 18,929 ODP tons. The verification of the 2019 and 2020 production has started virtually and will be completed after travel restrictions due to COVID-19 is lifted. Comments: The baseline for this indicator is revised. The 2018 allowable HCFC production is used as the baseline, instead of the 2017 production level 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 with the Agreement with ExCom. The end-traget is similarly revised to reflect the latest Agreement discussed with ExCom. IN00935482 ►Reduction of GHG emissions in the PU foam sector (Tones/year, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 17,000.00 5,335,340.00 24,870,000.00 Date 31-Dec-2018 16-Sep-2020 08-Apr-2021 31-Dec-2027 The impact of the production and consumption reduction policy has resulted in the actual HCFC-141b reduction in the foam sector by 809.5 MT against the 2018 baseline, equivalent to 7359 metric tons. Since alternatives of HCFC-141b are the cyclopentane and water blown technology, and HFOs with negligible GWP, the reduction of greenhouse gas (GHG) emission in the foam sector in 2020 is 5.3 million tCO2 equivalent (7359 MT multiplied by 725 which is the global warming potential of HCFC- 141b). Comments: The baseline and the end target for this indicator was revised. The 2018 allowable consumption of HCFC- 141b in the foam sector is used as the baseline, instead of the 2017 consumption data because the project became effective at the end of December 2018. The revision was made to better capture the actual impact of the project. The end target was revised to reflect the latest Agreement with ExCom. IN00935483 ►Reduction of GHG emissions in the production sector (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 108.9 million tCO2 Value 0.00 578,470 tCO2 equivalent 296.94 million tCO2e equivalent Date 31-Dec-2018 16-Sep-2020 11-Jan-2021 31-Dec-2027 Comments: With the ExCom's approval of the stage II production sector plan, the end target for reduction of GHG emission is 296.94 million tCO2 (difference between 2018 and 2026 targets) . The total production for controlled use in 2020 is 67,965.13 MT lower than the 2018 production level. By multiplying GWP of respective HCFCs (HCFC-22, HCFC-141b, HCFC-142b, HCFC-123 and HCFC-124), the total GHG emission reduction is about 108.9 million tCO2 equivalent. 5/28/2021 Page 3 of 6 Public Disclosure Copy The World Bank Implementation Status & Results Report China HCFC Phaseout Project Stage II (P156397) The GHG emission reduction reported in this ISR is significantly greater than the amount reported in the previous ISR, due to review and confirmation of the methodology. Intermediate Results Indicators by Components Investment in the Reduction of the Consumption of Controlled Substances IN00935484 ►Reduction by contracts signed in the PU foam sector (in ODP ton) (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 57.16 91.30 3,630.00 Date 31-Dec-2018 16-Sep-2020 08-Apr-2021 30-Dec-2027 Thus far, 11 consumption sector sub-grant agreements have been signed for the combined phaseout of 1,189.17 MT of HCFC-141b. Of this amount, 410.15 MT of HCFC-141b will be replaced by HC. The balance will be replaced by water and HFO alternatives. Since alternatives selected by these enterprises have low global warming potential (GWP of HFO and water is less than one, GWP of cyclopentane is about 4), the GHG reduction will be 860,506 tCO2 equivalent (1,189.2x725-410.5x4). This consumption Comments: has already gone down to 91.3 ODP T in 2020 as a result of completed conversions of 7 sub-projects. The total HCFC-141b consumption to be phased out by the 11 sub-grant agreements was revised downward from 1,189 MT, as reported in the previous ISR, to 1,028.2 MT (which is based on the final consumption validation of each enterprise by the implementing support agency). Investment in the Reduction of the Production of Controlled Subtances IN00935486 ►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 16-Sep-2020 08-Apr-2021 30-Dec-2027 The total production reduction based on the production quota reduction contract is 16,210 MT (equivalent Comments: to 814.25 ODP tons: 7,019 MT of HCFC-22; 836 MT of HCFC-141b; and 5,173 MT of HCFC-142b). Project Management IN00935485 ►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 16-Sep-2020 08-Apr-2021 30-Nov-2027 The semi-annual progress reports for the production and consumption sectors for the period ending December 2020 were submitted to the Bank on time. The audited financial report for the calendar year Comments: 2019 and the interim unaudited financial report for the period ending June 2020 were also submitted on time. IN00935487 ►Timely submission of implementation progress reports to the MLF (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No Yes Yes Yes 5/28/2021 Page 4 of 6 Public Disclosure Copy The World Bank Implementation Status & Results Report China HCFC Phaseout Project Stage II (P156397) Date 31-Dec-2018 16-Sep-2020 08-Apr-2021 31-Dec-2026 The implementation progress report was submitted to the 86th Meeting of the ExCom on September Comments: 2020. Performance-Based Conditions 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 27.28 137.19 17% 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 5/28/2021 Page 5 of 6 Public Disclosure Copy The World Bank Implementation Status & Results Report China HCFC Phaseout Project Stage II (P156397) Restructuring History There has been no restructuring to date. Related Project(s) There are no related projects. 5/28/2021 Page 6 of 6