The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) Program Information Document (PID) Concept Stage | Date Prepared/Updated: 03-Oct-2022 | Report No: PIDC266343 September, 2022 Page 1 of 15 The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) BASIC INFORMATION A. Basic Program Data OPS TABLE Country Project ID Parent Project ID (if any) Program Name China P178796 Water Saving and Low Carbon Paddy Rice Program for Results Does this operation Region Estimated Appraisal Date Estimated Board Date have an IPF component? EAST ASIA AND PACIFIC 09-Feb-2023 30-May-2023 No Financing Instrument Borrower(s) Implementing Agency Practice Area (Lead) Program-for-Results The People's Republic of Ministry of Agriculture and Water Financing China Rural Affairs Proposed Program Development Objective(s) To support green and climate resilient rice production in selected regions of China. COST & FINANCING FIN_SRC_TABLE1 SUMMARY (USD Millions) Government program Cost 1,150.00 Total Operation Cost 1,150.00 Total Program Cost 1,150.00 Total Financing 1,150.00 Financing Gap 0.00 FINANCING (USD Millions) Total World Bank Group Financing 200.00 World Bank Lending 200.00 Total Government Contribution 950.00 Concept Review Decision September, 2022 Page 2 of 15 The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) The review did authorize the preparation to continue B. Introduction and Context Country Context 1. Over the past four decades, China has seen remarkable economic development. Rapid economic ascendence of China over the past four decades has led to a nearly 30-fold increase in per capita income, which elevates the country to the world second largest economy. The Government declared in early 2021 that it had achieved the goal of eliminating extreme poverty, well ahead of the target year (2030) for the Sustainable Development Goals. In addition to industrialization and urbanization, rapid agricultural productivity growth has contributed significantly to these unprecedented achievements. The country’s average annual growth rates of agricultural output value and agricultural GDP were 5.3 percent and 4.5 percent respectively over the past forty years. China has produced enough food and fiber to feed one fifth of the world population with 9 percent of the world’s farmland and 6 percent of world’s freshwater resources, which is a remarkable achievement. 2. However, China’s fast agricultural growth has been accompanied with mounting environmental costs. This growth was driven mainly by increases in total factor productivity, technological changes, and large producer subsidies provided mainly for rice, wheat and maize production. However, this has come at high environmental costs. These include high greenhouse gas (GHG) emissions, excessive water use and environmental pollution among others. Agriculture ranks No. 5 among GHG emission contributing sectors and accounts for 6 percent of the total GHG emission in China, amounting to 792 Mt CO2e per year (China CCDR, World Bank 2022). Agricultural production relies heavily on irrigation and accounts for some 60 percent of the total water uses, which puts increasing pressure on the rivers, lakes and groundwater systems. The agricultural water productivity of staple crops is at a relative low level comparing with the average of OECD countries, despite the applaudable yield increase over the years. In addition, agriculture remains an important source of non-point source (NPS) pollution. 3. In recognizing that the development model with high environmental costs is not sustainable, China has decided to pursue a green growth path through decarbonization and improving resource use efficiency and climate resilience. With the vision of an “ecological civilization� that integrates sustainability into development, the Government has started to shift its overall development strategy toward green growth and high-quality development. In the year 2020, China made its ambitious long-term climate commitment, pledging to peak GHG emissions before 2030 and achieve carbon neutrality by 2060. The 14th Five Year Plan (FYP) for National Economic and Social Development (2021-2025) has highlighted this shift clearly, emphasizing economic growth alongside a range of environmental and social targets. At the start of the 14th FYP period, the Government also launched the National Agriculture Green Development Strategy with the aim of transitioning China’s agriculture sector toward green, low-carbon and sustainable development. Sectoral (or multi-sectoral) and Institutional Context of the Program 4. China is the world’s biggest agricultural economy and largest rice producing country, contributing substantially to the country’s and global food security. China cultivates a total of 30 million ha for rice production (or about 30 percent of the world total). In accordance with the classification in the "National Regional Distribution Plan for Agricultural Products (2008-2015)", paddy rice is essentially produced in three major regions: the Yangtze River Basin (covering Sichuan, Chongqing, Yunnan, Guizhou, Hunan, Hubei, Henan, Anhui, Jiangxi and Jiangsu provinces), Northeast Plain September, 2022 Page 3 of 15 The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) (covering Heilongjiang, Jilin and Liaoning provinces), Southeast and South Region (Shanghai, Zhejiang, Fujian, Guangdong, Guangxi and Hainan provinces). These three regions account for more than 95 percent of the country's total rice planting area and production over the past 20 years. The country has achieved high rice yield through crop intensification, investment in infrastructure and technologies as well as intensive use of natural resources and chemical fertilizers. Rice production at 214 million tons per year (2020) is about 40 percent of the total grain production in the country, and rice is the staple food for over half of the 1.4 billion people of China, which is an enormous contribution to the country’s and global food security. Table 1. Major Rice Producing Countries and GHG Reduction Potentials (Source: FAOSTAT, USDA/EPA) Country Production Million GHG Emission Rank Non-CO2 ag Rice non-CO2 share of Ag Million tons CO2e emissions (& country total) non- MT (global %) (global %) CO2 emission (%) China 146.7 (30%) 112.4 (21%) 1 20% (9%) India 118.4 (24%) 98.6 (19%) 3 18% (12%) Indonesia 34.0 (7%) 71.0 (13%) 7 40% (14%) Bangladesh 35.9 (7%) 24.9 (5%) 20 17% (12%) Vietnam 27.2 (5%) 28.1 (5%) 8 53% (36%) Thailand 17.7 (4%) 35.0 (7%) 16 56% (22%) Myanmar 12.7 (3%) 22.0 (4%) 30 34% (28%) Philippines 11.9 (2%) 33.7 (6%) 23 50% (29%) Japan 7.6 (2%) 6.4 (1%) 40 42% (16%) Cambodia 7.2 (2%) 10.0 (2%) 35 52% (21%) World Total ~496 ~532 ~11% (~5%) 5. Rice production in China is a major source of GHG emissions. A range of studies1 since the 1980s have shown that rice production is a major source of GHG emissions. The main GHGs from rice production are found to be methane (CH4) and nitrous oxide (N2O) whose global warming potential (GWP) are 25 and 298 times that of carbon dioxide (CO2), respectively.2 Rice cultivation and nitrogen fertilizer application are the main sources of methane and nitrous oxide in the agricultural sector, accounting for 40 percent and 47 percent respectively.3 It is estimated that about 8.0 million tons (Tg) of CH4 and 154 thousand tons (Gg) of N2O are emitted annually from rice fields in China4 and these combined contribute to over 20 percent of the total GHG emissions (in CO2 equivalent terms) from the country’s agricultural sector. They account for 19 percent of the global methane and 11 percent of global agricultural nitrous oxide emissions respectively.5 1 Chinese Academy of Sciences, International Rice Research Institute, and Chinese Academy of Agricultural Sciences, etc 2 Global Warming Potentials (IPCC Fourth Assessment Report). (link) 3 Cheng and Pan, 2021. 4 Sun et al. 2018. 5 UNFAO, 2022. September, 2022 Page 4 of 15 The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) 6. Rice production is also very water and fertilizer intensive. In the major rice producing areas, the water application to paddy fields can be as high as 13,500 m3/ha. Rice production uses over 30 percent of the total water consumption in China, contributing to increasing water stress and water pollution in various river and lake basins. Reportedly China consumes more than 20 million tons of nitrogen fertilizer every year, of which about 25percent is used for rice cultivation, accounting for about 37percent of the global rice nitrogen fertilizer application. Studies have shown that in rice cultivation regions of China, the amount of nitrogen fertilizer for rice production averages150-250 kg/ha and in some provinces are as high as 350kg/ha. The excessive application of nitrogen fertilizers results in low use efficiency of less than 40 percent, contributing significantly to GHG emission, water pollution and increase in production costs. 7. In addition, rice production faces significant challenges of underperforming irrigation services. As rice is produced largely on irrigated land, rice production performance relies heavily on that of irrigation services, especially under the changing climate and increasing hydrological variability. In spite of the continuous investments and improvement in the irrigation systems, in particular irrigation infrastructure modernization over the past decades, the issue of “vicious cycle� (low operation and maintenance (O&M) cost recovery leads to poor services which make the water users less willing to pay for the services) is still wide-spread across the country. Irrigation service is highly subsidized in majority of the irrigation districts, with low O&M cost recovery rate from irrigation service charge which is mostly paid based on land area rather than volume of water used, leading to deferred maintenance and underperforming irrigation services. Moreover, the level of farmer water user communities in irrigation service delivery is relatively low, which affects the accountability for irrigation service performance. 8. Multiple-win technologies and practices are available to substantially reduce rice GHG emissions, water use and pollution. Methane emissions from paddy fields are mainly due to organic matter decomposition under anaerobic soil conditions. Better irrigation water management can significantly reduce submergence, leading to the reduction of both methane emission and water use. Water-saving practices, such as alternate wetting and drying (AWD), has proven to be able to reduce up to 50 percent of methane emissions and 30 percent of water use without reducing yields.6 Better nutrient management and more precise fertilizer application can also reduce emissions, especially the emissions of nitrous oxide. These benefits also extend to the reduction of non-point source pollution from rice cultivation. China has studied and promoted water-saving practices for paddies since the 1980s.7 Studies indicate that up to 40 percent of rice producers in China has adopted some types of water-saving practices,8 and over 90 percent of the rice producing areas in China are suitable for such water-saving practices.9 However, some obstacles remain for wide adoption of these good practices. These include lack of incentives for rice producers, infrastructural constrains and underperforming irrigation services, and weakness in the management system. 9. To address those challenges facing agricultural production, the Government has embarked on a path of agriculture green development characterized with low GHG emission, high resource use efficiency and sustainable 6 Richards M, Sander BO. 2014. Alternate wetting and drying in irrigated rice. Climate-Smart Agriculture Practice Brief. Copenhagen, Denmark: CGIAR Research Program on Climate Change, Agriculture and Food Security (CCAFS) (link). 7 Dong, B, Mao, Z, Cui, Y, Luo, Y, Li, Y. 2020. Controlled Irrigation for Paddy Rice in China. Irrigation and Drainage. 2020; 69 (S2): 61– 74. (link) 8 Mckinsey & Company. Agriculture and climate change (link) 9 Yanhua Zhuang, Liang Zhang, Sisi Li, Hongbin Liu, Limei Zhai, Feng Zhou, Yushi Ye, Shuhe Ruan, Weijia Wen, Effects and potential of water-saving irrigation for rice production in China, Agricultural Water Management, Volume 217, 2019, Pages 374-382. (link) September, 2022 Page 5 of 15 The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) production. Starting from the late 1990s, China has been investing in modernizing agricultural production and improving irrigation systems while enhancing the sector policies and regulations and promoting management reforms of the support services including development of farmer community organizations. In 2021, the Government formally launched the green agriculture development strategy to promote green growth and decarbonization in the agricultural sector and systematically address the issues of high GHG emission and pollution, low resource use efficiency and concerns over sustainability of agricultural production and related support services. The overarching goal is to move toward greener, more resilient and sustainable agricultural development. This is expected to be achieved through institutional capacity strengthening, policy reforms and market mechanism pilots; demonstration, consolidation and replication of innovative technologies and good management practices. The key principles and overall strategy apply to all subsectors of agriculture including the irrigated rice production. The overall strategy is made concrete and implementable by a series of plans and implementation guidelines in specific areas, including the National High-Standard Farmland Construction Plan (HSFCP, 2021-2030). Released in 2021, the HSFCP sets out the phased nationwide farmland development and grain production targets now through 2030 for three main staple crops including rice, and supports their achievement with approaches to balance higher yield with better resources conservation, agricultural pollution reduction, climate change mitigation. 10. China has a well-established institutional framework for implementing green agricultural development. China has developed detailed policies and regulations for the implementation of the Agriculture Law, Rural Revitalization Promotion Law, Water Law and Environmental Protection Law. Dedicated administration authorities have been established within the agricultural sector at the national, provincial, municipal and county levels for different aspects of agriculture green development. For example, a farmland administration department has been established within the Ministry of Agriculture and Rural Affairs (MARA), and similarly at the lower levels of government, for high-standard farmland development and management in the country. This department at the national level was created after the 2018 government reorganization by consolidating the former State Office for Comprehensive Agriculture Development under the ministry of finance (MoF) and the related irrigation function from the ministry of water resources (MWR) and MARA. 11. Recent policy reforms in China have created the enabling environment toward incentivizing water saving and low carbon rice production. Promoting low carbon rice production can generate positive externalities, including water saving, GHG emission reduction and water pollution abatement. The country is now widely promoting eco-compensation mechanisms to reward positive (or to reduce negative) environmental externalities.10 Market-based eco-compensation mechanisms are also being explored, e.g. water right trading, pollution emission trading and carbon market, which can also be leveraged to promote low-carbon rice transformation. In addition, China launched an irrigation management reform program during the 13th FYP period (2016-2020) to promote water saving.11 This laid down the foundation for irrigation water management reform, including volumetric water pricing, establishing irrigation water use right system, promoting demand-driven irrigation water management, and empowering water user associations (WUAs), etc. Relationship to CAS/CPF 12. The proposed Program is fully aligned with the World Bank Group’s Country Partnership Framework (CPF) for China (FY2020-2025, Report No. 11785-CN). The China-World Bank Group (WBG) relation has entered a new era after 10 World Bank. 2022. Ecological Compensation in China : Trends and Opportunities for Incentive-Based Policies Towards a Greener China (link) 11 State Council. 2016. Opinions on promoting irrigation water tariff comprehensive reform (link) September, 2022 Page 6 of 15 The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) four decades of close partnership. The WBG’s CPF for China focuses on closing the remaining institutional gaps and supporting interventions that contribute significantly to global public goods. This shift of focus is consistent with China’s own new development strategy of promoting green growth and high-quality development to achieve “ecological civilization�.12 The proposed Program is directly linked to the Engagement Area 2 of the CPF, Promoting Greener Growth, which includes support to government in: (a) reducing air, soil, water, and marine plastics pollution; (b) demonstrating sustainable agricultural practices and improving food system quality and safety; and (c) strengthening sustainable natural resource management. In addition, the Program aligns well with the World Bank Group’s Green, Inclusive, and Resilient Development (GRID) framework and the Climate Change Action Plan (2021-2025). 13. The proposed Program is expected to contribute to China’s green agriculture development and generate substantial global public goods and climate co-benefits. The proposed Program is expected to generate substantial global public goods and climate co-benefits through (a) reducing greenhouse gas (GHG) emissions (CH4 and N2O) from rice fields; (b) improving natural resource (water and land) management and climate-resilience; and (c) reducing pollution from rice cultivation. By doing that, the Program will contribute to the achievement of China’s carbon peaking and carbon neutrality pledges. The lessons learned and knowledge generated from the Program would be relevant for addressing similar development challenges in other rice-growing Asian countries and beyond. In that sense, the Program also supports the Cross-Cutting Theme – Cooperating on Global Knowledge and Development of the CPF. Rationale for Bank Engagement and Choice of Financing Instrument 14. The proposed PforR is in response to the government’s proposal for the World Bank’s support in the implementation of the government strategy for agriculture green development and the priority program - the National High-Standard Farmland Construction Plan (HSFCP, 2021-2030). Following the achievement of the goal of eradicating extreme rural poverty during the 13th FYP period, China has shifted its strategic focus for agriculture to green and sustainable development. The government has put in place policies, strategies and plans for transitioning to green agricultural development. China’s 14th FYP for Economic and Social Development articulates the need to promote green development to achieve harmonious coexistence of man and nature. This includes: (a) accelerating green and low-carbon development; (b) consistently improving environmental quality; (c) improving quality and stability of the ecosystem; and (d) improving efficiency of natural and production resource utilization. The National 14th FYP for Agriculture Green Development (2021-2025) supports these goals through targeting increase in land and water resource use efficiency, reduction of agricultural GHG emissions, agricultural ecosystems and environmental quality, reduction of chemical fertilizer and pesticide application, etc. The HSFCP is a key priority government investment program for implementation of the National 14th FYP for Agriculture Green Development, and it supports farmland construction and improvements in sustainable production of the three staple crops, rice, wheat and maize for food security, environmental sustainability, climate resilience. 15. There is strong political commitment and leadership for green agricultural development. The Government is highly committed to modernizing and greening the agricultural development. This is not only reflected in different high level government strategic plans for agriculture development (e.g. National Agriculture Green Development Plan, National Agriculture Modernization Plan, National Agriculture Sustainable Development Plan), and the No.1 Central Government Document on agriculture and rural development over the past years, but also in the increasing investment for improving 12 The concept of ‘Ecological Civilization’ has become one of the government’s highest policy priorities; it includes a high -level focus on resource efficiency, environmental sustainability and ecological conservation. September, 2022 Page 7 of 15 The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) the quality and sustainability of agriculture, e.g. for the HSFCP program alone, an average of RMB 50 billion (or US$7.7 billion) each year had been invested over the 13th FYP period and the investment scale is likely to increase in the 14th FYP period. 16. The Bank is well-positioned to support the Government in transforming its rice production. Under the proposed Program, the Bank support will give priority to strengthening of the institutional capacity and management system, reform pilots and innovative technologies and management practices for the green and resilient rice production. Over the past decades, the Bank has financed a series of water management and agricultural development projects. These include Yangtze Water Resources Project, Guanzhong Irrigation Improvement Project, Guangdong Agricultural Pollution Control Project, Integrated Modern Agriculture Development Project, and the Climate Smart Staple Crops Production Project. These successfully completed operations generate valuable lessons and experiences which will benefit the design of the proposed Program. Further, the proposed Program design is informed by the recently completed analytics of the Bank, including the China Country Climate and Development Report, Transforming Rural China – Greening Agricultural Modernization, and Water Contributions to Global Public Goods. The ongoing analytical work - Greening China’s Rice Value Chain will also provide inputs to the final design of the Program. 17. The program for results (PforR) is proposed as the lending instrument for the proposed operation in consideration of the Government capacity and the ability to leverage ongoing financing. The results-based approach provides an opportunity to introduce performance-based incentives that are intended to improve the efficiency and effectiveness of public spending by leveraging Government’s own program and significant resources. It can leverage pre - agreed and verifiable results to help deliver development outcomes, improve accountability, and drive both innovation and efficiency, In comparing with the other lending instruments, the PforR can better support the government’s paradigm shift from infrastructure to closing the institutional gaps in the low-carbon and resource-efficient rice production management system; piloting market mechanism such as water right and carbon trading; and incentivizing the adoption of innovative technologies and management practices. C. Program Development Objective(s) (PDO) and PDO Level Results Indicators Program Development Objective(s) 18. The proposed Program Development Objectives (PDO) is to support green and climate resilient rice production in selected regions of China. This will be achieved through reducing GHG emissions and water use and improving the management system. PDO Level Results Indicators 19. The following outcome indicators will be used to measure the progress toward achievement of the Program development objectives: (a) improved water-saving and low-carbon rice management system; (b) GHG emission reduced; and (c) number of irrigation districts with establishment of sustainable O&M financing mechanism amount of irrigation water saved. September, 2022 Page 8 of 15 The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) (a) Outcome#1. Improved water-saving and low-carbon rice management system in place: measured through the number of management regulations, implementation rules and standards issued, a monitoring and accounting standard for GHG emission reduction promulgated, a “Best-practice guidelines on water-saving & low-carbon rice production� prepared and disseminated, and an investment result monitoring and evaluation system with a knowledge-sharing platform established and a nationwide scale-up plan disseminated; (b) Outcome#2: GHG emission reduced: measured by the quantity of O2 equivalent emission reduction from the rice fields in the demonstration counties. The contributing activities include promotion of integrated water and nutrient management practices, soil and water conservation and adoption of climate-smart agriculture interventions (covering irrigation and drainage, seeds variety, fertilization, soil tillage and crop residue management, etc.), along with technical assistance, skills training, and carbon trading pilots. (c) Outcome#3: Number of irrigation districts with establishment of sustainable O&M financing mechanism : measured by the cumulative amount of water withdrawal saved for rice irrigation in the demonstration counties. This is expected to result from a set of interventions: (a) irrigation management reforms including agricultural water pricing, participatory irrigation management, operationalization of irrigation service agreement; (b) increase in water tariff collection rate; (c) introduction of other sources of financing for irrigation O&M cost recovery including government eco-compensation, private sector investment, revenues from trading of use right for water saved and carbon emission reduced, etc. 20. Disbursement Linked Indicators (DLIs): The following factors were considered for selecting the DLIs: (a) the importance of the indicator that signals a critical action/output along the results chain, critical to achieving the PDO; (b) assessed need to introduce a strong financial incentive to deliver the result; (c) practical aspects of verifying the achievement of the planned results; and (d) capacity of the Borrower to achieve the DLI during the implementation period of the Program. Other indicators will be introduced into the Program action plan and others into the Program results framework. Based on the preliminary discussions with the client and initial assessments, the Program are likely to include the following DLIs: : (i) GHG emission reduced (Mt CO2e) or a proxy which is easy to measure and verify; (ii) Number of irrigation districts with establishment of sustainable O&M financing mechanism (number); (iii) An “Monitoring and accounting standards of carbon sequestration and GHG emission reduction in climate-smart crop production� promulgated (Yes/No); (iv) A knowledge sharing platform established and a nationwide scale-up plan disseminated (Yes/No);(v) Farmland area which adopts alternate wetting and drying (AWD) irrigation (million ha); (vi) Percentage of farmers who adopt climate-smart agriculture technologies (%); and (vii) amount of irrigation water saved (million m 3).. These DLIs are intended to incentivize beneficiary communities to change their incumbent farming practices and behaviors toward green and reliant rice production, and the government to improve the management system and capacity, consolidate and disseminate the cost-effective practices in achieving impacts at scale. D. Program Description PforR Program Boundary 21. Government program: The government program which the proposed PforR Program intends to support is the “National High-Standard Farmland Construction Plan (2021-2030)� (HSFCP) issued by the national authorities in August 2021. This Plan represents a critical area of the Government’s efforts in implementing the green agriculture development strategy to address the challenges of high resources consumption, high emission and pollution of irrigated rice production. September, 2022 Page 9 of 15 The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) It lays out the key principles of balancing agricultural development and environmental protection, the roles of government policy and financial support and farming communities, adopting a system approach and promoting technical and management innovations. The Plan includes phased performance targets on the total area of high-standard farmland construction aggregate grain production capacity, support service performance, natural resources use efficiency, production environment quality and new technology adoption, etc. There are six broad themes or results areas in the Plan, including (a) strengthening agricultural resources protection and use efficiency and improving production infrastructure to increase production capacity; (b) improving irrigation and drainage systems and water management; (c) reducing agricultural NPS pollution and uplifting the production environment; (d) enhancing ecological protection and restoration for sustainable production; (e) promoting green and low-carbon technologies and practices for mitigating climate impacts; and (f) improving institutions and capacity for O&M and sustainable services. The earmarked fiscal budget of the HSFCP is US$7.5 billion a year, based on a preliminary assessment of its predecessor program investment over the past four years (2018-2021). 22. Rice sub-plan of the HSFCP (HSFCP-Rice): The HSFCP covers the entire mainland China and the three main staple crops, rice, wheat and maize. The proposed PforR will relate only to the rice sub-plan of the HSFCP (HSFCP-Rice), which focuses on the main rice producing provinces. The rice production systems in the main rice cultivation areas are of three broad categories: one rice crop in the Northeast region (Songhua-Liao River basin), two to three crops in the Yangtze River basin and the Southeast & South region, mainly due to difference in climate and soil conditions. The objective, key principles, themes, types of interventions and most results targets, and implementation duration of the HSFCP-Rice are the same as HSFCP. The annual expenditure is about one third of the overall HSFCP. 23. Scope of the Proposed PforR: The proposed PforR will support a sub-set of the HSFCP-Rice program activities. Based on the program proposal of MARA and the initial discussions, the PforR is to prioritize a sub-set of the HSFCP-Rice activities which contribute significantly to green and climate resilient irrigated rice production. This sub-set of activities focus on three results areas covering interventions at the national level which benefit the entire HSFCP-Rice program, and activities at the provincial and county levels for demonstration of rice production transformation. The timeline for the PforR is from 2023 to 2028, with 2021 being the baseline year against which outcomes are measured. The objectives, duration, geographic coverage, results areas and financing of the government program and the proposed PforR Program are summarized in Table 1 below. 24. Topology of the PforR. The PforR Program is conceived as a national program covering national level activities and interventions in the participating provinces. At the national level, MARA will be the implementing agency. At the provincial level, two demonstration provinces will be selected to represent key rice production systems in China. Fujian, Henan and Hunan are the candidate provinces which have recently submitted proposals to the national government authorities to join the Program. The following is the basic rice production information of the three provinces: (a) Fujian Province: Rice is the most important crop in the southeastern Fujian Province. Rice cultivation area reached to 0.60 million ha in 2020, covering over 70 percent of croplands in Fujian. Rice production is facing the challenges of underperforming irrigation services, overapplication of fertilizer, limited adoption of water-saving techniques, and the lack of sustainable irrigated rice production; (b) Henan Province: Rice cultivation area in Henan was 0.62 million ha in 2020. Most rice is grown by smallholder farmers. Over 50 percent of the high-standard farmlands lacks water-saving infrastructure. The region is also facing challenges of groundwater overexploitation, deteriorated irrigation and drainage systems, difficulties to adopt new techniques by smallholder farmers, and non-point source pollution, etc.; and (c) Hunan Province: Hunan has the largest rice cultivation area in China, amounting to 4.2 million ha. The main challenges are the lack of water-saving September, 2022 Page 10 of 15 The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) infrastructure, serious water pollution from rice production, and low adoption of climate-smart technologies and practices. 25. The demonstration provinces will be selected based on four criteria: (a) provinces which are important rice producers and are covered under both the national high-standard farmland construction program and national water- saving rehabilitation program for large and/or medium sized irrigation systems before or during the 14th FYP period; (b) provinces which are committed to the related institutional reforms and capacity strengthening required for transforming the rice production; (c) provinces that are willing to introduce innovative approaches and good practices, including AWD, integrated water and nutrient management, innovative market mechanisms such as water use right trading and/or buy- back, and carbon trading; and (d) provinces which have sufficient fiscal space and are willing to borrow from the World Bank. Within each of the two Program provinces, a number of demonstration counties will be selected following similar criteria as above. Therefore, the proposed PforR Program boundary is the demonstration counties and the activities at the national and provincial levels. National high- Objective: Duration: Geographic Results Areas: Financing: standard To support 2021-2030 Coverage: 1. Strengthening agricultural ~US$37.5 farmland construction of All the provinces in resources protection and use billion (for construction climate-resilient, China efficiency and improving 2021-2025) plan (HSFCP) water efficient, production infrastructure to productive and eco- increase production capacity; friendly high- 2. Improving irrigation and standard farmland drainage systems and water for food and water management; security and higher 3. Reducing agricultural NPS farm income. pollution and uplifting the production environment; 4. Enhancing ecological protection and restoration for sustainable production; 5. Promoting green and low- carbon technologies and practices for mitigating climate impacts; 6. Improving institutions and capacity for O&M and sustainable services. Rice Sub-plan of To support 2021-2030 Rice growing Same as the RAs in HSFCP ~US$12.8 HSFCP (HSFCP- construction of provinces (incl. 15 billion (for Rice) climate-resilient, provinces with ½ 2021-2025) water efficient, million ha of rice each) productive and eco- friendly high- standard farmland for food and water security and higher farm income. Proposed PforR To support green 2023-2028 National program with RA1. Strengthening ~US$950 and climate resilient non-physical institutional capacity for million September, 2022 Page 11 of 15 The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) rice production in interventions at impacts at scale; Plus selected regions of national and RA2. Promoting low-carbon US$200 China. provincial levels (2 rice for green development; million demonstration RA3. Improving irrigation IBRD Loan provinces), physical services for resilient rice (i.e. a total investments at county production. of US$1.15 level (covering a billion) dozen of counties) Table 1. Government Program (Small “p�) and Proposed PforR (Big “P�) E. Initial Environmental and Social Screening 26. Preliminary Environmental and Social Risk Screening. The Program is intended to support a sub-set of activities under the Government’s National High-Standard Farmland Construction Plan (2021-2030) and the paddy sub-programs in demonstration provinces to promote green and resilient paddy production transformation in selected areas of China. The Program proposes to support activities mainly including (a) policy/institutional reforms related to improvement of irrigation service, involvement of farmer users and private sector, as well as to agricultural water pricing, water use right and carbon trading; (b) irrigation and water management improvement through modernization of on-farm irrigation system, construction or improvement of water irrigation canals, water ponds, on-farm access roads, land leveling and improvement, soil and water conservation, construction of windbreaks for protection of high-standard farmland; (c) nutrient management and agronomic measures, for example soil test and formula fertilization, and interventions aimed to reduce chemical fertilizer use; and (d) institutional strengthening and support services, such as strengthening farmer water user groups/cooperatives, smart irrigated agriculture management and targeted training and capacity building. Overall, implementation of these activities will have significant and broadly positive environmental and social (E&S) effects in the Program regions. Based on the current proposal of Program design, physical activities are likely to be carried out by only a few demonstration counties in two provinces (to be selected during the Preparation). The Program will focus on selected activities within the existing scope of farmland with low or moderate E&S risks and impacts. An initial E&S screening was conducted to define the proposed Program boundaries and activities and exclude those likely to have significant adverse impacts that are sensitive, diverse, or unprecedented on the environment and/or affected people. A detail E&S screening table will be prepared during the preparation after the demonstration provinces are selected and when the Program activities are confirmed. 27. Exclusion Lists: The Program will exclude all types of activities listed in paragraphs 14 and 16 of the Bank Guidance on PforR ESSA (issued in September 2020). Based on the information available at this stage and experiences with implementation of similar programs in the country (e.g. the Green Agricultural and Rural Revitalization PforR), the Program will also exclude: (a) activities involving large-scale infrastructure construction (for instance, main canals, reservoirs); (b) activities that would involve land use or acquisition for non-agriculture facilities; (c) acquisition of any basic farmland (which requires State Council approval); (d) land pooling, consolidation or redistribution that will involve physical displacement or affect the land titling (or land rights) for a large number of populations; (e) activities that would have significant adverse impacts to ethnic minorities; (f) construction of new irrigation systems resulting in more water abstraction; (g) construction/rehabilitation of reservoirs or over exploitation of groundwater for paddy rice irrigation; and (h) activities that are classified as Class A (Environmental Impact Assessment Report category) according to the national Catalogue for the Classified Management of the Environmental Impact Assessment of Construction Projects, etc. The task team will further refine the program-specific exclusion list during the preparation when more information on the Program and the positive list of investments is available. September, 2022 Page 12 of 15 The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) 28. The overall E&S risk for the Program is deemed Moderate based on the concept of Program design. The Program will screen out the activities with high or substantial E&S risks. The likely adverse E&S effects associated with the Program activities include construction-related impacts such as dust, noise, soil erosion, wastewater, solid waste, health and safety of workers and communities, labor working conditions, small-scale land acquisition, land adjustment or temporary land use; impacts during operation of paddy farms such as impacts of pesticide and fertilizer application, potential pollution of nitrogen and phosphorous from farmland drainage water, potential heavy metal pollution in rice, impacts on farmers’ livelihoods, exclusion risks to vulnerable groups; and downstream E&S implications from implementation of policy studies’ recommendations. Certain pilots concerning water pricing, water use rights and carbon trading, access to improved irrigation services and targeted training would have downstream E&S implications which need to be assessed in the ESSA process. These adverse E&S effects are typically not significant and can be well identified and readily avoided, minimized, and mitigated through enhancing designs and implementing mature technologies and good management practices. The currently proposed physical activities would be within the scope of existing farmland, and unlikely to have implications on associated facilities with reference to the World Bank’s definition of linked or associated facilities. The E&S effects are currently considered Moderate based on the limited information at the concept stage but subject to further examination during the preparation when further specificity (geographical location, scale, scope) of investments and technical assistance activities are known. The contextual risk is preliminarily deemed Moderate since the Program will be implemented in a broad coverage of two provinces but unlikely located in any sensitive E&S settings. The institutional risk is regarded Moderate considering that MARA and the provinces started to implement the national HSFCP program a few years ago and have obtained implementation experiences to promote effective coordination of related government authorities and manage E&S risks and impacts. The political and reputational risk is deemed Low as the agricultural sector in China is not known to be controversial, and the Program fits well with government strategy. During Program preparation, the task team will undertake a more comprehensive E&S screening to inform potential risks and opportunities that warrant further analysis, and to identify the E&S risks of Program activities and potential linked or associated activities which are required to achieve the Program objectives but are not explicitly defined as Program activities or included in the expenditure framework. The task team will further review the E&S risk classification during the preparation. 29. Stakeholder Engagement. The Program will involve various types of stakeholders such as government departments, e.g., the agriculture departments, water resource departments and ecology and environment departments, affected parties/people such as those affected by land use, water pricing, changes of irrigation or fertilization practices. Smooth implementation of the Program will require proactive and effective engagement with large number of farmers in the Program areas. There are also other agencies interested in influencing the design and implementation of the Program. The Program require establishing and maintaining an open, transparent, and meaningful engagement process accessible to relevant stakeholders, consistent with China’s regulations and practice and the Bank Guidance on PforR ESSA. 30. An Environmental and Social Systems Assessment (ESSA) will be conducted, consulted upon, and disclosed prior to the Program Appraisal. Once the Program is endorsed by Bank management for further preparation, the task team will conduct an ESSA to examine the geographical coverage, scope, scale, context, and potential impacts of the Program activities from an E&S perspective and scope out high E&S risk interventions. The ESSA will entail a review of domestic E&S legislation framework and the implementing capacities and performance based on the track record of the respective government agencies that will participate in the E&S management under the Program. It will also evaluate their consistency with the core principles and key planning elements specified in PforR Policy, Directive and Guidance on PforR ESSA. The ESSA will closely examine the activities with potential concerns on E&S risks and impacts, to determine whether the risks and impacts can be avoided or reduced to an acceptable level through technical or capacity-strengthening September, 2022 Page 13 of 15 The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) measures, which will be included in the Program Action Plan (PAP) and/or considered for potential DLIs. During the process of ESSA, the task team will meaningfully engage with both internal and external stakeholders to inform ESSA preparation and solicit inputs to strengthen E&S risks management throughout the lifecycle of the operation. The draft ESSA will be disclosed to the public and consulted with key stakeholders prior to appraisal. . CONTACT POINT World Bank Name : Xiaokai Li Senior Water Resources Management Designation : Role : Team Leader(ADM Responsible) Specialist Telephone No : 5720+7761 / Email : xli@worldbank.org Name : Sandra Broka Designation : Senior Agriculture Economist Role : Team Leader Telephone No : 5788+7692 / Email : sbroka@worldbank.org Borrower/Client/Recipient Borrower : The People's Republic of China Acting Director, Finance & Portfolio Contact : Xiang Peng Title : Management Division Telephone No : 010-68552485 Email : zjc@mof.gov.cn Implementing Agencies Implementing Ministry of Agriculture and Rural Agency : Affairs Contact : Wei Su Title : Director Telephone No : 010-59191272 Email : sbj1222@126.com September, 2022 Page 14 of 15 The World Bank Water Saving and Low Carbon Paddy Rice Program (P178796) FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects September, 2022 Page 15 of 15