The World Bank and China's environment 1993-2003

THE WORLD BANK OPERATIONS EVALUATION DEPARTMENT The World Bank and China's Environment 1993-2003 Robert C.G. Varley Director-General, Operations Evaluation: Gregory K. Ingram Director: Ajay Chhibber Manager: R. Kyle Peters Task Manager: Gene Tidrick This paper is available upon request from OED. It was prepared in 2003 as 2005 a background paper for the China Country Assistance Evaluation. The World Bank Washington, D.C.  ENHANCING DEVELOPMENT EFFECTIVENESS THROUGH EXCELLENCE AND INDEPENDENCE IN EVALUATION The Operations Evaluation Department (OED) is an independent unit within the World Bank; it reports directly to the Bank's Board of Executive Directors. OED assesses what works, and what does not; how a borrower plans to run and maintain a project; and the lasting contribution of the Bank to a country's overall development. The goals of evaluation are to learn from experience, to provide an objective basis for assessing the results of the Bank's work, and to provide accountability in the achievement of its objectives. It also improves Bank work by identifying and disseminating the lessons learned from experience and by framing recommendations drawn from evaluation findings. OED Working Papers are an informal series to disseminate the findings of work in progress to encourage the exchange of ideas about development effectiveness through evaluation. The findings, interpretations, and conclusions expressed here are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank cannot guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply on the part of the World Bank any judgment of the legal status of any territory or the endorsement or acceptance of such boundaries. Contact: Operations Evaluation Department Knowledge and Evaluation Capacity Development (OEDKE) e-mail: eline@worldbank.org Telephone: 202-458-4497 Facsimile: 202-522-3125 http:/www.worldbank.org/oed  Foreword The main purpose of this background paper on the Bank's environment work in China, is to support the 2003 China Country Assistance Evaluation. Its findings are based on Bank documents, interviews with Bank and Chinese officials, limited field- work in China, and interviews with DC-based staff, as well as outside China environment specialist.   Abbreviations & Acronyms AAA Analytical and Advisory Services ADP Agricultural Development Projects EIA Environmental Impact Assessment EPB Environmental Protection Bureau ESW Economic Sector Work ETAP Environmental Technical Assistance Project GEF Global Environment Facility MFMP Multilateral Fund for the Montreal Protocol NEPA National Environment Policy Act ODS Ozone depleting substance PACE Professional Association for China's Environment SEPA State Environmental Protection Agency SMU Sector Management Unit TA Technical Assistance TSP Total suspended particulates UE Urban environment WHO World Health Organization WWTP Waste water treatment plants   Table of Contents 1. Introduction 1.1 China's Environment .........................................................................................1 1.2 Bank Environmental Operations in China.........................................................2 2. China's Environmental Problems and Bank Responses 2.1 Air Pollution in China........................................................................................4 2.2 Bank Air Pollution Activities.............................................................................5 2.3 Land and Natural Resource Management Problems..........................................7 2.4 Bank Land Improvement and Natural Resources Management Activities........8 2.5 Water Quality and Water Resources Management............................................9 2.6 Bank Activities to Improve Water Quality......................................................10 3. The World Bank and the Environment 3.1 Did the Bank "Mainstream" the Environment in Projects and Programs?......11 3.2 What were the strengths and weaknesses of the Bank Environmental Safeguards and how might their application in China be improved?..............14 3.3 Was Bank Knowledge Management/ ESW/AAA its Most Important Contribution? ...................................................................................................16 3.4 Did the Bank have an Environmental Strategy?..............................................20 4. Conclusions..................................................................................................................23   1 1. Introduction China's Environment 1.1 The magnitude and costs of pollution in China are still large, despite sustained government efforts over the last decade. China's environmental degradation has developed over centuries, but record recent rates of economic growth have now widened environmental impacts and accelerated many adverse trends. China's urbanization, Figure 1 Annual Emissions of Air Pollutants and industrialization have produced rising material standards of living but have ever more costly environmental consequences. Vaclav Smil's "China's Environment" (1993), Lester Brown's "Who Will Feed China?" (1995) and "Grave Concerns - Problems of Sustainable Development for China" (1998)1 are typical examples of literature that has spread the notion of "China's Environmental Crisis." Plausible estimates of environmental costs vary from 3 percent to 15 percent of China's GDP.2 Accuracy is constrained both by methodology and limited accurate data. This is not simply a matter of lack of transparency - the National Peoples Congress's Oversight Committee on the Environment dispatches investigation teams over the vast area of China to check if attempts are being made at all to enforce environmental laws in particular provinces. 1.2 Despite local variations, emissions of soot, industrial dust and other pollution fell, new approaches to natural resource management were adopted, and new-growth forest area increased. But biodiversity was reduced, less than 30 percent of the sections of seven major river basins meet minimum water quality standards, lung diseases are now the major cause of premature death and erosion by wind and water still affects 3.6 million km2. Air quality in about two-thirds of Chinese cities failed to meet SEPA's (State Environmental Protection Agency) standard for Grade II.3 According to an important Bank-SEPA report 4 there was a general improvement in environmental conditions from 1995-2000 but they have started to reverse again. Emerging new patterns of dispersed non-point pollution and heightened competition for water and land threaten existing progress. Government 1, Grave Concerns, Zheng Yisheng and Qian Yihong (Environment and Development Research Institute at the Chinese Academy of Social Sciences)., Today's China Publishing House, October 1998. 2 For instance Professor Dale Jorgenson of the Harvard China Project is quoted recently in Harvard Magazine as saying that 5 percent of China's GDP is lost to the increased health costs and mortality associated with domestic environmental pollution and that this figure will rise to 15 percent by 2030 if nothing is done 3 China's Annual Report on Environment reports a range of indices. 4 "Air, Land and Water: Environmental Options for a new Millennium (2001)" was the result of a joint effort by the SEPA and the Bank. Since the data in this report represent the best efforts of SEPA and the Bank the figures have been reproduced here with permission of EASES.  2 ambitions to sustain reductions in the rate of growth of adverse environmental impacts over the next 5-year period planning period are a challenge. 1.3 China has an expanding menu of legal, voluntary and economic instruments to pursue environmental policies, but cannot yet use them effectively. Ability to implement comprehensive national environment policies has been limited by the high degree of administrative decentralization, local prioritization of investment and employment, vertical and horizontal fiscal imbalance, and absence of clear accountability for environmental conditions. Local governments are usually more concerned with economic growth and employment than they are with adhering to national environmental mandates. The legal system for compliance and enforcement is used sparingly, although it is slowly increasing, with actions brought by the victims of pollution receiving press attention. 1.4 SEPA has the environment mandate, supported by a good legal framework and comprehensive policies, but few resources. Relative to the World Bank's counterparts in the major infrastructure sectors (e.g. Energy, Transport, Water Resources) SEPA lacks the influence with the provinces, that access to a large investment budget can provide. Policy and its implementation depends heavily on the commitment of local officials and leaders, such as mayors and governors. As the lead environmental agency, SEPA has broad responsibilities for policy formulation and the small staff of 220 professionals has expertise in: (a) "Regulatory, Environmental Assessment and Planning"; (b) "Pollution Control"; (c) "Setting Standards"; and (d) "Environmental Monitoring and Public Participation." The power SEPA has is from the active support of the apex State Council, the commitment of mayors and local government leaders to environmental management, and increasingly, public opinion. Implementation of environmental policies is the responsibility of 100,000 provincial and local governments employees in the Environmental Protection Bureaux (EPB.) They are nominally under SEPA supervision but paid by the local administrations, creating the potential for a conflict of loyalties. Bank Environmental Operations in China 1.5 The period 1992-2001 coincided with a renewed Bank commitment to the environment, culminating in a new 2001 Bank Environmental Strategy. For the  3 evaluation period there were four policies against which environmental performance can be judged5: