China - Eco-Farming Project

Page 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB2370 Project Name Eco-Farming Project Region EAST ASIA AND PACIFIC Sector General agriculture, fishing and forestry sector (30%); Renewable energy (30%); Crops (15%); Animal production (15%); Agricultural extension and research (10%) Project ID P096556 Borrower(s) MINISTRY OF FINANCE Implementing Agency Ministry of Agriculture, Foreign Economic Capital Utilization Center, China and Anhui, Hunan, Hubei, Chongqing, Guangxi Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared June 6, 2006 Estimated Date of Appraisal Authorization November 15, 2006 Estimated Date of Board Approval March 27, 2006 1. Key development issues and rationale for Bank involvement China's rapid economic development has been accompanied by serious environmental degradation in many areas, including agriculture. Intensified and mechanized farming, desertification, natural disasters, chemical pesticide and fertilizer use, and general overuse of natural resources has taken a toll on the resource base. Although migration out of farming to urban areas is significant, over the next several decades millions of households will still derive their main livelihood from agriculture. Therefore, if natural resource constraints cannot be addressed, the opportunities for the households remaining in the rural areas to improve their livelihoods will significantly decrease. In this context, the Government of China sees biogas production as one way to improve the rural environment and the living conditions of the rural households. Therefore, biogas production from human, animal and other organic waste has relied heavily on government promotion and subsidies (as has been the case in other parts of the world), as it is seen as to have significant local environmental benefits among other positive externalities. That said, biogas generation can also have positive financial returns when generated as part of an integrated farming production system. China has had several large investment programs in rural household biogas since the 1970s with mixed success. Some of the early biogas installations were not designed taking local environmental and climatic conditions into account. In many cases training and after-installation support to users in operation and maintenance was inadequate resulting in unit breakdowns. A large national rural biogas program was launched in 2001 aggregating investments of more than RMB 3 billion until today. Currently, more than 750 large and medium size biogas projects have been completed and a total of 7.2 million rural households are cooking using biogas. Technically, this recent program has had much better success but is still lacking in training and technical support at the grass roots level at the time of construction and operation of the biogas units. Also, training and technical support for households in optimizing their production systems so as to make use of the new opportunities created by the biogas has been inadequate. E ven for successful cases, the government