FOR OFFICIAL USE ONLY Report No: PAD5143 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROGRAM APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$200 MILLION TO THE PEOPLE’S REPUBLIC OF CHINA FOR A YANGTZE RIVER PROTECTION AND ECOLOGICAL RESTORATION PROGRAM FOR RESULTS (HUBEI) March 9, 2023 Water Global Practice East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective January 31, 2023) Currency Unit = Chinese Renminbi (CNY) CNY 6.76 = US$1 FISCAL YEAR January 1–December 31 Regional Vice President: Manuela V. Ferro Country Director: Mara K. Warwick Regional Director: Benoit Bosquet Practice Manager(s): Maria Angelica Sotomayor, Ann Jeannette Glauber Task Team Leader(s): Xiaokai Li, Giovanni Ruta ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank ARAB Agriculture and Rural Affairs Bureau BCA Benefit-Cost Analysis CCDR Country Climate and Development Report CNAO China National Audit Office COD Chemical Oxygen Demand CPF Country Partnership Framework CPMO City/County Project Management Office CWRC Changjiang Water Resources Commission DARA Department of Agriculture and Rural Affairs DEE Department of Ecology and Environment DHURD Department of Housing and Urban-Rural Development DLI Disbursement-Linked Indicator DLR Disbursement-Linked Result DOF Department of Finance DRC Development and Reform Commission DWR Department of Water Resources E&S Environmental and Social EEB Ecology and Environment Bureau EFA Expenditure Framework Assessment EIA Environmental Impact Assessment ERR Economic Rate of Return ESSA Environmental and Social Systems Assessment FM Financial Management FSA Fiduciary Systems Assessment FYP Five-Year Plan GARR Green Agriculture and Rural Revitalization Program for Results GCRF Global Crisis Response Framework GDP Gross Domestic Product GHG Greenhouse Gas GPL Government Procurement Law GRS Grievance Redress Service HLG Higher-Level Government HURDB Housing and Urban-Rural Development Bureau ICR Implementation Completion and Results Report IFMIS Integrated Financial Management Information System IOI Intermediate Outcome Indicator IPF Investment Project Financing IT Information Technology M&E Monitoring and Evaluation MARA Ministry of Agriculture and Rural Affairs MEE Ministry of Ecology and Environment MHURD Ministry of Housing and Urban-Rural Development MOF Ministry of Finance MWR Ministry of Water Resources NDRC National Development and Reform Commission NPS Nonpoint Source NPV Net Present Value O&M Operation and Maintenance OHS Occupational Health and Safety PAO Provincial Audit Office PAP Program Action Plan PDEE Provincial Department of Ecology and Environment PDO Program Development Objective PDOF Provincial Department of Finance PDRC Provincial Development and Reform Commission PDWR Provincial Department of Water Resources PFM Public Financial Management PforR Program-for-Results PIA Program Implementation Agency PIP Program Implementation Plan PMO Program Management Office PPMO Provincial Program Management Office PPP Public-Private Partnership PSC Program Steering Committee RCO River Chief Office RCS River Chief System SLM Sustainable Land Management SNG Subnational Government SOE State-Owned Entity TA Technical Assistance TBL Tendering and Bidding Law TOR Terms of Reference TP Training Program TPVA Third-Party Verification Agency TSA Treasury Single Account WTF Waste Treatment Facilities WTP Willingness to Pay WWTP Wastewater Treatment Plant YRB Yangtze River Basin YREB Yangtze River Economic Belt YRPERP Yangtze River Protection and Ecological Restoration Program TABLE OF CONTENTS DATASHEET........................................................................................................................................1 I. STRATEGIC CONTEXT ..................................................................................................................6 A. Country Context ..................................................................................................................6 B. Sectoral (or Multi-Sectoral) and Institutional Context ...........................................................6 C. Relationship to the CPS/CPF and Rationale for Use of Instrument ....................................... 10 II. PROGRAM DESCRIPTION........................................................................................................... 14 A. Government Program ........................................................................................................ 14 B. Theory of Change .............................................................................................................. 14 C. PforR Program Scope......................................................................................................... 17 D. Program Development Objective(s) (PDO) and PDO Level Results Indicators ....................... 22 E. Disbursement-Linked Indicators (DLIs) and Verification Protocols ....................................... 23 III. PROGRAM IMPLEMENTATION .................................................................................................. 27 A. Institutional and Implementation Arrangements................................................................ 27 B. Results Monitoring and Evaluation .................................................................................... 28 C. Disbursement Arrangements ............................................................................................. 29 D. Capacity Building ............................................................................................................... 30 IV. ASSESSMENT SUMMARY .......................................................................................................... 30 A. Technical (Including Program Economic Evaluation) ........................................................... 30 B. Fiduciary ........................................................................................................................... 36 C. Environmental and Social .................................................................................................. 39 V. RISK ......................................................................................................................................... 42 ANNEX 1. RESULTS FRAMEWORK MATRIX ........................................................................................ 43 ANNEX 2. DISBURSEMENT LINKED INDICATORS, DISBURSEMENT ARRANGEMENTS AND VERIFICATION PROTOCOLS ..................................................................................................................................... 62 ANNEX 3. SUMMARY TECHNICAL ASSESSMENT................................................................................. 71 ANNEX 4. SUMMARY FIDUCIARY SYSTEMS ASSESSMENT .................................................................. 92 ANNEX 5. SUMMARY ENVIRONMENTAL AND SOCIAL SYSTEMS ASSESSMENT .................................. 100 ANNEX 6. PROGRAM ACTION PLAN ................................................................................................ 106 ANNEX 7. IMPLEMENTATION SUPPORT PLAN ................................................................................. 108 ANNEX 8. TEAM LIST ...................................................................................................................... 110 ANNEX 9. MAPS ............................................................................................................................. 111 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) DATASHEET BASIC INFORMATION BASIC_INFO_TABLE Country(ies) Project Name China Yangtze River Protection and Ecological Restoration Program for Results (Hubei) Project ID Financing Instrument Does this operation have an IPF component? Program-for-Results P178338 No Financing Financing & Implementation Modalities [ ] Multiphase Programmatic Approach (MPA) [ ] Fragile State(s) [ ] Contingent Emergency Response Component (CERC) [ ] Fragile within a non-fragile Country [ ] Small State(s) [ ] Conflict [ ] Alternate Procurement Arrangements (APA) [ ] Responding to Natural or Man-made Disaster [ ] Hands-on Enhanced Implementation Support (HEIS) Expected Project Approval Date Expected Closing Date 30-Mar-2023 31-Dec-2028 Bank/IFC Collaboration No Proposed Program Development Objective(s) To improve institutional coordination, enhance ecological protection and reduce water pollution loads along the Yangtze River Basin in Hubei Province. Organizations Borrower : People’s Republic of China Implementing Agency : Hubei Provincial Development and Reform Commission Contact: Tao Liu Page 1 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Title: Director, Yangtze River Economic Belt Division Telephone No: 027-87238093 Email: hbssjsjxmb_32093@163.com COST & FINANCING FIN_SUMM_WITH_IPF SUMMARY Government program Cost 1,074.00 Total Operation Cost 1,074.00 Total Program Cost 1,074.00 Total Financing 1,074.00 Financing Gap 0.00 Financing (USD Millions) Counterpart Funding 874.00 Borrower/Recipient 874.00 International Bank for Reconstruction and Development (IBRD) 200.00 Expected Disbursements (USD Millions) Fiscal 2023 2024 2025 2026 2027 2028 2029 Year Absolu 0.00 40.10 41.12 39.83 40.08 20.00 18.87 te Cumula 0.00 40.10 81.22 121.05 161.13 181.13 200.00 tive INSTITUTIONAL DATA INSTITUTIONAL DATA TBL Practice Area (Lead) Contributing Practice Areas Agriculture and Food, Environment, Natural Resources & Water the Blue Economy Page 2 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating 1. Political and Governance ⚫ Low 2. Macroeconomic ⚫ Low 3. Sector Strategies and Policies ⚫ Moderate 4. Technical Design of Project or Program ⚫ Moderate 5. Institutional Capacity for Implementation and Sustainability ⚫ Substantial 6. Fiduciary ⚫ Moderate 7. Environment and Social ⚫ Substantial 8. Stakeholders ⚫ Substantial 9. Other 10. Overall ⚫ Moderate COMPLIANCE Policy Does the program depart from the CPF in content or in other significant respects? [ ] Yes [✔] No Does the program require any waivers of Bank policies? [ ] Yes [✔] No Legal Operational Policies Triggered Projects on International Waterways OP/BP 7.50 No Projects in Disputed Areas OP/BP 7.60 No Page 3 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Legal Covenants Sections and Description Program Institutions (provincial level) (Program Agreement (PA), Schedule, Section I.B.1): The Program Implementing Entity shall maintain, and cause to be maintained, the following entities, with composition, powers, functions, staffing, facilities and other resources acceptable to the Bank: (a) at provincial level: (i) the Provincial Program Steering Committee; and (ii) the Provincial Program Management Office; (b) at the prefecture/county level: (i) a Program leading group in Enshi Prefecture and each of the Demonstration Counties; and (ii) a Program management office in Enshi Prefecture and each of the Demonstration Counties. Sections and Description Program Action Plan (PA, Schedule, Section I.B.2): The Program Implementing Entity shall: (a) undertake the actions set forth in the Program Action Plan; (b) not amend, revise or waive, nor allow to be amended, revised or waived, the provisions of the Program Action Plan, or any provision thereof, without the prior written agreement of the Bank; and (c) maintain policies and procedures adequate to enable it to monitor and evaluate, in accordance with guidelines acceptable to the Bank, the implementation of the Program Action Plan. Sections and Description Program Implementation Plan (PA, Schedule, Section I.B.3): The Program Implementing Entity shall apply, throughout the period of implementation of the Program, the Program Implementation Plan in a timely and efficient manner acceptable to the Bank. The Program Implementing Entity shall not amend, suspend, or waive said Program Implementation Plan or any provision or schedule thereof, without the prior written agreement of the Bank. In the event of any inconsistency between the provisions of the Program Implementation Plan and those of this Agreement or the Loan Agreement, the provisions of this Agreement and the Loan Agreement shall prevail. Sections and Description Mid-term review (PA, Schedule, Section III.2): the Program Implementing Entity shall prepare, under terms of reference acceptable to the Bank, and furnish to the Borrower and the Bank no later than October 31, 2025, a consolidated mid-term review report for the Program, summarizing the results of the monitoring and evaluation activities carried out from the inception of the Program, and setting out the measures recommended to ensure the efficient completion of the Program and to further the objectives thereof. Sections and Description Verification Agent (PA, Schedule, Section III.4): The Program Implementing Entity shall, not later than three (3) months after the Effective Date, hire, and thereafter maintain, throughout the period of Program implementation, verification agent(s) having experience and qualifications in the relevant technical fields, acceptable to the Bank, and under terms of reference, including a time-table and adequate budget for its activities, acceptable to the Bank, to monitor and verify the achievement of the DLRs. Page 4 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Conditions Type Financing source Description Effectiveness IBRD/IDA (Loan Agreement, Article V): The Program Implementing Entity has adopted the Program Implementation Plan in form and substance acceptable to the Bank. Page 5 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) I. STRATEGIC CONTEXT A. Country Context 1. China’s rapid economic growth has come at significant environmental costs. Transitioning to a more balanced and sustainable economic growth model has become an increasingly important government priority. The implied economic cost of environmental degradation in China was estimated as 2.2–3.1 percent of gross domestic product (GDP) annually between 2004 and 2017.1 Recognizing such challenges, China’s 13th Five-Year Plan (FYP) (2016–2020) emphasized the need for more balanced and sustainable economic growth. 2 The 14th FYP (2021–2025), released in March 2021, reflected a strengthening of ambitions, including improved water pollution and land management, as well as enhanced targets for greenhouse gas (GHG) emission reductions. 2. Addressing water pollution and improving riverine ecological health are integral elements to this green vision. Although China had made significant progress in tackling water pollution issues, 3 a nationwide survey in 2018 revealed that 29 percent of China’s rivers and lakes had poor water quality.4 Polluted waters drain into the oceans, causing eutrophication5 in the riverine and coastal environment, threatening global marine ecosystems. Biodiversity is heavily affected by water pollution, over- withdrawal, and inefficient use. For instance, nearly 30 percent of China’s reptiles are threatened, including more than 90 percent of turtles.6 Three Chinese freshwater fish species are globally extinct,7 and one species is regionally extinct. Endemic species account for 66 percent of the freshwater fishes, among which 247 species are threatened.8 Climate change also exacerbates these threats. Finally, while there is a need for further research, Chinese rivers and coasts are reportedly major contributors to global marine plastic pollution.9 Without interventions, this volume is expected to grow as the use of plastic products is expected to double over the next two decades.10 B. Sectoral (or Multi-Sectoral) and Institutional Context 3. The Yangtze River Basin (YRB) and its economic belt provide important cultural, socioeconomic, and ecological values. The YRB includes 19 provinces and plays an important role in China’s cultural and 1 Ma, G., et al. 2020. “The Valuation of China’s Environmental Degradation from 2004 to 2017.” ES&T (link). 2 See the 2015 Resolution of China State Council for Promoting Ecological Progress (link). 3 Ministry of Ecology and Environment (MEE), China Environment and Ecology Status Report (Years 2001, 2005, 2010, 2015, and 2020. Year 2000 is not available on the MEE website) (link). 4 Defined as being worse than Class III according to China’s Environmental Quality Standards for Surface Waters (GB3838-2002) which is not to be directly touched by human bodies. The national survey was conducted by a group of academics led by the Chinese Academy of Sciences: Huang, J., et al. 2021 “Characterizing the River Water Quality in China: Recent Progress and On- going Challenges.” Water Research 201: 117309 (link). 5 Eutrophication is a process in which a water body becomes enriched with nutrients (notably phosphorus and nitrogen), leading to rapid algal growth and consequent oxygen depletion and ecological degradation (including fish deaths). 6 Cai, B., J. T. Li, Y. Y. Chen, and Y. Z. Wang. 2016. “Exploring the Status and Causes of China’s Threatened Reptiles through the Red List Assessment.” Biodiversity Science 24: 578–587 (in Chinese with English abstract) (link). 7 Including the extinct baiji or Yangtze River dolphin (Lipotes vexillifer). 8 Of the 954 endemic species, 56 are critically endangered, 84 are endangered, and 107 are vulnerable. 9 Lebreton, L., et al. 2017. “River Plastic Emissions to the World’s Oceans.” Nature Communications 8: 15611 (link). 10 WEF (World Economic Forum). 2016. The New Plastic Economy: Rethinking the Future of Plastics. World Economic Forum (link). Page 6 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) historical identity, as it is referred to as the ‘mother river’ of the Chinese civilization. The Yangtze River Economic Belt (YREB) includes nine provinces and two municipalities,11 which together generated US$7.8 trillion (CNY 53.0 trillion) of GDP in 2021, accounting for 46.6 percent of the national total. As the world’s third largest river, over 200 billion cubic meters of water are withdrawn annually to support riparian economies and provide drinking water for almost 600 million people.12 The basin is also one of the world’s most biologically diverse regions,13 supporting over 200 fish species, more than 84 mammal species, 60 amphibian species, and 87 reptile species. It is home to some of China’s most iconic and endangered species such as the Chinese sturgeon, finless porpoise, and the giant panda, as well as 33 percent of the rare or endangered freshwater fish species in China and around 40 percent of the country’s rare or endangered plants. The basin’s lakes provide critical habitat for migratory birds, including 95 percent of the wintering Siberian white crane population. 4. Rapid urbanization, agricultural and industrial pollution, and policy failures have driven the loss of ecosystem services and biodiversity in the river basin. Urbanization has caused a decrease in lakes and wetland areas, with more than 800 lakes in the middle reach lost to land reclamation. The proportion of lakes and reservoirs in the basin exhibiting ‘moderate’ eutrophication increased from 31 percent in 2009 to 42 percent in 2018. The resulting degradation of water quality and loss of ecological function is driving losses of globally significant biodiversity and undermining the river’s contributions to human uses. Broader and sustained improvements will require strengthening institutions and management systems. These include harmonized and better-enforced standards, integrated monitoring platforms, basin-wide data and management systems that can improve coordination between branches and levels of government, and technical understanding of pollution hot spots and sources. 5. Many of the challenges facing the YRB are also exacerbated by climate change, while the region accounts for a large share of China’s GHG emissions. A Climate and Disaster Risk Screening14 and peer- reviewed literature highlight that the basin can expect a hotter future with more variable rainfall. As a result of more intense precipitation and flood events, a 10–21 percent increase in runoff is forecasted for 2041–2070 relative to 1970–2000,15 which will exacerbate flooding and associated economic costs16 and potentially affect the levels and variations in water pollution (including plastic debris). Changes in the hydrological regime are likely to increase pressure on biodiversity and ecosystems, particularly sensitive wetland and floodplain species. Water pollution also contributes to GHG emissions, notably due to methane released from eutrophic waters.17 For example, the largest lake in Hubei province, Hong Lake, is 11 Yunnan, Sichuan, Chongqing, Guizhou, Hubei, Hunan, Jiangxi, Anhui, Jiangsu, Zhejiang, and Shanghai from west to east. 12 This includes direct beneficiaries of the South-to-North Water Transfer (around 120 million people). 13 WWF (World Wildlife Fund). 2020. Living Yangtze Report. Beijing: World Wildlife Fund. (link) 14 The Program area was assessed using the World Bank Group’s Climate and Disaster Risk Screening Project Level Tool. The results highlighted risks from extreme precipitation and flooding, informing the Program’s activities on pollution management under climate extremes. 15 CWR. 2016. Yangtze Water Risks, Hotspots, and Growth . China Water Risk, Hong Kong SAR, China ( link). 16 Floods in 2020, for example, affected 63 million people and caused estimated economic costs of US$26 billion. See Pike, L. 2020. “China’s Summer of Floods Is a Preview of Climate Disasters to Come.” Inside Climate News August 17, 2020 (link). 17 The process of eutrophication is driven by changes in the concentration of nutrients (that is, phosphorous and nitrogen). It is a serious environmental problem that leads to reduced oxygen levels in the water, toxicity from algal blooms, and ecological decline. Tang, et al. 2020. “Response of Eutrophication Development to Variations in Nutrients and Hydrological Regime: A Case Study in the Changjiang River (Yangtze) Basin.” Water 12: 1634 (link). Page 7 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) identified as a significant source of atmospheric methane due to the high nutrient loads from the catchment area. 6. China launched a National Strategy for the Yangtze River Protection, followed by an overarching YREB Development Plan and the first basin legislation, requiring coordinated actions by provinces and the central government to protect and restore the Yangtze River. The overall national strategy for ‘prioritizing ecological protection, river basin coordination and integrated development of the Yangtze River’ is articulated in the YREB Development Plan issued by the National Development and Reform Commission (NDRC) in 2016 and supported by an overarching development plan issued in 2018 and an Action Plan for the Yangtze River Protection and Restoration issued in 2019. 18 A leading group for implementing the YREB Development Plan was established under the NDRC and chaired by the Vice Premier. In addition, the National People’s Congress approved the Yangtze River Protection Law 19 on December 26, 2020, which came into effect in March 2021 and is the first legislation for a large river basin in China. The law requires the establishment of a national-level coordination mechanism among the various ministries and provincial governments that oversee different aspects of the conservation of the Yangtze River20 and authorizes as needed, local governments to coordinate on, among others, relevant legislation and law enforcement. 7. A series of national-level reforms have been carried out to improve the coordination of water resources management. Water-related responsibilities were reorganized within the government system in 2018, with water pollution control responsibilities transferred to the Ministry of Ecology and Environment (MEE). While the 2018 institutional reforms signaled an important shift toward an environmentally oriented water management system, they also created challenges such as the division of responsibilities between water quantity and quality management. Key water-related data are still segregated across various platforms and agencies with data collection and sharing protocols yet to be standardized.21 The River Chief System22 (RCS) helped raise the importance of water-related issues and the need to address challenges between responsible departments and regions. Implementation of the RCS is supported by River Chief Offices (RCOs) that usually sit within water departments at the respective levels.23 China now has over 1.2 million river chiefs, with more than 460,000 in the YRB alone, providing 18 MEE, NDRC, Action Plan for the Uphill Battle for the Conservation and Restoration of the Yangtze River, January 24, 2019. (link) 19 The Yangtze River Protection Law of the People's Republic of China (March 2021) (link). 20 The coordination mechanism has the responsibility of “coordinating, guiding, and supervising Yangtze River protection work; coordinating and negotiating the management work between relevant State Council departments and provincial-level governments along the river; organizing and coordinating joint law enforcement, information sharing and other systems in the Yangtze River Basin.” 21 Zhang, B., et al. 2021. “Big Data Challenges in Overcoming China’s Water and Air Pollution: Relevant Data and Indicators.” SN Appl. Sci. 3: 469 (link). 22 The RCS is a network of government officials at the provincial, municipal, county, township and village levels who are assigned responsibility for outcomes along each section of every significant waterway. River chiefs at the village-level are required to patrol no less than once a week while also promoting river protection and mobilizing the community to assist in the removal of waste. See “Opinions on full implementation of the River Chief System across the Country” (2016) (link) 23 The six complementary mechanisms supporting the river chiefs are (a) River Chief Meetings, (b) Information Sharing, (c) Information Reporting, (d) Supervision, (e) Accountability and Incentives, and (f) Completion and Acceptance. Page 8 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) opportunities to address information asymmetries, promote integrated river basin management, and increase public participation in the decision-making process.24 8. The Yangtze River Protection and Ecological Restoration Program (YRPERP) supports the Government’s National Strategy for the Yangtze River Protection. The State Council of China approved World Bank financing for the YRPERP in early 2021, covering the provinces of Hunan, Jiangxi, and Hubei. Given the scale and complexity as well as the administrative realities of China’s fiscal responsibilities at the provincial level, it was proposed to use sequenced individual loans to the participating provinces in the YRB. The financing in the total amount of US$400 million for YRPERP supporting Hunan and Jiangxi provinces (YRPERP Hunan and Jiangxi) was approved by the World Bank’s Board of Executive Directors on December 17, 2021, , including a US$7.5 million Investment Project Financing (IPF) Central Basin Component to be implemented by the Changjiang (Yangtze) Water Resources Commission under the Ministry of Water Resources (MWR). 9. Located in the Yangtze River’s middle reaches, Hubei plays a critical role in protecting ecological systems and reducing pollution in the YRB. As the economic engine of Central China, Hubei is the riparian province hosting the longest section of the Yangtze River mainstream, more than 1,000 km. It has two of the eight major Yangtze River tributaries and the largest number of lakes, more than 750, in the country. The Hubei segment of the Yangtze River connects the river’s two important ‘kidneys’, Dongting Lake and Poyang Lake.25 Hubei’s rich biodiversity is of national and international significance, including over 3,400 endemic species and important wetland natural reserves, such as Honghu Wetlands, which was certified as a Ramsar site by the Ramsar Convention on Wetlands. Despite its ecological importance, Hubei disproportionately generates large amount of pollution in the YRB, up to 7 percent of the national water pollution loads, while it accounts for 4 percent of the GDP and population. 26 Within the YREB, Hubei accounts for 13 to 15 percent of the water pollution loads, compared to the province’s contribution to GDP of about 10 percent. 10. Hubei is also emblematic of the challenges facing protection of complex river and lake systems in the YRB while balancing development needs. Climate change and human activities have led to a drastic reduction in the size, ecological integrity, and ecosystem services of Hubei’s wetland areas. There were 1,309 lakes in Hubei province in the 1950s, but only 755 lakes existed in 2021. Some lakes had vanished completely because of cultivation and urban development, among other reasons. 27 In the 1980s, overfishing and other human activities, such as pollution from cities and agricultural production, became sources of pressure on the largest lake in Hubei, Hong Lake. Poor land management and soil erosion, which contribute to both recurrent flooding and ecosystem and water quality degradation, are key factors undermining living standards and sustainable economic development in this region. Climate change is further exacerbating these challenges by altering water availability and variability, increasing disaster frequency and severity, causing habitat loss, and so on. The following challenges remain in the implementation of the Government’s National Strategy for the Yangtze River Protection: (a) insufficient coordination, including data sharing, in the planning and implementation of ecological and water management actions across jurisdictions and sectors, especially with other provinces and agencies outside 24 Wu, et al. 2020. “Public Participation of the River Chiefs System in China: Trends, Problems, and Perspectives.” Water 12: 3496 (link). 25 Lakes are abundant in the province, which has been called ‘A Province with One Thousand Lakes’. 26 National Statistics Bureau (2020) (link) 27 Zhang, et al. 2010. Change Characteristic of Lakes in Hubei Province in the Past 100 Years (link). Page 9 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) of the province; (b) lack of integrated water and environment management regulations and policies simultaneously considering water quality, quantity, and ecology; (c) suboptimal and uncoordinated investments for point and nonpoint source pollution management and reduction, including plastics; and (d) large land areas with serious soil erosion issues, which need to be addressed through sustainable soil and conservation interventions. C. Relationship to the CPS/CPF and Rationale for Use of Instrument 11. The YRPERP (Hunan and Jiangxi) and the proposed YRPERP (Hubei) (the Program) together aim to target the entire middle reaches of the Yangtze River, where challenges between development and protection are increasingly pressing. By bringing in Hubei province, the proposed YRPERP (Hubei) expands significantly the geographical coverage of the YRPERP (Hunan and Jiangxi). Most of the sub-basins in Hunan and Jiangxi are located along the southern bank of the middle reaches of the Yangtze River, while those in Hubei sit on the northern bank of the middle reaches. Dongting Lake and Poyang Lake, supported under the YRPERP (Hunan and Jiangxi), are connected to the complex river and lake systems in Hubei. Thus, the two programs would allow mutually enhancing support to the entire middle reaches of the Yangtze River to achieve impacts at scale for the closely interdependent freshwater ecosystems in a more coordinated manner. There are no overlaps between the two programs as they target different geographic areas. However, a common Results Framework is used in the two programs to generate aggregated impacts and outcomes for the entire middle reaches. 12. The proposed Program is well aligned with the World Bank Group’s Country Partnership Framework (CPF) for China, which emphasizes contributions to global public goods. The Program is well aligned with the World Bank Group’s CPF for China (FY 2020–2025),28 which was discussed by the World Bank Board of Executive Directors on December 5, 2019. Specifically, the Program focuses on institutions and systems for integrated river basin management that can make a significant contribution to global public goods such as marine plastic pollution reduction; mitigating climate change; strengthening resilience to climate change-exacerbated vulnerabilities increasingly affecting the Program area, such as floods and droughts; and effectuating biodiversity conservation through pollution abatement, watershed management, and ecological restoration interventions. It contributes to Engagement Area 2 of the CPF, ‘promoting greener growth’, in line with the World Bank Group’s Twin Goals of Ending Extreme Poverty and Promoting Shared Prosperity. Moreover, lessons and knowledge generated by the Program are expected to be relevant for addressing integrated natural resource management issues elsewhere and can be scaled up (including with non-World Bank Group resources) in other river basins in China and internationally. The Program also aligns with the World Bank Group’s Green, Inclusive , and Resilient Development framework, the Global Crises Response Framework (GC)29, the Climate Change Action Plan 2021–2025, 30 and the recommendations of the Country Climate and Development Report (CCDR) for China (see paragraph 15). 28 World Bank Group. 2021. China - Country Partnership Framework for the Period FY2020–2025. Report No. 117875-CN. Washington, DC: World Bank Group (link). 29 Ibid. 30 Alignment with GRID and the Climate Change Action Plan 2021-2025 (link) is seen in the Program’s focus on environmental sustainability objectives while increasing resilience to climate change threats, mitigating emissions, and promoting inclusivity in economic opportunities. Page 10 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Box 1. Contributions of the YRPERP (Hubei) to Global Public Goods The YRPERP (Hubei) contributes to five global public goods: increased knowledge for development, reduced anthropogenic flows of nitrogen and phosphorous, reduced marine plastic pollution, biodiversity conservation, and reduced GHG emissions. (a) Knowledge for development. The Program contributes to the generation of international knowledge on addressing development issues. Knowledge is central to the World Bank’s ability to influence the global development agenda. Combining global and country knowledge, this project could generate wide- ranging insights for addressing development challenges related to integrated water and environment management in large river basins in other World Bank client countries across the world. (b) Reduction of anthropogenic flows of nitrogen and phosphorus to the biosphere and oceans. The biogeochemical cycles of nitrogen and phosphorus have been radically changed by human activities. Significant pollution of nitrogen and phosphorus used in agriculture makes its way to the sea and can cause marine and aquatic ecosystems to surpass ecological quality thresholds.31 This Program specifically addresses this challenge through four types of activities: (i) development and/or improvement of river/lake protection and water pollution management policies, regulations, and guidelines at the provincial level; (ii) integrated and market-based management of municipal wastewater in urban and peri-urban areas in demonstration counties for longer-term institutionalized impacts and enhanced pollution reductions; (iii) incentivizing of rural nonpoint source (NPS) pollution reduction from increasing manure resource utilization and promoting organic fertilizer application; and (d) reduction of nutrition leaching into waterways through soil and water conservation activities. (c) Biodiversity conservation. The YRB is a globally significant biodiversity hot spot. The National Biodiversity Conservation Strategy and Action Plan (2011–2030) prioritizes water pollution reduction efforts in the YRB to improve conservation of rare and critically endangered species. The two demonstration sub-basins supported under this Program are of national and international biodiversity significance. The Qing River Basin is rich in ecological resources, with nine species of wild animals under national level II protection.32 Enshi Prefecture is an important national ecological functional area and an important ecological barrier in Hubei province. In addition, the Hong Lake wetland (Ramsar site no. 1729) supports some species on the International Union for the Conservation of Nature’s Red List, like Anser cygnoides. The drivers of biodiversity loss in these areas have been attributed to unsustainable water use, water pollution, habitat loss, uncoordinated urban growth, and climate change. Habitat destruction and degradation of freshwater habits, along with land use change and the alteration of drainage basins, have major implications for freshwater biodiversity. The Program will address these challenges by implementing integrated water and environment management plans for improved ecological flows to safeguard water for the environment and to improve water quality through pollution reduction activities and enhancing sustainable land management (SLM) with soil and water conservation measures to protect habitat and biodiversity both on land and below water. (d) Reduction in marine plastic pollution. The Yangtze River is a major source of global marine plastic pollution,33 which affects marine ecosystems and wildlife via entanglement, indigestion and ecotoxicity. According to national statistics, in 2018, plastic use in Hubei ranked fifth among China’s mainland provinces, third among YREB provinces following Jiangsu and Zhejiang at the Yangtze Delta, and first among the middle-reach provinces. The Program will support plastic management and reduction of 31 The Nine Planetary Boundaries. (link) 32 According to China’s Wildlife Protection Law, the country has I and II protection levels on valuable and endangered species. 33 Ongoing research by the World Bank shows that 0.31 million tons of plastics from municipal solid waste and waste agricultural mulching entered the Yangtze River in 2019, roughly accounting for 44 percent of total plastics entering the eight main rivers of China. Among all provinces within the YRB, six provinces, namely Hunan, Sichuan, Jiangxi, Hubei, Guizhou, and Chongqing, collectively contributed more than 80 percent of the plastics that entered the river. Page 11 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) plastic pollution through two layers of activities in addition to policy interventions at the provincial level: (i) in urban and peri-urban areas, the Program supports the integrated and market-based management, that is, collection, transportation, and resource utilization, of municipal solid waste for longer-term institutionalized impacts, and (ii) in rural areas, the Program supports activities incentivizing agricultural plastic film collection and preventing uncollected film from entering water bodies. (e) Climate change mitigation. GHG emission reduction benefits can be realized through (i) reducing eutrophication and thus methane emissions from waterways (methane being a potent GHG)34 through manure management and reuse, increased treatment plant operating efficiencies, and management plans for key nutrient pollutants; (ii) increasing carbon sequestration from soil and water conservation activities through revegetation and soil protection measures; and (iii) mitigating methane emissions by improving environmental water flows to stabilize water levels that support aquatic vegetation. 35 Climate change co-benefit is detailed in Table 4. 13. PforR was identified as the most appropriate instrument for the YRPERP (Hunan and Jiangxi) and will continue to be used under the YRPERP (Hubei). The PforR instrument was selected in consideration of the Government’s capacity and the ability to leverage financing under the Government program. It provides an opportunity to introduce performance-based incentives that are intended to improve the efficiency and effectiveness of public spending and to support institutional mechanisms for sustainability of the investments. The PforR instrument leverages significant resources under the existing Government programs, allowing impact beyond traditional IPF. It focuses on a subset of activities where the Government aims to enhance the efficiency, effectiveness, and impact of expenditures by linking the disbursement of funds to the achievement of specific results. 14. The YRPERP (Hubei) builds upon ongoing analytical work and experience from other lending operations. The Water Governance Strategy36 jointly prepared by the World Bank and the Development Research Center of the State Council calls for integrated and coordinated management of water resources, tackling cross-sectoral and interjurisdictional challenges. The forthcoming World Bank report on ‘Water and Global Public Goods’ in China (P178034) quantifies GHG emissions from polluted rivers and lakes and identifies the complex river and lake systems in Hubei as hot spots for freshwater ecosystems and biodiversity conservation. In addition, the ongoing World Bank analytic work on ‘Green Agriculture’ (P179193) highlights the importance of institutional improvement to manage water pollution issues, such as integrated management, market-based mechanisms, and circular economy. The proposed PforR also draws lessons from other lending operations (Box 2). Finally, the YRPERP (Hubei) draws upon the lessons from The Natural Resource Degradation and Vulnerability Nexus37, the recent Independent Evaluation Group’s evaluation of the World Bank-financed natural resource management projects. The review finds that outcomes of a natural resource management project often take time to materialize, and benefits are often accrued after project closure. Improving governance, promoting good practices and improving financial incentive mechanisms are critical to aligning the short- to medium-term project interventions 34 Downing, J. A., et al. 2021. “Protecting Local Water Quality Has Global Benefits.” Nature Communications 12: 2709 (link). 35 Rosentreter, et al. 2021. “Half of Global Methane Emissions Come from Highly Variable Aquatic Ecosystem Sources.” Nature Geoscience 14: 225–30 (link). 36 World Bank and Development Research Center. 2019. “Watershed: A New Era of Water Governance in China (Policy Brief).” Washington, DC and Beijing (link). 37 Independent Evaluation Group Evaluation: The Natural Resource Degradation and Vulnerability Nexus. ( link) Page 12 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) with long-term outcomes to reduce natural resource degradation and the associated human vulnerability of resource users. 15. Finally, the proposed Program builds upon the key analytical findings from the recently concluded CCDR for China38 and supports the implementation of its key relevant recommendations. The CCDR highlights how shifts in climatic patterns will influence China’s ecological systems in the coming decades by shifting habitat ranges and amplifying weather extremes such as floods and droughts. The CCDR recommends enhancement of coordination across institutions and levels of government to provide better information and incentives for local governments, firms, and households to prepare for the effects of a warming climate. It also recommends integration of climate considerations in land use and water management plans to contribute to climate adaptation and mitigation for multiple-win outcomes of natural resources protection and improving the resilience of the related ecosystems and local communities. Box 2. Link between the YRPERP (Hubei) and Other Operations under the China Program • YRPERP (Hunan and Jiangxi). The proposed YRPERP (Hubei) design follows the same overall nested hierarchy framework as the YRPERP (Hunan and Jiangxi) approved by the Board in December 2021. Both operations integrate institutional coordination strengthening with demonstration activities for water pollution reduction and ecological protection. To increase the development impacts through improving domestic wastewater management services under the YRPERP (Hubei), the scope of integrated management services is extended to cover rural towns in the demonstration counties, while YRPERP (Hunan and Jiangxi) only deals with county seat towns. In response to the priority needs of Hubei province for ecological protection, soil and conservation interventions in eroded watershed are included under the YRPERP (Hubei), which are expected to generate significant climate co-benefit. • The China Plastic Waste Reduction Project (P174267, under implementation) and China Plastic Waste Reduction Project (Shaanxi) (P176989, under preparation). The Program draws lesson from the China Plastic Waste Reduction Project in promoting integrated waste management in urban and peri-urban areas. To improve municipal waste management, municipal waste collection, sorting, and transportation services in urban and peri-urban areas in demonstration counties are integrated and outsourced to private operators via performance-based contracts. The Program also promotes rural and urban integration of the plastic waste management agenda drawing lessons from the Shaanxi project. • Hubei Smart and Sustainable Agricultural Project (P168061, under implementation) and Green Agricultural and Rural Revitalization Program (Hubei and Hunan) (P178907, under preparation). The YRPERP (Hubei) complements other World Bank operations in Hubei in generating ecological results, for example, the Hubei Smart and Sustainable Agriculture Project which is currently under implementation 39 and the proposed Green Agriculture and Rural Revitalization Program (Hubei and Hunan) (GARR Hubei and Hunan). The Hubei Smart and Sustainable Agriculture Project aims to promote environmentally sustainable and climate-smart agriculture, and GARR (Hubei and Hunan) will support the adoption of green agricultural production practices in Hubei. While both the YRPERP (Hubei) and GARR (Hubei and Hunan) support Honghu as a demonstration county, the YRPERP (Hubei) focuses on animal manure treatment and utilization to reduce water pollution loads while GARR (Hubei and Hunan) intends to address NPS pollution from aquacultural production and mishandling of crop straw and other detrimental practices. These two programs, combined, are expected to 38 World Bank Group. 2022. China Country Climate and Development Report. CCDR Series. Washington, DC: World Bank Group (link). 39 https://projects.worldbank.org/en/projects-operations/project-detail/P168061. Page 13 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) contribute to controlling the major agricultural pollution sources, following a circular economy approach, which are critical for the protection of the Hong Lake. • The Yellow River Basin Ecological Protection and Pollution Control Program (P172806, under implementation). Together with the Yellow River Program, the YRPERP (Hunan and Jiangxi) and YRPERP (Hubei) target the two largest river basins in China focusing on, respectively, water scarcity and water pollution issues in delivering sustainable ecological protection and restoration results. A similar nested approach is being applied under these programs aligning with the government delineation of responsibilities from central to county-level governments. Furthermore, the YRPERP (Hubei) design benefits from the experiences of the Yellow River Basin program in defining the PforR program boundary based on physical investments at the county level and institutional interventions at the provincial and sub-basin levels. II. PROGRAM DESCRIPTION A. Government Program 16. The Government program at the provincial level is outlined in the Hubei 14th FYP for YREB Green Development, issued on November 21, 2021. The objectives of the Government program are to establish the basic system for green economy, strengthen ecological environment protection, increase the efficiency of resource use, upgrade green infrastructure, promote green lifestyle, and improve institutional mechanisms for green development. Since Hubei province is almost entirely within the YRB, the plan covers all the 103 counties of the province. It prioritizes reducing water pollution and protecting the ecological environment in important river and lake basins in Hubei, including the Yangtze River, Han River, Qing River, Hong Lake, and other lakes through well-coordinated joint efforts of different sectors and levels of government. 17. The Government program has the following themes, with specific mandatory and recommended results targets related to each thematic area: (a) land-based ecosystem protection and restoration; (b) integrated water environment management for key basins; (c) coordinated basin ecological environment improvement; (d) agriculture green development; (e) deepening of interjurisdictional cooperation in green development; (f) solid waste classification and resource utilization; (g) upgrade of urban and township environmental infrastructure; (h) rural living environment improvement; (i) establishment of long-term mechanisms for the protection of the Yangtze River in Hubei province; and (j) support for green development demonstration pilots. The Government program pools a range of financing sources including earmarked funds from national, provincial, municipal, and county governments, as well as private sector contributions. B. Theory of Change 18. The Program contributes to a long-term vision of an economically productive, ecologically sustainable, and climate resilient YRB. Aimed at addressing the abovementioned challenges, the Program will support interventions at three levels: (a) provincial-level coordination, including data sharing, and development of policies, regulations, and guidelines, as well as coordination with other provinces and agencies outside of Hubei, including participation in a tri-provincial cooperation mechanism on water environment management with the other two middle-reach provinces and establishing an Information Technology (IT) platform for sharing data on Yangtze River protection and ecological restoration; (b) sub- basin-level ecological protection and integrated water environment management; and (c) county-level Page 14 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) activities to reduce plastics and nutrient pollution discharges. The expected results are captured in the five outcomes linked to three parts of the Program Development Objective (PDO), respectively, on (a) institutional strengthening, (b) ecological protection, and (c) water pollution load reduction. Enabling environment activities (provided through the YRPERP (Hunan and Jiangxi) central component) include: (a) basin-level interjurisdictional collaboration and data sharing; (b) research-based technical guidance related to key activities, such as guidelines for the evaluation of river health and ecological flows and strategies for total phosphorous pollution prevention and control; and (c) overall coordination and technical support. The proposed YRPERP (Hubei) Program aims to support institutional strengthening and mechanisms for better coordination and cooperation, while addressing immediate challenges related to ecological protection and pollution management through results-based financing. The Program endeavors to lay a foundation for long-term institutional sustainability. Page 15 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Figure 1. Theory of Change Critical assumptions required for the Program’s success are: (a) provincial policies developed and approved under the Program are enforced and not contradicted by county- or municipality-level actions; (b) events beyond the control of the Program, such as droughts, do not undermine the ability to meet the water quality targets or minimum flow requirements; and (c) there are no major external changes to pollution loads, such as pollution accidents from industrial activities that are beyond the PforR scope. Page 16 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) C. PforR Program Scope 19. The Program supports three tiers of government structure, mirroring the governance structure of the YREB national program, which encompasses responsibilities at the national level, basin level and provincial level. The activities of the Program will be undertaken at three different levels of government within Hubei province: (a) at the provincial level, focusing on the formulation and implementation of policies, regulations, guidelines, and institutional coordination; (b) at the demonstration sub-basin level, focusing on integrated basin water environment management planning, water quality and quantity monitoring, and ecological flow enforcement; and (c) at the demonstration county level, focusing on priority point and nonpoint water pollution reduction interventions. 20. Demonstration sub-basins and demonstration counties were selected based on their relative importance in the ecology of the basin (see paragraph 49 for details). Qing River Basin is selected as a demonstration sub-basin as it is the second largest tributary of the Yangtze in Hubei and runs entirely within the province.40 Hong Lake is the largest lake in Hubei and thus selected as another demonstration sub-basin. There are 10 counties in the Qing River Basin and two in Hong Lake Basin. For the proposed Program, six counties were selected including five in Qing River Basin, namely Lichuan, Enshi, Jianshi, Xuan’en, and Badong, all of which are within Enshi prefecture, and Honghu city in Hong Lake Basin.41 The geographical boundary and expenditure framework of the PforR are defined at the level of the abovementioned six counties for physical investments and at the provincial level for institutional interventions. Figure 2. Overview of the Program and Geographic Boundary 40The largest tributary of the Yangtze in Hubei province, Han River, runs across two provinces, that is, Shaanxi and Hubei. 41County selection has considered the importance of ecological protection in the respective demonstration basins; therefore, counties at the upstream Qing River and Hong City that occupies the majority of Hong Lake Basin are selected. Page 17 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Table 1. Overview of Government program and PforR Program Program Supported by the Government Program Reasons for Nonalignment PforR Objective To promote ecological To improve institutional — protection and green coordination, enhance development of the YRB in ecological protection and Hubei. reduce water pollution loads along the Yangtze River Basin in Hubei province. Duration 2020–2030 2023–2028 — Geographic 103 counties. 6 demonstration counties (in 50% of counties within the two coverage two sub-basins). demonstration sub-basins Results areas Nine themes. Results Areas 1–3. Themes related to green development cover an agenda that is much broader than the objectives of this PforR. Overall US$25,793 million. US$1,074 million (Government — Financing funding: US$874 million; IBRD loan: US$200 million). 21. The Program’s results areas support a nested hierarchy of activities, at the provincial, sub-basin, and county levels. The proposed PforR will support a subset of the priority activities of the Government program which are reflected in the planned investment project database for the 14th FYP period of the six demonstration counties as outlined in the following paragraphs, subject to exclusion of high-risk interventions. 22. Results Area 1: Improving Institutions and Innovations (provincial level). This results area will support institutional coordination improvements for interjurisdictional cooperation and cross-sectoral coordination in Hubei province. Program activities under Results Area 1 include: (a) Support for Hubei province’s participation in a tri-provincial cooperation mechanism for water environment protection with the focus on river/lake protection; (b) Strengthening of institutional coordination through sharing data on Yangtze River protection between the provincial RCS information platform and relevant government agencies at national and provincial level, including Changjiang Water Resources Commission (CWRC); (c) Development of provincial-level policies, regulations, and guidelines on integrated water environment, ecological protection, and management; and (d) Public engagement in river and lake protection and management, through awareness campaigns, participatory approach, and development of public engagement guidance for river/lake management, targeted at enhancing climate change awareness and women’s participation. 23. Implementation of the activities supported by Results Area 1 will be coordinated by the Provincial Development and Reform Commission (PDRC) through the Provincial Program Management Office (PPMO), with participation of the Provincial Department of Finance (PDOF), Department of Water Page 18 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Resources (DWR), Department of Ecology and Environment (DEE), Department of Housing and Urban- Rural Development (DHURD), Department of Agriculture and Rural Affairs (DARA), and so on. The implementation agencies of each indicator are detailed in annex 1. Results Area 1 will help enhance resilience to climate vulnerabilities in the Program area by sharing climate-relevant hydrological and ecological data necessary for coordinated climate-sensitive management actions, strategies, and plans, leading to improved cross-sector coordination and interjurisdictional cooperation, in line with the recommendations formulated in the China CCDR. Although impact measurement is challenged by the paucity of high-frequency data on biodiversity, the multi-provincial cooperation mechanism for the water environment is expected to lead to improved ecological water flows, mitigating the impact of pollution and climate change on habitats and species. 24. Results Area 2: Advancing Ecological Protection through Integrated River/Lake Basin Management (sub-basin level). This results area will support ecological protection, biodiversity conservation, and climate resilience of river and lake ecosystems in the demonstration sub-basins of Qing River Basin and Hong Lake Basin. Activities under Results Area 2 include: (a) Strengthening of integrated water environment management systems, including integrated water environment protection planning; (b) Connecting of the Yangtze river water environment information platform under DEE with the RCS information platform to enhance cross-sector coordination; (c) Improvement of water environment monitoring systems on both water quantity and quality; (d) Determination of ecological flow and water depth requirements and incorporation into county water allocations to ensure long-term restoration and protection of the freshwater ecosystems; and (e) Carrying out sustainable soil and water conservation activities, with emphasis on sustainability of outcomes and climate change considerations. 25. Activities supported by Results Area 2 will be implemented by the PPMO/PDRC as the coordinating agencies, with the DWR and DEE as well as Enshi prefecture Program Management Office (PMO)/Development and Reform Commission (DRC) and six demonstration counties. As highlighted in the China CCDR, it will be important for China to integrate adaptation in land use and water use plans. Hence, these activities will contribute to climate adaptation and mitigation through climate-related data, for example, changes in precipitation, data collection and climate-sensitive planning, and ecological restoration, as well as through improved water management under climate-change-exacerbated runoff and water quality extremes. Moreover, the water allocation plan implemented is expected to increase adaptation capacity toward drought conditions by preventing exploitation of resources and ensure water resources are allocated efficiently. Finally, the soil and water conservation activities within this results area will lead to a reduction in GHG emissions by increasing carbon sequestration and to an increase in the area of habitats for biodiversity through increased vegetation cover. Page 19 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) 26. Results Area 3: Reducing Water Pollution and Transmission of Plastic Waste (county level). This results area will support reduction of point and nonpoint source pollution, including plastic debris, in demonstration counties. Activities under Results Area 3 include: (a) Improved wastewater services in county seats and rural towns by integrating the operation and maintenance (O&M) for treatment plant and collection network and private sector participation through performance-based contracts; (b) Prevention of plastics entering water bodies through increased collection of agricultural plastic film and establishment of a monitoring system; (c) Reduced nutrient runoff via improved management and utilization of livestock/poultry manure, focusing on large-scale animal farms; and (d) Improved integrated urban-rural domestic solid waste collection and transportation systems and services in the demonstration counties. 27. Activities supported by Results Area 3 will be implemented by the demonstration counties with oversight and guidance from DHURD and DARA as well as Enshi prefecture PMO/DRC (for the five counties under Enshi Prefecture). In addition to the benefits of reduced water pollution loads and more efficient wastewater and solid waste management operations, activities supported by Results Area 3 are expected to contribute to reduced GHG emissions by county-level investments delivering substantial GHG reductions through reducing point and nonpoint pollution discharges and resultant methane emissions from eutrophication. Additionally, the activities are expected to reduce pollution loads from point and nonpoint sources and increase the sub-basins’ resilience toward water pollution risks, especially under drought conditions, thus protecting freshwater biodiversity. Box 3. Tailored Results Indicators for the YRPERP (Hubei) Compared to YRPERP (Hunan and Jiangxi) Compared to YRPERP (Hunan and Jiangxi), the YRPERP (Hubei) introduces four different result indicators. These result indicators are tailored to Hubei’s specific provincial context and the program sub -river basins, as outlined: (a) Results Area 1: Establishment of an IT platform for sharing data on Yangtze River protection and ecological restoration. Under the YRPERP (Hunan and Jiangxi), a two-pronged DLI was used to: (i) incentivize the connection of county-level RCS information platforms to the provincial platform; and then (ii) to a basin level platform, in order to enhance the effectiveness of the RCS in cross-sectoral and inter- jurisdictional coordination of river/lake protection through improved data sharing. The first part of the indicator, i.e. an intra-province RCS information platform, has been already established and is being used by the RCOs of all counties and municipalities in Hubei for data-sharing. The second part of the indicator, i.e. systematic data sharing between Hubei and government agencies outside of Hubei, including CWRC, is yet to be developed. The Yangtze River Law mandates that a data sharing interface be put in place and made operational by 2025. Hubei has committed its own resources to establish an IT platform that will serve as an important building block towards the operationalization of data sharing. Data shared through the IT platform will eventually include water quantity and water quality, as well as other information related to river/lake protection. The YRPERP (Hubei) will support the establishment of said IT platform and introduces a new PDO-level results indicator to this effect. This is also reflected in an associated action in the Program Action Plan (PAP); (b) Results Area 1: Participation in a tri-provincial cooperation mechanism on water environment protection in the Yangtze River middle reaches. Further to the river-basin RCS cooperation platform mandated by the Yangtze River law, Hubei, along with Hunan and Jiangxi (the three provinces in the Page 20 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) middle-reaches of the Yangtze River), recently decided to create a tri-provincial cooperation mechanism on water environment protection that will enable the three provinces to create a ‘golden middle -reach triangle’ in protecting the Yangtze River, with joint actions which include water pollution management and emergency responses and riverbank protection. This is a welcome development given the importance of the three provinces in the management of the Yangtze River and is expected to set an example for other provinces along the basin, to strengthen cooperation under the umbrella of the overall basin-level RCS coordination mechanism. Building upon the YRPERP (Hunan and Jiangxi), the Program will support the establishment and operationalization of this cross-sectoral and interjurisdictional cooperation mechanism within the respective provinces and a related indicator has been introduced to this effect. (See paragraph 51 for details); (c) Results Area 2: New land area where sustainable land management (SLM) practices with climate change considerations were implemented. This indicator measures additional land areas in which soil and water conservation measures with climate change considerations are implemented. Enshi is a mountainous region prone to soil erosion, which has caused a variety of ecological and social economic impacts, including habitat loss, NPS pollution, and increased flood risks. Special emphasis will be given to long-term institutional impacts including increasing stakeholder participation and an integrated approach to Program interventions for win-win results in addressing land-based ecosystem degradation and vulnerability of the local communities to floods and droughts under changing climate as well as supporting sustainable O&M of Program facilities and rehabilitated areas; and (d) Results Area 3: Integrated domestic solid waste management system improved. In addition to continuing to manage plastic waste in rural area, this Program also aims to improve the management of urban-rural domestic solid waste, further contributing to plastic waste reduction in waterways. Specifically, this Program will promote integrated management of domestic solid wastes in urban and rural areas. Specific interventions include (i) consolidating plastic waste management responsibilities throughout the collection, sorting, and transportation cycle; (ii) improving plastic management efficiency and service quality by promoting private sector participation through performance-based contracts; and (iii) improving service accountability through strengthening the supervisory function. 28. Program financing. Total Program financing over 2023–2028 is expected to be US$1,074 million (Table 2), of which an expected US$874 million (81 percent) will be funded by the Government and US$200 million (19 percent) financed through IBRD. The proposed PforR will exclude high-risk activities with potentially adverse impacts on the environment and/or affected people. In addition, it will exclude activities that involve the procurement of (a) works estimated to cost US$75 million equivalent or more per contract, (b) goods and non-consulting services estimated to cost US$50 million equivalent or more per contract, (c) consulting services estimated to cost US$20 million equivalent or more per contract or (d) non-consulting services, estimated to cost US$50 million equivalent or more per contract. Table 2. Overview of Program Financing Source Amount (US$, millions) % of Total Counterpart Funding 874.00 81 Borrower/Recipient 4,200.00 81 International Bank for Reconstruction and Development (IBRD) 200.00 19 Total Program financing 1,074.00 100 Page 21 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) The Role of Development Partners 29. The PforR builds upon the ongoing work and support by other development partners. In particular, the Asian Development Bank (ADB) has a dedicated strategic framework for the YREB, providing support to the integrated economic and environmental development in the upper and middle reaches of the Yangtze River, which is intended to guide high-impact investments in the middle and upper reaches of the Yangtze River targeting ecological restoration and green development. Specifically, the ADB approved a US$100 million loan to support water quality improvement in the upstream Qing River by financing a new wastewater treatment plant (WWTP) and expansion of sewer networks in Enshi Prefecture from 2015 to 2021. The proposed Program will build on such infrastructural investment and focus on integrating the O&M of the WWTP and sewer network to generate longer institutional impact. 30. The PforR Program also offers potential opportunities to mobilize financing for development. The proposed Program promotes a market-based approach in improving domestic wastewater services, that is, collection and treatment and urban-rural domestic solid waste management services (collection, sorting, and transportation), in the demonstration counties through outsourcing the O&M of the WWTP and network system and the domestic solid waste collection and transportation services to the private sector. Under this Program, the six demonstration counties will (a) integrate the responsibility of wastewater service and outsource it after necessary management system upgrading to private sector by having the service contracts cover O&M of both the WWTPs and collection network, so that a single party in each town is accountable for the system and service performance; and (b) engage consultant experts under the guidance and supervision of the provincial sector authority (DHURD) to design performance- based contracts for outsourcing wastewater services including collection and treatment in an integrated manner based on amounts of pollutants (e.g. COD, BOD) removed. On that basis, sample/standard performance-based contracts will be issued by the DHURD to guide province-wide wastewater management service provision related to DLI 3. D. Program Development Objective(s) (PDO) and PDO Level Results Indicators 31. To be in line with the overall objectives of the YRPERP (Hunan and Jiangxi), the PDO of this Program is ‘to improve institutional coordination, enhance ecological protection and reduce water pollution loads along the Yangtze River Basin in Hubei Province’. 32. The achievement of the PDO will be measured through the following outcome indicators: (a) strengthened RCS for institutional coordination - an IT platform for data sharing established; (b) improved water environment management system in the demonstration sub-basins; and (c) reduced pollutant loads entering waterways in demonstration counties. (a) PDO#1: Establishment of an IT platform for sharing data on Yangtze River protection and ecological restoration. This indicator aims to strengthen the RCS system in Hubei for institutional coordination. The Program supports data sharing between the RCS of Hubei province and relevant basin and provincial government agencies, including the CWRC, through the establishment of an IT platform. The Government has committed to establishing an IT platform with the objective of improving data access, informed decision-making, and ultimately intra- and inter-provincial coordination. Its commitment and implementation will be monitored through a PDO indicator and a related action in the PAP. Page 22 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) (b) PDO#2: Improved water environment management system in the demonstration sub- basins. This indicator is measured by the number of defined water environment management actions undertaken at the sub-basin level, including: (i) sub-basin water environment protection plans approved for the two sub-basins; (ii) big data water environmental information platform operationalized and operated by the DEE and connected with the RCS information platform for improved cross-sector coordination; and (iii) ecological flows complied with (that is, meeting defined flow targets) in the Qing River Basin and water depth requirement achieved in the Hong Lake Basin. (c) PDO#3: Reduced pollutant loads entering waterways in demonstration counties. This indicator is measured by the number of key pollutant reduction targets met (yes/no) in each of the six demonstration counties. The pollution reduction targets refer to six targets: three annual targets per county, (that is, chemical oxygen demand [COD] reduction, agricultural plastic film collection, and manure utilization) and three one-off targets (that is, wastewater management strategy adopted, wastewater integrated agreements in place, and urban- rural domestic solid waste integrated agreements in place). E. Disbursement-Linked Indicators (DLIs) and Verification Protocols 33. The Program’s DLIs quantify the parameters and values that need to be achieved to trigger disbursements (Table 3). The province is responsible for measuring the achievement of DLIs within a framework that is consistent with the one established for YRPERP (Hunan and Jiangxi), allowing for aggregation and reporting at the Program level. The choice of these DLIs is based on four factors: (a) importance of the indicator to signal a critical action/output along the results chain to achieving the PDO; (b) relevance of the indicator in fostering a strong financial incentive to deliver the results; (c) feasibility and robustness of verification of results achievement; and (d) capacity of Hubei province to achieve the DLI during the implementation period of the Program. The selected DLIs prioritize the use of existing indicators and reporting mechanisms within the Government system where possible, to ensure efficiency in implementation and sustainability. Table 3. Overview and Rationale for DLIs DLIs Rationale for Selection Results Area 2: Advancing Ecological Protection through Integrated River Basin Management DLI 1: Improved water The purpose of this DLI is to improve environmental water management. It environment management supports the approval of water environment protection plans for the system in the demonstration demonstration sub-basins, enhancement of interjurisdictional cooperation sub-basins through facilitating information and data sharing, and monitoring of compliance (25% of the loan) of ecological flows of the Qing River Basin and ecological depth of the Hong Lake Basin. The China CCDR also highlights the need to integrate climate considerations in land use and water management plans. This DLI will contribute to Pillar 3 of the GCRF “Strengthening Resilience” and Pillar 4 of the GCRF “Strengthening Policies, Institutions and Investments for Rebuilding Better”. DLI 2: Land area where The purpose of this DLI is to improve sustainable landscape management and sustainable land management reduce water and soil erosion, which would also contribute to reducing NPS (SLM) practices with climate pollution and increasing carbon sequestration and biodiversity conservation Page 23 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) DLIs Rationale for Selection change considerations have with emphasis on outcome sustainability and longer-term institutional impacts, been implemented including by promoting stakeholder participation, emphasizing O&M, and (25% of the loan) implementing climate considerations. This DLI will contribute to Pillar 3 of the GCRF “Strengthening Resilience”. Results Area 3: Reducing Water Pollution and Transmission of Plastic Waste DLI 3: Improved township The purpose of this DLI is to improve wastewater management systems in domestic wastewater service demonstration counties and reduce point source pollution to the waterways systems through establishing longer-term sustainable institutional systems. (30% of the loan) This DLI will contribute to Pillar 3 of the GCRF “Strengthening Resilience”. DLI 4: Demonstration counties The purpose of this DLI is to improve manure resource utilization, including as meeting annual targets for organic fertilizer, to improve management of rural and agriculture NPS manure utilization pollution, promoting the development of circular economy and contributing to (20% of the loan) reduction of GHG emissions (fugitive methane). This DLI will contribute to Pillar 3 of the GCRF “Strengthening Resilience”. 34. Verification will be carried out by a third-party agent based on data collected by the provincial and county-level program management agencies. At the county level, inspection will be conducted by the county PMO on behalf of the county government; at the province level, sample inspections will be conducted by the Provincial PMO (PPMO) on behalf of the provincial government. County-level inspections will cover county-level Program activities (DLIs 2–4); provincial-level inspections on DLI 1 will randomly review a percentage of the reported accomplishments throughout the province as specified in the Program Implementation Plan (PIP). A third-party verification agent (TPVA) will be appointed within three months of loan effectiveness. It will be contracted by the PPMO using a consistent and agreed verification protocol. The World Bank will review and provide feedback on the terms of reference (TOR) for the verification agency, with the final agreement subject to confirmation of acceptability by the World Bank. The Program verification procedures and implementation arrangements are to be detailed in a Monitoring and Evaluation (M&E) Plan for the Program. 35. DLI 1: Improved water environment management system in the demonstration sub-basins. DLI 1 is a composite index with a series of discrete actions with recurrent compliance monitoring, including (a) approval of integrated water and environment protection plans covering the demonstration sub-basins (Qing River Basin and Hong Lake Basin), (b) establishment and operationalization of a big data water environment information platform for YRB in Hubei, and (c) implementation of ecological flows (meeting defined flow targets) in Qing River Basin and water depth requirements in Hong Lake Basin. Public disclosure of the integrated water environment management plans will be required for verification, along with publication of monthly ecological flow and water depth monitoring bulletins. This information, plus the status of the information platform, will be collected by the DEE and provincial RCO and verified through the verification agency. 36. DLI 2: New land area where sustainable land management practices with climate change considerations are implemented. SLM involves the use of land resources, including soil, water, and plants, for the production of goods to meet human needs, while simultaneously ensuring the long-term productive potential of these resources and the maintenance of their environmental functions. DLI 2 measures the annual increase of land area under soil and water conservation measures which: (a) meet national technical standards; (b) consider climate change impacts on resilience and carbon sequestration; Page 24 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) and (c) have O&M plans, including the O&M requirements and implementation responsibilities. Verification will be conducted based on national technical standards listed in annex 2 combining site verification with remote sensing technology. Data will be collected by PPMO and demonstration counties and verified through the verification agency by random sample check. 37. DLI 3: Improved township domestic wastewater service systems is defined by: (a) integrated wastewater management strategies issued considering institutional arrangements, financial sustainability, O&M for plant and network, climate resilience for infrastructure investment or rehabilitation, social inclusion, and low-carbon technologies; (b) integrated institutional arrangements for plant and network O&M; and (c) annual COD reductions during project implementation at WWTPs due to improved utilization of plant capacity. Confirmation of improved wastewater systems is based on: (a) county-level integrated wastewater management strategies publicly disclosed at county government websites; (b) signed contracts of integrated county wastewater collection and treatment; and (c) verification of COD concentrations based on environment bureau real-time monitoring data records and through random sample check. 38. DLI 4: Demonstration counties meeting annual targets for manure utilization is defined by the number of counties meeting their annual livestock and poultry manure utilization ratio targets in the demonstration counties. Unutilized and improperly managed manure is a nonpoint source of water pollution and GHG emissions. Utilization of manure includes generation of biomass energy. Manure is used as organic fertilizer (a partial substitute for GHG-intensive synthetic fertilizer). Regular data on the quantities of livestock and poultry manure produced and utilized are reported in the direct reporting system of the Ministry of Agriculture and Rural Affairs (MARA). Reported quantities will be verified based on random sampling of large-scale farms 42 and other supporting documents (for example, manure utilization contracts and annual inspection reports from DARA) by the verification agencies through random sample check. 39. The Program contributes to both climate change mitigation and adaptation in the YRB in line with China’s Nationally Determined Contribution. The impacts of climate change have been a key consideration in the Program design. All demonstration sub-basins are vulnerable to climate change and are affected by extreme temperatures and rainfall events, with a high frequency of floods and droughts, as particularly demonstrated in the summer of 2022. The Program makes substantial contributions to both climate change mitigation and adaptation through the following activities, which are also summarized in Table 4. Climate Change Adaptation • DLI 1. Climate change adaptation measures are incorporated into the provincial integrated water environment management plans, which will include specific climate change adaptation measures, and an ‘Emergency Preparedness Plan’ is prepared based on the Smart Yangtze Information Platform, which are expected to improve the institutional capacity toward climate-exacerbated risks and climate-related emergencies at the provincial level. 42A large-scale animal farm is defined as 500 or more pigs, 2,000 or more egg-laying chickens, 10,000 or more meat chickens, or 30 or more heads of cattle. Page 25 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) • DLI 2. Improved vegetation coverage through soil and water conservation measures can act as effective nature-based solutions to improve the resilience of the demonstration sub- basins toward both droughts and floods through increasing water storage capacity and reducing peak runoffs. • DLI 3. Improved resilience of basic infrastructure, that is, wastewater facilities, is achieved through incorporating climate considerations into design of WWTPs and integrated wastewater management strategy. • DLIs 3 and 4. Reduced pollution loads from point and nonpoint sources increase the sub- basins’ resilience toward water pollution risks, especially under drought conditions, which reduces public health risks due to water pollution. • Other indicators. Besides DLIs, other program activities are also expected to generate substantial climate change mitigation benefits. For instance, the tri-provincial cooperation mechanism (intermediate outcome indicator [IOI] 1) includes mechanisms to mitigate environment risks, such as pollution, droughts, floods, and so on, at the basin level across provincial boundaries; public participation document issued for river and lake protection (IOI 4) would include guidance on increasing people’s awareness and preparedness for weather extremes, which will be embedded in public participation activities (IOI 5). Ecological flow/depth targets established under IOI 7 with water allocation plan implemented under IOI 6 are also expected to increase adaptation capacity toward drought conditions. Climate Change Mitigation • DLI 2. Increased carbon sequestration in soil and vegetation due to soil and water conservation measures • DLIs 3 and 4. Reducing fugitive methane emissions from polluted water bodies due to reduced pollutant discharges from point sources (DLI 3) and NPSs (DLI 4).43 Table 4. Summary of Climate Co-Benefits Associated with DLIs DLI Activity Climate Adaptation Climate Mitigation DLI 1 Hubei Provincial Water An Emergency Forecasting and — Environment Information Preparedness Plan is developed and Platform. issued based on the platform. Integrated water and Improve climate impacts, management responses, and mitigation measures environmental incorporated in infrastructure investment planning. management plan. 43In addition, other elements of the Program are also expected to have substantial GHG mitigation benefits that are challenging to quantify: (a) DLI 1. data and information exchange that underpin water quality management and pollution control could further contribute to longer-term mitigation benefits, (b) DLI 2. (i) incorporating climate mitigation measures into integrated water environment management plans is expected to lead to longer-term water quality improvements through reducing nutrient inflow and thus eutrophication and (ii) mitigating methane emissions through stabilizing water levels supports aquatic vegetation, and (c) DLI 4. county-level integrated wastewater management strategies are expected to include an assessment of cost-effective climate change mitigation measures, such as installing solar panels, energy efficiency improvement, and so on to be incorporated into future plant design, which are expected to reduce GHG emissions through the life cycle of wastewater management. Page 26 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) DLI Activity Climate Adaptation Climate Mitigation Ecological flows Increase resilience to temperature Mitigate methane emissions from determination and extremes and drought. large flow variations and build up implementation. carbon stocks. DLI 2 Sustainable landscape Improved vegetation cover and Increased vegetation cover management. improved land management act as contributes to increased carbon effective nature-based solutions that sequestration and climate change increase water storage capacity and mitigation. improve flood resilience by reducing Reduced soil and water erosion peak runoffs. leads to reduced nutrition load leaching to water bodies and therefore reduced methane emissions from eutrophication. DLI 3 Integrated wastewater Promote options to improve Promote low-carbon technologies management strategies. treatment plant resilience measures (for example, smart energy (for example, flood-resilient site management systems selection). development). COD reduction from Reduced pollution loads from point County-level investments will WWTPs and nonpoint sources increase the deliver substantial GHG reductions DLI 4 Increased manure sub-basins’ resilience toward water through reducing point and utilization rate at large- pollution risks, especially under nonpoint pollution discharges and scale animal farms. drought conditions. resultant methane emissions from eutrophication. III. PROGRAM IMPLEMENTATION A. Institutional and Implementation Arrangements 40. The national level Program Steering Committee (PSC) to be established under the YRPERP (Hunan and Jiangxi) is expected to provide coordination and guidance for the activities under this Program. The PSC to be established under the YRPERP (Hunan and Jiangxi), will expand its responsibilities to include overall coordination and guidance to the implementation of the current Program. Figure 3 provides an implementation arrangement overview of the YYRPERP (Hunan and Jiangxi) and YRPERP (Hubei). 41. Program leading bodies and management offices will be established at the provincial, prefecture and county levels in Hubei for implementation. A Provincial Program Steering Committee (PPSC) or equivalent body, which will comprise senior representatives from relevant departments, will be established at the provincial level, responsible for providing leadership and policy guidance in the preparation and implementation of the Program. A Provincial Program Management Office (PPMO) has been established with members from PDRC, PDF, DNR, DEE, DHURD, DWR, DARA, DFG, Jingzhou Municipal Government and Enshi Prefecture Government. The PPMO under the leadership of the PPSC will be responsible for supporting the coordination, management, reporting, and supervision of the Program, including coordination with the provincial/prefecture line departments and the Demonstration Counties on the implementation of the Program. At the prefecture/county level, a Program leading group will be established in Enshi Prefecture and each of the Demonstration Counties, responsible for providing overall policy, financial and institutional guidance on Program implementation and facilitating coordination Page 27 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) among different implementing agencies within its respective jurisdiction; and a Program management office set up in Enshi Prefecture and each of the Demonstration Counties, responsible for implementation of the Program at the county level and coordinating day-to-day activities with the PPMO and other agencies, monitoring Program implementation within the county concerned. The Program Implementation Plan (PIP) to be prepared by Hubei province and accepted by the Bank before loan effectiveness, will include details on the institutional and implementation arrangements at different levels. Figure 3. Implementation Arrangements Overview of YRPERP (Hunan and Jiangxi) and YRPERP (Hubei) B. Results Monitoring and Evaluation 42. Program M&E capacity. M&E for the Program will follow the model adopted under the YRPERP (Hunan and Jiangxi), where the PforR results targets will be monitored internally by the PMOs at different levels and the DLIs verified by a TPVA to be engaged by the implementation entity with TOR cleared by the World Bank. The Government program entities (PPMO/PDRC, Enshi prefecture, and six demonstration Page 28 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) counties) all have experience of working with World Bank-financed IPF operations and are therefore familiar with the general results M&E requirements. M&E focal points at the provincial, prefecture, and county levels will be designated as part of the PMOs, to be responsible for internal results M&E, with the assistance of a project management consultant team. Hands-on M&E training for the Hubei Program team has been provided by the World Bank team during the preparation phase. A detailed M&E plan will be developed, and a tailored expenditure and financial reporting arrangement agreed upon, which will be included in the PIP. Further technical assistance (TA) on M&E will be provided during the implementation stage to the Hubei Program team as part of the World Bank’s implementation support plan. 43. An M&E plan will be prepared as part of the PIP, specifying the baseline value, target, and data sources for each indicator, along with the methodology and responsibility for data collection and reporting. Existing government systems based on the relevant technical guidelines applied by authorities at all levels will be used for results measurement. These systems have proven effective at documenting the achievements and impacts of a wide range of ecological protection and water pollution control measures under other (World Bank and non-World Bank) projects. The PPMO will prepare and submit semiannual progress reports (including M&E reports), a midterm review report (expected no later than October 31, 2025), and a Program Implementation Completion and Results Report (ICR) by Program closure. C. Disbursement Arrangements 44. Hubei authorities have indicated that the province would like to apply for a 25 percent advance payment (US$50 million) under the PforR. The advance amount will be deducted from the total amount due to be disbursed when the DLIs are achieved, and the World Bank will record this amount of the advance as disbursed for an achieved Disbursement-Linked Result (DLR) (recovered) after it has notified the borrower of its acceptance of the evidence of achievement of the result for which the advance was provided. The reclassified amount will become available for further advances. The cumulative disbursement in the first two years after Board approval is not reasonably expected to exceed 60 percent of the IBRD loan. Accordingly, the IBRD loan for this operation is not deemed as fast disbursing. The World Bank requires that the borrower refund any advances (or portion of advances) if the DLIs have not been met (or have been only partially met) by the Program closing date. If, by the end of the Program, the PforR financing amount disbursed exceeds the total amount of Program expenditures, the borrower refunds the difference to the World Bank. 45. The PPMO will be responsible for consolidating reports from different agencies participating in the PforR and submitting to the DOF. Disbursements will be made annually upon verification of the results of the DLIs (see section II on DLIs and verification). The PPMO will submit a verification letter with the results to the World Bank and, upon acceptance of the verification results by the World Bank, the DOF will prepare disbursement applications and submit them to the World Bank. The applied disbursed amount will depend on the verified results. Some annual allocations are scalable and non-fixed, meaning that the World Bank will disburse for overperformance up to the DLIs’ total allocation (see annex 2). Overperformance will enable the DOF to bring forward disbursements from Years 4 and 5 to Years 2 and 3. The DOF can apply for disbursements as soon as the province meets targets and provides the necessary evidence to the World Bank and the World Bank accepts that evidence in a formal notice to the borrower with the disbursement amounts. The DOF can also ask to be reimbursed for any results achieved beyond the indicative annual target up to and not exceeding the total PforR target and amount allocated for those Page 29 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) DLIs that are scalable and confirmed by the World Bank. The Advanced Account for the Hubei DOF will be in US dollars. D. Capacity Building 46. Technical capacity is generally strong but will benefit from further reinforcement in select areas. The technical assessment has identified areas requiring strengthening which are reflected in actions captured by the Results Framework. These include increased coordination and monitoring capacity on water environment-related issues, development of public engagement guidance notes for river and lake protection with details on the roles and responsibilities of all parties, capacity building, technical support, and provisions for citizen feedback and increasing gender inclusion. The development of strategic plans for sustainable wastewater services by counties is intended to improve their operational efficiency, with training on agricultural waste management for farmers aimed at improving water pollution control. 47. Hubei province and the demonstration counties have experience with IPF projects, but have less experience with results-based financing in the water and environment sector. Fiduciary and environmental and social (E&S) assessments have identified needs including strengthened occupational health and safety (OHS) procedures and management for temporary workers in relation to construction and facilities operation, strengthened monitoring mechanisms on livelihood restoration for those affected by land acquisition, strengthened community engagement and public consultation, and strengthened grievance redress recording systems. IV. ASSESSMENT SUMMARY A. Technical (Including Program Economic Evaluation) 48. Strategic relevance and technical soundness. The proposed YRPERP (Hubei) will be embedded within the Government’s national program for the YREB at the central basin level and within the subnational program at the provincial level of Hubei province. These provide a nested hierarchy of activities and objectives, aligned with administrative responsibilities of the different levels of government and the provisions of the Yangtze River Protection Law. The law’s passage was a key step toward ecological protection and restoration of the Yangtze River and reflects the importance placed by the Government on the strategy for the YREB. The activities supported by the Program contribute to the implementation of the law and more broadly to the YREB national priority. 49. Selection of the two demonstration sub-basins. Qing River is the second largest tributary of the Yangtze River in Hubei and runs entirely within the province. 44 It is rich in biodiversity resources and provides a range of ecosystem services including soil and water conservation and flood buffer among others in the upstream of the Yangtze River. The Qing River Basin covers 10 counties within two municipalities (Enshi and Yichang). Among the 10 counties in the Qing River, 9 were considered national- level poverty counties before 2021, including all 7 counties in the Enshi municipality. By 2021, GDP per capita in Enshi, US$5,890, still ranked the last among all 13 municipalities in Hubei. Soil erosion poses specific challenges in the mountainous Enshi prefecture, contributing to increased flooding risks, NPS 44 The largest tributary of the Yangtze River in Hubei, Han River, runs across both Shaanxi and Hubei provinces. Page 30 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) pollution, ecosystem degradation, and so forth. In addition, climate change and human activities have led to a drastic reduction in the size, ecological integrity, and ecosystem services of Hubei’s wetland areas. Lake protection and restoration have been emphasized in high-level government priorities. Hong Lake is the largest lake in Hubei and the seventh largest freshwater lake in China, and it faces challenges (for example, water pollution from urban development and intensive agricultural cultivation) in balancing development and protection. The protection of the largest intra-provincial river basin (Qing) and lake basin (Hong) in Hubei province, which has probably the most complex labyrinth of river and lake systems in China, thus represents key challenges and opportunities in balancing development needs with environment and ecological protection for Yangtze River Protection and Ecological Restoration in the development of YREB. 50. The cross-sector coordination and interjurisdictional cooperation remain the most challenging task for improving river basin management, which will be the focus of Results Area 1. The RCS is identified as an effective governance mechanism for cross-sectoral coordination and interjurisdictional cooperation in river protection and restoration. An RCS platform has been developed in Hubei at the provincial level, which is being used by all counties and municipalities for related data sharing. The key challenge remains with sharing data between Hubei and government agencies outside of Hubei, including CWRC. Hubei RCS has committed its own resources to establish an IT platform for improvement in this regard. The IT Platform will be used to share data related to Yangtze River Protection with relevant government agencies. Data shared through the IT platform will include water quantity and water quality as well as other information related to river/lake protection. Selected data will be made available to the public. The Program will also support the efforts in improving public engagement, including increasing the level of women’s participation in a more structured manner. Furthermore, the Program will support Hubei’s participation in the basin-wide RCS coordination mechanism which was supported by the YRPERP (Hunan and Jiangxi) to bring together the provinces within the YRB and the basin organization for better monitoring and information sharing. 51. While the basin-wide RCS coordination mechanism primarily focuses on monitoring and information sharing, the proposed YRPERP (Hubei) will also support Hubei’s participation in a tri- provincial cooperation mechanism which intends to promote more coordinated basin planning and co- management systems in the Yangtze River middle reaches. In October 2021, the governments of Hubei, Hunan and Jiangxi provinces set up, a general working mechanism for coordinated development among the three provinces of the Yangtze River middle-reaches. Under that general working mechanism, specific cooperation mechanisms are expected to be established in priority areas of common interest. Specific activities to be supported by this tri-provincial cooperation mechanism include: (a) cross-jurisdictional coordination in planning and operational management; (b) joint research on water environment, water ecology, and water resources management issues related to the Yangtze River; and (c) related information sharing. Such tri-provincial cooperation mechanism will be co-chaired by provincial leaders of the three provinces and supported by focal points designated in each province with annual meetings held. This mechanism will target a variety of transboundary water environment issues such as water pollution incidents, riverbank protection, and vessel pollution, among others. The proposed horizontal tri-provincial cooperation is likely to complement the vertical basin-level RCS coordination mechanism, with a specific geographic focus on the middle reaches. 52. A generally sound policy framework and rationale are required for promoting integrated water environment planning and management, including monitoring, which will be the focus of Results Area Page 31 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) 2. At the provincial level, as an integral part of the implementation of the integrated water environment management plans, this Program will support the determination, monitoring, and supervision of ecological flows of Qing River Basin and water depth for Hong Lake Basin. To complement the system for safeguarding the water environment, this Program will also support sustainable landscape management for soil and water conservation, which will contribute to multiple benefits including improved habitats, reduced NPS pollution, improved climate resilience, and increased carbon sequestration. Specifically, the program will promote the engagement and contributions of beneficiary communities throughout the project cycle for soil and water conservation to broaden the benefits and enhance the sustainability of outcomes, which is also reflected in a PAP action. 53. Results Areas 1 and 2 both support investing in data sharing and transparency and contributing to evidence-based decision-making. Results Area 1 promotes data sharing between Hubei and government agencies engaged in the RCS outside of Hubei, including CWRC. In the meantime, under Results Area 2, cross-sector data sharing will also be facilitated between the provincial RCS platform operated by the RCO/DWR and the Big Data Environment Information Platform operated by the Provincial Department of Ecology and Environment (PDEE). Furthermore, public access to the related data will be enhanced from the abovementioned platforms to allow for greater transparency and monitoring. 54. Under Results Area 3, the program will expand the existing initiatives to introduce an integrated approach and circular economy to the management of different water pollutants, including NPS, municipal wastewater, and domestic solid waste for program counties. Market mechanisms are being piloted at the county and township levels for domestic wastewater and solid waste management services. The technical assessment identified the areas where improvements are needed with corresponding recommendations: (a) The domestic wastewater collection and treatment services need to be integrated, particularly for the urban areas (counties and county seats), for efficiency improvement and clearer accountability, by having one service provider accountable for the results; (b) Performance-based contract is needed for both domestic wastewater (collection and treatment) and solid waste (collection and transportation) service provision. For better and more sustainable services, a sample performance-based contract will be developed as a PAP action and related training provided under the Program; (c) The relevant international good practices in managing agricultural NPS pollution need to be captured and disseminated in the Program areas, and a good agricultural practice manual is to be prepared by the provincial agriculture sector authority; and (d) The program M&E requires some improvement, and a systematic M&E plan will be developed as part of the PIP, targeted training will be provided through implementation support, and a TPVA will be engaged for DLR verification. 55. Results Area 3 supports activities that reduce pollutants entering waterways and complements other Program components. Activities at demonstration counties are expected to include point source pollution control through improvements in access and operations of township domestic wastewater collection and treatment services, along with NPS pollution reduction through improved management of plastic waste, including both agricultural mulch and urban municipal solid wastes, and improved management of animal manure. For the wastewater and urban-rural domestic solid waste management Page 32 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) systems, the Program will support integrated and market-based management aimed at clarifying responsibilities, improving efficiency, and enhancing sustainability45. The Yangtze River Protection Law requires provincial governments to formulate a total phosphorus pollution control plan and organize its implementation (supported by Results Area 2). Program Expenditure Framework 56. The Expenditure Framework Assessment (EFA) covers physical interventions in 6 counties in Hubei (out of total 103 counties) and institutional interventions at the provincial level from 2023 to 2028. The EFA was conducted based on information provided by Hubei governments, a review of public financial management (PFM) regulations and rules, and interviews with government officials during the field visits. The EFA included the following aspects: (a) fiscal sustainability and resource predictability, (b) well-functioning budget allocation and execution, and (c) incentives for efficient service delivery and value for money. 57. Hubei has developed an integrated financial management system to track budgetary expenditures. The provincial governments in China adopt a uniform budget classification to prepare budget and report government expenditures following the instruction of the central MOF. Since Results Area 1 emphasizes institutional innovation and strengthening, for which the budget expenditure is negligible, the EFA was mainly focused on the budget expenditure related to the program activities under Results Area 2 and Results Area 3. The boundary of the PforR Program expenditure is defined as selected sub-items of the Government program that cover the Results Area 2 activities and Results Area 3 activities (Table 5). Based on the budget data of 2018–2021, the total amount of budget expenditures on the Program activities during the Program implementation period (2023–2028) can be predicted. Table 5. Program Expenditure Boundary 2018–2021 (US$, millions) Government PforR Program Program Code Budget Line Results 6 Program Hubei Areas Counties 2110302 Water pollution prevention and Treatment 3,342.57 RA3 134.12 2110399 Other pollution prevention and Treatment 1,302.61 RA3 15.42 2110401 Ecological protection 558.15 RA2 37.91 2110402 Rural environment protection 1,409.41 RA2 129.06 2129901 Other urban and rural community spending 4,417.21 RA3 58.38 2130135 Protection, Restoration and Utilization of Agricultural Resources 609.23 RA3 27.18 2130305 Water conservancy project construction 5,402.02 RA2 129.21 2130306 Operation and maintenance of water conservancy projects 991.92 RA2 26.92 2130308 Preliminary work on water conservancy 56.98 RA1 2.52 2130309 Water conservancy law enforcement supervision 78.38 RA1 2.53 2130310 Soil and water conservation 130.55 RA2 8.57 2130311 Water resource conservation management and protection 268.68 RA2 6.69 45 Among the six demonstration counties, only Xuan’en county has completed outsourcing its township wastewater treatment plants and respective networks for integrated management services in the baseline year 2022. Page 33 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Government PforR Program Program Code Budget Line Results 6 Program Hubei Areas Counties 2130319 integrated management of rivers, lakes and reservoirs 298.31 RA2 4.93 2130399 Other water conservancy expenses 1,768.77 RA1 115.38 Total 20,634.78 698.82 Note: RA = Results area. 58. The expenditure framework in Hubei province presents an adequate basis for the PforR. Implementation of the ‘Hubei YREB 14th Five-Year Green Development’ Plan is funded from a number of sources. At the provincial level, over US$698.82 million has been invested in the demonstration counties on the proposed activities from 2018 to 2021. Therefore, an estimated US$874 million would be invested in all six project counties from 2023 to 2028. Of this estimated investment, the majority will be spent on the physical interventions under Results Areas 2 and 3 with financing from different sector agencies, including DWR, DEE, DHURD, and DARA. Of the total Program financing of US$874 million from the Government, expenditure in Results Area 1 accounts for 6.15 percent, Results Area 2 for 41.74 percent, and Results Area 3 for 52.11 percent. Results Area 2 and Results Area 3 involve substantive investment, while Results Area 1 puts more emphasis on the institutional innovations and improvement of management mechanism, for which the budget expenditure is negligible. 59. The EFA concluded that the identified government expenditure would be stable and sustainable. First, the amount of the funding available is considered much higher than that of the expenditure required. There are two high-level government transfers that provide funds to county governments for carrying out the Program activities, that is, ‘general transfer for central-local shared functions on agriculture, forestry and water affairs’ and ‘special transfer for agricultural, forestry and water affairs’. According to the assessment, the budget amount from the two funding sources (US$1,453 million) is much higher than those of the expenditures (US$698.82 million) from 2018 to 2021. Second, the overall financial situation in Hubei province is sound and stable (see details in annex 3). The government statistics this year show that Hubei’s economy is recovering fairly quickly from the COVID-19 pandemic impacts with improved government finance. The total expenditure of the PforR is expected to account for only about 0.45 percent of the general public budget revenue from 2023 to 2028 in Hubei province. Overall, financial sustainability is not deemed as a major concern for the Program. The EFA has been reviewed and confirmed by client government officials. Economic Evaluation Overview 60. The proposed Program is expected to generate both global and local benefits including substantive climate co-benefits. At the local level, benefits will accrue from reducing water pollution from NPSs, reducing plastic pollution in water bodies, and improving habitat for plant and animal species. These will increase the productivity of water resources; improve the amenity value of rivers and lakes, real estate values, fishery productivity, and shipping services; and reduce the costs of water treatment. Global benefits will be generated through reduced GHG emissions and the conservation of biodiversity. Climate benefits (primarily GHG mitigation) will be derived from improved watershed management, treated livestock wastes and wastewater, and displaced use of synthetic fertilizer as well as from more efficient and sustainable wastewater collection and treatment systems. Biodiversity conservation and sustainable Page 34 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) resource use benefits will be derived from reduced eutrophication of water bodies, integrated water environment management, and reduction in plastic pollution. These are public goods in the sense that it is difficult for private actors to capture the full social benefits of their actions, thus requiring public sector interventions. Moreover, the sharing of information within the county/municipal/provincial chief river system will allow efficiency gains in water resources management throughout the basin. Therefore, from the economic assessment perspective, public sector financing is justified by the expected positive externalities of improved information systems and management practices. 61. The economic evaluation uses a simple cost-benefit analysis based on benefit transfer, applied at the sub-basin level. The evaluation combines activities under the three results areas to value outcomes as integrated water environment quality improvements. Results Area 1 (institutional strengthening) can be seen as facilitating outcomes achieved under Results Area 2 and Results Area 3. The evaluation compares a scenario of no Government program to a scenario of a Government program including World Bank support. It is expected that the World Bank’s involvement will increase the exposure of government authorities at different levels to international experience and best practices in integrated river/lake basin management, water pollution control, and ecological protection. 62. The Program economic rate of return (ERR) is consistently above the social discount rate under the scenarios with or without GHG benefits, indicating the Program is economically viable. The Program net benefit cash flows have been projected with the assumptions that (a) investment will be completed within the Program life (5 years), and investment costs are net of taxes and duties; (b) benefits will accrue starting from Year 4 for a total of 15 years, with full benefits being reached from Year 6 onward; (c) O&M costs of infrastructure and other recurrent costs will be 10 percent of the total Program investment cost; and (d) social discount rate is 6 percent.46 The results of the analysis (Table 6) show that the substantially higher ERRs with the GHG benefits reflect the Program’s significant contribution to the global public goods as elaborated in the following section. A more detailed description of the analysis is provided in annex 3. Table 6. Project-Level ERRs/NPVs under Various Scenarios47 With GHG Benefits With GHG Benefits Without GHG Benefits (Carbon Shadow Price at Low Level) (Carbon Shadow Price at High Level) ERR NPV (US$, millions) ERR NPV (US$, millions) ERR NPV (US$, millions) 13% 411.35 21% 951.66 27% 1,491.98 Note: NPV = Net present value. 46 World Bank. 2015. “Technical Note on Discounting Costs and Benefits in Economic Analysis of World Bank Projects.” World Bank, Washington, DC. The discount rate is also recommended to be 6 percent for investments with long-term unquantified social and environmental benefits; NDRC. 2006. Economic Analysis of Construction Projects: Methods and Parameters. Beijing: China Planning Press. 47 According to the World Bank’s guidance note on the shadow price of carbon in economic analysis issued on November 12, 2017, projects’ economic analysis should use a low and high estimate of the carbon price, starting at US$40 and US$80, respectively, in 2020 and increasing to US$50 and US$100 by 2030; the low and high values on carbon prices are extrapolated from 2030 to 2050 using the same growth rate of 2.25 percent per year that is implicit between 2020 and 2030, leading to values of US$78 and US$156 by 2050. Page 35 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) GHG Emission Mitigation 63. GHG emission reductions of 25.62 million tons CO2-e are expected due to the PforR Program activities (Table 7). Quantification of GHG emissions focuses on DLIs 2, 3 and 4. Mitigation is assessed over 15 years and is compared to a no-Program scenario (baseline). Upgrade to the wastewater network and treatment operations is expected to reduce emissions due to leakage of wastewater to groundwater. The treatment and utilization of animal manure (through on-farm treatment facilities and organic fertilizer displacement of synthetic fertilizer) is also expected to substantially mitigate emissions. Soil and water conservation measures are expected to increase carbon sink. This assessment does not include the expected emission reductions through institutional, policy, and planning measures. The quantitative estimates presented here should thus be considered a lower bound on the Program’s GHG mitigation. Table 7. GHG Mitigation from Quantifiable Program Activities over 15 Years (tons CO2-e) DLI Activity Net Emission Reduction Net Average Annual Emission Reduction 2 Soil and water conservation 25,081,000 1,672,067 3 Wastewater management 100,000 6,667 4 Manure utilization 444,000 29,600 Total 25,625,000 1,708,333 Gender 64. A preliminary gender study based on the data collected from the six demonstration counties48 found that there is a systematic underrepresentation of women working as county-level river chiefs (12.2 percent on average), among other positions, in the local river resource management system in Hubei province (see annex 3). In general, there are fewer women (on average 30 percent) professionally engaged in water treatment utilities and relevant sectors. Gender actions will include designing targeted skill enhancement trainings for women across different roles in river/lake management system, improving gender-disaggregated data collection and monitoring via the integration of RCS platform, and conducting public awareness campaigns, which will aim at increasing the number of female river chiefs that link to women’s presence, voice, and influence in the water sector; sectoral gender-balanced workforce structure; pattern change of pollution behavior at the community level; and prioritization of portfolio of investments. The above actions will be monitored by the increase of proportion of women civil river chiefs in demonstration counties. B. Fiduciary 65. Adequacy of the Program’s fiduciary systems. Pursuant to the World Bank’s Policy and its associated Directive on PforR Financing of November 10, 2017, and June 20, 2019, respectively, as well as the World Bank’s PforR Fiduciary Systems Assessment Guidance Note issued on June 30, 2017, the World Bank’s fiduciary team carried out a Fiduciary Systems Assessment (FSA). According to the FSA dated October 25, 2022 and given the agreed actions to strengthen the fiduciary systems, as reflected in the PAP, and other proposed mitigation measures that will be implemented, the Program’s fiduciary systems, including the financial management (FM), procurement, and governance systems, are considered to 48 Badong County, Enshi City, Honghu City, Jianshi County, Lichuan City, Xuanen County. Page 36 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) adequately meet the requirements laid out in the World Bank’s PforR Policy and Directive. They provide reasonable assurance that the Program’s financing proceeds will be used for the intended purposes, with due attention to the principles of economy, efficiency, effectiveness, transparency, and accountability. 66. FM risks. Major risks identified include the following: (a) Budget quota was distributed to counties/cities in batches, and some Program funds were delivered in the second half of the year or even the year-end, which prevents the county government from including the entire program funds in its annual budget and delays the implementation of planned activities; (b) ‘Program’ is not a budget classification element in China and the required Program financial reporting cannot be generated from government treasury system; (c) There is no requirement by the provincial government on reporting of Program expenditures in Hubei province; (d) The absence of efficient supervision by related provincial entities on the use of Program funds may bring potential risk of improper use of funds; and (e) Government auditors did not audit the Program funds and prepare the Program audit report. 67. Mitigation measures. The proposed mitigation measures include the following: (a) Multiple-year program budgeting should be prepared to ensure Program funds could be secured and a county government could prioritize its investment to enhance the efficiency of its scarce financing resources. Provincial entities should revisit their budget quota distribution and ensure the budget quota could be distributed to county/city in advance; (b) A blue tagging mechanism which can trace program expenditures from the existing government integrated financial management system has been recommended, and it is expected to be piloted, especially in those demonstration counties, during program implementation. This also creates a fundamental basis for generating program financial reporting from the government treasury system; (c) A tailored program financial reporting template will be designed, which can capture the data from the government system that is used by the program. This will be agreed with related government entities; (d) Provincial entities involved should strengthen their supervision of program funds in line with related government decrees; and (e) The World Bank will work with the Provincial Audit Offices (PAOs) to develop the TOR for program auditing to ensure program funds could be audited in line with the World Bank’s policy. 68. Procurement overview. The Government of China has a robust legal framework for procurement, which includes the Tendering and Bidding Law of 1999 (TBL); the Government Procurement law of 2003 (GPL); and regulations and orders issued at the national, provincial, and county levels. Although the laws could be modernized and aligned to modern principles such as ‘value for money’ and ‘fit for purpose’, Page 37 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) both offer a fair playing field for bidders and promote transparency and competitiveness. The Government has recently encouraged the use of electronic bidding. All open bidding competitive processes are conducted by public resources trading centers, which provide facilities and modern platforms for processing procurement activities electronically. 69. Procurement risks and mitigation measures. Three major procurement risks have been identified as follows: (a) Contracts may be awarded to firms or individuals that are debarred or under temporary suspension by the World Bank or other multilateral development banks. The following mitigation measures are proposed: (i) Upon Program loan effectiveness, the Hubei Program Provincial Leading Group/Provincial Authority/PDRC shall issue a high-level official letter or official instruction to require Program implementation agencies to ensure that no contract will be awarded to ineligible firms or individuals. The Program implementation agencies (that is, procuring entities) are to include the World Bank’s website link to the debarment list (which is dynamic) as one of the minimum qualification requirements in the bidding documents. When the bid evaluation starts or before contract award is issued, the implementation agencies and/or the bid evaluation committees shall check the latest lists of the debarred and temporarily suspended firms and individuals to ensure the contract is being awarded to eligible firms or individuals or, as an alternative, since the full-process electronic bidding (e-procurement) has functioned in the provincial e-procurement system and the systems in the 6 cities/counties, the World Bank recommends that one additional function may be developed in the existing e-procurement systems to link to the sanction list of the World Bank’s website and the procuring entities are required to check the website and the list and shall confirm in the e-procurement system that the recommended bidder is not included in the list, before the bid evaluation results are allowed to be published through the e- procurement systems; and (ii) The TOR for annual external audit shall include the task of randomly selecting contracts and assessing whether they have been awarded to an ineligible firm or individual. (b) The World Bank may not be informed of fraud allegations and corruption issues during the implementation of the Program. A PIP shall be prepared by the Provincial Project Management Office (PPMO) and City/County Project Management Offices (CPMOs), and they are required to inform the World Bank of any credible and material allegations of fraud and any corruption issues as part of the Program Progress Reports, as mandated in the loan agreement; and (c) Contracts may not be completed within the contractual completion time, and the contract completion audit may not be completed on time. Procedures or a guidance note should be produced by the PPMO and/or CPMOs that clearly define the undertaking of contract administration responsibilities in line with the Regulatory Framework of the agencies. 70. Fiduciary supervision. Procurement and FM are subject to annual audit by government audit offices. Procurement following the procedures of the TBL is subject to regular supervision and oversight Page 38 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) by DRCs at various levels and relevant sector authorities (water, environment protection, agriculture, housing and construction). The Finance Department or Bureaus at various levels exercise regular supervision and oversight for procurement following the procedures of the GPL. 71. Fraud and corruption risks. The Government has institutions in place to combat fraud and corruption. These institutions are designed to prevent, report, detect, investigate, prosecute, and sanction fraud and corruption. These institutions include the discipline inspection commissions within all implementation agencies, supervision bureaus, anti-corruption bureaus under People’s Procuratorates, and audit offices, all at the central, provincial, prefectural, and county levels. These agencies have comprehensive mandates to combat fraud and corruption. Any bidder or any party can report fraud and corruption issues to any of these government agencies. The World Bank’s right to conduct an inquiry into such allegations or other indications, independently or in collaboration with the borrower regarding activities and expenditures supported by the Program, as well as its right to access to the required persons, information, and documents will be observed in accordance with the standard arrangements for this purpose between the Government and the World Bank. The Program’s Legal Agreement will also oblige the client to fully comply with obligations under the World Bank’s Anti-Corruption Guidelines for PforR Operations. C. Environmental and Social 72. An Environmental and Social Systems Assessment (ESSA) was conducted for this PforR to provide a comprehensive review of applicable E&S systems, including regulatory framework, institutional arrangement, tracked E&S performance, and outcome, at the national and provincial levels. The ESSA explored a combination of approaches, including E&S risk screening, desktop review, site visits and observations, and meaningful stakeholder engagement. It recommends actions to address identified gaps and opportunities to enhance E&S performance and sustainability during the PforR implementation. Annex 5 summarizes the ESSA’s main conclusions. 73. The Program is expected to bring overall E&S benefits. It supports the selected activities among the numerous development projects of the ‘14th Five-Year Plan for Green Development of the Yangtze River Economic Belt in Hubei Province’, with the Program aiming to improve institutional coordination , enhance ecological protection, and reduce water pollution loads in Hubei province of the YRB. The significant and broad E&S benefits in the Program regions in Hubei province mainly include reduced domestic wastewater, solid waste, plastic waste, and livestock/poultry waste; improved river and lake water quality; and rehabilitated ecological environment. The Program implementation is essentially to be regulated by the existing national and provincial environmental and social management system and in- place institutions and capacity to manage underlying E&S risks and impacts. 74. The ESSA deems the E&S risk for the Program is Substantial. After applying the exclusion criteria, the Program will support water pollution control and ecological restoration activities including county seat and rural township domestic WWTPs and pipelines, domestic solid waste collection and transfer, agricultural mulch film collection, waste treatment and utilization of existing livestock/poultry farms, soil and water conservation, and TA activities. The Program will have an adverse E&S impact including at the construction stage, such as dust, noise, disturbance of water body, soil erosion, wastewater and solid waste management, construction worker and community health and safety, labor management, small scale of land acquisition (for example, ranging from about 500 m2 to less than 1 ha for siting a solid waste Page 39 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) transfer station), temporary land occupation, and potential impacts to vulnerable groups; impacts during operation stage, such as effluent discharge from wastewater treatment facilities, safe operation of facilities, workers’ health and safety, safe application of fertilizers, and impacts on farmers’ livelihood; and also the potential downstream indirect impacts of TA activities. These adverse E&S impacts are well identified and readily avoided, minimized, and mitigated through mature technologies and good management practices of China’s existing domestic E&S management system. Neither OP/BP 7.50 Projects on International Waterways nor OP/BP 7.60 Projects in Disputed Areas is applicable to the Program. 75. Consistent with the World Bank Guidance on PforR ESSA, a Program-specific E&S exclusion list was established. The Program excludes activities with the potential to cause significant adverse impacts that are sensitive, diverse, or unprecedented on the environment and/or people, including (a) activities that would involve large-scale infrastructure construction or large-scale land acquisition; (b) activities that would involve acquisition of basic farmland; (c) activities that involve lake/river restoration through returning of water/fishing/farmland to lake; (d) activities involving closure or relocation of livestock or poultry farming, (e) activities involving relocation of minority households in ethnic minority communities/villages; (f) TA activities, the implementation of whose outputs may lead to downstream activities of high E&S risks; (g) activities that are classified as domestic Category A (Environmental Impact Assessment Report category) projects; (h) activities that would be conducted in environmentally sensitive areas; (i) activities that would be conducted in areas with significant legacy pollution; and (j) activities that would construct treatment/disposal facilities for domestic solid waste and wastewater sludge. 76. The ESSA concludes that China has established comprehensive systems and capable institutions for managing the related E&S issues at the national, provincial, and local levels. The systems consist of legal frameworks (laws, regulations, guidelines, and standards) that are principally consistent with the World Bank’s PforR Policy and Directive and have corresponding implementation mechanisms and institutional arrangements for enforcing the legal frameworks. A well-financed and staffed institutional structure covering various government levels exists and operates efficiently in general in executing the existing legal framework and achieving sound performance on the ground. The track records show that the management capacity and performance is generally sufficient and that the systems can provide an acceptable basis for addressing the possible E&S issues related to the activities supported under the PforR. 77. Meaningful stakeholder engagement was conducted throughout the process of ESSA preparation. In June 2022, the World Bank task team, with the coordination of the provincial/municipal/county government, explored various means (both face-to-face and virtual) to meaningfully engage with relevant stakeholders, including line government departments at provincial/municipal/county levels, enterprise representatives, the workers, and local communities in the six demonstration cities/counties. The draft ESSA was shared with Hubei provincial government and the six demonstration cities/counties (Honghu, Lichuan, Enshi, Jianshi, Badong, and Xuan’en) in late August 2022. The World Bank task team carried out consultation workshops (both face-to-face and virtual) with the key stakeholders at the provincial, municipal, and county levels during the mission in September 2022. All relevant provincial, municipal, and county-level authorities voiced their support in implementing the proposed Program, provided feedback to the draft ESSA, and concurred with the findings and recommendations of the draft ESSA, which were considered relevant and valuable for strengthening the actual effectiveness of the implementation of the existing E&S system. Some participants provided valuable opinions to improve the accuracy of the ESSA description in local context, which have been Page 40 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) reflected in the revised ESSA. The revised ESSA was disclosed locally and on the World Bank’s website on October 27, 2022. 78. Grievance redress. Communities and individuals who believe that they are adversely affected as a result of a Bank supported PforR operation, as defined by the applicable policy and procedures, may submit complaints to the existing program grievance mechanism or the Bank’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address pertinent concerns. Project affected communities and individuals may submit their complaint to the Bank’s independent Accountability Mechanism (AM). The AM houses the Inspection Panel, which determines whether harm occurred, or could occur, as a result of Bank non-compliance with its policies and procedures, and the Dispute Resolution Service, which provides communities and borrowers with the opportunity to address complaints through dispute resolution. Complaints may be submitted at any time after concerns have been brought directly to the Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the Bank’s Grievance Redress Service (GRS), please visit http://www.worldbank.org/GRS. For information on how to submit complaints to the Bank’s Accountability Mechanism, please visit https://accountability.worldbank.org. 79. The ESSA recommends that the PforR be treated as an opportunity and entry point to strengthen the E&S institutions and capacity and improve site-specific E&S performance. The assessment concluded that although the national and subnational systems for addressing the E&S impacts/risks are principally consistent with the World Bank’s PforR Policy and Directive, opportunities do exist for strengthening the efficiency and effectiveness of E&S risk management under the Program. The key recommendations are as follows: (a) Measures should be taken to strengthen odor control in livestock/poultry waste management and domestic solid waste transfer to reduce odor impacts; (b) Monitoring of social risk management should be strengthened. When conducting social risk assessment, the screening of social risks and impacts, public participation, and appeal records during the construction and operation of various facilities should be managed and documented, including the monitoring arrangements for the implementation of the social risk management plan, and included in the scope of social monitoring. To this end, each subproject should configure or arrange necessary human resources to ensure the implementation of the above measures; (c) Enterprises such as sewage treatment plants, livestock and poultry manure recycling enterprises, and waste treatment facilities should strengthen occupational health training and management; and (d) The PPMO shall submit TOR of TA activities to the World Bank for review and concurrence before commencement of TA activities. TOR for TA activities that may have potential downstream E&S risks and impacts shall include requirements for assessment of such E&S risks and impacts. Page 41 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) V. RISK 80. The overall risk is rated Moderate. The risk assessment is informed by the results of the technical, fiduciary, and E&S systems assessments, with a summary of substantial (or higher) risks provided below. Based on the different risks identified and mitigation measures taken and proposed, the overall risk for the Program is rated Moderate. The risks in all categories will be monitored during implementation and adjusted as needed. 81. The implementation capacity risk is rated Substantial. Despite significant experience in implementing different IPF operations at the provincial, municipal, and county levels, Hubei has not yet had extensive experience with results-based financing supported by the World Bank. For that reason, the risk for implementation capacity remains substantial. To mitigate the implementation capacity risk, conscious efforts were made to have relatively simple and easy to measure and verify DLIs that target priority outcomes. Extensive training on the PforR instrument has been delivered to provincial and local government officials. The proposed Program has also maintained close coordination with other World Bank-financed operations under preparation to support Hubei in enhancing the overall implementation capacity and understanding of the PforR instrument. The program management teams at the provincial and county levels are staffed with qualified technical experts to support the design, implementation, and supervision of the PforR Program. 82. The E&S risk is rated Substantial. Based on the detailed ESSA, the E&S risk is rated Substantial because the Program will have adverse E&S impacts including construction and operational stages and also the TA activities may have potential downstream impacts (paragraph 74). The mitigation measures including setting up mechanisms for social risks and impacts screening, labor health and safety training and enforcement, and so forth are detailed in the ESSA summary (annex 5) and PAP (annex 6). 83. The stakeholder risk is rated Substantial. The Program’s support for institutional coordination raises the risk for overall stakeholder engagement, as it would require extensive consultation and consensus building among diverse actors at different levels of government. There is also the risk that Hubei’s participation in establishing and operationalizing the tri-provincial cooperation mechanism among Jiangxi, Hubei, and Hunan provinces may face resistance from relevant stakeholders, including different sector departments within Hubei as well as in the other two provinces. The Program design mitigates the stakeholder risks in several different ways: (a) By supporting the strengthening of the RCS for institutional coordination and constructing DLIs according to well-defined areas of responsibility, for example, under DLI 1, the DEE and the DWR are accountable for the integrated water environment management plan and the ecological flow monitoring and compliance, respectively; (b) By establishing a participatory PPMO headed by the PDRC and comprising representatives from concerned sector departments and using results-based financing to incentivize coordination among sector agencies; and (c) Through the basin-level coordination mechanism hosted at the CWRC and participated by all the provinces in the basin, as well as the World Bank’s leverage and support to Jiangxi and Hunan through the YRPERP (Hunan and Jiangxi). . Page 42 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) ANNEX 1. RESULTS FRAMEWORK MATRIX Results Framework COUNTRY: China Yangtze River Protection and Ecological Restoration Program for Results (Hubei) Program Development Objective(s) To improve institutional coordination, enhance ecological protection and reduce water pollution loads along the Yangtze River Basin in Hubei Province. Program Development Objective Indicators by Objectives/Outcomes RESULT_FRAME_TBL_ PD O Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 To improve institutional coordination, enhance ecological protection and reduce water pollution Develop an IT platform Establish an IT platform to: (a) regularly to: (a) regularly exchange and share data exchange and share data with relevant basin and with relevant basin and Number of registered Number of registered provincial government provincial government government agencies government agencies 1. Establishment of an IT agencies, including agencies, including accessing the platform: accessing the platform: platform for sharing data on Changjiang Water Changjiang Water 10 15 No No Yangtze River protection and Resources Commission Resources Commission ecological restoration (Text) (CWRC) , related to (CWRC), related to Yangtze River protection Yangtze River protection People: accessing the People accessing the and ecological and ecological platform: 1,000 platform: 2,000 restoration; and (b) restoration; and (b) make selected data make selected data publicly available publicly available Page 43 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) RESULT_FRAME_TBL_ PD O Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 The Ecological Flow / The Ecological Flow / The Ecological Flow / Water Depth Water Depth Water Depth Requirements at Requirements at Requirements at Integrated water and approved control approved control approved control 2. Improved water environment Hubei Yangtze River sections on the Qing sections on the Qing sections on the Qing environment management management plan DLI 1 No Protection Digital River and Hong Lake River and Hong Lake River and Hong Lake system in the demonstration approved, including for Platform is operational have been complied have been complied have been complied sub-basins (Text) Qing River and Hong with for at least 90% of with for at least 90% of with for at least 90% of Lake in Hubei the days of the Calendar the days of the Calendar the days of the Calendar Year (excluding the days Year (excluding the days Year (excluding the days of Eligible Emergencies) of Eligible Emergencies) of Eligible Emergencies 3.Reduced pollutant loads entering waterways in 0.00 23.00 24.00 22.00 20.00 18.00 demonstration counties (Annual Target) (Number) . Page 44 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) . Intermediate Results Indicator by Results Areas RESULT_FRAME_TBL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 Improving Institutions and Innovations 1. Hubei-Hunan-Jiangxi Tripartite Water Environment No No No Yes Yes Yes Cooperation Mechanism established (Yes/No) 2. Provincial level policies, regulations and guidelines on water environment and plastic 1.00 3.00 3.00 6.00 7.00 7.00 waste management issued (Number) 3. Guidance note on public participation in river and lake No No Yes Yes Yes Yes protection developed (Yes/No) 4. People engaged in river/lake protection activities (Number 160.00 160.00 320.00 480.00 640.00 800.00 (Thousand)) 5. Women civil river chiefs in demonstration counties 13.70 16.70 19.70 22.70 26.30 30.00 (Percentage) Advancing Ecological Protection through Integrated River Basin Management 6. Water allocation schemes for the demonstration sub- Yes Yes Yes Yes Yes Yes basins (Yes/No) 7. Ecological flow / water depth requirements Yes Yes Yes Yes Yes Yes determined for demonstration Page 45 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) RESULT_FRAME_TBL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 sub-basins (Yes/No) 8. Improved sub-basin water environment monitoring network (Number of water 16.00 18.00 20.00 21.00 21.00 21.00 quality monitoring stations) (Number) 9. New Land area where sustainable land management practices with climate change DLI 2 0.00 103.00 103.00 104.00 105.00 107.00 considerations are implemented (Square kilometer(km2)) Reducing Water Pollution and Transmission of Plastic Waste Cumulative number of Cumulative number of Cumulative number of Cumulative number of Cumulative number of wastewater management wastewater Cumulative number of wastewater wastewater wastewater strategies issued: 0 management strategies wastewater management management strategies management strategies management strategies issued:6 strategies issued: 6 issued: 3 issued: 4 issued: 6 Number of counties 10. Improved township achieving full plant- Number of counties Number of counties Number of counties Number of counties Number of counties domestic wastewater service DLI 3 network integrated achieving full plant- achieving full plant- achieving full plant- achieving full plant- achieving full plant- systems (Text) management: 1 (Xuan'en network integrated network integrated network integrated network integrated network integrated county) management: 6 management 6 management: 1 management: 4 management: 4 COD Reduction (tons): COD Reduction (tons): COD Reduction (tons): COD Reduction (tons): COD Reduction (tons): COD Reduction (tons): 12,990 13,968 14,176 13,211 13,539 13,758 11. Plastic waste (agricultural plastic film) prevented from 1,654.00 1,564.00 1,583.00 1,615.00 1,617.00 1,632.00 entering water bodies (Metric ton) Page 46 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) RESULT_FRAME_TBL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 12. Demonstration counties with integrated and market- 0.00 2.00 4.00 6.00 6.00 6.00 based municipal waste management system (Number) 13. Demonstration counties meeting annual targets for DLI 4 0.00 6.00 6.00 6.00 6.00 6.00 manure utilization (Number) . Page 47 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) . Monitoring & Evaluation Plan: PDO Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection An IT platform is developed and established for data- sharing related to the protection and ecological restoration of the Yangtze River. This platform will enable Hubei Provincial RCO to: (a) regularly exchange and share data with relevant government agencies of other provinces, including Semi-annual Changjiang Water 1. Establishment of an IT platform for report on Resources Commission Provincial PMO sharing data on Yangtze River protection Annual provincial PDWR/RCO Records (CWRC), related to Yangtze and Provincial RCO and ecological restoration program River protection and progress ecological restoration; and (b) make selected data available to the public. By the end of project implementation, 15 government agencies are expected to register to access the platform and at least 2000 people are expected to have accessed the platform. A Functional Connection Page 48 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) with the provincial platform means county and municipal level RCS offices: (a) uploads on a monthly basis (or such other frequency established in the Program Implementation Plan for the specific data category) multi-sectoral data to the provincial platform; (b) the provincial RCS has data sharing/exchange on a monthly basis (or such other frequency established in the Program Implementation Plan for the specific data category) data from sectoral agencies; and (c) makes selected data publicly- available; all in accordance with data-related protocols and procedures, acceptable to the Bank, as set forth in the Program Implementation Plan. Improved integrated water (1) Water Ecological Provincial PMO and 2. Improved water environment environment management Report from Environment Protection (1): PDEE management system in the is defined by the following: Annual verification Plan for Qing River and (2): PDEE demonstration sub-basins (1) Integrated water agency Hong Lake Basin is (3): PDWR environment management publicly disclosed and Page 49 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) plans means a provincial accessible on PDEE plan, acceptable to the website Bank, to be adopted by (2) (a) publicly available Hubei that sets out official documents; (b) requirements on, inter alia, data exchange record; water environment, water (c) public data records; ecology, and related issues (3) Monthly ecological for (a) Qing River Basin and flow / water depth (b) Hong Lake Basin. monitoring bulletins . (2) Hubei Yangtze River Protection Digital Platform has passed expert review for acceptance and is operational, meansing (a) an ‘Emergency Forecasting and Prepardness Plan based on the Information Platform’ is issued; (b) the platform has data and information exhange with the provincial RCS platform; (c) makes selected data publicly- available; all in accordance with data-related protocols and procedures, acceptable to the Bank, as set forth in the Program Implementation Plan. (3) The Ecological Flow / Page 50 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Water Depth Requirements at approved control sections on the Qing River and Hong Lake have been complied with for at least 90% of the days of the Calendar Year (excluding the days of Eligible Emergencies) Ecological flow /water depth requirement means the minimum ecological flow / water depth targets approved by Hubei in accordance with the prevailing national technical standards and/or guidelines, including targets for control sections, as specified in the Program Implementation Plan, in the Qing River and Hong Lake. “Eligible Emergencies” means emergencies duly declared by the Program Implementing Entities due to severe droughts, extreme water pollution events, or such other Page 51 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) emergency specified in the Program Implementation Plan, all] in accordance with the Borrower’s and the Program Implementing Entities’ prevailing laws and procedures, specified in the Program Implementation Plan. Annual number of county- level targets met by Hunan and Jiangxi Provinces (annually) based on 6 demonstration counties with 6 targets: 3 annual targets per county, (i.e. COD reduction, agricultural plastic film collection and Semi-annual Data collection by 3.Reduced pollutant loads entering manure utilization), and 3 report on Semi- Demonstration County Provincial PMO and waterways in demonstration counties one-off targets, (i.e. provincial annual PMOs and submitted to demonstration counties (Annual Target) wastewater management program Provincial PMO strategy, small town progress wastewater integrated agreements and municipal waste collection and transportation integrated agreements). Annual targets from 2023 to 2028 are listed in the . PIP. Page 52 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) . Monitoring & Evaluation Plan: Intermediate Results Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Cooperation mechanism is established means: (1)Establish cooperation (1) Official documents office and designate a Semi-annual (2) Meeting Minutes 1. Hubei-Hunan-Jiangxi Tripartite Water provincial contact person report on Semi- (3) Public available Environment Cooperation Mechanism (2) Have work meetings provincial PPMO and DEE annual documents or established and coordination meetings program documents submitted to (3) Sign a tripartite progress the World Bank collaboration document on water environment management Provincial level policies, regulations and guidelines on water environment and plastic waste management include PPMO and (1)“Hubei Water Pollution 1．DEE Management Regulation Semi-annual 2．DWR 2. Provincial level policies, regulations and (Amendment”(2022) report on Semi- 3．Jingzhou Municipality guidelines on water environment and (2) “Hubei River/Lake Chief provincial Official Documents annual 4．DHURD plastic waste management issued Working Rules”(2023) program 5．DEE (3) “Hong Lake Protection progress Regulation”(2025) 6．Forestry Department (4) “Hubei Urban and Rural 7．DARA Municipal Waste Management Regulation”(2025) (5) “Hubei TP pollution Page 53 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Management Plan”(2026) (6) “Hubei Wetland Protection Regulation”(2023) (7) “Hubei Good Agricultural Practice”(2025 Provincial RCO develops and issues public engagement guidance note to guide the implementation and evaluation of public awareness raising activities Semi-annual and campaigns, public report on 3. Guidance note on public participation feedback and other Semi- Documents publicly Provincial PMO and provincial in river and lake protection developed river/lake protection annual issued by provincial RCO Provincial RCO program related activities, progress specifically addressing (1) how to increase and monitor women’s participation; (2) raise awareness and preparedness for extreme weather events. Number of public participants (accumulative Semi-annual people times) registered report on 4. People engaged in river/lake protection for river protection Semi- Provincial RCO work Provincial PMO and provincial activities activities under the RCS, annual record Provincial RCO program including: (1) civil river progress chiefs; (2) volunteers for river cleanup and Page 54 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) protection; (3) river cleaners; and (4) river rangers. Semi-annual Percentage of females report on 5. Women civil river chiefs in among the civil river chiefs Semi- County-level RCO Provincial PMO and provincial demonstration counties in the demonstration annual records Demonstration Counties Program counties progress Total amount of water Semi-annual Municipal water allocated in accordance report on allocation plans in the Provincial PMO, Enshi 6. Water allocation schemes for the Semi- with national standards to provincial Qing River and Hong Municipality and demonstration sub-basins annual counties within Qing River Program Lake Basins are provided Jingzhou Municipality and Hong Lake Basins progress by PDWR PDWR-issued provincial Ecological flow / water Semi-annual technical documents for depth requirements 7. Ecological flow / water depth report on determination of determined in accordance Provincial PMO and requirements determined for Annual provincial ecological flow targets, with national sector PDWR demonstration sub-basins program progr including for Qing River standards for (a) Qing River ess Basin and Hong Lake and (b) Hong Lake Basin Semi-annual Number of new or 8. Improved sub-basin water environment report on upgraded water quality Semi- River/Lake Chief Office Demonstration counties monitoring network (Number of water provincial monitoring stations in Qing annual Records and PPMO quality monitoring stations) program progr River and Hong Lake basins ess Annual newly added land Based on national areas with soil and water technical standards 9. New Land area where sustainable land conservation measures Report from combining site- Semi- Demonstration counties management practices with climate implemented meeting verification verification with remote annual and PPMO change considerations are implemented national technical agency sensing technology and standards, with O&M plan ground-truthing. formulated with O&M At least one project of Page 55 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) responsibility, financing each type of soil and and interventions water conservation designated. Soil and water measures will be conservation measures randomly selected to be supported under this verified according to the project include: pertinent national desertification standards below: management; slope Code for soil and water farmland treatment, conservation ecological small watershed engineering design (GB- management. Those 51018-2014) measures all contribute to Technical specification (i) climate change for soil and water mitigation by increasing conservation soil-based and plant-based (GB/T16453-2008) carbon sequestration and Completion acceptance (ii) climate change standards for integrated adaptation as nature-based soil and water solutions to increase water conservation (GB/T1577 storage capacity, flood 3-2008） resilience and so forth Technical guidelines for ecologically-clean small watershed construction (SL534-2013) Technical specification for ecologically- clean small watershed construction (DB11/T54 8-2008) O&M plans with clear technical requirements, responsibility division, Page 56 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) financing arrangements will be available to the Bank and the Verification Agency. Township includes county- seats and counties. (1) County-level Improved wastewater integrated wastewater service system is defined management strategies by: are publicly disclosed at (1) Integrated wastewater county government management strategy websites means a county-level (2) Institutional strategy, acceptable to the integration verified by Bank, to be issued by each valid or official Demonstration County, documents of integrated that sets out institutional wastewater collection arrangements, financial Report from and treatment services 10. Improved township domestic Semi- Demonstration counties sustainability, performance verification as detailed in the PIP wastewater service systems annual and PPMO based measures for agency (3) Influent COD and integrated operation and discharge COD can be maintenance, including verified according to considerations on automatic real-time employment equity and a monitoring records at workforce roadmap for environmental addressing gender gaps, authority. At least one measures to increase WWTP in each town will climate resilience and be randomly selected to promote low-carbon monitor the influent technologies. COD throughout a full (2) Wastewater Treatment day. Plant and Network Page 57 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Integration Arrangement means an arrangement, acceptable to the Bank, to be established by each Demonstration County in the form of a contract, an agreement or such other instrument set forth in the Program Implementation Plan, specifying the roles, responsibilities and performance standards for the provision of integrated wastewater services by service provider(s) assigned with the operation and maintenance of the wastewater treatment plants and/or the sewage network. The targets in each year are annual targets. Among all six demonstration counties, only Enshi city has completed outsourcing the town plants and respective networks for integrated management services in the baseline year of 2022. (3) Annual COD Reduced measured by influent COD minus discharged COD at Page 58 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) WWTPs. The weight of agricultural Inventories at the plastic film collected at agricultural plastic film collection network sites Semi-annual collection network sites, (including agro-input sale report on including agro-input sale 11. Plastic waste (agricultural plastic film) networks, solid waste Demonstration counties Annual provincial networks, solid waste prevented from entering water bodies sorting centers, recycling and PPMO program progr sorting centers, recycling centers, and direct ess centers, and direct recycling at scale farms and recycling at scale farms so on) in the and so on demonstration counties. 1. Signed contracts Number of counties that are meeting the below three available to the criteria (1) Sign World Bank; performance-based 2. Acceptance agreement with a third- documents of party; (2) establish a smart the platforms supervision platform; (3) Semi-annual 3. The utilization municipal waste resource 12. Demonstration counties with report on ratio is defined utilization rate reaches Semi- Demonstration counties integrated and market-based municipal provincial as: (Waste annual targets set in PIP annual and PPMO waste management system program progr sorted and County Recycling rate ess recycled + waste (2021) Targets incineration for Enshi 10 83 power Lichuan 15 80 generation or Badong 38 80 utlization) / total Jianshi 16 60 waste Xuan’en 15 80 generation。 The Honghu 90 90 total waste Page 59 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) generation is estimated based on population. Waste generation per person in each county is defined in PIP. Number of demonstration Verification will be counties meeting the based on large-scale annual target ratio (%) of farms (defined in the livestock and poultry Verification Table) in manure (tons) utilized (for demonstration counties. organic fertilizer, biomass Data source: manure energy, or other means) by generation and farms to the total amount utilization data can be generated annually (tons) obtained from MARA by large-scale pig, cow or direct reporting system chicken farms (or such Report from and can be verified by 13. Demonstration counties meeting other farms described in Demonstration counties Annual verification supporting materials annual targets for manure utilization the Program and PPMO agency such as inventories, Implementation Plan) in manure utilization each Demonstration contracts, annual County, as such target ratio inspection and is set forth in the Program verification reports from Implementation Plans. provincial DARA County Utilization Rate according to the (2021) 2028 Targets "Manure utlization third- Enshi 98 98 party evaluation Lichuan 95 95 implementation plan' Badong 95 95 issed by MARA. Jianshi 94 95 Page 60 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Xuan’en 90 92 . Honghu 85 92 Page 61 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) . ANNEX 2. DISBURSEMENT LINKED INDICATORS, DISBURSEMENT ARRANGEMENTS AND VERIFICATION PROTOCOLS . Disbursement Linked Indicators Matrix DLI_TBL_MATRI X DLI 1 DLI 1. Improved water environment management system in the demonstration sub-basins Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Outcome No Text 49,500,210.00 24.75 Period Value Allocated Amount (USD) Formula Baseline No 2024 Integrated water and environment management 9,500,042.00 US$ 9,500,042 for the approval of plan covering Qing River and Hong Lake basins the provincial Integrated water and approved environment management plan covering Qing River and Hong Lake 2025 A water environment information platform for 10,000,042.00 US$ 10,000,042 for the the Yangtze River basin in Hubei operational establishment of water environment information platform for the Yangtze River basin in Hubei 2026 The Ecological Flow / Water Depth Requirements 10,000,042.00 US$ 5,000,021 per year for at approved control sections of the Qing River / ecological flows requirements met Hong Lake have been complied with for at least in Qing River Basin and US$ 90% of the days of the CY (excluding the days of 5,000,021 per year for ecological Eligible Emergencies) depth req 2027 The Ecological Flow / Water Depth Requirements 10,000,042.00 US$ 5,000,021 per year for at approved control sections of the Qing River / ecological flows requirements met Page 62 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Hong Lake have been complied with for at least in Qing River Basin and US$ 90% of the days of the CY (excluding the days of 5,000,021 per year for ecological Eligible Emergencies) depth req 2028 The Ecological Flow / Water Depth Requirements 10,000,042.00 US$ 5,000,021 per year for at approved control sections of the Qing River / ecological flows requirements met Hong Lake have been complied with for at least in Qing River Basin and US$ 90% of the days of the CY (excluding the days of 5,000,021 per year for ecological Eligible Emergencies) depth req DLI_TBL_MATRI X DLI 2 DLI 2. Land area where sustainable land management practices with climate change considerations have been implemented Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Square Intermediate Outcome Yes 49,999,770.00 25.00 kilometer(km2) Period Value Allocated Amount (USD) Formula Baseline 0.00 2024 103.00 9,865,855.00 US$95,785 per km2 of additional land area implementing water and soil conservation measures 2025 103.00 9,865,855.00 US$95,785 per km2 of additional land area implementing water and soil conservation measures; 2026 104.00 9,961,640.00 US$95,785 per km2 of additional land area implementing water and soil conservation measures Page 63 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) 2027 105.00 10,057,425.00 US$95,785 per km2 of additional land area implementing water and soil conservation measures 2028 107.00 10,248,995.00 US$95,785per km2 of additional land area implementing water and soil conservation measures DLI_TBL_MATRI X DLI 3 DLI 3. Improved township domestic wastewater service systems Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Outcome Yes Text 60,000,030.00 30.00 Period Value Allocated Amount (USD) Formula Baseline 0 Integrated Wastewater Management Strategy issued; 1 Wastewater Plant and Network Integration Arrangement Established (Xuan'en county); 12,990 tons of COD reduced at township-level wastewater treatment plants 2024 3 Integrated Wastewater Management Strategy 12,229,440.00 US$750/ton of COD reduced; issued; 0 Wastewater Plant and Network US$773,730/ county issuing Integration Arrangement Established; 13,211 strategy;US$773,730/county tons of COD reduced at township-level establishing wastewater plant- wastewater treatment plants network integ arrange 2025 1 Integrated Wastewater Management Strategy 13,249,170.00 US$750/ton of COD reduced; issued; 3 Wastewater Plant and Network US$773,730/county issuing strategy; Integration Arrangement Established; 13,539 US$773,730/county establishing tons of COD reduced at township-level wastewater plant-network integ wastewater treatment plants arrange Page 64 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) 2026 2 Integrated Wastewater Management Strategy 11,865,960.00 US$750/ton of COD reduced; issued; 0 Wastewater Plant and Network US$773,730/county issuing Integration Arrangement Established; 13,758 strategy;US$773,730/county tons of COD reduced at township-level establishing wastewater plant- wastewater treatment plants network integt arrange 2027 2 Wastewater Plant and Network Integration 12,023,460.00 US$750/ton of COD reduced; Arrangement Established; 13,968 tons of COD US$773,730/county issuing strategy; reduced at township-level wastewater treatment US$773,730/county establishing plants wastewater plant-network integ arrange 2028 14,176 tons of COD reduced at township-level 10,632,000.00 US$750/ton of COD reduced; wastewater treatment plants US$773,730/county issuing a strategy;US$773,730/county establishing wastewater plant- network integ arrang DLI_TBL_MATRI X DLI 4 DLI 4. Demonstration counties meeting annual targets for animal manure utilization Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Intermediate Outcome Yes Number 39,999,990.00 20.00 Period Value Allocated Amount (USD) Formula Baseline 0.00 2024 6.00 7,999,998.00 US$1,333,333 per county that achieves their annual target 2025 6.00 7,999,998.00 US$1,333,333 per county that achieves their annual target Page 65 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) 2026 6.00 7,999,998.00 US$1,333,333 per county that achieves their annual target 2027 6.00 7,999,998.00 US$1,333,333 per county that achieves their annual target 2028 6.00 7,999,998.00 US$1,333,333 per county that achieves their annual target . Page 66 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) . Verification Protocol Table: Disbursement Linked Indicators DLI_TBL_VERIFICATI ON DLI 1 DLI 1. Improved water environment management system in the demonstration sub-basins Improved integrated water and environment management is defined by the following: (1) An integrated water and environment management plan adopted by Hubei covering, among others, the Qing River Basin and Hong Lake Basin; the plan will need to be acceptable to the Bank, and set out requirements on, inter alia, water environment, water ecology, and related issues. (2) Basin-level water environment information platform established for Yangtze River basin in Hubei: the platform is reviewed and accepted by a panel of experts, and (i) issue a ‘Emergency Preparedness Plan based on the Smart Yangtze Platform"; (ii) connection to the provincial RCS platform; (iii) makes selected data publicly-available; all in Description accordance with data-related protocols and procedures, acceptable to the Bank, as set forth in the Program Implementation Plan. (3) The Ecological Flow and Water Depth Requirements at approved control sections, as specified in the Program Implementation Plan, on Qing River and Hong Lake have been complied with for at least 90% of the days of the CY (excluding the days of Eligible Emergencies). “Eligible Emergencies” means emergencies duly declared by the Program Implementing Entities due to severe droughts, extreme water pollution events, or such other emergency specified in the Program Implementation Plan, all] in accordance with the Borrower’s and the Program Implementing Entities’ prevailing laws and procedures, specified in the Program Implementation Plan. Data source/ Agency Verification report from a verification agency Verification Entity Verification agency Verification methods are outlined below: 1. Integrated water and environment management plan covering Qing River and Hong Lake Basins is publicly disclosed (as a part of the provincial integrated water and environment management plan for river and lake basins). 2. Expert review and acceptance report available; (i) the Emergency Forecasting and Preparedness Plan based on the Smart Yangtze Platform is issued; (ii) data exchange record available; (iii) public access to selected data can be verified. Procedure 3. The compliance rate of (i) ecological flow of the Qing River and (ii) ecological water level requirement of the Hong Lake can be respectively verified through the Government line agency's ecological flow and water depth monthly monitoring bulletins for key rivers and lakes. Disbursement will be made upon each target being met. 1) The disbursement on the achievement of the Integrated Water and Environment Management Plan for Hunan Province is not specific to a given year, the World Bank will disburse US$9,500,042 on the achievement made before the end of CY27; Page 67 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) 2)The Bank will disburse US$10,000,042 for the water information platform operational 3) From CY25-CY27, the disbursement on the achievements for Ecological Flow and Water Depth requirements are specific to a given year, if the ecological flow and water depth requirements are not complied for at least 90% of the calendar year, no disbursement will be made; The three achievements (disbursement linked results) are independent of one another. DLI_TBL_VERIFICATI ON DLI 2. Land area where sustainable land management practices with climate change considerations have been DLI 2 implemented Annual newly added land area with water and soil conservation measures implemented meeting pertinent national technical standards, with O&M plans formulated with clear technical requirements, responsibility division and financing arrangements. The soil and water conservation project designs will incorporate applicable international best practices, Description including use of nature-based solutions and integration of reducing natural resources degradation and local communities' vulnerability to climate change. Soil and water conservation measures supported under this program include: desertification prevention and control; slope farmland treatment, ecologically-clean small watershed rehabilitation. Data source/ Agency Demonstration counties and PPMO Verification Entity Verification agency Verification: The annual additional new land area implemented with soil and water conservation measures implemented can be verified based on national technical standards combining site-verification with remote sensing technology and ground-truthing. At least one project of each type of soil and water conservation measure will be randomly selected to be verified according to the related national standards below: Code for soil and water conservation engineering design (GB-51018-2014) Technical specification for soil and water conservation (GB/T16453-2008) Procedure Completion acceptance standards for integrated soil and water conservation (GB/T15773-2008） Technical guidelines for ecologically-clean small watershed construction (SL534-2013) Technical specification for ecologically-clean small watershed construction (DB11/T548-2008) The O&M plan including clear technical requirements, including considerations on climate change mitigation and adaptation, responsibility division and financing arrangements will be available to the verification agency. Disbursement will not be capped at the annual target within the total 522 km2 of land areas implemented with eligible soil and water conservation measures within the project period. . Page 68 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) DLI_TBL_VERIFICATI ON DLI 3 DLI 3. Improved township domestic wastewater service systems Improved wastewater service system is defined by: (1) Integrated wastewater management strategy means a county-level strategy, acceptable to the Bank, to be issued by each Demonstration County, that sets out institutional arrangements, financial sustainability, performance based measures for integrated operation and maintenance, including considerations on employment equity and a workforce roadmap for addressing gender gaps, measures to increase climate resilience and promote low-carbon technologies. (2) Wastewater Treatment Plant and Network Integration Arrangement means an arrangement, acceptable to the Bank, to be established by each Demonstration County in the form of a contract, an Description agreement or such other instrument set forth in the Program Implementation Plan, specifying the roles, responsibilities and performance standards for the provision of integrated wastewater services by service provider(s) assigned with the operation and maintenance of the wastewater treatment plants and/or the sewage network. The targets in each year are annual targets; Among all six demonstration counties, only Enshi city has completed outsourcing the town plants and respective networks for integrated management services in the baseline year of 2022. (3) Annual COD Reduced measured by influent COD minus discharged COD at WWTPs. Data source/ Agency Demonstration counties and PPMO Verification Entity Verification agency Verification: 1. Institutional integration can be verified by valid or official documents of integrated county wastewater collection and treatment services as detailed in the PIP 2. County-level integrated and sustainable wastewater management strategies are publicly disclosed at county government websites. Procedure 3. Influent COD and discharge COD can be verified according to automatic real-time monitoring records at the WWTP. At least one WWTP in each town will be randomly selected to monitor the influent COD throughout a full day. Disbursements are made according to the formula. Disbursement is made scalable based on the number of counties issuing strategies, establishing integration arrangement and the timing of completion of these actions is indicative. The cumulative total target of COD reduction t (68,652 tons) can be achieved during any time year of Program implementation, and the Bank will make disbursement based on the actual achievement in each calendar year. Page 69 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) DLI_TBL_VERIFICATI ON DLI 4 DLI 4. Demonstration counties meeting annual targets for animal manure utilization Number of demonstration counties meeting the annual target ratio (%) of the livestock and poultry manure (tons) utilized (for organic fertilizer, biomass energy, or other means) by farms to the total amount generated annually (tons) by largescale Description pig, cow or chicken farms (or such other farms described in the Program Implementation Plan) in each Demonstration County, as such target ratio is set forth in the Program Implementation Plan. Data source/ Agency Demonstration counties and PPMO Verification Entity Verification agency Verification will be based on large-scale farms in demonstration counties which are defined as below: A farm with ≥ 500 heads of pigs (annual production), ≥ 2,000 egg chickens, ≥ 10,000 meat chickens, ≥ 50 meat cattle, and ≥ 100 dairy cattle During implementation, each year, 10% samples out of all the large-scale animal farms will be randomly selected and verified if they have completed their annual targets according to the MARA reporting system (if possible, pig, chicken and Procedure cattle farms must be included) Data source: Animal waste production, treatment and resource utilization data can be acquired from the established MARA direct reporting system and can be verified by supporting documents such as manure utilization contracts, Hubei DARA annual verification results and so on. . Disbursement is made if that the calendar year’s target is being met by the individual county. Page 70 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) ANNEX 3. SUMMARY TECHNICAL ASSESSMENT 1. Strategic Relevance. The proposed YRPERP (Hubei) will be embedded within the Government’s national program for the YREB at the central basin level and within the subnational program at the provincial level of Hubei province. These provide a nested hierarchy of activities and objectives, aligned with administrative responsibilities of the different levels of government and the provisions of the Yangtze River Protection Law. The law’s passage was a key step toward ecological protection and restoration of the Yangtze River and reflects the importance placed by the Government on the strategy for the YREB. The activities supported by the Program contribute to implementation of the law and more broadly to the YREB national priority. 2. Located in the middle reach of the Yangtze River, Hubei is the most economically developed province in Central China with the longest Yangtze mainstream. With more than 58 million residents, Hubei's GDP reached over 5 trillion yuan in 2021, ranking 7th nationally, 4th in the YREB and first in Central China. The Yangtze River runs 1061 km in Hubei province, longest among all the riparian provinces. There are over 4000 large and small rivers, totaling over 60,000 km long, resulting in abundant water resources. In addition, lakes are densely covered in this province and this province has been always called ‘A Province with One Thousand Lakes’. Of the gross provincial area, 20 percent are lowland lake areas. The COP 14 of the Ramsar convention was held in Wuhan, Hubei in November 2022. 3. Qing River is the second largest tributary of the Yangtze River in Hubei and runs entirely within the province.49 It is rich in biodiversity resources and provides a range of ecosystem services including soil and water conservation, flood buffer among others in the upstream of the Yangtze River. The Qing River Basin covers 10 counties within two municipalities (Enshi and Yichang). Among the ten counties in the Qing River, nine were considered national-level poverty counties before 2021, including all seven counties in the Enshi Municipality. By 2021, GDP per capita in Enshi, US$5,890, still ranked the last among all 13 municipalities in Hubei. In particular, soil erosion poses specific challenges in the mountainous Enshi prefecture, contributing to increased flooding risks, NPS pollution, ecosystem degradation and so forth. In addition, climate change and human activities have led to a drastic reduction in the size, ecological integrity, and ecosystem services of Hubei’s wetland areas. Lake protection and restoration have been emphasized in high-level government priorities. Hong Lake is the largest lake in Hubei and the seventh largest freshwater lake in China, and it faces challenges (for example, water pollution from urban development and intensive agricultural cultivation) in balancing development and protection. The protection of the largest intra-provincial River Basin (Qing) and Lake Basin (Hong) in Hubei province, which has probably the most complex labyrinth of river and lake systems in China, thus represents key challenges and opportunities in balancing development needs with environment and ecological protection for Yangtze River Protection and Ecological Restoration in the development of YREB. Technical Soundness 4. The cross-sector coordination and inter-jurisdictional cooperation remain the most challenging task for improving river basin management, which will be the focus of Results Area 1. The main 49 The largest tributary of the Yangtze River in Hubei, Han River runs across both Shaanxi and Hubei provinces. Page 71 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) conclusions from the technical assessment of coordination institutions in Hubei province are summarized below: (a) RCS: To improve on the effectiveness of the RCS, Hubei has established a provincial RCS Information platform, which is being used by all county and municipal RCOs. The River Chief Information Platform has enabled functions on water quality, water ecology and runoff information reporting and sharing but these functions are yet to be operationalized. Further, Hubei has put in place a large RCS with over 30,000 official river chiefs and over 60,000 river/lake patrols and about 100,000 volunteers. However, there is no dedicated policy to guide the engagement of the public in supporting the RCS in the province. The female proportion in civil river chiefs ranges from only 1 percent in Badong County to 13 percent in Lichuan County, averaging at only 6.5 percent among the six demonstration counties. The proposed Program will support Hubei’s action toward sharing RCS related data with other government agencies outside the province, including CWRC, through development and establishment of a dedicated IT platform, as well as enhancement of public participation including women’s representation in the RCS. (b) Tripartite Mechanism for Yangtze River Protection: The three middle-reach provincial governments of Hubei, Hunan and Jiangxi have signed in 2021 a principle agreement on protection of the Yangtze River focusing on the Middle Reaches of the Yangtze River. However, a tripartite cooperation mechanism for integrated water environment management is yet to be established. The Program will support Hubei’s participation in this tripartite mechanism. (c) Ecological Environment Information Platform: Hubei has established a Smart Yangtze Ecological Environment Information Platform, which contains information on water quality and water ecology. However, this information platform is yet to be operationalized. The two platforms, Ecological Environment Information Platform and RCS Information Platform, are expected to start sharing data during the Program period. 5. A generally sound policy and regulatory framework is noted for promoting integrated water environment planning and management, which will be the focus of Results Area 2. Technical assessment found a generally robust policy and regulatory framework in the province, which are reflected in the different sector FYPs. Besides the Hubei Provincial Ecological and Environment 14th FYP, Water Security 14th FYP, some key policy documents Hubei issued during the 13th FYP period that are related to the program activities include (a) ‘Hubei Municipal wastewater treatment quality and efficiency improvement action implementation plan (2019–2021)’ that implemented a three-year program to improve wastewater treatment efficiency in Hubei through actions such as network maintenance and so forth; (b) Hubei provincial municipal waste sorting plan (2021–2025) and Hubei provincial working plan to promote municipal waste sorting to promote waste sorting, collection and recycling, supported by Hubei municipal waste fee management method issued in March 2021; (c) In terms of soil and water management, Hubei has issued a Soil and Water Management Plan in 2016, setting a path forward until 2030; and (d) Hubei DWR has issued River/Lake Health Assessment Evaluation Guidelines in December 2021, guiding the establishment and implementation of water allocation and ecological flows. 6. More specifically related to the two demonstration basins, Hubei has issued a ‘Qing River Water Ecology and Environment Protection Regulation’ in 2019, effective in 2020, to protect the ecology and Page 72 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) environment of the Qing River Basin. The regulation has made several requirements on water pollution control and water ecological restoration, including chemical fertilizer reduction, agricultural mulch recycling, manure treatment and resource utilization, limiting production, sales and use of P-containing detergent and so forth. In addition, Hubei’s Provincial Lake Protection Regulation has undergone amendment in 2021, further clarifying the institutional responsibilities of lake protection in Hubei. 7. Hubei plans to develop and issue the following key policy documents during the Program period to further strengthen the enabling environment: (a) Pollution Reduction: ‘Hubei Provincial Water Pollution Control Regulation’ (Amendment) (2022/2023) and ‘Hubei TP Management Plan’ (2025); (b) River/Lake Chief System: ‘Hubei Provincial River/Lake Chief Working Rules’ (2023); (c) Solid Waste Management: ‘Hubei Urban and Rural Municipal Waste Management Regulation’ (before 2025); (d) Lake Protection: ‘Hong Lake Protection Regulation’ (2025); and (e) Agricultural NPS: Hubei Good Agricultural Practice (2025). 8. The Program prioritizes support to water allocation and ecological flow determination and monitoring in the demonstration sub-basins. River/lake restoration and protection is highlighted in the 14th Five-Year Plan for Ecological Environment Protection of Hubei province with Qing River and Hong Lake as high priorities. In particular, the Plan intends to (a) promote the restoration and protection of the ecological functions of lakes and wetlands such as Hong Lake and implement the wetland protection and restoration project in the four lake basins with Hong Lake and Chang Lake as the key areas; (b) establish the buffer zone for lake watershed; and (c) strengthen the ecological restoration of ecologically damaged and eutrophic lakes in the four lakes basins. The provincial target, principles and timeline for the water allocation are to (a) ensure ecological flow of rivers and lakes; (b) accelerate the completion of water allocation in important rivers and key large and medium-sized reservoirs across municipalities; and (c) strictly control the development of water resources in river basins and areas where the total withdrawal exceeds the withdrawal cap. 9. The 14th Five-Year Plan for Ecological Environment Protection of Hubei province also requires accelerating the formulation of assurance measures and management systems for ecological flow and ecological water level. By the end of 2023, the water allocation of important river basins and the determination of ecological flow targets for key rivers and lakes should be largely completed. By 2025, the target for the overall ecological base flow satisfaction rate of important control sections in key rivers and lakes should reach more than 90 percent. The discussions at the provincial, prefecture and counties levels indicate that water resources (in terms of annual total water withdrawal) have been allocated to the municipality/prefecture level and will be further allocated to county level; the government has determined the cross-sections and corresponding ecological flows for the Qing River and its tributaries (and in the case of Hong Lake, the ecological water level). The six counties have a reasonably good water quality and hydromet monitoring network, some of the water quality and hydrological stations are managed vertically by the provincial authorities (DEE or DWR) and CWRC. The counties plan to upgrade some of the existing stations and/or build selected number of new stations to support the water quality and flow monitoring, basin management and RCS operation. 10. The water quality of important lakes in Hubei such as Hong Lake requires improvement with various levels of eutrophication due to the water pollution. The water quality of Hong Lake has remained largely Class IV and sometime Class V over the past years, with relatively high total phosphorus level discharged into the water bodies from agricultural sources and wastewater. The three key drivers for lake Page 73 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) water quality deterioration in the past include water pollution, solid waste mismanagement and long- term and large-scale lake reclamation. A large quantity of wastewater untreated or treated but not to the right level was discharged into the lakes. Secondly, NPS pollution due to the overuse of chemical fertilizers, pesticides and non-standard aquaculture in the basin brought major nutrient loads to the lakes. Thirdly, over exploitation of lakes through land reclamation and large-scale aquaculture development also contributed to the deterioration of lake quality. 11. Water pollution control has synergy with GHG emission reduction. Both the Yangtze Protection Law and the provincial Lake Protection Plan require the local government to improve sewage treatment and sewer networks coverage and promote integrated network and treatment management for more efficient and sustainable wastewater services. They also call for strengthening the prevention and control of agricultural NPS, reducing the application of chemical fertilizers, and promoting organic fertilizer application, collecting, and recycling the agricultural plastic films. These interventions could substantially reduce the pollutant and nutrient loads to the lakes, improve lake water quality and reduce the GHG methane emissions. 12. Entropic lakes contribute significantly to GHG (particularly methane) Emission. Lakes play a critical role in the global carbon cycle and climate change. Eutrophication as a serious global challenge to water quality affects lake GHGs emission, making lakes hotspots of atmospheric methane emissions. Hong Lake has a surface area of less than 400 km2 with an average water depth of 1.35 m and classified as a macrophyte-dominated shallow lake. The catchment area of Hong Lake is approximately 3,314 km2, about 70 percent of which is covered by dry farmlands and paddy fields. In the past decades, the lake has experienced many intensive anthropogenic disturbances. Aquaculture was the major anthropogenic disturbance in the lake and peaked in 2004 with a total area of 240 km2. Over the past decade, the majority of aquacultural enclosures was removed and ecological restoration measures were taken to improve the water quality and rehabilitate the submerged vegetation. It has been reported the diversity and biomass of submerged vegetation have increased significantly after ecological restoration. Estimates of methane diffusion flux of Hong Lake were conducted through modelling analysis, with data collected from field measurements from 2017 to 2021 with sampling sites distributed evenly in the lake. Major parameters included pH, water temperature, and dissolved oxygen concentration. The methane emission flux of Lake Hong was also higher than that at Lake Taihu and Lake Chaohu, two eutrophic lakes with abundant phytoplankton. The macrophyte-dominated shallow lake with an average depth 1.35 m bears resemblance to a wetland, likely leading to large methane emission. Meanwhile, the nutrient loadings were significantly higher at the lake, which may be an alternative explanation for the high flux. The agriculture framing may contribute to the high nutrient loading of the lake and then largely increase the aquatic methane production and emission. 13. The proposed Program will provide incentives for SLM with adequate climate considerations and engagement of beneficiary communities. Over the past decades, the province has seen important progress in reducing the land erosion which affects both related ecological services including biodiversity, downstream water environment as well as the vulnerability of the local communities to climate risks. However, there remains a vast area in Hubei which suffers different degrees of land erosion, which is identified as a high priority for the river/lake protection and ecological restoration in the province for the 14th FYP period (2021–2025), for example, the provincial ecological environment protection plan and provincial water security plan both include soil and water conservation as a key priority for investment. Hubei commits itself to a total target of increasing 8,000 km2 of land area with sustainable soil and water Page 74 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) conservation measures during the 14th FYP period and ‘soil and water conservation rate’ increased from 82.97 percent in 2020 to 84.46 percent in 2025. Following the rollout of the national soil and water conservation plan (2015–2030) in 2015, Hubei province and different municipalities developed the corresponding provincial and municipal soil and conservation plans (2016–2030). Investments in soil and water conservation focus on the hilly areas with significant land erosion and key ecological function zones such as Enshi prefecture. The typical soil and water conservation investments include slope farmland protection and treatment, ecological protection/rehabilitation of small catchments, and comprehensive rehabilitation/restoration of land degradation (rocky desertification), following an integrated catchment/basin approach which involves engineering, tree and grass planting and management measures. In plain areas such as Honghu city, soil and water conservation interventions are usually along river and lake shores. Each county has set a clear soil and water conservation target for the 14th FYP period (2021–2025). The soil and water conservation investment project design and results monitoring follow the well-established national standards and guidelines for soil and water conservation issued by the MWR. Completion acceptance for investment projects over large and remote areas involves use of remote sensing and drone technologies, in addition to field inspection and measurement. The local communities are generally involved in different stages of the soil and water conservation investments. 14. To incentivize the adoption of SLM practices under the Program, the ‘new land area where sustainable land management practices with climate considerations are implemented’ is included as a DLI. As shown in a recent evaluation report by the World Bank’s Independent Evaluation Group “The Natural Resource Degradation and Vulnerability Nexus: An Evaluation of the World Bank’s Support for Sustainable and Inclusive Natural Resources Management (2009– 2019) (https://ieg.worldbankgroup.org/evaluations/natural-resource-degradation-and-vulnerability- nexus)”, the Program counties will be required to integrate in Program design and implementation, the natural resources protection activities with interventions that reduce the vulnerability of local communities to relevant climate risks through participatory watershed management (locally better known as participatory soil and water conservation). This involves combining interventions for land and water resources as well as related biodiversity protection (for example, increasing vegetation coverage, stabilizing slopes and reducing pollutant discharge) with activities which help improve communities’ climate resilience (such as nature-based solutions that help better deal with increasing intensity of rainfall and frequency of extreme weather events, and planting trees to generate additional income). It also requires deeper engagement of the beneficiary communities throughout the project cycle from planning to design to implementation and to O&M of the Program facilities. Some of the interventions are expected to lead to positive results in short to medium terms, for example, reduction in soil erosion and water pollution as well as improvement in communities’ resilience, while others may take time to generate the anticipated long-term outcomes and impacts such as improvement in ecosystems and related ecological services. The Program is expected to lay a solid foundation for and demonstrate the effective way of SLM in the Program counties. 15. Under Results Area 3, the program will support improved management of different water pollutants, including from municipal wastewater, solid waste and agricultural NPS in the demonstration counties following an integrated approach and circular economy practices. First, in spite of the rapid increase in treatment capacity of domestic wastewater at county seat towns, significant improvement is needed through the Program support in operationalizing the integrated approach to wastewater services. As of end 2021, 23,490 km of sewer collection pipelines had been built in the urban areas, that is, urban areas/properties of all cities and county seat towns, among which sewer pipes (separated system) took Page 75 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) about 16,600 km or 4,285 km increased comparing with that of 2018; and drainage pipes (combined system) about 6,890 km or 424 km decreased comparing with that of 2018. At the same time, 147 WWTPs, with a total designed treatment capacity of 1.016 million m3/d, had been built, which meets basic demands for economic and social development as the discharged water quality meets the requirements of Class 1A effluent according to GB18918-2002. The wastewater treatment ratio50 in the urban areas, that is, cities and county seat towns, had reached to 97 percent. The centralized treated urban wastewater collection ratio51 achieved to 60 percent, 14 percent increase comparing with that by end of 2018. Since 2018, the province had issued action plans and guidance to promote the enhance the wastewater management that helped the improvement of wastewater collection and treatment, including (a) diagnosis and inspection of 12,555 km of sewer pipes in 38 cities, among which 24 cities completed and 9 substantially completed and (b) construction of new sewer pipes, as described above. The province had set up a clear target to increase the wastewater collection ratio52 to over 70 percent in prefecture level cities and over 40 percent in county-level cities before 2025. To achieve such a goal, the province will prioritize support through the Program the following: (a) inspecting or diagnosing the sewer networks to identify the issues, such as aging pipes, misconnection, and infiltration; (b) accelerating the construction and/or rehabilitation of sewer networks, which would help in increasing the wastewater collection ratio; (c) enhancing the quality control though the entire construction; and (d) promoting the integrated management by engaging professional O&M entities. 16. Good progress has been made in wastewater management in rural towns throughout the province. Hubei province included in 2017 the wastewater management in “Four “Three Key Ecological Projects””. By the end of 2020, all the rural towns in Hubei province had built up their wastewater collection and treatment systems mostly through concessionary contracts. During those three years, the township towns had invested in a total of 996 projects that: (i) built their wastewater facilities, with the total investment of CNY 31.7 billion and the total built up treatment capacity of 1.147 million ton/day; and (ii) laid down trunk and secondary main sewers of 11,368 km, as well as connected 2.18 million users. Among those 996 projects, 83.7 percent were built in the form of public-private partnership (PPP). To date, over 90 percent of the rural towns have been covered by wastewater collection and treatment, where the wastewater collection ratio is over 80 percent and wastewater treatment ratio over 75 percent. The province had set up its plan to promote quality O&M through: (a) further expanding the sewer collection, total planned investment of CNY 2.77 billion in 2022; (b) introducing the smart operation through digitalizing the networks and treatment facilities; and (c) standardizing the operation management through performance-based contract. Field visits in Honghu, Lichuan and Enshi found the status of domestic wastewater management systems in these three counties as follows: (a) Honghu city has one WWTP for its county seat town, with the designed treatment capacity of 70,000 m3/day and one sewer pumpstation, and 17 wastewater treatment facilities for its 17 rural towns, with a total treatment capacity of 21,600 m3/day and 236.89 km of sewer collection networks and six sewer pumpstations. The county seat town treatment plant was built in June 2003 and completed and put into operation in April of 2006. In 2018, the county 50 Wastewater Treatment Ratio = (urban domestic wastewater treated, in ton or 10,000 ton)/ (urban domestic wastewater discharged, in ton or 10,000 ton) × 100 percent. 51 Centralized Treated Urban Wastewater Collection Ratio = (amount of wastewater delivered to and treated in centralized WWTP)/ (urban domestic wastewater generated) × 100 percent. 52 Wastewater collection Ratio = (wastewater collected and delivered to the WWTP)/ (total wastewater generated within the urban property) × 100%. Page 76 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) packed the upgrade of this wastewater treatment and upgrade/construction of sewer collection and treatment facilities of 17 rural towns and outsourced the package to Tianjin Chuangye Environment Protection Co. Ltd. The project was completed in September 2019 and put into full operation in January 2020. (b) Lichuan city has recently completed an ADB financed project, that is, building a WWTP with the designed capacity of 50,000 m3/day, next to an old 20,000 m3/day treatment plant built under a build-operate-transfer contract with in 2008, and 28 km associated pipes. Before 2016, the city had built 73 km sewer pipelines, among which 60 km combined sewers. Since 2016, the city obtained funds from different sources to expand the sewer network and added 38 km of pipes to the sewer networks. The wastewater treatment facilities constructed in two phases, are now managed by two entities and the county plans to buy back Phase 1 facility and outsource the entire treatment services to one entity. However, the sewer networks are still under the management of the urban construction bureau. The city is planning to raise a total of CNY 600 million to expand and upgrade the sewer collection in the city. (c) Enshi city completed two WWTPs under an ADB-supported project, which made the total number of wastewater treatments in Enshi to three, that is, Guanpo (60,000 m 3/day and associated sewer networks of 120 km), Hongmiao (30,000 m 3/day and associated sewer networks of 68 km), and Dashaba (50,000 m3/day and associated sewer pipes of 42.61 km). Three treatment plants were operated by three different professional operators, but sewer networks were managed by a state-owned entity (SOE) (Enshi Lvyuan Company) and City Management Bureau. 17. Technical assessment shows that there are rooms to improve the wastewater management in the rural towns under the Program through the following interventions: (a) separating the sewer from stormwater drainages; (b) expanding the sewer collection to cover larger urban areas; (c) connecting more users; and (d) upgrading/renovating the aged sewers, which match in general with that promoted by the provincial government. The preparation mission also discussed in detail with the counties and provincial officials on how to define the value of DLIs and provided guidance on how it could be linked to the activities, such as improvement of the sewer networks and separation of combined sewers. 18. Dedicated efforts were made and significant progress achieved throughout Hubei province during the 13th FYP period (2016–2020) to improve integrated urban-rural domestic solid waste management. The overall management service model is ‘collection at village level, transfer at township level and treatment at county level’. In different counties there is a mix of management by government entities (environmental sanitation bureau or alike) (for example, in Jianshi, Xuanen, and Badong) and outsourcing to private or SOE providers (for example, in Honghu, Lichuan and Enshi) for collection and transportation services. Some counties have built/are investing to build incineration plants (for example, Honghu, Enshi, and Lichuan) through various forms of PPP while others continue to use landfills. There has been a substantial increase in coverage and treatment rates of domestic solid wastes in both urban (county seats) and rural areas over the past few years. The 14th FYP requires that the service coverage rate reaches 100 percent throughout the province. Furthermore, the government is also devoting much effort in promoting classification and reuse of solid wastes including plastic wastes. The province has issued “Hubei Provincial Domestic Solid Waste Sorting and Reuse Plan (2021–2025), “Hubei Provincial Implementation Plan for Promoting Urban-Rural Domestic Solid Waste Classification and Reuse” and Page 77 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) “Hubei Provincial Technical guidelines for Urban-Rural Domestic Solid Waste Classification”, which require that by 2025, the reuse rate (also called resource utilization rate) in the urban areas of different counties should be not lower than 50 percent, with reduction at source, demonstration areas and construction of reuse/recycling centers and markets. In the six demonstration counties, it is expected to reach 100 percent treatment of domestic solid waste by incineration plants which generate power and utilize the remains for different purposes, before 2025. 19. Agricultural NPS is found to substantially contribute to water pollution and the Program intends to focus on management of two important sources of pollution, animal manure and agricultural mulch. According to the Second National Pollution Source Census of China jointly issued by the MEE, National Statistical Bureau and MARA, 53 in 2017, agricultural NPSs (that is, farming, livestock and aquaculture) contribute 49.77 percent of national COD, 46.52 percent of total nitrogen and 67.22 percent of total phosphorus. In March 2020, the MEE issued an ‘Implementation Plan for Agricultural Non-Point Source Pollution Treatment and Supervision (Trial)’, 54 which outlined overall tasks for comprehensively controlling agricultural NPS pollution in important regions, especially the YREB, by 2025 through chemical fertilizer reduction, animal manure resource utilization, agricultural mulch recycling and so on. 20. Animal manure is rich in nutrients, including trace elements necessary for crop growth. Approximately 70–80 percent of nitrogen (N), 60–85 percent of phosphorus (P), and 80–90 percent of potassium (K) found in feeds is excreted in the manure.55 These nutrients can replace fertilizer needed for pasture or crop growth, eliminating the need to purchase fertilizers. Furthermore, compared to commercial fertilizer, manure contains organic carbon which is the key to maintaining soil health, including the characteristics of cation exchange capacity, soil tilth, and water holding capacity. Based on the Second National Pollution Source Consensus (2020), COD discharge from the Livestock and Poultry Breeding Industry amounted to 10.01 million tons, contributing 93.76 percent of the agricultural pollution; Total Nitrogen and Total Phosphorous discharges amounted to respectively 0.60 million and 0.12 million tons, contributing 42.14 and 56.46 percent of agricultural pollution. In 2017, State Council issued the ‘Opinions on accelerating resource utilization of Livestock and Poultry Breeding waste’ and required the national rate of resource utilization of animal manure from Livestock and Poultry Breeding reach 75 percent by 2020, and waste treatment facility coverage of large-scale farms reach 95 percent. 56 The Ministry of Agriculture then subsequently issued the ‘Resource Utilization of Livestock and Poultry Manure Action Plan (2017–2020)’.57 21. According to Hubei DARA, Hubei province started to promote manure resource utilization during the 13th FYP period. In 2018, provincial government has issued ‘Hubei Provincial Livestock Manure Resource Utilization Coordination Mechanism’ headed by vice governor and including DARA, DEE, PDRC, Department of Finance (DOF), and Department of Natural Resource. DARA is the leading sector department responsible for promoting manure resource utilization. In the same year, DARA issued a three-year working plan for promoting manure resource utilization. From 2017 to 2020, over CNY 2 billion from both central and provincial financing has been invested in manure resource utilization in 78 counties. 53 http://www.mee.gov.cn/xxgk2018/xxgk/xxgk01/202006/W020200610353985963290.pdf. 54 http://www.gov.cn/zhengce/zhengceku/2021-03/26/content_5595893.htm. 55 https://ag.umass.edu/crops-dairy-livestock-equine/fact-sheets/manure-nutrient-resource. 56 http://www.gov.cn/zhengce/content/2017-06/12/content_5201790.htm. 57 http://www.moa.gov.cn/nybgb/2017/dbq/201801/t20180103_6134011.htm. Page 78 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) By 2022, almost 100 percent of large-scale livestock farms in Hubei have been equipped with manure treatment facilities. Provincial average manure resource utilization rate has reached 92 percent in Hubei. 22. Except Xuan’en and Honghu whose manure utilization rates are higher than the provincial average, amounting to 97 and 93 percent respectively, the other four counties’ livestock manure resource utilization rates are below the provincial average by different margins, ranging from 70 percent in Enshi to 80 percent in Lichuan. The mission visited manure resource utilization plants in Honghu, Enshi and Lichuan counties and found that livestock manure can be utilized as organic fertilizer (including returning to farms or composting), producing animal feed or energy. The main areas requiring attention include: (a) long-term sustainability: due to the difficulties in long-distance transportation, manure resource utilization rate of livestock farms often depends on whether there are large fertilizer consumers, that is, plant growers, or energy users nearby; (b) Financing: the mission found that especially in mountainous areas such as the five demonstration counties in Enshi, manure collection, treatment and resource utilization requires large amount of initial capital investment and substantive O&M financing is required; and (c) Verification system: the mission found that although the Ministry MARA has established a direct reporting system which is being utilized by provincial and local governments. However, there lacks effective verification mechanism on the data and information reported by farmers. 23. The Program will support Hubei’s efforts in agricultural mulch collection. Being the world’s largest plastic producer, producing nearly 60 million tons of plastics per year, and reported a major contributor to marine plastic pollution, China has embarked upon a series of policy initiatives to combat its emerging plastic pollution issues. It started to ban the import of various types of waste recycling materials, including plastic wastes, since July 2017. In 2018, State Council issued the ‘Waste-free City Piloting Method’ and the Ministry of Environmental Protection announced 11 pilot cities in 2019 to pilot comprehensive programs for improving the management of all types of solid wastes. In 2020, NDRC and MEE issued the ‘Opinions on further strengthening plastic pollution control’ that envisages measures to ban the use of certain single-use plastic items, substitute many other single-use plastics with biodegradable materials, regulate the use of agricultural plastic mulch, improve monitoring, reporting and supervision, and promote eco-design and material recycling. 24. Among the different plastics, agricultural mulch is a major contributor to riverine and marine plastic pollution due to the lack of management system, that is, collection, recycling and so on, in rural areas. China has the world’s largest agricultural mulch consumption as well as land coverage. In 2015, agricultural mulch use in China amounted to over 2.6 million tons, among which mulch film amounted to 1.45 million tons, making up 75 percent of the global total, covering nearly 0.3 billion Mu of land. 58 However, the recycling rate of agricultural mulch is lower than two thirds.59 While agricultural mulch has important impacts on improving water efficiency and land productivity, uncollected mulch waste in the field is causing increasing problem in terms of reducing land productivity. In 2017, Ministry of Agriculture issued ‘Action Plan for Recycling Agricultural Mulch’ setting target of recycling 80 percent of agricultural mulch by 2020. 25. Based on discussions with DARA and field visits, it was learnt that agricultural mulch use in Hubei has been decreasing steadily from peaking at 71,321 tons in 2015 to 58,801 tons in 2019. In 2019, DARA 58 According to Prof. Yan Rongchang from Academy of Agricultural Sciences (link). 59 http://www.moa.gov.cn/nybgb/2017/dlq/201712/t20171231_6133712.htm. Page 79 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) and DEE jointly issued ‘Hubei Provincial Rural Pollution Treatment Implementation Plan’ and stipulated that provincial recycling rate should exceed 80 percent through reduction in mulch use, increase in used mulch recycling, promote mulch recycling awareness raising and improve recycling system, including establishing recycling centers and providing financial incentives and so forth. 26. Agricultural mulch use varies significantly between Enshi and Hongu. Counties under Enshi prefecture use 300 to 500 tons of agricultural mulch due to their relative cold temperatures while Honghu uses less than 200 tons of agricultural mulch per year. Furthermore, mulch recycling rate varies significantly between counties from merely 15 percent in Xuan’en to 85 percent in Badong due to several reasons, including technical and financial capacity, topography, and corresponding difficulties in mulch collection and so forth. Two main challenges found at the county level include the lack of integrated management system, as mulch use is often very scattered and difficult to management, and lack of sufficient funding to motivate farmers. Although uncollected mulch waste in the field can reduce the land productivity in the long run, it requires both financial incentive and educational activities to motivate farmers. Expenditure Framework Assessment 27. The duration of the PforR is from 2023 to 2028. The PforR covers physical interventions in 6 counties in Hubei (out of total 103 county-level administrations) and institutional interventions at the provincial level. The total Program financing is estimated at US$1,074 million, of which US$874 million will be financed by government and US$200 million will be financed by IBRD Loan. 28. Expenditure Boundary. The Program consists of three results areas, innovations and strengthening, ecological protection enhancement and water pollution reduction. Table 3.1 provides the breakdown of the Program financing by results areas. Of the total Program financing US$874 million from government, Results Area 1 accounts for 6.15 percent, Results Area 2 for 41.74 percent and Results Area 3 for 52.11 percent. The Results Area 2 and Results Area 3 involve massive investment, while Results Area 1 put more emphasis on the institutional innovation or improvement of management mechanism, for which the budget expenditure is negligible. Therefore, the following EFA will mainly focus on the budget expenditure related to the program activities under Results Area 2 and Results Area 3. Table 3.1. Program Financing by Results Areas (2023–2028) 2018–2021 Actual (US$, millions) 2023–2028 Estimated (US$, millions) Results Areas All Project Counties in Hubei All Project Counties in Hubei Share (%) RA1 42.98 53.75 6.15 RA2 291.69 364.81 41.74 RA3 364.16 455.44 52.11 Subtotal 698.82 873.53 29. The provincial governments in China adopt a uniform budget classification to prepare budget and report government expenditures following the instruction of the MOF. Hubei has developed an integrated financial management system to track budgetary expenditures. DEE takes the main responsibility for implementing the government program on “pollution prevention” and records the related expenditures under the budget item “pollution prevention” (code 21303), such as “water pollution prevention and Page 80 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) treatment” (code 2110302). DHURD takes the main responsibility for implementing the government program on “urban and rural community construction” and records the related expenditures under the budget item “urban and rural community affairs” (code 212), where expenditures on urban waste and sewage treatment are mainly recorded under the budget item “other urban and rural community expenditures” (code 2129901). DARA takes the main responsibility for implementing the government program on agricultural and rural modernization and records the related expenditures under the budget item “agriculture and rural affairs” (code 21301) and “rural environment protection” (code 2110402),for example, expenditures on “comprehensive treatment and resource utilization of livestock and poultry manure” and “reduction of chemical fertilizers and use of organic fertilizers” are mainly recorded under the budget item “protection, restoration and utilization of agricultural resources” (code 2110135). DWR takes the main responsibility for implementing the government program on water conservancy and records the related expenditures under the budget item “water conservancy affairs” (code 21303), such as “soil and water conservation” (code 2130310) and “water resource conservation management and protection” (code 2130311). It is worth noting that some expenditure on institutional innovation and capacity building, such as the construction of river and lake chief systems, are recorded under the budget item “other water conservancy expenditure” (code 2130399). 30. The boundary of PforR Program expenditure is defined as selected sub-items of the government program that cover the Results Area 2 activities and Result Area 3 activities (Table 5). Based on the budget data of 2018–2021, we can predict the total amount of budget expenditures on the Program activities during the Program implementation period (2023–2028) (Table 3.1). 31. Overall Program Financing. China is by far the most decentralized country in the world, with responsibilities for providing public services being highly decentralized to subnational governments (SNGs). As of 2019, SNGs accounted for about 85.30 percent of total public expenditure. In particular, the local share of the expenditure on ‘Agriculture, Forestry and Water Conservancy’, is as high as 97.7 percent. It is also highly centralized on the revenue side. Tax rates are set centrally, and the tax revenue are collected by the State Administration of Taxation and allocated to SNGs in the forms of shared tax revenues, general transfers, and earmarked transfers. The counties rely heavily on the transfers from upper-level governments to finance public services to the local residents. 32. For this PforR Program, county governments will undertake activities of Results Area 2 and Results Area 3 and the corresponding expenditures are recorded under the county government’s budget. Counties mostly rely on the higher-level government (HLG) transfers (including general transfers and earmarked transfers) to finance these activities, and the gap between overall budget expenditure on Program activities and HLG transfers shall be filled up with the county’s own-source revenue. 33. There are two HLG transfer items that provide funds to county governments for carrying out the Program activities, namely, ‘Transfer for central-local shared functions on agriculture, forestry and water affairs’ and ‘Special transfer for agricultural, forestry and water affairs’ (Table 3.3). The earmarked transfer plays an instrumental role in steering counties to implement the Program activities, while general transfer helps to provide additional funds needed. As Table 3.2 shows, the amounts of the two funding sources (US$1,453 million) are much higher than those of the expenditures (US$698.82 million) listed in Table 3.1, which indicates the budget funding for the Program is adequate and largely predictable. Page 81 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Table 3.2. Program Funding Sources during 2018–2021 (US$, millions) 2018 2019 2020 2021 Total HLG General transfers Transfers for central-local common functions on agriculture, 0.0 217.0 281.8 282.9 781.7 forestry and water affairs HLG Earmarked transfers Earmarked transfers for agricultural, forestry and water affairs 314.7 115.1 124.5 117.0 671.3 Total 314.7 332.1 406.2 400.0 1,453.0 34. Earmarked Transfers. The HLGs’ earmarked transfers for Results Area 2 and Results Area 3 activities play an important role in steering counties to enhance ecological protection and reduce water population. As shown in Table 3.3, we list the main earmarked transfers from the Central Government and Hubei provincial government on Results Area 2 and Results Area 3 during 2018–2021. It can be seen that the transfers from the Central Government account for more than 85 percent (174.3/203.8). In general, from 2018 to 2020, the amounts most earmarked transfers showed an upward trend, such as water conservancy development fund, agricultural resources and ecological protection fund, and so on. Although the total transfers on Results Area 2 and Results Area 3 activities from central and provincial governments decline slightly in 2021, which may be due to the negative impact of COVID-19 on fiscal revenue, we believe that this impact is temporary. Table 3.3. Earmarked Funds for Ecology Protection and Water Pollution Reduction in Hubei (US$, millions) Provincial Central Total Subto Subtot 2018 2019 2020 2021 2018 2019 2020 2021 Total tal al Allocated by Financial Department Water Conservancy Development 0.0 0.0 0.0 0.0 0.0 17.0 25.7 20.6 27.42 90.7 90.7 Water Pollution Prevention and 0.0 0.0 0.0 0.0 0.0 0.0 11.8 12.5 7.4 31.8 31.8 Control Water Conservancy Reform and 14.8 5.7 5.9 2.6 29.0 0.0 0.0 0.0 0.0 0.0 29.0 Development Key ecological protection, 0.0 0.0 0.0 0.0 0.0 0.0 12.9 13.6 2.5 28.9 28.9 restoration and governance Agricultural Resources and 0.0 0.0 0.0 0.0 0.0 0.1 4.6 11.1 4.5 20.4 20.4 Ecological Protection Township domestic sewage 0.0 0.9 4.7 6.3 11.9 0.0 0.0 0.0 0.0 0.0 11.9 treatment Urban pipe network and sewage 0.0 0.0 0.0 0.0 0.0 0.0 5.1 1.7 4.7 11.5 11.5 treatment Fishery Development Subsidy 0.0 0.0 0.0 0.0 0.0 0.0 1.5 1.2 7.1 9.9 9.9 Modern Agriculture Transfer 3.0 1.6 2.5 1.3 8.5 0.0 0.0 0.0 0.0 0.0 8.5 Urban and rural domestic waste 0.8 1.1 0.8 0.0 2.7 0.0 0.0 0.0 0.0 0.0 2.7 innocuous treatment subtotal 18.6 9.3 13.9 10.2 51.9 17.2 61.6 60.7 53.7 193.2 245.2 Allocated by the DRC Qing River Treatment Project 0.1 8.8 0.0 0.0 8.9 0.0 8.6 0.0 0.0 8.6 17.5 Page 82 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Provincial Central Total Subto Subtot 2018 2019 2020 2021 2018 2019 2020 2021 Total tal al Green development of the Yangtze 0.0 0.0 0.0 0.0 0.0 0.7 0.2 0.0 16.4 17.3 17.3 River Economic Belt Project (Treatment of ecological pollution in the Yangtze River) Ecological protection and 1.4 0.0 0.0 0.0 1.4 3.9 3.6 6.9 0.0 14.4 15.7 restoration in key areas Project (Control of rocky desertification) Ecological Environment System 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14.8 14.8 14.8 Improvement Project of Honghu Small and medium river 0.0 0.0 0.0 0.0 0.0 0.7 5.0 6.4 0.5 12.7 12.7 governance project Management of water 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 9.3 11.5 11.5 environment in key river basins project Yangtze River Economic Belt Green 0.0 0.0 0.0 0.0 0.0 0.0 1.4 0.7 6.9 9.1 9.1 Development Project (Green Development Demonstration) Ecological Protection and 0.0 0.0 0.0 0.0 0.0 1.0 0.0 4.1 0.0 5.1 5.1 Restoration in Key Areas (Water Conservancy Management Project) Subtotal 1.5 8.8 0.0 0.0 10.3 6.3 18.8 20.3 47.9 93.3 103.6 Total 20.1 18.0 13.9 10.2 62.2 23.5 80.4 81.0 101.6 286.5 348.7 35. The assessment also collects data on the main usages of the funds listed in Table 3.3, which can be seen in Table 3.4. Table 3.4. Specific Usages of Earmarked HLG Transfers in Hubei (2018 –2021, US$, millions) HLG Transfer Usage of Funds Provincial Central Total % of Total Water Subtotal 0.00 86.52 86.52 42.45 Conservancy soil and water conservation 0.00 8.12 8.12 3.98 Development water resources conservation and 0.00 2.44 2.44 1.20 protection management of small and medium rivers 0.00 33.75 33.75 16.56 other 0.00 42.22 42.22 20.72 Key ecological protection, restoration and governance 0.00 31.64 31.64 15.53 Water Pollution Subtotal 0.00 24.98 24.98 12.26 Prevention and drinking water source protection 0.00 1.56 1.56 0.77 Control basin water ecological protection and 0.00 10.29 10.29 5.05 restoration basin water pollution control 0.00 13.13 13.13 6.44 Subtotal 0.00 21.41 21.41 10.51 Page 83 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) HLG Transfer Usage of Funds Provincial Central Total % of Total Agricultural comprehensive treatment and resource 0.00 20.87 20.87 10.24 Resources and utilization of livestock and poultry Ecological manure Protection reduction of chemical fertilizers and use 0.00 0.55 0.55 0.27 of organic fertilizers Urban Pipe Network and Sewage Treatment 0.00 9.79 9.79 4.80 Modern Subtotal 8.65 0.00 8.65 4.25 Agriculture resource utilization of livestock and 4.46 0.00 4.46 2.19 Transfer poultry waste other 4.19 0.00 4.19 2.06 Township Domestic Sewage Treatment 7.39 0.00 7.39 3.62 Water Subtotal 6.53 0.00 6.53 3.20 Conservancy subsidy for river and lake chief system 1.99 0.00 1.99 0.98 Reform and subsidies for the confirmation of rights 0.77 0.00 0.77 0.38 Development and demarcation of rivers and lakes soil and water conservation 0.75 0.00 0.75 0.37 water resources conservation and 0.03 0.00 0.03 0.02 protection management of small and medium rivers 1.17 0.00 1.17 0.58 other 1.81 0.00 1.81 0.89 Ecological Subtotal 3.99 0.00 3.99 1.96 Civilization National ecological city and county quota 0.94 0.00 0.94 0.46 Construction reward Local ecological civilization construction 3.05 0.00 3.05 1.50 reward Urban and Rural Domestic Waste Innocuous Treatment 2.90 0.00 2.90 1.42 Total 29.46 174.35 203.80 100.00 36. Funding Allocation and Expenditure Performance. While the county governments are undertaking main accountability for implementing the Program activities, the provincial government has taken various measures to ensure the counties deliver the expected results, including (a) mandating the use of the funds for implementing activities critical to the achievement of expected results; (b) conducting expenditure performance evaluation and granting rewards; and (c) providing technical guidance and so forth. 37. A series of documents on management of the earmarked funds have been issued by the MOF, MARA, as well as DARA, DHURD and DWR in Hubei, according to which the fund shall only be used for the specified usages. The allocation of the funds is factor-based or project-based and shall all be subject to performance evaluation. The performance evaluation results are taken as an important factor for the fund allocation. Therefore, there are strong incentives for the counties to achieve the desirable objects on ecological protection enhancement and water pollution reduction and to ensure value for money. Taking an example of the biggest earmarked transfer program-Water Conservancy Development, the water conservancy development funds are allocated by the factor method, and the performance factor is one of the important reference factors, accounting for 20 percent. The water conservancy development fund Page 84 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) mainly adopts the management model of ‘big earmarked project + task list’, and uses regional performance targets as the basis for performance evaluation. Specifically, the PDOF will cooperate with the Water Conservancy Department to score on five dimensions including project decision-making, management, output, benefit, and public satisfaction. 38. Financial Sustainability. The overall financial situation in Hubei province is sound and stable (Table 3.5), although the unfolded COVID-19 Pandemic is expected to have negative but only short-lived impact on the government finance. The total expenditure of the PforR accounts for only about 0.45 percent (= 1.1 / 244 × 100) of the general public budget revenue from 2023 to 2028 in Hubei. Overall, the financial sustainability is not deemed as a major concern for the Program. Table 3.5. Financial Situation in terms of General Public Budget in Hubei Hubei 2018 2019 2020 2021 General public budget revenue (GPBR), US$, billions 47 48 36 47 Transfer from Central Government (TFCG), US$, billions 62 68 89 77 GDP, US$, billions 600 649 614 714 Debt balance (DB), US$, billions 95 115 144 170 Debt repayment amount of current year (DRA) 51 59 68 — Debt-to-GPBR ratio (= DB / GPBR + TFCG), % 88 99 115 137 Debt-to-GDP ratio (= DB / GDP), % 16 18 23 24 Debt repayment ratio (= DRA / (GPBR + TFCG)), % 43 46 50 — Source: Hubei DOF. Economic Assessment 39. Public sector financing is justified by expected positive externalities in line with the Program's focus on public goods. The Program is expected to generate environmental benefits from reducing water pollution through improved municipal waste management, land and water conservation measures, livestock mature treatment, providing habitat for plant and animal species, and generating global benefits through reduced GHG emissions. Specific private sector actors do not capture the economic benefits of most Program outcomes, limiting the possibility for private financing for many activities (that is, benefits are diffuse and public). The Program will develop institutional systems, which will sustain and scale the activities delivering these benefits beyond the Program’s life, with a focus on increasing transparency and efficiency in achieving these outcomes relative to a ‘no Program’ scenario. 40. The PforR will provide value addition by focusing on a subset of activities where the Government wants to enhance efficiency, effectiveness, and impact of expenditure. The design of the World Bank Program, in the form of a nested hierarchy of activities, helps align actions of governments across levels (that is, vertically) and across jurisdictional borders (horizontally) in support of basin-wide and sub-basin-wide outcomes, in ways that do not always occur under traditional programming and governance arrangements. The World Bank's involvement will increase central and provincial governments’ exposure to international experience and best practices in integrated basin management, water pollution control, and ecological flows and ensure lessons from recent World Bank-supported Page 85 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) ecological restoration and water pollution control projects are incorporated into the broader government program for the YRB. Assessment Methodology 41. This economic assessment uses a Cost Benefits Analysis based on benefit transfer, applied at the sub-basin level for Qing River and Hong Lake Basins. The assessment implicitly combines activities under Results Area 1, Results Area 2, and Results Area 3 to value outcomes as a combined water environment quality improvement. Results Area 1 is seen as facilitating outcomes achieved under Results Area 2 and Results Area 3. The assessment compares a scenario of no government program to a scenario of a government program including World Bank support. This approach issued because under a PforR, Government and World Bank funds are combined to achieve results, with limited distinction at the activity level between World Bank-financed and Government-financed achievements. This approach can determine whether the overall program – of which Bank financing part-supports – is net socially beneficial. 42. The benefits of the proposed Program include both global and local benefits including substantive climate co-benefit. At the local level, benefits will accrue from reducing water pollution from NPSs, reducing plastic pollution in water bodies, improving habitat for plant and animal species. These will increase the productivity of water resources, improve the amenity value of rivers and lakes, real estate values, fishery productivity, shipping services and reduce the costs of water treatment. Global benefits will be generated through reduced GHG emissions (for example, through animal water treatment, improved wastewater management and soil and water conservation) and the conservation of biodiversity. Climate benefits (primarily GHG mitigation) will be derived from improved watershed management and from treated livestock/poultry wastes, as well as from more efficient and sustainable wastewater collection and treatment systems. Moreover, the sharing of information within the county/municipal/provincial chief river system will allow efficiency gains in water resources management throughout the basin. Therefore, from the economic assessment perspective, public sector financing is justified by the expected positive externalities of improved information systems and management practices. Costs are based on total Program financing over 2023–2028, which is expected to be US$1,074 million, of which an expected US$8740 million (81 percent) will be financed by the Government and US$200 million (19 percent) by the proposed IBRD loan. 43. To estimate the Program’s economic benefits, values were drawn from the literature and benefit transfer was used to apply these to the case of Hubei. The economic values of water quality and ecological improvement are challenging to quantify due to the dispersed spatial extent of benefits across the basin, the wide range (and indirect nature) of benefit types, and data limitations. However, a number of studies provide benefit estimations that can be adapted to the parameters of this program to indicate likely economic values. These studies utilize a contingent valuation method60 to capture the broad range of benefits (both use and non-use economic values) that are expected. Economic assessment at the river/lake basin level considers the benefits from the program as a whole (that is, as a package of activities) within its basin areas, thus capturing the bulk of the Program activities. The Program’s physical investment 60 Contingent valuation method uses questionnaires targeted to impacted populations to elicit their WTP for non-market environmental goods, such as avoidance or reduction of pollution impacts. It has been applied extensively to water pollution issues. Page 86 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) activities will cover Qing River and Hong Lake Basins with soft investment in institutional and capacity building benefiting the whole province. 44. Under the YRPERP (Hunan and Jiangxi), a survey of relevant literature found four studies well- suited to comprehensively value water environment improvements in river basins.61 A lower bound of 0.55 percent and an upper bound of 2.9 percent for willingness to pay (WTP) as a percentage of gross household income was found across the four studies for comprehensive impacts of water pollution, including water treatment and health values, amenity values, recreational values, and ecological values (existence value to people). While they are broad, these attributes are similar to those expected from the program and thus provide rough indications of the population’s comprehensive valuation (that is, including both use and non-use values) of the outcomes of the program. As with YRPERP (Hunan and Jiangxi), the lower identified estimate was used for a conservative approximation (0.55 percent of household income) of the values of Qing River and Hong Lake residents place on improving water quality in these two basins under YRPERP (Hubei). Adjustment for these population and per capita income levels were made and estimates compared to the total program cost (Table 3.6). Table 3.6. Estimation of Annual WTP Value and Program Cost62 Government Program Population Annual per Capita WTP (0.55% of Income) Cost (millions) Gross Income (US$) (US$, millions, Annual) (US$, millions, total) Qing River Basin 4.63 3,646 92.85 1,074.00 Hong Lake Basin 6.28 4,435 153.21 Assessment Conclusions 45. The project ERR is well above the social discount rate under the scenarios with or without GHG benefits, indicating the Program is economically viable. Program net benefit cash flows have been projected with the assumptions that (a) investment will be completed within the Program life (5 years), (b) benefits will accrue starting from year 4 for a total of 15 years, with full benefits being reached from year 6 onward; (c) O&M costs of infrastructure and other recurrent costs will be 10 percent of the total program investment cost, and (d) social discount rate is 6 percent.63 46. Based on the World Bank’s guidance note on the shadow price of carbon in economic analysis issued on November 12, 2017, projects’ economic analysis should use a low and high estimate of t he carbon price, starting at US$40 and US$80, respectively, in 2020 and increasing to US$50 and US$100 by 2030; the low and high values on carbon prices are extrapolated from 2030 to 2050 using the same growth rate of 2.25 percent per year that is implicit between 2020 and 2030, leading to values of US$78 and US$156 by 2050. 61 See Program YRPERP (Hunan and Jiangxi) PAD Annex 3 (Para 43). 62 World Bank team’s preliminary calculations to be refined during the Pre-appraisal mission. 63 See: World Bank. 2015. Technical Note on Discounting Costs and Benefits in Economic Analysis of World Bank Projects . The discount rate is also recommended to be 6 percent for investments with long-term unquantified social and environmental benefits. See: NDRC. 2006. Economic Analysis of Construction Projects: Methods and Parameters. China Planning Press, Beijing. Page 87 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) 47. The results of the analysis are summarized in Table 3.7. The substantial higher ERRs with the GHG benefits reflect the Program’s significant contributions to the global public goods as elaborated in the Section below. Table 3.7. Program-Level ERRs under Various Scenarios With GHG Benefits With GHG Benefits Without GHG Benefits (Carbon Shadow Price at Low Level) (Carbon Shadow Price at High Level) ERR NPV (US$, millions) ERR NPV (US$, millions) ERR NPV (US$, millions) 13% 411.35 21% 951.66 27% 1,491.98 48. Sensitivity test was not warranted due to (a) WTP was estimated at the very low end and (b) no downstream benefits were included in the analysis. The results therefore only reflect the limited the economic benefits the Program will have generated. GHG Emission Mitigation 49. GHG emission reductions of 25.62 million tons of CO2e are expected due to PforR Program activities (Table 3.8) for the Program life. Quantification of GHG emissions focuses on DLIs 3, 4, and 5. Mitigation is assessed over 15 years and is compared to a no-Program scenario (baseline). Upgrading the wastewater network and treatment operations is expected to reduce emissions due to the current leakage of wastewater to groundwater. The treatment and utilization of animal manure (through on-farm treatment facilities and organic fertilizer displacement of synthetic fertilizer) is also expected to substantially mitigate emissions. Soil and water conservation measures are expected to increase carbon sinks. This assessment does not include the expected emission reductions from institutional, policy, and planning measures. The reductions presented here should thus be considered as a conservative estimate of the Program’s GHG mitigation potential. Table 3.8. GHG Mitigation from Quantifiable Program Activities over 15 Years (tons CO 2-e) DLI Activity Net Emission Reductions Net Average Annual Emission Reductions 3 Soil and Water Conservation 25,081,000 1,672,067 4 Wastewater 100,000 6,667 5 Animal Manure 444,000 29,600 Total 25,625,000 1,708,333 Gender Analysis 50. Women are substantially underrepresented across different roles in local river resource management system. According to the data from the six counties, women account for only 12.2 percent of river chiefs, and in Honghu County this number can be as low as 8.5 percent. Despite women’s limited presentation as river chiefs in Hubei, which manifests a gendered imbalance of decision-making power in water governance, women are supposed to be key drivers of behavioral change in environmental protection and they are assumed to be better communicators and advocates for public participation based on the Gender Study of the River Chief System in the YRB,64 which explored the status and reasons 64 Gender Study of the River Chief System in the YRB. Ongoing. Conducted under the YRPERP (Hunan and Jiangxi). Page 88 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) of gender gaps existing in the RCS in the YRB. A lower share of women is also found among volunteers and river keepers based on the data collected, which shows a general gender gap in the water sector workforce in Hubei province. The disproportionate representation in the county-level RCS limits women’s voice and agency in water governance and their influence on raising public awareness of ecological protection. Figure 3.1. Proportion of Women in River Chief Position and others Proportion of Women in River Chief Position and others 9.2% 9.2% Honghu 2.5% 8.5% 14.0% 29.4% Jianshi 16.8% 18.1% 20.0% Enshi 12.0% 13.4% 47.2% Xuanen 42.7% 13.0% 10.1% 11.9% Badong 35.0% 10.2% 12.4% 21.5% Lichuan 8.0% 13.6% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% Cleaner River Keeper Volunteer River Chief Source: Technical Assessment (January 12, 2023) Figure 3.2. Women Working in Relevant Sectors Women working in relevant sectors 76.0% Honghu 18.3% 29.7% 34.6% Jianshi 31.3% 24.7% 44.1% Enshi 36.2% 22.0% 26.8% Xuanen 23.8% 18.2% 44.8% Badong 25.9% 13.9% 50.0% Lichuan 34.5% 21.1% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% General Technical Managerial Source: Technical Assessment (January 12, 2023) Page 89 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) 51. Figure 3.265 shows the proportion of women working across managerial, technical, and general positions in project-related divisions including Water Conservancy Bureau, Urban Management Bureau, Environmental Protection Bureau, Agriculture and Rural Affairs Bureau, Housing and Urban-Rural Development Bureau of the six demonstration counties. These types of positions are formal, and the personnel considered government staff, which constitute a crucial segment of the decision-making power at the county level. The systematic gender employment gap is more acute in managerial and technical positions. 52. In general, fewer women (on average 30 percent) are professionally engaged in water treatment utilities. The lower share of women in technical and managerial positions can be explained by the structural skill gap and gender bias which assumes women to be unsuitable for this industry and unfit for the role of leaders. Due to such conditions, it is assumed that women can be put at an even greater disadvantage when the recruitment system does not fully apply non-discrimination principles. The data of Xuan’en and Badong has however shown the potential of achieving a gender balance in managerial positions in water treatment utilities, and this can serve as reference for other counties. Figure 3.3. Women Working in Water Treatment Utilities Women working in water treatment utilities 57.1% 52.9% 70 50.0% 50.0% 60.0% 60 50.0% 36.4% 50 33.3% 28.6% 8 30.8% 18 31.0% 28.6% 40.0% 40 8 25.0% 25.9% 24.0% 17.0% 18.6% 30.0% 30 20 39 40 7 6 20.0% 35 6 10 3 4 0.0% 9 4 0.0% 20 4 15 19 10.0% 6 10 3 0 2 1 8 9 4 0 4 7 0 3 2 2 3 3 0 0.0% General General General General General General Technical Managerial Managerial Managerial Managerial Managerial Managerial Technical Technical Technical Technical Technical Linchuan Badong Xuanen Enshi Jianshi Honghu Men Women Proportion of Women Source: Technical Assessment (January 12, 2023) 53. Proposed Gender Actions: Based on above analysis, the following actions are recommended: (a) Design targeted professional skill enhancement trainings such as on natural resource management, data analysis, leadership skills, among others to the women working across different roles and sectors in the RCS, with the aim to help them acquire necessary skills and keep updated with the most advanced knowledge in the sector to stay competitive for relevant positions, especially the leadership role in the RCS. (b) Carry out gender awareness training for the water treatment utilities to improve the implementation of gender equal employment practices, mobilize technical support to 65Data from Water Conservancy Bureau, Urban Management Bureau, Environmental Protection Bureau, Agriculture and Rural Affairs Bureau, Housing and Urban-Rural Development Bureau of the six demonstration counties. Page 90 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) review their human resource policies, procedures, and guidelines to identify areas for improvement. (c) Conduct public awareness campaigns, send out brochures on river resource management and environmental protection to the general public. Women river chiefs can be the featured people of the campaigns and brochures to enhance the public recognition of the female efforts in river resource management and encourage more women to join as a vital force in river resource management and governance. (d) Gender indicator. Increased number of women as river chiefs in project counties. Page 91 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) ANNEX 4. SUMMARY FIDUCIARY SYSTEMS ASSESSMENT 1. Program Scope. The scope of the FSA is based on the defined boundary and Program Expenditure Framework The government program for the proposed PforR is the “Hubei’s 14th FYP for YREB Green Development”. The scope of program includes 6 cities/counties (one in Jingzhou municipality and 5 in Enshi municipality) and several activities implemented by related provincial entities. Implementation of the Program will follow the existing national, provincial, and sectoral legal framework and practices for fulfilling PFM, public procurement, and governance responsibilities. The FSA provides a comprehensive review and analysis of the current systems, identifies risks, and recommends mitigation measures for implementation to enhance the performance of the current systems in meeting the Program objectives. This annex summarizes the main conclusions of the FSA. 2. Assessment of Fiduciary Systems. The fiduciary team has assessed the fiduciary systems of all key Program implementing agencies in Hubei province, including the PDOF, DRC, DEE, DWR, DARA, Department of Housing and Constructions, PAO and related line bureaus in the demonstration cities/ counties. The assessment covers the review of the PFM cycle, Program systems and capacity improvements, and the Program implementation support. 3. The assessment concludes that the Program’s fiduciary systems are adequate for meeting Bank’s PforR Policy and Directive requirements. The systems can reasonably assure that the Program’s financing proceeds will be used for the intended purposes, with due attention to the principles of economy, efficiency, effectiveness, transparency, and accountability. 4. Public Financial Management System. The funds to be invested in the proposed Program would stem from various funding sources, including transfer funds from the central and provincial governments, as well as funds from the respective county government’s budget. The higher-level transfers from central and provincial government, which are more stable and reliable, are the dominant financial sources of the program budget. Since the county sector entities prepare their budget in line with the pre-noticed quota, there were no big gaps in program counties between the requested and approved program budget in the last three years. In addition, it is noted that besides the normal approved budget, some counties also got the supplementary budget which secures sufficient funds are allocated on program activities. The HLG transfers are normally distributed to counties in batches. Most Central Government transfers for the current year are distributed at the end of previous year, the others and most provincial government transfers are delivered to counties in different month of the year. The city/county government used to integrate the first tranche in their annual government budget, but the treatment of the second tranche is various. Some counties included the second tranche in their annual budget based on the projection and made adjustment later on, while others just waited the distribution of budget quota. As the result, the activities had to be postponed to the next year since the quota was normally received quite late. The lack of predictability of the second tranche hampers the capacity of local governments to forecast cash or credibly allocate budgets to budgetary units. It is noted county governments neither prepare medium- term budgets, nor do they link budgets to the prevailing development strategies or provide any explanation about the fiscal implications of policy changes. Since the budget quota was distributed to counties in tranches and sometimes the quota was delivered quite late, it is hard for counties to include all program funds in their annual budget. The budget preparation process at the county level appears to be carried out in an orderly and predictable manner. As reported by program counties, most of them Page 92 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) integrated higher-level transfers in their annual budget although the distribution is in batches. Since most higher-level transfers are stable, the county government used to integrate the transfers in their annual government budget based on their projections and then make adjustment in the second half year. 5. Since program is not an element of budget classification in China, the required program reporting cannot be generated from government Integrated Financial Management Information System (IFMIS). Related provincial line departments did not require counties to report program expenditures regularly. Several budget items which can capture program expenditures were selected and the data was analyzed to review the budget execution status. Budget completion rate is relatively satisfactory in program counties, which demonstrates the budgetary entities take budget execution seriously and once the budget is approved, the completion is not a questionable issue. However, there are still some circumstances that the completion rate is low and budget execution status is not quite stable. Governments at all levels have integrated all financial funds into the treasury single account (TSA) system. All revenues are directly collected into the treasury account or the special financial account, and all expenditures are paid to the contractors/suppliers/beneficiaries through the TSA. County governments effectively strengthen fund supervision and ensure the standard and efficient use of funds by strictly following the basic requirements of special funds, centralized payment by the national treasury, public bidding, and government procurement. The county finance bureaus allocate funds based on relevant materials such as the acceptance and settlement statement prepared by project supervisory entity, project unit, county auditing bureau and county finance bureau. Related regulations have been established in some counties to standardize the appropriation principle, appropriation conditions, appropriation process and account review procedures to ensure the fund appropriation system is implemented within a time limit, and the funds are allocated to the user unit in a timely manner, which improved the use of funds and ensured the safety of fund operations. Payments can be made to the budgetary units within the approved budget. The centralized payment center at each county finance bureau is responsible for initiating all payments, following the request of the budgetary units. Disbursement of IBRD loan will follow the conventional procedures. After the loan agreement is signed by the Bank and the MOF, the MOF will sign an on-lending agreement with Hubei province. Therefore, an advanced account will be opened and managed by Hubei provincial finance department. The IBRD loan will be disbursed to the account based on the request from provincial finance department for an advance deposit and achievement of DLIs. 6. Since program is not a budget classification element, it is hard to trace the program expenditures from government existing treasury system. Although the regular reporting mechanism has been established in some sectors, for example a sectoral project database is set up within the ecological and environmental sector in Hubei province and county ecological and environmental bureaus are required to report the usage of project funds through the database, counties were not required to report program expenditures regularly. Based on the discussion with the budget division of provincial finance department, it is noted that selecting some budget line items which can capture program expenditures and summing up the account balances is the normal practice for them to report program expenditures when needed. Therefore, a similar measure is adopted to design a tailored Program financial reporting template which will be discussed and agreed on by the Bank and all government entities involved. 7. There is adequate control over, and stewardship, of program funds, with well-defined delegation of authority. Following the national policy and regulations issued by the MOF and NDRC, the Provincial Governments have issued a series of regulations regarding fund management, implementation Page 93 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) measures, and result verification procedures, and so on. For example, the following government decrees have been issued by both central and provincial government for some earmarked funds, which are the main financing sources of program activities, to regulate the usage of these earmarked funds to ensure the budget could be used for the intended purposes. A set of performance indicators are attached to these earmarked funds which covering very broad aspects include economic, social, ecological, and others. Each year a performance assessment is jointly organized by provincial finance department and the responsible sectoral department, and the third party is hired to conduct the assessment against the pre- determined indicators. The allocation of the next year’s budget is linked with the performance of current year. The IFMIS has been established in both provinces, county finance bureaus are required to report their budget execution monthly by using the data generated from IFMIS so that budget execution can be monitored closely. Some county line bureaus also submit their monthly fund utilization report to higher- level administrative bureaus/departments. Most program counties prepared detailed practicable guidance on these higher-level regulations/decrees. Based on the interviews on provincial entities and counties interviewed and the data collected, it is noted that internal audit function has not been widely established in the province. At the provincial level, internal audit function (rather than the independent internal audit unit) has been set up in provincial water resources department, provincial agricultural and rural affaires department, and provincial ecological environment department. The supervision and performance evaluation bureau (the unit responsible for the internal audit and internal audit) within provincial finance department carries out its inspection on the usage of program funds. At county level, besides the supervision and performance evaluation unit being established within each county finance bureau, the internal audit function has been set up in all related line bureaus in Badong county and some sectoral buraus in other counties. 8. Although government auditors indeed audit program funds when they carry out budget execution audit, accountability audit and other types of audits, no specific audit was conducted by PAO and audit offices of interviewed counties on the usage of program funds in the past years. The audit of the proposed Program will be conducted by Hubei PAO. Besides conducting the audit on budget execution and other provincial-level entities, the PAO has been the auditors of Bank-financed projects for about three decades. They are the auditors the Bank accepted in China. The first year’s audit report issued by the PAO is subject to the quality review by the China National Audit Office (CNAO). 9. Public Procurement System. The TBL and GPL are the primary public procurement laws governing public procurement in China. TBL focuses on construction-related works, goods, and consulting services; while GPL focuses on fiscal budget funds financed purchasing activities carried out by government departments, institutions, and organizations. The demarcation line is not very clear between the two until the issuance of monetary threshold 66 for tendering and bidding activities by NDRC and guidance documents by the MOF, NDRC and respective line ministries. Each province and line ministry issue procurement related guidance and orders to regulate procurement in its respective administrative jurisdiction or sector. Though fragmented, there is no conflict with the two laws. Anti-corruption requirements and measures are available in laws and regulations to prevent, report, detect, investigate, prosecute, and sanction fraud and corruption conducts. 10. The assessment analyzed data, interviewed, and discussed in person with procuring entities and public trading centers (mandated by government for providing service and supervision to procuring 66 https://www.ndrc.gov.cn/xxgk/zcfb/fzggwl/201803/W020190905495130858389.pdf. Page 94 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) activities through open and selective bidding) on procurement legal framework implementation in practice. It identifies no deviations from the legal requirements. 11. The key stakeholders of procurement under the Program are line government agencies, procuring entity, procurement agent, design institute, supervisor, transaction center and the selected supplier / contractor / consultant. The line government agencies plan and get approval the activities to be carried out under the Program; the procurement agent assist the procuring entity (government agency itself or its delegated agencies) to prepare procurement documents and facilitate the procurement process; design institute provides technical contribution to the procurement process; supervisor monitors contract implementation; trading center provides service to procurement process and supervises the process simultaneously; the selected supplier /contractor / consultant implements the contract as agreed with the employer/purchaser /client. 12. A complaint mechanism is provided in both TBL and GPL. Complainant has the right to file a complaint with the procuring entity or supervising authority of the procuring entity. GPL further allows administrative reconsideration or administrative proceeding to the People’s court in case the complainant is unsatisfied with the resolution or any delay handling of the case by the supervising authority of the procuring entity. 13. Key Conclusions and Recommendations. A comprehensive PFM framework has been established including government regulations, decrees, standards, and procedures, and so on which regulate the program activities to ensure program funds are used for the intended purposes. However, the enforcement is various at different places and the Bank’s involvement could strengthen the institutional capacity of related government entities. Given Program is not an element for budget classification in China, which brings challenges on most PFM areas. During the fiduciary assessment, the major FM risks have been identified and mitigation measures provided: (a) The financing sources of the program are quite comprehensive as it integrates funds from very broad sources. Multiple-year program budgeting should be prepared to ensure program funds could be secured and county government could prioritize its investment to enhance the efficiency of its scarce financing resources. (b) Budget quota was distributed to counties/cities in batches and some program funds were delivered in the second half year or even the year-end which prevents the county government from including the entire program funds in its annual budget and delays the implementation of planned activities. Provincial entities should revisit their budget quota distribution and take actions to ensure the budget quota could be distributed to county/city in advance. (c) ‘Program’ is not a budget classification element in China and the required Program financial reporting cannot be generated from government treasury system. A blue tagging mechanism which can trace program expenditures from government existing integrated financial management system has been recommended and it is expected to be piloted, especially in those demonstration counties, during project implementation. This also creates fundamental basis for generating program financial reporting from government treasury system. Page 95 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) (d) No requirement by provincial government on reporting of program expenditures in Hubei province. A tailored program financial reporting templet will be designed which can capture the data from government system and used by the project upon agreed by related government entities. (e) Absence of efficient supervision by related provincial entities on the usage of program funds may bring potential risk of improper use of program funds. The decrees about program expenditure supervision should be established in Hunan province. Provincial entities involved should strengthen the supervision on program funds in line with related government decrees. (f) Government auditors did not audit the program funds and prepare the program audit report. The Bank will work with the PAO to develop the TOR for program auditing to ensure program funds could be audited in line with the Bank’s policy. 14. The Program has a robust legal framework for procurement, which includes the TBL; the GPL; and regulations and orders issued at national, provincial, and county levels. Although the laws could be modernized and aligned to modern principles such as ‘value for money’ and ‘fit for purpose’, both offer a fair playing field for bidders and promote transparency and competitiveness. Three major procurement risks have been identified and mitigation measures provided: (a) Contracts may be awarded to firms or individuals which are debarred or under temporary suspension by the Bank or other multilateral development banks. The following mitigation measures are proposed: (i) Upon Program loan effectiveness, the Hubei Program Provincial Leading Group/PPMO shall issue a high-level official letter or official instruction to require Program implementation agencies to ensure that no contract will be awarded to ineligible firms or individuals, which will include: The Program implementation agencies (that is, procuring entities) are to include the Bank’s website link to the debarment list (which is dynamic) as one of the minimum qualification requirements in the bidding documents. When the bid evaluation starts or before contract award is issued, the implementation agencies and/or the bid evaluation committees shall check the latest lists of the debarred and temporarily suspended firms and individuals to ensure contract being awarded to eligible firms or individuals; or, as an alternative to the measure in above, since the full- process electronic bidding (e-procurement) has functioned in the provincial e-procurement system and the systems in the 6 cities/counties, the Bank recommends that one additional function may be developed in the existing e-procurement systems to link to the sanction list of the World Bank’s Website and the procuring entities are required to check the website and the list, and shall confirm in the e-procurement system that the recommended bidder is not included in the list, before the bid evaluation results are allowed to be published through the e-procurement systems; and (iii) The TOR for annual external audit shall include the task of randomly selecting contracts and assessing whether they have been awarded to an ineligible firm or individual; (b) The Bank may not be informed of fraud allegations and corruption issues during the implementation of the Program. A PIP shall therefore require the client to inform the World Bank of any credible and material allegations of fraud and any corruption issues as part of the Program progress reports, as mandated in the Loan Agreement; and Page 96 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) (c) Contracts may not be completed within the contractual completion time, and the contract completion audit may not be completed timely. Procedures or a guidance note should be produced by the PPMO and/or CPMOs that clearly define the undertaking of contract administration responsibilities in line with the regulatory framework of the agencies. Table 4.1. Program Fiduciary Systems Risks and Mitigation Measures Risk Mitigation Action The contracts may be awarded to firms or PAP: (1) Upon Program loan effectiveness, the Program Provincial individuals which are debarred or under Leading Group or the Provincial Authority/PDRC shall issue a high- temporary suspension by the World Bank or level official letter or official instruction to require Program other multilateral development banks. implementation agencies to ensure that no contract will be awarded to ineligible firms or individuals. The Program implementation agencies (that is, procuring entities) are to include the Bank’s website link to the debarment list (which is dynamic) as one of the minimum qualification requirements in the bidding documents. When the bid evaluation starts or before contract award is issued, the implementation agencies and/or the bid evaluation committees shall check the latest lists of the debarred and temporarily suspended firms and individuals to ensure the contract is awarded to eligible firms or individuals; or as an alternative to above, since the full-process electronic bidding (e- procurement) has functioned in the provincial e-procurement system and the systems in the 6 cities/counties, the Bank recommends that one additional function may be developed in the existing e-procurement systems to link to the sanction list of the World Bank’s Website, and the procuring entities will be required to check the sanctions list in the website and confirm in the e- procurement system that the recommended bidder is not included in the list, before the bid evaluation results are allowed to be published through the e-procurement systems; and PIP: (2) The TOR for annual external audit shall include the task of randomly selecting awarded contracts to check whether they have been awarded to ineligible firms or individuals. The World Bank may not be informed of any PAP: The Program manual will require the PPMO to regularly credible and material allegations of fraud inform the Bank of any credible and material allegations of fraud and corruption during the implementation and corruption in the Program progress report, as required in the of the Program. loan agreement. The financing sources of the Program are PIP: Multiple-year program budgeting should be prepared to quite comprehensive, integrating funds from ensure Program funds could be secured and the county very broad sources, budget quota was government could prioritize its investment to enhance the distributed to counties/cities in batches and efficiency of its scarce financing resources; provincial entities some Program funds were delivered in the should revisit their budget quota distribution and take actions to second half of the year or even the year-end, ensure the budget quota could be distributed to the county/city in which prevents the county government from advance. including the entire Program funds in its annual budget and delays the implementation of planned activities. Page 97 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Risk Mitigation Action ‘Program’ is not a budget classification PIP: A blue tagging mechanism which can trace Program element in China and the required Program expenditures from the Government’s existing integrated FM financial reporting cannot be generated system has been recommended and it is expected to be piloted from the government treasury system. during project implementation, especially in those demonstration counties. Provincial finance department will decide when and how to implement this piloting by considering the readiness of government reform on IFMIS. No requirement by provincial government PIP: Provincial entities involved should strengthen the supervision on reporting of program expenditures in of program funds in line with related government decrees. Hubei province. Absence of efficient Guidance and training should be provided to the supervision and supervision by related provincial entities on performance evaluation unit as they are performing the internal the usage of Program funds may bring audit function. potential risk of improper use of program funds. Government auditors did not audit the PIP: The World Bank will work with the PAOs to develop the TOR Program funds and prepare the Program for program auditing to ensure Program funds shall be audited in audit report. line with the World Bank’s policy. Based on the analyses of the contract PIP: Procedures or a guidance note should be produced by Hubei administration, most contracts were PDRC that clearly defines the undertaking of contract completed within the contractual period. administration responsibilities in line with the Regulatory However, some contracts could not be Framework. completed within the contractual completion time; the longest delay was over one year. Some contract completion audit could not be conducted on time. 15. Program Implementation Support. During Program implementation, the proposed fiduciary implementation support includes the following: (a) Work with the team to review Program implementation progress, including the achievement of Program results and implementation of the PAP. (b) Work with the team to assess timeliness and adequacy of Program fund appropriation as approved in the budget. (c) Continuously assess and monitor the performance of the FM and procurement systems under the Program and provide suggestions for enhanced efficiency and effectiveness. (d) Monitor application of the PforR anti-corruption guidelines. (e) Monitor the performance of the fiduciary systems and the audit report, including the implementation of the PAP. (f) Monitor the PforR financial statement reporting process and assist the client as necessary. (g) Monitor the contracts implementation, including cost, time, and quality control. (h) Help the client resolve implementation issues and carry out institutional capacity building. (i) Assist CNAO and the audit offices at provincial and county level in strengthening audit arrangements. Page 98 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) (j) Hold regular trainings for provincial and county audit offices, particularly with respect to procurement post audit to build capacity. (k) Monitor changes in fiduciary risks of the Program and, as relevant, compliance with the fiduciary provisions of legal covenants. Page 99 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) ANNEX 5. SUMMARY ENVIRONMENTAL AND SOCIAL SYSTEMS ASSESSMENT 1. The Program supports the selected activities among the numerous development projects of the “14th Five-Year Plan for Green Development of the Yangtze River Economic Belt in Hubei Province”. The Program is expected ‘to improve institutional coordination, enhance ecological protection, reduce water pollution loads along the Yangtze River Basin in Hubei Province’, and, therefore, bring overall E&S benefits. The Program implementation will rely on the existing applicable national and provincial E&S regulatory framework and in-place institutional arrangements to manage underlying E&S risks and impacts. The ESSA for this Program evaluates the system soundness and recommends necessary recommendations and actions to address gaps where they exist. This annex summarizes the main conclusions of ESSA. 2. ESSA Methodology. The World Bank team conducted an ESSA using the following methodology, including (a) thorough screening of the potential E&S impacts/risks of the Program activities; (b) desktop review of the national and subnational E&S laws, regulations, and procedures for managing the E&S impacts/risks; (c) consultation with provincial sector departments on the E&S systems, including the legal framework, institutional arrangement, in-place capacity and tracked performance and outcome; (d) field visits to the sites of typical Program activities in the selected counties, with extensive meetings and interviews with key stakeholders from implementing agencies to government officials at provincial, municipal and county levels and representatives of local communities/villages; and (e) disclosure and consultation meetings to seek feedbacks on the draft ESSA and PAP from various stakeholders. Observations and discussions during these site visits and stakeholder engagement provided a good understanding of the potential E&S impacts/risks associated with the Program activities and the procedures and capacity of the government departments for dealing with such impacts/risks. The ESSA also recommended actions to address gaps and opportunities to enhance the performance of the E&S systems during the PforR implementation. 3. The Program will support the implementation of three results areas: i) Improving Institutions and Innovations (provincial level) to support institutional coordination improvements for inter-jurisdictional cooperation and cross-sectoral coordination in Hubei province; ii) Advancing Ecological Protection through Integrated River Basin Management (sub-basin level) to support ecological protection and climate resilience of river and lake ecosystems in the demonstration sub-basins of Qing River Basin and Hong Lake Basin; and, iii) Reducing Water Pollution and Transmission of Plastic Waste (county level) to support the reduction of the point and nonpoint source pollution, including plastic debris, in demonstration counties. The activities under the Results Areas will primarily generate E&S benefits of reduced pollutant discharge to water bodies and improved river and lake water quality and basin ecological environment. 4. Environmental and Social Exclusion List. In line with the Bank Guidance on PforR ESSA, activities with the potential to cause significant adverse impacts that are sensitive, diverse, or unprecedented on the environment and/or people are excluded, including a) activities that would involve large-scale infrastructure construction or large-scale land acquisition; b) activities that would involve acquisition of basic farmland; c) activities that involve lake/river restoration through returning of water/fishing/farmland to lake; d) activities involving closure or relocation of livestock or poultry farming; e) activities involving relocation of ethnic minority people, f)TA activities that implementation of whose outputs may lead to high E&S risks of downstream activities; g) activities that are classified as domestic Category A (Environmental Impact Assessment Report category) projects; h) activities that would be Page 100 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) conducted in environmentally sensitive areas; i) activities that would be conducted in areas with significant legacy pollution; and j) activities that would construct treatment/disposal facilities for domestic solid waste and wastewater sludge, and so on. 5. E&S Effects and Risk Rating. The ESSA concludes that the overall E&S risk rating of this Program is Substantial. After applying the exclusion criteria, the Program will support pollution control and ecological restoration activities including county and township domestic WWTPs and pipelines, domestic solid waste collection and transfer, agricultural mulch film collection, waste treatment and utilization for existing livestock/poultry farms, soil and water conservation, and TA activities, and so on. The significant and broad E&S benefits in the Program regions in Hubei province mainly include reduced domestic wastewater, solid waste, plastic waste, and livestock/poultry waste; improved river and lake water quality; and rehabilitated ecological environment. In the meantime, the program is also to have adverse E&S impact including construction-related impacts such as dust, noise, disturbance of water body, soil erosion, wastewater and solid waste management, construction worker and community’s health and safety, labor management, small scale of land acquisition (for example, ranging from about 500 m2 to less than one ha for sitting a solid waste transfer station), temporary land occupation, and potential impacts to vulnerable groups; impacts during operation such as effluent discharge from wastewater treatment facilities, safe operation of facilities, workers’ health and safety, safe application of fertilizers, and impacts on farmers’ livelihoods; and also the potential downstream ramifications of TA activities. These adverse E&S impacts are well identified and readily avoided, minimized, and mitigated through mature technologies and good management practices of China’s domestic existing E&S management system. Neither OP/BP 7.50 International Waterways nor OP/BP 7.60 Disputed Areas is applicable to the Program. 6. System Assessment. The ESSA concludes that China has established comprehensive systems for managing the related E&S issues at national, provincial, and local levels. The systems consist of legal frameworks (laws, regulations, guidelines, and standards) that are principally consistent with the World Bank’s PforR Policy and Directive and have corresponding implementation mechanisms and institutional arrangements for enforcing the legal frameworks. A well-financed and staffed institutional structure through various official levels exists and efficiently operates to generally well execute the existing legal framework and guarantee the achievement of sound performance tracks on the ground. The track records show that the management capacity and performance is generally sufficient and that the systems can provide an acceptable basis for addressing the possible E&S issues related to the activities supported under the PforR Program. 7. Environmental Management System. Since the promulgation of its first Environmental Protection Law in 1979, China has gradually established a comprehensive environmental management system. In recent years, the Government of China has been working to reform the system by enhancing the environmental law enforcement and pollution prevention approach. A set of laws, regulations, and technical guidelines have been—or are in the process of being—issued or updated by national and local governments regarding Environmental Impact Assessment (EIA) for construction projects and OHS management. 8. The key PforR government stakeholders involved in environmental, health, and safety management include various levels of Ecology and Environment Bureau (EEB), Housing and Urban-Rural Development Bureau (HURDB), water bureau, Agriculture and Rural Affairs Bureau (ARAB), natural resources bureau, health commission, and emergency management bureau, and so on. EEB is responsible Page 101 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) for reviewing and approving the EIA documents and supervising the environmental compliance of activities under this PforR during the construction and operation phases; water bureau reviews and approves the projects’ soil and water conservation reports; HURDB has sector management authority for domestic wastewater and solid waste projects; ARAB supervises the activities involving agricultural mulch films and livestock/poultry waste; and emergency management bureau and health commission take overall responsibility of OHS management. 9. Consultations of government departments at provincial, municipal and county levels and site visits to typical activities in the six demonstration counties of Hubei, have demonstrated that the domestic environmental management systems, implementation mechanisms, institutional arrangements, and management capacity related to the Program activities are principally consistent with the World Bank’s PforR Policy and Directive and can provide an acceptable basis for addressing the possible environmental issues related to the Program activities. The assessment results also indicate gaps in the implementation of some environmental management systems, such as inadequate odor management in livestock/poultry farms and domestic solid waste transfer stations. 10. Social Management System. The assessment concludes that China has formulated a series of laws and policies at the national and local levels and has established appropriate management agencies and mechanisms to govern social risks in relation to the program's activities. Subject to the potential social impacts and risks identified, the social system assessment focused on the dimensions concerning social impacts and risks assessment and management system, cultural heritage protection, occupational health and community safety, land acquisition and resettlement, public participation, ethnic minorities, and vulnerable groups. The social systems are essentially deemed comprehensive and consistent with the World Bank PforR Policy and Directive. 11. Hubei have established management agencies with clear responsibilities and qualified staff at the provincial, municipal, and county levels for managing corresponding social risks and impacts. The ESSA report assessed the organizational setup of relevant social authorities against the principles and elements as set out in the World Bank Guidance. For example, China has established a functioning mechanism of Social Stability Risk Assessment, which is implemented by related project implementation agencies and managed through the committees of provincial and county political and legislative affairs of related regional governments. The cultural departments are responsible for managing adverse impacts on physical cultural heritage. The natural resource bureaus enforce land acquisition, compensation, and resettlement following the amended Land Management Law (2020) with the support of and coordination by township governments and village committees. Other line bureaus, such as social security bureaus, labor bureaus, among others, are also to be involved in the process of livelihood restoration for project- affected persons. China has set up various competent authorities to manage to support and assistance to different vulnerable groups. For example, poverty reduction offices or countryside revitalization bureaus are mainly responsible for poverty reduction, disabled person federation for assistance to disabled people, civil affairs bureaus for support to left-behind old people and children, and women’s federations for assistance to women. 12. During the preparation, the engagement with various stakeholders from both provincial and municipal/county levels, and the solid due diligence of relevant prior similar projects, concluded that the social management systems are well functioning in line with the laws and regulations and that the overall social outcomes in similar domestic projects are fairly good. However, the ESSA also identified the Page 102 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) government social systems per se is sound. Some minor gaps and primarily opportunities in terms of site- specific practice and performance remain, requiring further improvement to consistently manage social risks and impacts, including (a) there is lacking explicit mechanisms and institutional arrangements to properly document the process of social risks and impacts screening, stakeholder engagement, and grievance redress and monitor the social risk management; and (b) the Health Commissions do not adequately extend the public outreach and training campaigns and supervisions to some small-scale facilities, for instance, the waste transfer stations, livestock mature utilization units, and downstream landfills and plastic waste treatment, for which both the owners/management and workers have relatively low awareness of relevant regulations and have room to improve site-specific practice to promote the worker’s health and safety. 13. Consultation and Information Disclosure. The team explored various means (both face-to-face and virtual) to meaningfully engage with relevant stakeholders, following the World Bank’s latest guidance notes on public consultation in response to the outbreak. Relevant stakeholders, including line government departments, enterprise representatives, the workers, and local communities, were consulted in the process through meetings and field visits to the six demonstration cities/counties. The draft ESSA report was shared with Hubei government and the six demonstration cities/counties (Honghu, Lichuan, Enshi, Jianshi, Badong, and Xuan’en) in late August 2022. The Bank task team carried out consultation workshops with the key stakeholders at provincial, municipal and county levels to seek the participants’ feedbacks to the findings and recommendations of the draft ESSA. The participants voiced their support in implementing the proposed Program and concurred with the findings and recommendations of the draft ESSA, which were considered relevant and valuable for strengthening the actual effectiveness of the implementation of the existing E&S system. Some participants provided valuable opinions to improve the accuracy of the ESSA description in local context, which have been reflected in the revised ESSA. The revised ESSA was disclosed locally and on the World Bank’s website in October 2022. 14. Conclusions and Recommendations. The ESSA concluded that although the national and subnational systems for addressing the E&S impacts and risks are principally consistent with the World Bank’s PforR Policy and Directive, opportunities do exist for strengthening the efficiency and effectiveness of E&S risk management under the Program. Key E&S recommendations are as follows: (a) Measures should be taken to strengthen odor control in livestock/poultry waste management and domestic solid waste transfer to reduce odor impacts. (b) Monitoring of social risk management should be strengthened. When conducting social risk assessment, the screening of social risks and impacts, public participation, and appeal records during the construction and operation of various facilities should be managed and documented, including the monitoring arrangements for the implementation of the social risk management plan, and the Included in the scope of social monitoring. To this end, each subproject should configure or arrange necessary human resources to ensure the implementation of the above measures. (c) Enterprises such as sewage treatment plants, livestock and poultry manure recycling enterprises, and waste treatment facilities should strengthen occupational health training and management. Page 103 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) (d) TOR for TA activities that may have potential downstream E&S risks and impacts shall include requirements for assessment of such risks and impacts. 15. To implement the abovementioned recommendations, four actions have been proposed in the PAP: (a) Hubei provincial and county-level HURDBs and ARABs shall ensure the design and implementation of appropriate odor treatment facilities/measures in construction or upgrade of livestock and poultry waste management facilities and domestic solid waste transfer stations to reduce odor impacts. (b) During the social risk assessment of specific subprojects, the monitoring arrangements for the implementation of the social risk management plan should be included. At the same time, the records of public participation and appeals during the construction and operation of various facilities should be documented and archived and included in the scope of social monitoring. Each subproject shall allocate or arrange necessary human resources to ensure the implementation of the above measures. (c) Enterprises such as sewage treatment plants, livestock and poultry manure recycling enterprises, and waste treatment facilities (such as landfills and plastic waste treatment) should strengthen occupational health training and management. (d) The provincial PMO shall submit TOR of TA activities to the Bank for review and concurrence before commencement of TA activities. TOR for TA activities that may have potential downstream E&S risks and impacts shall include requirements for assessment of such risks and impacts. Page 104 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) . ANNEX 6. PROGRAM ACTION PLAN Action Description Source DLI# Responsibility Timing Completion Measurement Issue an official Fiduciary PPMO Other By loan Provincial official notification to notification that no Systems effectivenes affiliations/counties are issued contract will be s and copies are shared with the awarded to either a World Bank. firm or an individual appearing on either the World Bank’s debarred list or under temporary suspension list. Regularly inform Fiduciary PPMO Recurrent Semi- Reflected in the PforR’s the World Bank of Systems Annually quarterly/semi-annual progress any credible and reports. material allegations of fraud and/or corruption regarding the PforR’s activities as part of the overall PforR’s reporting requirements. Ensure the design Environmental Hubei, county-level Other Throughout Odor treatment design and and and Social HURDBs, ARABs Program facilities available to be implementation of Systems implementa checked by the World Bank. appropriate odor tion stage treatment facilities/measures in construction or upgrade of livestock and poultry waste management facilities and domestic solid waste transfer stations to reduce odor impacts. Put in place Environmental PIA Other Throughout PPMO will submit semiannual functioning and Social Program progress reports to the WB, mechanisms for Systems implementa including records of social social risks & tion stage impacts and risks screening and impacts screening, mitigation, information information disclosure, public participation, disclosure, public grievance redress and supports Page 105 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) consultation, to vulnerable groups. grievance redress, monitoring, reporting, strengthen the records-archiving during the process of social risks and impact mgmt In coordination Environmental PIAs Other Throughout PPMO will submit semiannual with Health and Social Program progress reports to the World Commissions, Systems implementa Bank, including OHS training tailor, enforce an tion stage and health checkup records. outreach TP, prioritize budget, support facilities under the Program and downstream waste treatment facilities to promote adequate worker H&S consistent with regulatory requirements. ToRs for technical Environmental PPMO Other Throughout PPMO will submit the ToRs to assistance (TA) and Social Program the Bank for review and activities that may Systems implementa concurrence prior to have potential tion stage commencement of TA downstream E&S activities. risks and impacts include requirements for assessment of such risks and impacts Enhance public Technical DLI 2 PPMO and County Other Throughout PPMO will submit semiannual participation DWR/RCO Program progress reports to the WB, related to soil and implementa including measures to enhance water conservation tion stage public participation and records related to DLI 2. Improve Technical DLI 3 PPMO and PIAs Other Throughout DHURD will prepare and issue a performance-based Program sample performance-based contracting for implementa contract to guide province-wide wastewater tion stage wastewater management management service provision related to DLI services 3. Develop and Technical PDWR Other 2025 (for Official accept. report on: (a) establish an IT developmen Development: IT parameters platform to: t) and 2026 design and protocols; (b) regularly exchange (for Establishment: user manual; & share data with establishme data sharing protocols for HB- relevant gov nt) ext. gov agencies; selected data Page 106 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) agencies of other public access; and functions for provinces, incl. platform integration. CWRC, related to Yangtze River protection and WRM, and make selected data publicly available; under TORs acceptable to Bank. . Page 107 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) ANNEX 7. IMPLEMENTATION SUPPORT PLAN 1. Support for implementation of the PforR will require close attention and continuous support from the World Bank team. The PforR instrument is new to most of the government teams involved in the Program. This annex outlines the key activities to address risks identified by the risk assessment and provides the TA needed to improve the quality of Program implementation. Emphasis is placed on (a) supporting early-stage implementation and building institutional capacity; (b) reviewing implementation progress (including that of the PAP) and achievement of Program results and DLIs; (c) providing support to resolve emerging implementation issues; (d) monitoring the adequacy of systems performance, and monitoring compliance with Legal Agreements; and (e) supporting the Government in monitoring changes in risks. 2. The strategy and approach for implementation support includes an emphasis on the technical, fiduciary, and E&S support needed during implementation. The World Bank team provided technical expertise during preparation and will continue to provide technical support during implementation, as well as guidance to the agencies on Fiduciary and E&S aspects to ensure completion of the actions agreed in the PAP. Implementation support from the procurement and FM team will focus on reviewing and monitoring compliance with the Government’s own systems and the actions defined in the PAP. 3. Given the multi-provincial, cross-sectoral characteristics of the Program, the support will be ensured through leadership and close contributions from team members in the China Country Office, located in Beijing, with additional support and leadership from international technical specialists. This combination will leverage the World Bank’s global knowledge and local expertise to enable timely and effective responses to the needs of the borrowers. Formal implementation support missions and field visits covering all aspects of implementation will be conducted periodically during implementation. The characteristics of the program necessitate that these implementation support missions will be longer than the standard single agency engagement. Tables 7.1 and 7.2 outline the estimated inputs from different specialists and resources required at different stages of Program implementation. Table 7.1. Main Focus of Implementation Support Resources Time Focus Skills Needed Estimate First 12 • Implementation of program management • Core team, particularly 50 months systems technical, FM, procurement, • Setting up cross sector-level coordination E&S experts mechanism • Integrated water and • Staff capacity building, on-the-job training environment management on E&S and fiduciary expert • Procurement process and training • E&S training, support to implementation of policy requirements • Technical support to activities and implementation • FM and disbursement training and capacity building Page 108 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Resources Time Focus Skills Needed Estimate 12–48 • Technical support to implementation • Core team, particularly 90 months • Continued improvements in project technical, FM, procurement, management systems including fiduciary E&S expert and safeguards • Integrated water and • Program Midterm Review environment management expert Other • Completion of activities • Core team, particularly 42 • Capacity building and facilitate knowledge technical, FM, procurement, exchange and events E&S experts • Support technical and financial analysis of • Integrated water env. program investments management and solid waste • End-term evaluation and client ICR management experts Table 7.2. Task Team Skills Mix Requirements for Implementation Support (Template) Number of Skills Needed Number of Trips Comments Staff Weeks Task team leader/program management 10 annually Three in the first year, County Office-based staff two thereafter Task team leader(s)/program management 14 annually Three in the first year, Country office-based staff two thereafter Procurement specialist 3–6 annually Two per year Country office-based staff Financial management specialist 3–4 annually Two per year Country office-based staff Operations specialist 4–6 annually Two per year Country office-based staff Environmental specialist 3–4 annually Two per year Country office-based staff Social specialist 3–4 annually Two per year Country office-based staff Monitoring and evaluation specialist 4–6 annually Two per year Country office-based staff Integrated water environment management 2–4 annually Two per year Consultant (national) expert Solid waste management expert 2–4 annually Two per year Consultant (national) Smart technology expert 2 annually One per year Consultant (national) Page 109 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) ANNEX 8. TEAM LIST No. Name Title Unit 1. Mr. Yi Dong Senior Financial Management Specialist EEAG1 2. Ms. Fang Zhang Senior Financial Management Specialist EEAG1 3. Ms. Li Du Senior Public Finance Consultant SEAW1 4. Mr. Yiren Feng Senior Environmental Specialist SEAE1 5. Mr. Shunong Hu Senior Water Engineer SEAW1 6. Ms. Yoonhee Kim Program Leader SEADR 7. Mr. Xiaokai Li Senior Water Resource Specialist, Task Team Leader SEAW1 8. Mr. Xiawei Liao Environmental Specialist SEAW1 9. Mr. Xueming Liu Senior Economist Consultant UNFAO 10. Ms. Yun Ma Public Finance Consultant SEAW1 11. Mr. Aristeidis Panou Senior Counsel LEGAS 12. Mr. Giovanni Ruta Lead Environmental Economist, Co-Task Team Leader SEAE1 13. Mr. Kai Shang Social Development Specialist SEAS1 14. Ms. Qi Tian Senior Water Resource Specialist SEAW1 15. Mr. Marcus Wishart Lead Water Resource Specialist SMNWA 16. Ms. Ruxin Zhao Team Assistant EACCF 17. Mr. Songling Yao Senior Social Development Specialist SEAS1 18. Mr. Zheng Liu Senior Procurement Specialist EEAR1 19. Ms. Xinchen Zhang Environmental Specialist SEAE1 20. Ms. Minghe Zheng Finance Officer WFACS 21. Mr. Guoxin Zhou Social Specialist Consultant SEAS1 22. Ms. Chunyan Hou Environmental Consultant SEAE1 23. Ms. Li Wang Environmental Consultant SEAE1 24. Mr. Wendao Cao Senior Agricultural Economist SEAAG 25. Mr. Shuiying Zhong Senior Social Development Consultant SEAS1 26. Ms. Fei Huang Gender Consultant SEAW1 27. Ms. Eileen Burke Lead Water Resources Management Specialist, Peer SWADR Reviewer 28. Mr. Nagaraja Rao Harshadeep Lead Environmental Specialist, Peer Reviewer SENDR 29. Mr. Jian Xie Senior Environmental Specialist, Peer Reviewer SAEE2 30. Mr. Sanjay Pahuja Lead Water Resources Management Specialist, Peer SAWW1 Reviewer Page 110 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) ANNEX 9. MAPS Page 111 of 112 The World Bank Yangtze River Protection and Ecological Restoration Program for Results (Hubei) (P178338) Page 112 of 112