Initial Environmental Examination Project Number: 38301 December 2007. Updated: May, November 2014; April 2015

People’s Republic of China: Dryland Sustainable Agriculture Project Prepared by Ministry of Agriculture for the Asian Development Bank (ADB). The summary initial environmental evaluation is a document of the borrower. The views expressed herein do not necessarily represent those of ADB’s Board of Directors, Management, or staff, and may be preliminary in nature.

CURRENCY EQUIVALENTS

(as of 10 October 2007)

Currency Unit -- Yuan (CNY) CNY 1.00 = $0.1344 $1.00 = CNY 7. 44

ABBREVIATIONS

AAHB – Agriculture and Animal Husbandry Bureau ADB – Asian Development Bank BOD – Biological Oxygen Demand CA – Conservation Agriculture COD – Chemical Oxygen Demand EA – Executing Agency EIA – Environmental Impact Assessment EMMF – Environmental Management and Monitoring Framework EMP – Environmental Management Plan EPB – Environmental Protection Bureau FYP – Five-Year Plan GPG – Gansu Provincial Government HPG – Henan Provincial Government IA – Implementing Agency IEE – Initial Environmental Examination MOA – Ministry of Agriculture PMO – Project Management Office PRC – People’s Republic of China SEIA – Summary Environmental Impact Assessment SEPA – State Environmental Protection Administration SIEE – Summary Initial Environmental Examination TA – Technical Assistance SPG – Shandong Provincial Government TSS – Total Suspended Solids UNDP – United Nations Development Program

NOTE

In the report, “$” refers to US dollars.

TABLE OF CONTENTS Map of Project Provinces Map of Project Cities/Counties in Gansu Province Map of Project Cities/Counties in Henan Province Map of Project Cities/Counties in Shandong Province I. INTRODUCTION .......................................................................................................................... 1 II. DESCRIPTION OF THE PROJECT ............................................................................................. 1 III. DESCRIPTION OF THE ENVIRONMENT ................................................................................... 2

A. Physical and Ecological Resources ....................................................................... 2 C. Quality of Life Values ............................................................................................. 4

IV. ENVIRONMENTAL IMPACTS AND MITIGATION MEASURES ................................................ 4

A. Conservation Agriculture ........................................................................................ 5 B. Livestock and Poultry Farms .................................................................................. 6 C. Agro-Processing .................................................................................................... 7 D. Biogas Systems ..................................................................................................... 8 E. Agriculture Support Services .................................................................................. 8 V. DUE DILIGENCE ANALYSIS ................................................................................. 8

VI. PUBLIC INVOLVEMENT ............................................................................................................. 9 VII. INSTITUTIONAL REQUIREMENT AND ENVIRONMENTAL MONITORING PROGRAM ......... 9 VIII. ASSURANCES ........................................................................................................................... 10 IX. FINDINGS AND RECOMMENDATIONS ................................................................................... 11 X. CONCLUSION ............................................................................................................................ 12 APPENDIX 1. SUMMARY OF PARTNERSHIPS, DOMESTIC ENVIRONMENTAL APPROVALS, AND CORE VERSUS DUE DILIGENCE. ............................................................................................ 13

Figure 1: Map of Project Provinces

Figure 2: Map of Project Cities/Counties in Gansu Province

Figure 3: Map of Project Cities/Counties in Henan Province

Figure 4: Map of Project Cities/Counties in Shandong Province

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I. INTRODUCTION 1. The purpose of this report is to summarize the results of the initial environmental examination (IEE) for the Dryland Sustainable Agriculture Project. This Initial Environmental Examination (IEE) is prepared on the basis of a sector-like approach in reference to the environmental assessment requirements stipulated in the ADB Environmental Policy (2002).1 2. The report contains: (i) introduction to the background of this study; (ii) an overview of the Project; (iii) description of the environment; (iv) screening of potential environmental impacts and mitigation measures; (v) institutional requirement and environmental monitoring program; (vi) public involvement; (vii) public involvement; (viii) assurances; (ix) findings and recommendations; and (x) conclusion. 3. This IEE was originally prepared in 2008. 2 In 2013, one enterprise in Shandong Province, the Koufu Cotton Seed Oil Company, withdrew from the project and was replaced by the Boxing Golden Seed Company. In 2015, unused funds from two project enterprises were re-allocated to four other project enterprises, all within Henan Province. These changes necessitated a minor change in scope for the project and updating of the IEE. This version of the IEE succeeds and replaces the previous versions. These changes are indicated in Appendix 1.

II. DESCRIPTION OF THE PROJECT 4. The Project has 29 partnerships in 27 poor rural counties of three provinces, Henan, Shandong and Gansu. The Project counties have a total population of 8.2 million, 27% of whom are in poverty, relying on very small farms (0.28 ha or 4.2 mu), for most of their income. 5. There are two components in each Project province. First, sustainable agricultural partnerships will promote financially and environmentally sustainable agriculture in dryland areas. Poverty is seen as a cause of land degradation, and improved access to finance and income opportunities will enable farmers to adopt appropriate and sustainable farming practices – including but not limited to conservation agriculture (CA) – which will improve farm incomes whilst reducing the rate of land degradation. In order to enable the farmer to improve incomes and agricultural practices, the Project will address market failures in the provision of technology and finance to farmers and also give them more assured access to markets to give security to their expectations of increased cash incomes The output is expected to be sustainable production and processing partnerships in which the enterprise and farmers combine to develop a production base, and the farm products are then processed and marketed by the enterprise. Rather than narrowly focusing on a narrow product range, such as apple juice, the Project follows the diversified processing and production patterns of the project area to include: wheat, dates, fruit, vegetables, peanuts, soybeans, sweet potatoes, maize, mushrooms, cotton seed, herbs, bees, poultry (broilers and layers), pigs, sheep, cattle, and dairy. The Project is estimated to directly benefit 0.84 million farm households and 4.45 million mu (300,000 ha). The agro-enterprises will produce an incremental 722,000 metric tons of products annually and create some 18,000 new off-farm employment opportunities. 6. Secondly, agricultural support services will be developed primarily in the form of services and input capacity for sustainable agricultural production, including soil testing labs, agricultural

1 Environmental Policy (2002), Asian Development Bank, Manila, Philippines.

2 As “Supplementary Appendix F” of the project documents.

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extension and technology transfer centers, mechanization services centers, organic fertilizer production, and high quality seed production. Additionally, market access support will be provided through centers for marketing, product quality analysis and quality management systems training. Generally, these services will be integral units of the agricultural partnerships, making them commercially sustainable after project completion without reliance on government funding. Six investments will be independent commercial ventures in specialized machinery manufacture, seed production, organic fertilizers, and wholesale markets. These six commercial ventures will provide benefits of improved services and supplies to an additional 0.25 million households. 7. The Ministry of Agriculture (MOA) will be the EA. It will coordinate and supervise all implementation activities through an existing leading group. The Project is structured provincially to match the three Provincial IAs and sub-borrowers. Provincial and county leading groups will also be set up in Henan and Shandong, and municipal (Tianshui) and county leading groups will be established in Gansu. Provincial and county governments will be the IAs for all project components. The EA will be in charge of overall coordination and monitoring. The Provincial PMO will be established in the Agriculture and Animal Husbandry Bureaus in Henan and Shandong and the Finance Bureau in Gansu. The Provincial PMO will supervise the Project implementation activities. 8. The total investment cost of the Project is estimated at $206.0 million, including a loan of $100 million from the ADB, a grant of $350,000 from ADB, $9.9 million from the national and provincial and local governments, $82.15 million from enterprises and $13.6 million from the farmers. The Project will be implemented over five years starting in 2008. In 2010, ADB and the Government will jointly evaluate implementation progress and take measures, including modifying the scope, implementation arrangements, and allocation of loan funds, necessary to achieve the project objectives.

III. DESCRIPTION OF THE ENVIRONMENT A. Physical and Ecological Resources 9. Gansu Province is situated in the upper reaches of the Yellow River Basin, at the convergence of Loess, Mongolian and Qinghai-Tibet Plateaus. The total land mass covers 454,000 km2, with mountainous and hilly areas covering 77.8% and plains 22.2%. Gansu belongs to the arid temperate monsoon climate, with average yearly precipitation at approximately 300 mm that occurs mostly in June to August. The area of arable land totals 4.63 million ha; and the area of pasture land covers 14.11 million ha. The volume of water resources on a per-capita basis stands at 1,150 m3 or about 1/2 of the national average. Soil erosion and desertification are among the most prominent ecological problems in the province. About 83.4% of the provincial territory suffers from soil erosion, and 54.7% from desertification. 10. Lying in the lower reaches of the Yellow River Basin in the central eastern PRC, Henan Province has a total land mass of 167,000 km2, including 44,400 km2 of mountainous areas (26.6% of the Province’s total land mass), 29,600 km2 of hilly areas (17.7%) and 93,000 km2 of plains (55.7%). Belonging to the transitional climatic zone from subtropical climate and warm-temperate continental climate, Henan has mild temperatures year around and clear-cut seasons. The average yearly precipitation fluctuates between 600 and 1,200 mm, and concentrates in the months of July, August and September. The vast and fertile alluvial plains, coupled with plenty of sunshine, provide for excellent conditions for agriculture. In fact, the total arable land in the province amounts to 7.17 million mu (478,000 ha), ranking the third in the

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country. However, the province is constrained by shortage of water resources; the volume of water resources on a per-capita basis is only about 420 m3 or below 1/5 of the national average. Moreover, more than 1/4 of the provincial territory suffers from desertification; and about 18% is plagued by soil erosion. 11. Shandong Province is situated in the central eastern PRC. It has a total land mass of 156,700 km2, including 24,300 of mountainous areas (15.5%), 20,700 km2 of hilly areas (13.2%), 98,300 km2 of plains (62.7%) and 13,400 km2 of river deltas, coastal zones and shoals (8.6%). Shandong is situated in the northern temperate, sub-humid monsoon climatic zone, with clear-cut seasons and mild temperatures. The average yearly precipitation ranges from 550 mm in the north and 850 mm in the south, and concentrates in the summer months of July to September. The arable land totals 112.8 million mu (7.52 million ha). The province also suffers from water shortage; the volume of water resources on a per-capita basis is only 344 m3 or below 1/6 of the national average. More than 42% of the land area in the province suffers from soil erosion. B. Human and Economic Development 12. At the end of 2006, Gansu Province had a population of 26.1 million at the end of year, of which 31.1% were urban and 68.9% were rural. The population natural growth rate in 2006 was 6.24‰. In the past five years, the GDP growth rate increased by 9.9% in 2002, 10.7% in 2003, 11.5% in 2004, 11.8% in 2005 and 11.4% in 2006, reaching CNY22.75 billion by 2006. The incomes for both urban and rural residents have grown steadily. For rural residents, the per-capita net income increased by 5.4% in 2002 over the previous year to CNY1,590, 5.2% in 2003 to CNY1,673, 10.7% in 2004 to CNY1,852, 6.9% in 2005 to CNY1,980 and 7.8% in 2006 to CNY2,134. But the rural-urban income gap remained large in 2006, CNY2,134 for rural and CNY8,921 for urban. In spite of the fast growth in the past few years, Gansu remains one of the poor provinces in the PRC, with 2006 per-capita GDP at US$1173 ranking 30th among the 31 PRC provinces and being only 1/7 that of first-ranked Shanghai at US$7330 and 56.9% of the national average at US$2,060. In terms of the UNDP Human Development Index, Gansu ranks 28th out of the 31 PRC provinces at 0.68 compared to 0.76 for the PRC as a whole3. 13. At the end of 2006, Henan Province had a population of 98.2 million, with an annual natural growth rate of 5.32‰. Between 2003 and 2006, the annual rate of GDP growth averaged 13.2% or 2.9 percentage points higher than the national average, reaching CNY1,246.4 billion by 2006. The rural per-capita net income reached CNY3,261 by 2006 or an increase of 12.1% over 2005, compared to CNY9,810 for urban residents and increase of 9.4%. On a per-capita basis, the GDP increased from US$914 in 2003 to US$1,730 by 2006, ranking 16th among the 31 PRC provinces and compared to US$7,330 for first-ranked Shanghai and the national average of US$2,060. In terms of the UNDP Human Development Index, Henan ranks 17th among the 31 PRC provinces at 0.74 compared to 0.76 for the PRC as a whole. 14. At the end of 2006, Shandong had a population of 93.1 million, with an annual growth rate of 5.5‰. Between 2002 and 2006, the provincial GDP experienced double-digit growth, reaching CNY2,184.7 billion by 2006. The rural per-capita net income increased from CNY2,954 in 2002 to CNY4,368 in 2006, compared to CNY7,615 and CNY12,192 for urban per-capita disposal income for the same years. On a per-capita basis, the GDP increased from US$1,400 in 2002 to US$3,040 by 2006, ranking 7th among the 31 PRC provinces and compared to US$7,330 for first-ranked Shanghai and the national average of US$2,060. In terms of the

3 China Human Development Report 2005, UNDP.

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UNDP Human Development Index, Shandong ranks 11th among the 31 PRC provinces at 0.74 compared to 0.76 for the PRC as a whole. C. Quality of Life Values 15. In Gansu Province, the water quality has also witnessed a continuous improvement in the past few years, thanks to the nation-wide effort to strengthen the environmental standards and enforcement. In 2006, of the monitored 30 river sections, 16 met the water quality targets or an increase of 3 sections over 2005. However, air quality in the majority of the cities experienced a decline in 2006 compared to that in 2005. The air quality for nine of the 14 major cities worsened and five improved. The forest cover increased stood at 9.9% at the end of 2006. Sandstorms caused disastrous damage in 2006, resulting in the death of two people and 6,873 large animals, loss of 25 houses and loss of harvest for 41,160 ha of crops, with the estimated direct economic loss totalling CNY 162.7 million. By 2006, Gansu has 57 nature reserves, including 13 national, 40 provincial and 4 county-level. They cover 9.88 million ha or 23.2% of the provincial territory. In 2006, the Gansu Provincial Government (GPG) launched the “Gansu Provincial Action Plan for Rural Wellness and Environmental Protection”, which focuses on village landscape improvement, animal husbandry, agro-processing and biogas utilization. 16. In Henan Province, the water quality and urban environmental quality has continued to improve, as a result of the continuous strengthening of the environmental standards and enforcement. For example, 93.9% of the surface waters flowing through major cities met the quality targets in 2006, an increase of four percentage points over 2005. In 2006, 16 out of the 18 major cities met the Level II of the National Atmospheric Quality Standards, compared to four in 2004. The forest cover increased from 19.8% in 2004 to 22.6% in 2006, to a planned 26% by 2010 and 30% by 2020. The number of national and provincial nature reserves has increased from only one in 1982 to 22 by 2005, covering about 3% of the provincial territory, to a planned 48 by 2010. 17. The water quality and urban environmental quality in Shandong Province have also benefited from the nation-wide continuous strengthening of the environmental standards and enforcement. In 2005, the monitored river sections with water quality better than the Level II of the National Ambient Water Quality Standards increased by 4.3 percentage points over 2004; those with water quality below Level V decreased by 1.7 percentage points over 2004; and water environment functional zones meeting the prescribed standards rose by 11.2 percentage points over 2004. Meanwhile, 15 of the 17 major cities in the province met the Level II of the National Atmospheric Quality Standards, compared to 9 for 2004. The forest cover increased from 18.8% in 2000 to 24% by 2005. The nature reserves in Shandong by 2005 reached 74 in number, 1,083,000 ha in area and 6.9% in percentage of the provincial territory, compared to 46 in number, 555,000 ha in area and 3.5% in percentage of provincial territory in 2000, representing an increase of 28 nature reserves, 528,000 ha in area and 3.4 percentage points in territory.

IV. ENVIRONMENTAL IMPACTS AND MITIGATION MEASURES 18. The Project is expected to produce significant environmental and social benefits. The development of the production bases will introduce ecologically sustainable farming practices that will conserve water, improve soil texture and fertility, reduce soil erosion, and reduce the use of agricultural chemicals. The livestock farming interventions will provide farmers with good quality manure as organic fertilizers that will reduce the use of agricultural chemicals. The biogas interventions will result in the same benefits. The agro-processing interventions are

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expected to generate significant socioeconomic benefits on the one hand, and on the other hand, they also have the potential to produce negative impacts on the environment. 19. The interventions that are likely to produce direct environmental benefits and impacts are divided into five general categories on the basis of similar nature, similar environmental impacts and similar mitigation measures. These potential environmental impacts for each category of interventions will be identified, mitigation measures proposed and residual impacts evaluated. 20. It is stipulated in the ADB’s Environmental Policy (2002) that ADB will follow the standards and approaches detailed in the World Bank’s Pollution Prevention and Abatement Handbook (PPAH)4,5, and justifications will be needed in cases whereby alternative standards are adopted. For the purpose of this assessment, the national environmental standards of the PRC were used, because: (i) there is a comprehensive environmental regulatory framework and a comprehensive system of environmental standards 6 that cover all categories of the interventions under this Project; (ii) the PRC environmental standards better reflect the development and environmental priorities of the country. For example, the SO2 emission limit of the PRC for small coal-fired boilers used in fruit and vegetable processing plants is lower than that in the PPAH (900 ppm vs. 2,000 ppm), reflecting the priority concern of the PRC over acid rain pollution. Third, the PRC has set the target of reducing the releases of major pollutants by 10% during the 11th Five-Year Plan Period (2006-2010). To this effect, pollution quotas are allocated to each province, then down to the city/county level. In addition to meeting the prescribed emission and discharge standards, a proposed project will have to apply for use of the “pollutant quota” of the respective city/county. Fourth, the Government has established seven regional supervision centers to oversee the compliance of the local governments with national environmental policies, regulations and standards. Finally, the World Bank has adopted PRC’s national environmental standards for all its projects in the country7. A. Conservation Agriculture 21. The Project includes 29 interventions in conservation agriculture, including 5 in Gansu, 13 in Henan and 11 in Shandong. This category of interventions will support the development and rehabilitation of 1,465,960 mu (97,931 ha) of crop and vegetable farms and fruit orchards with the use of conservation-oriented farming practices. The crops will include the following varieties: wheat, corn, cotton, fodder, peanut, sweet potato, fungus, fruits (e.g., grape, yellow peach and Chinese dates) and vegetables. Conservation agriculture practices to be introduced into these activities will include: (i) selection of drought-and pest-resistant and water-saving varieties; (ii) contour terraces, alternating corrugation culture, mulching, and low or no tillage; (iii) use of organic fertilizers; (iv) small-sized water collection and storage facilities such as water

4 In determining appropriate environmental standards for ADB projects, ADB will follow the standards and

approaches detailed in the World Bank’s Pollution Prevention and Abatement Handbook. This handbook describes

generally acceptable pollution prevention and abatement measures and emission levels. However, as in the case of the World Bank environmental assessment procedures, the environment assessment for any individual project may recommend adoption of alternative emission levels and approaches to pollution prevention and abatement. This flexibility is required to best reflect national legislation and local conditions in determining the appropriate standards and emissions levels. In all such cases, the environment assessment report will provide justification for the levels and approaches chosen for the particular project or site.

5 Pollution Prevention and Abatement Handbook, 1998, World Bank Group, Washington DC.

6 Details can be found in the Country Environmental Analysis for the People’s Republic of China, 2007, Asian

Development Bank, Manila, Philippines. 7 Correspondence of the Consultant on 28 September 2007 with the Environmental Department, World Bank.

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tanks and ponds; (v) water-saving irrigation technologies such as drip irrigation, sprinkler irrigation, infiltration irrigation and pipe irrigation; (vi) balanced fertilizer application; and vii) minimized, proper and safe use of pesticides. The choice of orchards and farms to be rehabilitated will be based on technical and financial viability with priority given to poor areas. 22. These interventions are expected to produce many direct environmental benefits such as water savings, reduced use of agricultural chemicals, reduced soil erosion and improved soil fertility. In addition, they will produce other environmental benefits such as reduced siltation of rivers and coastal areas, reduced flow of chemical nutrients into surface water bodies, and protected downstream ecology. No natural forests will be adversely affected by the activities. The production bases are far from any protected areas (closest distance is five kilometres) and no negative impacts are anticipated. Project beneficiaries will be required to attend training sessions, in the form of field schools, on the use of the conservation agriculture practices. Other forms of information dissemination, such as brochures and radio and TV programs, will also be used when appropriate. 23. In 2013, one enterprise in Shandong Province, the Koufu Cotton Seed Oil Company, withdrew from the project and was replaced by the Boxing Golden Seed Company. The scope of works for this new enterprise includes growing and processing of cotton and wheat, and construction of small-scale processing infrastructure (access roads, storage and processing plants). Comparison of the enterprise with the “non-core” projects listed with the due diligence completed for the other non-core projects (Appendix 1) confirms that the scope of works, potential environmental impacts, and their mitigation requirements, is similar. The new enterprise is therefore categorized as a “non-core” project. The domestic EIA for the enterprise was approved by the Boxing County EPB on 4 January 2013. It includes requirements to avoid discharge of untreated wastewater, minimize noise, dust and other impacts during construction and operation. The new enterprise will need to comply with the existing ADB project requirements for environmental mitigation, monitoring, and reporting as described in this IEE. 24. In 2015 in Henan Province, unused funds from two project enterprises were re-allocated to four other project enterprises: (i) Anyang Yuhe Agricultural Products Development Center; (ii) Henan Beixu (Group) Co., Ltd; (iii) Henan Mengxiang Food Co., Ltd.; and (iv) Luoyang Jiajiale Agricultural Production Development Co.,Ltd (Appendix 1). All changes relate to internal modifications of the existing project activities on existing project lands e.g. purchase of improved machinery, and re-allocation of existing land from sweet corn to asparagus (both of which are already under cultivation in the project sites (Appendix 2). For (iv), water extraction and regulation will be considerably improved (conversion from extraction in numerous small wells to just two larger wells). The proposed changes have been assessed and approved by the domestic environment protection bureaus. None of the changes represent a change in the project environmental categorization. B. Livestock and Poultry Farms 25. There are six such interventions in Gansu Province only. The six interventions include the expansion of: (i) seed hog farm by 3,000 heads; (ii) cow breeding centre by 2,000 heads; (iii) chicken farm by 700,000 heads; (iv) hog farm by 10,800 heads; (v) sheep farm by 50,000 heads; and (vi) cattle farm by 7,330 heads. The estimates of waste generation are shown in the following table.

Intervention Scale

(heads) Waste

(tons/day)

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Seed hog farm 3,000 15.15

Cow breeding center 2,000 77.82

Chicken farm 700,000 191.10

Hog farm 10,800 54.54

Sheep farm 50,000 92.50

Cattle farm 7,330 164.27

26. The farms will be fully integrated with their own feed mills, breeding stock, slaughterhouses, and processing facilities. Waste disposal methods will include (i) biogas digestion ponds, (ii) wastewater treatment facility, and (iii) solid waste treatment facility or appropriate disposal. The solid and liquid wastes after treatment will be used as irrigation water and organic fertilizers. In the past few years, the PRC Government has proclaimed national standards on the management of wastes for livestock farms. They include: (i) Management Guidelines on Pollution Prevention and Control for Livestock and Poultry Breeding (SEPA, 2001); (ii) Technical Standard of Preventing Pollution for Livestock and Poultry Breeding (SEPA, HJ/T81-2001); and (iii) Discharge Standard of Pollutants for Livestock and Poultry Breeding (SEPA, GB 18596-2001). Under the Classified List of Construction Projects for Environmental Protection Management (2002), livestock and poultry farms are required to submit a full or simplified EIA report, in the form of environmental impact statement, environmental impact report form or environmental impact registration form, depending on the scale. The environmental impact assessment reports will include, as appropriate, an environmental management plan (EMP). Most recently, Gansu also released its own provincial regulation, namely, Gansu Provincial Codes and Management Guidelines for Livestock and Poultry Farms (August 2007). All these partnerships will be required to comply with the national and provincial guidelines and standards. The Gansu Provincial EPB, through the county EPBs, will be responsible for environmental monitoring and enforcement. Training and advisory services will also be provided to the IAs under the Project. C. Agro-Processing 27. There are 48 interventions in this category, including 24 in Gansu, 12 in Henan and 12 in Shandong. The interventions involve the establishment and expansion of the agro-processing capacity of existing facilities for the canning and juicing of local fruits, canning of vegetables, processing of spices and herbs, processing of meat products, processing of dairy products, and producing and storage of foods (including frozen foods). All of these plants will use local produces produced from the partnership production bases. 28. Most of the solid wastes from agro-processing factories will be organic matter (e.g., fruit skins and rejects, waste vegetable leaves and waste meat) and will be used by farmers as animal feed or to produce compost as organic fertilizers, thus effectively recycling waste in an environmentally sound manner. The wastewater will be treated with a variety of technologies, such as sedimentation ponds and biological treatment, to reduce TSS and biological oxygen demand (BOD) and chemical oxygen demand (COD) to levels that conform to PRC standards8. All of these processing facilities will be located in rural areas where the effluent after treatment will be used for irrigation purposes. The treated effluent will meet the Standards for Irrigation Water Quality (GB 5084-92).

8 They include, for example: i) Discharge Standard of Pollutants for Livestock and Poultry Breeding (GB 18596-2001);

ii) Discharge Standard of Water Pollutants for Meat Packing Industry (GB 13457-92); and iii) Integrated Wastewater Discharge Standards (GB 8978-1996).

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29. Environmental assessments in the form of environmental impact statements or environmental impact reporting form or environmental impact registration form were prepared in accordance with the PRC EIA Law of 2003. All of the EIA reports have been approved by the responsible provincial and/or municipal EPBs. The provincial EPBs, through the city/county EPBs, will be responsible for environmental monitoring and enforcement. Training and advisory services to the IAs will also be provided under the Project. D. Biogas Systems 30. This category of interventions is located in Gansu Province. A total of 100,000 biogas digesters will be built throughout the project cities/counties in Gansu9. Biogas as cleaner energy for rural communities has been promoted by the Government. The organic wastes from the livestock and poultry farms and food/meat processing plants will be used as input materials. The slurry from the biogas digesters will be used as organic fertilizers for the vegetable farms and orchards. The use of biogas as a cleaner fuel will reduce outdoor and indoor air pollution and the emission of greenhouse gases (GHGs). 31. These biogas systems will be built in the house yards of rural communities, integrated with the kitchen, toilet and animal pen10. Many millions of biogas digesters are operational throughout the country and in the Project provinces, cities/counties in particular; no negative impacts on regional ecology or the human environment have been recorded. This is expected to be true for the biogas systems under this particular Project. E. Agriculture Support Services 32. There are three interventions in Gansu Province that support the expansion and modernization of wholesale markets at 342,000 m2, 66,670 m2 and 80,000 m2 respectively. The activities will include: wholesale yards, retail outlets, storage and distribution facilities, general product testing labs, “green” vegetable testing labs and market information systems. 33. The markets will be located away from such sensitive spots as city and urban centers, residential areas and schools to avoid any unacceptable odours transferring to adjacent communities and to minimize impacts of noise levels during market operations. The waste fruits and vegetables will be transported to the nearest composting centers. Small volumes of floor cleansing wastewater will be treated in sedimentation and aeration ponds and be transmitted to municipal wastewater treatment plants. 34. This type of activities is excluded from any environmental impact assessments under the PRC EIA Law of 2003.

V. DUE DILIGENCE ANALYSIS 35. The domestic EIA reports of all partnerships were completed and approved by the respective Provincial EPBs. A due diligence analysis of the domestic EIAs has been performed to determine if they meet ADB requirements. The due diligence analysis covered the adequacy and appropriateness of: (i) mitigation measures; (ii) incremental environmental protection budget; (iii) public consultations; and (iv) EIA conclusions. The analysis has shown that all

9 Primarily under livestock partnerships.

10 It is nicknamed “four in one” in the PRC.

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domestic EIAs adequately meet ADB environmental safeguard requirements. A summary of the results of the due diligence analysis is presented in Appendix 1.

VI. PUBLIC INVOLVEMENT 36. Public involvement has been an important part of this Project preparation. Key government stakeholders and environmental experts have been consulted throughout the domestic EIA and this IEE process. Extensive consultations with community leaders and members in the partnership areas have also been conducted during the preparation of the domestic EIAs. These stakeholder consultation exercises will continue during the Project implementation and operation in accordance with ADB’s and PRC’s procedures and guidelines. The results of the consultations will be included in the progress reports to be prepared by the EA/PMO with assistance from the implementation consultancy and submitted to the ADB and the Government. 37. Public consultations conducted to date in connection with the preparation of each partnership covered four major forms: (i) information dissemination; (ii) community meetings; (iii) community surveys; and (iv) focus group discussion. Information concerning the partnership was placed in local newspapers; and/or a public announcement was posted in partnership communities. At least one consultation session with key government stakeholders (e.g., agriculture and animal husbandry bureaus, environmental protection bureau, finance bureau, water resource bureau, poverty reduction office, rural energy office, etc.) and partnership communities was organized, with the number of participants ranging from 20 to 50. A 50-person questionnaire survey was carried out in each beneficiary area. The comments and suggestions from these consultations are directed at such issues as the protection of the interest of farmers, technological advancements for improving crop varieties and animal breeds, efficient use of water resources, protection of the rural environment, improvement of rural transportation infrastructure, and extension and training services. Their views and suggestions have been incorporated into the Project design of environmental mitigation measures and environmental monitoring programs. A summary of the public consultations and feedback is provided in Appendix 9 of the IEE. VII. INSTITUTIONAL REQUIREMENT AND ENVIRONMENTAL MONITORING PROGRAM 38. The EPBs at the provincial and city/county levels in the three Project provinces have been involved in the planning stages of the Project, and are the responsible agencies for reviewing and approving the domestic environmental impact assessment reports of the partnerships in accordance with the PRC EIA Law of 2003 and relevant national, provincial and local regulations. As required by PRC regulatory requirements 11 , the city/county EPB will conduct an inspection of the environmental protection facilities upon completion of construction of each partnership, and will issue an approval certificate if the environmental facilities meet the design criteria, or else issue an order for corrective action. The city/county EPB will also be responsible for implementing the environmental monitoring program for each partnership. This monitoring program will include source monitoring where the discharges and emissions of the partnerships will be sampled and tested for relevant parameters on regular intervals. The quality of the receiving environment will also be monitored regularly for relevant parameters. Source and ambient environmental monitoring will be conducted by the city/county environmental monitoring centers on behalf of the EPBs.

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Management Guideline on Acceptance Review and Approval of Construction Projects upon Completion, SEPA, 2001.

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39. The provincial and city/county agriculture and animal husbandry bureaus (AAHBs) will be responsible for monitoring of the impact of soil conservation measures. They will be supported by the soil conservation offices under them. The AAHBs will have a role in monitoring the incidence and effects of manure and pesticide runoff from project sites on water quality at strategic locations and the report on the uptake of environmentally sustainable farming practices by project farmers developed under the agriculture and livestock components. More proactively, the AAHBs, through its respective administrative divisions and support institutions, will provide training and extension services on the proper and safe use of agrochemicals, integrated pest management, balanced fertilizer application, composting of organic wastes, use of organic fertilizers, and green food production and marketing. The rural energy offices under the AAHBs will be called up to assist with the biogas development program. 40. As the Executing Agency, the Ministry of Agriculture (MOA) will have the overall accountability for ensuring the Project and all of the partnerships will comply with the PRC environmental laws and regulations as well as the provisions of the Environmental Assessment Guidelines of the ADB. Each IA will be responsible for implementing the specific mitigation measures as contained in the environmental management plan (EMP) of the particular partnership. A PMO has been set up at the EA and each IA. The PMO will recruit or assign at least one environmental officer. The PMO will be responsible for coordinating and overseeing: (i) the preparation, review and approval of the EIA reports during Project preparation; (ii) implementation of the mitigation measures in the EMP during construction; and (iii) implementation of the environmental monitoring program after the partnership becomes operational. 41. The PMOs will be supported by the implementation consultancy to be retained competitive bidding. The implementation consultancy will include a domestic environmental expert and an international counterpart. It will: (i) advise the PMOs and IAs on ADB environmental safeguards requirements and PRC environmental laws and regulations; (ii) provide training to PMOs and IAs on environmental management and environmental monitoring; (iii) assist the PMOs in overseeing the implementation of the EMPs and environmental monitoring programs; and (iv) assist the EA/PMO in meeting the environmental reporting requirements of the ADB and PRC.

VIII. ASSURANCES 42. To ensure that the overall Project and the partnerships will meet the environmental safeguard requirements of the ADB, a number of assurances have been put in place. These assurances include: (i) initial selection of interventions by means of a set of sustainability criteria; (ii) full compliance with the PRC environmental regulatory requirements; (iii) a sector-like approach to the environmental assessment, including the IEE of the overall Project supplemented by the IEEs of six core partnerships; (iv) environmental support and extension services; and (v) environmental management and monitoring framework, with assignment of institutional roles and responsibilities. These assurances will be summarized in the Environmental Management and Monitoring Framework (EMMF) which is presented in Appendix 1of the IEE. 43. The PRC has put in place a comprehensive regulatory framework for safeguarding the environment from development activities. EIA was sanctioned, as a legal requirement for all construction projects, in the 1979 National Environmental Protection Law. The EIA process and procedures were defined in the 1986 Management Guideline for Environmental Protection of

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Construction Projects, and upgraded into the PRC EIA Law in 2003. Waste emission and discharge standards for key sectors and ambient environmental quality standards for the major environmental media have been adopted and gradually tightened over the years. Another important milestone in the history of EIA is the release in 2006 of the Interim Guideline on Public Participation in EIA. The years of upgrading and strengthening have made the regulatory framework for environmental safeguard more and more harmonized with international good practices. More importantly, in an effort to achieve the 11th FYP target of 10% reduction in emissions and discharges of major pollutants (particularly COD, SO2), the Government is strengthening its enforcement efforts, by setting up regional supervision centers and by tying the promotion of local government officials to environmental performance. The partnerships have gone through the domestic EIA process whereby individual EIA reports have been prepared by SEPA-certified EIA institutes and reviewed by city/county, and have received approval by the respective provincial EPBs. 44. This IEE has been prepared in accordance with the ADB Environmental Policy (2002) and the PRC EIA Law (2003). The potential environmental impacts by category have been screened and mitigation measures recommended for all activities. Six representative EIA reports have been translated into English and presented in a supplementary appendix using ADB’s format for IEEs. The six EIA reports were selected in consideration of a number of factors, including the representativeness of the types of interventions, the nature and extent of the potential environmental impacts, and geographical balance. A due diligence analysis of the remaining activities has been conducted, and it has been concluded that all activities can adequately meet ADB’s environmental safeguard requirements. 45. Moreover, the EA and IAs will be provided with training and advisory services by the relevant government agencies and institutions and the implementation consultancy, in respect to, among other things, soil conservation, water-saving irrigation, integrated pest management, balanced fertilizer application, proper and safe use of agrochemicals, composting, use of organic fertilizers, and waste minimization. An environmental monitoring program will also be implemented during Project implementation and operation. The environmental monitoring program will include regular source and ambient monitoring by the city/county environmental monitoring centers on behalf of the local EPBs under delegation by the provincial EPBs. The PMOs, assisted by the implementation consultancy, will conduct regular inspection and supervision over the implementation of the EMPs. 46. Finally, the proposed institutional structure for Project management as a whole and for environmental management in particular provides for a key assurance. Key government stakeholders at the national, provincial and city/county levels have demonstrated their commitment to ensuring the environmental sustainability of the Project and the partnerships. MOA, provincial and city/county AAHBs and provincial and city/county EPBs will be responsible for overseeing and monitoring the environmental performance. The PMOs at the national, provincial and city/county levels have coordinated the domestic and ADB environmental assessment processes and will continue to coordinate and oversee the implementation of the EMPs in the partnerships.

IX. FINDINGS AND RECOMMENDATIONS 47. The IEE findings show that the environmental impacts of the Project are expected to be positive especially for the interventions under agriculture conservation component. It has also demonstrated that no significant adverse environmental impacts are anticipated from the overall Project. Analysis of the IEEs has indicated that there will be many positive environmental

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benefits and the potential environmental impacts associated with the waste emissions and discharges from the livestock and poultry farming partnerships and the agro-processing partnerships can be effectively mitigated such that the residual impacts will be insignificant. The due diligence analysis of the other partnerships has shown that the EIAs of these partnerships can adequately meet ADB’s environmental safeguard requirements. A Summary Environmental Impact Assessment (SEIA) is, therefore, not required.

X. CONCLUSION 48. The Project will produce many significant environmental benefits in the Project area, including reduced soil erosion, enhanced soil fertility, increased water savings, reduced use of agrochemicals, etc. The IEE findings show that the environmental impacts of the Project are expected to be positive. It has also demonstrated that no significant adverse environmental impacts are anticipated from the overall Project. The potential environmental impacts associated with the waste emissions and discharges from the livestock and poultry farming partnerships and the agro-processing partnerships can be effectively mitigated such that the residual impacts will be insignificant. The due diligence analysis of the EIAs adequately meet ADB’s environmental safeguard requirements. The EMPs, as contained in the domestic EIA reports, are sufficient to meet the environmental protection regulatory requirements of the PRC. This Summary IEE, including the Environmental Management and Monitoring Framework (EMMF), together with the IEEs for the six core subprojects and the due diligence analysis for the remaining sub-projects (Appendix 1), is adequate to meet the environmental safeguard requirements of the ADB 2002 Environment Policy.

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APPENDIX 1. SUMMARY OF PARTNERSHIPS, DOMESTIC ENVIRONMENTAL APPROVALS, AND CORE VERSUS DUE DILIGENCE. Includes the new subproject in 2013, Boxing Golden See Company (Shandong Province). Dates of PRC EIA approval are 2007 for all projects except where indicated.

Province/ County Partnership

Conservation Agriculture

Live-stock

Agro- Processing

Bio-gas

Agriculture Support Services

PRC EIA Approval

Core/Due Diligence

Henan Province (12 Partnerships)

Anyang Yuhe Sweet Corn Yes Yes 15 Nov Due diligence

Ruzhou Special Wheat Production Base and Processing

Yes Yes 15 Nov 2007; 2 Jul 2013

Core

Jiaozuo Pollution-free Soybean Production Base and Processing

Yes Yes 15 Nov Due diligence

Dancheng Sweet Potato Production Base and Processing

Yes Yes 15 Nov Due diligence

Shanxian Special Corn Production Base and Processing

Yes Yes 15 Nov Due diligence

Changge Pollution-Free Vegetable Production Base and Processing

Yes Yes 15 Nov Core

Zhecheng Sanyingjiao Pepper and Garlic Yes Yes 26 Nov Due diligence

Luoyang Fumeida Oganic Materials and Fungus Yes Yes 15 Nov Due diligence

Luyi Medical Gingko Production Base and Processing

Yes Yes 15 Nov Due diligence

Linying Quality Wheat Production Base and Processing

Yes Yes 15 Nov Due diligence

Zhengzhou Maozhuang Vegetable Production Base Yes Yes 15 Nov Due diligence

Xuchang R&D, Demonstration & Extension of Dryland Farming Machines

Yes 15 Nov Due diligence

Shandong Province (10 Partnerships)

Zhucheng Zhongkang Vegetable Processing Yes 27 Nov Due diligence

Boxing Longsheng Vegetable Processing Yes 27 Nov Due diligence

Boxing Golden Seed Yes Yes 4 Jan’13 Due diligence

Gaomi Fuerde: Fertilizer Yes Yes 27 Nov Due diligence

Linshu Changlin Peanut Processing Yes Yes 27 Nov Due diligence

Qingzhou Quancheng Fodder (Wheat and Maize) Yes 5 Dec Core

Tancheng Zhengde: Maize Starch Processing Yes 4 Dec Due diligence

Wudi Wandefu: Date Products Yes Yes 5 Dec Core

Yishui Yulong Peanut Processing Yes 27 Nov Due diligence

Yishui Zhenghang Wheat Processing Yes 27 Nov Due diligence

Gansu Province (7 Partnerships)

Gangu Gangu Sustainable Agriculture Partnership

Yes Yes Yes Yes Yes 20 Nov Due diligence

Qin’an Qin’an Sustainable Agriculture Partnership

Yes Yes Yes Yes 20 Nov Core

Qinzhou Qinzhou Sustainable Agriculture Partnership

Yes Yes Yes Yes Yes 20 Nov Core

Wushan Wushan Sustainable Agriculture Partnership

Yes Yes Yes 20 Nov Due diligence

Maiji Maiji Sustainable Agriculture Partnership Yes Yes Yes Yes 20 Nov Due diligence

Zhangjiachuan Zhangjiachan Sustainable Agriculture Partnership

Yes Yes Yes 20 Nov Due diligence

Qingshui Qingshui Sustainable Agriculture Partnership

Yes Yes Yes 20Nov Due diligence

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APPENDIX 2. MINOR CHANGES IN ACTIVITIES FOR FOUR EXISTING PROJECT BASES IN HENAN PROVINCE, 2015

Name Original activity Activity in 2015 Adjustment Domestic EIA

approval Domestic approval

Anyang Yuhe

Agricultural Products

Development Center

Construct 10,000 mu sweet corn base; 2,000 mu asparagus base; construct quick frozen fruit and vegetable production line; initiate a villager association

Construct 7,000 mu sweet corn base; 1,800 mu outdoor asparagus base; 200 mu of asparagus greenhouse base; 1,000 mu yellow peach base; production line with 6,902 tons annual output of sweet corn, asparagus, yellow peach

(i) Reduce 3,000 mu from the sweet corn base, in which 1,000 mu will be used for the yellow peach base; (ii) 200 mu outdoor aspagus base changed to asparagus greenhouse base; (iii) 600 mu outdoor asparagus base changed to standard asparagus base; (iv) enhance construction of the safety monitoring, inspection, protection and control system for agricultural products; (iv) change establishment of the peasant association into farmer specialized cooperative

None required: (i) no change in total base area (and 2,000 mu is actually decreased); (ii) changes include environment protection measures for greenhouse production

Henan Foreign Investment for Development and Reform [2014] No. 1297

Henan Beixu (Group)

Co., Ltd.

Construct 30,000 mu high-quality wheat production base and one production line for wheat powder with annual processing capacity of 80,000 tons of wheat

Construct 30,000 mu high-quality wheat production base and one special production line for wheat powder with annual processing capacity of 10,000 tons wheat and annual production capacity of 72,000 tons of wheat powder

(i) Purchase new equipment (4 pulverizers and conveying elevators) used in grain storage and finished products warehouses; (ii) replace two existing transformers; (iii) install a new warehouse for finished products (630 m

2), grain storage warehouse

(2,180 m2); (iv) annual wheat

processing capacity raised from 80,000 tons to 100,000 tons

As above – confirmed by Municipal Environmental Protection Bureau

Henan Foreign Investment for Development and Reform [2014] No. 1298

Henan Mengxiang Food Co.,

Ltd.

Construct 100,000 mu special biscuit wheat production base; construct a special biscuit wheat powder workshop and a supporting production line with annual processing capacity of 150,000 tons

No change in these activities; in addition, construct a production line with yearly output of 10,000 tons of functional fruit pie croissant

Add a new croissant production line with annual production capacity of 10,000 tons of functional fruit pie croissant

Ruzhou Environmental Supervision (2013) No. 19

Henan Foreign Investment for Development and Reform [2014] No. 1583

Luoyang Jiajiale

Agricultural Production

Development Co.,Ltd.

Construct 10,000 mu agricultural organic raw material production base and 1 rare edible mushroom with annual production capacity of 900 tons

Increase the production line of edible mushrooms to yearly output of 2,688 tons of top-grade rare edible mushroom products

(i) Move raw material production base to Taoying Village, Ruyang county; (ii) improve water regulation by utilizing 2 wells (under permit from water resources bureau) instead of the previous 1,000 cisterns; (iii) expand existing warehouses to 7,000 m

3; (iv) reduce 100 straw crushers to

6 straw crushers; (v) purchase 1 warehouse for fast fermentation of mushrooms; (vi) add 3,000 m

2 of

warehouse for raw materials; (vii) purchase bagging machines

Luoyang Environmental Supervision [2014] No. 95

Henan Foreign Investment for Development and Reform [2014] No.1834