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LESSONS:

People’s Republic of China: Shanxi Environment Improvement Project [Loan 1715]

| country: China, People’s Republic of

Integrated and Holistic View of Coal Industry. Coal is considered a highly polluting fossil fuel. Where the coking industry produces significantly more coal gas than needed for processing, the coal gas can be distributed to households, commercial and industrial consumers to replace coal – which will reduce emissions of sulfur dioxide (SO2) and other local pollutants. Where coal mining provides an opportunity to capture and use coal-bed-methane/coal-mine-methane gas global environment benefits can be derived from preventing its atmospheric release, and local environmental benefits can be achieved by using coal-bed-methane/coal-mine-methanegas as a fuel instead of coal.

Setting Prices of Outputs and Services. While price setting in a regulated or controlled market is often a balancing act involving multi-faceted concerns, it is important to make the long-term sustainability of the service provider, including investment in its modernization and expansion, one of the prime considerations.

Successful Implementation of Market-Based Instruments for Pollution Control. The People’s Republic of China (PRC) experience shows that it is difficult to design a market-based instrument and make it work, be widely accepted, and achieve the intended results. The existing pollution levy system in Shanxi was not punitive enough to encourage enterprises to invest in pollution abatement. Experience now makes clear the need for higher discharge fee rates and steps are being taken in that direction. The attempts to introduce the more complex sulfur dioxide (SO2) emissions permit trading system also highlighted issues that need to be addressed before the sulfur dioxide (SO2) emissions permit trading can be successfully implemented. Against this background, enhancing the awareness and sensitization of the stakeholders, including the enterprises and government bureaus at all levels, is very important.

Estimation of Environmental Benefits. Towards making reasonable estimates of environmental benefits, it is important to give specific attention to emissions estimated before and after the three subprojects began commercial operations in the respective cities. A statistically significant sample of measurements should cover the entire range of fuel quality, type and quality of fuel using equipment, and equipment utilization levels. If necessary, measurements should be taken year-round for certain customer categories, to adequately capture the effects of seasonal variations.

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