The World Bank Capacity Strengthening for Implementation of Minamata Convention on Mercury Project (P151281) REPORT NO.: RES36510 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF CAPACITY STRENGTHENING FOR IMPLEMENTATION OF MINAMATA CONVENTION ON MERCURY PROJECT APPROVED ON SEPTEMBER 9, 2016 TO PEOPLE'S REPUBLIC OF CHINA ENVIRONMENT, NATURAL RESOURCES & THE BLUE ECONOMY EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Martin Raiser Regional Director: Benoit Bosquet Practice Manager/Manager: Ann Jeannette Glauber Task Team Leader(s): Ms. Anisi, Laurent Granier The World Bank Capacity Strengthening for Implementation of Minamata Convention on Mercury Project (P151281) I. BASIC DATA Product Information Project ID Financing Instrument P151281 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 09-Sep-2016 30-Apr-2021 Organizations Borrower Responsible Agency Foreign Economic Cooperation Office of the Ministry of People's Republic of China Ecology and Environment Project Development Objective (PDO) Original PDO The PDOs are to (a) develop a national strategy on mercury and related action plans, and (b) improve China's mercury management capacity and readiness to implement this strategy in the project provinces. Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A3066 14-Nov-2016 14-Nov-2016 06-Feb-2017 30-Apr-2021 8.00 3.20 4.80 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Capacity Strengthening for Implementation of Minamata Convention on Mercury Project (P151281) I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES 1. Project Background: China became a Signatory to the Minamata Convention on Mercury in 2013 and ratified it in 2016 to join the global efforts of reducing mercury production, consumption, and emissions. The Capacity Strengthening for Implementation of Minamata Convention on Mercury Project (the Project) is supported with funding through a Global Environment Facility (GEF) grant in an amount of US$ 8 million. The Project was approved by the Board on September 9, 2016, became effective in Feb. 6, 2017, and is scheduled to close on April 30, 2021. 2. The Project Development Objectives (PDO) are to (a) develop a national strategy on mercury and related action plans; and (b) improve China’s mercury management capacity and readiness to implement this strategy in the project provinces. The project includes three components: a) development of National Strategy and Sectoral and Provincial Action Plans; b) capacity strengthening for mercury management and risk assessment; and c) project management. 3. Implementation Progress: The PDO and overall implementation progress are currently rated as Moderately Satisfactory (MS). While the accumulative implementation progress still lags behind the original plan, the pace of implementation had significantly accelerated since 2019 and later slowed down again in early 2020 due to the impact of the COVID-19 pandemic. This was especially true for activities involving field work, consulting services, workshops, and training. Once COVID-19 was contained in China (around May 2020), some project activities started gaining momentum again. The total disbursed amount as at the time of this Restructuring Paper is approximately US$3.2 million, accounting for 40 percent of the total grant amount, versus 28 percent in May 2020. The actual implementation progress and contractual commitments reflect greater progress than suggested by disbursements alone, with only two of the 35 planned contracts pending signature. The consulting work under the signed contracts is well underway but most payments will be made in the later stages or after completion of the work and delivery of final outputs. 4. The PDO remains relevant and the Project is making good progress towards achieving it despite the delays. FECO has been working closely with relevant consulting firms, industry associations, government agencies and other stakeholders to deliver analytical reports and proposals and to develop sub strategies and action plans for mercury- related sectors, with technical support and advice from the National Strategy Development Expert Committee. The first draft national strategy has been submitted to the MEE for review and the draft sectoral and provincial action plans have been submitted to the relevant government agencies for review. The consultations with other key stakeholders are ongoing. Sectoral analysis and draft action plans have been prepared in areas including 10 subsectors covering mercury supply and trade, mercury-added products production, environmentally sound management of waste, environmentally-sound management of contaminated sites as well as five atmospheric point sources including coal-fired power plants, coal-fired industrial boilers, non-ferrous smelting facilities, cement clinker production facilities and waste incineration facilities. In addition, the consultancies of three cross-cutting sub-strategies are ongoing: Environmental and Social monitoring Strategy, Health Monitoring, and Research and Development Strategy for Minamata Convention compliance. Comprehensive analysis have been provided for the challenges and achievements of mercury management and a clear road map was provided for achieving the targets for Minamata Convention, including policies and actionable workplans, emission standard formulation, and supervisory monitoring regulations. 5. The national level mercury flow Management Information System (MIS) has been developed and tested in the pilot provinces and one municipality and is being reviewed by Ministry of Ecology and Environment (MEE). It is expected to be housed in FECO and connected to the National Environmental Statistics system and the pollutant discharge permitting system to ensure its sustainable usage and increased efficiency. The activities in the pilot provinces and municipality are also making headway to improve China’s mercury management capacity and readiness The World Bank Capacity Strengthening for Implementation of Minamata Convention on Mercury Project (P151281) to implement the strategy, including capacity building for selected laboratories, assessment of mercury management and recycling technologies, environmental risk assessment of selected contaminated sites, and awareness-raising activities etc. These analytical studies and pilot activities are establishing the building blocks that will support China’s long-term environmentally sound management of mercury, and mercury reduction and phase-out efforts. 6. Proposed Extension of Closing Date and Rationale: The project implementation period was originally four years, which was relatively short given the complexity and highly technical nature of the project. Moreover, the Project experienced accumulative delays due to slow start-up, lengthy procurement processes, difficulties finding qualified bidders given the technical nature of mercury, and the lengthy institutional reforms at the central, provincial and local levels. Throughout 2019 and leading up to the start of 2020, the project achieved good progress and demonstrated an overall positive trajectory – particularly as the procurement processes were completed for most contracts, institutional reform was completed, and the capacity of the Project Management Offices (PMO) was strengthened. Unfortunately the onset of the COVID-19 pandemic in early 2020 has caused further delays due to travel restrictions and work from home orders, which had an adverse impact on field work, consulting services, workshops, and training etc. 7. As such it would be difficult to complete the remaining activities by the original closing date, including further consultations and finalization of the national strategy, sectoral and provincial action plans, finalization of the mercury flow tracking MIS, mercury atmospheric baseline monitoring, assessment of mercury management and recycling technologies, environmental risk assessment of selected contaminated sites, awareness raising and dissemination activities, and dissemination of the Project results. The central PMO, provincial and local implementing agencies and the Bank have held extensive discussions and assessed that an 18-month extension will allow the Project to ensure completion of the procurement processes, trial operations, training, inter-laboratory comparisons, and consultations. An implementation plan and disbursement forecast have been agreed upon for the proposed extended period. Completion of the remaining activities would be critical to achieving the PDO through finalization of the national mercury strategy, and improvement of China’s mercury management capacity and readiness to implement the strategy. 8. On October 13, 2020 the Bank received the formal restructuring request from the Ministry of Finance proposing to extend the closing date by 18 months from April 30, 2021 to October 30, 2022, without any changes to the project design or indicators. The Bank team supports the proposal that will contribute to the achievement of the PDOs and will allow full disbursement of the remaining grant. The Results Framework will reflect the newly proposed closing date for the end target value of all results indicators. 9. The overall risk is considered low because: a) the capacity and institutional arrangements have been improved at the national and local level; b) the PMOs are demonstrating good momentum and have gained more experience in project management, technical discussions and procurement processes; c) the COVID situation in China is vastly improved. Therefore, the government and Bank team are confident that the remaining activities can be completed by the proposed revised closing date. This will be the first extension of the closing date. The GEF coordinator has endorsed the proposed extension in principle. 10. The project is in compliance with legal covenants as well as the Bank’s fiduciary and safeguards policies. There are no outstanding audits or audit qualifications. The performance of the recipient and project participants remains satisfactory, and safeguards performance is also rated satisfactory. The World Bank Capacity Strengthening for Implementation of Minamata Convention on Mercury Project (P151281) II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-A3066 Effective 30-Apr-2021 30-Oct-2022 28-Feb-2023