People's Republic of China: Shanxi Environment Improvement Project [Loan 1715]

Background

This report assesses the performance of the Shanxi Environment Improvement Project in the People's Republic of China (PRC). ADB approved a loan amounting to $102 million in December 1999 to support three clean energy subprojects:

The project's immediate intended outcomes were:

The project also included advisory technical assistance (ADTA) for setting up and operating a SO2 emissions permit trading system in Taiyuan city. This market-based instrument was meant to encourage pollution reduction at minimal cost.

Summary of Evaluation

The overall performance of the project is rated as successful.

The project is highly relevant based on the project design, which is consistent with the PRC's environmental protection policies and programs initiated in the 1990s, as well as with ADB's operational strategy at the time to support the development of cleaner energy sources.

The project is effective because it meets the targeted outputs in Taiyuan and Yangquan and exceeds the target in Datong; however, the actual coal savings per unit of gas supply or district heating service are significantly lower than initially estimated in Datong and Yangquan.

The project is also efficient, despite the prevailing tariffs and especially if environmental benefits are considered.

The project is likely to be sustainable as government price coordination coupled with budgetary support is likely to ensure that:

Issues

Lessons

Recommendations

The evaluation report proposes follow-up actions below:

Sustainability. Continue policy dialogue with responsible authorities in follow-on engagements to revise prices of clean products and services, such as coal gas, CBM/CMM, and centralized district heating.

Monitoring. Actively facilitate an improved assessment of environmental benefits of investments in clean energy subprojects by the subproject companies and other enterprises.

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