Sector: General water, sanitation and flood protection sector (55%); Pollution Control and Waste Management (45%) Project ID

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1 Project Name PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB6680 GEF Huai River Basin Marine Pollution Reduction Project Region EAST ASIA AND PACIFIC Sector Sector: General water, sanitation and flood protection sector (55%); Pollution Control and Waste Management (45%) Project ID P GEF Focal Area International waters Borrower(s) THE PEOPLE S REPUBLIC OF CHINA Implementing Agency Dongying Municipal Government, Shandong Province, China Office of Foreign Economy No. 127 Lishan Road, Lixia District Jinan Shandong Tel: (86-531) Fax: (86-531) Lipingsdxmb@126.com Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared June 23, 2011 Date of Appraisal July 8, 2011 Authorization Date of Board Approval October 31, Key development issues and rationale for Bank involvement 1.1 Over the past 30 years, China has seen impressive and unprecedented economic growth. However, this rapid growth, compounded by population growth and urban migration, has been achieved at the cost of considerable deterioration of the water environment caused mostly by land-based pollution from industries, farming and domestic sources. This has alerted Chinese policy makers and general public to give pollution reduction and control a much higher priority and this is clearly articulated in the 12 th Five Year Plan ( ), which aims to sustain the rapid and steady development of China s socialist market economy following a green growth path. 1.2 The Huai River Basin covers four provinces, i.e. Shandong, Jiangsu, Anhui and Henan. The key development challenge in the Huai River Basin is to maintain the balance between socio-economic development and environmental protection. With rapid economic growth in the region, many river systems in the Huai River Basin have become increasingly polluted rendering it one of the most polluted rivers in China, and consequently more and more nutrients and pollutants are discharged into the Bohai Sea and Yellow Sea contaminating these international waters. Shandong Province, with the longest coastlines of the Bohai Sea and the Yellow Sea within the Huai River Basin, is contributing more polluting loads to these seas than any of the other three provinces. 1.3 Coastal cities such as Dongying in Shandong Province are both significant contributors to and direct victims of such pollution. Dongying has been the central city of the Yellow River delta since its establishment in 1983, with over 350km coastlines along the Bohai Sea, and a total population of some 1.8 million. Oil, natural gas, salt, coal and geothermal energy are the major resources of Dongying. Over

2 the past two decades, the city has seen continued growth in different sectors. However, the delicate ecosystem of Dongying city has been heavily impacted by increasing water pollution. 1.4 Water pollution in Dongying originates from both urban and rural areas, point and non-point sources such as industries, domestic and animal wastes, and agricultural runoff. In spite of the government s efforts in pollution control over the years, the total nutrients and pollutants discharged into the Bohai Sea from Dongying city, in terms of COD, BOD, NH+-H, TP and TN, have not decreased substantially. The identified main sources of nutrients and pollutants at Dongying City bordering the Bohai Sea are municipal and industrial sewage, rural wastes and agricultural runoff. 1.5 The main issues with existing water pollution control practices are basically twofold: (a) lack of detailed information on the environmental impact of different water pollution sources, in particular rural wastes and agricultural runoff, and the cost-effectiveness of water pollution control investments; and (b) a supply-driven and infrastructure-focused approach, neglecting potentially more cost-effective demandside management interventions through introducing incentive mechanisms for nutrient/pollutant loads reduction and enforcing higher standards of effluents, etc. 1.6 Based on stakeholder consultation, the government proposes to select Guangli river watershed which is in Dongying City, Shandong Province and also within Huai River Basin, as the pilot area. Guangli river is a man-made drainage channel for Dongying central district and Kenli county. The river is 48.8km long and has a catchment area of 792km2 covering one urban district and a county with a total population of 745,000. It is chosen as the demonstration watershed because: (a) it is easier to measure and evaluate reliably the project impact, as this watershed is entirely within the jurisdiction of Dongying City and is not subject to interference from external pollution sources; (b) it is the main river following through Dongying city to Bohai Sea, so Dongying s pollution distribution data largely represents the situation with Guangli watershed; and (c) there is in the watershed a substantial wastewater treatment capacity in operation and this is the only watershed in Dongying covered under DMG s major water pollution control program. The GEF project is intended to pilot land-based rural waste and non-point agricultural pollution management, water purification using wetland and necessary institutional development, while the complementary government programs continue to concentrate on municipal and industrial water pollution control measures. Successful experiences of the pilot will subsequently be replicated in Dongying, Shandong and Huai River Basin. 1.7 Government strategy. The Master Plan for Dongying Municipality aims to transform Dongying into a Water City and Guangli River into an eco-corridor through improving the water quality and environment. Within this strategy the GEF project seeks to: (a) reduce nutrient and pollution loads from agricultural and rural sources through pilot interventions, complementary to the M&I point source pollution (sewage) treatment being covered by government programs; (b) purify the water in the Gunagli river through a constructed wetland at the downstream end of the river; and (c) increase the carrying capacity of the river system by improving the circulation of water through optimal operation of regulating sluice gates along the river. New management mechanism such as farmer environmental protection associations (FEPA) would be established to institutionalize the pilot interventions for sustainability. The project serves dual purposes: to help improve water environment in Guangli river contributing to reduction in pollution of Bohai Sea, and to gain experience for replication over a much wider scope. 1.8 Rational for Bank Involvement. The proposed project is part of the World Bank and GEF Strategic Partnership Investment Fund for Pollution Control in Large Marine Ecosystems of East Asia (the IF), a program approved by GEF in 2005 to finance innovative demonstration projects for pollution control. Compliant with the IF, the proposed project is expected to provide incremental benefits to the

3 baseline Bank-financed China Huai River Basin Flood Management and Drainage Improvement Project (HRBFMDI Project) which became effective in January The proposed project supports China s national priorities. The 12 th Five-Year Plan for Environmental Protection includes the following priorities: (a) reduction of SO2 and COD; (b) actions taken to control pollution in heavily polluted basins including Huai River, Hai River, Liao River, Tai Lake, and Songhua River basins; (c) expediting treatment of urban sewage and wastes; (d) prevention and control of rural and agricultural point and non-point source pollution; (e) reduction of land-based pollutants to seas; and (f) cleaner water in Bohai Sea The proposed project is consistent with the current Bank Group s Country Partnership Strategy for China (CPS dated May 23, 2006), which requires that the Bank Group help mainstream environmental concerns into the development process. "Taking steps to minimize water pollution" and piloting and scaling up "policies and mechanisms to address agriculture non-point pollution" are among priority Bank engagement areas. The project also fits with the regional PEMSEA strategy (of which the IF is a partner), which promotes sustainable development in the region. Proposed project development objective(s) 2.1. The project development objective is to demonstrate innovative and cost-effective water pollution control practices in Guangli river catchment of Dongying Municipality, contributing to pollution reduction in the Bohai Sea. 2.2 The main outcome indicators of the proposed project are: (a). reduction in pollutants and nutrients through the constructed wetlands; (b) reduction in pollutants and nutrients from farm fields of the pilot villages; (c) reduction in pollutants and nutrients discharged from the pilot villages; and (d) reduction in pollutants and nutrients entering Bohai Sea from Guangli River Watersheds. 3. Preliminary description 3.1 The proposed GEF project will consist of the following components. The total cost of the proposed project is estimated at US$38.98 million, with an anticipated GEF grant of US$5 million, and the remainder coming from Dongying government budget, participating entities and beneficiary rural households. The implementation period is from 2012 to Component A. Constructed Wetland and Sluice Gate Operation Optimization (Base Cost: US$22.37 million): This component aims at treatment of Guangli River water through constructed wetlands to improve water quality up to the level suitable for landscaping purpose, and increasing the carrying capacity of the river through sluice gate regulation. It supports: (a) construction of a wetlands at Dongbalu (1.8 km 2 ) which consists of a free-surface flow wetlands, an ecological retention pool, an entrance gate, a gated overflow weir and a pumping station, as well as related equipment and resettlement; and (b) upgrading the automatic gate control system covering three sluice gates on the Guangli River, and the gates at the entrance and exit of the Dongbalu wetlands. Component B. Agricultural Pollution Control and Rural Waste Management (Base Cost: US$1.97 million): The component finances facilities and management practices for agricultural pollution reduction and rural waste management to reduce nutrient/pollutant loads in selected pilot areas. It covers: (a) wastewater, human and livestock waste collection and treatment facilities in pilot villages of Kenli county and Dongying District; (b) introduction of agricultural pollution reduction technologies and management practices in pilot villages, concerning fertilizer and pesticide applications, recycling

4 mechanism for used agricultural plastic sheet in crop field, eco-trenches and buffer strips in crop fields; and (c) establishment/improvement of Farmer Environmental Protection Associations (FEPAs) in pilot villages within Guangli Watershed. Component C. Capacity Building and Policy Studies (Base Cost: US$6.24 million): This component intends to strengthen the pollution management capacity of Dongying government and farmer communities. It would support: (a) an environmental protection education and training center located in Dongying for related training and dissemination of good practices established under the project; (b) capacity building activities to provide technical and project management trainings for project entity staff; and (c) policy and/or plan studies critical to the long-term application and dissemination of the demonstrated technologies and practices, including development and dissemination of a Huai River Basin wide Replication Strategy. Component D. Project Management and Implementation Support (Base Cost: US$3.46 million): This component would finance project management and implementation support activities to ensure timely and efficient implementation. The main activities include: (a) implementation support to the project implementing units and Dongying PMO; (b) project monitoring and evaluation; and (c) project management by the Huai River Basin Commission, Provincial PMO, Dongying PMO and three project implementing units (PIUs), namely, Dongying Water Resources Bureau, Dongying Construction Bureau and Dongying Agriculture Bureau This project is part of the WB/GEF Strategic Partnership Investment Fund for Land-based Pollution Reduction in the Large Marine Ecosystems of East Asia, which focuses on both urban wastewater treatment and agricultural pollution reduction. The IF is managed in cooperation with the PEMSEA that has developed a Regional Sustainable Development Strategy of the Seas of East Asia. PEMSEA is also part of the regional implementation plan of the UNEP s Global Program of Action (GPA) for the Protection of the Marine Environment from Land-based Activities. The objective of the IF is to scale up investment to reduce land-based water pollution in coastal areas and major river basins in East Asia The Project will benefit from experiences and lessons learned from other international and national initiatives and programs completed or under way around the Bohai Sea and Yellow Sea, for example, Reducing Environmental Stress in the Yellow Sea Large Marine Ecosystem (GEF/UNDP), Regional Program on PEMSEA (GEF/IMO), Hai River Basin Integrated Water and Environment Management Project (GEF/WB), and Baltic region agricultural pollution control program (GEF/WB). The proposed project is prepared to join the Yellow Sea Partnership an inter-agency initiative established to facilitate co-operation and coordination among various organizations which undertake activities for environmental conservation in the Yellow Sea. This will provide additional links between the IF and the YSLME The project adopts a tiered organizational structure involving Huai River Basin Commission, Shandong Province, Dongying Municipality (including project entities) and community levels. At the Huai River Basin level, the Water Resources Protection Bureau (WRPB) of the Huai River Basin Commission will provide technical guidance to the project and participate in the implementation of institutional development and capacity building component. At the Shandong provincial level, the Provincial Project Leading Group (PPLG) and Provincial Project Management Office (PPMO) established for Shandong Province Component of the HRBFMDI Project, will also serve as the PPLG and PPMO for this project to oversee project implementation and provide necessary guidance. At Dongying municipal level, the Dongying Project Leading Group (DPLG) and Dongying Project Management Office (DPMO) have been established for project preparation and implementation. Task forces have been

5 established at each of the three project implementing units: Water Resources Bureau, City Management Bureau and Agricultural Bureau to implement different components and sub-components respectively At the township level and authorized by respective township government, a small Project Unit will be established in each participating township responsible for implementing respective project activities. At the village level, Farmer Environmental Protection Associations (FEPAs) will be established in each of the participating villages under the project and will directly participate in the project implementation of agricultural/rural pollution management. The FEPAs will be established on the basis of the existing or new community organizations and under the support from Dongying Agricultural Bureau including agricultural technological service station, agricultural economy section and soil-testing station, and concerned township and county/district governments. A task force within Dongying Agricultural Bureau will be responsible for FEPA establishment and development under the guidance and help from the DPMO. 4. Safeguard policies that might apply 4.1. The safeguard policies triggered by this project include environmental assessment and involuntary resettlement. The client project team has carried out required assessments with stakeholder participation, and completed the environmental assessment, environmental management plan and resettlement action plan. These are detailed in the Integrated Safeguards Data Sheet. 5. Tentative financing Source: ($ m.) Borrower/Recipient Beneficiary Contributions Global Environmental Facility (GEF) Total Contact point Contact: Xiaokai Li Title: Senior Water Resources Management Specialist East Asia and Pacific Region Washington, D. C., USA Tel: (202) xli@worldbank.org