Documentof The World Bank FOROFFICIAL USEONLY ReportNo: 39892 CN - PROJECTAPPRAISALDOCUMENT ONA PROPOSEDGRANT FROMTHE SPECIALCLIMATE CHANGEFUND (ADMINISTEREDBY THE GLOBALENVIRONMENTFACILITY) INTHEAMOUNT OFUS$5.0MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FORA MAINSTREAMINGCLIMATE CHANGEADAPTATION INIRRIGATEDAGRICULTUREPROJECT March 18, 2008 RuralDevelopment,NaturalResourcesandEnvironment SectorUnit SustainableDevelopmentDepartment EastAsia andPacific Region This documenthas arestricteddistributionandmaybeusedbyrecipientsonly inthe performanceoftheir official duties. Itscontentsmaynot otherwisebe disclosedwithout World Bank authorization. CURRENCYEQUIVALENTS (Exchange Rate Effective May 30,2007) Currency Unit = Yuan Y/RMB Y7.50 = US$1 US$0.13 = Y 1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS 3H Basin Huang-Huai-Hai Basin MWR MinistryofWater Resources AB Agriculture Bureau NDRC NationalDevelopment and Reform CAD Comprehensive Agriculture Commission Development O&M Operation & Maintenance CAS Chinese Academy of Sciences OBD Output-based Disbursements CATEC County Agro-technical Extension occ Opportunity Cost of Capital Center OFD/OFW On-Farm DevelopmentlOn-FarmWorks CBD Project Implementation Plan cc Convention on Biological Diversity PIP Climate Change PMO Project Management Office COCAD County Office of Comprehensive POCAD Provincial Office of Comprehensive Agriculture Development Agricultural Development CPMO Central Project Management Office PPC Provincial Planning Commission EMP Environmental Management Plan PPG Project Preparation Grant ERR Economic Rate o f Return PPMO Provincial ProjectManagement Office ET Evapo-transpiration PPRWRP Pro-Poor Rural Water Reform Project FA Farmers' Association (financed by the UK Dept. for FB Finance Bureau International Development) FMS Financial Management System SCCF Special Climate Change Fund FRB Forestry Bureau SEPA State (National) Environmental GEF Global Environment Facility Protection Agency GOC Government of China SFA State Forestry Administration IAIL3 Irrigated Agriculture Intensification SIDD Self-managing Irrigation Drainage I11Project District MES Monitoringand Evaluation System SOCAD State Office of Comprehensive MIS Management Information System Agricultural Development MOA MinistryofAgriculture UNCDD UnitedNations Conventionon Drought M O O MunicipalPrefecture Office o f and Desertification Comprehensive Agriculture UNFCCC UnitedNations FrameworkConvention Development on Climate Change MOF MinistryofFinance WP Water Productivity WRB Water ResourcesBureau WUA Water Users Association Vice President: James W. Adams, EAPVP Country Director: David Dollar, EACCF Sector Director: Christian Delvoie, EASSD Sector Manager: Rahul Raturi, EASRE Task Team Leader: Qun Li,EASRE CHINA MainstreamingClimate Change AdaptationinIrrigatedAgriculture Project CONTENTS Page I STRATEGICCONTEXTANDRATIONALE . ............................................................. 1 A. Country and sector issues .................................................................................................... 1 B. Rationale for Bank involvement......................................................................................... 2 C . Higher level objectives to which the project contributes.................................................... 3 I1. PROJECTDESCRIPTION ............................................................................................. 4 A. Lendinginstrument ............................................................................................................. 4 B. Project development objective andkeyindicators .............................................................. 4 C. Project components............................................................................................................. 4 D. Lessons learned and reflected inthe project design............................................................ 8 E. Alternatives considered and reasons for rejection.............................................................. 9 I11. IMPLEMENTATION ...................................................................................................... 9 A. Partnership arrangements .................................................................................................... 9 B. Institutionaland implementation arrangements ................................................................ 10 C. Monitoring and evaluation o f outcomeshesults................................................................ 13 D Sustainability andReplicability........................................................................................ . 15 E. Critical risks andpossible controversial aspects............................................................... 15 F. Grant conditions and covenants........................................................................................ 16 I V . APPRAISAL SUMMARY ............................................................................................. 18 A. Economic and financial analyses...................................................................................... 18 B. Technical........................................................................................................................... 19 C. Fiduciary........................................................................................................................... 21 D. Social................................................................................................................................. 21 E . Environment...................................................................................................................... 22 F. Safeguard policies ............................................................................................................. 22 G. PolicyExceptions and Readiness...................................................................................... 23 FOR OFFICIAL USEONLY This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not be otherwise disclosed without World Bank authorization. Annex 1: Countryand Sector or ProgramBackground ......................................................... 24 Annex 2: Major RelatedProjectsFinancedby the Bank and/or other Agencies .................29 Annex 3: ResultsFrameworkandMonitoring ........................................................................ 30 Annex 4: DetailedProjectDescription ...................................................................................... 34 Annex 5: ProjectCosts ............................................................................................................... 42 Annex 6: ImplementationArrangements ................................................................................. 47 Annex 7: FinancialManagementandDisbursementArrangements ..................................... 50 Annex 8: ProcurementArrangements ...................................................................................... 58 Annex 9: Economicand FinancialAnalysis ............................................................................. 62 Annex 10: SafeguardPolicyIssues ............................................................................................ 69 Annex 11:ProjectPreparationand Supervision ..................................................................... 73 Annex 12: Documentsinthe ProjectFile ................................................................................. 74 Annex 13: Statementof LoansandCredits .............................................................................. 75 Annex 14: Countryat a Glance ................................................................................................. 81 Annex 15: AdditionalCost Analysis .......................................................................................... 84 Annex 16: STAP RosterReview ................................................................................................ 97 Maps........................................................................................................................................... 104 CHINA MAINSTREAMING CLIMATE CHANGE ADAPTATION INIRRIGATEDAGRICULTURE PROJECT PROJECT APPRAISAL DOCUMENT EAST ASIA AND PACIFIC EASRE Date: March 18, 2008 Team Leader: Qun Li Country Director: David R.Dollar Sectors: Irrigationand drainage (68%); Sector Managermirector: RahulRatud Agricultural extension andresearch (12%); Christian Delvoie Generalpublic administration sector (11YO); Project ID: PO84742 Forestry (9%) Lending Instrument: SCCF Grant Themes: Other rural development (P); Rural services and infrastructure (P); Ruralpolicies and institutions (S); Environmental policies and institutions (S) Environmental screening category: B Global SupplementalID:P105229 Team Leader: Qun Li Lending Instrument: Specific Investment Loan Sectors: Irrigation and drainage (64%); Focal Area: C-Climate change Agricultural extension andresearch(16%); SupplementFully Blended: Partially Blended Generalpublic administration sector (14%); Forestry (6%) Themes: Climate change (P); Environmental policies and institutions (P); Natural disaster management(P); Water resource management (P); Rural services and infrastructure (S) [XI Loan [ ] Credit [XI Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: IBRD LoanUS$20.00M/SCCF Grant US$5M Total Bank financing (US$m): US$25 million (of which IBRD loan US$20 million for IAIL3 and SCCF grant ofUS$5 million) Global Environment Facility (GEF) 4.73 0.27 5.00 GLOBAL ENVIRONMENT - Associated 20.00 0.00 20.00 IBRDFund(IAIL3) Total: 55.23 0.27 55.50 XZ.Guan@Mof.g0V.cn ResponsibleAgency: State Office for Comprehensive Agricultural Development MinistryofFinance Beijing China Tel: 86-10-8819-1812 I GEFEstimateddisbursements(BankFY/US$m) FY 08 09 10 11 12 Annual 0.30 2.07 1.49 0.86 0.28 Cumulative 0.30 2.37 3.86 4.72 5.00 Does the project depart from the CAS incontent or other significant respects? Re$ PADI. C [ ]Yes [XINO Does the project require any exceptions from Bank policies? Re$ PAD I K G [ ]Yes [XINO Have these been approved by Bankmanagement? [ ]Yes [XINO I s approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated "substantial" or "high"? Re$ PAD III.E [ ]Yes [XINO Does the project meet the Regional criteria for readiness for implementation? Re$ PAD I K G [XIYes [ ] N o Project development objective Re$ PAD II.B., Technical Annex 3 The project development objective i s to enhance adaptation to climate change in agriculture and irrigation water management practices through awareness-raising, institutional and capacity strengthening, and demonstration activities inthe 3H Basin. This would help mainstream climate change adaptation measures, techniques, and activities into the national Comprehensive Agricultural Development (CAD) Program which is China's largest national investment program inirrigatedagriculture. The mainproject development impact indicators would be: (a) increased climate change adaptation awareness o f farmers, Water User Association (WUA) and ProfessionalAssociations (FA)members, technical staff, andofficials (percentage o fpeople); (b) relevant climate change adaptation measures implementedinselected demonstration areas (number o fhectares) andby participatory stakeholders (number o fhouseholds); and (c) documents issued by SOCAD/POCADs/COCADs integratingadaptation policies, measures and activities (through policy briefs, government reports, implementation and/or replication plans). Global Environment objective N.A. Project description Re$ PAD II.C., TechnicalAnnex 4 Component1. Identificationandprioritizationof adaptationoptions.Adaptation involves making adjustments ineconomic, social or ecological systems inresponse to actual or expected climatic changes andtheir effects or impacts. The component will analyze the impacts o f climate change and thus i s important for measuringvulnerability, andidentifyingwhat specifically should be done indifferent places over different time periods to facilitate adaptation. Component2. Demonstrationandimplementationof adaptationmeasures.The purpose o f this component is to introduce, demonstrate andimplement the specific adaptation measures in selected demonstration areas, and adjust and integrate appropriate adaptation measures into the implementation of the IAIL3 project, inorder to reduce vulnerability to climate change inthe 3 H Basin. Component3. MainstreamingadaptationintonationalCAD programandinstitutional strengthening.The component would aim at integratingandmainstreamingclimate change adaptation into the national C A D program, including a series o f capacity building, technical assistance, knowledge sharing, public awareness activities, and preparation o f a "National Climate Change Adaptation Plan" for C A D by SOCAD, with the close cooperation o f CAS, the NDRC and MOFnational climate change adaptation offices. Which safeguard policies are triggered, if any? Re$ PAD I K F, Technical Annex 10 Environmental Assessment (OP/BP/GP 4.01) Indigenous Peoples (OD 4.20, being revised as OP 4.10) The proposedproject will bringnew concepts o frisk management, new standards inirrigation management andinfrastructure, and the use o f natural resilience (land, water, forests) to moderate the impact o f extreme weather conditions and climate change. Therefore, the project has been classified as a category C project (see Annex 10 for details). Significant, non-standard conditions, ifany, for: Re$ PAD IIL F. Board presentation: None. Effectivenessconditions. Confirmation from the Recipient and eachProject Province, respectively, which the GEF Grant Agreement and GEF Project Agreement have beenduly authorized or ratified, and are legally bindingupon the Recipient and each project province in accordance with their terms. Covenantsapplicableto projectimplementation. The mainlegal covenants are: (a) The RecipientRroject Provinces shall, throughout the period o f implementation o f the Project, promptly inform the World Bank o f any identified adverse impact and take measures, satisfactory to the World Bank, to mitigate the identified adverse impacts, including measures set out in the relevant environmental and resettlement plans and policies referred to inthe IAIL3 Loan Agreement; The Recipientproject Provinces shall, no later than September 1, 2008, develop and install a results-based monitoring and evaluation system and a management information system focusing on assessing the effectiveness o f climate change adaptation measures and link and coordinate said systems with the monitoring and evaluation system o f the IAIL 3 Project. The Recipient shall maintain and operate said systems ina manner satisfactory to the World Bank; The Recipient shall, no later than June 30, 2011,formulate policy recommendations and an action plan on climate change adaptation for the CAD Program focusing, inter alia, on the application o f adaptation policies and measures in the areas o f irrigated agriculture and water resources management and development, satisfactory to the World Bank. The recipient shall initiate implementationplanina manner satisfactory to the World Bank; The Recipient shall, no later than June 30, 2009, establish a data, metadata, and knowledge framework, satisfactory to the World Bank for collecting and developing modeling information relating to climate change adaptation measures developed under the project. The Recipient shall maintain and utilize said framework through SOCAD, and ensure that the Project Provinces utilize said framework, all ina manner satisfactory to the World Bank and for the purpose o f ensuring that the lessons learned from the implementation o f the activities under the Project are widely disseminated and practiced; The RecipientProject Provinces shall maintain throughout the period of implementation o f the project: (i) central, provincial and lower-level (at municipal the and county levels) Project Leading Groups, with terms o f reference, composition and other resources acceptable to the World Bank, to be responsible for providing policy guidance and inter-agency coordination for the implementation of the Project; and (ii) the central, provincial and lower-level (at municipal and county levels) Project Management Office, with terms o f reference, staffing and other resources acceptable to the World Bank, to be responsible for overall project implementation and management o f its respective activities, timely allocation o f counterpart fimds for the project implementation, and Project monitoring, evaluation and reporting at each level; The Recipientproject Provinces shall maintain a team o f mobile scientific and technical experts (MSTE) at the central, provincial and lower level (as a part o f the IAIL3 MSTE), including experts with adequate qualifications and experience in climate change adaptationmeasures, with terms o f reference, compositions, and other resources acceptable to the World Bank, to be responsible for providing advice to respective PMOSon technical matters relating the Project implementation; and The Recipient shall prepare and submit to the Bank the following reports: (i)semi- annual progress reports by February 15 and August 15 each year summarizing, inter alia, physical and financial progress during the previous half-year and the latest implementation status from project start-up, and project impacts based on agreed monitoring indicators; (ii)annual project M&E report, including the social and environmental safeguards monitoring and evaluation with groundwater and ET management plan and impacts in Hebei, and development o f WUA, FALFPCO in each province, summarizing activities, findings, annual evaluation results, technical and scientific recommendations from the MSTE and actions taken for the previous year by SOCADPOCAD; (iii) preparing and furnishing to the Bankby June 30,2010 o f a Mid-term Review Report, summarizing, inter alia, problems and issues encountered during implementation, revised costs estimates, proposed revised components and covenants, results of project monitoring and evaluation activities, measures recommended to ensure the project completion before December 31, 2011 and to further its objectives, and implementation o f measures agreed at the Mid-term Review; and (iv) the Recipient's Implementation Completion Report (ICR) within six months after project completion. Retroactive Financing. As SOCAD requested, retroactive financing from the grant for some project activities incurred after September 30, 2007, will be available up to an aggregated of $310,000. The retroactive financing will cover all activities in respect o f all the expenditure categories. I. STRATEGICCONTEXTANDRATIONALE A. Country and sector issues 1. The North China Plain or Huang-Huai-Hai River Basin (3-H Basin) is particularly vulnerable to the impact o f climate change. Overall, China i s in the bottom 25 percent o f countries in terms o f water availability per capita. Within China, 3 H Basin has only about one- third o fthe China average andabout halfthe per capitawater availability specifiedbythe United Nations as the standard for maintaining socio-economic and environmental development. At the same time, the 3H Basin i s China's prime agricultural area and breadbasket, producing some 50 percent o f national grain output and accounting for about 35 percent o f national industrial output. The basin also has a population o f 425 millionpeople. Water demand inthe region, already high, i s growing rapidly. However, available water resources generally are already fully allocated and often overexploited. Moreover, in several locations, increasing water quality degradation exacerbates water shortage problems. The projected climate changes could further decrease water stream flows and groundwater recharge in the Basin, while concurrently increasing irrigation water demand and withdrawals due to higher temperatures and consequent higher crop evapo-transpiration (ET). 2. It has been shown recently that the stagnation o f grain production for a number o f consecutive years in the 3 H Basin area i s linked to climate variability. China's irrigation-based agriculture inthis region will be further negatively affected by climate change, and remedial and adaptation measures need to be taken to ameliorate these effects. Action i s needed quickly because it takes time for such measures to have a significant impact. 3. Adaptation involves making adjustments in the management o f productive activities, assets and natural resources (inthis case, agriculture and water) inresponse to actual or expected climatic changes and their effects or impacts. The goal is to reduce the vulnerability o f communities, regions and activities to climate change. Especially important with regard to adaptation are: (a) the assessment o f climate change impacts and vulnerabilities; and (b) the development and evaluation o f climate change response and adaptation options. 4. These issues and their relationship to climate change are only recently becoming clear and their seriousness understood. In fact, past and current interventions generally have not addressed climate change and how to adapt to it. This is the case, for example, with the country's National Comprehensive Agricultural Development Program (CAD) and the Bank- supported Irrigated Agriculture Intensification I11Project (IAIL3) which i s part of the C A D Program. The objectives and components o f IAIL3 are important but do not consider climate change factors, their likely impacts and how to prevent or reduce their negative impacts. However, climate change adaptation has recently become an important national priority inChina and IAIL3 needs to be strengthened to include objective assessments o f measures and priorities for adaptation to climate change and to address gaps inthe original design o f IAIL3. Indeed, the main objectives o f IAIL3 are to increase water and agriculture productivity inlow- and medium- yield farm land areas, raise farmers' incomes and promote sustainable participatory rural water resources management and agro-ecological environmental management in the 3-H Basin. The main components o f IAIL3, especially on water-saving irrigation, drainage, agro-ecological environmental protection and management are likely focuses o f any future adaptation to climate change strategy. However, IAIL3 components were not designed with climate change as an 1 impact factor, which means that there may be a number o f vulnerabilities due to increasing climate variability and change that need to be addressed. 5. IAIL3 i s unusually well suited to the purpose o f introducing and demonstrating climate change adaptation measures. The project covers the primary food production region in China, the 3 H Basin. This basin i s particularly vulnerable to the impacts o f climate change and according to some recent research has already begun to feel the effects o f climate change. IAIL3's largest components are water saving irrigation and water saving agriculture, which are among the most likely areas to be affected adversely by climate change. Morevover, as part of the national C A D program, IAIL3 offers a potential path for mainstreaming adaptation measures into a major national program. IAIL3 i s implemented by the State Office for Comprehensive Agricultural Development (SOCAD) in the Ministry o f Finance (MOF) which, because o f its position, has significant influence with all provinces and close working arrangements with central agencies concerned with adaptation to climate change, including the ministries o f Water Resources and Agriculture and the State Forest Administration. Finally, M I L 3 i s based on a flexible "program approach" design which facilitates the incorporation o f measures to demonstrate climate change adaptation and to fill adaptation gaps duringproject implementation, since such measures were not included inthe original project. The proposed GEF/SCCF (Special Climate Change Fund) financed project has been designed as a gap-filling and programmatic operation that would focus on the 3 H region with possible expansion to other regions as appropriate, based on initial experience with the project. 6. China ratified the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol inJanuary 1993 and August 2002, respectively. Itjoined the Convention on Biological Diversity and the United Nations Convention on Drought and Desertification. Therefore, China i s eligible for SCCF administered by the Global Environment Facility (GEF). More recently, China has also developed a strong policy and strategic framework to support climate change adaptation, setting out several national environment and sustainable development policies, strategies and programs, and identifying adaptation to climate change as a national priority. These policies and programs relate directly to China's Initial National Communication on Climate Change, the National Strategy for Climate Change, the New Environmental Protection Standards, the CAD, and the ongoing IAIL3 Project. B. Rationale for Bank involvement 7. The proposedproject is consistent with the Bank's assistance to China inthe rural sector, focused on reducing the inequality between urban and rural areas and on facilitating the shifts from subsistence to commercial agriculture and from quantity to quality and value o fproduction. The proposed project is also consistent with the Bank's recent China Water Resources Assistance Strategy, which confirmed that better water resources management was central to sustainable economic growth and poverty reduction. The project i s highly innovative and can help establish a model which is very relevant to GoC's priority o fusingthe Bankto help develop and explore adaptation measures to address agricultural and associated natural resource management vulnerabilities to climate change. Adaptation concepts and measures developed under this project will thus further enhance the relevance, quality and sustainability o f the investments and work that the Bank i s supporting in rural China. In addition, the proposed project will contribute to the successful implementation o f the Bank's "China Country 2 Partnership Strategy (2006-20 10)'' which focuses on economic integration, poverty reduction andsustainable development. 8. Agriculture and rural development are central to China's strategy to accelerate economic growth and poverty reduction. However, China has little experience dealing with adaptation to climate change in agriculture and water resource management. With its global perspective, GEF (in partnership with the Bank) is the leading body in this new field and is well positioned to provide knowledge and institutional experience gained from its programs worldwide. 9. Implementation o f the proposed project will require close coordination and integration with IAIL3 and therefore the Bank's direct involvement will be required. Moreover, as the executing agency for the proposed project, the Bank has the capacity to mobilize worldwide expertise on a wide range o f aspects related to project management, agriculture, water resources management and climate change adaptation to assist in both project preparation and implementation. Inaddition, results and lessons from other Bank-executed, related activities can be utilized under this project. Finally, the Bank already has supported large investments in agriculture, irrigation and rural development in China; this provides strong incentives for the Bank to support effective adaptation measures which can help make China's agriculture and irrigation more resilient against climate change and variability. 10. In addition, the Bank is the Implementing Agency of the ChindGEF Integrated Management o f Haihe River Basin Water Resource and Water Environment project that focuses on reforming water administration institutions and related capacity-building. The project includes the concept of E T management in order to increase water-use efficiency, mitigate water resource shortages and improve the ecological environment. The Haihe project also includes Hebei Province but project areas o f the two projects do not overlap and the Haihe project does not include adaptation to climate change. However, the proposed GEF/SCCF adaptation project team has coordinated with Haihe project team during the project preparation, and these two projects would further coordinate and complement each other duringimplementation. C. Higher level objectives to which the project contributes 11. The higher level objectives to which the proposed GEF/SCCF project contributes are: (a) to strengthen the resilience o f agricultural development to climate change in North China; and (b) to help mainstream climate change adaptation in irrigation and rural water resource management. 12. The project is consistent with the goals o f the Bank's assistance to China in the rural sector, which i s focused on reducing inequality between urban and rural areas and on facilitating the shift from subsistence to commercial agriculture and from quantity to quality of production. The successfil implementation o f this project will contribute to the approved "China Country Partnership Strategy (2006-20 1O)", which focuses on economic integration, poverty and sustainable development inChina. 3 11. PROJECTDESCRIPTION A. Lendinginstrument 13. The proposed project would be partially blended with the ongoing IAIL3 project (P084742). Its cost totals US$55.5 million to be funded by: (a) a GEF/SCCF grant (from the Special Climate Change Fund) o f US$5 million; and (b) US$ 50.5 million financed under the ongoing IAIL3 including US$30.5 million from government (SOCAD) and US$20 million from the IBRD loan. B. Projectdevelopmentobjectiveandkeyindicators 14. The project development objective i s to enhance adaptation to climate change in agriculture and irrigation water management practices through awareness-raising, institutional and capacity strengthening and demonstration activities in the 3 H Basin. This would assist in mainstreaming climate change adaptation measures, techniques and activities into the national Comprehensive Agricultural Development (CAD) Program which i s China's largest national investmentprogram inimgated agriculture. 15. The main project development impact indicators would be: (a) increased climate change adaptation awareness o f farmers, Water User Association (WUA) and Farmer Professional Associations (FA) members, technical staff and officials (percentage o f people); (b) relevant climate change adaptation measures implemented in selected demonstration areas (number o f hectares) and by participatory stakeholders (number o f households); and (c) documents issuedby SOCAD/POCADs/COCADs integrating adaptation policies, measures and activities (through policy briefs, government reports, implementation and/or replication plans). C. Projectcomponents 16. The project objectives would be achieved through the implementation o f three components inthe six project provinces: Hebei, Henan, Shandong, Anhui, Jiangsu, and Ningxia. Implementation o f these components would lead to the integration o f climate change adaptation measures, techniques and activities into the national C A D program. Based on a preliminary gap analysis o f IAIL3 from a climate change adaptation perspective, these components can be described as follows: 17. Component 1: Identification and Prioritization of Adaptation Options (US$OSO millon from GEF/SCCF). Adaptation involves making adjustments in economic, social or ecological systems in response to actual or expected climatic changes and their effects or impacts. The goal o f adaptation i s to reduce the vulnerability o f individuals, communities, regions or activities to climatic change and variability. Understanding adaptation is important for two reasons: (a) adaptation will reduce the final impacts o f climate change and thus i s important for mitigating vulnerability; and (b) what specifically should be done in different places over different time periods to facilitate adaptation needs to be determined. Preliminary work on this component was started during project preparation under the Project Preparation Grant (PPG). Under the proposed project, this work would continue in order to: (a) finalize conclusions and recommendations from the PPG work; and (b) undertake additional work on impact assessment, 4 gap analysis and selection and prioritization o f measures to expand adaptation to C A D investment areas, The work would integrate climatological, hydrological, and economic analyses through the related models and studies. The analyses would capture climate change impact and adaptations for both irrigated agricultural development (climate change sensitivity at the local levels) and irrigation water resources management (at the river basin level). The study outcomes would be reviewed and disseminated by SOCAD and the six project provinces in accordance with their specific circumstances andpolicies. Specific activities underthis component include: (a) Impact assessment of climate change in 3-HBasin andproject area, including: (i) stocktaking o f previous studies; (ii)testing and adapting o f existing hydrology and agricultural production models to be dynamic and responsive to climate and resulting changing land cover-land use (including cropping patterns); (iii)assessing of the sensitivity o f 3-H Basin agriculture to climate andwater availability; and (iv) conducting farm households analyses inthe project area and elsewhere inthe 3 H Basin to determine climate sensitivity, water demand, adaptation response and the effectiveness o f household- and community-level adaptation options in the face o f projected climate change. The work would integrate all the relevant climatological, hydrological and economic aspects; capture climate change impact and adaptations inboth agriculture and irrigation (climate sensitivity); and in water resources management (at the river basin level). The use o f these state-of-the-art modeling techniques to integrate climate, hydrology and agricultural economics over key spatial and time scales i s an important and essential innovation in the approaches that will be adopted under the proposed project; (b) Gap analysis and study on adaptation measures. Adaptation measures for climate change were not included in the design o f IAIL3 and a gap analysis was conducted for IAIL3 during preparation o f the GEF/SCCF project. Preliminary key gaps in the design o f M I L 3 were identified with regard to climate change and adaptation to climate change in relation to knowledge and public awareness, design of irrigation and drainage facilities, agricultural practices, farmer participation and economic cooperative organizations, water and soil conservation and biogas activities. During GEF/SCCF project implementation, the gap analysis would be expanded to cover more IAIL3 and C A D program areas inthe six project provinces. This analysis would identifythe needed adaptation measures and help integrate those measures more broadly into IAIL3 and the C A D program. SOCAD and the six POCADs would organize national, provincial and local scientists and experts to carry out any such additional gap analysis work at the national, provincial and local levels as needed; and (c) Prioritization and selection of adaptation measures and demonstration areas. Based on preliminary results from project preparation work, activities under this sub- component would include: (i)identification and selection o f demonstration areas for adaptation, giving priority to areas with both high vulnerability and high likelihood o f making significant impacts; (ii)use o f scientific and technical analysis to develop potential adaptation options in terms o f content, implementation, costs and impacts o f various climate change scenarios on surface and groundwater and on flood and drought predictions and risks, in order to identify and select the most cost-effective adaptation measures for each project province; and (iii) consultations with farmers and discussions 5 with provincial and county experts to help incorporate empirical experiences into adaptation measures duringproject implementation. 18. Component 2: Demonstration and Implementation of Adaptation Measures (US$48.43 million comprising US$2.25millionfrom GEF/SCCF and US$46.18million co-financed from IAIL3). This component aims to introduce, demonstrate, and implement specific climate change adaptation measures in selected demonstration areas; and to integrate appropriate adaptation measures into the implementation o f IAIL3 to help reduce vulnerability to climate change inthe 3 H Basin. The adaptation measures would focus mainly on agricultural production andpractices and on irrigation water management anduse, taking into account expected temperature increases due to climate change. Adaptation measures would be carried out in conjunction with the ongoing IAIL3 project and would be expanded to cover as much o f the IAIL3 project area as possible. The two sub-components would be as follows: (a) Demonstration of Climate Change Adaptation Measures (US$2.25 million from GEFBCCF). Based on the gap analysis o f IAIL3 and preliminary conclusions o f scientific studies under Component 1, initially identified demonstration adaptation measures for each specific demonstration area would be introduced and demonstrated in each related sub-region o f the 3-H Basin (focusing on agricultural production and irrigation water management and utilization). The selected specific new activities (in addition to those included in IAIL3) include the following: (i)water resources management measures based on each sub-region 's conditions, including the development o f catchments (natural and artificial ponds) to enhance rainfall storage capacity and reduce water logging threats, well-based irrigation with reinforced prevention and resistance to drought and advanced field "real" water-saving irrigation technologies and works; (ii)adaptation-oriented farming practices, including adjustment o f farming patterns to reduce water consumption (proportion o f wheat-rice, wheat-rape seed and other crops would be adjusted based on the climate change tendency), and combining drainage with irrigation to avoid soil deterioration; (iii) water-savings-oriented farming technologies, including development o f drought resistant varieties, "seeded in water" practices, membrane and biological water conservation to deal with water scarcity, and land and eco-system rehabilitation and amelioration; and (iv) supporting through SCCF sub-grant financing, the development and expansion o f Farmers Associations and Water Users Associations for carrying out water-saving management and agricultural adaptation measures. The identified innovative adaptation activities would be implemented and tested in selected demonstration areas, and then supported, expanded and promoted where appropriate in all IAIL3 project areas, as described in (b). The specific additional activities andmeasures supported under the project are detailed inAnnex 4. (b) Integration of Adaptation Measures into IAIL3 Project Implementation Activities (US$46.18 million from IAIL3 comprising US$18.47 million IBRD loan and US$27.71 million counterpartfunding). The proposed component would focus on IAIL3 activities that are at risk from climate change. Based on the gap analysis o f IAIL3, scientific and modeling analysis under Component 1 and lessons from demonstration sites, this sub- component would review and refine the original IAIL3 technical design to help "climate proof' IAIL3 project activities. M I L 3 activities related to climate change adaptation would be modified and expanded as appropriate, including in particular: (i) engineering water-saving measures, including various water-saving irrigation and drainage 6 technologies and facilities; (ii)agronomic water-saving measures, including land leveling, deep plowing, minimum tillage, balanced fertilizer use, use o f crop residues, introduction o f adaptive varieties and high quality seeds, adaptive on-farm forestry belts (to be financed by sub-grants), etc.; and (iii) water-saving management measures such as volumetric water charges and high quality WUAs/FAs (also financed through sub- grants). IAIL3 activities would be enhanced to respond to actual or expected short-term climate variability and long-term climate change and their effects ineach specific region. All identified IAIL3 activities related to adaptation measures would be supported and expanded where appropriate (see the detailed activities inAnnex 4). 19. Component 3: Mainstreaming Adaptation into National CAD Program and Institutional Strengthening (US$6.58 million, including US$2.25 million from GEF/SCCF and US$4.32 million eo-financed from IAZL3). The component would aim to integrate and mainstream climate change adaptation into the ongoing national C A D program. Key activities would be a series o f capacity building,technical assistance, knowledge sharing, public awareness activities and preparation o f a "National Climate Change Adaptation Plan" for C A D by SOCAD, with the close cooperation o f Chinese Academy o f Sciences (CAS), the NDRC and M O F national climate change adaptation offices. Sub-components and activities would include the following: (a) Research and development of adaptation policies (US$112,400from GEF/SCCF), including development o f the national CAD climate change adaptation policy and replication and implementation plans; (b) Institutional strengthening and capacity building on climate change adaptation (US$5.25 million, US$1,43 million from GEF/SCCF and US$3.82 million eo-financed from IAIL3), including training, workshops, technical assistance, study tours and information dissemination; (c) Results-based monitoring and evaluation (M&E) (US$221,400from GEF/SCCF), including establishment o f a data, metadata, knowledge framework and implementation o f a results-based M&E system and a management information system (MIS) focusing on adaptation measures. Adaptation M&E would be linked to and coordinated with (and may be added on to) the ongoing comprehensive M&E system o f IAIL3 and will be designed to assess the effectiveness o f adaptation implementation mechanisms and measures; and (d) Project management (US$990,000, US$490,000 from GEF/SCCF and US$500,000 eo-financed from IAIL3 ) including support for project implementation management and dealing with project and implementation related issues such as procurement, financial management, the project Management Information System (MIS) and other incremental costs. In particular, the development o f mechanisms to promote and support cooperative work on adaptation between MOF, NDRC and SOCAD would be supported. 20. Overall, the project logical framework that has been followed for the general design o f the project, and the identification and sequencing o f project components can be summarized in the diagram below: 7 Analytic work on Demonstrations climate change L J * CAD Program design o f IAIL3 mainly "climate proof' A' dealing with water conservation D. Lessonslearnedandreflectedinthe projectdesign 21. Although China i s still exploring specific climate change adaptation measures and methodologies, lessons from experience have shown that there i s a wide range o f possible adaptations with the potential to reduce adverse climatic change impacts. Many o f these adaptations -especially in agriculture and water applications - represent improved resource management and many have benefits in dealing with current climatic hazards as well as with future climatic risks. 22. Duringproject preparation, Chinese stakeholders, including scientists and farmers under the leadership o f SOCAD and based on scientific information and empirical experiences, agreed on two categories o f adaptation measures: (a) modification o f current practices to adapt to changed climate trends inorder to avoid natural disadvantages or disasters; and (b) opportunistic search for practices favored by global warming which will also better benefit humans and the ecological environment. With this pro-active adaptation approach, adaptation measures would embrace a much broader scope and thus adaptation could support and accelerate the process of transition from traditional development into sustainable development. 23. Adaptation measures could include: (a) using advanced water-saving irrigation technologies and management to improve both technical and economic water-use efficiency; (b) changing cropping patterns and practices including timing o f farm operations and mulching to conserve soil moisture; (c) developing and using drought and flood-tolerant crop varieties; (d) broader utilization o f biogas digesters, taking advantage o f rising temperature, faster growth o f micro-organisms, more rapid fermentation and increased biomass production; and (e) increased use o f greenhouses to allow farmers to utilize the favorable factors o f climate warming to advance crop cultivation, save water and improve the capacity o f farmers inproduction o f cash crops. The modeling framework and information system established under Component 1would be utilized to evaluate adaptation tradeoffs throughout the region. 24. It is important to highlight that current knowledge o f adaptation and adaptive capacity is generally insufficient for rigorous evaluation o f planned adaptation options, measures and 8 policies. A key need i s to enhance the process o f consultation and decision-making on adaptation, conditions that stimulate or constrain adaptation and the role o f non-climatic factors. In addition, existing methods for evaluation adaptation options have limitations. For example, economic benefits and costs are important criteria but are not always sufficient to determine the appropriateness o f adaptation measures. Social andinstitutional criteria are also very important. 25. The proposed project would also coordinate with the GEF-supported Hai Basin Integrated Water and Environmental Management Project which was designed before the role o f climate change adaptation was recognized but which includes a number o f activities which are closely relatedto adaptation. E. Alternativesconsideredandreasonsfor rejection 26. The proposed GEF/SCCF project has been designed to be blended with IAIL3. An independent "stand alone" and smaller operation using the GEF/SCCF grant for adaptation to climate change only would have been inappropriate because the contemplated adaptation activities are numerous and their testing clearly calls for a wider area o f implementation and a longer time period. Inaddition, IAIL3 has included in its design a certain number o f activities that can be characterized as good adaptation measures to cope with climate change. Moreover, a stand-alone project would present much less opportunity for mainstreaming o f climate change policy and adaptation measures directly into a Bank-financed project and the national C A D program. 27. The partial blending o f the proposedproject with IAIL3would be based on a gap-filling analysis utilizing a programmatic approach adopted under IAIL3. This would lead to identification o f specific priority climate change issues that need to be addressed under the project. The proposed blending as proposed under the project would infact help: (a) identifythe adaptation gaps inIAIL3 and expand and deepen responses as needed; (b) provide an adaptation framework for comprehensive and cross-sectoral interventions; (c) support farmer participation, institutional capacity building and public awareness on climate change and adaptation; (d) create a favorable environment for more highly integrated agriculture and water management and for replication o f good practices; and (e) avoid practices which run counter to climate change adaptation needs. 111. IMPLEMENTATION A. Partnershiparrangements 28. The partners for the GEF/SCCF project are the government, the concerned provincial and local governments, the farmers and the World Bank. To establish climate change adaptation priorities, needs and constraints, direct engagement with stakeholders i s essential. The major direct intended beneficiaries o f the project are farmers and local communities in the demonstration sites and the counties where these sites are located. Farmers, the private sector andgovernments at other levels could also benefit from the project once it is replicated. 9 29. It is fimdamental to gather the most useful stakeholder input and this requires careful planning and an inclusive stakeholder dialogue process. This process should: (a) include a wide range o fnecessary viewpoints; and (b) enable the project to respondto adaptationpriorities. 30. The stakeholder participation process will be interactive, with the initial project team consulting with a small group o f stakeholders, to inform them on the initial development o f project objectives, and then the full project team engaging a broad group o f stakeholders throughout the project. A documentation log will be kept to retain institutional memory o f key views, recommendations and agreed decisions by the stakeholders. It is important to note that participation will apply to each o f the project components during both the design and implementationstages. 31. The major stakeholders o f the project are: (a) National government departments, including Ministry of Finance (MOF), National Development and Reform Commission (NDRC), Ministry o f Water Resources (MWR),Ministry ofAgriculture (MOA), State Environmental ProtectionAdministration (SEPA) and State Forestry Administration (SFA); (b) National andregional research institutions and universities; (c) Local governments and government staff, especially Finance Bureaus, Planning Commissions, Water Resource Bureaus (WRBs), Irrigation Districts (IDS),Water Management Stations (WMSs), Agriculture Bureaus (ABS)andForestry Bureaus (FBs); (d) The private sector including local input suppliers, traderdmerchants and dragonhead enterprises; (e) Civil society and organizations, including Water User Associations (WAS), Farmer Associations (FAs) andFarmer Cooperatives; and (f) Farmers and local communities. B. Institutionalandimplementationarrangements 32. The GEF/SCCF project will share project management and institutional arrangements for implementation with IAIL3. The project would have a four-year implementation period up to December 31,201 1. The project closing date will therefore be June 30,2012. 33. Project Management and institutional responsibilities. Effective institutional management arrangements for the GEF/SCCF project are crucial to its success, especially in view o fthe needto ensure an adequate breadth o fparticipationinimplementingthis new type o f project and the objective o f integrating climate change adaptation into the national C A D Program. As the implementing agency for the GEF/SCCF project, SOCAD will be responsible for management, monitoring and supervision o f project implementation, ensuring that agreed requirements and conditions are met and liaising with the Bank on behalf o f the six project provinces. As under IAIL3, MWR, MOA, SFA, SEPA and other agencies as needed, will provide technical support to ensure the project i s implementedsmoothly and according to plans. It is particularly important that NDRC and its lower-level offices participate in design and preparation for implementation and provide implementation support; NDRC i s the lead agency for climate change issues in China and this i s the first project on climate change adaptation. 10 Local C A D offices and IAIL3 PMOs will be responsible for project implementation at the field level, under the direction and coordination o f the concerned POCADs and the leadership and guidance o f SOCAD. Management arrangements for the GEF/SCCF project would be integrated with IAIL3, and the following organizational and institutional arrangements for management o f the GEF/SCCF project inconjunctionwith IAIL3 have been agreed and established. (a) Project Leading Groups (PLGs). PLGs for the proposedproject, from the central level down to provincial and county government levels, will be the same as for IAIL3, but will be strengthened with special experts and scientists concerned with climate change and adaptation. The central PLG would be chaired by the MOF vice-minister responsible for the project and would include, as needed, members from MOF, NDRC, MWR, MOA, SFB, SEPA and other concerned agencies and experts. The provincial PLGs would be chaired by the provincial vice-governor responsible for agriculture with members from the provincial Finance Bureau, Provincial Planning Commission, WRB, AB, FRB, EPA and other agencies and institutes as appropriate. It is important that the PPCs as representatives o f NDRC participate in the PLGs and provide support to the project; and that the representatives from the All China Women's Federation also participate where possible. The major responsibilities o f the PLGs are to provide coordination, policy-level support and policy guidance. City and county PLGs will follow the same model o f the provincial PLG and have similar organizational format, composition and responsibilities. (b) Central Project Management Office (CPMO). The national level or Central PMO (CPMO) inSOCAD for IAIL3 would be the CPMO for the GEF/SCCF project, but with responsibilities added which are specific to the GEF/SCCF project, and would be chaired by the Director o f SOCAD. Under the leadership o f the PLG, the CPMO would be responsible for handling day-to-day management o f the project at the national level, overall project coordination, project financial management, funding mobilization and allocations, ensuring overall project progress and quality, overall project supervision, monitoring and evaluation and reporting on project implementation and supervision. Particularly, the CPMO will be responsible for the project monitoring and evaluation system (M&E System), guidelines and procedures, providing oversight and technical and policy guidance to lower levels, specifying tasks and responsibilities for overall project implementation, making implementation recommendations and providing guidance to improve the project and its impact duringimplementation as appropriate. (c) Provincial PMOs (PPMOs). PPMOs for the IAIL3 project will be responsible for implementation o f the GEF/SCCF project in the respective province, similar to the national level, with specific responsibilities and unit(s) added as needed. Special units for the GEF/SCCF project have been established within the existing PPMOs in Hebei, Henan, Shandong, Anhui, Jiangsu and Ningxia with terms o f reference, staffing and other resources acceptable to the Bank. PPMOs will be responsible, inter alia, for day-to-day implementation management, direction, monitoring and supervision o f implementation, ensuring coordination between different departments involved in implementation, provision o f adequate and timely flow o f funds to lower levels, coordinating funding from the various sources, management and disbursement o f the GEF/SCCF grant funds, provision o f specialized technical assistance support to lower levels, operation o f M&E systems, various types o f procurement, arranging for project research, information 11 dissemination, workshops and other related activities. GEF/SCCF units in the PPMOs would include senior-level, expert staff from WRB, AB, and FRB. (d) Local Level Project Management Offices (PMOs). Similarly, local level (municipality and/or county) PMOs at lower levels for IAIL3 will be responsible for implementation o f the GEF/SCCF project, but will have specific responsibilities and units added as needed. Membership o f PMOs will follow the same pattern as for PPMOs. These local-level PMOs will be responsible for routine day-to-day operation and implementation o f the project, including local project planning, field implementation, field supervision, inspection, field M&E data and statistics collection and preliminary analysis, local procurement, reimbursements, local project management activities and coordination among local line bureaus involved inthe project. Institutional arrangements for management o f the GEF/SCCF project have been established in the concerned MunicipaVPrefecture and County C A D Offices (MOCADs and COCADs). M O C A D PMOs would in particular be responsible for overseeing project design, execution and supervision in the field, as well as overall local coordination and financing. COCAD PMOs would be responsible for project implementation in the field and arranging local fundingand labor contributions. (e) Mobile Expert Teams (METs). METS have been established under IAIL3 by SOCAD and the POCADs. For the GEF/SCCF project, these METs would be strengthened and expanded with suitable experts to provide guidance on climate change andadaptation to staff and farmers inthe field duringimplementation. The METs should include experienced leading scientist and experts on climate change, meteorology and environment, as well as the experts on water resources, agriculture and forestry for IAIL3. The METs would coordinate internally to ensure that the GEF/SCCF climate change work i s fully integrated with IAIL3 work and that the messages delivered to the field are consistent. National-level experts, in particular, should be utilized where appropriate. The functions o f the METs would include provision o f expert advisory services for implementation o f the project aimed especially at the farmers; provision o f technical consultation services to the PPMOs and lower-level PMOs for preparationhpdating o f the PIPS and implementation of the project; contribution o f suggestions to the PMOs to help facilitate smooth project implementation and recommendations to correct problems which arise during implementation; and assistance inproject supervision, monitoring, inspection andmid-term and completionreviews. 34. FinancingArrangements and FinancialManagement. Financing will be provided by a combination o f GEF/SCCF grant funds and IAIL3 project funding, including both the Bank loan and counterpart funds. GEF/SCCF funds will be used mainly to develop adaptation measures for IAIL3 and introduce them into IAIL3 implementation, as well as for promoting, expanding and/or enhancing the innovative aspects o f IAIL3 related to climate change adaptation (such as WUA and FA development, precision land leveling, ET management, and groundwater management) and for activities to promote mainstreaming o f climate change adaptation in the C A D program. The small amount o f GEF/SCCF funding will therefore help guide a large amount o f IAIL3 funding into climate change adaptation. Financial management (FM) under the GEFISCCF project would be based on the IAIL3 FM system and its computerized MIS. A separate FM system and MIS would be developed to cover the GEF/SCCF project. The GEF/SCCF project M I S would produce separate progress and financial monitoring reports for 12 the GEF/SCCF project, and the use o f funds would be reported separately from IAIL3. SOCAD will be responsible for unified FM o f the GEF/SCCF grant funds. Use o f funds will follow requirements o f the GEF/SCCF grant, IAIL3 and the C A D program for fimd use and management. GEF/SCCF grant funds would be used to reimburse qualified expenditures for the GEF/SCCF project following standard Bank procedures. Disbursements from the grant would be based on withdrawal applications prepared at the level at which the expenditures were incurred and submitted to the Bank through SOCAD. As with IAIL3, withdrawal applications would be prepared through the project MIS, with the same certification requirements including for W A S and FAs. Conversion o f the GEF/SCCF grant funds to Chinese Yuan during disbursements would follow standard Bankprocedures. 35. Inorder to facilitate project disbursement, it was agreed that as inIAIL3, a "sub-grant" category will be established for some small value project activities, including establishment o f WUA andFA, water wells, biogas, green houses and tree planting. These activities are expected to be conducted by the communities themselves. The sub-grants will be given to the F N W A and project participant household farmers to finance the cost o f goods, works and services required for carrying out all such activities. The local COCADs will provide the Sub-grant from SCCF grant using financial and management procedures already established under IAIL3. However, in order to ease disbursement monitoring and review process, the output-based disbursement (OBD) procedure will be used for some o f the project activities to be financed under these sub-grants (including water wells, biogas and green houses). The requirements specified in paragraph 15 in Annex 7, regarding OBD, should be followed and the only exception i s that the unit cost i s not applicable for activities which are not using the OBD. 36. Accounting system. PMOs at various levels will maintain separateproject accounts set up for the GEF/SCCF project and will have experienced full-time accountants available to manage the GEF/SCCF accounts and funds. Accounting standards, principles, internal financial controls, financial reporting and auditing methods inconformity with IAIL3 project management would be established. Field PMOs will maintain accounts and records o f expenditure for the project in the project MIS. These accounts will be submittedto upper levels usingthe M I S and the CPMO will submit to the Bank an annual settlement o fproject expenditures and funds based on these accounts andrecords. 37. Audits. The Audit Services Center (ASC) o f CNAO has been identified as auditors for the project and annual audit reports will be issued by ASC accordingly. The annual audit reports and project financial statements will be submitted to the Bank within six months after the end o f each calendar year. C. Monitoringandevaluationof outcomes/results 38. Management Information System (MIS). The project MIS will be the basis for physical and financial progress monitoring and reporting and will be coordinated and integrated with the IAIL3 MIS. As indicated above, the project MIS would be integrated with the IAIL3 computerized MIS, which would be expanded to cover the GEF/SCCF project. As with IAIL3, the project MIS will produce progress and financial monitoring tables, procurement monitoring tables, disbursement monitoring tables and WithdrawaVdisbursement requests, based mainly on procurement data entered into the system by the county PMO staff, The MIS data would then 13 be sent to PMOs at higher levels electronically, consolidated at provincial and central levels and provided to World Bank inthe semi-annual periodic reports for supervision reviews. 39. Monitoring and Evaluation System (MES). The project would establish a MES System for monitoring project outputs and evaluating and analyzing project outcomes. The system for the GEF/SCCF project would include key indicators specifically identified for the GEF/SCCF project (see Annex 3 for details on key indicators for the project). The MES would be able to produce separate MES reports for M I L 3 and the GEF/SCCF project, and consolidated reports for the two projects. SOCAD, POCADs and COCADs would be responsible at their various levels for maintaining the project MES, ensuring its accuracy and quality and undertaking analysis as needed for evaluation o f project outputs and outcomes; POCADS in particular would be responsible to monitor and supervise the operation o f the MES and ensure that MES data entered by lower levels i s high quality and accurate. MES results would be provided as required inperiodic reports, which would include the agreed key outcome and output indicators incoordination with financial and physical progress reporting through the MIS. These reports would be kept up-to-date and provided as needed for project supervision by the Bank (progress reports are discussed inAnnex 4). 40. As the GEF/SCCF project is the first o f its kind in China, high quality and timely monitoring and evaluation o f implementation and outcomes will be important to identify and resolve problems and to evaluate the outcomes and impacts o f the project. Evaluation will be especially important because the project i s based partly on "learning by doing" and one o f the major project objectives i s to mainstream climate change adaptation. The tasks are the collection and analysis o f data (on project implementation progress and quality and its social and environmental impacts) inassociation with the project M I S andMES. 41. Progress Reporting. Progress reporting to the Bank using the MIS and MES would be provided by SOCAD and POCADs twice a year, by February 15 and August 15. SOCAD and POCADs would carry out internal semi-annual supervision reviews and reviews by experts; and submit their supervision reports to the Bank (in English) before Bank supervision reviews. SOCAD and POCADs would provide input for project management and also Bank supervision reviews. 42. Institutional Responsibilities. PMOs at the field (and higher levels as appropriate) would be responsible for the collection and evaluation o f data collected for monitoring and evaluation indicators. PMOs would be responsible for entering data in the MIS (mainly for procurement and certification o f W A Sand FAs) and MES; and producing the required reports. The PMOs would designate specific units and/or staff to be responsible for these functions. MIS and MES responsibilities o f the CPMO and PPMOs would include: (a) the formulation o f uniform monitoring and evaluation standards and the key indicator system, and supervision o f the implementation and operation o f the project MIS and MES; (b) training, guidance, supervision and inspection o f lower-level MIS and MES institutions and personnel; (c) carrying out field inspections, consolidation o f data, studies on important issues and report writing; and (d) provision o fMIS and MES data andreports to CPMO which will submit reports to the Bank. 14 D. Sustainability and Replicability 43. The addition o f the GEF/SCCF project to the ongoing IAIL3, will further enhance IAIL3 sustainability in the face o f climate change. The GEF/SCCF project i s designed to demonstrate climate change adaptation implementation and integrate adaptation into the ongoing irrigation improvement, water management and rural development programs. The project will provide an . interactive and analytical methodology to assess current irrigation practices and cropping patterns in the light o f expected climate change and will test a comprehensive and integrated adaptation methodology and approach in demonstration areas. Project methods and lessons will be replicated in the existing C A D program and also in China's new rural development models. The project will strengthen the ability o f local communities to control their own resources and other factors that determine their livelihoods, such as through W A Sand FAs. All o f these characteristics will promote boththe sustainability andreplicability o fthe project. E. Criticalrisksand possible controversial aspects 44. The project faces a moderate overall risk. A project risk assessment has been carried out to identify the operation-specific risks and mitigation measures o f the project. The most important risk for the project is the delay inimplementing the activities, which would reduce the opportunity for climate change adaptation in IAIL3 and consequently reduce its impacts. Provisions for retroactive funding under the project have been included to minimize the impact o f delay. As for climate variation and change, activities under the project would reduce the associated risks. For example, public adaptations via "disaster loss mitigation" may include non- structural risk management initiatives (such as improved warning and preparedness systems, risk-averse land-use planning, crop loss insurance, more resilient water storage, irrigation and supply systems). Hardware or structural risk mitigation measures may include the revision of irrigation and drainage facility standards and measures to reduce non-beneficial evapo- transpiration. With the gap analysis and scientific approaches under the project and wide participation indecision-making processes, risks would further minimized. The following table summarizes the results o f the project risk analysis: Operation-specificRisks Project Weak understanding ofnew Sustainability climate change adaptation government staff and leaders indemonstration areas) on new concepts, measures and adaptation project concepts. Linkage to experts and specialized components institutions for training and support will be establishedand coordinated (integrated) with the establishedtraining systems under IAIL3. Low adoption rates/ Strengthening, expansion and integration of agricultural extension Unsuccessful demonstration services and technical support systems. Adaptation selection based at selected sites on good scientific practice, and farmers' and local officials' participation in decision making. Capacity building for individual rural households, village basedrural technicians. County level extension and service stations, and local governments. Pilot activities will be closely monitored and supported. Clear indicators for tracking outcomesand outputs with a focus on implementation milestones and project results and impacts. Failure of mainstreaming SOCAD (and MOF) sees climate change adaptation as critical to 2 adaptation into CAD their own CAD program and strongly supports mainstreaming measures. Use of appropriate extension and dissemination 15 Program mechanisms,including training, workshops, and demonstrations. Use of M&E information to enhanceand disseminatelocal and nationallaowledge of benefits of the project. Jointly with SOCAD andpartnerswork out an adaptationactionplanandrelevantpolicy for integrationof adaptationinto CAD Program. A delay inthe processing The Task Team will pay specialattention to the linkagebetween timetable and/or MIL3 and the proposedGEFISCCFprojectinterms of linkage implementation start-up with MIL3 implementationactivitiesand timetable, and the schedule could adversely identificationof the necessaryalternativesto address the options, affectprojectimpactand financingand arrangementsneeded ifthe GEF/SCCFproject the proposedpartial cannotbe completedat approximately the same time as IAIL3. blendingwith IAIL3. Financial Grantproceeds are not used SOCADhas substantialpreviousexperienceinmanagingWorld Management for the purposes intended Bank financedprojects, has consistently met FMrequirements,and (FM) i s currentlymanagingthe IAIL3 Projectfinanced by the Bank.An adequate FM system already inplace for MIL3 will be adapted for the GEF/SCCFproject, and can provide, with reasonable assurance, accurate and timely information on the status of the funds as requiredby the Bank.FMS/MIS will control and monitor counterpartfunds and expendituresas well as loan funds. Procurement All aspects as specified in 1 First 18 monthsprocurementplan will bepreparedand approved China's OverallPortfolio beforenegotiations. The sameproceduresas agreed for IAILI11 Risk assessment(incl. loss Projectwill be used for the GEF/SCCFproject. The existingMIS of efficiency, lack of systemunder IAIL3 will control and monitor "real-time" data on transparency, unfair procurementand contracting progressbasedonprocurement treatment of bidders, categoriesand methodsinthe loanagreement. unethical or corrupt behavior). Inadequateprocurement 2 Training to be organizedby PPMOfor procurementofficers at new capacity for new county County PMOSbeforestart up of the Project. PMO Social and In case anypossible Social 2 Annual environmentand safeguards M&E reports will be environmental and environmental providedhntegratedwith the MIL3 EMPby SOCADK'OCADs, safeguards safeguardsissues occurred. which will be followed up withnecessaryactions. Continuous and iterativeimplementation applied. Overall R i s k 'I overallrisk is moderate. I Nte: I= 2moderate3=substantial,4=high. 101 F. Grantconditionsandcovenants 45. The proposed GEF/SCCF project i s to be partially blended with the ongoing IAIL3 project. To be consistent with the latter, the GEF/SCCF project requires many of the same covenants as IAIL3. Some additional covenants have also been included to facilitate mainstreamingo f climate change adaptation into the overall C A D program. Inaddition, the legal documents o f IAIL3 will be modified as necessary to ensure that IAIL3 activity i s implemented in accordance with appropriate climate change adaptation measures developed under the GEF/SCCF Project. The technical designs of the activities under IAIL3 will be refined accordingly. The main covenants are listed below (the detailed covenants are described in the GEF/SCCF Grant andProject Agreements): 46. Effectiveness Conditions. Recipient's confirmation that the GEF/SCCF Grant Agreement and GEF/SCCF Project Agreement have been duly authorized or ratified by each project province, and i s legally bindingupon such project province inaccordance with its terms. 47. Covenantsapplicableto projectimplementation. The mainlegal covenants are: 16 (a) The RecipientProject Provinces shall, throughout the period o f implementationof the Project, promptly inform the World Bank o f any identified adverse impact and take measures, satisfactory to the World Bank, to mitigate the identified adverse impacts, including measures set out in the relevant environmental and resettlement plans and policies referred to inthe IAIL3 LoanAgreement; (b) The RecipientProject Provinces shall, no later than September 1, 2008, develop and install a results-based monitoring and evaluation system and a management information system focusing on assessing the effectiveness o f climate change adaptation measures and link and coordinate said systems with the monitoring and evaluation system o f the IAIL3 Project. The Recipient shall maintain and operate said systems ina manner satisfactory to the World Bank; (c) The Recipient shall, no later than June 30, 2011, formulate policy recommendations and an action plan on climate change adaptation for the CAD Program focusing, inter alia, on the application o f adaptation policies and measures inthe areas o f irrigated agriculture and water resources management and development, satisfactory to the World Bank. The recipient shall initiate implementationplanina manner satisfactory to the World Bank. (d) The Recipient shall, no later than June 30, 2009, establish a data, metadata, and knowledge framework, satisfactory to the World Bank for collecting and developing modeling information relating to climate change adaptation measures developed under the project. The Recipient shall maintain and utilize said framework through SOCAD, and ensure that the Project Provinces utilize said framework, all in a manner satisfactory to the World Bank and for the purpose o f ensuring that the lessons learned from the implementation o f the activities under the Project are widely disseminated andpracticed; (e) The Recipientproject Provinces shall maintain throughout the period o f implementation o f the project: (i) the central, provincial and lower-level (at municipal and county levels) Project Leading Groups, with terms o f reference, composition and other resources acceptable to the World Bank, to be responsible for providing policy guidance and inter-agency coordination for the implementation o f the Project; and (ii) the central, provincial and lower-level (at municipal and county levels) Project Management Office, with terms o f reference, staffing and other resources acceptable to the World Bank, to be responsible for overall project implementation and management o f its respective activities, timely allocation o f counterpart funds for the project implementation, andProject monitoring, evaluation andreporting at each level; (0 The Recipientproject Provinces shall maintain a team o f mobile scientific and technical experts (MSTE) at the central, provincial and lower level (as a part o f the M I L 3 MSTE), including experts with adequate qualifications and experience in climate change adaptation measures, with terms o f reference, compositions, and other resources acceptable to the World Bank, to be responsible for providing advice to respective PMOS on technical matters relating the Project implementation; and (g) The Recipient shall prepare and submit to the Bank the following reports: (i) semi-annual progress reports by February 15 and August 15 each year summarizing, inter alia, physical and financial progress during the previous half-year and the latest implementation status from project start-up, and project impacts based on agreed 17 monitoring indicators; (ii)annual project M&E report, including the social and environmental safeguards monitoring and evaluation with groundwater and ET management plan and impacts in Hebei, and development o f WUA, FA/FPCO in each province, summarizing activities, findings, annual evaluation results, technical and scientific recommendations from the MSTE and actions taken for the previous year by SOCADPOCAD; (iii) preparing and furnishing to the Bank by June 30, 2010 o f a Mid- term Review Report, summarizing, inter alia, problems and issues encountered during implementation, revised costs estimates, proposed revised components and covenants, results o f project monitoring and evaluation activities, measures recommended to ensure the project completion before December 31, 2011 and to further its objectives, and implementation o f measures agreed at the Mid-term Review; and (iv) the Recipient's Implementation Completion Report (ICR) within six months after project completion. 48. Retroactive Financing: As SOCAD requested, retroactive financing from the grant for some project activities incurred after September 30, 2007, will be available up to an aggregated o f $310,000. The retroactive financing will cover all activities inrespect o f all the expenditure categories. IV. APPRAISAL SUMMARY A. Economicandfinancialanalyses 49. Securing food production for a growing population while also maintaining the sustainability o f natural resources, such as land and water, has long been a great challenge for China. With the likely occurrence o f climate change, addressing such a challenge may become even more difficult. Climate change i s already reported to affect to some extent the pattern o f water resource availability, rainfall and temperature in some areas and thus may impact agricultural production invarious locations o f the country. This i s especially critical for the 3 H Basin, which is China's breadbasket. To address the likely impacts o f climate change, fanners will need to modify their production practices in response to changes in water availability, rainfall pattern andtemperature. The set o f possible modifications that farmers may undertake i s called adaptation. The ability o f farmers to adapt is based on many factors, including existing technologies, input and output process, human capital and knowledge, infrastructure and support services by the government. 50. The agronomic and economic assessment o f the proposed project was based on comparison o f simulations using two types o f models: bio-physical crop models for wheat and maize, two o f the major crops in the 3 H Basin; and a Ricardian model that observes present climate across regions and statistically quantifies impacts o f climate change on net income per hectare at the farm level. Although there are certain caveats and limitations with this approach, the analysis suggests that: (a) without adaptation, the agricultural sector, especially for maize in the 3 H Basin, will face significant economic losses under the various climate change scenarios tested; and (b) with adaptation, farmers can compensate for climate change and increase net farm income, especially under irrigation. 51. Overall, the comparison o f the bio-physical crop simulations models show that substantial yield reductions would occur as a result o f climate change without adaptation 18 (`without project' case), while the Ricardian models indicate that with adaptation net farm income can generally increase slightly (`with project' case). Although it is not possible to compare the outcomes o f the two model systems quantitatively, these results provide a strong qualitative justification for the proposed project. These results assume that the farmers have the knowledge, guidance and support needed to facilitate adaptation and this is a major purpose o f the proposed project. In addition, the Ricardian analysis did not consider water availability, which i s an implicit assumption that water i s non-limiting. Given that water supplies are very limited inthe 3H Basin, this provides a justification for the project's strong focus on improving "real water saving" as a means for climate adaptation. 52. Two key adaptation measures were indicatedby the analysis: (a) changing cropping patterns by moving from one set o f crops to another which is more adapted to the climate as it changes; and (b) moving from rainfed to irrigated agriculture based "real" water saving (with the assumption that sufficient water resources will be available). The analysis suggests that the combination o f irrigation and cropping pattern change would be critical adaptation measure for the 3 H Basin. The analysis also suggests that further work on analysis o f water availability and adaptation to climate change would be needed to help identify further critical adaptation measures, guide support and policy for adaptation in the future, monitor and respond to climate change and its impact on agriculture, and address adaptation needs as climate change progresses. B. Technical 53. The project technical study completed by the Chinese Academy o f Science (CAS) analyzed climate change in the 3H basin, historically and over the coming decades. Two approaches were used. The first was to analyze trends in climate over the past decades, and the second was to assess the best projections from computer modeling o f future climates. Temperatures have increased over the past 50 years, particularly in the 199Os, when temperatures rose by 1' to 1.5'C over the long-term average. The observed trends are consistent with climate modeling, which suggests that temperatures inChina will rise by 1.5' to 3'C by 2030 and by 4' to 6'C by 2100. Precipitation inthe 3 H region has decreased since the 1950s by 140mm, at a rate o f 2.92mdyr. Climate modeling projects changes in precipitation o f +5 percent or less by 2050 with 10 to 15 percent increase by the end o f the century. This small increase would be counterbalanced by increased evaporation as the result o fhigher temperatures. 54. Using state-of-the-art water balance models, the project investigated the net impact o f increasing temperatures and precipitation by modeling changes in water availability. These showed that projected water resource availability, as indicated by estimated run-off, i s likely to decrease significantly in the future. Modeling runs using scenarios consistent with the most likely climate projections showed that run-off might fall by 4 to 6 percent and that available soil moisture for crops would also decline significantly. 55. The impact on crops i s a complex outcome o f many factors, but the most important are: (a) higher temperatures, allowing a longer and often earlier-starting growing season; and (b) higher water use due to higher temperatures and increased growth rate and water-use efficiency as a direct response to the higher concentration o f COz in the atmosphere (the "COz fertilization effect"). The net impact on crops depends on the complex balance between these and other factors, including management actions (e.g., changing planting 19 dates, varieties or irrigation methods). The 3-H Basin crop production models show that the impacts on crop yield will usually be negative, unless they are counterbalanced by management activity. Marginal increases intemperature have very different effects with and without the COz enrichment effect; COz enrichment plays a positive role in crop yield, which either turns the original negative effect to moderate positive effect or mitigates the negative effect. 56. Up to 70 percent o f the irrigation water inthe region comes from ground-water. Changes in the recharge rate for ground-water under changing climate conditions are poorly understood and were not included in the original CAS study. However, a new effort to improve modeling capacity in this area was initiated during preparation. A statistical based model, RTFN, was used to evaluate the potential change in the depth o f the water table under different climate scenarios. A key assumption o f the model is that water consumption i s the same as in the historical records, and irrigation withdrawals were not included inthe model. The model showed that variations o f water table depths are generally consistent with the variations o f precipitation surplus as temperature increases. This model would need to be modified to examine scenarios o f irrigation withdrawals. 57. The CAS study has identified a number o f 3 H region wide preliminary adaptation options based on experience in dealing with climate variability and experience elsewhere. Essentially, they focus on greater water capture, more efficient water use through crop species and variety selection, and improved management practices. Based on these, specific adaptation measures are put forward for different sub-regions, as follows: (a) Piedmont plain (short o f surface water for agriculture): (i)reinforce replenishment o f ground water by flood management; (ii) develop advanced field real water-saving irrigation technologies and facilities; (iii) adjust agriculture farming-patterns to reduce water consumption; and (iv) explore alternative water resources, such as waste water. (b) Alluvial plain sub-region (relatively less rainfall and poor-quality shallow ground water): (i) develop technologies and facilities for collecting rainfall by using natural ponds and artificial ponds to promote recharge; and (ii) reduce proportion o f agriculture andincreaseproportion o fforestry, livestock and fisheries. (c) Huang-Huai plain sub-region (relatively more precipitation, with less groundwater utilization): (i)develop alternative water resources, such as treated waste water; (ii) develop technologies and facilities for both drainage and irrigation purposes; (iii) irrigationbasedonwells, soastoreinforcecapacitiestodealwithdroughtand plan flood disasters; and (iv) adjust proportions o f farming areas for wheat-rice, wheat-rape seed and other crops. (d) Yellow River irrigation area sub-region (replenish local water resources): (i) enhance efficiency o f utilization o f Yellow River and local water; and (ii) same follow strategies as Alluvial Plain andHuang-Hai sub-regions. (e) Tongxin County inNingxiaProvince (water short conditions): (i) fbrther develop rainfall-collecting technologies and facilities to collect the short-term but intensive rainfall inwater cisterns for supplementary irrigation utilization; and (ii) develop water- 20 saving oriented farming technologies, such as drought resistant species, "seeded inwater" measures, membraneapplication and biological materials for water conservation. C. Fiduciary 58. The GEF/SCCF project followed procedures similar to IAIL3 and will use the IAIL3 financial management system, which i s operating satisfactorily. Therefore, a full financial management assessment o f the project financial management system was not required. However, a detailed review o f financial management under IAIL3 covering related financial documents, audit reports, discussions with SOCAD and a review o f financial management plans for the proposed project have been undertaken. The proposed project will have inplace an adequate project financial management system that can provide, with reasonable assurance, accurate and timely information on the financial status o f the project inthe agreed reporting format as required by the Bank and accurate accounting for the grant funds used. Similarly, a full procurement assessment was not required. Procurement capabilities o f SOCAD and the COCADs have been adequate under IAIL3 and are expected to be adequate for the proposed project which will use the existing IAIL3procurement system and staff. D. Social 59. Preparation o f the proposed project has paid close attention to Bank policy, social objectives and appropriate means to achieve those objectives. The social development goal in the project context i s to support the empowerment o f local farmers through their involvement in design and implementation o f project activities and adaptation measures. Extensive consultations were conducted with farmers on the possible components to ascertain their views and priorities. A questionnaire survey o f 5,070 farm households under IAIL3 showed that project area farmers looked forward to the on-farm work and improved irrigation efficiency and would participate with their labor inputs. A number o f consultations during the preparation o f the proposed project also showed that farmers would welcome adaptation measures that would eventually help them reduce risks o f climate disasters. To help strengthen the farmers' own capability to deal flexibly with climate change, support for expansion o f WUAs and FAs as the farmers' own organizations has been included in the GEF/SCCF Project (as well as IAIL3)to enable the farmers themselves to participate in and (where appropriate) control decision-making on local irrigation management and agricultural production. Each o f the IAIL3 provinces under the GEF/SCCF project prepared WUA and FA development plans conducive to agricultural adaptation to climate changes as part o f project component design. In doing so, care was also taken to ensure the participation o f women farmers in W A Sand FAs, particularly as managers o f household land and water when males migrate for work. Moreover, the project also paid particular attention to vulnerable groups inthe official poverty counties (about one-third o f the IAIL3project areas) to promote inclusive institutions that increase the poor farmers' participation and benefit from both IAIL3 and the proposed GEF/SCCF project. 60. Because the GEF/SCCF program will be conducted not only in the regular five MIL3 provinces but also in Tongxi county in Ningxia Hui Autonomous Region, an EMDP was prepared for the Hui ethnic minority communities in the project area in Ningxia, in 21 combination with the IAIL3-related WUA pilot program in the same project area. Based on consultations with local ethnic minority groups duringthe project information dissemination campaign and social assessment process, the EMDP analyzed the local Hui people's needs and aspirations related to the project activities and set forth measures to help ensure equal opportunities for Hui ethnic groups to participate in project design and implementation. Although the GEF/SCCF program in Ningxia covers only 10 villages in one township, 6 o f the ten villages have Hui populations which account for 47 percent o f the total project beneficiaries there. The EMDP i s intended to ensure that these people participate in the GEF/SCCF program voluntarily and benefit equally from it and also help ensure that project design inNingxia i s inconformity with the required social safeguards under OP4.10. E. Environment 61. Partially blended with IAIL3, which is focused on improvement and upgrading o f existing farm irrigation facilities with limited new construction and no major civil works, the proposed project i s an environmental project. In line with its development objectives, the proposed project will introduce new concepts o f risk management, new standards for irrigation management and infrastructure, and the use o f natural resilience (land, water, and forests) to moderate the impact o f extreme weather conditions and climate change. Overall, environmental and social impacts o f project activities are expected to be positive. In addition, the proposed project will primarily provide technical assistance, capacity building andother software support for climate change adaptation. The project has been classified as a Category C project. F. Safeguardpolicies SafeguardPoliciesTriggeredby the Project Yes N o Environmental Assessment (OPBP 4.01) Natural Habitats (OP/BP 4.04) PestManagement (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Involuntary Resettlement (OPBP 4.12) Indigenous Peoples (OP/BP 4.10) Forests (OP/BP 4.36) Safety o f Dams (OPBP 4.37) [I [I Projects inDisputedAreas (OP/BP 7.60)* [I [I Projects on International Waterways (OPBP 7.50) [I [I 62. EnvironmentalAssessment: There are no major adverse environmental impacts expected as a result o f this project (as described in Section E above). The project is designed to be positive from an environmental point o f view, particularly by protecting vulnerable ecosystems from the impact o f climate change. Some expected direct positive impacts * By supporting theproposedproject, the Bank does not intend toprejudice thefinal determination of theparties' claims on the disputed areas 22 include: (a) reduced uncertainty o f impacts from climate change and formulation o f adequate adaptation measures; (b) mitigation of impacts from unsustainable agricultural practices and development and implementation o f sustainable alternatives; (c) reduced vulnerability o f agro-systems, and planning and management o f irrigation water supplies; and (d) increased public awareness buildingon adaptation needs and increased social and institutional capacity to manage the ecosystems. An Environmental Assessment will be performed as part o f the preparation of adaptation measures. 63. Involuntary Resettlement: The proposed project will not undertake activities that will require taking o f land and neither land acquisition nor involuntary relocation is expected duringproject implementation. Any potential impacts resulting from the proposed testing of adaptation measures at demonstration sites would be dealt in accordance with the Resettlement PolicyFramework prepared for the ongoing IAIL3. 64. Indigenous Peoples: The proposed GEF/SCCF project demonstrations sites are all within the original IAIL3 project areas, except for Tongxin county inNingxia Province, which has been added to the M I L 3 project area as a Participating Province for WUA development and in which there are Hui minority communities. For the five recently added Participating Provinces/regions under IAIL3, Ethnic Minority Development Plans (EMDPs) have been prepared for WUA pilot areas for the three provinces -- Ninxia, Yunnan and Inner Mongol -- where ethnic minorities reside. Seven ethnic minorities including Hui ethnic groups reside in about 61 WUA pilot sites in those three provinces/regions. Because Tongxin county under the GEF/SCCF project is located inthe IAIL3 project area inNinxia, those Hui communities related to GEF/SCCF program will also be covered by the EMDP prepared for Ninxia. The EMDP will help ensure that Hui communities have equitable opportunity to participate in and benefit from the GEF/SCCF program, and also ensure they have cultural and location- specific compatibility under boththe IAIL3 and GEF/SCCF projects. G. PolicyExceptionsandReadiness 65. The project is fully consistent with Bank policies and does not require any exceptions. Project staff has been mobilized at all levels and trained inBank procurement, disbursement procedures and financial management requirements. They are also experienced in IAIL3 implementationprocedures. The project meets the readiness criteria. 23 Annex 1: CountryandSector or ProgramBackground CHINA: MainstreamingClimateChangeAdaptation inIrrigatedAgricultureProject Key agricultureandwater issues inthe NorthChinaPlain 1. Overall, China ranks at the bottom 25 percent o f countries inwater availability per capita. Within China, the North China Plain or Huang-Huai-Hai Basin (3H Basin) has only about one- third o f the China average and about half the per capita water availability as specified in the UnitedNations standard for maintaining socio-economic and environmental development. At the same time, the 3 H Basin is China's prime agricultural area and breadbasket producing some 50 percent o f national grain output and accounting for about 35 percent o fnational industrial output. The basin also has a population o f 425 million people, which, if it were not in China, would be the third largest country in the world. Water demand in the region, already high, is growing. Available water resources generally are fully allocated and often overexploited, and groundwater levels are falling over wide areas, sometimes by as much as one meter per year. Moreover, in many locations, increasingwater quality degradation exacerbates water shortage problems. 2. It has been shown recently that stagnated grain production for a number of consecutive years in the 3 H Basin area i s linked to climate variability. Frequent natural disasters, such as droughts, floods, storms and insects in this region, are a major factor contributing to rural poverty and constraining rural development. The projected climate changes could further decrease water stream flows and groundwater recharges inthe Basin, while they would increase irrigation water demand and withdrawals due to higher temperatures and consequent higher crop evapo-transpiration (ET) and soil evaporation. Given the current global warming trend, China's irrigation-based agriculture in this basin will be hrther negatively affected by climate change and remedial measures need to be taken to ameliorate these effects. Action is needed quickly because it takes time for such remedial measures to have a significant impact. The importanceof addressingclimatechange issues 3. As the Intergovernmental Panel on Climate Change report (IPCC's Third Assessment Report, 2001) stated, "Approximately 1.7 billion people, or one third o f the world's population, presently live in countries that are water-stressed, including China. The projectedclimate change could further decrease the stream flow and groundwater recharge inmany o f these water-stressed countries." Climate change "may substantially affect irrigation withdrawals. ... Higher temperatures, hence higher crop evapotranspiration demand, mean that the general tendency would be towards an increase inirrigation water demands." More recently, estimates o f sea level rise suggest that coastal regions 1-5 m above sea level are likely to suffer inundation duringhigh tides and storm events and there is also a danger o f sea water infiltrating and salinizing depleted groundwater aquifers. 4. Adaptation to climate change involves making adjustments in the management o f productive assets and natural resources (in this case, agriculture and water) in response to actual or expected climatic changes and their effects or impacts. The goal o f adaptation is to reduce the vulnerability o f communities, regions, or activities to climatic change and variability. Adaptation i s important in the climate change issue in two ways: (1) regarding assessment o f impacts and vulnerabilities; and (2) regarding development and evaluation o fresponse options. 24 5. Climate change problems are only recently becoming clear and their seriousness understood. In fact, past and current interventions generally have not addressed climate change andhow to adapt to it. This is the case for example with the country's National Comprehensive Agricultural Development (CAD) Program and the Bank-supported Irrigated Agriculture Intensification I11Project (IAIL3). The latter was approved inOctober 2005. Its total cost is $463 million, including a World Bank loan o f $200 million with the remainder financed by the State, provincial and local governments and farmers. It supports sustainable development o f modem irrigated agriculture in 107 counties in five provinces within the 3 H Basin (i.e., Anhui, Henan, Hebei, Jiangsu and Shandong) through four integrated components: (a) Water-saving Irrigation and Drainage; (b) Agricultural Modernization and Organization Development; (c) Agro- ecological Environmental Protection and Management; and (d) Institutional Strengthening and Project Management Support. The Importanceof FactoringAdaptationto ClimateChange 6. Though both the GOC and WB through IAIL3 focused on sustainability, however, adaptation was little known at the time where the C A D and IAIL3 were prepared. The proposed GEFISCCF project would be a partially blended project with IAIL3. Based on a preliminary gap analysis, it i s designed to fill critical climate change adaptation gaps in the design o f IAIL3. In addition to improving sustainability o f IAIL3 investments, the proposed GEF/SCCF project would integrate climate change adaptation concepts and measures directly into IAIL3 implementation and subsequently into the national C A D program itself. The broader objective of this project would be to help strengthen the resilience o f China's agricultural sector by integrating adaptation to climate change into the design and implementation o f water management, agricultural andrural development programs. 7. A quick examination could easily identifymal-adaptationpractices which remain largely unaddressedunder current Chinese and WB interventions inthe 3 Hbasin: (a) Cropping Patterns and Irripation Modalities. Currently, in North China Plain, most o f agriculture productions are from winter wheat, corn, and cotton. Serious problems arise from application o f such a cropping pattern and accompanying irrigation modalities. The climate in the area i s dominated by monsoon, with rainfall and high temperatures occurring simultaneously in the warmest months: July and August. Rainfall is rare and river runoff very low during April and May while this i s the season where winter wheat needs water most for its growth. Though against natural rainfall, this type o f water-consumed crops is still dominant in the 3 H basin and therefore, winter wheat i s vulnerable to and often damaged by drought in spring and early summer. Withdrawing groundwater to irrigate wheat has increasingly reduced groundwater levels. Over the past 20 years, government and farmers spent great amounts o f financial and humanresources to fight against heavy drought during spring to ensure acceptable yields but wheat production is still declining and they continue to lose enormous human resources, financial investments, precious water resources, as well as other eco-system related services. There is no surprise that in 3 H Basin, the groundwater level was normally 2-5 meters deep 30 years ago and i s 30-50 meters deep now. It i s not unusual for the groundwater level to bebelow 80-100 meters insome places. 25 (b) Unsystematic design and actions to cope with climate change. In order to deal with severe water shortage inTianjin Metropolitan, also in3H Basin, water from Yellow River is transferred to Tianjin through canals. The problem i s that clear water is transferred but huge amounts o f sand from Yellow River water i s left inYangu County o f Shandong Province. An area o f 6,700 hectares has become man-made bare sandy land from original rich agricultural land and with sandy thickness o f 1-5 meters, and i s expanding in a speed o f 100 hectares per year. Without systematic and urgent follow-up, besides its severe negative impacts locally, this bare sandy landmay become a long-term threat to the provinces o f eastern China given the fact that the strong wind o f winter monsoonmay blow the sand over this most important agricultural area o f the country. Government GeneralPoliciesandProgramson Climate Change 8. China ratified the UnitedNations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol inJanuary 1993 and August 2002, respectively. Itjoined the Convention on Biological Diversity (CBD) in January 1993, and the United Nations Convention on Drought and Desertification (UNCDD) in October 1994. Therefore, China is eligible for Special Climate Change Fund(SCCF) administered by the Global Environment Facility. 9. Recently, China also developed a strong policy and strategic framework to support climate change adaptation. China has set out several national environment and sustainable development policies, strategies and programs, all o f which now identify adaptation to climate change as a national priority. The main thrusts o fthese programs can be summarized as follows: (a) Initial National Communication on Climate Change. China's Initial National Communication on Climate Change submitted to the Secretariat o f the UN Framework Convention on Climate Change in October 2004 aims to enable China to fulfill its commitments under the UNFCCC. Chapter three o f this communication, entitled "Impacts o f Climate Change and Adaptation" states inparticular that: (i) has been a there continuous drought in the North China Plain since the 1980s, while flooding disasters have happened more frequently in southern China; (ii) these natural disasters have been more pronounced during and after the 1990s; (iii) climate warming would speed up plant growth and shorten the crop-growing period, so would affect the accumulation o f dry biomass and grain yield; and (iv) China has started to take relevant adaptation measures. These include promulgating 13 related laws and regulations, constructing water conservation projects, planning water diversion from the South to the North, adjusting the agricultural cropping patterns and systems, and cultivating and spreading the new drought-resistant varieties. (b) National Strategy for Climate Change. China's National Strategy for Climate Change has just been published with the leadership of the National Development and Reform Commission (NDRC) and the active participation o f the Ministry o f Finance (MOF) and will be issued for implementation soon. The strategy emphasizes the urgent need for adaptation and indicates preliminary adaptation measures. The strategy identifies agriculture andwater as China's national priorities for climate change adaptation. (c) New Environmental Protection Standards. As part o f its 11th Five-Year Development Plan (2006-201 0) (FYP), China adopted new environmental protection 26 standards, which were approved in February 2006. According to the FYP, the State will enact and amend over 1,000 environmental standards. It also will draft and enact specific industry discharge standards for different sectors. The FYP provides a favorable policy framework to adopt and incorporate climate change adaptation measures inthe national development agenda, The FYP strongly encourages and supports sustainable agriculture and rural development, water-saving agriculture, modification o f cropping patterns and conservation farming. (d) Ongoing National CAD Program and the IAIL3 Project. The National C A D program i s China's largest agricultural program. C A D carries out "New Countryside" rural development tasks in a unified, comprehensive way. C A D therefore has the potential to play a key role in implementing the shift in focus for China's rural development over the next five years. 10. China has the necessary policy frameworks to implement adaptation measures. Adaptation can also be replicated in China and can even become a driving force for China to adopt sustainable development models in its rural areas while China's social-economic development has so far depended, to a large extent, on over-exploitation o f natural resources. Climate change can be a wake up call and adaptation may provide opportunities for China to adopt more sustainable development models through their pilot adaptation implementation inthe 3Harea. Lessons learned and activities of other partners 11. Although China i s still exploring specific climate change adaptation measures and methodologies, lessons from experience have shown that there are a wide range o f possible adaptations with the potential to reduce adverse climatic change impacts. Many o f these adaptations-especially in agriculture and water applications-represent improved resource management and many have benefits in dealing with current climatic hazards as well as with future climatic risks. For example, adaptation strategies could include (i) advanced water- using saving irrigation technologies and management to improve water-use efficiency and protect against soil erosion; (ii) changing farming cropping patterns and practices including timing farm operations andmulching to conserve soil water; (iii) developing and using droughtlflood-tolerant crop varieties; and (iv) being opportunistic based on climatic trends and find practices which are favored by global warming and which will also better benefit humans and ecological environment. From this pro-active adaptation mindset, adaptation measures could embrace a much broader scope and thus the adaptation could accelerate the process o f transition from traditional development into sustainable development. 12. However, it i s important to highlight that current knowledge o f adaptation and adaptive capacity is generally insufficient for rigorous evaluation o f plannedadaptation options, measures and policies. Key needs include the processes of adaptation decision-making, conditions that stimulate or constrain adaptation and the role o f non-climatic factors. In addition, existing evaluations o f adaptation options have limitations. For example, economic benefits and costs are important criteria but are not always sufficient to adequately determine the appropriateness o f adaptation measures. Social andinstitutional criteria are also very important. 27 The Role of GEF 13. During the last decade, the GEF support to China covered all its focal areas but adaptation to climate change. It would bring tangible global benefits and mitigate the economic andsocial impact o fclimate change ifChina could adopt andimplement the environmentally and economically sound approach o f climate change adaptation to its rapid development. This i s particularly important in the context o f improving water resource management and irrigation, which i s an essential aspect o f climate change adaptation as well as China's hture economic development. 14. The proposed GEF/SCCF adaptation project will provide an opportunity for China to bring new perspectives to and build on results from other existing GEF-supported projects in China as a number o f them are directly relevant to climate change adaptation, in particular the ongoing GEF Hai Basin Integrated Water and Environment Management Project. The Hai Basin Project is supporting an integrated approach to water resources management and pollution control at the river basin level inthe Hai Basin, which itself i s part o f the much larger 3 H Basin. Meanwhile, at the field level, the IAIL3 project includes provisions for support o f similar vital water management and irrigation innovations. The proposed project would aim to help mainstreamthe Hai Basininnovations inwater resource management, and apply them over much wider areas inthe context o f a large-scale project (IAIL3). 15. In light of these factors and as indicated above, the proposed GEF/SCCF project is designed to be partially blended with IAIL3, which includes components that deal directly with many o f the topics above, such as water-saving and improved crop patterns. The blendingwill be done through a gap-filling analysis utilizing the programmatic approach adopted under L4IL3. This methodwill be followed with the objective o f identifyingpriority climate change issues that need to be addressed. The proposed project would also coordinate with the ongoing GEF- supported Hai Basin Integrated Water and Environmental Management Project which was designed before the role of climate change adaptation was recognized. There is no overlapping betweenthe two projects. 28 Annex 2: Major RelatedProjectsFinancedby the Bankand/or other Agencies CHINA: MainstreamingClimateChangeAdaptationinIrrigatedAgricultureProject LatestSupervision(Form590) Ratings(Bank-financedprojects Sector Project only) Implementation Development Progress(IP) Objective (DO) EASRE Hai BasinIntegrated Water and Environment S S ManagementProject (P075035) EASRE Irrigated Agriculture Intensification Project I11 S S (P084742) EASRE Irrigated Agricultural Intensification LoanI1 Closed Closed Project (P049700) HS HS EASRE Pro-Poor RuralWater ReformProject S S (PO88116) EASRE Guanzhong IrrigationProject (PO5 1888) Closed Closed S S EASRE Yangtze BasinWater ResourcesProject S S (P064730) EASRE Water Conservation Project (PO56516) HS H S EASRE SecondTarim Basin Project (P046563) Closed Closed 29 Annex 3: ResultsFrameworkandMonitoring China: MainstreamingClimateChangeAdaptation inIrrigatedAgriculture Project ProjectDevelopmentObjectives OutcomeIndicators Use of OutcomeInformation (GEF/SCCFl The project development objective i s (i) awareness o f farmers, members Informationwill be used to to enhance adaptation to climate o f WUAs/FAs, technical staff and disseminate and replicate CC change inagriculture and irrigation officials on the needto enhance CC adaptation concept and water management practices through adaptation inagriculture and implementation measures inChina's awarenessraising, demonstration irrigation(percentage o f people). agricultural water management activities inthe 3HBasinand sectors. institutional, capacity andpolicy (ii)Relevant adaptation measures strengthening on CC adaptation. implemented inselected Progress on each o f these indicators This would helpmainstreamclimate demonstration areas (ha) andby will be reviewedand assessedto see change adaptation measures, participatory stakeholders to whether the project is having the techniques, and activities into the enhance CC adaptation in intendedimpacts. Ifnot, adjustment national Comprehensive agricultural practices and irrigation will be made to project activities so Agricultural Development (CAD) water management (number o f as to achieve the desiredproject Program which i s China's largest households). objective. national investmentprogram in irrigated agriculture. (iii)Documents issued by socADPocAD/cocADsto support and implement institutional strengthening, policies, measures and activities needed for CC adaptation inagriculture and irrigationmanagement (through policy briefs, government reports, implementation and/or replication plans). IntermediateResultsby IntermediateResultsIndicators Use of IntermediateResults Component Monitoring Component 1.Identificationand (i) baseline,projectedscenarios The To improve the design o f the Prioritizationof Adaptation andpossible long term impacts o f activities incomponent two and the Options including climate change identifiedfor the effectiveness o f adaptation project area through analyses o f measures. (i) Development o f adaptation relevant hydraulic and agricultural options, through CC impact production models and o f the results To draw the project baseline assessment, gap analysis, selection monitoringresults and other M&E andprioritizationo f adaptation o f economic research and surveys. activities. measuresbased on specific local CC conditions; and (ii) ofpossibleadaptation Menu measures developed based on (ii)Identification o f demonstration scientific analysis and stakeholder areas for implementation. participation. (iii) demonstrationareas Project identified based on appropriate selection criteria. 30 Component 2: Demonstrationand (i) Adaptation measuresdeveloped The outcomes o f demonstration and implementationof adaptation and implementedinthe implementation will help: measures demonstration areas (ha under each different measure). (I) whetheradaptation confirm This would include: measuresare appropriate for the (ii) changeadaptation Climate selected demonstrationareas; (i) Introduction, demonstration and concepdmeasures integratedwith implementation o f the specific MIL3design andimplementation (ii) exchange experiences and adaptation measures inthe selected (covered bypercentage o f the lessons learnt among demonstration demonstration areas; and project area). areas; (ii) Integrationo f appropriate (iii)Acceptance by farmers o f (iii) andimprovethedesign adjust adaptation measures into MIL3 adaptation measures (No. o f o fthe adaptation technologies and project implementation inthe project households). practices that couldbe developed area. elsewhere; and (iv) promote CC adaptation in agricultural practices and irrigation water management inthe 3HBasin. Component 3: Mainstreaming (i) SOCAD/POCAD/COCAD Publications, documents and other adaptation to climatechangeinto webpages, booklets and other informationsources will be usedto nationalCAD programand publications and mass-media raise awareness o f and motivate institutionalstrengthening coverage incorporating adaptation change inthinking about CC and to climate change knowledge and help integrate adaptation into CAD This would be achievedthrough a measures. program. series o f capacity building, technical assistance, knowledge sharing, and Consultations and coordination public awareness activities, the (ii)Consultations, coordination among agencies and actionplanning formulation o f the Policy meetings and training on adaptation and recommendations will be used recommendations and the "National to CC among SOCAD, MOF, as intruments to promote policy Climate Change Adaptation Plan" NDRC, CAS and other concerned change, raise understanding and by SOCAD, with close cooperation technical line agencies. integrate CC adaptation into CAD o f CAS and the NDRC and MOF and irrigated agriculture. national climate change adaptation (iii) recommendationsand Policy offices. the action planto integrate CC M&E results willprovide goodbasis adaptation into CAD program to plan andjustify integration o f formulated. adaptation into China's major comprehensive agricultural (iv) Climate Change Adaptation development programs, together Monitoring and Evaluation with institutional and knowledge mechanism inoperation. building and experiences and lessons learned from demonstration sites. 31 - B-*P * E PI 0 m 9 0 z l o l o O I O f z W m N OI W N N z > m '0 cs z * B m m 0 m Annex 4: DetailedProjectDescription CHINA: MainstreamingClimateChangeAdaptation inIrrigatedAgricultureProject I. IntroductionandSummary 1. The project development objective is to enhance adaptation to climate change in agricultural practices and irrigation water management through awareness raising, demonstration activities in the 3 H Basin, and institutional and policy strengthening. This would help mainstream climate change adaptation measures, techniques and activities into the national Comprehensive Agricultural Development (CAD) Program which i s China's largest national investment program inirrigated agriculture. 2. The main project development impact indicators would be: (a) increased climate change adaptation awareness o f farmers, Water User Association (WUA) and Farmer Organizations (FO) members, technical staff and officials on the need to enhance understanding o f climate change and adaptation in agriculture and irrigation (percentage o f people); (b) relevant climate change adaptation measures implemented in selected demonstration areas (number o f hectares) and by participatory stakeholders (number o f households) to enhance climate change adaptation in agricultural practices and irrigation water management; and (c) documents issued by SOCAD/POCAD/COCADs integrating climate change adaptation and policies, measures and activities needed to support climate change adaptation in agriculture and irrigation management (through policy briefs, government reports, implementation and/or adaptation replication plans). 3. Key components o f IAIL3 are related to and sensitive to climate change. However, adaptation measures for climate change were not included in IAIL3 project design because the need for climate change adaptation has been widely recognized only recently. The proposed project would identify gaps in the IAIL3 project design with regard to needed adaptation measures and would help integrate adaptation measures into IAIL3 components. The proposed GEF/SCCF project has been designed to be partially blended with IAIL3 and the $463 million total cost o f the latter, an estimated $50.5 million would be partially blended with and used as co-financing for the proposed project activities. This represents the portion o f IAIL3 which would be directly modified for climate change adaptation purposes under the proposed project, although it i s plannedthat adaptation should expand to as much o f IAIL3 as possible. 4. The project objectives would be achieved through the implementation in the six project provinces (Hebei, Henan, Shandong, Anhui, Jiangsu, and Ningxia) o f the following project components: (1) Identificatioflrioritization o f Adaptation Options; (2) Demonstration and Implementation o f Adaptation Measures; and (3) Mainstreaming Adaptation into the national C A D Program and Institutional Strengthening. The mainproject activities are detailed as below. 11. Projectcomponents 5. Inline with the above objectives, andbased on apreliminarygap analysis ofIAIL3 from a climate change adaptation perspective, the proposed GEF/SCCF project would include the following components: 34 6. Component 1:Identification and Prioritization of Adaptation Options (US$0.50million from GEF/SCCF). Understanding adaptation to climate change i s important for two reasons: (a) adaptation will reduce the impacts o f climate change and thus understanding the need for adaptation is important for measuring vulnerability; and (b) it is important to understand what specifically should be done indifferent places over different time periods to facilitate adaptation. Preliminary work on this component was started during preparation under the PPG. Under the project, that work would continue inorder to: (a)finalize conclusions and recommendations from the PPG work; (b)undertake additional work on impact assessment, gap analysis and selection and prioritization o f measures to expand adaptation into IAIL3 and C A D investment areas; and (c)integrate climatological, hydrological and economic models to analyze the comprehensive impact o f climate change and adaptation measures for agricultural and irrigation at the local levels and rural water resources management at the river basin level. The study outcomes would be reviewed and disseminated by the six project provinces and ten counties in accordance with their specific circumstances. Specific activities include 3 subcomponents: (a) Impact Assessment of Climate Change in 3H Basin and Project Area. The activities under this subcomponent include: (i)stocktaking o f previous studies on assessment o f vulnerability to climate change and potential adaptation options, including local knowledge and practice; (ii)adapting state-of-the art simulation models and observations to assess climate change impacts on local hydrology (including surface and groundwater) and on agriculture. Inclusion o f cropping patterns and agricultural yields will be addressed by coupling the hydrology model(s) to agriculture models; (iii) conducting a farm household analysis study in the project area and the 3 H Basin to determine climate sensitivity, water demand and adaptation responses. This farm household analysis study will compare farm behavior and outcomes across different climate zones. The study would examine changes in yields and water use, quantify climate sensitivity, estimate the agricultural demand for water and its sensitivity to climate and determine potential adaptations by Chinese farmers; and (iv) estimate the sensitivity o f 3 H Basin agriculture to climate and water availability. The use o f these state-of-the-art modeling techniques to integrate climate, hydrology and agricultural economics over key spatial and time scales is an important and essential innovation inthe approach beingadopted under the proposed project. (b) Gap analysis and study on adaptation measures. Adaptation measures for climate change were not included in the design o f IAIL3, and a gap analysis was conducted for IAIL3 during preparation o f the GEF/SCCF project. Preliminary key gaps in the design of IAIL3 were identifiedwith regard to knowledge and public awareness about adaptation to climate change, design o f irrigation and drainage works, agricultural practices, farmer participation and economic cooperative organizations, water and soil conservation andbiogas activities. Under the GEF/SCCF project, the gap analysis would be expanded to cover more IAIL3 areas and C A D program areas in the six project provinces. This analysis would identify the needed adaptation measures and help integrate those measures into IAIL3 and the C A D program. SOCAD and the six POCADs would organize national, provincial and local scientists and experts for the gap analysis in order to integrate adaptation into M I L 3 and the C A D program, maximize adaptation benefits, and improve the design o f C A D investment programs at the national andprovincial levels. 35 (c) Prioritization and Selection of Adaptation Measures and Demonstration Areas. Based on preliminary results during preparation, activities under this sub-component would include: (i) identification and selection o f expansion areas for adaptation, giving priority to areas with both high vulnerability and high likelihood o f making significant impacts; (ii) use o f scientific technical analysis to develop potential adaptation options (in terms o f content, implementation, costs and impacts), and to estimate the impacts o f various climate change scenarios (on surface and groundwater and on flood and drought predictions and risks), in order to identify and select the most cost-effective adaptation measures for each project province; and (iii) consultations with farmers and discussions with provincial and county experts to incorporate empirical experiences into adaptation measures duringproject implementation. 7. Component 2: Demonstration and Implementation of Adaptation Measures (US$48.43 million comprising US$2.25million from GEF/SCCF and US$46.18 million co- financed from IAIL3). The objectives o f this component are to introduce, demonstrate, and implement specific climate change adaptation measures in selected demonstration areas; and to integrate appropriate adaptation measures into the implementation o f the IAIL3 project to help reduce vulnerability to climate change in the 3 H Basin. The adaptation measures would focus mainly on agricultural production and practices and on rural water management and would take into account expected temperature increases and variations in precipitation due to climate change. Demonstrationmeasures would be implemented inconjunction with the ongoing IAIL3 project and would be expandedto cover as much o f the IAIL3 project area as possible. The two subcomponents would be as follows: (a) Demonstration of Climate ChangeAdaptation Measures (US$2.25millionfrom GEF/SCCF). Based on the gap analysis o f IAIL3 under Component 1, the proposed project would identifyspecific climate change adaptation measures and techniques which would be demonstrated at selected project sites. These new adaptation measures would aim to: (i) explore and develop alternative or additional water resources; (ii)promote adaptive farming practices, technologies and institutions (including participatory FAs); (iii) promote adaptive and water saving irrigation and drainage design, technologies and management (including participatory management by farmer WAS); and (iv) pilot small-scale biogas facilities. The specific new activities and measures include: (i) Rainfallcollectionworksandwaterharvesting(307demonstrationsites). Construction o f field rainfall collection and water harvesting works to increase storage andretention o f surface runoff andrainfall and mitigate rainfall deficits or insufficient irrigation water resources, especially in dry seasons, and to help compensate for increasingly unbalanced natural rainfall between seasons expected as a result o f climate change; (ii) Adaptive agricultural technologies (36 demonstration sites). Through promotion and demonstration o f measures like "dry seeding" technologies, precision irrigation, minimum tillage practices, precision land leveling, land shaping, accurate nitrogen fertilizer use and other adaptive agricultural technologies and practices, the capacity o f farmers inthe project areas to adapt to climate change would be improved; 36 (iii) Adaptive cropvarieties (438,900 kgofseeds). Newcropvarieties with increased resistance to drought, water logging resistance and extreme temperatures would be introduced, such as: Ningxia alfalfa; Tongxin dates and potatoes; heat resistant rice and wheat from Anhui; stripe disease and heat resistant rice from Jiangsu; and drought resistant wheat, corn and vegetables from Henan. (iv) Biogas digester demonstrations (2,570 digesters and ancillary facilities) will be financed through SCCF sub-grants. Technical assistance and pilot small- scale biogas digesters and facilities will be provided to farmers inthe project area to produce and use clean-burning biogas. This would utilize higher temperatures, faster growth o f microorganisms, longer fermentation time and increased biomass production under climate change to reduce the need for burning wood and coal and the by-product biogas slurry would be used to increase the organic matter content o f soil; (v) Greenhouse development (237,200 m2 o f greenhouse space). Greenhouses would enable farmers in the project area to fblly use favorable factors brought by climate warming to advance crop cultivation and the capacity o f farmers to overcome unfavorable conditions; (vi) Establishing enhanced, high quality W A S and FAs (17 additional WAs/FAs). W A Sand FAs have proven very effective farmer participatory organizations under IAIL3. In addition to increasing the number o f W A Sand FAs, the proposed project would, through the provision o f SCCF sub-grants, develop, promote and demonstrate enhancements which would improve their use for climate change adaptation, demonstration and training and would also strengthen their sustainability inthe face o f climate change; (vii) Afforestation (676 hectares). Tree species specially adapted to climate change would be selected and introduced for field windbreaks. This would help reduce wind velocity and evaporation, increase moisture in the air, improve the "micro climate" o f farm fields and help mitigate the impact o f higher temperatures; (viii) ET monitoring and management. Remote sensing data together with hydrological and meteorological observation data and ground truth observations would be used to monitor and manage crop ET in the project areas. Based on calibrated remote sensing ET estimates, the impacts o f climate change and water saving measures on agricultural production and crop water use would estimated; these would provide the basis for managing ET for optimal water use and irrigation inselected project area sites; and (ix) Groundwater management. A number o f areas in the northern 3 H Basin suffer from severe groundwater overdraft, especially in Hebei. In conjunction with ET management (above), the project will also assist development of comprehensive Groundwater Management Plans for all water-short counties under the project inHebei (19 o fthe 22 IAIL3 project counties inHebei). 37 (b) Integration of Adaptation Measures into IAIL3 Project Implementation Activities (US$46.18 million from IAIL3 comprising US$18.47 million IBRD loan and US$27.71 million counterpart funding). The proposed project would focus on IAIL3 activities that are at risk from climate change. Based on the gap analysis o f IAIL3, scientific analysis and modeling under Component 1, and lessons from demonstration sites, this sub-component would review and refine the original IAIL3 technical design to help "climate proof' IAIL3 project activities. IAIL3 activities related to climate change adaptation would be modified and expanded as appropriate, including in particular: (i) engineering water-saving measures, including various water-saving irrigation and drainage technologies and facilities; (ii)agronomic water-saving measures, including land leveling, deep plowing, minimum tillage, balanced fertilizer use, use o f crop residues, introduction o f adaptive varieties and high quality seeds, adaptive on-farm forestry belts to be financed by SCCF sub-grants,etc.; and (iii) water-saving management measures such volumetric water charges and as high quality WUAdFAs also financed through sub-grants. IAIL3 activities in the GEF/SCCF project area which would be enhanced to strengthen climate change adaptation include: Adaptive irrigation canals and drainage systems (13,001,600 m3); Small field water storage (691 units); Impervious canals (1,832,600 m2); Low pressure pipe (4,507,400 m); Drip irrigation (123.3 hectares); Land leveling (38,998.4 hectares); Balanced fertilization (29,133 hectares); Crop residue shredding (18,783.2 hectares); Water Users Associations (strengthening 134 existing and planned WUAs to disseminate adaptation practices andtraining); Introduction o f quality seed for adaptive and resilient varieties (1,554,300 kg); Integrated Pest Management demonstration and extension (1,800 hectares); Greenhouses (1,000,000 m2); Farmers Associations (strengthening 31 existing and planned FAs to disseminate adaptation practices and training); Adaptive farmland shelter belts (3,958.3 hectares); and Bio-energy for rural areas (1,230 biogas digesters and facilities). 3: Mainstreaming Adaptation into National CAD Program and institutionalstrengthening (US$6.58 million, comprising US$2.25 million from GEF/SCCF and US$4.32 million co-financed from IAIL3). The component would aim to integrate and mainstream climate change adaptation into the ongoing national CAD program. Key activities would be a series o f capacity building, technical assistance, knowledge sharing, and public 38 awareness activities, and, preparation o f a "National Climate Change Adaptation Plan" for C A D by SOCAD, with the close cooperationo f CAS andthe NDRC andMOFnational climate change adaptation offices. Sub-components and activities would include the following: (a) Research and development of adaptationpolicies (US$112,400). (i) Researchandanalysis on: adaptationgapsfor CADProgram; theimpact o f climate change on water availability and agriculture, farm economics and income, crop pattern adjustments, rural water resource management and agricultural green house gas emissions; and specific measures to address the identifiedgaps; (ii) Formulationofpolicyrecommendations toaddressclimatechangewith regard to agricultural water management and rural development, incorporating scientific, economic and technical input from CAS and provincial and local scientists and experts, empirical experience from farmers, including women, and their organizations ( W A Sand FAs), and good practices and lessons learned from SOCAD, POCADs and COCADs; (iii) Preparation ofa"National Climate Change AdaptationPlanfor CAD" under the leadership o f SOCAD, with close cooperation o f the NDRC and MOF national climate change adaptation offices and CAS; and (iv) C A D arrangements and actions to implement the above Plan for adaptation, including mechanisms for consultation and coordination among government agencies, development and implementation o f policy support recommendations, andinstitutionalization o f adaptation into CAD. (b) Institutional strengthening and capacity building on climate change adaptation (US$5.25million). (i) Trainingandworkshops, includingtrainingonscientificunderstandingof climate change, impact o f climate change on agriculture, adaptation to climate change and sustainable development, adaptive project design and water resource management. Target groups for training would be farmers, including women and other vulnerable rural population groups; agricultural and water resource technical and fieldextension staff; andproject management staff. (ii) Informationdisseminationonclimatechangeadaptationthroughvarious means such as print and communications media, public awareness campaigns, development and distribution o fprinted materials, DVDs, and the internet; and (iii) Technical assistance from Mobile Expert Teams (METs). METs are established and operating under IAIL3, would be strengthened to include international and national experts specialized in climate change and adaptation in water resources, agriculture and meteorology and would follow a structured program to provide technical advice and guidance on climate change and climate change adaptation. (c) Results-based monitoring and evaluation (M&E) (US$221,400). (i) Establishment of a Data, Metadata, and Knowledge Framework. The resulting modeling information would be developed as a "Dynamic (Landscape- 39 Water Resources) Information Framework (DIF)", maintained by SOCAD, and applied by the decision makers and PMO staff in SOCAD/POCADs/COCADs during Implementation. It would play an important role in ensuring that lessons learned duringthis immediate project are practiced more widely; and (ii) Establishment ofaclimatechangeM&Esystem, inconjunctionwiththe management information system (MIS) and the ongoing M&E system under IAIL3, to focus on implementation progress and the impact o f adaptation measures and assess effectiveness o f adaptation implementation mechanisms and measures. The investment costs o f M&E system are composed by M&E training workshops (US$120,000), M&E system and related indicators development (US$26,600), data collection, analysis and reporting (US$57,900), and establishing sample/pilot sites (US$16,900). (d) Project management OJS$990,000). This sub-component would support project implementation management, including dealing with project and implementation related issues such as procurement, financial management, and other incrementalcosts. Scope of Project Area, Selection Criteria and Selection of Pilot Demonstration Areas 9. IAIL3, implemented by SOCAD o f MOF, involves the major grain producing area o f China, the 3H Basin, which at present has rather weak capacity to adapt to climate change. The major contents o f IAIL3 involve irrigation and agriculture, which at the field level are prone to the negative impacts o f climate change. However, IAIL3 is designed for flexible implementation under its "program approach" and can be modified during implementation to incorporate adaptive measures and overcome deficiencies inadaptation. Meanwhile, considering that the 3 H Basin i s ecologically vulnerable region and also subject to the negative impacts o f climate change, climate change adaptation under the GEF/SCCF project i s badly needed and should be integrated with IAIL3 and implemented in the 3 H Basin (as a demonstration for the national C A D program). The project area for the GEF/SCCF project will comprise the M I L 3 provinces o f Hebei, Jiangsu, Anhui, Shandong, and Henaninthe 3 H Basin and the Autonomous Region o f Ningxia inthe aridnorthwest. 10. Demonstration sites under the GEF/SCCF project would be identified mainly within the 3 H Basin. Special demonstration sites under IAIL3 outside the 3 H Basin (e.g, in Ningxia) may also be selected to illustrate adaptation under other specific climatic conditions for adaptation. The criteria for site selection are that: (i) climate conditions are identical or similar across local the region; (ii)agricultural irrigation and cropping patterns are typical o f the region; (iii) the ecological environment i s rather fragile; (iv) local leaders have strong enthusiasm for the project; and (v) local areas have reasonably complete and accessible hydrological, meteorological and agricultural data. 11. In accordance with these selection criteria, the six project provinces (Hebei, Henan, Jiangsu, Anhui, Shangdong, and Ninxia) have selected 10 countries as demonstration sites in these provinces. The sites are all included under IAIL3 and represent different types o f climate, irrigation, and landconditions. The sites are located and briefly described inthe following table: 40 Table of demonstrationsites I Hebei ICangzhou 1 Cangxian IGroundwater plus canal I I I I I IXuzhou I Xionyi IRiver diversion Jiangsu Suqian SUYU River diversion Bengbu Huaiyun Groundwater Chuzhou Mingguang Surface water Weifang Groundwater Shandong Henan Yellow River Diversion for Shangqiu Liangyuan supplementing local water sources Ningxia Wuzhong Tongxin Yellow River diversion Total 10 10 41 Annex 5: ProjectCosts CHINA: MainstreamingClimateChangeAdaptationinIrrigatedAgriculture Project 1. The total cost o f the project i s estimated at US$55.5 million equivalent, including physical and price contingencies o f about US$2.64 million. The direct foreign exchange cost i s estimated at about US$0.27 million equivalent. The base cost totals US$52.86 million, o f which US$0.47 million (about 1percent) i s for identification and prioritization o f adaptation options; US$45.96 million (about 87 percent) is for demonstration and implementation o f adaptation measures; US$6.42 million (about 12 percent) is for mainstreaming adaptation into National C A D program and institutional strengthening. 2. The project baseline cost is expressed in September 2007 prices and includes local taxes and duties computed at about US$3.10 million equivalent. The unit costs and estimated annual quantities are based on typical designs with a uniform physical and technical standard for each province. Cost estimates for civil works are derived from costs o f works recently completed under MIL3 and similar recent works in each province. Cost estimated for goods are based on recent quotations from manufacturers and suppliers or prices o f similar goods that were recently purchased under MIL3 and similar program. Consultants' services costs are based on the experience inthe country with recent consulting contracts for similar tasks. 3. Physical contingencies are about 5 percent for all civil works and goods, 3 percent for all consultants' services in ongoing MIL3 project. For the GEF/SCCF grant, physical contingencies are 4 percent for all expenditure categories, including civil works, goods, consultants' services, studies, training and workshops, sub-grants for WUA establishment and incremental operation costs. For price contingencies, the Bank's standard local and foreign inflation rates were applied over the project's implementationperiod. For costs expressed inU S dollars, the expected annual price increases are estimated at 0.4, 0.8, 0.7 and 0.6 percent for the period 2008-2011. For costs expressed inYuan, the annual rates are 1.9, 3.0,2.8 and2.5 percent for the period 2008-2011. 42 Table 1: ProjectCosts by Component ComponentsProject Cost Summary (us$'ooo) (us$'ooo) Local Foreign Total A. IdentificationandPrioritizationof Adaptation Options (GEF/SCCF) 1. Impact Assessment of Climate Change in3-HBasin and Project Area 23.9 13.0 36.8 2. Gap Analysis and Study onAdaptation Measures 381.5 28.1 409.7 3. Prioritization and Selection ofAdaptation Measures and Demonstration Areas 16.5 8.9 25.4 Subtotal 421.9 50.0 471.9 B. DemonstrationandImplementationof AdaptationMeasures 1. Demonstration of Climate Change Adaptation Measures (GEF/SCCF) 2,139.9 2,139.9 2. Integrationof Adaptation Measures into IAIL3 Project ImplementationActivities 43,822.9 43,822.9 Subtotal 45,962.8 -- 45,962.8 C. MainstreamingAdaptation intoNationalCAD Programand InstitutionalStrengthening 1. Research and Development ofAdaptation Policies (GEF/SCCF) 106.8 106.8 2. Institutional Strengthening and Capacity Building on Climate Change Adaptation (GEF/SCCF/IAIL3) 4,952.1 210.0 5,162.1 3. Results-based Monitoring and Evaluation (M&E)(GEF/SCCF) 210.8 210.8 4. Project Management (GEF/SCCF) 942.7 942.7 Subtotal 6,212.4 210.0 6,422.4 TotalBASELINE COSTS 52,597.1 260.0 52,857.1 Physical Contingencies 2,3 11.2 4.4 2,315.6 Price contingencies 325.3 .~. 2.0 327.3 ~ Total PROJECTCOSTS 55,233.6 266.4 55,500.0 The total project cost includes identifiable taxes and duties of about US3.10 million, and the total project cost, net of taxes is US$52.40 million. Therefore, the share o f project cost net of taxes i s 94.4%. Table2: ProjectCosts by Category ExpenditureAccounts Project Cost Summary (us%'ooo) Local Foreign Total I.InvestmentCosts A. CivilWorks 41,495.5 - 41,495.5 B.Goods 1,445.5 1,445.5 C. Consultants' Services 1,304.8 21.9 1,326.7 D.Studies, training and workshops 5,217.3 238.1 5,455.4 E. Sub-grant 2,191.3 2,191.3 F. IncrementalOperationCosts 942.7 942.7 TotalBASELINE COSTS 52,597.1 260.0 52,857.1 Physical Contingencies 2,3 11.2 4.4 2,315.6 Price Contingencies 325.3 2.0 327.3 TotalPROJECTCOSTS 55,233.6 266.4 55,500.0 43 Table3: Project Costs by ComponentsandYear (US$ '000) China Mainstreaming Climate Change Adaptation inIrrigated Agriculture Project Project Componentsby Year -- Totals Including Contingencies (us$'ooo) 2008 2009 2010 2011 Total A. Identificationand Prioritizationof Adaptation Options(GEFECCF) 1. Impact Assessment of Climate Change in3-H Basin andProject Area 11.5 11.6 11.7 3.9 38.7 2. Gap Analysis and Study onAdaptation Measures 128.1 128.8 129.8 43.6 430.3 3. Prioritization and Selection of Adaptation Measures and Demonstration Areas 7.9 8.0 8.0 2.7 26.6 Subtotal 147.5 148.4 149.5 50.2 495.6 B. DemonstrationandImplementationof AdaptationMeasures 1. Demonstration of Climate Change Adaptation Measures (GEFECCF) 1,550.1 663.6 32.3 2,246.0 2. Integrationof Adaptation Measures into IAIL3 Project ImplementationActivities 23,004.6 18,514.2 4,663.2 46,182.0 Subtotal 24,554.7 19,177.8 4,695.5 -- 48,428.0 C. MainstreamingAdaptation intoNational CAD Programand InstitutionalStrengthening 1.Research and Development ofAdaptation Policies (GEF/SCCF) 33.5 33.7 33.9 11.4 112.4 2. Institutional Strengthening and Capacity Building on Climate Change Adaptation (GEF/SCCF/IAIL3) 2,328.9 1,960.2 818.3 145.2 5,252.6 3. Results-based Monitoring and Evaluation (M&E)(GEF/SCCF) 65.9 66.3 66.8 22.4 221.4 4. Project Management (GEF/SCCF) 294.7 296.4 298.7 100.2 990.0 Subtotal 2,722.9 2,356.6 1,217.7 279.2 6,576.4 TotalPROJECT COSTS 27,425.2 21,682.8 6,062.7 329.4 55,500.0 44 Table 4: Project Cost by FundsResources China Mainstreaming Climate Change Adaptation inIrrigated Agriculture Project ComponentsProjectCost Summary Counterpart IBRD GEF/SCCF Total US$ `000 US$ `000 US$ `000 US$ `000 A. IdentificationandPrioritizationof AdaptationOptions (GEF/SCCF) 1. Impact Assessment of Climate Change in3-HBasinand Project Area 36.8 36.8 2. Gap Analysis and Study onAdaptation Measures 409.7 409.7 3. Prioritizationand Selection of Adaptation Measures and DemonstrationAreas 25.4 25.4 Subtotal 471.9 471.9 B.DemonstrationandImplementationof Adaptation Measures 1. Demonstration of Climate Change Adaptation Measures (GEF/SCCF) 2,139.9 2,139.9 2. Integration of Adaptation Measures into IAIL3 Project Implementation Activities 26,293.8 17,529.2 43,822.9 Subtotal 26,293.8 17,529.2 2,139.9 45,962.8 C. MainstreamingAdaptation intoNationalCAD Program andInstitutionalStrengthening 1. Researchand Development ofAdaptation Policies (GEF/SCCF) 106.8 106.8 2. Institutional Strengthening and Capacity Building on Climate Change Adaptation (GEF/SCCF/IAIL3) 2,277.7 1,518.5 1,365.9 5,162.1 3. Results-based Monitoring and Evaluation (M&E)(GEF/SCCF) 210.8 210.8 4. Project Management (GEFBCCF) 476.1 466.6 942.7 Subtotal 2,753.8 1,518.5 2,150.1 6,422.4 TotalBASELINE COSTS 29,047.6 19,047.6 4,761.9 52,857.1 Physical Contingencies 1,271.7 835.2 208.8 2,315.6 Price Contingencies 180.7 117.2 29.3 327.3 TotalPROJECT COSTS 30,500.0 20,000.0 5,000.0 55,500.0 45 Table 5: ProjectCost By FundsResources(Totals includingcontingencies) ComponentsProject TotalsIncludingContingencies-Summary Counterpart IBRD GEF/SCCF Total US$ `000 US$ `000 US$ `000 US$ `000 A. IdentificationandPrioritizationof Adaptation Options (GEFECCF) 1. ImpactAssessment of ClimateChange in3-H Basinand ProjectArea 38.7 38.7 2. Gap Analysis andStudy onAdaptationMeasures 430.3 430.3 3. Prioritization and Selection of AdaptationMeasures and DemonstrationAreas 26.6 26.6 Subtotal 495.6 495.6 B. DemonstrationandImplementationof Adaptation Measures 1. Demonstrationof ClimateChange AdaptationMeasures (GEF/SCCF) 2,246.0 2,246.0 2. IntegrationofAdaptationMeasures into IAIL3 Project ImplementationActivities 27,709.2 18,472.8 46,182.0 Subtotal 27,709.2 18,472.8 2,246.0 48,428.0 C. MainstreamingAdaptation intoNationalCAD Program and InstitutionalStrengthening 1. ResearchandDevelopment ofAdaptationPolicies (GEF/SCCF) 112.4 112.4 2. InstitutionalStrengtheningandCapacity Building on ClimateChange Adaptation(GEF/SCCF/IAIL3) 2,290.8 1,527.2 1,434.6 5,252.6 3. Results-basedMonitoring andEvaluation (M&E)(GEF/SCCF) 221.4 221.4 4. ProjectManagement(GEF/SCCF) TotalPROJECTCOSTS 30,500.0 20,000.0 5,000.0 55,500.0 Table6: ProjectCosts by Category(Totalsincludingcontingencies) ComponentsProject TotalsIncludingContingencies Summary Counterpart IBRD GEF/SCCF Total US$ `000 US$ `000 US$ `000 US$ `000 I.InvestmentCosts A. CivilWorks 26,142.2 17,428.1 217.6 43,787.8 B.Goods 670.1 446.8 405.3 1,522.2 C. Consultants' Services 205.2 136.8 1,046.8 1,388.9 D.Studies, trainingandworkshops 2,290.8 1,527.2 1,743.0 5,561.0 E. Sub-grant 691.7 461.1 1,097.3 2,250.1 F.IncrementalOperationCosts 500.0 490.0 990.0 TotalPROJECTCOSTS 30,500.0 20,000.0 5,000.0 55,500.0 46 Annex 6: ImplementationArrangements CHINA: MainstreamingClimateChangeAdaptation inIrrigatedAgricultureProject 1. Institutionalarrangements for project implementation. As the implementing agency for the GEF/SCCF project, SOCAD will be responsible for management, monitoring and supervision o fproject implementation, ensuring that agreed requirements and conditions are met, and liaising with the World Bank on behalf o f the six Project Provinces. As under IAIL3, the Ministry o f Water Resources (MWR), Ministry of Agriculture (MOA), State Forestry Administration (SFA), State Environmental Protection Administration (SEPA) and their local lower level offices and other agencies as needed will provide technical support for GEF/SCCF project implementation to ensure that project is implemented smoothly according to agreed schedule and plans. It is also important that the National Development and Reform Commission (NDRC) and its lower level offices support the project and provide implementation support, as NDRC i s the lead agency for climate change issues in China and this i s the first infrastructure investment project on climate change adaptation. Local offices for Comprehensive Agricultural Development (CAD) offices and IAIL3 PMOSat various levels will be responsible for project implementation at the field level, under the direction and coordination o f the concerned Provincial Offices o f C A D (POCADs), and the leadership and guidance o f SOCAD. Management arrangements for the GEF/SCCF project would be integrated with IAIL3, and the following organizational and institutional arrangements for management o f the GEF/SCCF project inconjunction with IAIL3 have been agreed and established. 2. ProjectLeadingGroups(PLGs). PLGs for theproposedproject, from the central level down to provincial and county government levels, will be the same as for IAIL3, but will be strengthened with special experts and scientists concerned with climate change and adaptation. The central PLG would be chaired by the MOF Vice-Minister responsible for the project and would include as needed members from MOF, NDRC, MWR, MOA, SFB, SEPA and other concerned agencies and experts. The provincial PLGs would be chaired by the provincial Vice- Governor responsible for agriculture with members from the provincial Finance Bureau, Provincial Planning Commission, WRB, AB, FRB, EPA and other agencies and institutes as appropriate. It i s important that the PPCs as representatives o fNDRC participate inthe PLGs and provide support to the project, and those representatives from the All China Women's Federation also participate where possible. The major responsibilities o f the PLGs are to provide coordination, policy-level support and policy guidance. City and county PLGs will follow the same model of the provincial PLG and having similar organizational format, composition and responsibilities. 3. Central Project Management Office (CPMO). The national level or Central PMO (CPMO) in SOCAD for IAIL3 would be the CPMO for the GEF/SCCF project, but with responsibilities added which are specific to the GEF/SCCF project, and would be chaired by the Director o f SOCAD. Under the leadership o f the PLG, the CPMO would be responsible for handlingday-to-day management o fthe project at the national level, overall project coordination between agencies involved, project financial management according to Bank requirements, annual funding mobilization and allocations, ensuring overall project progress and quality according to agreed plans, overall project supervision including regular supervisionmissions and technical support for Bank supervision missions, monitoring and carrying out o f procurement according to Bank requirements, monitoring and evaluation and the overall operation and 47 performance o f the M I S and MES, revision o f the project PIP as needed, and reporting regularly to the Bank on project implementation and supervision. In particular, the CPMO will be responsible ensuring that the project monitoring and evaluation system (M&E System) will provide useful analytical results for guiding future climate change adaptation, providing guidelines and procedures, providing oversight and technical and policy guidance to lower levels, specifying tasks and responsibilities for overall project implementation, and making implementation recommendations and providing guidance to improve the project and its impact duringimplementationas appropriate. 4. Provincial PMOS(PPMOs). PPMOs for the IAIL3 project will be responsible for implementation o f the GEF/SCCF project at the provincial level, similar to the national level, with specific responsibilities and unit(s) added as needed. Special units for the GEFISCCF project have been established within the existing PPMOs in Hebei, Henan, Shandong, Anhui, Jiangsu andNingxia with terms o f reference, staffing and other resources acceptable to the Bank. PPMOs will be responsible inter alia for day-to-day implementation management, direction, monitoring and supervision o f implementation, providing periodic progress reports, ensuring coordination between different departments involved in implementation, provision o f adequate andtimely flow o ffunds to lower levels, coordinating fundingfrom the various sources, ensuring financial management and procurement inaccordance with Bank requirements, management and disbursement of the GEF/SCCF grant funds and ensuring accurate accounting for their use, provision o f specialized technical assistance support to lower levels, proper operation o f the MES and analysis o f MES data, operation o f the METs, carrying out various types o f procurement, and arranging for project research, information dissemination, workshops and other related activities. GEF/SCCF units in the PPMOs would include senior-level, expert staff from WRB, AB, andFRB. 5. Local Level Project Management Offices (PMOs). Similarly, local level (municipality and/or county) PMOs at lower levels for IAIL3 will be responsible for implementation o f the GEF/SCCF project, but will have specific responsibilities and units added as needed. Membership o f PMOS will follow the same pattern as for PPMOs. These local-level PMOs will be responsible for routine day-to-day operation and implementation o f the project, including local project planning, field implementation, field supervision, inspection, field M&E data and statistics collection and preliminary analysis, local procurement, reimbursements, local project management activities, and coordination among local line bureaus involved in the project. Satisfactory institutional arrangements for management o f the GEF/SCCF project have been established in the concerned MunicipaWrefecture and County C A D Offices (MOCADs and COCADs). MOCAD PMOs would in particular be responsible for overseeing project design, execution and supervision in the field, as well as overall local coordination and financing. COCAD PMOs would be responsible for project implementation in the field and arranging local fundingand labor contributions. 6. Mobile Expert Teams (METs). METS have been established under IAIL3 by SOCAD and the POCADs. For the GEF/SCCF project, these METswould be strengthenedand expanded with suitable experts to provide guidance on climate change and adaptation to staff and farmers inthe field duringimplementation, and shouldinclude inparticular experienced leading scientist and experts on climate change, meteorology and environment, as well as the experts on water resources and agriculture and forestry for IAIL3. The METs would coordinate internally to ensure that the GEF/SCCF climate change work is fully integrated with IAIL3 work and that the 48 messages delivered to the field are consistent. National-level experts, in particular, should be utilized where appropriate. The h c t i o n s o f the METs would include provision o f expert advisory services for implementation o f the project aimed especially at the farmers; provision o f technical consultation services to the PPMOs and lower-level PMOs for preparat.ion/updating of the PIPSand implementation o f the project; contribution o f suggestions to the PMOs to help facilitate smooth project implementation and recommendations to correct problems which arise during implementation; and assistance in project supervision, monitoring, inspection and mid- term and completion reviews. 7. Farmer Participation. To establish adaptation priorities, needs and constraints, engagement with farmers and other stakeholders i s essential. Major direct intended beneficiaries o f the project are farmers and local communities in demonstration areas and technical line agencies and governments and their staff at different levels. Because one o f the major goals o f the project i s to change awareness and thinking on climate change and adaptation, it is essential to ensure a carefully planned and inclusive stakeholder input. Stakeholder dialogue should: (a) include a wide range o f viewpoints; and (b) enable the project to respond effectively to adaptation priorities. 8. Preparation o f the proposed GEF/SCCF project has paid close attention to public participation and consultation. Extensive consultations were conducted with farmers on the possible components to ascertain their views and priorities on issues affecting agricultural development and climate change adaptation, as well as their own interests and lives. A questionnaire survey o f 5,070 farm households under IAIL3 showed that project area farmers looked forward to having adequate on-farm works and improved irrigation efficiency with great enthusiasm and wanted to participate with their voluntary labor input.A number o f consultations during the preparation o f the GEF/SCCF project also showed that farmers would welcome adaptation measures which would help them reduce risks o f climate disasters. To help strengthen individual farmers' capability to deal flexibly with climate change, support for expansion o f Water Users' Associations (WAS)and Farmers' Associations (FAs) as the farmers' own organizations has been included to enable farmers to participate in and, where appropriate, control decision-making on local irrigation management and agricultural production. Each o f the IAIL3 provinces prepared WUA and FA development plans for IAIL3 and those have been revised to make them conducive to agricultural adaptation to climate changes as part o f the GEF/SCCF project design. In doing so, care was also taken to ensure full participation o f women farmers in W A Sand FAs, particularly as managers o f household land and water when males migrate out for work. Moreover, the project has also paid particular attention to vulnerable groups in the official poverty counties that count for about one-third o f the IAIL3 project areas, in order to promote inclusive institutions to increase poor farmers' participation in andbenefits from bothIAIL3 andthe GEF/SCCF project. 9. Major stakeholders o fthe project include: (a) National government departments and technical line agencies including MOF, NDRC, MWR, and MOA; (b) National andRegional research institutions anduniversities; (c) Local governments; (d) Civil societies including W A S ,FAs and village communities; and (e) Individual farmers. 49 Annex 7: FinancialManagementandDisbursementArrangements CHINA: MainstreamingClimateChangeAdaptation inIrrigatedAgricultureProject ExecutiveSummary 1. The Financial Management Specialist (FMS) has conducted an assessment o f the adequacy o f the project financial management system o f the Mainstreaming Adaptation to Climate Change into Water Resources Management and Rural Development (MACCWRMRD) Project. The assessment, based on guidelines issued by the Financial Management Sector Board on November 3, 2005, has concluded that the project meets minimum Bank financial management requirements, as stipulated inBP/OP 10.02. Inthe FMS' opinion, the project will maintain financial management arrangements that are acceptable to the Bank and that, as part o f the overall arrangements that the borrower has inplace for implementing the operation, provide reasonable assurance that the proceeds of the trust fund are used for the purposes for which the trust fund was granted. The FMrisk ratingproposed for this project during the appraisal stage i s modest. 2. The project is partially blended with the on-going IBRD lending project and the total project investment i s USD 55.5 million. However, the GEF/SCCF grant i s USD 5 million and the remaining USD 50.5 million is the counterpart funds committed under the Bank's on-going IAIL3 lending project. There is no additional counterpart funds injection for the GEF/SCCF project. Inorder to avoid any confusion and duplication, the Bank agreed that only GEF/SCCF financed transactions would be recorded in the project accounting and financial reports. The IAILI11financed activities would be recorded separately through its accounting and reporting system. The GEF/SCCF grant will flow from the Bank into project designated accounts (DA) to be set up at and managed by the State Office for Comprehensive Agricultural Development (SOCAD) under the MOF. 3. N o outstanding audits or audit issues exist with any o f the implementing agencies involved in the proposed project. However, the task team will continue to be attentive to financial management matters duringproject supervisions. Audit Arrangement 4. The Bank requires that project financial statements be audited in accordance with standards acceptable to the Bank. Inline with other Bank financed projects in China, the project will be audited in accordance with International Auditing Standards and the Government Auditing Standards o f the People's Republic o f China. The Audit Services Center (ASC) o f CNAO has been identified as auditors for related project components and annual audit reports will be issuedbythe ASC accordingly. 5. The annual audit reports o f project financial statements will be due to the Bank within 6 months after the end o f each calendar year. SOCAD i s responsible for submitting Consolidated Project financial statements on June 30 o f each year o f implementation. 50 FundsFlow andDisbursementArrangements 6. Funds flow for GEF/SCCF grant will follow Bank and MOF requirements. One designated account (DA) will be established and managed by the SOCAD. The funds flow is as follows: The - DA Provincial - - Municipal County Suppliers World managedby + Finance Finance Finance -b and Bank SOCAD Bureau Bureau * Bureau contractors * ForNingxia, Jiangsu and Anhui province, the finds will be delivered to county level directly rather than go through the municipal level. 7. All GEF/SCCF grant funds will be disbursed against same eligible expenditures using identical disbursement percentages, as indicated inthe following table. Amount of the Grant Percentageof Disbursement Allocated Expenditures Category (in thousandUSD) to befinanced (1) Civil Works 217.6 100 (2) Goods 405.3 100 (4) Studies, Training and Workshops 1743.0 100 (5) Sub-grant 1097.3 100 (6) Incremental Oueration Costs 490.0 100 8. Four disbursement methods will be available for the project: reimbursement, advance, direct payment and special commitment. The minimumvalue o f applications for reimbursement, direct payment, and special commitment will be agreed before signingo fthe grant agreement. RetroactiveFinancing 9. The Project requested retroactive financing for some project activities incurred after September 30, 2007. The aggregated amount will not exceed $310,000 o f total grant amount. The retroactive financing will finance the activities in respect o f all the categories and will be finalized duringproject negotiations. 10. For expenditures against contract amounts indicated in the table below, Statements o f Expenditure (SOEs) will be furnished as supporting documentation with the request for reimbursement and to report eligible expenditures paid from the DA. 51 ExpenditureCategory ContractsEquivalentor Less than US$ Equivalent Civil Works All FirmConsultant 100.000 Individual Consultant 50,000 Studies, TrainingandWorkshops All Sub-grant All Goods 300,000 11. For contract amounts subject to the Bank prior review indicated in the table below, the list o f payments against the contracts, and records evidencing eligible expenditures, e.g., copies o f receipts, supplier invoices, will be finished as supporting documentation with the request for reimbursement andto report eligible expenditures paid from the DA. I Consulting firm I 100.000 I Individual consultant 50,000 Goods 300,000 County Provincial SOCAD - World Finance +Municipal Finance --b Finance Bank Bureau Bureau * Bureau * ForNingxia,JiangsuandAnhuiprovince, the withdrawalapplicationwillbe submittedby county levelto province directlyandwill not be reviewedbymunicipallevel. 14. During project implementation, the Bank will closely monitor the efficiency and effectiveness o f the approval and disbursement procedures. Ifpossible, the Bank will work with related implementing agencies and PMOSto find ways for more effective streamlinedprocessing procedures. 15. Inorder to facilitate project disbursement, it was agreed that a "sub-grant" category will be established for some small value project activities, including establishment o f WUA and FA, water wells, biogas, green houses and tree planting. These activities are supposed to be conducted by the communities themselves. Meanwhile, in order to ease disbursement monitoring and review process, the output-based disbursements (OBD) will be used for some o f project activities to be financed under the Sub-grant category including water wells, biogas and green houses. The following requirements regarding output based disbursement should be followed and the only exception is that the unit cost i s not applicable for activities which are not usingthe OBD. 52 (a) Selection o fHouseholds: Participating households would be selected through a participatory approach inaccordance with principles agreed with the Bank. The list o f project villages i s provided ineachprovincial PIP and would be updated as needed. (b) Signing o f ImplementationAgreements with Villages: Based on approved annual work plans, the County PMOs would sign the detailed village implementation Agreements with individual villages. The Agreements should include: (i) scope o f work; (ii) total cost and agreed grant and household contributions; (iii) implementation schedule; (iv) technical and construction standards in accordance with related regulations; (v) supervision and final acceptance procedures; and (vi) payment arrangements. (c) Implementation: Household(s) would purchase the materials from the local market and employ certified technicians andor carry out the works by themselves under the technical guidance from County PMO in accordance with the technical standards set out in the Implementation Agreement. But due to unavailability o f some materials, as per request o f households, County PMOs may help purchase those materials inlarge package andprovide in-kindto households. (d) Inspection and Pavment: After project activities are completed, the County PMO will organize an inspection panel to inspect the completed works and issue inspection certificates to accept the works. Payment would be made based on the agreed amount o f Bank contribution per package against completed and acceptedcertified physical works. (e) Special Checking, Monitoring and Reporting: Special checkinghpervisionwould be arranged by the County PMO to verify implementation o f the works and proper use of fknds on a six-month basis by external consultants hired by County PMOs. The six- month checking report would be available for review by Bank supervisionmissions. In addition, each project village should disclose completion information to the local public, including names o f households, use o fthe funds and the completion date. (0 UnitCost To BeUsed: 53 FinancialManagementandReportingRequirement Risk Assessment and Mitigation 16. The following risks with correspondingmitigating measures have been identified during assessment: Risk Risk RiskMitigatingMeasuresIncorporated intoProject Design Rating 0Country Modest See the followingmitigating measures utilized inthe project. level 0Entity Modest Legal and institutional framework i s acceptable and current Level PFMsystems are functioning reasonably well. As thisproject will be implementedby various agencies at different levels, monitoring o f compliance with PFMand Bankprocedures will be important. Various level PMOSand finance bureaus involvement will mitigate some o f these risks. Furthermore, Bank will work with the project agencies to further strengthen their FMknowledge and capacity. 0Project Modest Although this project will involve geographically dispersed Level implementingagencies, all the implementingentities are executingthe on-going IAIL3 project andproject staff have due experiences and knowledge about the Bank's requirements. The well-prepared FMmanual will help them to better understand some specific requirements o f the GEF/SCCF project. Furthermore, finance bureaus at different levels will review and manage the project funds to ensure appropriate usage. Control Risk Budgeting Modest The FMS will work with the SOCAD and PMOSat different levels to improve budget preparation, execution and budget to actual variation monitoring and evaluation. 0Accounting L o w Accounting policies and procedures are already inplace. Circular #13 has been issuedby MOF and adopted for all World Bank financed projects. The tailored accounting requirements and case studies will be documented inthe FM manual. Necessary training will be provided to the accounting - staff to improve their knowledge and qualifications. Internal Modest Internal control procedures and policies will be documented in Control the FMmanual and all project implementing agencies are required to follow them. Inaddition, project expenditures will be disbursed based on reimbursement basis and all supporting documents are subject to detailed review conducted by the finance bureaus at different level. Refer to the related section below for details. 0Funds Modest Funds flow arrangement will involve multi-layered approval Flow process and a large number o f spending units. Any instance o f delayed disbursement will affect project implementation. Related requirements and procedures will be documented inthe 54 FMmanual. 0 Financial LOW The financial reportingresponsibilities are established. The Reporting form, content and periodicity of financial reports are well definedby MOF and understoodby all the implementing agencies and PMOs. Auditing L o w The external auditor, the ASC of CNAO, has extensive experience with Bank project audits. The audit will be conducted inaccordance with acceptable auditing standards and the audit reports will be due to the Bank every June 30*. 17. Therefore, the overall FMrisk-rating o f this project at the appraisal stage is modest. The FMSwill monitor the project FMrisk duringproject implementation. Strengths and Weaknesses 18. Strengths. SOCAD, provincial PMOs and lower level PMOs have accumulated extensive experience in Bank project financial management and disbursement procedures and requirements, including the ongoing MIL3 project. Inaddition, the provincial PMOs, equipped with experienced and qualified financial staff, will guide and provide oversight on participating communities' implementation and enhance overall project financial management capacity. 19. Weaknesses and Action Plan. Besides the weakness that give rise to risks identified above, the following significant weaknesses and the action plan for addressing each weakness have been identified: Significant weaknesses Actions Responsible Completion PersonAJnit Date This is the first time for all A detailed FMmanual shouldbe SOCAD The FMmanual the entities involved to prepared by the SOCAD. and related implement GEF/SCCF Furthermore, a well designed FM training hadbeen grant. training workshop shouldbe completed before provided to all the project financial negotiations. Budgeting 20. Inaccordance withproject implementationplanandconstructionprogress, provincialand county PMOs will prepare annual budgets corresponding to the project activities they are responsible for. These budgets will be reviewed and approved by provinciaVcounty finance bureaus and/or related line authorities, which provide related counterpart funds. For budget variances arising during execution, necessary authorization procedures and close monitoring should be established. Timely and accurate information on variances should be used as the basis for mid-term adjustments. Accounting 21. After discussing with MOF and SOCAD, it was agreed that the accounting regulation stipulated by MOF for trust funds will be used for this GEF/SCCF grant. But given this regulation i s too simple and may not meet project financial management requirements, SOCAD will prepare more tailored accounting requirements, which will be achieved by revising the 55 current regulation and adding some more accounts and statements. All these requirements will bereflectedinthe financial management manual. 22. The project financial reporting package, including detail format and content o f project financial statements, was agreed and will be included in FM manual. The project financial reporting package set includes the following: (a) Balance Sheet (b) Summary o f Sources andUses o fFundsbyProject Component (c) Statement o f Implementation o f Grant Agreement (d) Designated Account (DA) Statement (e) Notes to Financial Statements 23. County PMOs will be managing, monitoring and maintaining respective project accounting records. Provincial PMOs will prepare consolidated project financial reporting package for their province and submit to the SOCAD. The SOCAD will consolidate the financial reporting and submit it to the Bank for review and comments on a regular basis. Original supporting documents for project activities will be retainedby implementing agencies at different level. 24. Adequate project accounting staff with educational background and work experience commensurate with the work they are expected to perform is one o f the factors critical to successful implementation o f project financial management. Based on discussions, observation and review o f educational background and work experience o f the staff identified for financial and accounting positions in the implementing agencies, the task team noted that all staff i s qualified and appropriate to the work they are expected to perform. However, given this i s the first time for all the entities involved to implement a GEF/SCCF-related project, FM and disbursement training for all financial staff should be provided before signing o f the grant agreement. 25. To strengthen financial management capacity and achieve consistent quality o f accounting work, the task team has recommended that a project financial management manual (the FMM) be prepared. The FMMwill be part o f the Project Implementation Plan (PIP). The FMMwill provide detailed guidelines on financial management, internal controls, accounting procedures, fund and asset management and withdrawal application procedures. The second draft o f the FMMhas been submitted to the Bank for review. The FMS reviewed the FMMand provided comments for their W h e r modification. The FMMwill be finalized and distributed to all the relevant financial staffbefore implementation starts. Internal Control and Internal Auditing 26. The project will use the internal control procedures and policies established for the IAIL3 project, including approval and authorization controls, segregation o f duties, clear staff functions, and safeguarding o f assets. The funds flow will be arranged and monitored through FinanceBureau channels and will include their substantive review. 27. There will be no formal internal audit function to be set up within project. However, project expenditures will be disbursed based on reimbursement basis and all supporting 56 documents are subject to detailed review conducted by the Finance Bureaus at different levels. Duringproject implementation, the FMS will review the Finance Bureaus' project examination reports anddetermine whether the Bank can rely on their work. Financial Reporting 28. The format and content o f the project financial statements represents the standard project financial reporting package agreed to between the Bank and MOF and have been discussed and agreed to with all parties concerned. 29. County PMOs will prepare financial statements on their implemented components, which will then be usedby the related Provincial PMOs for preparing consolidated provincial project financial statements. The provincial consolidated financial reporting will then be consolidated by SOCAD and submitted to the Bank for reviewandcomment on a regular basis. SupervisionPlan 30. The supervision strategy for this project is based on its FM risk rating, which will be evaluated on regular basis by the FMS andinconsultation with relevant Bank Task Team leader. 57 Annex 8: ProcurementArrangements China: MainstreamingClimateChangeAdaptation inIrrigatedAgricultureProject A. Introduction 1. Procurement for the proposedproject would be carried out in accordance with the World Bank's "Guidelines for Procurement under IBRD Loans and IDA Credits" dated May 2004 and revised inOctober 2006; the "Guidelinesfor Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004 and revised inOctober 2006; and the provisions stipulated in the GEF/SCCF Grant Agreement. The various items under different expenditure categories are described below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements and time frame are given in the Procurement Plan. The first procurement plan will cover initially 18 months period and will be updated at least annually or as required to reflect the actual project implementationneeds and improvements ininstitutional capacity. ProcurementofWorks 2. The works procured under this project would include low value farm irrigation and drainage construction and improvements such as lining o f canals, structures, pumping stations, buildings and tube wells. The procurement will be done using the Bank's Standard Bidding Documents (SBDs) for all ICB and Model BiddingDocuments (MBDs) for N C B agreed with the Bank. (a) International CompetitiveBidding (ICB). Although not anticipated, any contract for works estimated to cost US$10 million equivalent or more would be procured under ICB procedures specified inthe Procurement Guidelines. (b) National Competitive Bidding (NCB). Contracts for works estimated to cost less thanUS$10 million equivalent may be awarded under NCB procedures acceptable to the Bank. Works contracts with estimated values o f less than US$2 million may be advertised only inprovincial press. To the extent practicable, contracts for works shall be grouped inbidpackages estimated to cost US$lOO,OOO equivalent or more each. (c) Small Civil Works Procurement (Shopping). Contracts for works estimated to cost less than US$lOO,OOO equivalent per contract would be awarded through shopping procedures as specified in para. 3.5 o f the Procurement Guidelines. These works would be suitable for lump-sum and fixed-price contracts awarded on the basis o f quotations obtained from at least three qualified domestic contractors in response to a written invitation. To promote the transparency and competition, County Offices o f Comprehensive Agricultural Development (COCADs) shall carry out shopping procurement in accordance with the agreed Procedures for Procurement o f Small Civil Works developed for this Project. (d) Community Participation in Procurement: Plantation, construction o f greenhouse, small scale bio-gas and other works which are small and widely scattered, 58 which are not suitable for competitive contracting, would be procured through communities participation inaccordance with the following procedures: 9. Siminp o f Implementation Agreement: Based on annual work plan issued by POCAD, county PMO through its township government will sign detailed implementation agreement with administrative villages to specify: (i) scope o f works and quantities; (ii) total financing and source o f financing including agreed unit cost for each activity; (iii)implementation schedule; (iv) technical standards; (v) supervision and final acceptance procedures; and (vi) payment. 10. Implementation: Administrative villages would mobilize local villagers, use local equipment and materials to implement the activities as specified in the signed agreement under technical guidance from county PMOs. 11.Pavment and Auditing: Payment would be made on unit cost basis against completed physical works as verified by county PMOs. A special review would be arranged by county PMOs together with POCAD, to verify the use o f the loans on a six-month basis. The review report would be provided to the Bank supervisionmissionwithin one month after completion o freview. Procurementof Goods 3. Goods procured under this project would include equipment and seeds. The procurement will be done using Bank's Standard Bidding Document (SBD) for all International Competitive Bidding (ICB) and Model Bidding Documents (MBDs) for National Competitive Bidding(NCB) agreed with the Bank. (a) International Competitive Bidding (ICB). All contracts for goods costing US$500,000 equivalent or more, would be awarded through ICB procedures. (b) National Competitive Bidding (NCB). N C B procedures would be used for procurement o f goods costing less than US$ 500,000 equivalent per contract. Contracts may be advertised only inprovincial press. (c) Shopping. Other goods in smaller quantities and available o f the shelf, would be procured using shopping procedures with contracts under US$ 100,000 equivalent per contract. (d) Direct contracting. New species o f seeds and equipment with proprietary nature would be procured through direct contracting with prior agreement to the Bank. EstablishmentofWater Users Associations (WUAs) andFarmersAssociations(FAs) 4. Sub-grants would be provided to establish W A Sand FAs. Each WUMFA established which meets agreed project requirements and principles set forth in its WUA/FA Development Plan and is so certified by the responsible PMO would be eligible for a Sub-grant. The Sub- grants as agreed WUMFA Development Plan would be used to cover costs for association establishment including: association registration; office equipment and facilities; office building; water measurement facilities and equipment; and training activities required for the establishment and operational start-up o f each association. Considering that the amounts 59 involved are very small and are at scattered locations, no centralized procurement i s required. For each association, procurement would be conducted by the concerned local project agency responsible using local shopping practices in accordance with the agreed Project Implementation Plan. Selectionof Consultants 5. Consultants' services would be required under this project. The consultants' services would include development o f MIS, mobile expert team and groundwater management. Most services would be provided by individual consultants and some would be provided by consulting firms. The consulting contracts for firms which are expected to cost more than US$200,000 equivalent per contract will use the Quality and Cost Based Selection (QCBS) inconformity with paragraphs 2.1 through 2.31 o f the Consultants Guidelines. Most consulting contracts for firms are estimated under US$200,000 equivalent per contract under this project. The Selection Based on Consultants Qualifications (CQ) would be used for these contracts. Chinese University, Design and Research Institute as source o f consultants may be included in the shortlist if they meet the requirements specified in paragraph 1-11o f the Consultants Guidelines. In such case, CQ would be usedinstead o f QCBS. Shortlists o f consultants for services estimated to cost less than US$300,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultants Guidelines. Under the circumstances described inparagraph 3.10 o f the Consultants Guidelines, the consultants would be selected and awarded under a sole-source basis, subject to the Bank's prior approval. Individual consultants would be selected and contracts awarded in accordance with the provisions o fparagraphs 5.2 through 5.3 o f the Consultants Guidelines. Under the circumstances described inparagraph 5.4 o f the Consultants Guidelines, individual consultants may be selected and awarded on a sole-source basis, subject to the Bank's prior approval. Training and Studies 6. Training and studies would be required. Detailed programs will be developed by the SOCAD during project implementation and included in project annual work plans to be submitted each year by November 30 for the Bank's review and concurrence. Loan hnds for training and studies will be disbursedbased on the actual expenditures. B. Assessment of the Agency's Capacityto ImplementProcurement 7. Procurement activities would be carried out by project provinces through the established C A D Offices at various levels. SOCAD will play a coordinating role in the project implementation. Since GEF/SCCF i s supplementary to IAILI11Project, no separateprocurement assessment was done. The organizational structure, roles, functions and M&E mechanism are already in place. Implementing units are equipped with experienced procurement staff, The overall project procurement risk is average. 60 C. ProcurementPlan 8. SOCAD has developed a procurement plan for project implementation which indicates the procurement methods to be used. The initial 18 months procurement plans has been reviewed at appraisal and cleared duringGEF/SCCF grant negotiation on February20-25,2008. D. Frequencyof ProcurementSupervision 9. Inaddition to standard prior reviews, procurement supervision will be carried out from the Bank offices. The Project Team has recommended that a supervision mission visit the field every six months to carry out procurement post reviews during the first two years of project implementation; ifprocurement i s satisfactory duringthat period, procurement post reviewsmay be carried out once a year for the remaining three years. The sampling ratio for the ex-post procurement reviews would be one out o f five contracts. TableA TotalProject Costsby ExpenditureCategory (inUS$millionequivalent) I Goods I 1.52 I Consultants' Services 1.39 Studies, Training and Workshops 5.56 Sub-grant 2.25 Others 0.99 Total 55.50 Table B Thresholds for ProcurementMethods andPriorReview ExpenditureCategory Contract Value Threshold ProcurementMethod (US% thousands) 1. Goods 2300 ICB/NCB All direct contractingcontracts 2. Consultants 2100 for firms QCBSICQ 250 for individual consultants All single source selection contracts regardless o f contract 61 Annex 9: EconomicandFinancialAnalysis China: MainstreamingClimateChangeAdaptation inIrrigatedAgriculture Project Introduction 1. Securing food production for a large and growing population, while also maintaining the sustainability o f natural resources such as land and water, has long been a great challenge for China. With climate change, addressing such a challenge may become even more difficult. Climate change i s already suspected o f affecting the pattern o f water resource availability, rainfall and temperature to some extent in some areas; and thus may impact agricultural production in various locations o f the country. Such impacts would be especially critical in the case o f the 3 H basin, which i s China's breadbasket. It should be noted that impact o f climate change on agricultural production may vary substantially by region (some may benefit and some may lose), depending on the climate that farmers in a specific location face at present and potential climate changes inthe hture. 2. Farmers may modify their production practices in response to changes in water availability, rainfall pattern and temperature. The set o f possible modifications that farmers may undertake i s called adaptation. The ability of farmers to adapt to climate change i s based on many factors, including existing technologies, input and output prices, human capital and knowledge, infrastructure and support services by the government. Inthe event that farmers do not adapt to negative impacts of climate change, they may face losses because o f possible reduction in yields and increase in costs o f production. If farmers adapt, they may be better off compared to the no-adaptation case, although they may still face losses. Inthis case, their losses would be smaller than inthe no-adaptationcase. 3. Measuring the economic benefits from adaptation is, however, not a simple task. It faces difficulties that may arise in identification o f the set o f adaptations farmers may undertake, the costs and benefits associated with each o f them and the selected subset o f adaptation measures chosen by the farmers. Because there i s a high degree o f uncertainty associated with a likely climate facing a given region, the set o f prioritized adaptation measures undertaken by different groups o f farmers i s also uncertain. Hence, there i s a wide range o fpossible adaptation strategies and a wide range o f opportunities and benefits to be realized from adaptation to climate change. Moreover, climate change and adaptation to it i s relatively slow and changes are incremental and mixedwith other changes such as market signals. This situation makes it difficult to recognize, observe andmeasure the process o f climate change adaptation. Methodologyfor ProjectAssessment 4. A two-model methodology, used to assess the likely benefits from the proposed GEF/SCCF-financed project, i s described below. The methodology i s applied to the 3H basin and focuses on the project provinces o f Jiangsu, Henan, Hebei, Shandong, Anhui and Ningxia andthe 10pilot areas (pilot project sites) inthose provinces. Any methodology for assessmentis constrained by the assumptions inherent in the models used. In this case, two complementary model approaches are used: (a) a set o f bio-physical process based crop models prepared by a team o f scientists from the Chinese Academy o f Sciences (CAS); and (b) a farm-level, 62 statistically-based economic model to simulate inferred farmer behavior prepared by an agricultural economics group at CAS. The latter i s referred to as "Ricardian" model. 5. Overall, the CAS crop models are used to simulate the impact o f expected climate change on the yields o f major crops inpilot locations (the "without project" or without adaptation case), while the farm-level economic models are used to estimate the impact o f farmer adaptation to climate change on farm income (the "with project" or with adaptation case). Although a quantitative comparison o f the two models is not feasible, a qualitative comparison could indicate roughly the value o f adaptation measures taken by farmers in response to climate change. Crop models, ifproperly calibrated to local conditions, can provide reasonably accurate estimates o f forecasted changes intemperature and precipitation on the yields o f specified crops in particular locations. Crop models can also simulate the impact o f changes to production practices or technologies, or o f external conditions (such as fertilization effects from ambient CO2). By themselves, however, unless otherwise specified, such models do not evaluate adaptation options. Moreover, it must be emphasized that the CAS crop simulation models are purelybio-physical and do not consider farm economics. And by definition, the crop modeling methodology i s limited to the crops being modeled and therefore does not a priori capture situations where farmers may switch crops which i s one important adaptation measure. Nevertheless, even with such limitations, crop model simulations can provide a base-line case corresponding to an assumption o f current conditions unchanged except for the climate changes specified inthe crop simulation models. 6. To evaluate possible farmer adaptive responses to climate change in various locations, the Ricardian economic model methodology was used. The Ricardian model assumes that each farmer wishes to maximize income subject to the exogenous conditions o f their farm. Specifically, the farmer chooses the crop and inputs for each unit o f land in order to maximize income per hectare. Ifthe farmer chooses crops that provide the highest net income and for each crop also chooses each endogenous inputs in order to maximize net income, the resulting net income will be a (Ricardian) function o fjust the exogenous variables (prices, climate, soils, and water availability). The Ricardian function i s the locus o f income with respect to each o f these exogenous variables. Because the Ricardian net income function does not include unprofitable alternatives, it does not look like the standard response function for any single crop. It is a "comprehensive" function across many crops and technology choices undertaken by farmers. As climate changes, farmers move from one set o f crops and or technology to another. Because o f the wide set o f crops, technologies and production practices included inthe Ricardian function, it provides an estimate o f the benefits derived from adaptation (although it is limited to the observed ones in the particular region). It should be noted that the Ricardian function can also include livestock and thus allow farmers switch between crops and livestock as climate changes. However, inthis analysis only cropped agriculture will be considered. 7. An important caveat that applies to both the bio-physical crop models and the Ricardian economic models i s that the impact o f climate change on availability o f water in the various sample locations was not analyzed. Water availability, which i s an external variable, can affect the adaptation decisions which farmers undertake, including water saving technologies to help farming with less water. Inorder to add water availability considerations, the water system in the 3H basin should be modeled to assess various future climate scenarios and their impact on water availability from the basin down to the field. Although the crop models do consider on- farm water availability by adjusting irrigation schedules according to soil moisture status, they 63 assume implicitly that additional basinwater resources are available when needed. Similarly, the Ricardian analysis does not consider variations inthe amount o f water available and used at the farm level; it implicitly assumes that sufficient water i s available at the specified location to accommodate the specific adaptation measurers undertaken by farmers. Both o f these models and their analyses need to be enhanced to include the impact o f changes inwater availability as a result o f climate change. This was not done at this stage due to lack o f time and resources, but should be done in the future to help guide future programs, investments and policy related to climate change. Water availability i s an especially important consideration for agriculture inthe 3H Basin because the basin is already critically water-short over wide areas. Another caveat is the C02 fertilization effect which i s included inthe crop models analysis cannot be addressed in the Ricardian model analysis due to the non-spatial distribution o f C02. 8. Climate change scenarios (assessed in both the crop models and the Ricardian model) include combination of: (a) increased temperature o f 0, 2, and 5 degrees; and (b) increased and decreased precipitation o f 0 percent, +15 percent and -15 percent, +30 percent and -30 percent &year. Changes invariations by season were not simulated. Without ProjectCase/Results 9. A first approximation o fpossible outcomes without adaptation was provided by running one o f two crop models for crops in each sample location, with both rainfed and irrigated conditions being simulated. Because the volume o f output for all cropAocation combinations is high, only the results for two locations are presented to indicate the impact on crop yields. Two typical counties and eight demonstration locations in other counties were selected. For the typical counties, the results are simulated by the Vegetation Interface Program (VIP) model. For the other counties, the results are simulatedbythe Decision Support System for Agro-technology Transfer (DSSAT) model. The presentation of the DSSAT results in the CAS report could be provided, with an incremental effort, in terms o f percent reduction from present yield values using the same scenarios as inthe case o f VIP. But at present, only the VIP results for the Botou and Huaiyuan counties are usedfor comparisonwith the Ricardianresults. 10. Tables 1 and 2 below present results for the two counties o f the various climate change scenarios for two crops (maize and wheat), under two technologies (irrigated and rainfed). The climate change scenarios are shown as percent changes in mm of rainfall (+ and -), and temperature increases in degrees C (5 degrees and 2 degrees). Values are percent reduction in yields compared to the present climate (rounded values) as a result o f those changes. Because the way the irrigated crops were modeled.' one can view the irrigated simulation as an adaptation compared with the rainfed simulation. 'The crop models allow adjusting irrigation schedules according to soil moisture status. When soil moisture is below a given threshold, then water i s applied during the simulation. This i s a case where water is provided o n demand, which is typical o f an irrigation system. However, by doing so, the modelers still assume that water i s available at the source to satisfy the demand. 64 Table 1: Percent Yield Changes Resulting from Climate Change Scenarios for Boutou County Maize Wheat Maize Wheat +15%mmY+2C -5 20 -3 26 O%mm:+2C -6 20 -6 21 O%mm;+SC -20 32 -22 39 -3O%mm;+5C -21 32 -30 24 model (54618). Scenario/Crop Irrigation Rainfed Maize Wheat Maize Wheat +l5%mmY+2C -12 17 -9 23 O%mm;+2C -12 16 -14 18 -1~%IIuII:+~C -14 15 -17 12 +3O%mmy+5C -27 -6 -24 2 O%mm;+SC -28 -8 -31 -6 -30%mm;+5C -29 -10 -38 -18 11. As can be seen, in all cases for maize, the simulated climate change lead to losses compared to the present climate in the two sample locations. And under most climate change scenarios maize yield always shows a more negative response than wheat, for both irrigation and rainfed technologies. Generally, crop yields are higher from irrigated land than rain-fed land in 3 H plain.2 This i s true not only for the baseline but also for the climatic change situation. The relative negative change o f crop yields i s usually smaller for irrigated land than that for rainfed, especially in the range o f a 2 degree C increase, showing that irrigation helps mitigating the negative impact of increased evapotranspiration (ET) that results from rising temperatures and changes inprecipitation, on crop yields. With ProjectCase/Results 12. As explainedabove, an estimate o fpossible outcomes with adaptation was provided from the Ricardian economic models in each sample location, for both irrigated and rainfed farms. 2While yield under irrigation is higher than under rainfed technology, these incremental yield changes may not necessarily be high enough to justify investment in irrigation. Net economic benefits may actually be negative under irrigation. Additional economic assessment would be needed to verify this point. 65 The Ricardian climate estimates were taken from a recent all-China statistical analysis o f agricultural sensitivity. To estimate the economic impact o f adaptation at the local county level, the present climate for each county was inserted into the Ricardian function inorder to calculate the present net revenue per ha. It shouldbenotedthat the net revenue per ha captures a crop mix that i s being grown all year round, as well as technologies and management practices that farmers already undertake in response to various signals they perceive, including responses to present changes inclimate. 13. As can be seen from Table 3, the 10 counties vary in their sensitivity to climate. Additionally, changes in net revenue per ha resulting from change in climate vary across counties. For example, Botou and Gaomi are counties that face already extreme climate and this is reflected intheir low net revenue per rainfed land. Therefore, with climate change inthe range simulated in this study, these two counties may face less favorable situation compared to other counties. Unlike the other counties, Nanyang and Mingguang counties exhibit almost no difference between rainfed and irrigated net revenueper ha. Table 3: Annual Net Crop Revenue per ha UnderExistingClimate Conditions($/ha, 2006) Ming- Botou Huaiyuan Cangxian Yang-gu Gaomi Nanyang Shangqiu Suqian Xinyi guang Irrigated Farms 1450 1119 1361 2182 1227 1239 2545 1730 1979 2328 Rainfed Farms -399 404 332 215 -94 1185 1286 202 253 2326 14. Climate change scenarios (following the ones that were used in the crop modeling simulations) were then incorporated into the Ricardian models to calculate the change in net revenue resulting from change inclimate for each county. The change innet revenue per ha are presented in Table 4. The results in the table show a large variance in the economic impact o f climate change on net revenue for both irrigated and rainfed farms. It is also clear that the various counties exhibit different sensitivities, interms o fthe size o f gains or losses. 66 Table 4: ChangeinAnnualNet Crop Revenueper ha(% change + or - from 2006) 15. Except for two sites and a few anomalies inthe results, Table 4 shows that ingeneral net farm income per hectare increases somewhat with increased temperatures o f 2 and 5 degrees C. These results indicate that, with adaptation, farmers in the 3H Basin can compensate for increasing temperature due to climate change and maintain or even increase their net farm income per hectare. Although results are not completely consistent, Table 4 also indicates that, interms of percent, change in net returns rainfed farms may in general benefit relatively more from adaptation under the climate change scenarios tested, compared to irrigated farms. Conclusions 16. Overall, the comparison o f the bio-physical crop simulations models show that reductions inmaize would occur as a result of climate change without adaptation (`without project's case), while the Ricardian models indicate that with adaptation net farm income can increase (`with project's case). Although it i s not possible to compare the outcomes o f the two model systems directly, these results provide a strong qualitative justification for the proposed project. These results o f course assume that the farmers have the knowledge, guidance and support needed to facilitate adaptation and thus, it i s a major purpose o f the proposed project. In addition, the Ricardian analysis did not consider water availability, which i s an implicit assumption that water i s non-limiting. Given that water supplies are very limited in the 3H Basin, this provides a justification for the project's strong focus on improving "real water saving" as a means for climate adaptation. 67 17. More specifically, while it i s difficult to compare percent change in per ha yield o f individual crops with dollar reduction inper ha net revenue, it is possible to make a number o f observations and comparisons which serve to justify qualitatively the project. (a) Modeling the production o f two major crops (wheat and maize) that capture 40- 60% o f the sown area in various counties inthe 3 H basin, suggests that at the crop level, climate change scenarios will result in maize yield losses and loss and gain in wheat, ranging between 1-46 percent, depending on the scenario and the crop and technology (irrigation or rainfed crops). Translating yield losses to economic losses could be done using crop budgets data and would enable a closer comparison. But even without such data, it is reasonable to conclude conservatively that without adaptation, the agricultural sector in the 3 H Basin will face significant economic losses at least in maize under various climate change scenarios; and that with adaptation those losses can be mitigated or eliminated. (b) Another likely conclusion from the crop model simulations is that use o f irrigation (considered to be an adaptation measure) may result in lower losses due to climate, compared to rainfed technology for the same crop. Holding all other factors constant, if the incremental change inyield under irrigation pays for the irrigation investment (or part o f it + the value o fthe water), then irrigation could be an important adaptation measure in the 3HBasin. (c) The results o f the Ricardian method suggest that adaptation matters. Adaptation is embedded implicitly and explicitly inthe Ricardian function. The methodology is able to observe differences between irrigated and rainfed farms and between cropping patterns (shares o f various crops used in various farms). Although the Ricardian methodology is not able (inthe case o f the 3 H basin) to observe differences stemming from specific farm level production methods that have been adapted to climate change, these are implicitly included in the observed data. Therefore, if one can obtain monetary values per ha o f agricultural production from a crop model (CP) and from the Ricardian model (RM), the difference RM-CP (all other factors being equal) may reflect the "value" o f adaptation. While the CP impact values are given inpercent yieldha lost and the RM impact values are given in $ha, it i s clear that such differences would (after transformation) always be positive, at least inthe sample locations inthe tables above. 18. Several caveats to this qualitative analysis need be addressed. (a) Water availability should be part o f the analysis. This i s important since climate change may reduce (or increase) the amount o f water that i s available to farmers and this effect i s not captured so far in the Ricardian analysis. Therefore, the current "with adaptation" estimates be upward-biased. The role o f water-saving technologies as an adaptation measure i s likely to be especially significant in the 3 H Basin. Including real water-saving technologies in the project assessment would be possible if water availability analysis (including both surface water and groundwater) is connected to the agricultural production system. (b) All models are constrained bythe assumptions and processes represented inthem. Giventhe importance o fthis topic, continued effort and fundingis needed to enhance and expand boththe bio-physical crop models and the Ricardian economic models. 68 Annex 10: SafeguardPolicyIssues CHINA: MainstreamingClimateChangeAdaptation inIrrigatedAgricultureProject A. Environmentalsafeguardissues Introduction Environmental Assessment Category C - 1. The proposed GEF/SCCF project would be partially blended with the ongoing IAIL3 project, which itself is focused on rehabilitation o f existing sites with limited construction and no major civil works. Inaddition, the proposed GEF/SCCF adaptation project is an environmental project and aims: (a) to help strengthen the resilience o f agricultural development to climate change in China through implementation o f selected adaptation measures at demonstration sites; and (b) to mainstream climate change adaptation into irrigation, water resource management and thus, in the wider context o f rural development. It has been designed to have positive environmental and social impacts effects, avoid negative impacts and improve the sustainability o f IAIL3. 2. The proposed adaptation project will use a "gap-filling plus programmatic approach". A gap analysis will be carried out and a flexible programmatic approach will be adopted with the objective o f identifying priority issues to address. Such a gap-filling plus programmatic approach would help: (i) focus on adaptation gaps from other partners' interventions (e.g., IAIL3); (ii)provide an adaptation framework for comprehensive and cross-sectoral interventions; (iii)support institutional capacity building and public awareness; (iv) create a favorable environment for integrated water management, optimizing opportunities for replicating good practices, and ensuring sustainability; and (v) avoid practices which are counter to adaptation. 3. Based on a preliminary gap analysis o f IAIL3, the proposed project would, in particular: (a) identify, prioritize and select adaptation options and measures to be tested during project implementation; (b) demonstrate and implement selected adaptation measures at demonstration sites; and (c) help mainstreaming climate change adaptation into the national Comprehensive Agricultural Development (CAD) Program and provide institutional strengthening support to help replicate adaptation approaches into the wider context o frural development. 4. The particular strength o fthe proposed project is that it will screen relevant IAIL3 project activities on the basis o f climate change impacts and then suggest specific adaptation measures (including changing the mind-of decision makers) in view o f making IAIL3 and Chinese agriculture and irrigation more resilient and sustainable. The project will raise public awareness o f adaptation to climate change, strengthen institutional coordination and build capacity to identify and implement adaptation measures needed. In selecting appropriate adaptation measures, the project will rely on scientific knowledge, experiences gained, lessons learned and "learning by doing" in pilot demonstrations. This approach will be fhther strengthened by full participation o f stakeholders at different levels. For the IAIL3 Project, the EMP was prepared for each province. The mitigation measures, monitoring program and other activities described in the EMP would also be applied to GEF/SCCF-supported activities. 5. Insummary, the proposed project aims to further strengthen positive environmental and social impacts through new concepts o f risk management, new standards in irrigation infrastructure and management, local and farmer participation and use o f natural resilience (land, 69 water, forests) to moderate extreme weather conditions. Environmental and social impacts o f project activities are expected to be positive and the project has therefore been classified as a Category C project. Based on review o f proposed activities, other environment safeguards policies are not triggered (see table below). Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [XI [I Natural Habitats (OP/BP 4.04) [I [ I Pest Management (OP 4.09) [I [ I Cultural Property (OPN 11.03, being revised as OP 4.1 1) [I [I Involuntary Resettlement (OP/BP 4.12) [ I [I Indigenous Peoples (OD 4.20, being revised as OP 4.10) [XI [ I Forests (OPBP 4.36) [ I [I Safety o f Dams (OP/BP 4.37) [I [ I Projects inDisputed Areas (OP/BP/GP 7.60) [I [I Projects on International Waterways (OP/BP/GP 7.50) [ I [ I EnvironmentalAssessment 6. As described above, there are no major adverse environmental impacts expected as a result o f this project. The project i s designed to be entirely positive from an environmental point o f view, particularly by protecting vulnerable ecosystems from the impact o f global climate change. Some expected direct positive impacts include: (i) reduced uncertainty o f impacts o f global climate change and formulation o f adequate adaptation measures; (ii) mitigation o f the impacts o f unsustainable agricultural practices and development and implementation o f sustainable alternatives; (iii)reduced vulnerability o f agro-systems and planning and management o f irrigation water supply; and (iv) increase public awareness based on adaptation needs and increased social and institutional capacity to manage the ecosystems. Adaptation measures selected under the project would be assessed in terms o f environmental impact (or an Environmental Assessment will be performed as part o f the preparation o f the adaptation measures). B. Social Safeguards Issues I nvoluntary Resettlement 7. The proposed project will not undertake activities that will require taking off land, and neither land acquisition nor involuntary relocation i s expected during project implementation. Any potential impacts resulting from the proposed testing o f adaptation measures at demonstration sites will be dealt in accordance with the Resettlement Policy Framework prepared for the ongoing IAIL3. Indigenous peoples 8. The Bank's IP policy was not triggered by IAIL3, as there are no ethnic minority groups inthe project areas inthe five Project Provinces area inthe 3H basin, as confirmed inthe social 70 impact review carried out by SOCAD. The proposed GEF/SCCF project demonstrations sites are all within the original IAIL3 project areas, except for Tongxin county inNingxia which has been newly added to the IAIL3 project area as a Participating Province for WUA development and in which there are Hui minority communities. For the five recently added Participating Provinces/regions under IAIL3, Ethnic Minority Development Plans (EMDPs) have been prepared for WUA pilot areas for the three provinces where ethnic minorities reside. Seven ethnic minorities including Hui ethnic groups reside in about 61 WUA pilot sites in Ninxia, Yunnan and Inner Mongol. Because Tongxin county underthe GEF/SCCF program is located in the same project area inNinxia, those Hui communities related to GEF/SCCF program will also be coveredby the EMDPprepared for Ninxia. The EMDPwill help ensure that Huicommunities have equitable opportunity to participate in and benefit from the GEF/SCCF program and that they have cultural and location-specific compatibility within the context o f both the IAIL3 and GEF/SCCF projects. 9. Inparticular, the Eh4DP for ethnic minorities inNingxiaHuiAutonomous Regioncovers all the project areas mainly in three prefecture level cities, namely Yinchuan, Wuzhong and Nonghen. Inthese project areas, the ethnic minority group i s only the Huipeople. The proposed GEF/SCCF program would be located in a township called Xiamaguan in Tongxin county o f Wuzhong city. Ten village communities from the Xiamaguan township would participate in the GEFISCCF program, and six o f them have Huipopulation, accounting for about 47% o f the total population o f the ten. There are four villages which are almost purely Hui. The table below shows the basic ethnic-demographic situation o fthe GEF/SCCF project area. The BasicEthnicCensusinthe GEF/SCCFProgramArea inNingxia I 1 Average annual Area 1 Population House- Ethnic income per minority Hui in the capita (Yuan) (only Hui) whole (%) year 2005 I I I Nanguan 61 780 3393 3393 100% 1800 Beiguan 21 230 1358 1222 90% 1800 Xigou II55 II536 II2790 II2623 II 94% II1600 II Total I 405 I 3779 I 19042 I 9035 I 47% I I 10. According to the ethnic census survey done in social assessment process, most Hui population and their communities center around the township seat which forms the local Hui communications center in their daily life. Because o f both geographical requirements o f the 71 project activities and the need for ethnic minority development, the GEF/SCCF program will be introduced around this area. Combined with Hui traditional livestock production, adoption of WWF grass cultivation with date tree planting to reduce low-yield wheat area in community fields is readily accepted among local villages, while water cisterns are another priority need because o f their adaptation to the local arid climate. Inaddition to extensive consultation among these communities, the EMDP also requires that a participation mechanism be established specifically for the Hui communities' regular involvement in the project, not only for project implementation but also for choices and decision-making on project activities. This leads to establishment o f farmer W A Sand farmer professional association (FAs) under both IAIL3 and the GEF/SCCF project, in parallel with a participatory identification of project beneficiaries. Both give assurance that Hui villagers will share voluntarily in the control o f the project processes. Inaddition, a special dissemination campaign on the GEF/SCCF project concepts and intensive training for new adaptation technologies and production patterns are also planned and included under the EMDP. As in IAIL3, a participatory approach i s thus especially ensured through the EMDPinthe Huiethnic minority area under the GEF/SCCF project. 72 Annex 11:ProjectPreparationandSupervision CHINA: MainstreamingClimateChangeAdaptation inIrrigatedAgricultureProject Planned Actual PCNreview March, 2007 InitialPID to PIC March, 2007 InitialISDS to PIC March, 2007 Appraisal September, 2007 Negotiations February20-25,2008 Board/RVP approval April 17,2008 Planned date of effectiveness July 31,2008 Planned date ofmid-termreview June 30,2010 Planned closing date June 30,2012 Keyinstitutions responsiblefor preparation ofthe project: State Office for Comprehensive Agricultural Development Bank staffandconsultantswho worked onthe project included: Name Title Unit Qun Li Task Team Leader EASRE SalahDarghouth Water Advisor ETWWA Ariel Dinar Lead Economist DECRG Richard B.Reidinger Lead Agricultural Economist Consultant Song Li Climate Change Specialist Consultant Jeffrey Richey Hydrology andEcology Specialist/Consultant Washington U. Robert Mendelsohn Environmental Economist/Consultant Yale University SyedI. Ahmed Lead Counsel LEGES Junxue Chu Senior Finance Officer LOAGl Jinan Shi Senior Procurement Specialist EACCF Yi Dong Senior Financial Management Specialist EACCF Zhongchen Lin Senior Social Safeguards Specialist EACCF Chongwu Sun Senior Environmental Specialist EACCF Patria C. M.Morente ProgramAssistant EASRE Bank hnds expendedto date on project preparation: (as of March7,2008) 1. Bankresources: US$247,884.69 2. Trust funds: US$ 152,046.77 3. Total: US$ 399,931.46 EstimatedApproval and Supervision costs: 1. Remaining costs to approval: US$22,750 2. Estimated annual supervision cost: US$ 65,000 73 Annex 12: Documentsinthe ProjectFile CHINA: MainstreamingClimateChangeAdaptation inIrrigatedAgricultureProject A. Project Implementation Plan 1. Objective, Scope andProject Site Profile 2. SafeguardPolicy 3. Project Contents, Costing and Financing Plan 4. Project Benefits 5. Risk Analysis andMitigationMeasures 6. Institutional Arrangement for Project Implementation 7. ProcurementPlan 8. Disbursement o f Grant 9. FinancialManagement, Accounting andAuditing 10.M&EPlan 11.Project MonitoringandInspectionPlan B. Bank StaffAssessments Identificatioflreparation MissionAide Memoire C. Assessment Report by the IAP (Institute of Atmospheric Physics) and IGNRR (Institute of Geographic Sciences and Natural Resources Research) of the Chinese Academy of Science AssessmentReport of the Climate Change and ComprehensiveAgriculture Development in3 Huang-Huai-Hai Region Annex A Introduction of Appraisal Expert Panel Annex B Introduction ofAppraisal Models AnnexC Features of Water Demands, Consumption and Deficit in Growing Season of Crops inHuang-Huai-Hai Region Annex D Climate Change, Agriculture Production, Water Resources and Farmland Water Balance inHistory inTotou City and Huaiyuan County Annex E Simulation of Suface HydrologicalSituation inHuang-Huai-Hai Region with VIC Model Annex F Changes of Yield o f Main Crops and Water Consumption Under Future Climate Change Scenarios inTypical Counties inHuang-Huai-Hai Region Simulated with VIP Model Annex G Changes on Water Consumption Under Future Climate Change Scenarios in Typical Counties inHuang-Huai Region Simulated with FWBMModel AnnexH Changes in Yields o f Main Crops Under Future Climate Change Scenarios in Demonstrative Counties in Huang-Huai-Hai Region Simulated with DSSAT Model Annex I ReferencedPublication 74 Annex 13: Statementof Loansand Credits CHINA: MainstreamingClimateChangeAdaptation inIrrigatedAgricultureProject Differencebetween expected and actual Original Amount in US$Millions disbursements Proiect ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd PO86515 2007 CN-3rdNationalRailway 200.00 0.00 0.00 0.00 0.00 200.00 0.00 0.00 PO81776 2007 CN-GUANGDONGlPRD2 96.00 0.00 0.00 0.00 0.00 96.00 0.00 0.00 PO77752 2007 CN-SHANDONG ENVMT 2 147.00 0.00 0.00 0.00 0.00 147.00 0.00 0.00 PO88964 2007 CN-Guangxi IntegratedForestry Dev 100.00 0.00 0.00 0.00 0.00 100.00 0.17 0.00 PO91020 2007 CN-FujianHighway Sector Investment 320.00 0.00 0.00 0.00 0.00 320.00 4.00 0.00 PO75613 2007 CN-ShaanxiAnkang Road Development 300.00 0.00 0.00 0.00 0.00 300.00 0.00 0.00 PO83322 2007 CN-SICHUAN URBAN DEV 180.00 0.00 0.00 0.00 0.00 177.00 -3.00 0.00 PO75732 2006 CN-SHANGHAIURBANAPL2 180.00 0.00 0.00 0.00 0.00 149.79 -3.55 0.00 PO84742 2006 CN-MIL 111 200.00 0.00 0.00 0.00 0.00 160.99 26.74 0.00 PO81255 2006 CN-ChangjiangPearlRiver Watershed 100.00 0.00 0.00 0.00 0.00 97.75 7.08 0.00 Reha PO82993 2006 CN-GEF-PCB Mgnt & Disposal 0.00 0.00 0.00 18.34 0.00 17.57 6.09 0.00 PO85124 2006 CN-Ecnomic ReformImplementation 20.00 0.00 0.00 0.00 0.00 18.44 -0.23 0.00 PO70519 2006 CN-FuzhouNantai Island Peri-UrbanDev 100.00 0.00 0.00 0.00 0.00 99.75 12.58 0.00 PO85333 2006 CN-5th InlandWaterways 100.00 0.00 0.00 0.00 0.00 78.01 10.65 0.00 PO96158 2006 CN-RenewableEnergy I1(CRESP 11) 86.33 0.00 0.00 0.00 0.00 74.64 -11.69 0.00 PO94388 2006 CN-HFC-23 EmissionsReduction 0.00 0.00 0.00 0.00 0.00 1,052.40 0.00 0.00 PO93906 2006 CN-3rdJiangxi Hwy 200.00 0.00 0.00 0.00 0.00 200.00 0.00 0.00 PO99992 2006 CN-LiaoningMedium Cities 218.00 0.00 0.00 0.00 0.00 202.88 -6.78 0.00 Infrastructure PO90336 2006 CN-GEF-NINGBOWATER & ENVMT 0.00 0.00 0.00 5.00 0.00 4.50 0.43 0.00 PO82992 2006 CN-GEF-Termite Control Demonstration 0.00 0.00 0.00 14.36 0.00 14.36 0.10 0.00 PO86629 2006 CN-HeilongjiangDairy 100.00 0.00 0.00 0.00 0.00 96.75 0.92 0.00 PO81348 2006 CN-HENAN TOWNS WATER 150.00 0.00 0.00 0.00 0.00 149.63 3.79 0.00 PO69862 2005 CN - AgriculturalTechnology Transfer 100.00 0.00 0.00 0.00 0.00 86.69 22.73 0.00 PO68752 2005 CN-InnerMongolia Highway& Trade 100.00 0.00 0.00 0.00 0.00 76.93 8.59 0.00 Conid PO71094 2005 CN - Poor RuralCommunities 100.00 0.00 0.00 0.00 0.00 86.25 36.95 0.00 Development PO72721 2005 CN-GEF-HeatReform& Bldg Egy Eff. 0.00 0.00 0.00 18.00 0.00 15.09 5.47 0.00 PO75730 2005 CN-HUNAN URBAN DEV 172.00 0.00 0.00 0.00 0.00 160.06 35.40 0.00 PO81161 2005 CN-CHONGQMG SMALL CITIES 180.00 0.00 0.00 0.00 0.00 169.28 33.61 0.00 PO81346 2005 CN-LIUZHOU ENVIRONMENT MGMT 100.00 0.00 0.00 0.00 0.00 82.16 2.26 0.00 PO57933 2005 CN-TAI BASIN URBAN ENVMT 61.00 0.00 0.00 0.00 0.00 37.12 12.97 0.00 PO86505 2005 CN-NINGBO WATER & ENVMT 130.00 0.00 0.00 0.00 0.00 109.66 -0.34 0.00 PO67625 2005 CN-GEF-RenewableEnergy Scale-Up 0.00 0.00 0.00 40.22 0.00 37.67 -0.35 0.00 Program PO67828 2005 CN-RenewableEnergy Scale-up Program 87.00 0.00 0.00 0.00 0.00 20.34 4.44 0.00 PO87291 2005 CN-PCFJinchengCoalBedMethane 0.00 0.00 0.00 0.00 0.00 18.13 0.00 0.00 Project PO81749 2004 CN-HubeiShiman Highway 200.00 0.00 0.00 0.00 1.00 38.44 -7.22 0.00 75 PO77615 2004 CN-GEF-Gansu& Xinjiang Pastoral 0.00 0.00 0.00 10.50 0.00 6.81 7.57 0.00 Develop PO77137 2004 CN-4th InlandWaterways 91.00 0.00 0.00 0.00 0.46 60.51 14.64 14.14 PO75728 2004 CN-GUANGDONGRRD UR ENVMT 128.00 0.00 0.00 0.00 0.64 79.40 -2.33 0.00 PO84003 2004 CN-GEF GUANGDONG PRDURB 0.00 0.00 0.00 10.00 0.00 9.82 4.03 0.00 ENV PO75602 2004 CN-2ndNationalRailways(Zhe-Gan 200.00 0.00 0.00 0.00 1.oo 5.73 -46.60 -47.60 Line) PO75035 2004 CN GEF-Hai BasinIntegr. Wat. - 0.00 0.00 0.00 17.00 0.00 11.52 9.18 0.00 Env.Man. PO73002 2004 CN-Basic EducationinWestern Areas 100.00 0.00 0.00 0.00 0.00 40.65 35.88 0.00 PO65035 2004 CN-Gansu& Xinjiang Pastoral 66.27 0.00 0.00 0.00 0.00 28.57 10.68 0.00 Development PO65463 2004 CN-JiangxiIntegratedAgric. Modem. 100.00 0.00 0.00 0.00 0.00 67.63 29.92 0.00 PO66955 2004 CN-ZHEJIANG URBAN ENVMT 133.00 0.00 0.00 0.00 0.00 90.34 17.72 0.00 PO69852 2004 CN-WuhanUrban Transport 200.00 0.00 0.00 0.00 1.oo 104.50 98.88 0.00 PO70441 2003 CN-Hubei Xiaogan Xiangfan Hwy 250.00 0.00 0.00 0.00 0.00 35.55 32.22 0.00 PO58847 2003 CN-3rdXinjiang Hwy Project 150.00 0.00 0.00 0.00 0.00 20.88 14.22 0.00 PO70191 2003 CN-SHANGHAIURB ENVMT APLl 200.00 0.00 0.00 0.00 0.00 111.53 53.39 0.00 PO67337 2003 CN-2nd GEF EnergyConservation 0.00 0.00 0.00 26.00 0.00 7.57 25.75 0.00 PO76714 2003 CN-2ndAnhui Hwy 250.00 0.00 0.00 0.00 0.00 81.60 22.10 0.00 PO40599 2003 CN-TIANJINURB DEV I1 150.00 0.00 0.00 0.00 0.00 132.04 60.76 0.00 PO68058 2003 CN-Yixing PumpedStorage Project 145.00 0.00 0.00 0.00 0.00 70.65 43.98 0.00 PO68049 2002 CN-HubeiHydropowerDev in Poor Areas 105.00 0.00 0.00 0.00 0.00 20.53 11.27 0.00 PO58846 2002 CN-Natl Railway Project 160.00 0.00 0.00 0.00 5.00 2.73 7.73 0.00 PO60029 2002 CN-GEF-Sustain.Forestry Dev 0.00 0.00 0.00 16.00 0.00 6.88 13.93 0.00 PO70459 2002 CN-Inner Mongolia HwyProject 100.00 0.00 0.00 0.00 0.00 20.33 5.66 0.00 PO64729 2002 CN-SustainableForestry Development 93.90 0.00 0.00 0.00 0.00 22.44 12.28 0.00 PO71147 2002 CN-TuberculosisControl Project 104.00 0.00 0.00 0.00 0.00 47.49 25.97 0.00 PO45915 2001 CN-Urumqi UrbanTransport 100.00 0.00 0.00 0.00 0.00 32.47 32.47 0.00 PO47345 2001 CN-HUAI RIVER POLLUTION 105.50 0.00 0.00 0.00 0.00 23.11 23.11 1.37 CONTROL PO56596 2001 CN-ShijiazhuangUrbanTransport 100.00 0.00 0.00 0.00 0.00 49.90 49.90 0.00 PO56199 2001 CN-3rd InlandWaterways 100.00 0.00 0.00 0.00 0.00 11.67 6.84 0.00 PO51859 2001 CN-LIAO RIVER BASIN 100.00 0.00 0.00 0.00 0.00 18.04 16.45 0.00 PO42109 2000 CN-BEIJING ENVIRONMENT I1 349.00 0.00 0.00 25.00 26.51 184.28 210.80 -4.92 PO45910 2000 CN-HEBEI URBAN ENVIRONMENT 150.00 0.00 0.00 0.00 0.00 34.62 33.28 0.00 PO49436 2000 CN-CHONGQINGURBAN ENVMT 200.00 0.00 0.00 0.00 29.50 66.52 96.02 3.68 PO64924 2000 CN-GEF-BELTINGENVMT I1 0.00 0.00 0.00 25.00 0.00 19.90 25.00 6.48 PO56424 2000 CN-Tongbai PumpedStorage 320.00 0.00 0.00 0.00 100.00 30.75 135.95 1.51 P058843 2000 CN-Guangxi Highway 200.00 0.00 0.00 0.00 19.70 3.37 23.07 3.37 PO64730 2000 CN-YangtzeDike Strengthening 210.00 0.00 0.00 0.00 0.00 71.10 71.10 12.10 PO36953 1999 CN-HealthIX 10.00 50.00 0.00 0.00 0.40 15.89 14.61 14.61 PO42299 1999 CN-Tec Coop Credit IV 10.00 35.00 0.00 0.00 5.84 13.52 17.12 0.00 PO38121 1999 CN-GEF-RENEWABLEENERGY 0.00 0.00 0.00 35.00 0.00 8.71 34.77 28.12 DEVELOPMENT PO51705 1999 CN-FujianI1Highway 200.00 0.00 0.00 0.00 0.00 12.32 12.32 10.05 PO51856 1999 CN-AccountingReform& Development 27.40 5.60 0.00 0.00 0.00 7.18 7.04 2.98 PO36414 1998 CN-GUANGXI URBAN ENVMT 72.00 20.00 0.00 0.00 13.48 19.16 32.05 3.37 PO03614 1998 CN-GuangzhouCity Transport 200.00 0.00 0.00 0.00 20.00 46.78 66.78 46.78 PO03566 1998 CN-BASIC HEALTH (HLTH8) 0.00 85.00 0.00 0.00 0.00 1.58 0.08 0.00 76 PO03539 1998 CN-SustainableCoastal ResourcesDev. 100.00 0.00 0.00 0.00 2.06 14.20 16.27 14.20 PO36405 1997 CN-Wanjiazhai Water 400.00 0.00 0.00 0.00 75.00 4.41 79.41 4.41 Total: 9,707.40 195.60 0.00 260.42 301.59 6,470.46 1,715.08 114.65 77 CHINA STATEMENT OF IFC's HeldandDisbursedPortfolio InMillions ofUSDollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2002 ASIMCO 0.00 10.00 0.00 0.00 0.00 10.00 0.00 0.00 2006 ASIMCO 0.00 0.00 4.12 0.00 0.00 0.00 3.61 0.00 2005 BCCB 0.00 59.21 0.00 0.00 0.00 59.03 0.00 0.00 2003 BCIB 0.00 0.00 12.04 0.00 0.00 0.00 0.00 0.00 2006 BUFH 8.14 0.00 0.00 0.00 8.14 0.00 0.00 0.00 2005 Babei 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00 BabeiNecktie 11.00 0.00 0.00 6.00 8.94 0.00 0.00 4.88 1999 Bank of Shanghai 0.00 21.76 0.00 0.00 0.00 21.76 0.00 0.00 2000 Bank of Shanghai 0.00 3.84 0.00 0.00 0.00 3.84 0.00 0.00 2002 Bank of Shanghai 0.00 24.67 0.00 0.00 0.00 24.61 0.00 0.00 2005 BioChina 0.00 3.70 0.00 0.00 0.00 3.13 0.00 0.00 2002 CDH ChinaFund 0.00 2.02 0.00 0.00 0.00 0.00 0.00 0.00 2005 CDH China I1 0.00 17.99 0.00 0.00 0.00 11.38 0.00 0.00 2006 CDH Venture 0.00 20.00 0.00 0.00 0.00 0.51 0.00 0.00 2005 CT Holdings 0.00 0.00 40.00 0.00 0.00 0.00 0.00 0.00 2004 CUNA Mutual 0.00 10.53 0.00 0.00 0.00 0.00 0.00 0.00 2006 CapitalToday 0.00 25.00 0.00 0.00 0.00 0.32 0.00 0.00 2005 Changyu Group 0.00 18.07 0.00 0.00 0.00 18.07 0.00 0.00 1998 ChengduHuarong 3.36 3.20 0.00 3.13 3.36 3.20 0.00 3.13 2004 China Green Ener 20.00 0.00 0.00 0.00 15.00 0.00 0.00 0.00 2004 China Re Life 0.00 0.27 0.00 0.00 0.00 0.27 0.00 0.00 1994 China Walden Mgt 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00 2006 Chinasoft 0.00 0.00 15.00 0.00 0.00 0.00 10.00 0.00 2004 Colony China 0.00 15.31 0.00 0.00 0.00 9.29 0.00 0.00 2004 ColonyChinaGP 0.00 0.84 0.00 0.00 0.00 0.49 0.00 0.00 2006 Conch 81.50 40.93 0.00 0.00 81.50 0.00 0.00 0.00 2006 DagangNewspring 25.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 Darong 10.00 0.24 0.00 8.00 6.67 0.24 0.00 5.33 2006 Deqingyuan 0.00 2.85 0.00 0.00 0.00 2.85 0.00 0.00 1994 DynamicFund 0.00 2.21 0.00 0.00 0.00 2.01 0.00 0.00 2007 Epure 0.00 10.00 0.00 0.00 0.00 0.00 0.00 0.00 2004 Fenglin 17.64 0.00 6.00 13.47 13.64 0.00 6.00 12.53 2006 FenglinHJMDF 0.23 0.00 0.00 3.27 0.00 0.00 0.00 0.00 2005 Five Star 0.00 0.00 7.00 0.00 0.00 0.00 0.00 0.00 2006 GDIH 50.85 0.00 0.00 0.00 50.85 0.00 0.00 0.00 2003 Great Infotech 0.00 1.73 0.00 0.00 0.00 1.03 0.00 0.00 2006 HangzhouRCB 0.00 10.85 0.00 0.00 0.00 0.00 0.00 0.00 2005 HiSoft Tech 0.00 4.00 0.00 0.00 0.00 3.00 0.00 0.00 2006 HiSoft Tech 0.00 4.34 0.00 0.00 0.00 1.74 0.00 0.00 2004 IB 0.00 52.18 0.00 0.00 0.00 52.18 0.00 0.00 78 2004 Jiangxi Chenming 40.00 12.90 0.00 18.76 40.00 12.90 0.00 18.76 2006 LaunchTech 0.00 8.35 0.00 0.00 0.00 8.33 0.00 0.00 2001 MaanshanCarbon 5.25 2.00 0.00 0.00 5.25 2.00 0.00 0.00 2005 MaanshanCarbon 11.00 1.oo 0.00 0.00 5.00 1.oo 0.00 0.00 2005 Minsheng 15.75 0.00 0.00 0.00 7.00 0.00 0.00 0.00 2006 Minsheng& E3 25.09 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2001 MinshengBank 0.00 23.50 0.00 0.00 0.00 23.50 0.00 0.00 2005 MinshengBank 0.00 2.80 0.00 0.00 0.00 2.79 0.00 0.00 2001 NCCB 0.00 8.94 0.00 0.00 0.00 8.82 0.00 0.00 1996 NanjingKumho 0.00 3.81 0.00 0.00 0.00 3.81 0.00 0.00 2004 NanjingKumho 31.38 2.23 0.00 0.00 31.38 2.23 0.00 0.00 2006 Neophotonics 0.00 0.00 10.00 0.00 0.00 0.00 10.00 0.00 2001 New China Life 0.00 5.83 0.00 0.00 0.00 5.83 0.00 0.00 2005 New Hope 0.00 0.00 45.00 0.00 0.00 0.00 0.00 0.00 1995 NewbridgeInv. 0.00 0.22 0.00 0.00 0.00 0.22 0.00 0.00 2005 North Andre 8.00 6.74 0.00 0.00 0.00 4.25 0.00 0.00 2003 PSAM 0.00 2.01 0.00 0.00 0.00 0.00 0.00 0.00 RAKChina 13.00 0.00 0.00 0.00 13.00 0.00 0.00 0.00 2006 RenaissanceSec 0.00 0.00 20.04 0.00 0.00 0.00 0.00 0.00 2006 Rongde 0.00 35.00 0.00 0.00 0.00 31.38 0.00 0.00 SAC HK Holding 0.00 1.60 0.00 0.00 0.00 1.oo 0.00 0.00 2003 SAIC 12.00 0.00 0.00 0.00 12.00 0.00 0.00 0.00 2006 SBCVC 0.00 20.00 0.00 0.00 0.00 2.00 0.00 0.00 2000 SEAF SSIF 0.00 3.74 0.00 0.00 0.00 3.37 0.00 0.00 SHKeji IT 3.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2004 SHCT 38.18 0.00 0.00 28.64 29.04 0.00 0.00 21.78 2004 SJBFI 0.14 0.07 0.00 0.00 0.00 0.07 0.00 0.00 1998 Shanghai Krupp 19.25 0.00 0.00 36.75 19.25 0.00 0.00 36.15 2006 Shanshui Group 50.00 5.50 2.20 0.00 50.00 5.50 0.00 0.00 1999 Shanxi 12.61 0.00 0.00 0.00 12.61 0.00 0.00 0.00 SinoSpring 0.00 0.00 20.00 0.00 0.00 0.00 0.00 0.00 StoraEnso 20.83 0.00 0.00 4.17 11.00 0.00 0.00 0.00 2005 StoraEnso 29.17 0.00 0.00 20.83 0.00 0.00 0.00 0.00 2006 Stora Enso 50.00 0.00 0.00 175.00 0.00 0.00 0.00 0.00 2006 TBK 4.00 0.00 0.00 0.00 2.00 0.00 0.00 0.00 2006 VeriSilicon 0.00 1.oo 0.00 0.00 0.00 1.oo 0.00 0.00 Wanjie High-Tech 9.89 0.00 0.00 0.00 9.89 0.00 0.00 0.00 2004 Wumart 0.00 1.62 0.00 0.00 0.00 1.62 0.00 0.00 2003 XACB 0.00 17.95 0.00 0.00 0.00 0.64 0.00 0.00 2004 Xinao Gas 25.00 10.00 0.00 0.00 25.00 10.00 0.00 0.00 2006 ZhejiangGlass 50.00 24.96 0.00 18.00 0.00 0.00 0.00 0.00 2003 Zhengye-ADC 10.43 0.00 0.00 4.87 10.43 0.00 0.00 4.87 2002 ZhongChen 0.00 4.78 0.00 0.00 0.00 4.78 0.00 0.00 2006 Zhongda-Yanjin 21.89 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total portfolio: 733.58 577.30 181.40 340.89 470.95 371.06 29.61 108.03 79 Approvals PendingCommitment FY Approval Company Loan Equity Quasi Partic. 2002 SML 0.00 0.00 0.00 0.00 2004 NCFL 0.00 0.00 0.02 0.00 2007 Xinao CTC 0.04 0.01 0.00 0.14 2004 ChinaGreen 0.00 0.00 0.01 0.00 2006 Launch Tech 0.01 0.00 0.00 0.00 2005 MS Shipping 0.00 0.01 0.00 0.00 2003 Peak Pacific 2 0.00 0.01 0.00 0.00 Totalpendingcommitment: 0.05 0.03 0.03 0.14 80 Annex 14: Country at a Glance CHINA: MainstreamingClimateChangeAdaptation inIrrigatedAgricultureProject East Lower- POVERTY and SOCIAL A8la 8 mlddle- Chlna Paclflc Income Development dlamond. 2005 Population, mid-year(millions) 1304.5 1685 2,475 GNIpercapita(Atlasmethod, US$) 1740 1627 Life expectancy 198 GNI(Atlas method, US$ billions) 2269.6 3,067 4,747 Average annual growth, 1999-05 Population(%) 0.7 0.9 10 Laborforce (%j 10 1.3 14 GNI Gross per primary M 08t recent estlmate (latest year available, 1999-05) capita enrollment Poverty(% ofpopulation belownetionaipo vertyiinej Urbanpopulation (%oftotalpopulation) 40 41 50 Lifeexpectancyat birth( w r s ) 71 70 70 i Infant mortality(per 1OOOiivebirths) 28 29 33 Childmalnutrition (%ofchildren under5) 8 15 t? Access to improvedwtersource Access to an improvedvatersource (%ofpopulationj 77 79 62 Literacy(%ofpopulafion age $59 91 91 89 Gross primaryenrollment (%of school-age population) 18 115 in -China Male 18 16 1% -Lowr-middie-incomegmup Female I7 114 10 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1985 1995 04 2005 Economic ratlos. GDP (US$ billions) 304.9 728.0 19317 2228.9 Gross capitalformation1GDP 37.8 39.3 38.7 Exports of goods andserviceslGDP 0.0 23.1 34.0 Trade Gross domestic savings1GDP 33.6 415 412 Gross nationalsavings1GDP 34.0 40.1 422 Currentaccount balance1GDP -3.8 0.8 3.6 5.0 Interest paynentslGDP 0.2 0.6 0 2 Total debtIGDP 5.5 s.2 Q.9 Total debt serviceleuports 7.7 8.6 3.5 Presentvalueof debt1GDP P.5 1 Present valueof debtlexports 35.7 Indebtedness 1985-95 1995-05 2004 2005 2005-09 (average annualgmMhj GDP 9.7 6.8 0.1 9.9 8.0 -China GDP percapita 8.2 8.0 9.4 9 2 7.3 Lowr-middle-incomegmup Exports of goods andservices 9.4 8.7 28.4 23.6 0.3 STRUCTURE of the ECONOMY I 1985 1995 2004 2005 (%of GDPj Growth of capltal and GDP ('4 I Agriculture 28.4 8 8 0.1 Industry 43.1 47.2 46.2 Manufacturing 34.9 Services 28.5 33.1 40.7 Householdfinal consumption expenditure 53.2 47.5 46.5 00 01 02 03 M 05 Genera gov't final consumption expenditure 0.2 110 02 Imports of goods andservices 14.1 20.9 314 -GCF d G D P 1985.95 1995.05 2004 2005 (averageannuaigmMhj Agriculture 4.2 3.3 6.3 5.0 Industry 2 6 9.9 111 0.6 Manufacturing 0.0 Services 9.5 9.7 9.6 0.1 Householdfinal consumption expenditure 0.2 5.7 ti Generalgov't final consumplionexpenditure 9.4 8.9 6.8 W 01 02 03 Gross capitalformation 9.4 0.1 0.0 0.5 -Exports - 0 - l m p O T t S Imports of goods andservices 0.3 u.4 22.5 15.3 Note:2005 data are preliminaryestimates. This tableMS producedfromthe Development Economics LDB database. 'Thediamonds showfourkeyindicators inthecountly(in bo1d)comparedvcithitsincome-groupavemge. if dataare missing,thediamondMil be incomplete. 81 China PRICES andGOVERNMENT FINANCE I:] 1985 1995 2004 2005 Domestic prices lnflatlon (Oh) (%change) Consumer pnces E 9 4 0 18 ImplicitGDP deflator 0.1 137 6 9 3.8 Government finance (??ofGDP.includescurrentgrants) Current revenue 26 0 0 8 16.6 7.5 Current budget balance 7 3 0 6 17 2.0 Overallsurplusldefici! 00 -15 -15 -13 TRADE 1985 1995 2004 2005 (US$ mrllronsj Export and import levels (US$ mill.) Total exports (fob) 27,350 148,780 593,369 771,511 Food 1,000,000 T 3,803 9,954 18,670 Minera fuels,lubncants.andrelatedmaterial! 7,132 5,332 ?4,476 800 000 Manufactures '0,522 127,295 552.818 727,81 600 000 Total imports (cif) 42,252 132,084 561423 674,331 Food 1553 6,132 9.256 400 000 Fuelandenergy 7 2 5,27 48.003 200 000 1 I Capitalgoods 16,239 52,642 252,624 230,369 0 Exportpriceindex(2000=00) 52 118 0 2 0 6 99 00 01 02 03 04 05 Import priceindex(2000=WO) 74 0 7 112 18 exports @Imports Terms of trade (2000-MO) 70 10 91 88 82 BALANCE of PAYMENTS 1985 1995 2004 2005 (US$ millionsj Current account balance to GDP (Oh) Ewortsof goods andservices 30.489 167,974 655,827 843,537 Imports of goods andservics 43,092 151882 606,543 746,150 Resource balance -12,602 16.092 49284 97,386 Net income 841 -11,774 -3,523 4,668 Net current transfers 243 1,434 22,898 0,000 Currentaccount balance -11.518 5,752 68,659 112.055 Financingitems (net) 6,096 16,711 87,705 98,000 Changesinnet reserves 5,422 -22,463 -206,364 -213.055 1 99 00 01 02 03 04 05 Memo: Reserves includinggold (US$ millionsj 80,277 622,945 826,303 Conversionrate (DEC,local/US$) 2.9 8.4 8.3 8 2 EXTERNAL DEBT and RESOURCE FLOWS 1985 1995 2004 2005 (US$ millionsj Composition o f 2004 debt (US$ mill.) Totaldebt outstandinganddisbursed 16.696 118,090 248,934 iBRD 498 7,209 11,035 11140 A: 11,035 IDA 431 7.038 D.670 9,741 8: 10,670 Totaldebt service 2.478 15,066 23,657 D:4,783 IBRD 26 8D 1054 189 IDA 4 63 264 296 Compositionof net resourceflows Official grants 17 330 381 Official creditors tm 7,902 16 Private creditors 2.867 5,OU 7,970 Foreigndirect investment (net inflows) 1,659 35,849 54,936 Portfolio equity(net inflows) 0 0 13,923 World Bank program Commitments 1,092 3.?48 1285 E-Bilatsai Disbursements 565 2,269 A 1188 1,131 B IDA -- IBRD D Othermultilateral - F - Private Principalrepaynents 0 364 999 1004 . C - I M F G- Short-tef Net flows 565 1905 8 0 P7 Interestpaynents 29 509 3 8 430 Net transfers 536 1,396 -80 -303 Note:This tablewas producedfrom the Development Economics LDB database. 8/12/06 83 Annex 15: AdditionalCost Analysis CHINA: MainstreamingClimateChangeAdaptation inIrrigatedAgricultureProject I.Overview 1. The project development objective is to enhance adaptation to climate change in agriculture and irrigation water management practices through awareness raising, institutional and capacity strengthening and demonstration activities in the 3 H Basin. This would help mainstream climate change adaptation measures, techniques and activities into the national Comprehensive Agricultural Development (CAD) Program which is China's largest national investmentprogram inirrigated agriculture. 2. Key components o f IAIL3 project are related and sensitive to climate change. However, adaptation measures for climate change were not included in IAIL3 project design because the need for climate change adaptation has been widely recognized only recently. Therefore, the proposed project would identify gaps in the IAIL3 project design with regard to needed adaptation measures and this will help integrate adaptation measures inIAIL3 components. The proposed project has been designedto be partially blendedwith IAIL3. 3. The proposedproject has therefore been designed to be partially blendedwith IAIL3. As such, it will provide additional and gap filling support to existing and planned (baseline) activities related to sustainable development o f modem irrigated agriculture in Hebei, Henan, Shandong, Jiangsu and Anhui provinces o f the Huang-Huai-Hai river plain (3H Basin), which i s China's most important agricultural region. Activities inthe five Project Provinces are part o f the ongoing IAIL3 Project, while a sixth -NingxiAutonomous Region-has been recently added to IAIL3 as a "Participating Province" for Water User Association (WUA) development. The proposed project i s also important to C A D ingeneral for "best practice" demonstration purposes, as about 85 percent o f CAD'S investments target water saving irrigation, on-farm irrigation infrastructure and agriculture and water management which is closely related to and affected by climate change. 4. China has documented and described various phenomena showing its vulnerability to climate change in different regions and provinces, especially given its vast geographic area and widely varying climate conditions. For example, China's initial national communication states: "There has been a continuous drought in the North China Plain since the 1980s, while flooding disasters have happened more frequently in southem China; these natural disasters have been more pronounced during and after the 1990s; global warming would speed up plant growth and shorten the crop-growing period, so it would affect the accumulation o f dry biomass and grain yield." 5. For the purposes of the proposed GEF/SCCF project, vulnerabilities to climate change in the North China Plain canbe summarized as follows: (a) Water availability, as indicated by projections o f river run-off (according to the Assessment Report o f Climate Change in 3 H Basin done by the Chinese Academy o f Science) i s likely to decrease significantly in the future. Water scarcity threatens both rural income growth and food security. China i s in fact among the bottom 25 percent o f countries globally interms o f water availability per capita and inthe 3 H Basin area water 84 availability per capita i s only about one-third o f the national average and about half the standard specified by the UnitedNations as necessary for maintaining socioeconomic and environmental development. At the same time, the 3 H Basin i s China's prime agricultural area and breadbasket, producing some 50 percent o f national grain output, and about 35 percent o f national industrial output. Because o f this, water demand in the region i s already high and growing rapidly and available water resources generally are fully allocated and often overexploited, especially groundwater. Moreover, inmany locations, increasing water pollution and water quality degradation is exacerbating water shortage problems and the projected climate changes could further decrease water stream flows and groundwater recharge inthe Basin. (b) It has been shown recently that grain production has been stagnant for a number o f consecutive years in the 3 H Basin area due in part to climate variability. Given the current global warming trend, China's irrigation-based agriculture in this basin is likely to be further negatively affected by climate change and remedial measures need to be taken to ameliorate these effects. Action is needed quickly because it takes time for such remedialmeasures to have a significant impact. (c) Climate change may offset IAIL3 and C A D Program benefits and poverty reduction efforts. The above issues and their relationship to climate change are only recently becoming clear and their seriousness understood. In fact, past and current interventions generally have not considered or addressed climate change and how to adapt to it. This is the case, for example, with the country's national C A D Program and the Bank-supported IAIL3 referred to above. IAIL3 needs to be strengthened to include measures for adaptation to climate change; if not, the expected benefits from IAIL3 (and from C A D in general) could be substantially offset by the negative impacts o f climate change. 11. BroadDevelopmentGoals andthe Baseline Development Goals 6. China has signed the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol and joined the Convention on Biological Diversity and the United Nations Convention on Drought and Desertification. Recently, China has developed a strong policy and strategic framework to support climate change adaptation and has set out several national environment and sustainable development policies, strategies and programs, all o f which now identify adaptation to climate change as a national priority. The main thrusts o f these programs relate primarily to China's Initial National Communication on Climate Change, National Strategy for Climate Change, New Environmental Protection Standards, National Comprehensive Agricultural Development Program (CAD) and the World Bank-supported IAIL3. More recently (June 11, 2007), China has promulgated a National Climate Change Program which took two years to prepare and which documents the country's efforts to deal with climate change issues, analyzes future climate change challenges for China and describes China's policies and positions on international cooperation to deal with climate change. The program both elaborates on China's own initiatives and vows to continue support for international cooperation dealing with climate change issues. 85 BaselineScenario 7. The overall development objectives o f the baseline project (IAIL3) are to: (a) increase water and agricultural productivity in low and medium yield farm land areas; (b) raise farmers' income and strengthen their competitive capacity under post-WTO conditions; and (c) demonstrate and promote sustainable participatory rural water resources and agro-ecological environmental management inthe 3 H Basin. The project i s consistent with the Bank's assistance to China in the rural sector which is focused on reducing current trends o f inequality between urban and rural areas and on facilitating the shift from subsistence to commercial agriculture and from quantity to quality o f production. It i s also consistent with the Bank's recent China Water Resources Assistance Strategy, which confirmed that better water resources management, through both broad-based and targeted interventions, was central to sustainable growth and poverty reduction. IAIL3 also supports a range o f related national and domestic policies aimed at sustainable rural development, in particular, increasing fanners' incomes, reducing poverty, promoting more efficient, sustainable agricultural production and competitiveness and meeting WTO and international market requirements. 8. IAIL3 finances sustainable development o f modem irrigated agriculture in 107 counties located in 32 prefecturedcities inthe five project provinces in the 3 H Basin (Le., Anhui, Hebei, Henan, Jiangsu and Shandong) through five components: (a) Comprehensive Water-saving Irrigation and Drainage (US$3 16.14 million); (b) Agricultural Modernization and Organization Development (US$65.47 million); (c) Agro-ecological Environmental Protection and Management (US$24.46 million); (d) Institutional Development and Support (US$33.78 million); and (e) Project Survey, Design and Management (US$23.33 million). The investment cost o f IAIL3 totals $463 million. 9. The main project outcomes o f the baseline scenario would be: (a) increased water and agricultural productivity and resource use efficiency; (b) increased per capita income for farm households; (c) increased high qualityhalue and non-polluting/green crop production; (d) adoption o f techniques leading to "real" water savings and mitigation o f adverse environmental impacts; and (e) establishment o f institutional mechanisms for enhanced farmer involvement and participation. Summary of theIAIL3 "Adaptation GapAnalysis" 10. As stated above the key components IAIL3 are relevant to climate change, butthe overall project design o f IAIL3 did not consider climate change or identify and integrate measures for adaptation to climate change. A number o f specific weaknesses in IAIL3 with regard to climate change have been identifiedandare summarized below: (a) The public's awareness o f issues relating to adaptation to climate change is very limited, and so is the understanding and capacity o f staff, officials and decision-makers regarding climate change and adaptation. (b) Inthe design ofwater saving works, the concept of collecting and storing natural precipitation was not integrated with irrigation and drainage works and there are few, if any, works and facilities in the field to collect and store rainfall runoff to use available rainfall more effectively; 86 (c) Some agricultural measures for climate change adaptation have not been filly considered, such as planting nitrogen fixation crops, adjusting sowing times o f double cropped areas, staggered maturity o f crops to reduce peak water demand and the more widespread development o f agriculture facilities such as greenhouses; (d) Farmer associations (FAs) and cooperative organizations are weak and have only limited ability to popularize new varieties, practices and technologies which are more adapted to climate change; (e) Although farmer water user associations (WAS)are included in IAIL3, their coverage i s limited and they lack focus, activities or support on adaptive water management; (f) Development o f water and soil conservation forestry was not considered (hence soil erosion by wind and water are not effectively controlled) and tree species adapted to climate change have not been selected; and (g) Insufficient consideration was given to biogas activities under the project, although biogas i s an important measure in adapting to climate change, provides a new rural energy resource (in place o f coal, for example), develops recycling and supports rural and agricultural sustainability. 111.Alternative (GEF/SCCF Project Enhancement o fIAIL3) 11. The proposed GEF/SCCF climate change adaptation project will support baseline development goals included in M I L 3 (and the national C A D program). In addition, it will increase the sustainability o f IAIL3 and more broadly the resilience o f Chinese irrigated agriculture in the face o f climate change and support global environmental objectives. The project would, among other things, identify gaps in the M I L 3 project design with regard to needed adaptation measures and help integrate adaptation measures in the main IAIL3 components. Specifically, the project will focus on those IAIL3 activities that are identified as being at risk from climate change. Scientific analysis and modeling would be applied in the design o f these components and provide more climate resilient outcomes (sometimes referred to as "climate proofing"). The proposed GEF/SCCF project will review and refine the original IAIL3 technical design for all adaptation-related activities and adjust the IAIL3 Project Implementation Plan to respond to the effects o f both short term climate variability as well as long term climate change in each region. As indicated above, the proposed GEF/SCCF project has been designed to partially blend with IAIL3. Of the $463 million total cost o f IAIL3, an estimated $50.5 millionwould be used to co-finance the proposedGEF/SCCF project. 12. Major expected outcomes o f the proposed project include: (a) Identification and Prioritization of Adaptation Options. Adaptation involves making adjustments in economic, social or ecological systems in response to actual or expected climatic changes and their effects or impacts. The goal o f adaptation is to reduce the vulnerability o f individuals, communities, regions, or activities to climatic change and its variability and to promote understanding o f climate change and the need for climate change adaptation. Understanding adaptation to climate change i s important for two reasons: (i)adaptation will reduce the impacts o f climate change and thus understanding the need for adaptation i s important for reducing vulnerability; and (ii) 87 understanding what specifically should be done in different places over different time periods will facilitate adaptation. Understanding expected adaptations is also needed for impact and vulnerability assessment and estimating the costs or risks o f climate change. Inaddition, the analysis of potential impacts and adaptation methods will help develop andevaluate different response options to climate changes that will likelyoccur. (b) Demonstration and Implementation of adaptation measures. This component aims to: (i) introduce, demonstrate and implement specific climate change adaptation measures in selected demonstration areas; and (ii)integrate appropriate adaptation measures into the implementation o f IAIL3 to help reduce vulnerability to climate change inthe 3HBasin. The adaptation measureswould focus mainlyon agriculturalproduction and practices and on rural water management and use, taking into account expected temperature increases due to climate change. Both demonstration and implementation measures would be carried out in conjunction with the ongoing IAIL3 project and would be expanded to cover as much o f the IAIL3 project area as possible. (c) Mainstreaming Adaptation into national CAD Program and institutional strengthening. The component would aim at integrating and mainstreaming climate change adaptation into the national C A D program. Key activities would be a series o f capacity building, technical assistance, knowledge sharing, public awareness activities and preparation o f a "National Climate Change Adaptation Plan" for CAD under the leadership o f SOCAD, with the close cooperation o f NDRC and MOF national climate change adaptation offices. 13. As a result o f the above project activities, both farmers and the agricultural system in Northern China would become more adaptive and resilient to short-term climate variability and long-term climate change; and adaptation to climate change consideration and measures would be integrated into the national rural development process through the C A D program. 14. Overall, the logical framework which has been followed for the general design o f the project and will continue for sequencing o f project components during implementation i s summarized inthe diagram below: Analytic work on New adaptive Demonstrations Grant impacts of ' actions (e.g., crop climate change selection planting strategies) Further assessment and refine the Leading to a more ReplicatiordNational design and implementation of M I L 3 + "climate proof' :,_-----__ _ _ _ _ _ _ CAD Program mainly dealing with water conservation design Scope of the Project 15. The proposed GEF/SCCF project will mainly cover the IAIL3 project area, inparticular under its Component 2. This includes the five Project Provinces o f IAIL3 (Hebei, Henan, Jiangsu, Anhui, and Shangdong) and the Ningxia Autonomous Region. The latter was selected mainly because it represents an arid climate typical o f the provinces o f north-western China. It 88 has in fact been added to IAIL3 as a "Participating Province" for WUA development. Within these provinces, project activities will be concentrated inthe selected 10 demonstration counties, including the Cangxia county inHebei, Xionyi and Suyu inJiangsu, Huaiyuan and Mingguang in Anhui, Gaomi and Yanggu in Shandong, Wancheng and Liangyuan in Henan, and Tongxin county inNingxia. 16. As CAD i s a national program, some o f the proposed activities under Component 1 and more-so under Component 3 are expected to be implemented outside these six provinces. For example, development o f adaptation policy and plans within CAD, mainstreaming adaptation into C A D and the proposed replication o f good practice adaptation measures could be used inthe C A D program inmany other regions and provinces inChina. Additional Costs under the GEF/SCCF Projectfor adaptation to climate change in IAIL3 17. Total expenditures associated with the GEF/SCCF Climate Change alternative adaptation scenario are estimated to be US$55.5 million. These include 2 parts: (a) US$50.5 million co- funded under the ongoing IAIL3 Project to support those activities o f this project that are potentially most affected by climate change. These have been identified by SOCAD and the POCADs and are mostly included in Component 2 below; and (b) US$ 5 million funded by GEF/SCCF to support the other activities o f the proposedproject. 18. Component 1:Identification and Prioritization of Adaptation Options (US$0.50million GEF/SCCF). Specific activities include: (a) Impact assessment o f climate change in the 3H Basin and project area; (b) Gap analysis and study on adaptation measures; and (c) Prioritization and selection o f adaptation measures and demonstration areas. These would include: (i) conducting a gap analysis o f IAIL3 to identify adaptation measures and plan their implementation; (ii) identification and selection o f adaptation demonstration areas, which would be in accordance with well defined selection criteria. Priority is given to areas where there is both high vulnerability and a high likelihood o f making significant impacts in terms o f strengthening resilience to climate change; and (iii) use of the computer models and scientific technical analysis to select and refine adaptation options in content, implementation, cost and impact for each project demonstration area and province. 19. Component 2: Demonstration and implementation of adaptation measures (US$48.43 million including GEF/SCCF, US$2.25 million and IAIL3 cofinancing, US$46.18 million). This component aims to introduce, demonstrate and implement specific climate change adaptation measures in selected demonstration areas; and to integrate appropriate adaptation measures into the implementation o f IAIL3 to help reduce vulnerability to climate change in the 3 H Basin. The adaptation measures would focus mainly on agriculturalproduction and practices and on rural water management and use, taking into account expected temperature increases due to climate change. Both demonstration and implementation measures would be carried out in conjunction with the ongoing IAIL3 project and would be expanded to cover as much of the IAIL3 project area as possible. The two sub-components would be as follows: (a) Demonstration of Climate Change Adaptation Measures (US$2.25 million GEF/SCCF). Based on the gap analysis o f IAIL3 and preliminary conclusions of the various models described under component 1, the GEF/SCCF project has identified demonstration adaptation measures, and in consultation with the concerned stakeholders, 89 specific adaptation techniques and measures would be introduced and demonstrated in the selected sites. This would focus on agricultural production, rural water management and efficient water utilization and take into account the expected temperature increases due to climate change. The selected specific new adaptation activities (in addition to those in IAIL3) would include measures to: (i) explore and develop alternative water resources based on each sub-region 's conditions, including the development of catchments (natural and artificial ponds) to enhance rainfall storage capacity and reduce water logging threats in the alluvial plain, well irrigation for reinforced resistance to drought, and advanced field water-saving irrigation technologies and works; (ii) promote adaptation-oriented farming practices, including adjustment o f agricultural farming pattern to reduce water consumption in agricultural production (proportion o f wheat-rice, wheat-rape seed and other crop would be suitably adjusted based on climate change tendencies) combining drainage with irrigation to avoid the soil deterioration; and (iii) adopt water-savings-oriented farming technologies, including development and spread of drought resistant varieties, "seeded in water" practices, membrane and biological water conservation, etc. to deal with water scarcity, land and eco-system rehabilitation and amelioration; and (iv) supporting the development and expansion o f Farmers Associations and Water Users Associations for carrying out water saving management and agricultural adaptation measures. The identified innovative adaptation activities would be implemented and tested in selected demonstration areas, and then supported, expanded and promoted where appropriate inall IAIL3 project areas. (b) Integration of Adaptation Measures into IAIL3 Project Implementation Activities (US$46.18 million IAIL3). The proposed project would specifically focus on IAIL3 activities that are at risk from climate change perspectives. Based on the gap analysis o f IAIL3, scientific andmodeling analysis under Component 1,and lessons from demonstration sites, this sub-component would review and refine the original IAIL3 technical design to help "climate proof' IAIL3 project activities. IAIL3 activities related to climate change adaptation would be modified and expanded as appropriate, including in particular: (i)engineering water-saving measures, including various water-saving irrigation and drainage technologies and facilities; (ii) agronomic water-saving measures, including land leveling, deep plowing, minimum tillage, balanced fertilizer use, use o f crop residues, introduction o f adaptive varieties and highquality seeds, adaptive on-farm forestry belts, etc.; and (iii) water-saving management measures such as volumetric water charges and high quality WUAs/FAs. IAIL3 activities in the GEF/SCCF project area which would be enhanced to strengthen climate change adaptation, and respond to actual or expected short-tern climate variability and long-term change and their effects in each specific region. All identified IAIL3 activities related to adaptation measures would be supported and expanded where appropriate. 20. Component 3: Mainstreaming Adaptation into National CAD Program and Institutional Strengthening (US$6.58 million, GEF/SCCF, US$2.25 million, co-financing, US$4.32 million). Under this component a series o f research and development, public awareness, capacity building, technical assistance, knowledge sharing, and M&E activities would be carried out to increase CAD'Scapacity to address this newly recognizedissue. Based in part on the demonstration with adaptation, a "National Climate Change Adaptation Plan" for C A D would be prepared under the leadership o f SOCAD, with the close cooperation o f NDRC and MOF national climate change adaptation offices. 90 21. The GEF/SCCF alternative scenario incorporates both the baseline costs o f the IAIL3 plan indicated above, as well as the costs o f activities required to adjust IAIL3 for mitigating or preventing expected climate change impacts. Additional costs are calculated as the difference between baseline costs and the GEF/SCCF alternative, implying that all the proposed project activities and costs are additional to the baseline scenario. The proposedproject would therefore cover two types o f additional costs: (1) gap filling costs, including the additional costs for Component 1 (identification and prioritization o f adaptation options), Component 2 (a) (new adaptation measures); and Component 3 (mainstreaming adaptation in the national C A D program and institutional strengthening); and (2) costs to refine and enhance IAIL3 activities, which mainly relate to Component 2(b). The following detailed GEF/SCCF costs which are additional to IAIL3 are estimated for each component at: (a) GEF/SCCF US$495,600 for Component 1: Identification and Prioritization o f Adaptation Options; (b) GEF/SCCF US$2,246,000 for Component 2: Demonstration and Implementation o f Adaptation Measures, with specific measures to include: (i) Demonstrationof ClimateChangeAdaptationMeasures (US$2,246,000, GEF/SCCF) a. Rainfall collection works and water harvesting (307 sites); b. Adaptive agricultural technologies (36 technical demonstration sites); c. Adaptive crop varieties (438,900 kg o f seeds); d. Biogas digester demonstrations (2,570 digesters and ancillary facilities to use biogas); e. Development o f greenhouses (237,200 m2 o f greenhouse space); f. Establishing additional Water User Associations (WAS)and Farmer Associations (FAs) (17 additional W A Sand FAs); g. Afforestation (676 hectares); h. ETmonitoring; and i.Groundwater management. In conjunction with ET management (above), the project would assist development o f comprehensive Groundwater Management Plans for 19 water-short counties inHebei. (ii) Integration of Adaptation Measures into IAIL3 Project Implementation Activities (US$46,182,000, IAIL3). a. Adaptive irrigation canals anddrainage systems (13,001,600 m3) b. Small field water storage (691 units) c. Impervious canals (1,832,600 m2) d. Low pressure pipe (4,507,400 m) e. Drip irrigation (123.3 hectares) f. Landleveling(38,998.4 hectares) 91 g. Balancedfertilization (29,133 hectares) h. Crop residue shredding (18,783.2 hectares) i. Water Users Associations (strengthening 134 existing WASto disseminate adaptation practices andtraining) j. Introductionofadaptive seed(1,554,300 kg) k. IPMdemonstrationand extension (1,800 hectares) 1. Greenhouse (1,000,000 m2) m. Farmers Associations (strengthening 31 existing FAs to disseminate adaptation practices and training) n. Farmlandshelter belts (3,958.3 hectares) 0. Alternative biogas energy inrural areas (1,230 digesters) (c) GEF/SCCF US$2,258,400 for Component 3: Mainstreaming Adaptation into the National C A D Program. Summary 22. The difference between the cost o f the baseline scenario (US$50.5 million) and the cost o f the GEF/SCCF alternative (US$55.5 million) i s US$5.0 million. This represents the incremental cost o f introducing climate change adaptation andmitigation into IAIL3 andinto the C A D Program. For details see the table below: 92 EstimatedAdditionalCosts andProposedGEF/SCCFfinancing (FiguresinUS$ thousand) 1. Identificatiodprioritization f adaptatic options Domestic benefits: I.1.Assessmentoftheimpact 38.7 38.7 o f climate change Having a better understanding o f climate change impacts and potential adaptation options through stocktaking of existing studies. Potential adaptation options (including content, implementation, costs, and impacts), 1.2. Gap analysis and study on 430.3 430.3 and climate change scenarios' impacts on adaptation measures surface and ground water fluxes and flooddrought predictions and risks will provide a better basis for decision making. The outcomes o f estimates o f the sensitivity o f 3 H Basin agriculture to variations in climate and water availability, economic analysis o f climate change impacts, risks and 1.3. Prioritization and 26.6 26.6 costs, and benefits o f various adaptation selection o f adaptation measures will help 3 H area better planthe use measures and demonstration o f scare water resources and thus help 3 H areas become more adaptive to climate variability. Global benefits. Expansion o f the range o f experiences with adaptation; and refinement of the use o f state- of-the-art models for estimating climate change impacts and identifiying adaptation options. Sub-total 495.63 495.6 The activities under Component 1were started during preparation and have been partly financed by PPGgrant and domestic budget duringthe project preparation. 93 t Domestic benefits: 2.1. Exploredevelop 2,021.9 2,396.7 374.9 Throughdevelopingand testingcomprehensiveand alternativewater resources integratedadaptationmeasuresandpproaches,the basedon each sub-region's GEF/SCCFprojectwill strengthenIAIL3 project conditions4 by: increasingawareness of farmers to climate 2.2.Promote adaptation- 10,464.2 11,472.7 1,008.5 variation; strengtheningfarmer participation orientedfarmingpractices' throughWUAs andFAs; improving effectivenessin 2.3. Adopt water saving 32,027.1 32,027.1 water managementandsaving; promotinguse of orientedfarming cleanerenergy(biogas); conservingforests/wood; technologies6 andstabilizingthe income o fpoor farmers. 2.4. Promote adaptation- 1,152.8 1,484.8 332.0 Global benefits: orientedirrigation and drainage designand Providinggoodpracticeand enrichingexperience of management' adaptationmeasures inagriculture; improved 2.5. Pilot small-scalebiogas 5 16.1 1,046.7 530.7 effectiveness/efficiency of scarce water resources use; reducedGHG emission by use ofbiogas; increasedGHG sinks from afforestation;and reducedcutting of trees due to biogas. Sub-total 46,182.0 48,428.0 2,246.0 The GEF/SCCFprojectwill improvethe strengthening effectivenessof the CAD Program; improved 3.1. Researchand institutional coordinationandcapacity of relevant development of adaptation agenciesat national,provincial and local levels; policies(GEFlSCCF improvedknowledgeandpublic awareness on 3.2. Capacity building on I 3818.0 climatechange and adaptationto climatechange; climatechange adaptation improvedcapacity ofM&E system. GEF/SCCF/IAIL3 Better coordinationamong major agencies(MOF, results-basedmonitoring NDRC, and SOCAD) to support adaptation. andevaluation Valuablepracticeto other countries. (GEFISCCF) 3.4. Proiectmanagement (GEFISCCF) - I 500.0 Sub-total 4318.0 Total project 50500.0 55500.0 5000.0 2.1 sub-component includes the activities Works for rain collection under GEF, and Small field water storage under IAIL3 project. 2.2 sub-component includes the activities Demonstration o f adaptation agro-technology, Demonstration of adaptation crop variety, Greenhouse and Shelter belt under GEF, and Land leveling, Balance fertilization, Crop residueshreding, Introduction of adaptive seed, IPM demonstration andextension, Greenhouse andFarmlandshelter belts under IAIL3 project. 6 2.3 sub-component includes the activities Adaptive irrigationcanals and drainage, Canal lining, Low-pressure pipe and Drip irrigationunder IAIL3 project. 2.4 sub-component includes the activities WUA and FA, ETmonitoringand groundwater management under GEF, and Water users association and Farmers' association under IAIL3 project. * 2.5 sub-component includes the activities Shelter beltunder GEF, and Farmland shelter belts under M I L 3 project. 94 Summary of co-financing Additional Costs and Domestic/Global benefits 23. The additional financing o f US$5 million from the GEF-managed SCCF for the China Mainstreaming Climate Change Adaptation in Irrigated Agriculture Project will serve as a catalyst to integrate climate change adaptation into China's national sustainable development and poverty reduction strategy. This project is expected to have three main outcomes: (a) increased awareness by farmers, government staff and officials and policy makers; (b) climate change adaptation measures implemented in selected demonstration areas; and (c) policy and implementation plans issued by SOCAD/POCAD/COCADs on climate change adaptation policies, measures and activities. Awareness and adaptation measures under the project would improve agricultural productivity and water resource management (compared to a "non- adaptation" scenario) in cases where agriculture and water i s adversely impacted by climatic change patterns. The additional resources from GEF/SCCF would be used, inter alia, to finance: (a) capacity building at the national level in view diversifying agricultural practices to deal with adaptation; (b) utilization o f water saving and environmental friendly technologies, techniques and management; (c) demonstration o f adaptation measures for rural development based on China's special circumstances; (d) identification and filling o f adaptation gaps in the ongoing Bank-supported IAIL3 project and the national C A D Program; (e) mainstreaming adaptation to climate change into CAD; and (f) replicating and scaling- up adaptation measures which prove successhl. All these activities have great potential for integration into China's national strategy for sustainable development and poverty reduction. 24. The GEF/SCCF financing will also generate additional domestic development benefits. For example, the proposed project i s expected to hrther strengthen environmental and social impacts by bringing in a new concept o f risk management, new standards in irrigation infrastructure and management, and a wiser use o f natural resources (land, water, forests) to moderate extreme weather conditions. The project activities would also contribute to poverty reduction by making poor farmers less vulnerable to climate changes by teaching new technologies and techniques to better use and manage land, water and other natural resources. Improved water works and water management would enable them to use scarce water more efficiently and help them to deal more effectively with both droughts and floods; and drought and water-stress resistant crops would be better able to withstand both short-term droughts and changes inclimate patterns. 95 25. Besides the above-mentioned national, social, economic and environmental benefits, a few direct global benefits would be generated from this project, for example, reduced emission o f greenhouse gasses from substitution o f biogas for certain other fuels; increased greenhouse gas sinks because o f afforestation; and reduced deforestation and cutting o f trees for firewood by providing biogas. The project would also contribute to the expansion o f experiences with adaptation to improve global understanding o f the challenges brought on by climate change. The project would demonstrate how a comprehensive approach to deal with climate change adaptation and change in thinking can strengthen the resilience o f farmers and agriculture in dealing with climate change and it would serve as an opportunity to reconsider and change current unsustainable development patterns infavor o f longterm sustainability. 96 Annex 16: STAPRosterReview CHINA: MainstreamingClimateChangeAdaptationinIrrigatedAgricultureProject Review prepared by Ian Burton 15,June 2007 Independent consultant Emeritus Professor, Universityo f Toronto Scientist Emeritus, Environment Canada 26, St. Anne's Rd. Toronto, ON. M6J 2C1, Canada Ian.Burton@ec.gc.ca Tel Nos. 416 739 4314 or 416 538 2034 OverallAssessment 1. The adaptation imperative. As global progress in the reduction o f greenhouse gas emissions continues at a slow pace it is becoming increasingly clear that all countries face a considerable challenge in finding and implementing ways o f coping or adapting to the inevitable changes in climate, including the risks o f climate variability and extremes. The need for adaptation is greatest in those countries where development i s already stressed by climatic variables. The area o f north China (3H Basin area) covered by this project certainly qualifies as one o f the world regions where development is at risk especially inthe field o f rural agricultural development and the availability o f water resources. This project i s therefore timely, opportune and well conceived. 2. A pilot, experimental approach. While there is considerable experience in the management o f water resources and agricultural development under "normal" climatic conditions in China, including farmers, the agriculture and food industries, and governments at all levels, many are only now becoming aware o f the serious new threats being generated by climate change. While the fact o f climate change i s now accepted there remains considerable uncertainty about the exact nature and rate o f the changes in temperature and rainfall in specific regions. There can therefore be no clear blueprint for action. It is necessary to "learn by doing" in an experimental pilot project approach. The north China adaptation project falls into this mould. It i s carefblly planned and at the same time designed to be flexible and responsive to inputs from the farming community and to new information about the nature o f the climate risks as this is generated duringthe course o f the project. China as well as other countries with similar challenges stands to learn and gain a lot from this project. 3. Mainstreaming adaptation into development. Although climate change is a new threat to water resource management and rural development it makes no sense to develop new purpose- built or problem-specific responses and institutional capacity. Such so called "stand-alone' adaptation projects can be expected to have little value, and could be quite counter-productive. It i s entirely appropriate therefore that this project is an "add-on" to existing World Bank projects in the region including especially the IAIL3. These projects did not specifically take climate change into consideration. Nevertheless they do involve the sorts o f actions that are needed to cope with the added risks o f climate change. This means that if climate change should by some 97 good fortune happen at a slower pace that anticipated there would still be considerable potential benefit from the adaptation measures that it i s anticipatedwill be put inplace. This project i s also therefore a good example o f "no regrets" adaptation. 4. The future incorporation or mainstreaming o f adaptation. While adaptation to climate change has not been specifically incorporated into existing World Bank projects innorth China, it is encouraging to note that the designers o f this adaptation project have planned to extend the lessons learned more broadly into China's national agricultural development, (Comprehensive Agricultural Development). Inthis way this project promises to be a good model that can lead to the much wider adoption o f the mainstreaming o f climate change risks into development activities inChina and elsewhere. 5. The dynamics and sustainability o f adaptation. A fundamental and recurrent problem in development assistance o f all kinds i s the matter o f the continuity and sustainability o f the changes initiated. This i s likely to be especially acute indealing with climate change, because the nature o f the climate problem i s essentially dynamic, fluid and indeterminate. It is not a matter o f shifting from adaptation to present climate to adaptation to a future climate as in moving from one equilibriumstate to another. Climate i s changing, will change, and will go on changing. The task i s not so much therefore to promote the adoption o f a set o f specific selected adaptation measures although this certainly forms an important part o f the project. The task includes the creation o f an adaptable farming and water management community and capacity. There i s probably enough o f this kind o f flexible learning and adaptability build into the project. It i s important to recognize however that an important legacy o f the project should be the generation and strengthening o f a sense o f adaptability and adaptive capacity. Such benefits are not readily measured inmonetary terms. 6. A positive assessment. The perspective o f this reviewer is that this is an excellent, first rate, timely and much needed project. The vision and enthusiasm o f the project developers and proponents comes through all the technical text. It i s easy to be captured by the enthusiasm. It may be appropriate therefore to express a cautious note. The project i s very ambitious and promises a lot. Some o f the claims made seem a little optimistic. These are not small plans, and even if they are not fully achieved in all respects there is every indication that this will be an extremely valuable project. Some Specific Comments 7. Baselines. It i s important for project evaluation and for the future application o f this type o f work elsewhere to know and understand enough about the starting conditions. One way to express this i s to ask, "How well adapted to current climate i s agriculture and water management now?" The project documents provide some evidence that crops yields are already suffering as a result o f climate stress and water deficiency. 8. The mix o f rainfall and irrigation. The relative role o f rainfall versus irrigation clearly varies from on part of the project region to another. In developing adaptation measures it i s important to tailor or design such measures to present and future changes inthe balance between rainfall and irrigation water. 9. Specific measures versus adaptation and development strategy. There i s a dominant flavour in the project documents that seems to lean towards the selection and promotion o f 98 specific adaptation measures. While this i s valid it should also be recognized that vulnerability to climate change can be increased or decreased by the overall choice o f development path or strategy. How will this be taken into account? For example the focus o f the project i s on rural development and agriculture, but there are also likely to be competing demands for water from other uses. The documents refer at one point to the potential for "reallocation" o f water resources. It might be advisable as the project develops therefore to keep inmindwhat i s known (and not known) about the expected development trajectory o f the region. This involves not only the strategy for agricultural development, choice o f crops, anticipated markets and the like, but also the phenomena o f urban growth, rural-urban migration and so forth. 10. Constraints and opportunities. The project includes stakeholder involvement, interviews and surveys o f the farming community, farmer's perception o f climate risks, and the choice o f adaptation measures. These are important ingredientso f the project. It should also be recognized that there are many other factors that enter into farm-level decisions about choice o f crops and cultivars, modes o f cultivation, and other agricultural practices, including such things mentioned inthe project documents as tree planning and conservation, biodiversity, off-farm employment, size o f farm and farm boundaries, and scores of other variables. All o f these can interact with climate variables and affect farmer's choices. The importance o f this i s that adaptation measures for climate change that may seem to make sense and should be widely adopted face obstacles and barriers that are not immediately apparent, or may be deliberately disguised or concealed. Farmers and farming communities make choices inrelation to a wide range o f considerations and variables and climate and especially climate change i s not necessarily perceived as being important among them. 11. Opportunities. It i s good that the project documents also mention the idea o f pro-active adaptation in terms o f new opportunities. It i s a common pattern in the adaptation literature to talk about worst case scenarios and emphasize the negative aspects o f climate change exclusively. It i s surprising however how often challenges can lead to new opportunities and this project does recognizethat. 12. Partially blended? The projects make reference to the fact that the proposed adaptation project will be "partially blended" with the ongoing Intensified Irrigated Agriculture Project (IAIL3). The integration o f adaptation to climate change into ongoing development makes good sense and i s essential in this case. Why then only "partially blended"? There may be good reasons for this but they are not explicit or apparent inthe project documents. Summary 13. From the project documents this has all the hallmarks o f an acceptable project. It i s technically sound; the project team is competent, capable and balanced, and the necessary safeguard polices have been applied. The project has good country level buy-in. It promises to fillsome importantgaps indevelopment inatimely andeffective fashion andits demonstration value should be considerable both within China and more widely in the international development community. IanBurton. 15. June. 2007. 99 I M E x A response Responses to STAP reviewer comments 14. The project task team would like to express their gratitude to the STAP reviewer for the encouraging and supportive comments on this proposed GEF/SCCFadaptation project. The team also appreciates the highly insightful and professional views o f the STAP reviewer. The team reviewed the STAP review's comments carefully and incorporated the points as appropriate to further strengthen the project documents, including the GEF/SCCF Executive Summary. In particular, the team would like to underline the following points: STAPReview Responsefrom the Task Team 2. A pilot, experimental approach is needed. There i s This is a very important point, especially inChina, considerable uncertainty about the exact nature and where implementation o f "plans" i s a standard rate o f the changes intemperature and rainfall in procedure. The GEF/SCCF project will break this specific regions and there can therefore be no clear, pattern as it requires "learning by doing" and fixed blueprint for action. It is necessary to "learn by adjusting project implementation accordingly while doing" inan experimental pilot project approach. The the project i s progressing. IAIL2/3 was also designed proposed project needs to be carefully planned and at with the flexibility to enable project components to the same time designed to be flexible and responsive to be adjusted and improved inview o f changed inputs fromthe farming community andto new conditions even during the implementation. Ifthis information about the nature o f the climate risks as this "learning by doing," programmatic approach information is generated duringthe course o f the succeeds, it will be a major accomplishment and both project. help enhance project impacts substantially and provide useful lessons to onproject design and implementation for other project inChina and also for other countries.. Inadditionto the `learning bydoing` approach adopted under the project, preparation o f the project also uses state o f the art models for assessment o f possible interactions between climate uncertainties and change, interventions and behavioral responses based on available data; this will help avoid irreversible mistakes. Among several studiedassessments underway or planned, the role o f hydrologic and economic modeling i s critical. This work has been a main focus o f project preparation so far. 3. Mainstreaming adaptation. So-called "stand-alone' The Task Team has been working with China to adaptation projects can be expected to have little value, integrate the GEFBCCF components with I A I L 3 at and couldbe quite counter-productive. It i s entirely the operational level. Advantages o f the appropriate that tlus project i s an "add-on" to an mainstreaming approach include: the GEF/SCCF $5 existing World Bank-supported project (IAIL3). million would influence/leverage the muchlarger Although IAIW didnot specifically take climate financial and human resources o f IAIL3 and the change into consideration, it involves the sorts o f CAD programinChina; GEF/SCCF's adaptation actions that are needed to cope with the added risks o f concepts and approach would be widely climate change. This means that ifclimate change disseminatedthrough the IAIL3 implementation shouldby some good fortune happen at a slower pace demonstration; and more Chinese would have that anticipated there would still be considerable opportunities to learn about climate change potential benefits from the IAIW adaptation measures.. 100 This project i s also therefore a good example o f "no adaptation. regrets" adaptation. 4. The future incorporation or mainstreaming of This i s a highly valid point. Inaddition, it should be adaptation. While adaptation to climate change has not noted that methodology-wise, the approach taken by been specifically incorporated into existing World this project could be extended relatively easily to Bank projects inChina, this adaptation project is other countries elsewhere. This important aspect o f planned to extend the lessons learned more broadly the project can also be o f value to agencies, such as into China's national agricultural development (CAD). the World Bank and GEF/SCCF inconsidering This project promises to provide a good model that can future climate-adaptation-development type projects. lead to the muchwider adoption and mainstreaming of adaptation to climate change risks into development activities inChina and elsewhere. 5. The dynamics and sustainability o f adaptation. A The project has incorporated the concept o f "flexible fundamental and recurrent problem indevelopment adaptation" which is dynamic and can change over assistance the continuity and sustainability o f changes time according to climate changes adaptation needs. initiated. This i s likely to be especially acute indealing The mind-set changes based o n knowledge sharing with climate change, because the nature o fthe climate andpublic awareness under the project is especially problemis essentially dynamic, fluid and at present important to reduce vulnerability and increase indeterminate. Climate i s changing, will change, and adaptive capacity, and also continue the adaptation will go on changing. The task is not so muchtherefore processes over the long term. The Task Team will to promote the adoption o f a set o f specific selected place more emphasis o n t h s point duringpreparation adaptation measures (although this certainly forms an and appraisal and will continue to work with Chinese important part o f the project). The task is the creation stakeholders to further strengthenthis dynamic o f an adaptable (adaptation-oriented) farming and response system which includes awareness building water management community, capacity and mentality. o f both public (government officials) andprivate A key legacy o fthe project shouldbe generation and decision makers at different levels.. strengthening o f a sense o f adaptability and adaptive capacity. Such benefits are not readily measured in monetary terms. 6. A positive assessment o fproject and also a caution. Although the project appears ambitious, there are The reviewer considers the project to be excellent, first several reasons to believe that the project i s doable in rate, timely and much needed, but it also notes that the the Chinese context: (a) China has strong ownership project is very ambitious and promises a lot. of this project and recognizes the urgent need for adaptation to climate change for its agriculture, in particular inthe vital 3 H area; (b) China has an excellent implementationperformance record for innovative Bank-supported projects, including IAIL2 (the predecessor o f IAIL3); (c) China has committed substantial additional financial and in-kindresources to the project duringpreparation and will provided muchmore duringimplementation; (d) although this i s a completely new project and knowledge on climate change adaptation i s very limited, it will be partially blended and closely associated with IAIL3 which already has many climate-change related activities under successful implementation; and (e) measures have been taken inthe project to avoidreduce risks and a number o f appropriate assessments and studies have already been undertaken satisfactorily. Also, the Task Team working with Chinese counterparts and stakeholders have already removed a number of overly-ambitious elements from the original project design, such as exploration o f 101 agricultural insurance and mainstreaming adaptation into the N e w Countryside Program. Giventhe flexibility inthe project design and strong ownership o f GoC, the Team will continue to work on the details o fproject implementation to ensure realism and pragmatism as needed for a successful adaptation project o n the ground. Specific c rnments 1.Baselines. Iti s important to know andunderstand enough about the starting conditions. One way to express this is to ask, "How well adapted to current Baseline issues are very important given the climate are agriculture and water management now?" demonstration nature o f the project. Duringthe last The project documents provide some evidence that mission, M&Ewas an important subject o f crops yields are already suffering as a result o f climate discussion with SOCAD and the provinces. stress and water deficiency, which i s a signthat of Identifying baselines and indicators requires learning inadequacies inwater management. and special efforts, especially since the propose project is the first GEF/SCCF supported project in any country for adaptation inthe area o f agriculture. Inaddition, different adaptationmeasuresrequire different baselines and indicators. The work plan on indicators and baseline data collectionhas been agreed as a collective effort among scientists, SOCAD, POCAD, farmers, and the Task Team. IN addition, several assessments and studies already getting underway will contribute directly to baseline data, for example, the economic analysis studies could provide a good economic estimate o f adaptation to present climates across various samples. This point will be stressed further during project preparation and appraisal. 3. Specific measures versus adaptation and * The task team considers this a key point for overall development strategy. There i s a dominant focus o f the climate change adaptation strategy,. and one which project documents i s o n selection and promotion o f will likely impact onthe climate change adaptations specific adaptation measures which i s valid. However, under the proposed project. Due to the limited vulnerability to climate change can also be increased or resources o f the GEF/SCCF project, however, decreased by the overall choice o f development path or significant work on climate change adaptation inthe strategy. For example, although the focus o f the other areas will not be possible under the project. project is on rural development and agriculture, it Nevertheless, possibilities for a preliminary study o n mightbe advisable as the project develops to keep in how adaptation requirements for major competing mindwhat is known (and notknown) about the water users may impact agricultural adaptation will expected future development trajectory and pattern o f be explored. the region. This involves not only the strategy for agricultural development, choice o f crops, anticipated markets and the like, but also for urban growth, rural- urban migration, etc. 4. Constraints and opportunities. The project includes Several measures taken so far inthe project would stakeholder involvement, interviews and surveys o f the help deal with these issues, including: (a) the full farming community, farmer's perception o f climate participationo f direct beneficiary farmers (through risks, andthe choice o fadaptation measures. These are their own organizations -- the W A Sand FAs) in important ingredients o f the project. It should also be project preparatiodimplementationand the relevant recognized that there are many other factors that enter decision-making process; (b) the modeling exercise into farm-level decisions about choice o f crops and the project has been undertaking; and (c) the cultivars, modes o f cultivation, and other agricultural empirical experiences from local stakeholders (local practices, including such things mentioned inthe governments, local scientists, etc.) as well as 102 project documents as tree planting and soil expertise o ftop adaptation experts inChina and other conservation, biodiversity, off-farm employment, size countries. I t is very difficult for such an operation o f farm and farm boundaries, and scores o f other analyze such complex issues precisely because o f variables. All o f these can interact with climate obstacles andbarriers that are not immediately variables and affect farmer choices. This means that apparent or may be deliberately disguised and adaptation measuresfor climate change that appear to concealed. This i s why one o f the fundamental make sense and should be widely adopted may face methodological approaches o f the project is to unexpected obstacles andbarriers that are not consult with the farmers and other key stakeholders immediately apparent, or may be deliberately disguised as much as possible during project preparation and or concealed. Farmers and farming communities make implementation and ensure their participation inthe choices inrelation to a wide range o f considerations selection o fthe adaptation measureswhich are most and variables, and climate change is not necessarily relevant andusefulto them. perceived as being important among them. 6. Partial blending. The project documents make The needfor "partial blending" is becauseIAIL3 was reference to the fact that the proposed adaptation approved by the World Bank Board (inOctober project will be "partially blended" with the ongoing 2005) before the GEFBCCF project was conceived IAIL3 project. The integration o f adaptation to climate and the GEF/SCCF project would be added on now, change into ongoing development makes good sense instead o fpreparing the two projects together at the and is essential inthis case. Why i s the blending only same time. Fortunately, IAIL3 has a program "partial "? There may be good reasons for this but they approach design which allows changes during are not explicit or apparent inthe project documents. implementation, unlike most projects. This should not affect the impacts ofthe GEF/SCCF adaptation activities but will provide an opportunity to adjust IAIL3 design and make IAIL3 more resilient to climate change. 103 Maps CHINA: MainstreamingClimateChangeAdaptation inIrrigatedAgriculture Project 104
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China - Mainstreaming Climate Change Adaptation in Irrigated Agriculture Project
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