UNITED NATIONS DEVELOPMENT PROGRAMME
Programme of the Government of the People's Republic of China
Project Document

Summary of UNDP and cost-sharing inputs
		 	    US$
UNDP/GEF:		  7,992,000
Co-financing:
Government and others: 	10,550,000

Total:			18,542,000

		

Total:

Project number:	CPR/99/G31/A/1G/37
Project title:  	Energy Conservation and GHG Emissions
Reduction in Chinese TVEs – Phase II 
Short title:	TVE Energy Conservation II

Estimated start date:	June 2000
Estimated end date:	June 2004

Designated institution: 	Ministry of Agriculture

Classification information:
ACC sector and subsector:		Energy planning and conservation (510)
DCAS sector and subsector:	Energy conservation (51)
Primary area of focus/sub-focus: 	Promotion of sustainable energy and atmospheric quality (21)
Secondary area of focus/sub-focus:	Application of science and technologies for environmental sustainability (24)
Primary type of intervention:	Institutional building (1) 
Secondary type of intervention:	Pilot and demonstration (14)
Primary target beneficiaries:	Natural feature of atmosphere (57)
Secondary target beneficiaries:	Governmental organizations (38), Professional groups and associations (43)

UN executing agency:	UNIDO
Project sites:		Beijing and various counties
Beneficiary country:	China

Brief description:
Township-Village Enterprises (TVEs) constitute a significant share of Chinese economic production and social welfare. TVEs also contribute significantly to local and global environmental problems. This project is to reduce GHG emissions in China from the TVE sector by increasing the utilization of energy efficient technologies and products in the brick, cement, metal casting and coking sectors. The project removes key market, policy, technological, and financial barriers to the production, marketing and utilization of energy efficient technologies and products in these industries.
Project objectives include: a) creating institutional mechanisms for barrier removal at the national, county and enterprise level; b) establishing incentives and monitoring systems to strengthen existing regulatory programs at the county level; c) building technical capacity for energy efficiency and product quality improvement in TVEs; d) creating access to commercial financing for TVE in the four industries; and e) commercialize the financing of TVE energy conservation projects and; f) expanding the application of best practices for local regulatory reform to the national level.

On behalf of 		Signature		Date			Name/Title

Government:		________________	___________		_____________________

UNIDO:		________________    	___________		_____________________	

UNDP:			________________	___________       	_____________________

UN official exchange rate at the date of signature: $1.00 = RMB Y 8.267

List of Abbreviation

ABC		Agricultural Bank of China
ADB		Asian Development Bank 
AEPI		Agro-Environment Protection Institute
CHP		Combined Heat and Power
COMFAR 	Computer Model for Feasibility Analysis and Reporting 
CTA		Chief Technical Advisor 
EIAs		Environment Impact Assessments
EMCs		Energy Management Companies
EPBs		Environmental Protection Bureaus
ERI		Energy Research Institute 
ESMAP	Energy Sector Management Assistance Programme
GDP		Gross Domestic Product 
GEF		Global Environment Facility
GHG		Greenhouse Gas 
GoC		Government of China
IRR		Internal Rate of Return
LPIC		Local Policy Implementation Committee 
MOA		Ministry of Agriculture
MOF		Ministry of Finance 
MOST		Ministry of Science and Technology
NPD		National Project Director 
OECD		Organization for Economic Cooperation and Development 
PIC		Policy Implementation Committee
PMO		Project Management Office 
PR		Public Relations 
PTPMC	Production Technology and Product Marketing Consortium 
RCF		Revolving Capital Fund 
R&D		Research and Development 
SBAA		Standard Basic Agreement and Assistance 
SC		Sub-contractor 
SDPC		State Development Planning Commission 
SEPA		State Environment Protection Administration 
SETC		State Economic and Trade Commission 
SME 		Small and Medium-size Enterprise
SOE		State Owned Enterprises 
TOR		Terms of Reference 
TPR 		Tripartite Project Review
TVEs		Township-Village Enterprises 
UNIDO	United Nations Industry Development Organization
UNDP		United Nations Development Programme
UNV		United Nations Volunteers 
WB		World Bank

Table of Contents
List of Abbreviation	iii
A.	Project Context	1
1.	Description of sub-sector	1
2.	Host country strategy	2
3.	Prior or ongoing assistance	3
4.	Institutional framework for sub-sector	5
B.	Project Justification	6
1.	Problem to be addressed	6
2.	Expected end of project situation	8
3.	Target beneficiaries	11
4.	Project strategy and institutional arrangement	11
4.1	Strategy	11
4.2	Institutional Arrangements	13
5.	Reasons for assistance	14
6.	Special considerations	15
7.	Co-ordination arrangements	16
8.	Counterpart support capacity	16
C.	Development Objective	17
D.	Immediate  Objectives, Outputs and Activities	17
1.	Immediate Objective 1:	18
2.	Immediate Objective 2:	20
3.	Immediate Objective 3:	20
4.	Immediate Objective 4:	21
5.	Immediate Objective 5:	22
E.	Inputs	23
1.	GoC In-kind inputs	23
2.	Government, TVE and domestic bank financial inputs	24
3.	UNDP/GEF funded inputs	25
F.	Monitoring and Evaluation	27
G.	Risks	27
H.	Prior Obligations and Prerequisites	29
I.	Legal Context	29
J.	Budget	29
Annexes	30
Annex 1:	Project and Government Budget	1
Annex 2: Success criteria by Objectives	1
Annex 3:	Group Subcontracts	1
Annex 4: 	Workplan	1
Annex 5:	Capacity Building and Training Materials: Contributions from phase I	1
Annex 6:	Equipment list for PIC, PTPMC and RCF	1
Annex 7a: Job  descriptions for experts and consultants	1
Annex 7b: UNIDO Technical Inputs	1
Annex 8:	Description of PIC, PTPMC and RCF, including Terms of Reference for subcontracts to help design these.	1
Annex 9: 	Detailed description of the four sub-sectors	1
Annex 10: 	Detailed descriptions of 8 pilot project sites	1
Annex 11: Incremental Cost	1
Annex 12: Logical Framework Project Planning Matrix	

A.	Project Context

1.	Description of sub-sector

China’s township and village enterprises (TVE) are rural, collective economic organizations established at the township or village level. They also include the city branches of township enterprises. TVEs were first promoted in the 1950s as a way to strengthen the rural economy through diversification and industrialisation. Present ownership of TVEs varies, some are owned by collectives, some by individuals or private entities, others by local governments. Some are joint ventures.

By 1980 TVEs had become a major component of the Chinese economy, contributing significantly to GDP, employing large numbers of people and contributing to social development. During the 1980’s, TVEs out-performed the state sector in terms of growth of output and productivity increases. By 1995, there were 22 million units of TVEs, employing 128 million workers.

The importance of TVEs to county and lower level governments increased during the 1980s for two reasons. First, the ongoing fiscal decentralisation process meant that tax revenues from TVEs became an important source of local revenue. Second, they contributed to local stability and prosperity as they created significant employment and rural income. Accordingly, local governments took supportive measures to develop and protect their TVEs. Within this environment, TVEs were flexible to pursue market opportunities and subjected to some market principles.

The development of TVEs has varied across China’s regions and economic sectors. TVEs in some sectors are hi-tech or export oriented, and they face regional and international competition. However, TVEs in the brick, cement, coking and metal-casting sub-sectors were set up primarily to absorb rural labour, to provide essential low cost products, and to contribute to improving livelihoods in a localised area. In these sectors TVEs relied heavily on direct interventions from local governments for access to resources and marketing opportunities. As a result of the limited exposure of TVEs in these sectors to the market and to market forces, development in these sectors was characterized by expansion, without technology and technique development. 

The TVEs and the rural economy have experienced slower growth in the 1990s, particular in the four above-mentioned sectors. Slower growth means lower profits, and fewer funds to self-finance expansion or business development. This lack of finance has been offset to only a very limited extent by the new availability of commercial financing. 

Despite their general dynamism and growth, TVEs still have many disadvantages compared to state owned enterprises (SOE). A key one is the shortage of workers having significant professional skills. Another is the lack of access to finance. These gaps are also found between TVEs in Central China and those in the coastal regions. 

While the building material, coking and metal casting sectors provide key inputs to China’s economic development and have been a major contributor to China’s economic growth over the last 20 years (TVE provide more than half of the total output from these sectors), the level of technology in these sectors is low. Accordingly, TVEs in these sectors are characterised by high pollution levels. Notably, these four TVE sectors account for a staggering one sixth of China’s total emissions of CO2.  As indicated in Table 1, their average relative energy consumption is 30% to 60% higher than state-owned-enterprise sector using currently available technologies.  In addition, the low quality of their products leads to additional energy inefficiencies in product use (notably, poor building materials have low insulation levels, leading to heat loss in buildings).  TVE are also major contributors to local air and water pollution and health hazards for employees.  
Table 1: Summary of energy trends in the four TVE sectors
Sector	Energy consumption in Mtce	Projected production growth rate 	Energy efficiency gap compared to
[in %]	Share of TVE in total sector energy consumption 
[% p.a.]	
	1995		local state-of-art	International state-of-art		
Brick	79	2-5%	28	37	
58% across the board	
Cement	27	2-5%	40	57		
Coking	54	2%	28	48		
Metal-casting	3.4	2%	16	45		
For reference, total energy consumption in China was approximately 1300 Mtce in 1995

2.	Host country strategy

The Government of China (GOC) considers the TVE sector a strategic component of the development of the rural economy. In line with the overall transition to a market-oriented socialist economy in China, the overall objective is to bring the TVEs fully into a competitive market, whilst supporting the role TVE  play as employers and engines of rural development.

The GOC has placed overall responsibility for TVE development with the Ministry of Agriculture (MOA). GOC and MOA have taken regulatory action to support and guide their sustainable and healthy development, protect their legal interests and regulate their actions while improving the rural economy and promoting modernisation. 

The Government recognizes the need to finance product development, technology, management methods and job creation. For example, the Government requires that 5 percent of TVE sales revenue be spent on these programmes. The government has also established an office responsible for overseeing TVE science and education affairs, and has established many TVE training centres. GOC also recognises the benefits of foreign direct investments in TVEs.

In the mid 1980s, some localities initiated a transformation of the ownership and governance structure of TVEs. Some collective TVEs were sold to private domestic or foreign investors or firms. Other collective TVEs, especially in the coastal regions, issued shares to mobilise foreign capital. An estimated 3.5 million TVEs adopted the joint stock co-operative form.

The TVE Law of 1 January 1997 protects the right of TVEs to act as independent business entities and secures management autonomy with full responsibility for financial consequences of business decisions. By covering enterprises with different forms of ownership, it acknowledges the existence and growing importance of the non-public sector in rural enterprises.  Further improvements in the TVE Law are expected in the near future.  

The GOC is also committed to improving the local and global environment. GOC recognises that TVEs contribute to environmental pollution, high energy use and low product quality. In line with its overall policies to increase energy efficiency and reduce pollution, the GOC has made the drive towards energy conservation, technology innovation and quality awareness in the TVE a top priority. The State Environmental Protection Administration (SEPA) has undertaken studies of TVE environmental pollution prevention since the mid 1980s. SEPA’s findings were incorporated into subsequent legal action by the State Council and the MOA to strengthen environmental management and energy conservation of TVE.  Such legal actions include:
•	Township and Village Enterprise Law from January 1st 1997
•	Energy Conservation Law from November 1st 1997
•	Environment Protection Law from December 26th 1989
•	Water Pollution Protection Law from May 11st 1984
•	Air Pollution Protection Law from September 5th 1987
•	Solid Waste Law from March 1997
•	Water Law from January 21st 1988
•	Temporary Regulation for Energy Conservation Management from January 12th 1986

In order to promote technology development and improve productivity, the GOC has traditionally used an approach of picking technology winners and funding the installation of these technologies on a broad scale. China’s move towards a market economy and the limited availability of public funds for such purposes has led GOC to change this supply-based  approach. GOC relies increasingly on market-forces to promote adoption of improved techniques and technologies. For TVEs, this includes strengthening efforts to enforce relevant laws on the county level, letting the market mechanism guide TVE technology choices and shutting down obsolete technologies. In complement, the GOC is facilitating consumer demand and strengthening the market-based regulatory environment to induce technological change. 

The MOA recently launched the “One Hundred Counties Integrated Rural Energy Construction Programme”.  This programme is based on incentives (recognition and awards for counties, financial support).  The program also encourages interagency cooperation at the county level to achieve rational utilisation of energy by means of integrated rural energy planning, renewable energy development and energy conservation.

3.	Prior or ongoing assistance

In the early 1990’s the “Energy Sector Management Assistance Programme” (ESMAP) of UNDP and  World Bank completed a study that resulted in the UNDP/GEF project titled: “Energy Conservation and GHG Emissions Reduction in Chinese Township and Village Enterprises – Phase 1”. Phase 1 (which is a precursor to the present project and was implemented during 1998-1999) provided detailed information on technology and markets related to energy efficient technologies in TVEs. The project identified and detailed the barriers to energy efficiency in TVEs and it designed a barrier removal framework. The project also identified sites suitable for the implementation of pilot barrier removal projects. In addition, it assessed the national capacity to provide energy efficiency services to TVE, developed a comprehensive training package and trained trainers of local training institutes. Finally, it built capacity to remove the barriers. 

The above project is one in a programme of energy and environment projects that UNDP is supporting. Many of the projects focus on removing barriers to energy efficiency and clean energy use. The most closely related projects are:

•	Capacity Building for Rapid Commercialization of Renewable Energy in China, Project No. CPR/97/G31.  This project (financed by GEF and the Governments of Australia and the Netherlands) is to build the capacity of China to remove barriers to widespread adoption of renewable energy sources in China.
•	Improving the Performance of Power Plants in China.  Project No. CPR/96/312. The objective of this project is to build the capacity among China’s power industry to use modern management practices, tools and technologies to improve the technical, economic and environmental performance of power plants. This project focuses on plant level management.
•	Capacity Building for the China Green Lights Programme, Project No. CPR/96/311.  The objectives of this project were to create the capability in China to introduce market mechanisms to create a market pull for energy efficient lighting through consumer awareness and confidence in the products. 
•	Modernized Biomass Energy in China: Jilin, Project No. CPR/99/H01.  The objectives of this project are: (1) to build the capacity to design, install and operate biomass-based CHP, (2) to demonstrate biomass gasification technology, and (3) to disseminate the information learned throughout China and other developing countries.
•	Study on Resources Concessions for Sustainable Development of Renewable Energy, Project No. CPR/97/005.  This study aims at establishing a framework for doing resources concessions and will result in a set of draft model regulations, power off-take agreements and policy recommendations on renewable energy.

The GEF/UNDP project “China: Issues and Options in GHG Emissions Control” – executed by the World Bank - identified large energy savings and green house gases (GHG) abatement potentials via “no regrets” projects in all key economic sectors.  It provided a foundation for a portfolio of GEF-supported projects. GEF Energy efficiency projects currently under implementation include: 

-	The “China Efficient Refrigerators” project (UNDP/GEF) focusing on both demand-pull and supply-push activities to promote the design, production, and utilisation of more energy-efficient refrigerators throughout China.  The project addresses the key market, technological, social and commercial barriers both to the adoption of high-efficiency refrigerator technology by Chinese manufacturers and to the acceptance of high-efficiency refrigerators by Chinese consumers.
-	The “China Efficient Industrial Boilers” (WB) project aims to develop affordable and energy-efficient industrial boiler designs; to mass produce and market them; and to disseminate them.  The project provides technology transfer and technical assistance.
-	The “China Energy Conservation” (WB) project aims to achieve sustainable investments and increases in energy efficiency through the proliferation of energy performance contracting to a variety of companies in China through improved access to information on successful experiences with energy efficiency. The project supports the establishment and pilot demonstration of the first Energy Management Companies (EMCs – similar in concept to energy-service companies), followed by a program to support proliferation of the EMC concept.
  
UNDP is also implementing CPR/96/513, Small Enterprise Reform and Development. In the pilot city of Zhenjiang, this project is providing support to SME, notably through the establishment of a Small Credit Guarantee Fund. This facilitates SME access to loans to upgrade production. The project has established Administrative Regulations for the Fund. Experience so far indicates that the Fund can operate on a commercial basis and support SME development. 

A relevant project in the context of the removal of financial barriers is the Asian Development Bank’s project to strengthen rural credit co-operatives and improve risk management skills of the Agricultural Development Bank of China.  That project increases capacity of rural financial organisations.

4.	Institutional framework for sub-sector

Central government level: TVE operation is regulated by the “Law of the People’s Republic of China on Township Enterprises”, number 76, issued on 29 October 1996. The TVE Bureau of the MOA is the Government national focal point for the TVE sector. All policy matters on the TVE sector are coordinated by the TVE Bureau and the State Council clears all policy issues administered by the TVE Bureau in advance.

The MOA TVE Bureau consists of eleven divisions, has 75 professional staff and is headed by a Director General, followed by three Deputy Director Generals, ten Division Directors and Deputy Division Directors. The Bureau also oversees TVE related energy and environment activities, including planning, R&D, technical support. The MOA also administers a TVE college, a TVE research centre and a TVE Daily Publishing Company, which issues the monthly TVE Magazine.

The following national agencies also have the following responsibilities with regards to TVEs:

The State Development Planning Commission (SDPC). Determine macro economic and social development policies and prepare short and long term development plans of national strategic importance, which include draft policies and plan programmes for energy development. 

Ministry of Science and Technology (MoST). Prepare large national science and technical programmes, mobilize resources and coordinate efforts of different institutions to implement these programmes. MOST have some responsibility for technology development and research related to TVE sector.

State Economic and Trade Commission (SETC). Prepare national trade and business policies, supervise performance of large enterprises and key economic sectors, design and implement state annual economic plan. SETC also provides policy support to develop TVE economy. The SETC has an overall national role to coordinate energy efficiency in China.

State Environment Protection Administration (SEPA). Design national standards of environment protection, prepare and enforce the follow-up to various regulations and policies, monitor air, water and solid waste pollution and other types of pollution and collect pollution fees. SEPA is in charge of environmental supervision of the TVE sector. 

Province government level: Provincial level governments have a strong role in the context of bringing about TVE transformation, as they are in charge of establishing implementation regulations for TVE (based on the law established on the central level). Each province appoints an agency to be responsible for the development of the TVE sector. These agencies report directly to the TVE Bureau of the Ministry of Agriculture, but they do not have a direct administrative relationship with individual TVEs. 

Within the SEPA framework, the local Environmental Protection Bureaus form part of the local governments, under the administrative supervision of local governments. EPBs review EIAs for all projects funded through government channels.

County government level: Ninety percent of China’s 2500 counties have an office specifically responsible for the TVE sector.  They are in charge of TVE registration and play a strong role in TVE’s day to day operation. While the overall responsibility for environmental supervision for the TVE sector is located at the central level with SEPA, enforcement is carried out at the local level through Environmental Protection Bureau which form part of the local, municipal or provincial governments. 

Support structures: A number of TVE technical service centres exist at the regional level. They provide product quality, management and marketing services for TVE.  Some of these centres are under MOA leadership, others are affiliated to other ministries.

B.	Project Justification
1.	Problem to be addressed

Based on the findings of the Phase 1 project, Chinese TVEs in the brick-making, cement, metal-casting and coking sectors continue to use outdated, inefficient technology. This leads to high pollution emissions, in particularly greenhouse gases. Finance is available to fund technology upgrades, and in many cases such upgrades would be economically and financially justified. However, TVEs do little to reduce pollution, or to upgrade their production technologies, or to produce higher quality products, due to a series of inter-related barriers:

a) Policy barriers 

In the past, policies both to regulate enterprises and promote enterprise development were aimed at state-owned enterprises and were implemented through sector-focused line ministries. This includes efforts to increase energy conservation and environmental protection. The administrative exclusion of TVE from these initiatives led to a lack of clarity regarding application of policy, and restricted TVE participation in many activities. This barrier remains, despite the fact that recent legal initiatives (such as the TVE law, the energy conservation law and a number of pollution control laws) apply to TVEs. 

When national laws and regulations clearly do apply to TVEs, enforcement of these regulations at the local (township and county) level is often weak. This is largely because the role of local government in energy conservation and environmental protection is confused. On the one hand, local government is responsible for enforcing relevant laws, including shutting down obsolete plants and collecting pollution fees. On the other hand, given that they may have investments in, or partly own, the TVEs, and given the need to maintain social stability and employment levels, local governments are keen to maximize TVE profitability. 

This difficulty to translate national policy into local action also limits the ability of TVEs to respond to market forces. Despite national policies to liberalise and standardise the market, in practice TVEs still need to maintain strong connections with the local government if they are to prosper. Without the support of local government officials it can be difficult to obtain a business license, or project approval, or loans, land leases and workers. Also tax and social contributions can be costly. Building government support consumes key human resources, resources that otherwise would have been allocated to business development.

b) Technology barriers

TVEs started out as commune-based, non-sector specialist enterprises and from their outset relied on low-grade, non-standardised technologies. As TVEs in the four sectors have developed, they have been isolated from both government sponsored and market mechanisms to upgrade technology. With regards to the former, the fact that they lie outside the sector-specialist line ministries means they have had little access to the new technologies. Notably, TVEs are excluded from participation in many technology improvement and training programs under the SETC and MOST. With regards to the latter, TVEs in the four sectors operate largely in areas isolated from the market. Market oriented technology transfer mechanisms – such as interchange with technology suppliers – have therefore been very limited and sporadic. The result has been few efforts in these sectors by TVEs to upgrade. 

A further barrier to technology upgrades is the low awareness of TVE managers, both of the benefits of increased energy efficiency, and of the alternative technologies available.

When TVEs do decide to upgrade technology, they are often unable to adequately take into account the existing conditions of production. This leads to the poor integration of system components and sub-standard performance. Moreover, TVE staff are often not qualified to operate and maintain the new equipment properly, and the supply of spares is sub-standard. 

c) Market barriers

Local markets are often not competitive in the four concerned sectors. TVE are rarely able to enter the market in other counties that have a TVE industry in that same sector. This is largely due to protectionist measures, and is exacerbated by lack of marketing skills and absence of distribution networks. Notably, rural building material markets are highly localised and non-competitive. 

In addition, rural consumers for building materials demonstrate no willingness to pay for products that exceed basic product characteristics, even though the use of such products offer significant savings and additional benefits.  At the same time, local governments do not promote product quality, e.g. by enforcing minimum heat efficiency standards for buildings, construction guidelines or product quality specifications.

d) Financial barriers

Should TVEs decide to upgrade their technology, they are faced with several barriers to accessing finance. 

Until recently, only the Agricultural Bank of China (ABC) and the Bank of Agricultural Development were allowed to set up branches in rural areas. This has changed recently but most commercial banks lack local presence. The lending of commercial banks to TVE is also limited because TVE often do not have proper procedures for asset assessment, they do not control sufficient securities to meet formal loan eligibility requirements and banks have little experience lending to TVE. Finally, TVE managers are also reluctant to seek loans. This is in part because they have a shortage of resources to devote to investment planning and project monitoring. Also, TVE are reluctant to make investments which will not lead to immediate returns and/or expansion of jobs. 

Like of rural finance also reduces demand for improved product quality. Unlike the rural real-estate market in developed countries, private builders in rural China do not finance (mortgage) the construction of houses but rely on their savings and income. This severely limits their ability to purchase higher quality building materials for construction, even though the life-cycle benefits of building better houses would far exceed the added costs.

2.	Expected end of project situation

This project, in complement with a series of GOC initiatives, will bring about a market transformation in eight pilot counties by removing the above barriers. Building on this, the project will also strengthen national capacity to govern the clean development of TVEs. By project end, a national barrier removal process will be irreversibly underway. This will have led to a significant and sustained increase in commercial funding to technology upgrade/energy efficiency projects in TVEs.

As a consequence of this project, improved production techniques and processes will have led to on-site energy saving in the four sectors of between 20 and 60 percent. In addition to this on-site energy saving, technology upgrades will have led to product quality improvement and additional energy saving downstream.

Specifically; 

a) Policy barriers removed in eight pilot counties

Local Policy Implementation Committees (LPIC) will be established in eight pilot counties. Under these committees, experts, government officials and TVE will negotiate detailed Voluntary Agreements for TVE transformation. The Agreements will define commitments by both local governments and TVEs. The Agreement will cover the implementation of both existing command and control programmes and innovative incentive-based programmes. For example, the Agreements will include strong financial incentives (see section d below for more details) for the implementation of concerned regulations. The Agreements will also cover how to separate TVE management from government, and how to get technical and administrative support to TVEs. Under the Agreement, an award system will honour and recognise successful participants. The local TVEs will also commit to participating in later project activities related to dissemination and replication of project results.

Participating local officials will have been enabled through training to improve the implementation of existing laws and regulations related to environmental protection, energy conservation, industrial and fiscal policy, ownership/stockholding of TVE and land use rights on the local level. 

b) Technology barriers removed in eight pilot TVE 

The project will identify national and international agencies qualified to give technical and technological support to the 8 pilot TVEs. The project will then finance this support to the pilot TVEs. Likewise, the project will provide technology information and contribute to raising local awareness and support for energy efficiency projects. This will remove technology barriers at the 8 sites.

To complement this, the project will provide for technical and management training to the pilot TVE managers and other staff to upgrade their production using modern technologies. 

c) Market barriers removed for the eight pilot TVE

By project end, the pilot TVEs will be exposed to market forces and incentives. Product Standards will have been developed and will be enforced (under the ‘Voluntary Agreements’). This will also facilitate the sales of high quality products. Local markets will be open to competition.

To assist the pilot TVEs, the project will use the services of suitably qualified national/international agencies to support the development of marketing strategies to ensure increased sales of quality products for the pilot TVEs. Ways to expand their market to neighboring and distant counties will be determined. In some cases export may be an option. 

These measures, and the Voluntary Agreements, will lead to the sophistication of the market and will slowly increase customer demand for higher quality products.

d) Financial barriers removed in eight pilot TVE

A financial mechanism dedicated to channeling funds to bankable investments in TVE energy efficiency will be established – the revolving capital fund (RCF). The first 8 projects to be financed by the RCF were identified under Phase One. Through the project, suitably qualified national/international agencies will oversee the full design of these 8 projects and their submission to the RCF. Notably, the LPIC will ensure that financing from the RCF to TVEs is only approved if the TVE complies with environmental standards. The project will also deposit seed funding into the RCF, to mitigate the risks to lenders. With this support, by project end, the pilot TVEs will have procured and constructed technology and commenced with the production of energy efficient products.

In addition, staff of financial institutions, staff of non-pilot TVE, and staff of SME business development service providers will have participated in training on the preparation of bankable energy conservation and product quality improvement projects. 

These exercises will collectively demonstrate, both to TVEs and to financial institutions, that investing in TVE energy efficiency is a commercial, profitable exercise.

e) Replication of barrier removal activities in additional TVE and counties, and, where appropriate, at the national level

To ensure sustainability, building on the work in the 8 counties, a barrier removal framework able to support TVEs across China will be put in place. By the end of the project, this framework will have demonstrated how to remove the barriers in the 8 counties, and it will demonstrate that removing them leads to win-win solutions. The framework will be continuously monitored, and sections will be strengthened, modified or phased out as applicable. From the outset, every measure will be taken to ensure that the framework is sustainable – it will continue functioning beyond the support of the project.

A national Policy Implementation Committee (PIC) will oversee the replication and dissemination of the barrier removal activities across China. Recommendations regarding the application of this barrier removal framework nation-wide will have been given and disseminated to all government authorities, at the appropriate level, including the State Council, SETC, SSTC and SEPA. A framework capable of developing markets, facilitating financial flows, separating government from TVE management and promoting technologies will be in place. The Voluntary Agreement approach will be promoted nationally.

A consortium of agencies qualified to provide services to TVE will be established – the Production Technology and Product Marketing Consortium (PTPMC). By project end, all national and international agencies qualified to provide economic, technical, managerial or financial support to TVEs will be members of the PTPMC (members of the Consortium will provide services mentioned in a) to d) above). Through the project, members of the PTPMC will undertake feasibility studies and prepare detailed project designs for over 100 TVE technology upgrade projects from across the country. Each of which will be of a high enough quality to receive commercial funding. Each of which would lead to increased energy efficiency and GHG emission reductions. Included in this will be activities to raise awareness on energy efficiency issues, such as undertaking energy audits. PTPMC will help TVEs to secure financing for these projects, by the RCF or other sources.

TVE staff and local governments officials from outside of the 8 pilot sites will be invited to many of the training events under a, b, c and d.

By project end, the impact and framework of the LPIC will have been assessed, and recommendations to modify their TOR incorporated into the workplan. The feasibility of similar LPIC in other jurisdictions across China will have been assessed, and a plan for their dissemination/replication initiated.

By project end, impact and framework of the national PIC will have been assessed. Recommendations to modify it will be developed and approved under the project. 

By project end, the PTPMC will be operating on a commercially sustainable basis. Its main functions will be: act as an association of service providers; market the services of its members to TVEs; seek out business opportunities for its members; organise (on a commercial basis) support to its members such as training, information, etc. Through the support of the project, a large number of service providers through China will have had experience, will have worked with foreign counterparts, and will have received direct support. 

By project end, the operations of the RCF will also be assessed. The need for a dedicated fund for TVEs will be assessed, and if no longer necessary, the operations may be absorbed by the ABC. Alternative mechanisms for channeling funds to ABC will be assessed, and effort taken to ensure that ABC does not benefit from a monopoly position in this potentially lucrative area. 

Annex 2 provides indicators of the end of project situation. A more detailed description of LPIC, PIC, PPTMC and RCF is provided in Annex 8.

3.	Target beneficiaries

The capacities of the government system to transform the TVE sector will have been strengthened, notably through provincial and local government offices in charge of TVE regulation and with MOA, SEPA and SETC. These latter will be enabled to co-ordinate the transformation of the TVE sector in the four industries according to the development objectives defined by the GOC. This will contribute to economic growth in rural areas. Local governments will benefit from higher taxes that result from the economic growth.

Pilot TVE will benefit from a strengthened and clear regulatory environment, staff training and investment.  They will become more competitive and increase profitability. TVE staff from pilot and non-pilot TVE that participated in training measures will benefit from higher wages for their more skilled labour. Gender sensitive regulations in the context of participation in training measures will alleviate gender biases within TVE.

SME business development service providers will be able to strengthen their own capabilities and competitive positions in the business development service market. They will have experienced extensive client exposure and will have earned a reputation to attract future clients.  The project will strengthen the market for business development services in general by demonstrating that this is a viable business.

Involved financial institutions will benefit from a low-risk and profitable loan portfolio and the experience with TVE related energy conservation and product quality upgrading financing for future lending.

Across China, the rural population will benefit from improved environment and more competitive TVEs. The rural economy will benefit from the project indirectly, as the regulatory experience should help transform TVE in other sectors as well. These benefits will apply to additional TVEs and counties through replication.

The people of the world will benefit from reduced GHG emissions, and therefore less risk from climate change. People in rural areas in China will benefit from lower pollution levels.

4.	Project strategy and institutional arrangement
4.1	Strategy

Based on the findings of the Phase one project, this project adopts a comprehensive, innovative and ambitious market transformation approach to promoting energy efficiency in TVEs. The two elements of the strategy are building a sustainable barrier removal framework, and providing direct support to TVEs and local governments. Given its innovative nature, the barrier removal framework will be subjected to constant monitoring and, if necessary, modification. 

In order to build the barrier removal framework, the first step is for the project to establish barrier removal institutions covering 8 pilot counties. The institutions will demonstrate the benefits of barrier removal, and they will demonstrate how barriers can be removed. Next, during the project, and based on the pilot experience, the institutions will be replicated, expanded nationally, or absorbed into existing national institutions. 

The main elements of the barrier removal framework are (see Annex 8 for further details of this framework):

•	PIC, which includes representatives of concerned government agencies. It will have the government mandate to implement the market transformation initiatives nationally. Locally, the LPICs will oversee the market transformation. Each LPIC will work closely with the PIC.
•	A key finding of Phase 1 was that there are many agencies capable of providing energy efficiency services to TVEs, and there is a nascent demand for such services. However there is no market mechanism to connect the agencies with the demand. Hence, as recommended under Phase 1, the project is to establish a Consortium of agencies - the PTPMC. The project will also help the PTPMC to become commercially sustainable. The project will use the services of the PTPMC and its members to remove market, policy and technology barriers, at the 8 sites and beyond. The PTPMC will be managed by a small secretariat. It will help its members to provide services, on a competitive basis, to pilot TVE and other stakeholders. 
•	The revolving capital fund (RCF) is a dedicated financial instrument hosted within the ABC to catalyse TVE based investments in energy conservation.  It provides financing to TVE that seek to modernise their production technologies and upgrade the quality of their products that also result in significant energy conservation. Initially the RCF will be jointly funded by GOC, Agricultural Bank of China, and UNDP/GEF.

The project will support subcontracts to design the PTPMC and RCF. The project will support the initial activities of the RCF, PTPMC Secretariat, PIC and LPIC. Project activities will ensure that, progressively, all will become institutionally and financially sustainable. By the project end, the PIC will be able to help counties across China to remove policy barriers; the LPIC will continue to support market transformation in their counties; the PTPMC Secretariat will be self-financing and it will be helping members to provide services, on a commercial basis, to TVEs and financial institutions across China; and the RCF will continue, under the ABC, to channel commercial funding to profitable energy efficiency investments. Towards the project end, the performance, relevance, design and functions of these institutions will be assessed as part of the project, and recommendations made for their continued operations. 

To complement the barrier removal framework, a major element of the project is to provide technical assistance and capacity building support to TVEs, TVE staff and to local government officials. Much of this will be done through subcontracts. These sub-contracts are grouped into four categories: regulatory reform; engineering services; marketing and management; and financial management. Altogether at least 30 sub-contracts will be provided and the general terms of reference for each group of sub-contracts is provided in Annex 3.

All sub-contracts in these 4 groups (under budget lines 2100, 2200, 2300 and 2400) will be managed by UNIDO. However, in order to build capacity within the PTPMC, it will have a management role. PTPMC will develop the TOR for each sub-contract, it will source service providers, it will oversee the competitive bid and make recommendations to UNIDO, and it will monitor the sub-contracts implementation, making recommendations to UNIDO regarding payments. Members of the PTPMC will be eligible to compete in the bid. UNIDO will provide strong technical support to PTPMC in this process. This support will include review/clearance of equipment specifications as well as review/finalisation of TORs.  This approach to managing the sub-contracts is designed to develop the capacity of PTPMC to provide services to its members and to TVEs, and to ensure the sustainable operation of PTPMC after the project.
4.2	Institutional Arrangements

The project will be executed by UNIDO and implemented by the MOA. MOA will appoint a senior official as National Project Director (NPD). A project management office (PMO), under the supervision of the NPD, will be established. A CTA – full time for the first year and then with short term inputs - will support the NPD and PMO.  After the first year, a full time UNV will be recruited to support operations of the PMO. (See the below organogram of institutional arrangement)

A Project Steering Committee, composed of the MOA (Chair), NPD, MOF, UNDP and UNIDO will be established to review progress and recommend future activities, updating work-plan etc. Steering Committee Meetings will be held each year in Beijing. The PMO Director, PIC Senior Administrator, RCF Manager, PTPMC Director and CTA may be called on to attend Steering Committee meetings. The project will also promote the involvement of other potential financiers (such as development banks) in the Steering Committee. 
 
The project will also benefit from the short-term inputs of international experts. Indicative outline TOR for these consultants is provided in Annex 7. These TOR will be developed in response to needs during project implementation. The short-term consultants will contribute directly to individual project activities, and will undertake their work in China. Given UNIDO’s in house capacity, it is expected that almost half of these short term technical consultants will be UNIDO staff. This is also more cost-effective. Much of the work of the short-term consultants will be to support the PTPMC and its members. 

Institutional Arrangement

5.	Reasons for assistance

a)	GEF assistance

GHG emissions from industrial TVEs constitute a major share of China’s overall GHG emissions. Their average relative energy consumption is 16% to 60% higher than currently available technologies and they produce low quality products that result in additional energy use downstream.  In addition, according to recent estimates, TVE contribute half of all of China’s environmental pollution.

The proposed project has the potential to reduce substantial amounts of CO2 as well as other pollutants. It also satisfies all GEF criteria under its operational program 5. The potential for nation-wide energy conservation and CO2 reduction in the four TVE industries will be more than 1,000 times more than those that will be achieved in this project.  This replication potential justifies the establishment of a barrier removal framework that will be self-sustained after project intervention.

b)	Reason for assistance from UNDP

This project does not only contribute to global and local environmental protection.  It will assist in the alleviation of poverty by developing the rural economy, creating new employment opportunities and improving the livelihoods of rural people.  It contributes to the transformation of the rural economy, particularly the TVE sector. As such, it is supportive to China’s general economic reform process. It is also sensitive to the participation and education of women. UNDP is a competent resource on all of these issues and they are central to UNDP’s mission.

UNDP has extensive experience in providing technical assistance to China’s environmental protection and energy development.  It is well placed to work with and advise the government on policy, strategy and best approaches to meet serious environmental and energy challenges. 

6.	Special considerations

Project financial mechanism: The RCF is an alternative mechanism to energy service contracting.  It will attract outside funding for energy conservation investments without getting involved into the complexities of performance contracting. This design feature is based on the realisation that TVE energy conservation investments are small. The RCF will be sufficiently flexible for inexperienced TVEs to access it. 

Voluntary agreements between local and central government: The project introduces the idea of voluntary agreements between the central and local governments as a way of strengthening the implementation of laws and regulations on the local level using an incentive based approach.  Under this approach, the compliance with the agreement is rewarded by recognising the accomplishments of individual public officials in the complying county and eligibility of TVE in the county to receive the subsidised services of SME business development service providers and funding for energy conservation and product quality improvement projects. The voluntary agreement needs to determine a penalty mechanism for the case of non-compliance.

Gender: All TOR, sub-contractors, activities will be designed to take into consideration gender issues. The project also addresses gender issues by making gender sensitive regulations in the context of participation in training measures.  This will alleviate gender biases in labour practices within TVE. To ensure these, a part-time national gender consultant will be recruited at the outset, and UNIDO technical experts will provide further support on gender issues. The reports of the Gender consultant will be given full attention by project decision-making bodies, and a summary report will be provided to each annual Tri-Partite Review meeting.

Support to SME: In most economies, the core sectors targeted by the project (notably coking, cement and brick-making) do not have a strong SME component. Hence the project’s direct support to SME is limited. However, there will be knock-on effects and other forms of support. First, the project seeks to develop the market for SME business development services.  The PTPMC should put the demands of TVE in touch with the supply of SME service providers, in a commercial context. Second, many of the suppliers to large scale TVEs in the coking, cement and brick-making sectors are SME. Hence, by developing large-scale TVEs, this should help their SME suppliers.

Other social issues: Increasing the competitivity of TVEs and of the TVE sector as a whole could, in theory, have a negative impact on employment leading to lay-offs. However, related experience from other countries suggests that this will not be the case. To address this, the project is to recruit a national expert (Social Impact Expert) to look into this issue in-depth, to help the project monitor this issue, and to make appropriate recommendations to the project decision-makers.

7.	Co-ordination arrangements

From an early stage in project execution,  the PIC will assume responsibility for ensuring co-ordination of work with other development projects, with the ongoing GOC TVE reform process and with the work of other Commissions and line Ministries. The PIC will include representatives of SDPC, SETC, MOST, ABC and SEPA

The PMO, under the leadership of the NPD and with support from the CTA, will play a key integrative role in the start-up phase of the project.  Together they will ensure integration between the operational activities of PIC, PTPMC and PMO.

The MOA’s TVE Bureau will play a critical role in the co-operation between local, provincial and national government officials in the context of forming the PIC/LPIC mechanism as well as co-ordination with ongoing projects and programmes, such as the “One Hundred Counties Integrated Rural Energy Construction Programme”.

Members from other government ministries will be expected to facilitate in making project arrangements, such as to ensure the full participation of industrial SME business development service providers and the financial sector.  When applicable, members from other government ministries will be expected to co-ordinate with other ongoing activities, such as the ADB’s project to strengthen rural credit co-operatives and improve risk management skills of the Agricultural Development Bank of China.

UNIDO will play a key role in investment promotion activities using its global network for and experience with the facilitation of industrial investment promotion.  UNIDO will also provide key technical support services to the project, drawing on its pool of highly specialised staff and consultants.

UNDP, in its implementing agency capacity, contributes its broad expertise with project implementation in the field of environmental protection, energy conservation and capacity building in China to this project.  UNDP will ensure project co-ordination with related ongoing projects.

8.	Counterpart support capacity

The national counterpart (MOA) has already established a nation-wide administrative network capable of providing effective support for the implementation of the project. The network consists of the provincial prefecture and county level TVEs offices and rural energy offices with some 110,000 staff totally. In MOA, the Bureau of TVE and the Department of Research, Education & Rural Environment have governmental functions related to the production and energy efficiency in TVEs. MOA can also supply assistance and support in the field of investment and technology development in TVEs. MOA has already successfully implemented a series of WB and UNDP projects, especially the joint study with UNDP/WB/ESMAP on energy efficiency and pollution control of TVE brick making, coking and metal casting sub-sectors.

The MOA, through Phase 1 of this project and the “One Hundred Counties….” Programme, has developed its capability for implementing multi-component energy and environment related projects in rural areas, especially in TVEs, as well as the capability to co-opt various sources of expertise and resources into action. 

In addition, MOA have received assistance support from the other ministries and commissions such as MOF, SDPC, SETC, MOST, SEPA etc. when MOA developed activities for energy conservation and GHG emissions reduction in TVEs.
 
C.	Development Objective

The development objective of this project is to reduce the potential adverse social, environmental and economic consequences of global climate change by reducing GHG emissions from TVE-based production and use of building materials, coke and metal-casts. This will also lead to improvements in the quality of life in rural areas.
D.	Immediate  Objectives, Outputs and Activities

An overall success criteria of the project would be an increased amount of commercial funding to energy efficiency upgrades in TVEs across China. Much of this funding should be through the project partners or institutions. Specifically, a list of criteria for each of the five objectives is provided in Annex 2.  A monitoring system will be put in place to monitor the overall and specific criteria.

1.	Immediate Objective 1: 

To create an institutional mechanisms for barrier removal at the national, county, or enterprise level
(See Annex 2 for specific success criteria)

Output 1: Project coordination and management capacity 
Activity	Responsibility	B/L	
1.1.1. Appoint National Project Director. (NPD)	MOA		
1.1.2. Establish Project Management Office (PMO)	MOA		
1.1.3. Recruit CTA 	UNIDO, MOA	11-001	
1.1.4. Recruit Project Coordinator and Assistant to PMO	UNIDO, MOA	17-001, 17-014	
1.1.5. Appoint National Staff for PMO 	MOA		
1.1.6. Inception workshop, and preparation of detailed first year workplan, including detailed TOR for all activities to be implemented in the first year.	UNIDO, CTA, MOA	35-006	
1.1.7. Training of PMO, PIC, RCF, PTPMC staff on project 
          management (MS Project)	UNIDO, PMO	33-001	
1.1.8. Recruit United Nations Volunteer 	UNIDO, MOA	14-001	
1.1.9. Preparation of detailed annual workplans, including detailed TOR for all activities to be implemented in the year.	UNIDO, CTA, MOA		
1.1.10. Annual Steering Committee & TPR Meetings, to approve workplans	PMO	35-005	

Output 2: Policy Implementation Committee (PIC) established and its capacity built.
Activity	Responsibility	B/L	
1.2.1. Recruit Senior Administrator (PIC Adm) for the PIC	UNIDO, CTA, MOA	17-006	
1.2.2. Recruit PIC Secretariat support staff	PIC Adm., UNIDO, CTA	17-007 17-008	
1.2.3. Equip PIC Secretariat in the MOA.	PIC Adm., UNIDO, CTA	41-001, 42-002	
1.2.4. Recruit legal expert to assist in the preparation of the PIC 
          statutes	UNIDO, CTA	11-002	
1.2.5. Draft written statutes for the operation of the PIC	PIC Adm., CTA,
legal expert	11-002	
1.2.6. Constitute the PIC and nominate national/ international 
          members	PIC Adm., MOA, UNIDO		
1.2.7. Train PIC members/staff on regulatory reform	UNIDO, CTA	31-001	
1.2.8. Adoption of PIC Statutes	PIC members		
1.2.9. Annual meetings with LPICs, PTPMC, RCF	PIC Adm., PMO	35-001 35-002 35-003	

Output 3: Local PICs established in 8 Counties.
Activity	Responsibility	B/L	
1.3.1. Issue directives for establishment of LPIC’s.	PIC Adm., 
PIC Members, 
legal expert 	11-002	
1.3.2. Constitute LPIC’s in pilot townships	PIC Adm., 
Local Gov’t		
1.3.3. Prepare information materials on project and LPIC objectives	PIC Adm., PMO	51-40	
1.3.4. Identify LPIC focal points	Local Gov’t 
PIC Adm.		
1.3.5. Nominate LPIC Members	Local Gov’t
PIC Adm.		
1.3.6. Conduct training for LPIC focal points on strengthening of regulatory reforms	PTPMC, UNIDO, CTA, Sub-contractor (S/C)	21-100	

Output 4: Production Technology and Product Marketing Consortium (PTPMC) established and its capacity built.
Activity	Responsibility	B/L	
1.4.1.  Recruit PTPMC Director	UNIDO, CTA, MOA	17-002	
1.4.2.  Recruit national staff for PTPMC Secretariat	PTPMC Dir. , CTA, UNIDO	17-003, 17-004, 17-005	
1.4.3.  Equip office for the PTPMC secretariat	PTPMC Dir. , UNIDO, CTA	41-001, 42-001	
1.4.4.  Design and establish PTPMC	UNIDO, CTA, S/C	21-001	
1.4.5.  Draft PTPMC business plan	PTPMC Dir. , S/C, CTA	21-001	
1.4.6.  Training of PTPMC Director and contract officers on international contract rules and practices, including UNIDO procedures.	UNIDO	32-001	
1.4.7.  Identify and pre-select qualified members of PTPMC	PTPMC, UNIDO, CTA, MOA, S/C		

Output 5: Revolving capital fund (RCF) established and its capacity built. 
Activity	Responsibility	B/L	
1.5.1.  Recruit RCF Manager from ABC	UNIDO, ABC, 
CTA, MOA	17-009	
1.5.2.  Recruit RCF Loan Officer and support staff	RCF Manager, 
CTA, UNIDO	17-010 17-011 17-012	
1.5.3.  Establish and equip RCF office	RCF, CTA, UNIDO	41-001 42-001	
1.5.4.  Design and Establish RCF 	RCF Manager, CTA, UNIDO, S/C	21-002	
1.5.5.  Draft and adopt investment criteria/prospectus	S/C, ABC, RCF, UNIDO, CTA	21-002	
1.5.6.  Conduct technical training for RCF and local ABC based on needs assessment.	S/C	21-002	
1.5.7. Establish and agree modalities transfer GEF funds to RCF	ABC, RCF, UNIDO, CTA, SC		

2.	Immediate Objective 2: 
To remove policy barriers in eight counties by establishing and implementing incentives and monitoring systems, and strengthening existing regulatory programs.
(See Annex 2 for specific success criteria)

Output 1: An agreed action plan to TVE market transformation. This will include improving implementation county level regulation related to energy conservation, environmental protection and product quality improvements.
Activity	Responsibility	B/L	
2.1.1.  Draft action plans, including indicators and monitoring systems, to strengthen the application of local regulations	LPIC focal points, S/C	21-100	
2.1.2. Draft and finalize a voluntary agreement between 8 LPICs and PIC to implement the action plans. Agreement will include an incentive/penalty based enforcement mechanism	LPIC focal points,  PIC, S/C, CTA	21-100	
2.1.3.  Identify training and service needs for the implementation of this plan	LPIC Adm., PTPMC, CTA, S/C	21-100	
2.1.4.  Provide training and other services according to needs assessment from 2.1.3.	PTPMC, UNIDO, S/C	21-100	

Output 2: Financial incentives for the implementation of concerned regulations
Activity	Responsibility	B/L	
2.2.1.  Initial evaluation of implementation of voluntary agreement from 2.1.2 and regulatory performance	PIC/LPIC		
2.2.2.  Based on 2.2.1, select counties eligible for TVE energy efficiency investments 	PIC		
2.2.3 Facilitate investment from RCF into selected counties	PIC, RCF		

Output 3: Incentive/penalty system continuously applied to facilitate implementation of TVE transformation agreement
Activity	Responsibility	B/L	
2.3.1.  Continuous monitoring and reporting on implementation of voluntary agreement relative to indicators in counties	LPICs, PIC Adm., PMO		
2.3.2.  Apply awards and penalties based on review of monitoring reports (such as: merit based awards to local officials, financial penalties (i.e.) All should be in line with action plans & agreements 	PIC	51-040	
3.	Immediate Objective 3: 
To remove market and technology barriers in eight pilot counties
(See Annex 2 for specific success criteria)

Output 1: Enhanced capacity within TVEs to upgrade technology and products, and to market products.
Activity	Responsibility	B/L	
3.1.1.  Confirm training needs of TVE in energy efficiency technologies	PTPMC, CTA/UNV,       11-050	11-050	
3.1.2.  Confirm training needs of TVE in product quality management	PTPMC, CTA/UNV,        11-050	11-050	
3.1.3.  Confirm training needs of TVE in product marketing management	PTPMC, CTA/UNV,        11-050	11-050	
3.1.4.  Identify and select, through competitive bidding, PTPMC members to provide training on: energy-efficient technologies, product quality management and product marketing management	PTPMC, CTA,      11-050	11-001 11-050	
3.1.5.  Award of contracts to selected PTPMC members	PTPMC, UNIDO	21-200 21-300	
3.1.6. Invite non-pilot TVE to participate in training identified under activity 3.1.1., 3.1.2 and 3.1.3.	PTPMC, S/C, PMO	21-200 21-300	
3.1.7.  Implement in-depth and widescale training for pilot and non-pilot TVEs (see Annex 3 for further details of training to be provided under this activity)	S/C, 11-050	21-200 21-300 11-050	

Output 2: Stimulated market demand for energy-efficient products, and for products manufactured using energy efficient technologies.
Activity	Responsibility	B/L	
3.2.1.  Review marketing and distribution system of building materials in rural areas	PTPMC, S/C, UNIDO, CTA/UNV	21-300	
3.2.2.  Develop marketing strategies for energy-efficient building materials	PTPMC, S/C, UNIDO, CTA/UNV	21-300	
3.2.3. Based on the marketing strategy developed under 3.2.2, implement measures to stimulate demand for energy-efficient building materials.	PTPMC, S/C, UNIDO, CTA/UNV	21-300	

4.	Immediate Objective 4: 
To remove financial barriers by creating  access to commercial financing for TVE at 8 pilot sites in the four industries
(See Annex 2 for specific success criteria)

Output 1:  Bankable project proposals for TVE  technology investments at eight sites
Activity	Responsibility	B/L	
4.1.1. Through competitive bidding, select PTPMC member(s) to complete feasibility studies and provide training to prepare eight energy efficiency proposals. This includes awareness raising and energy auditing. 	PTPMC, UNIDO, CTA/UNV		
4.1.2.  Recruit international technical/financial experts to assist the selected PTPMC members to prepare project proposals and conduct of training	UNIDO, MOA, PTPMC	11-050	
4.1.3. In 8 pilot sites, prepare and submit 8 bankable project proposals (for loans)  to PIC for approval 	S/C, PIC	21-400	
4.1.4 Submit 8 proposals to the RCF for financing as loans	PIC, RCF		
4.1.5. Hold training on preparation of bankable energy efficiency proposals. Participants include both pilot and non-pilot TVE	S/C, Consultants	21-400 11-050	

Output 2: Financial closure and implementation of 8 pilot investments
Activity	Responsibility	B/L	
4.2.1. Acceptance of bankable project proposals	RCF		
4.2.2.  Make available GEF contribution to RCF loan for pilot TVE investments	UNIDO	21-400	
4.2.3. Finalize co-financing arrangements	RCF, TVE, Local Gov’t, other co-financiers		
4.2.4. Finalise engineering design and equipment procurement contract	PTPMC, TVE, S/C UNIDO, CTA/UNV		
4.2.5. Commissioning and start up	TVE, S/C		

Output 3: Continued satisfactory performance of 8 pilot TVE technology investments ensured.
Activity	Responsibility	B/L	
4.3.1. Preparation of monitoring and targeting plans for continuous evaluation of performance of the technology demonstrations  (in terms of energy/fuel consumption, GHG emissions reductions, other emissions, and product quality)	PTPMC, LPICs, 
S/C, Consultants, CTA/UNV	11-050
21-200	
4.3.2. Continuously evaluate performance with remedial action as required.	S/C, Consultants, CTA/UNV	11-050 21-200	
4.3.3  Record performance data for monitoring and evaluation purposes	S/C, PTPMC	21-200	

5.	Immediate Objective 5: 
To replicate the best practices for local regulatory reform to the national level, in part through the commercial financing of TVE energy conservation projects.
(See Annex 2 for specific success criteria)

Output 1: Operational Guidelines for PIC, LPIC, PTPMC and RCF. 
Activity	Responsibility	B/L	
5.1.1. Develop framework for monitoring and assessment of the national and local barrier removal framework, its impact on TVE industry transformation in the pilot counties and recommendations for improvements. Undertake independent monitoring constantly through the project life. An outline of the framework, to monitor the success of this project, is provided in Annex 2.	PTPMC, SC, Consultants	21-100 11-051	
5.1.2.  Based on review of implementation of action plan (Output 2.1) and 5.1.1 submit recommendations to LPIC and PIC on adjustments to local laws and regulations to improve removal of technology and market barriers.	PTPMC, S/C	21-100	
5.1.3. Based on review of implementation of action plan (Output 2.1) and 5.1.1 submit recommendations to LPIC and PIC on adjustments to local laws and regulations to improve removal of financial barriers	PTPMC, S/C	21-100	
5.1.4.  Review PTPMC operations and recommend revisions to its long-term business plan	PTPMC, S/C	21-300	
5.1.5. Review RCF operations and recommend revisions to its operational procedures.	PTPMC, S/C	21-400	
5.1.6 Review effectiveness of PIC and LPIC as mechanism to disseminate and replicate project results; recommend improvements		21-100, 11-051	

Output 2: PTPMC operating commercially
Activity	Responsibility	B/L	
5.2.1.  Develop revised long-term business plan (incl. improved cost recovery) for PTPMC taking into consideration recommendations made under activity 5.1.4.	PTPMC, UNIDO, S/C	21-003	
5.2.2. Expand PTPMC membership to regional entities equipped to 
          market the commercial services of the PTPMC “mechanism” 
          (operations of the Secretariat and members) to potential new 
          TVE clients throughout China.	PTPMC, S/C		
5.2.3. Develop and conduct marketing activities incl. promotion by local media	PTPMC, UNIDO, S/C	21-300	
5.2.4. Develop a pipeline of projects for a new, nationwide investment portfolio.	PTPMC, PIC, UNIDO, S/C, CTA/UNV	21-200	
5.2.5. Undertake feasibility work for up to 100 new projects (see Annex 3 for further details)	PTPMC, S/C, CTA/UNV	21-200	
5.2.6. Progressively increase shares of cost recovery from client 
          TVE	PTPMC		

Output 3: Expand the capital base of the RCF and other co-financing vehicles
Activity	Responsibility	B/L	
5.3.1. Adjust RCF investment criteria/prospectus and explore alternative funding mechanisms taking into consideration the recommendations made under activity 5.1.5.	RCF, UNIDO, CTA/UNV, S/C	21-004	
5.3.2. Develop marketing strategy, plan and promotional materials for investment promotion. This should include awareness raising for TVEs nationally on the benefits of technology upgrades.	RCF, PTPMC, UNIDO, CTA/UNV, S/C	21-400	
5.3.3.  Seek new investments for TVE-based energy conservation and product quality improvement projects from both foreign and domestic sources	RCF, ABC, MOA		
5.3.4.  Organize and convene international investment and business forum through the UNIDO and other investment promotion networks	UNIDO, PMO, PTPMC, RCF, UNV, experts	11-050 17-013 
31-002
32-002 42-001 51-040
35-004
11-003	
5.3.5.  Finance new projects from loan repayment	RCF, ABC		
5.3.6.  Evaluate the performance of the RCF, assess alternative mechanisms for channeling funding to TVEs, and assess continued need for a financial mechanism dedicated to TVEs 	PTPMC	21-400	
5.3.7  Open new co-funding mechanisms	RCF, ABC		

Output 4: National dissemination of lessons-learnt regarding implementing regulatory reform and technology upgrading.
Activity	Responsibility	B/L	
5.4.1.  Conduct workshops at the county level to promote regulatory reform initiative	PTPMC, PIC, LPICs, UNIDO, S/C	21-100	
5.4.2.  Reproduce regulatory reform in a wider subset of communities nation-wide, based on findings of Output 5.1	PTPMC, PIC, UNIDO, S/C	21-100	
5.4.3 Information and awareness material on benefits to TVEs of energy efficiency and technology upgrades.	PTPMC, PMO	21-100	

E.	Inputs
1.	GoC In-kind inputs

The Government of China will contribute US$ 1.25 Million as in-kind contribution:

Personnel (US$ 500,000 in-kind) 
a.	Senior State representatives of MOA, MOF and possibly ABC and SEPA to participate in the project Steering Committee.
b.	Senior State representatives of MOA act as NPD.
c.	Staff and support within related departments of GOC as identified at the inception of the Project both in central and local.
d.	Staff and support within related Institutes and Agencies as identified at the inception of the Project both in central and local.
e.	Specialists from GOC as required.
f.	Drivers and other support staff as required.

Operating and Facilities Cost (US$ 450,000 in-kind)
a.	PMO, PIC, and LPIC office operating costs 
b.	PMO, PIC and LPIC accommodations, facilities and supplies. PMO and PIC office accommodation shall be provided to Consultants on a temporary basis when they are in the locale.
c.	Preparation of project reports
d.	Project information dissemination services

Transport (US$ 150,000 in-kind)
a.	Internal local transport for GOC participants to and from training / seminar events.
b.	Internal local transport for PMO and other professionals on Project business as required.
c.	Internal local transport for international specialists and staff provided by PMO.

Training  (US$ 150,000 in-kind)
a.	Training facilities
b.	Living expenses for national project participants during training exercises/workshops held in Beijing and provinces

The Government will also provide accommodation/housing for the UNV for 2 years.

2.	Government, TVE and domestic bank financial inputs

Sources of funds:
National Government:		RCF Cash $1 million
ABC	RCF Cash $2 million (in addition to commercial loans to be developed through project)
Beneficiary enterprises	$6.3 million

Most Domestic financial support is in the form of technology supplied by enterprises or by the municipal government. Details of this are listed below. Should the municipal governments/enterprises not be able to provide the finance, the MOA and ABC shall cover these inputs in the form of a soft loan.
a.	Capital and operating costs of pilot project technologies when not provided by other domestic sources of capital;
b.	Maintenance and costs equipment supplied under grant by the project;
c.	$6.3 million investment in technologies for pilot projects. The beneficiary enterprises are to pay the majority of the costs for purchasing energy efficient technologies, as follows:

•	2 pieces of high quality brick manufacturing equipment, US$ 1.4 Million,
•	3 sites of cement plant renovation, US$ 2.1 Million,
•	1 site of high efficient coking manufacturing equipment worth, US$0.7 million, and
•	2 sites metal casting plant renovation US$ 1.6 Million.
•	Enterprise personnel training & operating cost for the demonstration technologies worth US$ 0.5 million

3.	UNDP/GEF funded inputs

UNDP/GEF inputs will be 7,952,000 USD for the inputs listed below. 

Personnel
Type of input	W/M	Budget in USD 	
INTERNATIONAL CONSULTANTS 
(see annex 7)			
Chief Technical Advisor (11-001)	20	280,000	
Legal expert (11-002)	3	45,000	
Investment promotion (11-003)	3	45,000	
Short-term consultants (11-050)	14	210,000	
UNIDO Technical Consultants (11-050)	18	180,000	
UNV (14-001)	24	51,000	
Subtotal 	87	811,000	
NATIONAL CONSULTANTS (see annex 7)			
Project Coordinator (17-001)	48	100,000	
PTPMC Director (17-002)	48	100,000	
PTPMC Contract Officer (17-003)	48	 70,000	
PTPMC Information Management Officer (17-004)	48	 70,000	
PIC Senior Administrator (17-005)	48	100,000	
RCF Manager (17-006)	24	 50,000	
RCF Loan Officer (17-007)	48	 70,000	
Investment Promotion (17-008)	12	 24,000	
Gender Expert (17-009)	10	 20,000	
Social Impact Expert	4	10,000	
PTPMC Support Staff (13-001)	48	 28,000	
PIC Assistant (13-002)	48	 70,000	
PIC Support Staff (13-003)	48	 28,000	
RCF Support Staff (13-004)	48	 28,000	
PMO Assistant (13-005)	36	 52,500	
Subtotal		820,500	
Mission Costs		54,000	
Duty Travel		22,000	
Subtotal		76,000	

Explanatory note: the first fifteen months are critical to project success, at it is during this period that the barrier removal framework (LPIC, PIC, RCF and PPTMC) is designed and established. This is also the period during which the project team will be assembled, and the monitoring framework established. Accordingly, for this period, a full-time CTA is to be recruited, to provide maximum technical guidance during this critical period. After this initial 15 months, the CTA will provide regular support through short missions (totaling 5 months). Also, during this later period, a United Nations Volunteer (UNV) is to join the PMO to assist full time in project management, coordination and information exchange.

Subcontracts (see annex 8)
Type of input	Budget in USD	
Set up PTPMC (21-001)	120,000	
Set up RCF (21-002)	70,000	
Revise PTPMC business plan and marketing campaign (21-003)	70,000	
Revise investment criteria and marketing campaign for new sources of funding for TVE-based energy conservation and product quality improvement investments (21-004)	70,000	
Subtotal	330,000	

Subcontract groups (see annex 3)
Type of input	Budget in USD	
Regulatory reform service group (21-100)	410,000	
Engineering service group (21-200)	1,940,000	
Marketing and management service group (21-300)	770,000	
Finance management service group (21-400)	600,000	
Subtotal	3,720,000	

Revolving Capital Fund
UNDP/GEF will contribute $1million to the RCF (71-001)		$1,000,000

Training/Meetings
Type of input	Budget in USD	
Inception workshop (35-006)	20,000	
Fellowship on regulatory reform (31-001)	100,000	
Investment promotion delegation programme for 2-3 people to oversees investment promotion centres (31-002)	40,000	
PTPMC contracting study tour (32-001)	22,000	
Investment promotion tour (32-002)	40,000	
Software training (33-001)	10,000	
PIC meetings with LPICs, PTPMC, RCF	70,000	
Investment promotion forum (35-004)	30,000	
Annual SC/TPR Meetings (35-005)	10,000	
Subtotal	342,000	

Equipment
Type of input	Budget in USD 	
Expendable equipment	20,000	
Non-expendable equipment	100,000	
Subtotal	120,000	

Miscellaneous
Type of input	Budget in USD	
Audits (annual)	20,000	
Evaluation 	60,000	
Miscellaneous	100,500	
UNDP support services	148,000	
Agency administrative support services	444,000	
Subtotal	772,500	
Grand total (in USD)	7,992,000	

F.	Monitoring, Evaluation and Lessons Learned

Annual TPR meetings will be held between MOA, UNDP and UNIDO to review progress and ensure that progress is in line with approved work plan. The TPR will approve the work plan for the following year. The APR will be shared with UNDP/GEF in advance of the TRP for comment and review.  A GEF Project Implementation Review will be completed annually for each year that the project is under implementation. A mid term evaluation will be conducted in the third year.  A final evaluation will be conducted four months prior to the terminal TPR.  Quarterly progress reports will be prepared by the project manager for submission to UNDP.

PIC oversees the implementation of policy barrier removal activities on the county level.  The PTMPC controls data on performance of the pilot projects in terms of product qualities and energy conservation. PTPMC also collects information on overall project performance indicators, sector data and data on new pipeline projects.  The RCF monitors financial performance of the eight pilot TVE and loan repayment.  PTPMC and RCF report to the PIC as well as the PMO.  An independent contractor is to be recruited to verify the collected data and assess project success in terms of barrier removal.

The track record of technical and financial performance of PTPMC projects, the financial performance of the RCF, results of activities initiated by the PIC and the portfolio of future projects are published and used to attract new interest from TVE and investors for post project participation. A consultant will conduct independent monitoring and assessment of the national and local barrier removal framework, its impact on TVE industry transformation in the pilot counties and recommendations for improvements. 
G.	Risks

Insufficient project integration - Medium
The project is complex and involves many partners, who must work closely together if objectives are to be achieved. During project lifetime, the PMO will take overall responsibility for ensuring this integration. After the project, the partners will have developed an inter-dependence.

The efficient flow of information between project constituencies and their cooperation is ensured by creating co-dependencies and a system of checks and balances.  PIC relies on information from the LPIC and PTPMC members for its decision-making regarding its recommendation for RCF’s participation in TVE production technology and product quality improvement investments.  RCF relies on the guidance from PIC as well as ABC’s own investment criteria. PTPMC members rely on close cooperation with TVE to ensure good quality of their investment pre-feasibility studies to ensure subsequent PIC recommendation and financing approval by the RCF. LPIC need to closely co-operate with PIC to ensure PIC recommendation to RCF of investments in their counties.

Insufficient policy reform - Medium -Low
Governments across China are looking for ways to reform. However, inertia and local pressures may sometimes slow reform.
County governments are likely to fully co-operate with policy barrier removal activities as they will fully perceive the local benefits of these changes.  Project design addresses this by tying the eligibility of RCF financing for TVE energy conservation projects to the prior implementation of agreed policy activities.  Recognising the positive achievements of local officials creates a second incentive.

Insufficient replication - Medium-Low
Considering the small energy conservation impact of the eight pilot projects compared to the total project potential in the sub-sector, insufficient replication poses an important risk.  Replication is most dependent on the commercial viability of the PTPMC mechanism, the RCF and the energy conservation investments.  It is also dependent on the perceived value of policy implementation strengthening on the county level.

A number of measures are build into the projects to strengthen its replication potential.  Participants from non-pilot TVE are integrated into project activities at an early stage of project implementation.  Also, TVE need to cover a significant share of the costs of PTPMC service delivery from project beginning to create a commercial corporate culture in the PTPMC. The project strategy focuses on getting the PTPMC, PIC and RCF sustainable. It will be in the interests of these entities to ensure replication after the project.

Insufficient commitment to replication from piloting TVEs – Medium-Low. The project success depends on the piloted TVEs participating in the follow-up dissemination and replication activities. However, given the changing legal status of TVEs in China, these TVE’s may become fully privatised and so unwilling to contribute to later project activities. The project takes several steps to mitigate this risk. First, the voluntary agreements signed with pilot TVEs will commit them to participate in dissemination. Second, a short-term expert will be hired to monitor this issue, and propose necessary steps. Finally, the TOR of the CTA and Project Coordinator include paying sufficient attention to this. 

Co-financing can not be arranged - Low
The funding for the project needs to be efficiently collected and administered by the RCF. TVE investment proposals are prepared by a qualified member of the PTPMC.  This ensures that the investment proposals that are brought to the attention of the PIC and subsequently RCF are of high technical quality and financially sound.  This limits the risks that co-financing can not be arranged.  In addition, there are many project activities to support establishment of the RCF.

A poor performance record on the part of an individual PTPMC member would jeopardise the ability to win future sub-contracts, thus creating a strong incentive for superior performance in terms of project preparation throughout the project.

Poor TVE performance after project implementation - Low
Poor technology selection, operation and insufficient demand for higher quality products pose a risk to overall TVE performance after project implementation.  These risks are limited by thorough project preparation through qualified PTPMC members, staff training, performance monitoring and the availability of corrective interventions by the PTPMC.

Poor loan repayment – Low 
Loan repayment depends on TVE cash-flow, which is determined by TVE sales and its cost structure, including production costs and fiscal costs.  Project preparation and marketing support will limit production cost and sales risks while the project’s integration into the PIC/LPIC agreement will protect it from unexpected changes in fiscal policy.
H.	Prior Obligations and Prerequisites

The Government will allocate funds in its national budgets as indicated in Section E, Government Inputs.

The Government will co-ordinate the selection and designation of counterparts from the various ministries, institutes and local municipal governments as required by the description of the Counterpart Support Capacity in this document.

I.	Legal Context

This project document shall be the legal instrument for the management of the all project activities and UNDP funding.

The following types of revisions may be made to this project document with the signature of the authorised UN official only, provided he/she is assured that the other signatories of the project document have no objections to the proposed changes:
(i)	Revisions in, or additions of, any of the annexes of the project document with the exception of the Standard Legal Text for non-SBAA countries which may not be altered and the agreement to which is a precondition for UNDP assistance;
(ii)	Revisions which do not involve significant changes in the immediate objective, outputs or activities of the project, but are caused by the rearrangements of inputs already agreed to or by cost increases due to inflation; and
(iii)	Mandatory annual revisions which re-phase the delivery of agreed programme inputs, or reflect increased expert or other costs due to inflation, or take into account agency expenditure flexibility. 

J.	Budget

See Annex 1
Annexes

Annex 1:	Project and Government Budget

Annex 2: 	Success Criteria by Objectives

Annex 3:	Subcontract Groups

Annex 4:	Workplan

Annex 5:	Capacity Building and Training Materials: Contributions from phase I

Annex 6:	Equipment list for PIC, PTPMC and RCF

Annex 7a:	Job descriptions for experts and consultants 
Annex 7b:	UNIDO Technical Inputs

Annex 8:	Description of barrier removal framework (PIC, PTPMC amd RCF), including Terms of Reference for subcontracts to help design these

Annex 9: 	Detailed descriptions of four sub-sectors

Annex 10: 	Detailed descriptions of 8 pilot project sites

Annex 11: 	Incremental Cost 

Annex 12: 	Logical Framework Project Planning Matrix

Annex 1:	Project and Government Budget

CPR/99/G31 – TVE Energy Conservation II
Budget “A”
Main Source of Funds: 1G - GEF										
Executing Agency: UNIDO - UN Industrial Development Organiza										
										
Sbln	Description	Implementing		Total	2000	2001	2002	2003	2004	
10	PERSONNEL									
11	International Consultants									
1101	Chief Technical Advisor	UNIDO	Net Amount	280,000	62,000	98,000	70,000	30,000	20,000	
			W/M	20	4.5	7	5	2.5	1	
			AOS	16,800	3,720	5,880	4,200	1,800	1,200	
			Total	296,800	65,720	103,880	74,200	31,800	21,200	
1102	Legal Expert	UNIDO	Net Amount	45,000	45,000					
			W/M	3	3	0	0	0	0	
			AOS	2,700	2,700					
			Total	47,700	47,700					
1103	Investment Promotion	UNIDO	Net Amount	45,000				45,000		
			W/M	3	0	0	0	3	0	
			AOS	2,700				2,700		
			Total	47,700				47,700		
1150	Short-term Consultants	UNIDO	Net Amount	210,000	22,500	52,500	52,500	52,500	30,000	
			W/M	14	1.5	3.5	3.5	3.5	2	
			AOS	12,600	1,350	3,150	3,150	3,150	1,800	
			Total	222,600	23,850	55,650	55,650	55,650	31,800	
1151	UNIDO Technical Consultants	UNIDO	Net Amount	180,000	25,000	45,000	45,000	45,000	20,000	
			W/M	18	2.5	4.5	4.5	4.5	2	
			AOS	10,800	1,500	2,700	2,700	2,700	1,200	
			Total	190,800	26,500	47,700	47,700	47,700	21,200	
1199	Line Total	----------	Net Amount	760,000	154,500	195,500	167,500	172,500	70,000	
			W/M	58	11.5	15	13	13.5	5	
			AOS	45,600	9,270	11,730	10,050	10,350	4,200	
			Total	805,600	163,770	207,230	177,550	182,850	74,200	
13	Administrative Support									
1301	PTPMC Support Staff	UNIDO	Net Amount	28,000	4,670	7,000	7,000	7,000	2,330	
			W/M	48	8	12	12	12	4	
			AOS	1,680	280	420	420	420	140	
			Total	29,680	4,950	7,420	7,420	7,420	2,470	
1302	PIC Assistant	UNIDO	Net Amount	70,000	11,700	17,500	17,500	17,500	5,800	
			W/M	48	8	12	12	12	4	
			AOS	4,198	700	1,050	1,050	1,050	348	
			Total	74,198	12,400	18,550	18,550	18,550	6,148	
1303	PIC Support Staff	UNIDO	Net Amount	28,000	4,670	7,000	7,000	7,000	2,330	
			W/M	48	8	12	12	12	4	
			AOS	1,680	280	420	420	420	140	
			Total	29,680	4,950	7,420	7,420	7,420	2,470	
1304	RCF Support Staff	UNIDO	Net Amount	28,000	4,670	7,000	7,000	7,000	2,330	
			W/M	48	8	12	12	12	4	
			AOS	1,680	280	420	420	420	140	
			Total	29,680	4,950	7,420	7,420	7,420	2,470	
1305	PMO Assistant	UNIDO	Net Amount	52,500	11,700	17,500	17,500	5,800		
			W/M	36	8	12	12	4	0	
			AOS	3,150	702	1,050	1,050	348		
			Total	55,650	12,402	18,550	18,550	6,148		
1399	Line Total	----------	Net Amount	206,500	37,410	56,000	56,000	44,300	12,790	
			W/M	228	40	60	60	52	16	
			AOS	12,388	2,242	3,360	3,360	2,658	768	
			Total	218,888	39,652	59,360	59,360	46,958	13,558	
14	UN Volunteers									
1401	UNV	UNIDO	Net Amount	51,000			25,500	25,500		
			W/M	24	0	0	12	12	0	
			AOS	3,060			1,530	1,530		
			Total	54,060			27,030	27,030		
1499	Line Total	----------	Net Amount	51,000			25,500	25,500		
			W/M	24	0	0	12	12	0	
			AOS	3,060			1,530	1,530		
			Total	54,060			27,030	27,030		
15	Monitoring and Evaluation									
1501	Duty Travel	UNIDO	Net Amount	22,000	2,500	5,500	5,500	5,500	3,000	
			AOS	1,320	150	330	330	330	180	
			Total	23,320	2,650	5,830	5,830	5,830	3,180	
1599	Line Total	----------	Net Amount	22,000	2,500	5,500	5,500	5,500	3,000	
			AOS	1,320	150	330	330	330	180	
			Total	23,320	2,650	5,830	5,830	5,830	3,180	
16	Mission Costs									
1601	Mission Costs	UNIDO	Net Amount	54,000	6,000	18,000	18,000	6,000	6,000	
			AOS	3,240	360	1,080	1,080	360	360	
			Total	57,240	6,360	19,080	19,080	6,360	6,360	
1602	Evaluation	UNIDO	Net Amount	60,000			30,000		30,000	
			AOS	3,600			1,800		1,800	
			Total	63,600			31,800		31,800	
1699	Line Total	----------	Net Amount	114,000	6,000	18,000	48,000	6,000	36,000	
			AOS	6,840	360	1,080	2,880	360	2,160	
			Total	120,840	6,360	19,080	50,880	6,360	38,160	
17	National Consultants									
1701	Project Coordinator	UNIDO	Net Amount	100,000	17,000	25,000	25,000	25,000	8,000	
			W/M	48	8	12	12	12	4	
			AOS	6,000	1,020	1,500	1,500	1,500	480	
			Total	106,000	18,020	26,500	26,500	26,500	8,480	
1702	PTPMC Director	UNIDO	Net Amount	100,000	17,000	25,000	25,000	25,000	8,000	
			W/M	48	8	12	12	12	4	
			AOS	6,000	1,020	1,500	1,500	1,500	480	
			Total	106,000	18,020	26,500	26,500	26,500	8,480	
1703	PTPMC Contract Officer	UNIDO	Net Amount	70,000	11,700	17,500	17,500	17,500	5,800	
			W/M	48	8	12	12	12	4	
			AOS	4,200	702	1,050	1,050	1,050	348	
			Total	74,200	12,402	18,550	18,550	18,550	6,148	
1704	PTPMC Information Mgmt. Officer	UNIDO	Net Amount	70,000	11,700	17,500	17,500	17,500	5,800	
			W/M	48	8	12	12	12	4	
			AOS	4,200	702	1,050	1,050	1,050	348	
			Total	74,200	12,402	18,550	18,550	18,550	6,148	
1705	PIC Senior Administrator	UNIDO	Net Amount	100,000	17,000	25,000	25,000	25,000	8,000	
			W/M	48	8	12	12	12	4	
			AOS	6,000	1,020	1,500	1,500	1,500	480	
			Total	106,000	18,020	26,500	26,500	26,500	8,480	
1706	RCF Manager	UNIDO	Net Amount	50,000	12,500	12,500	12,500	12,500		
			W/M	24	6	6	6	6	0	
			AOS	3,000	750	750	750	750		
			Total	53,000	13,250	13,250	13,250	13,250		
1707	RCF Loan Officer	UNIDO	Net Amount	70,000	11,700	17,500	17,500	17,500	5,800	
			W/M	48	8	12	12	12	4	
			AOS	4,200	702	1,050	1,050	1,050	348	
			Total	74,200	12,402	18,550	18,550	18,550	6,148	
1708	Investment Promotion	UNIDO	Net Amount	24,000			12,000	12,000		
			W/M	24	0	0	12	12	0	
			AOS	1,440			720	720		
			Total	25,440			12,720	12,720		
1709	Gender Expert	UNIDO	Net Amount	20,000	5,000	5,000	5,000	5,000		
			W/M	10	2.5	2.5	2.5	2.5	0	
			AOS	1,200	300	300	300	300		
			Total	21,200	5,300	5,300	5,300	5,300		
1710	Social Impact Expert	UNIDO	Net Amount	10,000	2,000	3,000	3,000	2,000		
			W/M	4	0.8	1.2	1.2	0.8	0	
			AOS	600	120	180	180	120		
			Total	10,600	2,120	3,180	3,180	2,120		
1799	Line Total	----------	Net Amount	614,000	105,600	148,000	160,000	159,000	41,400	
			W/M	350	57.3	81.7	93.7	93.3	24	
			AOS	36,840	6,336	8,880	9,600	9,540	2,484	
			Total	650,840	111,936	156,880	169,600	168,540	43,884	
19	PROJECT PERSONNEL TOTAL	----------	Net Amount	1,767,500	306,010	423,000	462,500	412,800	163,190	
			W/M	660	108.8	156.7	178.7	170.8	45	
			AOS	106,048	18,358	25,380	27,750	24,768	9,792	
			Total	1,873,548	324,368	448,380	490,250	437,568	172,982	
20	SUBCONTRACTS									
21	Subcontract A									
2101	Set Up PTPMC	UNIDO	Net Amount	120,000	30,000	90,000				
			AOS	7,200	1,800	5,400				
			Total	127,200	31,800	95,400				
2102	Set Up RCF	UNIDO	Net Amount	70,000	20,000	50,000				
			AOS	4,200	1,200	3,000				
			Total	74,200	21,200	53,000				
2103	Revise PTPMC busi. plan & mkt. camp	UNIDO	Net Amount	70,000				70,000		
			AOS	4,200				4,200		
			Total	74,200				74,200		
2104	Revise investment criteria & market	UNIDO	Net Amount	70,000			70,000			
			AOS	4,200			4,200			
			Total	74,200			74,200			
2110	Regulatory Reform Service Group	UNIDO	Net Amount	410,000		45,000	45,000	160,000	160,000	
			AOS	24,600		2,700	2,700	9,600	9,600	
			Total	434,600		47,700	47,700	169,600	169,600	
2111	Engineering Service Group	UNIDO	Net Amount	1,940,000	20,000	180,000	740,000	700,000	300,000	
			AOS	116,400	1,200	10,800	44,400	42,000	18,000	
			Total	2,056,400	21,200	190,800	784,400	742,000	318,000	
2112	Marketing & Mgmt. Service Group	UNIDO	Net Amount	770,000	10,000	65,000	345,000	350,000		
			AOS	46,200	600	3,900	20,700	21,000		
			Total	816,200	10,600	68,900	365,700	371,000		
2113	Finance Mgmt. Service Group	UNIDO	Net Amount	600,000		150,000	300,000	150,000		
			AOS	36,000		9,000	18,000	9,000		
			Total	636,000		159,000	318,000	159,000		
2199	Line Total	----------	Net Amount	4,050,000	80,000	580,000	1,500,000	1,430,000	460,000	
			AOS	243,000	4,800	34,800	90,000	85,800	27,600	
			Total	4,293,000	84,800	614,800	1,590,000	1,515,800	487,600	
29	SUBCONTRACTS TOTAL	----------	Net Amount	4,050,000	80,000	580,000	1,500,000	1,430,000	460,000	
			AOS	243,000	4,800	34,800	90,000	85,800	27,600	
			Total	4,293,000	84,800	614,800	1,590,000	1,515,800	487,600	
30	TRAINING									
31	Fellowships									
3101	Fellowship on Regulatory Reform	UNIDO	Net Amount	100,000	50,000	50,000				
			AOS	6,000	3,000	3,000				
			Total	106,000	53,000	53,000				
3102	Investment Promotion Delegation	UNIDO	Net Amount	40,000			40,000			
			AOS	2,400			2,400			
			Total	42,400			42,400			
3199	Line Total	----------	Net Amount	140,000	50,000	50,000	40,000			
			AOS	8,400	3,000	3,000	2,400			
			Total	148,400	53,000	53,000	42,400			
32	Other Training									
3201	PTPMC Contracting Study Tour	UNIDO	Net Amount	22,000	22,000					
			AOS	1,320	1,320					
			Total	23,320	23,320					
3202	Investment Promotion Tour	UNIDO	Net Amount	40,000				40,000		
			AOS	2,400				2,400		
			Total	42,400				42,400		
3203	PIC Meeting with LPICs, PTPMC, RCF	UNIDO	Net Amount	70,000	17,500	17,500	17,500	17,500		
			AOS	4,200	1,050	1,050	1,050	1,050		
			Total	74,200	18,550	18,550	18,550	18,550		
3204	Investment Promotion Forum	UNIDO	Net Amount	30,000				30,000		
			AOS	1,800				1,800		
			Total	31,800				31,800		
3205	Annual SC/TPR Meetings	UNIDO	Net Amount	10,000	2,500	2,500	2,500	2,500		
			AOS	600	150	150	150	150		
			Total	10,600	2,650	2,650	2,650	2,650		
3206	Inception Workshop	UNIDO	Net Amount	20,000	10,000	10,000				
			AOS	1,200	600	600				
			Total	21,200	10,600	10,600				
3299	Line Total	----------	Net Amount	192,000	52,000	30,000	20,000	90,000		
			AOS	11,520	3,120	1,800	1,200	5,400		
			Total	203,520	55,120	31,800	21,200	95,400		
33	In-Service Training									
3301	Software Training	UNIDO	Net Amount	10,000	10,000					
			AOS	600	600					
			Total	10,600	10,600					
3399	Line Total	----------	Net Amount	10,000	10,000					
			AOS	600	600					
			Total	10,600	10,600					
39	TRAINING TOTAL	----------	Net Amount	342,000	112,000	80,000	60,000	90,000		
			AOS	20,520	6,720	4,800	3,600	5,400		
			Total	362,520	118,720	84,800	63,600	95,400		
40	EQUIPMENT									
45	Equipment									
4501	Expendable Equipment	UNIDO	Net Amount	20,000	10,000	10,000				
			AOS	1,200	600	600				
			Total	21,200	10,600	10,600				
4502	Non-expendable Equipment	UNIDO	Net Amount	100,000	20,000	60,000	20,000			
			AOS	6,000	1,200	3,600	1,200			
			Total	106,000	21,200	63,600	21,200			
4599	Line Total	----------	Net Amount	120,000	30,000	70,000	20,000			
			AOS	7,200	1,800	4,200	1,200			
			Total	127,200	31,800	74,200	21,200			
49	EQUIPMENT TOTAL	----------	Net Amount	120,000	30,000	70,000	20,000			
			AOS	7,200	1,800	4,200	1,200			
			Total	127,200	31,800	74,200	21,200			
50	MISCELLANEOUS									
52	Reporting Costs									
5201	Audits	UNIDO	Net Amount	20,000		5,000	5,000	5,000	5,000	
			AOS	1,200		300	300	300	300	
			Total	21,200		5,300	5,300	5,300	5,300	
5299	Line Total	----------	Net Amount	20,000		5,000	5,000	5,000	5,000	
			AOS	1,200		300	300	300	300	
			Total	21,200		5,300	5,300	5,300	5,300	
53	Sundries									
5301	Miscellaneous	UNIDO	Net Amount	100,500	17,625	27,625	27,625	27,625		
			AOS	6,032	1,058	1,658	1,658	1,658		
			Total	106,532	18,683	29,283	29,283	29,283		
5399	Line Total	----------	Net Amount	100,500	17,625	27,625	27,625	27,625		
			AOS	6,032	1,058	1,658	1,658	1,658		
			Total	106,532	18,683	29,283	29,283	29,283		
54	Direct Costs (GEF/Capacity 21)									
5401	Project Support Services	UNDP	Net Amount	148,000	24,670	37,000	37,000	37,000	12,330	
			Total	148,000	24,670	37,000	37,000	37,000	12,330	
5499	Line Total	----------	Net Amount	148,000	24,670	37,000	37,000	37,000	12,330	
			Total	148,000	24,670	37,000	37,000	37,000	12,330	
59	MISCELLANEOUS TOTAL	----------	Net Amount	268,500	42,295	69,625	69,625	69,625	17,330	
			AOS	7,232	1,058	1,958	1,958	1,958	300	
			Total	275,732	43,353	71,583	71,583	71,583	17,630	
70	MICRO-CAPITAL GRANTS									
72	Micro-Capital Grants (other)									
7201	Revolving Capital Fund	UNIDO	Net Amount	1,000,000		1,000,000				
			AOS	60,000		60,000				
			Total	1,060,000		1,060,000				
7299	Line Total	----------	Net Amount	1,000,000		1,000,000				
			AOS	60,000		60,000				
			Total	1,060,000		1,060,000				
79	MICRO-CAPITAL GRANTS TOTAL	----------	Net Amount	1,000,000		1,000,000				
			AOS	60,000		60,000				
			Total	1,060,000		1,060,000				
99	BUDGET TOTAL	----------	Net Amount	7,548,000	570,305	2,222,625	2,112,125	2,002,425	640,520	
			W/M	660	108.8	156.7	178.7	170.8	45	
			AOS	444,000	32,736	131,138	124,508	117,926	37,692	
			Total	7,992,000	603,041	2,353,763	2,236,633	2,120,351	678,212	

Ministry of Agriculture, the People’s Republic of China
CPR/99/G31-TVE Energy Conservation Ⅱ
Budget of the Government Inputs

Main Source of Funds	1.	Implementing Agency	Total (US$)	2000	2001	2002	2003	2004	
GOC In-kind inputs	MOA	1.25 million	300,000	300,000	250,000	200,000	200,000	
National Government inputs	MOA	1 million		500,000	500,000			
ABC Financial inputs	ABC	2 million		1 million	1 million			
Beneficiary Enterprises inputs	 	6.3 million	200,000	1.9 million	1.9 million	1.9 million	400,000	
Total	10.55 million	500,000	3.7 million	3.65 million	2.1 million	600,000	

Annex 2: 	Success criteria by Objectives
Immediate Objectives	Success criteria	
1. Institutional mechanism for barrier removal created	•	At least 50 individuals from GOC, local government and other stakeholders are trained.
•	PTPMC business plan, RCF investment criteria and modalities of PIC operation are publicised.
•	Pilot TVE and counties have participated in constituting meetings, received relevant documentation and are committed to the project	
2. Policy barriers in eight pilot counties removed by establishing incentive and monitoring systems	•	A voluntary agreement between the local and central government detailing a concrete action plan on the enforcement of relevant laws and regulation based on incentives and monitoring has been signed.
•	Changes of regulatory practices according to this agreement are monitored on the local level.
•	Award and penalty action are implemented on the county level.	
3. Market and technology barriers removed for eight pilot TVE by building technical capacity for energy efficiency and product quality improvements	•	At least 50 TVE staff will have participated in training arranged through the PTPMC.
•	The PIC and RCF will have received complete project documentation for financial closure of pilot projects. 
•	PTPMC member database will cover the required range of services and all bids will have been issued competitively. 
	
4. Financial barriers removed by creating access to commercial financing for eight pilot TVE	•	At least 20 staff from TVE, ABC and other finance entities will have participated in financial training. 
•	At least 8 loan applications will have been submitted to PIC, RCF and ABC. 
•	RCF and ABC will have arranged financial packages for eight pilot TVE. 
•	TVE loans will perform satisfactorily and TVE operate profitably. 
•	20 to 60 percent energy savings compared to pre-investment period will be observed. 
•	Product quality will meet design specifications. 
•	TVE performance will meet benchmarks related to production and sales data and energy efficiency of production.	
5. Financing of TVE energy conservation projects commercialised and  application of best regulatory practice expanded to the national level	•	The number of participating post pilot counties will increase to 20 at the end of phase 2 and at least 100 new pipeline projects will have been identified. 
•	The PTPMC will have secured post-phase 2 funding, its operation will have met profit expectations and its membership base make it a one-stop shop for all business development service needs of SME in the four industries.
•	By end of year 2.5, the RCF capital base will comprise 4 mil USD in new equity or a new alternative funding vehicle for TVE energy conservation will exist.
•	At least 1000 TVE managers, government officials, service providers will have participated in training to strengthen their ability to prosper in the market economy;
•	The service sector, providing training and technical support services to Chinese TVEs, will have grown, been strengthened, and become more commercial.
•	TVE will have a positive attitudes towards using business development services and commercial financing for technology and product upgrading and make regular use of it.
•	Total GHG reduction for the eight pilots will add up to 85,000 tCO2 p.a. and a potential of more than 1 mil t CO2 p.a. will have been identified in the pipeline.	
Overall project success criteria	•	By project end, a measurable increase in funding to energy efficiency in TVEs. At least $10 million should be channeled to the RCF capital base or to alternative funding vehicles identified by the project.	

Annex 3:	Group Subcontracts 

Subcontracts under this category of subcontract groups are awarded to members of the PTPMC according to the rules of the UNIDO and PTPMC.  The terms of reference for every sub-contract group contains a general description of the cluster of services that are to be provided.  However, the terms of reference for individual sub-contracts are to be determined based on client needs assessment to ensure that service delivery is client need driven. These detailed TOR are to be developed by the PTPMC, with support and guidance from UNIDO and PMO.

Sub-contract group title: 	21-100 Regulatory Reform Service Group

Description:
To provide services to GOC and local government officials that enable them to identify and implement suitable action plans for the strengthening of regulation implementation on the county level, including partial transformation of the TVE sector.

Activities:
1) Provide consulting services to local government officials, including:
-	Identify suitable strategies, instruments and activities towards improving the application of environmental and product quality standards on the county level
-	Facilitate the drafting of voluntary agreements between the GOC and LPIC focal points for the strengthening of regulation implementation
-	Identify training needs to enable strengthening of regulation implementation by local officials
-	Draft recommendations on how to adjust local laws and regulations to improve removal of technology, market and financial barriers on the local level for technology and product quality improvement
-	Provide an independent assessment of the barrier removal framework and its impact on TVE transformation in the pilot counties

2) Provide training services, including:
-	In-country (local) training for local PIC focal points
-	Environmental management.
-	Regulatory reform. 
-	Economic incentives in the environmental regulatory process.
-	Permitting, compliance monitoring and regulatory enforcement.

3) In country (local) training for county/township authorities (21 - 200)  (AEPI 
training materials) 
-	Coordination of local authorities in the application of regulatory programs
-	Product quality management.  
-	Permitting, compliance monitoring and regulatory enforcement. 
-	Economic incentives  and other market mechanisms in the environmental regulatory process.
-	Principles of cleaner production
-	Gender issues
-	Building codes to stimulate demand for energy efficient bricks.

Deliverables and Outcomes:
-	Policy assessment and policy option reports for improving regulation strengthening on the local level.
-	Draft voluntary agreement information documents for discussion at joint LPIC/PIC meetings
-	Need assessment reports
-	Assessment and recommendation reports on law and regulation adjustments to facilitate barrier removal to energy conservation
-	Assessment and recommendation report on improving the project’s barrier removal framework
-	Training materials
-	Series of training sessions with local officials

Estimated budget: 410,000 USD

Activity	Total	2000	2001	2002	2003	
Training LPIC focal points on strengthening regulatory reform (1.3.6.)	20,000	20,000				
Drafting of regulatory reform strengthening strategies (2.1.1.)	50,000	50,000				
Training of LPIC to implement reg. Reform strengthening strategies (2.1.4.)	20,000	20,000				
Recommendations to PIC for improved regulations to remove market/technology barriers (5.1.2.)	50,000				50,000	
Recommendations to PIC for improved regulations to remove financial barriers (5.1.3.)	50,000				50,000	
Assessment of barrier removal framework (5.1.1 and 5.1.6.)	50,000				50,000	
Regulatory Reform Strengthening Workshops (5.4.1.)	100,000				100,000	
Replication of regulatory reform strengthening strategies in other townships/counties in China (5.4.2.)	70,000				70,000	
SUBTOTAL (21-100)	410,000	90,000	0	0	320,000	

Sub-contract group title: 	21-200 Engineering

Description:
To provide technical and training services to TVE, RCF and the PTPMC secretariat including: identification, assessment/feasibility, engineering, technology procurement, construction, operation and maintenance of energy conservation investment projects in the four sub-sectors based on the existing phase 1 project outputs (mainly pre-feasibility studies for eight pilot projects and AEPI training materials).

Activities:
To provide the needs assessment, procurement, engineering, construction, operation, maintenance, monitoring and training services related to the following technologies, including product quality control, evaluation and remedial action:

CEMENT.
-	Energy efficient operation and optimization of vertical shaft kilns (to clinker output of 100,000 t/a and 250-350 Kcal/Kg specific heat consumption).
-	Peripheral technologies,  (dynamic separation for close-circuit ball mill operation, vertical roller mill raw grinding, ESP and mechanized bag-house  dust collection, instrumentation and micro-processor control, pneumatic blending prior to granulation.).

BRICKS.
-	Process control and monitoring of dryers and kilns. 
-	Hollow brick manufacture, equipment operation. 
-	Building codes and regulations to promote energy efficiency. 

METAL  CASTING.
-	improved operations, housekeeping and instrumentation.
-	Product quality control and improved operation (product testing and inspection) to reduce rejects and save energy. 
 
COKE MANUFACTURE.
-	By product marketing.
-	Waste heat recovery and cogeneration.

Deliverables and Outcomes:
-	Training and service need assessments
-	Bankable project proposals for eight pilot projects
-	Performance monitoring and remedial action plans
-	Engineering design work for pilot projects
-	Equipment procurement
-	Pilot project commissioning and start-up
-	Post phase 2 project descriptions
-	Post phase 2 project pre-feasibility studies
-	Training for TVE managers and ABC loan officers on the preparation of bankable energy conservation project proposals

Estimated budget: 1,940,000 USD

Activity	Total	2000	2001	2002	2003	
Training on energy-efficiency technologies 
(3.1.1. + 3.1.5. + 3.1.7.)	70,000	10,000	40,000	20,000		
Training on product quality management 
(3.1.2. + 3.1.5. + 3.1.7.)	70,000	10,000	40,000	20,000		
Continuous performance monitoring and evaluation 
(4.3.)	200,000			100,000	100,000	
Identification and technical preparation for a pipeline of up to 100 new projects (5.2.4 + 5.2.5)	1,600,000		400,000	600,000	600,000	
SUBTOTAL (21-200)	1,940,000	20,000	480,000	740,000	700,000	

Sub-contract group title: 	21-300 Marketing management.

Description:
To provide product marketing, training and related services to TVE and other stakeholders to strengthen demand for energy efficient and high quality TVE products.

Activities:
1.	Review marketing and distribution system of building materials in rural areas
2.	Develop marketing strategies for energy-efficient building materials
3.	Stimulate the demand for energy-efficient building materials by provide marketing management services and training for TVE related to:
-	Product quality control
-	Market assessment (market size, customer segments, product standards)
-	Marketing strategy (product positioning, pricing, branding, labelling)
-	Product distribution infrastructure
-	Product demonstration
-	Consumer education

Deliverables and Outcomes:
-	Marketing training needs assessment reports for TVE staff and intermediaries in the building materials industry
-	Marketing strategy options reports
-	Assessment and recommendation for demand stimulation activities
-	Implemented demand stimulation activities

Estimated budget: 770,000 USD
Activity	Total	2000	2001	2002	2003	
Training on marketing management (3.1.3. + 3.1.5. + 3.1.7.)	70,000	10,000	40,000	20,000		
Review market and distribution system and develop marketing strategy for energy-efficient building materials (3.2.1. + 3.2.2.)	100,000		25,000	75,000		
Stimulate market demand for energy-efficient building materials (3.2.3.)	500,000			250,000	250,000	
Review PTPMC operations and make recommendations for improvements (5.1.4.)	50,000				50,000	
Marketing activities for PTPMC (5.2.3.)	50,000				50,000	
SUBTOTAL (21-300)	770,000	10,000	65,000	345,000	350,000	

Sub-contract group title: 	21-400 Finance management

Description:
To provide finance and accounting related consulting and training services to TVE facilitating their eligibility for packaged loans from RCF/ABC for energy conservation investments and to co-finance such investments.

Activities:
1.	Prepare financial documentation for TVE according to ABC loan eligibility criteria
2.	Conduct financial assessment of pilot investment proposals and pre-feasibility studies for post project technology investments
3.	Finalize co-financing arrangements for injection of RCF contribution into TVE loan packages
4.	Make recommendations regarding the improvement of laws and regulations on the county level to remove financial barriers to energy conservation
5.	Prepare marketing plan and promotional material for the RCF
6.	Assess and recommend alternative financing vehicles to promote TVE based energy conservation investments
7.	In-country training for TVE in investment proposal preparation using the training package prepared in project phase 1 and supplementary materials on product marketing preparation:
-	Options for financing energy-efficiency investments. 
-	Financial analysis of energy efficiency projects. 
-	Accounting, financial statements, balance sheets and proposal preparation (technical and financial) 
-	Market analysis for TVE products. 
-	Asset management. 
-	Structure of modern shareholder-based businesses. 

Deliverables and Outcomes:
-	Complete bank documentation for eight TVE loan applications, including TVE standard balance sheet, profit and loss as well as the project financial analysis information
-	Financial closure of eight pilot projects including co-financing arrangements
-	Assessment report on RCF performance and recommendations on improving operational procedures
-	Financial assessment of post phase 2 pre-feasibility studies
-	Marketing study and promotional material for post phase 2 RCF expansion

Estimated budget: 600,000 USD 

Activity	Total	2000	2001	2002	2003	
Preparation of bankable proposals for 8 pilot technology investments (4.1.3. + 4.1.4.)	500,000		300,000	200,000		
Review of RCF operations and recommendations for improvements (5.1.5)	50,000				50,000	
Marketing activities for RCF (5.3.2.)	50,000				50,000	
SUBTOTAL (21-400)	600,000	0	300,000	200,000	100,000	

Further TOR for activities 4.1.3 and 4.1.4 are provided below

Sub-contract 21-401: 	Design, Installation, Servicing and Monitoring for Three Cement Pilot Projects 

Tasks:
1.	Carry out a best-practices study of international experience in cement plant innovation. Specify technologies and alternate institutional and financing mechanisms.
2.	For a pilot region identify and evaluate options for three cement plants on technology innovation for the mechanical vertical shaft kiln with the 88,000-tons production capacity. Options should specify pre-feasibility study, designs and costs, financing and administrative arrangements as well as required regulatory arrangements
3.	On approval complete design drawings and specifications for all systems. At this stage design for technical demonstration is a priority over financial viability. Systems, however, should be designed to meet national economic profitability criteria. Environmental impacts should be assessed and accounted for in the design.
4.	Analyse the equipment and training requirements for an existing regional installation and service centre selected to serve the regional pilot equipment. Procure equipment and provide training on installation, servicing and maintenance of equipment.
5.	Negotiate regulatory and financial matters between local energy companies and customers.
6.	In conjunction with energy service providers procure specified cement equipment.
7.	Design and implement a one year monitoring program of the systems’ administrative, financial and technical performance. Report.
8.	Prepare a guidebook for investors.
Estimated Budget: 200,000 USD
Required Qualifications:
Senior international and national engineering capability in the design, procurement, installation, financial and servicing of cement-making plant.

Sub-contract 21-402:	Design, Installation, Servicing and Monitoring of Two Brick Making Pilot Project 

Tasks:
1.	Carry out a best-practices study of international experience on technology innovation for two brick making plant. Specify technologies and alternate institutional and financing mechanisms.
2.	For a pilot region identify and evaluate options for two brick making plants on technology innovation, adjusting the product structure and control of production quality. Options should specify pre-feasibility study, designs and costs, financing and administrative arrangements as well as required regulatory arrangements.
3.	On approval complete design drawings and specifications for all systems. At this stage design for technical demonstration is a priority over financial viability. Systems, however, should be designed to meet national economic profitability criteria. Environmental impacts should be assessed and accounted for in the design.
4.	Analyse the equipment and training requirements for an existing regional installation and service centre selected to serve the regional pilot equipment. Procure equipment and provide training on installation, servicing and maintenance of equipment.
5.	Negotiate regulatory and financial matters between local energy companies and customers.
6.	In conjunction with energy service providers procure specified brick making equipment.
7.	Design and implement a one year monitoring program of the systems’ administrative, financial and technical performance. Report.
8.	Prepare a guidebook for investors.
Estimated Budget: 110,000 USD
Required Qualifications
Senior international and national engineering capability in the design, procurement, installation, financial and servicing of brick-making plant.

Sub-contract 21-403: 	Design, Installation, Servicing and Monitoring of Two Metal Casting Pilot Projects 

Tasks:
1.	Carry out a best-practices study of international experience on technology innovation for metal casting plant. Specify technologies and alternate institutional and financing mechanisms.
2.	For a pilot region identify and evaluate options for about two metal casting plants on technology innovation, adjusting the product structure and control of production quality. The technical retrofit mainly focus on technical process. Options should specify pre-feasibility study, designs and costs, financing and administrative arrangements as well as required regulatory arrangements.
3.	On approval complete design drawings and specifications for all systems. At this stage design for technical demonstration is a priority over financial viability. Systems, however, should be designed to meet national economic profitability criteria. Environmental impacts should be assessed and accounted for in the design.
4.	Analyse the equipment and training requirements for an existing regional installation and service centre selected to serve the regional pilot equipment. Procure equipment and provide training on installation, servicing and maintenance of equipment.
5.	Negotiate regulatory and financial matters between local energy companies and customers.
6.	In conjunction with energy service providers procure specified metal casting equipment.
7.	Design and implement a one year monitoring program of the systems’ administrative, financial and technical performance. Report.
8.	Prepare a guidebook for investors.
Estimated Budget: 120,000 USD
Required Qualifications:
Senior international and national engineering capability in the design, procurement, installation, financial and servicing of metal casting plant.

Sub-contract 21-404:	Design, Installation, Servicing and Monitoring of Coking Project

Tasks:
1.	Carry out a best-practices study of international experience on technology innovation for coking plant. Specify technologies and alternate institutional and financing mechanisms.
2.	For a pilot region identify and evaluate options for one coking plant on technology innovation, which include improving energy efficiency and co-generation with rest heat. The technical retrofit mainly focus on technical process, the annual output for unit plant is above 100,000 tons of coke. Options should specify pre-feasibility study, designs and costs, financing and administrative arrangements as well as required regulatory arrangements.
3.	On approval complete design drawings and specifications for all systems. At this stage design for technical demonstration is a priority over financial viability. Systems, however, should be designed to meet national economic profitability criteria. Environmental impacts should be assessed and accounted for in the design.
4.	Analyse the equipment and training requirements for an existing regional installation and service centre selected to serve the regional pilot equipment. Procure equipment and provide training on installation, servicing and maintenance of equipment.
5.	Negotiate regulatory and financial matters between local energy companies and customers.
6.	In conjunction with energy service providers procure specified metal casting equipment.
7.	Design and implement a one year monitoring program of the systems’ administrative, financial and technical performance. Report.
8.	Prepare a guidebook for investors.
Estimated Budget: 70,000 USD
Required Qualifications:
Senior international and national engineering capability in the design, procurement, installation, financial and servicing of coking plant.

Annex 4: 	Workplan

Please insert workplan from separate file (workplan.xls)

Annex 5:	Capacity Building and Training Materials: Contributions from phase I

Capacity building and training at the enterprise, local authority and central levels (including specialized training for existing TVE support institutions) are key to the success of this project. The project first establishes the new institutions and institutional framework to remove the policy, technology, market and financial barriers to the accelerated introduction of energy efficient technologies in TVEs. Capacity building is an essential component in establishing these new institutions. Practical training in regulatory reform at the local level, as well as energy conservation will be delivered to local government authorities and TVE managers from an early stage in project execution. 

During phase I of the project a detailed survey was undertaken of the existing TVE support institutions to identify and document their capacity to deliver the specialized  training required by both TVE enterprises and local government authorities. 

Also in phase I, a training package, tailored to the special  needs of TVE and local government authorities,  was prepared by a Chinese company AEPI.

The training materials developed are in two parts. The first part is for use with policymakers at various levels and TVE managers to create an enabling policy environment  for TVEs to invest in energy-efficient and clean technologies. The second part is intended to disseminate information on sector-specific technologies to the TVEs. 

PART 1.
•	Technology innovation and business management. 
•	Environmental policy and management.
•	Management of energy conservation.
•	Financing energy efficiency/conservation and clean technologies. 

PART 2.
•	Energy conservation and waste reduction in TVE metal casting, coke making, brick making and cement industries. 

The training package also includes:
•	Software for use in the financial analysis of energy efficiency investments. 
•	Illustrative  videos and trainer’s guide. 

The package has been pilot tested and subsequently  refined based on feedback from trainees. For maximum flexibility, the package takes an audience-oriented modular approach. 
A delivery mechanism for the training was subsequently initiated. Using national instructors, themselves acknowledged experts in the above subjects, the training package was delivered to 50 key individuals from TVE and related institutions. In phase II these individuals and their respective institutions will, as members of the PTPMC, have the opportunity assume  responsibilities to deliver the training package to the intended beneficiaries. As with other services provided by the PTPMC, the delivery of training will progressively move towards a commercial basis facilitating post project sustainability. 

Capacity building and training activities are integrated into all the 5 major components of the project. As such capacity building and training contribute to all 5 stages of the barrier removal process. 

Additional material on environmental management and policy instruments available from SEPA will be used to supplement the training package. Furthermore , product marketing (PTMPC) and the management of specialized funds (RCF) will be covered from other sources of training materials. 

Annex 6:	Equipment list for PIC, PTPMC and RCF

(A)	Equipment list for PIC Secretariat:  (US$ 15,000)

•	3 computer: (Pentium III 450 MHz CPU, 128 MB SDRAM, 8 MB RAM graphic
card, >8 GB HDD, 3.5” FDD, 40xCD-ROM drive, PS/2-keyboard, mouse, 17” color monitor, Windows 98 preinstalled and on CD, sound card and multimedia, NIC 10/100 MB)
•	1 ISDN Router 
•	ISDN line connection (excluding monthly fees)
•	1 printer
•	1 desk copy machine
•	1 fax machine
•	Software (MS Office Professional, MS Project, MS Frontpage)

(B)	Equipment list for PTPMC Secretariat: (US$ 17,000)

•	4 computer: (Pentium III 450 MHz CPU, 128 MB SDRAM, 8 MB RAM graphic
card, >8 GB HDD, 3.5” FDD, 40xCD-ROM drive, PS/2-keyboard, mouse, 17” color monitor, Windows 98 preinstalled and on CD, sound card and multimedia, NIC 10/100 MB)
•	1 ISDN Router 
•	ISDN line connection (excluding monthly fees)
•	1 printer
•	1 desk copy machine
•	1 fax machine
•	Software (MS Office Professional, MS Project, MS Frontpage)

(C)	Equipment list for RCF Secretariat: (US$ 15,000)

•	3 computer: (Pentium III 450 MHz CPU, 128 MB SDRAM, 8 MB RAM graphic 
card, >8 GB HDD, 3.5” FDD, 40xCD-ROM drive, PS/2-keyboard, mouse, 17” color monitor, Windows 98 preinstalled and on CD, sound card and multimedia, NIC 10/100 MB)
•	1 ISDN Router 
•	ISDN line connection (excluding monthly fees)
•	1 printer
•	1 desk copy machine
•	1 fax machine
•	Software (MS Office Professional, MS Project, MS Frontpage)

Annex 7a: Job  Descriptions for Experts and Consultants

1) Post title:	11-001.  Chief Technical Adviser (CTA)
Duration:	20 months over a 48-month period   (First 15 months full time basis).
Location:	Beijing with national travel as required.
Start date:	January 2000

Description:
Oversee project implementation in the start-up phase especially establishment of the new institutions required by the project in close cooperation with UNIDO/ National Project Management Office (PMO) and National Project Director (NPD)/UNDP Beijing, China on the.  

Activities:
-	Finalize job descriptions for national project staff, training programs and generic terms of reference for services to be provided by national and international PTPMC members through  competitive bidding
-	Assist NPD/PMO to prepare annual workplans and detailed TOR for all activities;
-	Attend TPRs and prepare documentation for Steering Committee meetings
-	Assist NPD/PMO with recruitment and equipping of PTPMC secretariat and staff, take responsibility for drafting business plan and assist Director of the PTPMC secretariat with the pre-selection of PTPMC members
-	Advise NPD/PMO with recruitment and equipping of PIC secretariat and staff
-	Advise UNIDO and PMO with the recruitment of the RCF Manager
-	Advise UNIDO and ABC with the selection of an international subcontractor to facilitate establishment of the RCF 
-	Facilitate work of UNIDO subcontractor in drafting the RCF prospectus/ investment guidelines and with the provision of initial training to RCF staff
-	In cooperation with subcontractor advise UNIDO and ABC on management of GEF component of RCF working capital
-	Facilitate work of legal expert in drafting PIC statutes
-	Advise NPD on how to ensure the piloted TVEs fully participate in later dissemination and replication activities.
-	Advise PIC Senior Administrator with nomination of PIC international members

Qualifications:
CTA has excellent English reading, speaking and writing, very good Mandarin speaking and reading would be an asset.
CTA has demonstrated project management experience, 5 years plus professional experience in consulting for or management of industrial SME preferably including in the building material industry.
CTA is familiar with working procedures of UN organizations and the structure of the TVE industry.
CTA should have an academic background in either business administration or mechanical engineering.
CTA has good communication, organization and writing skills.
 
Estimated budget: 280,000 USD

2) Post title:	11-002.  Legal expert. 
Duration:	3 months over a period of 12 months
Location:	Beijing
Start date:	early 2000

Description:
Address key legal and incentive aspects in the legal design of the barrier removal framework.

Activities:
-	In cooperation with the PIC Senior Administrator and UNIDO CTA draft PIC statutes, including governance and decision making rules for the PIC.
-	Develop criteria for the merit-based award and recognition program for regulatory reform by local communities including indicators of performance, type of award and procedure for candidate selection, frequency of awards.
-	Participate in the first PIC project investment review meeting.
-	Review the adequacy of PIC/LPIC agreements on regulatory strengthening on the county level.
-	Participate in joint meetings with subcontractor 21-001 and 21-002 to contribute to PTPMC business plan and RCF investment criteria development.

Qualifications:
Excellent English reading and writing skills.
Legal expert is experienced with the regulatory environment and practices in China, preferably including the TVE sector.  Legal expert is also experienced with various legal aspects of transitional economies.
Legal expert has an academic background in either institutional economics or public law.

Estimated budget: 45,000 USD

3) Post title:	11-003.  International Investment Promotion Expert
Duration:	3 months
Location:	Beijing, with travel to other locations as required
Start date:	2002

Objective:
To assist the attraction of investment capital to energy effiency improvement projects in Chinese TVEs, via the RCF and other mechanisms 

Description:
Prepare and conduct the investment promotion tour and forum.

Activities:
-	Preparation of investment promotion documentation including COMFAR project analysis for utilization in UNIDO’s as well as other investment promotion mechanisms
-	Identifying potential investors and preparing an investment promotion tour
-	Arranging an international investment forum

Qualifications:
Experienced international professional in the field of industrial investment promotion in China, possibly including experience with the UNIDO investment promotion framework.
 
Estimated budget:  45,000 USD

3) Post titles:	11-050.  Short term technical consultants 
(brick making, coke making, metal casting, cement manufacture, environmental regulatory reform, business management, environmental management, marketing, quality control, monitoring and evaluation, gender specialist)
Duration:	14 w/m over a 4-year period   
Location:	Beijing and travel to national travel to sites in China as required.
Date required:	2001 onwards as required.

Description:
This position includes a number of consultants who will be recruited for short periods to provide specialized one-off services.

Activities:
-	Assist the PTPMC Director and Secretariat with evaluation of offers from PTPMC members for the provision of services to TVE and local authority clients. 
-	In close cooperation with the PTPMC Secretariat, advise qualified national PTPMC members (selected through a competitive bidding process to  provide services to TVE and local authorities) on:
-	completion of site-specific feasibility studies for TVE projects, which introduce new energy-efficient technologies and processes.
-	Realistic assessments of capital costs of new equipment. 
-	Introduction and implementation of regulatory enforcement (permitting/compliance monitoring/enforcement) in local communities.
-	Implementation of technical and environmental management training programs.
-	Market assessment for TVE products. 
-	Product Quality management. 
-	Energy auditing, monitoring and targeting, monitoring energy savings and greenhouse gas emissions reductions. 
-	Technology-specific services:

1. CEMENT:
-	Energy efficient operation and optimization of vertical shaft kilns  (to clinker output of 100,000 t/a and 250-350 Kcal/Kg specific heat consumption).
-	Peripheral technologies,  (dynamic separation for close-circuit ball mill operation, vertical roller mill raw grinding, ESP and mechanized bag house  dust collection, instrumentation and micro-processor control, pneumatic blending prior to granulation.).

2. BRICKS:
-	Process control and monitoring of dryers and kilns. 
-	Hollow brick manufacture, equipment operation. 
-	Building codes and regulations to promote energy efficiency. 

3. METAL  CASTING:
-	improved operations, housekeeping and instrumentation.
-	Product quality control and improved operation (product testing and inspection) to reduce rejects and save energy. 

4. COKE MANUFACTURE:
-	By product marketing.
-	Waste heat recovery and co generation.
-	Assessment of all TOR, job descriptions and training programs with respect to their gender sensitivity.
-	Monitoring and evaluation of the barrier removal framework, measurement of indicators 
-	Supervision of all bidding for SC and equipment
-	Implementation of SC, including review of progress reports and quality control

Qualifications:
All experts require excellent written and oral English skills.
Industry experts require five plus years of practical experience with technology assessment and operation in their industries. They need to have demonstrated that they are capable to conduct technology and product related problem assessment, solution development and implementation.  They also need to be able to communicate this to non-technical staff.
Technical expert (regulation, management and monitoring) require five plus years of practical experience in their respective fields, including in-country experience; preferably TVE related.

Estimated Budget: 210,000 USD

4) Post title:	14-001.  United Nations Volunteer (UNV)
Duration:	24 months
Location:	Beijing
Start date:	early 2001

Description:
Assist NPD in the day-to-day management of PMO, and in any other tasks, as requested.

Activities:
-	Monitor establishment of local PICs, PIC/LPIC agreements, action plans, training needs for regulatory strengthening and report progress to UNIDO/UNDP
-	Monitor identification and implementation of PTPMC member service delivery
-	Participate in PTPMC, RCF and PIC review activities and replication activities
-	Advise NPD and Directors of PTPMC and PIC Secretariats as necessary

Qualifications:
UNV has excellent English reading, speaking and writing, very good Mandarin speaking and reading would be an asset.
UNV has demonstrated project management experience, 5 years plus professional experience in consulting for or management of industrial SME preferably including in the building material industry.
UNV is familiar with working procedures of UN organizations and the structure of the TVE industry.
UNV should have an academic background in either business administration or mechanical engineering.
UNV has good communication, organization and writing skills.
 
Estimated budget: 51,000 USD

5) Post title:	17-001. Project Coordinator 
Duration:	4 years
Location:	Beijing with national travel as required.
Start date:	2000

Description:
The Project Management Office (PMO), under the chairmanship of the national project director (NPD) handles the administrative oversight of project implementation as well as communications to the implementing, executing and coordinating agencies. The PMO will be set up within MOA with staff from the Dept. of Science and Education, from the TVE Bureau and with experts from MOA/TVE Institutes. The PMO will have a project coordinator to be recruited by UNIDO in cooperation with the National Project director (NPD). The PMO is tasked with management and co-ordination of national inputs to the project for a period of 4 years. Among other tasks the PMO will:
-	Coordinate the identification and implementation of national project inputs (as listed in E1) with UNIDO’s inputs and assistance of the CTA .
-	Take full responsibility for the timely delivery of all national inputs. 
-	In cooperation with the CTA and subcontractors facilitate  establishment of the PIC, PTPMC and RCF and their respective secretariats. 
-	Facilitate the work of the CTA, UNV, subcontractors.
-	Prepare  updated quarterly work plans and forward to UNIDO/UNDP.
-	Organise translation/interpretation where required in connection with meetings and missions of foreign experts. 

The project coordinator oversees the identification and implementation of national project inputs (as listed in E1) with UNIDO’s inputs.

Activities:
-	Work closely with the CTA (and subsequently the UNV) to co-ordinate the identification and implementation of national project inputs (as listed in E1) with UNIDO’s inputs.  
-	Facilitate the timely delivery of all national inputs. 
-	In co-operation with the CTA and subcontractors facilitate establishment of the PIC, PTPMC and RCF and their respective secretariats. 
-	Advise NPD on how to ensure the piloted TVEs fully participate in later dissemination and replication activities
-	Facilitate the work of the CTA, UNV, subcontractors.
-	Prepare updated quarterly work plans and forward to UNIDO/UNDP.
-	Organise translation/interpretation where required in connection with meetings and missions of foreign experts. 

Qualifications:
The project coordinator is a native Mandarin Chinese speaker with very good English reading and writing skills.
The project coordinator is an experienced public administrator with excellent knowledge of the TVE sector.
The project coordinator has demonstrated experience with project management/ coordination.

Estimated Budget: 100,000 USD

6) Post title:	17-002. Director of the PTPMC Secretariat
Duration:	4 years
Location:	Beijing with national travel as required.
Start date:	2000

Description:
Manage the operation of the PTPMC Secretariat and its organizational development to a commercial entity.

Activities:
-	Work closely with the CTA and subcontractor with development of the PTPMC business plan.
-	Assist CTA and subcontractor with selection of  pre-qualified PTPMC  members
-	In cooperation with the NPD/PMO/UNIDO recruit PTPMC Secretariat staff members
-	Oversee operation of the PTPMC network – Secretariat and members  (with assistance from the CTA  and experts ) :
-	   Manage the network of qualified PTPMC members. (national and international),
-	Manage the work of the PTPMC Secretariat in assessing the resource needs of TVE and local authority clients, (regulatory strengthening, technical/business training, feasibility studies, proposal preparation, asset management, product quality control, market development…….
-	Supervise competitive bidding among PTPMC members for the provision of services and equipment for client local authorities and TVEs
-	Supervise PTPMC Secretariat staff with preparation of TOR and  negotiation of contracts with PTPMC members, draft conditions of service and equipment procurement contracts.
-	Oversee management of service and procurement contracts with PTPMC members. 
-	Take responsibility for the submission of bankable proposals for TVE energy efficiency projects to the PIC secretariat.
-	Supervise preparation of plans for the monitoring and evaluation of the TVE pilot technology demonstrations. 
-	Using services of PTPMC member(s), plan and implement a work program to provide for commercial operation of the PTPMC network following completion of the GEF project.
-	Develop long-term business plan (incl. improved cost recovery from TVE demonstration loans) for PTPMC. 
-	Expand PTPMC membership to regional entities equipped to market the commercial services of the PTPMC “mechanism” (operations of the Secretariat and members) to potential new TVE clients throughout China. 
-	Supervise PTPMC marketing including promotion by local media.
-	Supervise feasibility work for new projects.
-	Progressively increase shares of cost recovery from client TVE.

Qualifications:
The PTPMC Director is a native Chinese speaker with very good written and verbal English skills.
The PTPMC Director has demonstrated entrepreneurial talent, management experience preferably in either consulting or small and medium-sized company development.
The PTPMC Director has demonstrated people skills, including communication, staff motivation and development.

Estimated budget: 100,000 USD

7) Post title:	17-003/004.  PTPMC Secretariat staff. (purchase/contract, information management officers)
Duration:	4 years each
Location:	Beijing with national travel as required.
Start date:	2000

Description:
The PTPMC staff carry out the PTPMC duties under the general direction of the PTPMC Director. The purchasing officer develops and manages contracts with PTPMC members as well as clients.  The information management officer is responsible for the drafting of project reports, tracking and management of client and PTPMC member information, as well as PTPMC marketing activities.  The support staff carries out standard office support activities.

Activities:
-	Under the supervision of the PTPMC Director the officers undertake the following tasks:
-	Develop requests for proposals based on client needs and lists of eligible bidders,
-	Manage the bidding, negotiation and contract preparation process for individual contracts with PTPMC members. (Preparation of Terms of Reference, obtaining minimum 3 competitive bids for requested service)
-	Oversee service delivery and quality management of sub-contractors,
-	Develop and maintain a database of  PTPMC members and PTPMC website, including database on TVE capacity developed during phase 1 of this project,
-	Document all key PTPMC decisions covering the  investment proposals received from TVE onward transmission to the PIC,
-	Maintain a reference system of reports prepared by contracted PTPMC members, and
-	Prepare reports and correspondence related to the operations of the PTPMC network and its interaction with the PMO, RCF and PIC.

Qualifications:
Officers and support staff are mandarin native speakers, adept in speaking, reading and writing (drafting) English.  All of them should be able to comprehend relevant English technical, management and regulatory terms.
Contracting officer only: He/she should have university background in legal or management field and practical experience with contracting/contract negotiations in the private or public administration sector.  He/she should have basic knowledge of UN contracting procedures.
Information management officer only: He/she should have an advanced computer background, preferably including an information technology related university degree and practical experience with database management.

Estimated budget: 140,000 USD

8) Post title:	17-005. Senior Administrator of the PIC Secretariat.
Duration:	4 years
Location:	Beijing with national travel as required.
Start date:	2000

Description:
The PIC identifies the need for, encourages and monitors the enforcement of relevant laws and regulations on the  county level to establish a policy environment that is conducive to energy conservation. It facilitates integration of project activities with existing  TVE reforms. The PIC’s primary means of enforcement is to recommend the funding of bankable proposals to a  the RCF, the project’s dedicated investment mechanism. PIC approval and submission to the RCF are based on achievements in regulatory  reform in that county.
The PIC consists of delegates from relevant commissions, ministries, other relevant institutions and  experts. The PIC interacts with a local policy implementation committee (LPIC) consisting of delegates from the county/township governments, TVE and the Environmental Protection Bureau to implement local policy initiatives. The PIC also recognises local officials and TVE managers for their achievements through a merit-based award programme. Based on experience gained from the 8 pilot demonstrations, the PIC is responsible for introducing the regulatory reform process to a wider subset of communities.
The work of the PIC is managed by a small permanent Secretariat, consisting of a senior Administrator and support staff.
The Senior Administrator of the PIC secretariat manages the work of the PIC and is the main liaison person for PIC members.

Activities:
At project start-up (immediate objective 1.):
-	Work closely with the Legal expert to draft the PIC statutes.
-	In co-operation with the other experts and PMO constitute the PIC and nominate national 
participants. 
-	Facilitate work of MOA to ensure timely adoption of PIC statutes. 
-	Supervise drafting of directives for establishment of LPIC’s. 
-	Constitute LPIC’s and nominate members.
-	Supervise preparation of information materials on project and LPIC objectives.
-	Convene 1st. meeting of PIC and LPIC’s.

During project implementation in 8 pilot counties/townships:
-	In co-operation with LPIC’s and with support of PTPMC member identify and draft 
	strategy to strengthen local regulatory programmes, establish benchmarks and prepare an 
	action/monitoring plan for local regulatory reform. 
-	In co-operation with LPIC’s and PTPMC Secretariat Director identify training and other 
	services required by local authorities for implementation of the regulatory reform 
	strategy. 
-	Report on progress with regulatory reform.
-	Issue merit-based awards to county officials for success with regulatory reform. 
-	Identify TVE energy efficiency investment opportunities according to satisfactory 
	performance of concerned local authority with regulatory reform.
-	Supervise preparation of all documentation for PIC project investment review meetings.
-	Convene PIC project investment review meetings. Submit proposals to RCF Supervise 
	planning and implementation of technical/financial/environmental performance 
	evaluation  of pilot demonstrations. Initiate remedial action as required. 

Following implementation of regulatory reform in at least four pilot counties: 
-	Initiate an independent monitoring and assessment of the regulatory reform process by a PTPMC member.
-	Document lessons-learned from regulatory reform and convene one workshop on the national level and four workshops at the county/ level.
-	Replicate regulatory reform in a wider subset of communities nation-wide.

Qualifications:
The PIC Senior Administrator is a native Mandarin Chinese speaker with very good English reading and writing skills.
The PIC Senior Administrator is an experienced public administrator with excellent knowledge of the TVE sector, county-level administration and experienced with the conduct of cross-ministerial activities, including participation in the phase I National Co-ordination Group.
The PIC Senior Administrator has demonstrated experience with project management/ coordination.

Estimated Budget: 100,000 USD 

9) Post title:	17-006.  RCF Manager. (ABC staff member)
Duration:	24 person months over 4 years
Location:	Beijing with national travel as required.
Start date:	2000

Description:
Overall responsibility for the operation of the RCF, arrangement of ABC co-financing and liaison with other ABC departments.

Activities:
-	Approve UNIDO’s list of bidders to develop RCF investment criteria/prospectus
-	Provide key inputs to the investment prospectus
-	Oversee the operation and performance of the RCF
-	Liaison with PIC Secretariat
-	Using services of PTPMC member(s) as required and in cooperation with ABC, plan and implement a program for expansion of the RCF capital base, including:
-	Prepare marketing strategy, plan and promotional materials for the RCF
-	Update RCF prospectus/criteria
-	Seek new investments for the RCF from both foreign and domestic sources
-	Organize and convene international investment and business fora through the UNIDO and other investment promotion networks
-	Commence financing of new projects from loan repayment
-	Open new co-funding mechanisms

Qualifications:
RCF manager is a mandarin native speakers, adept in speaking, reading and writing (drafting) English and good communicators.  He/she should be able to comprehend relevant English technical, management and financial terms.
RCF manager has a ten plus years experience in the banking sector, preferably with practical experience in lending operations for industrial TVE, and occupies a responsible position in the ABC.
RCF manager should have demonstrated project management ability.

Budget: 50,000 USD

10) Post title:	17-007   RCF Loan officer.
Duration:	4 years each,
Location:	To be determined by ABC.
Start date:	2000

Description: 
RCF loan officer oversees RCF’s lending operations to TVE on the local level.

Activities:
-	Review of loan applications from PIC for RCF investments. (initially 8 pilot investments thereafter all applications from PIC)
-	Management of TVE loans, monitoring repayment progress
-	Integration with standard bank financing

Qualifications:
RCF loan officer is are mandarin native speakers, adept in speaking, reading and writing (drafting) English.  He/she should be able to comprehend relevant English technical, management and financial terms.
Loan officer should have a five years plus experience in lending operations and currently occupy a position of similar rank in the ABC.
Loan officer should have an academic background in finance.

Estimated budget: 70,000 USD  

11) Post title:	17-008.  National Investment Promotion Expert
Duration:	12 months
Location:	Beijing with national and international travel as required
Start date:	2001

Description:
National support for investment promotion

Activities:
-	Preparing COMFAR project analysis on potential investment projects for utilization in UNIDO’s as well as other investment promotion mechanisms, including data collection, verification and entry
-	Project liaison for interested investors and UNIDO investment promotion network.
-	Supporting the preparation and conduct of international investment forum.

Qualifications:
National expert in the field of industrial investment promotion in China, possibly including experience with the UNIDO investment promotion framework.
Mandarin native speakers, adept in speaking, reading and writing (drafting) English.  He/she should be able to comprehend relevant English technical, management and financial terms.
Experienced COMFAR Expert III user.

Estimated budget:  24,000 USD

12) Post title:	17-009.  National Gender Expert
Duration:	10 months over 3 years
Location:	Beijing with national travel as required
Start date:	early 2000

Description:
Working as an integral support to the PMO, provide analysis and design of gender-sensitive project arrangements in the context of project activities, staff recruitment and training.

Activities:
-	Develop a strategy for practically incorporating gender concerns into all project actives
-	Develop a monitoring framework to monitor implementation of gender strategy
-	Advise project management office on gender sensitive project-design issues, including all TOR for experts, sub-contractors and training programmes
-	Help identify service providers with gender senstiivity
-	In consultation with selected PTPMC sub-contractors, develop gender sensitive selection procedures for participation of TVE staff in training programs.
-	In consultation with selected PTPMC sub-contractors, integrate gender-related training components into training materials.

Qualifications:
National expert in the field of gender promotion in China, preferably including experiences with the integration of gender into the design of rural development projects in China. Post-graduate qualification related to gender and industrial or rural development.
Mandarin native speakers, adept in speaking, reading and writing (drafting) English.

Estimated budget:  20,000 USD  

13) Post title:	17-010.  Social Impact Expert
Duration:	4 months over 3 years
Location:	Beijing with national travel as required
Start date:	2000

Description:
Working as an integral support to the PMO, to provide analysis of potential negative social impacts of the project, notably related to unemployment and SME development. Specifically to assist design of project activities and recruitment, and make appropriate recommendations to project decision makers.

Activities:
-	Develop a monitoring framework to monitor impact of project on unemployment and SME
-	Advise project management office on social issues related to project-design, including commenting on TOR for concerned experts, sub-contractors and training programmes
-	Assist project to monitor social impacts, and make recommendations to project authorities.

Qualifications:
National expert in the field of unemployment in rural areas, and on SME development. Demonstrated experience working on internationally funded and policy driven projects. Post-graduate qualification related to employment and industrial or rural development.
Mandarin native speakers, adept in speaking, reading and writing (drafting) English.

Estimated budget:  10,000 USD

14) Post title:	13-001 PTPMC Support staff
Duration:	4 years
Location:	Beijing with national travel as required.
Start date:	early 2000

Description:
To provide secretarial support to the PTPMC Secretariat and the Secretariat Director. 

Detailed TOR to be developed by the CTA and PTPMC Secretariat Director.

Estimated budget:	28,000 USD

Post title:	13-002/003. PIC secretariat assistant and support staff
Duration:         4 years each	
Location:	Beijing with national travel as required.
Start date:	early 2000

Description:
Work under the guidance of the PIC Senior Administrator to prepare documentation for PIC/LPIC meetings as well as standard administrative functions.

Activities:
-	Under the supervision of the PIC Senior Administrator undertake the following tasks:
-	Preparation of information materials on project and LPIC objectives.
-	Organisation of meetings of PIC and LPIC’s 
-	Preparation of reports and correspondence related to the operations of the PIC and its interaction with the PMO. RCF and PTPMC. 
-	Organisation of PIC investment review meetings,
-	Document all key PIC decisions covering the merit-based award and recognition scheme, and the assessment of investment proposals received from the PTPMC Secretariat for onward transmission to the RCF. 
-	Co-ordinate performance monitoring of pilot technology demonstrations. 

Qualifications:
Staff are mandarin native speakers, adept in speaking, reading and writing (drafting) English and good communicators.  He/she should be able to comprehend relevant English technical, management and regulatory terms.
They should have experience with international co-operation projects.

Estimated budget: 98,000 USD

15) Post title:	13-004 RCF support staff
Duration:         	4 years	
Location:	Beijing.
Start date:	early 2000

Description:
Work under the guidance of the RCF Manager. The staff should provide full secretariat support.

Activities:
-	 Details of tasks to be developed by the CTA and RCF Manager

Qualifications:
Staff are mandarin native speakers, adept in speaking, reading and writing (drafting) English and good communicators.  He/she should be able to comprehend relevant English technical, management and regulatory terms.

They should have experience with international co-operation projects.

Estimated budget: 28,000 USD

16) Post title:	13-005.   PMO Assistant
Duration:	3 years
Location:	Beijing.
Start date:	2000

Description: 
Provide logistical and communications assistance to PMO
Undertake research activities
Conduct oral and written translations for CTA/NPD and implement other assignments as requested by CTA/NPD.

Activities:
-	Written and oral translations from Mandarin into Chinese and vice-versa.
-	Administrative, research and organizational assignments as requested by the NPD and CTA/NPD

Qualifications:
Assistant is a mandarin native speakers, with superior speaking, reading and writing (drafting) English.  He/she should be able to be fluent with relevant English technical, management and financial terms.

Assistant should be familiar with the TVE industry and the implementation of international development projects.

Assistant has excellent communication skills and is well organised.

Estimated budget: 52,500 USD

Annex 7b: UNIDO Technical Inputs

1) Post titles:	11-051.  Short term UNIDO technical support services

Duration:	18 w/m for UNIDO staff over a 4-year period   
Location:	Beijing with national travel to sites in China as required.
Date required:	2001 onwards as required.

UNIDO Technical staff will provide specific technical support services to the project. Detailed TOR for each input will be prepared by the PMO and approved by the NPD. 

It is anticipated that these technical inputs may cover issues such as: legal status of TVEs and ensuring piloted TVEs participate in dissemination/replication activities; social issues related to unemployment and impact on SMEs, gender, monitoring, etc. 

Estimated Budget: 180,000 USD
Annex 8:	Description of PIC, PTPMC and RCF, including Terms of Reference for subcontracts to help design these.

The PIC, PTPMC and RCF represent the institutional framework to remove barriers to energy efficiency in TVEs in China. This Annex provides an outline description of the PIC. The full written legal statutes of the PIC are to be developed through Output 1.2

As the PTPMC and RCF are to be designed with the assistance of sub-contractors, this Annex provides the TOR for those sub-contractors. An outline description of the PTPMC and RCF is included as an integral part of the TOR.

During the life of the project, sub-contractors will also be recruited to assist the PTPMC and RCF with their business development. The TOR for these sub-contractors are also included in this Annex.

Barrier Removal Framework

Outline of PIC activities and objectives

The Policy Implementation Committee (PIC) identifies the need for, encourages and monitors the enforcement of relevant laws and regulations on the county level to establish a policy environment that is more conducive to energy conservation.  Its activities are integrated with existing TVE reforms and its participants represent the mainstream players in the process of TVE market transformation.

The PIC’s primary means to achieve its objective is to strengthen incentive-based regulation, including voluntary agreements between the central government, county officials and the TVE industry, program monitoring and financial incentives for compliance.
  
The PIC consists of delegates from relevant commissions, ministries, other relevant institutions and experts. The PIC interacts with a local policy implementation committee (LPIC) consisting of delegates from the county/township governments, TVE and the Environmental Protection Bureau to implement local policy initiatives. 

The PIC, together with its local counterparts, negotiate voluntary TVE transformation agreements/action plans, including concrete benchmarks, towards the establishment and implementation of incentive-based regulatory programs that also strengthen existing command and control regulatory programs to remove policy barriers to energy conservation, environmental protection and product quality improvements.  These action plan will also cover transformation issues such as how to separate TVE management from government, and how to get technical and administrative support to TVEs.

The PIC will put in place financial incentives for the implementation of concerned regulations and operate a continuously applied incentive/penalty system to facilitate implementation of the TVE transformation agreement.

The PIC’s primary means of enforcement is to recommend the funding of bankable proposals to the RCF. PIC approval and submission to the RCF are based on achievements in regulatory  reform in that county. It also recognises local officials and TVE managers for their achievements through a merit-based award programme. Based on experience gained from the 8 pilot demonstrations, the PIC is responsible for introducing the regulatory reform process to a wider range of communities.

Based on expert assessment, participating local officials will be selected for training to enable them to develop action plans and improve the implementation of existing laws and regulations related to environmental protection, energy conservation, industrial and fiscal policy, ownership/stockholding of TVE and land use rights on the local level.

The work of the PIC is supported by a small permanent Secretariat, consisting of a senior Administrator and support staff.

Sub-contract title:	21 001.  Establish the PTPMC. 

Description:
The PTPMC secretariat is to be set up as an economic entity to develop the supply and demand for business development services and equipment for industrial TVE in the four sub-sectors.  The secretariat brokers business development services between qualified service providers and TVE clients.  Service delivery is subsidised by the GEF for the first four years of its operation.  Subsequently, it needs to secure other sources of revenue to cover its operational expenses and the costs of service delivery.

The PTPMC consists of a secretariat and member organisations.  Members will need to qualify for participation before they become eligible to provide business development services to TVE as well as other stakeholders.  They will compete with each other for such service contracts.   The Secretariat will work together with TVE and other stakeholders to determine their service needs, issue requests for proposals to its members, award task orders and oversee overall delivery.

The PTPMC Secretariat, consisting of a Director and purchase/contract specialists, plus support staff, will be constituted as an economic entity.  Subcontractor 021-001 together with the PTPMC Director, will develop a business plan for this entity and execute the pre-qualification for the consortium members.  These will include a wide range of national and international service institutions, companies and experts that have a proven capacity to deliver business development services to project stakeholders for barrier removal.  They include energy efficiency centers, design institutes, technology manufacturers, training and information centers, technology and product standardization bureaus, quality management consultancies, foreign enterprises.

After this initial stage, the PTPMC will become fully operational. It will sub-contracts task orders to its members through competitive bidding.  These PTPMC members deliver services, initially to the eight TVE pilot demonstration projects and other project stakeholders.  Services to be delivered include: feasibility analysis, equipment supply for demonstration projects, technical, financial and regulatory training, information, risk analysis, product/process quality control, energy auditing, monitoring and targeting, regulatory reform. PTPMC members are identified through a questionnaire-based search process undertaken by the PTPMC Secretariat. 

In the expansion phase, the PTPMC Secretariat takes the initiative to identify additional TVE energy efficiency investment that are suitable for funding.  Based on the recommendation of the PTPMC Director, projects are submitted for financing to the policy implementation committee (PIC).  PTPMC also monitors project operation and measures performance including actual energy savings. For this purpose the PTPMC Director can draw on the services of individual national/international experts who will also be PTPMC members.
 
The project seeks to make the PTPMC (secretariat and network of members) self sustaining beyond the four years of the phase two project. An important project goal is to build the confidence of TVE in the PTPMC's services for which they will be willing to pay. The PTPMC Secretariat will obtain its income by charging a fee to the service contracts it issues.  The fee will depend on the kind of service contract. (see also section B7). 

During the period of implementation of the GEF project, operations of the PTPMC Secretariat in respect of securing the services/products of PTPMC members will be undertaken in accordance with UNIDO’s rules and procedures. 

At project start the PTPMC Secretariat (Director and two purchase/contract officers) will receive training at UNIDO Vienna (two weeks) on UNIDO’s purchasing and contracting rules and procedures. 

The following main procedures will be applied in sub-contracting:

a)	Contracts above US$ 20,000
The PTPMC Secretariat:
1.	Identifies needs (services and/or equipment) of TVE and local government clients.
2.	Drafts TOR for required services or neutral specifications for equipment. 
3.	Forwards TOR/Specs to UNIDO Beijing/Vienna for approval.
4.	Issues requests for proposals from at least three (3) members of the PTPMC network
5.	Undertakes preliminary evaluation of minimum of three proposals received and forwards recommendations and proposals (in English) to UNIDO Vienna.
6.	Prepares contract/purchase order including schedule of deliverables (progress reports, terms and conditions for the supply of equipment) and forwards to UNIDO HQ for review, approval and signature.
7.	Monitors delivery of services/equipment and recommends payment to UNIDO HQ. 

b) Contracts below US$ 20,000
The PTPMC Secretariat:
1.	Identifies needs of TVE, TVE support institution and local government clients.
2.	Drafts TOR for required services.
3.	Forwards TOR/Specs to UNIDO Beijing for approval.
4.	Issues requests for proposals from at least three (3) members of the PTPMC network
5.	Evaluates proposals and identifies appropriate offer (least cost, technically acceptable) from a minimum of three offers received and forwards their evaluation with copies of offers to UNIDO Beijing for approval.
6.	Prepares contract including schedule of progress payments and deliverables and forwards to UNIDO Beijing for review, approval and signature. 
7.	Receives deliverables (progress reports) from subcontracted entities, evaluates and either requests subcontracted entity for additions/modifications to deliverable as appropriate or forwards to UNIDO Beijing with recommendations to issue payment.

The sub-contractor will prepare a comprehensive business plan for this entity to ensure the viability of its operation and its long-term sustainability.

Activities:
-	Identification of national and international service delivery entities that are potential candidates for the PTPMC
-	Assessment of TVE business development service needs and willingness to pay
-	Identification of qualified corporate structure for the PTPMC
-	Preparation of PTPMC business plan
-	Design of data base.
-	Organize and conduct in-country training for PTPMC Secretariat  Director and purchasing/contract officers, including:
-	UNIDO subcontracting rules and procedures
-	Drafting Terms of Reference and Contracts
-	Information technology and networking
-	Business planning for service companies
-	Chinese company and contract law
-	Data base development and management
-	Project management (software)
-	Participate in the organization of an overseas study tour

Deliverables and Outcomes:
Task 1: Electronic list of potential PTPMC member organizations (including those that were surveyed in phase 1 of the project) including statements of qualifications and contact persons.

Task 2: Business plan with the following outline:
A.	EXECUTIVE SUMMARY

B. COMPANY´S BUSINESS CONCEPT
Objective
Context
Rationale for Company
New market opportunities created 
	New risks created for potential clients 
Company’s legal structure 

C. PRODUCTS AND SERVICES 
Rules for bidding, bid evaluation and procurement (equipment, training, consulting and other  services)
Standard contracts

D. EXPERTISE

E. MARKET
Market structure and size
Market drivers
Competition
 	Customer segments

F. MARKETING
Market entry strategy
Market penetration

G. MANAGEMENT
Market experience
Organizational Structure
Skill Requirements and Partnerships
Capital
Expertise
Resource Requirements
  
H. THREE YEAR PLANNING
Investment Planning
Personnel Planning
Rentability
Liquidity Planning

I. RISK ASSESMENT
Policy/regulatory risk
Market structure risk

J. FINANCIAL PLANNING

Task 3: Training materials and on the job training for PTPMC staff.

Estimated budget: 120,000 USD

Sub-contract title:	21  002.  RCF design		

Description:
The revolving capital fund is a dedicated financial instrument hosted within the ABC to catalyse TVE based investments in energy conservation.  It provides financing to TVE that seek to modernise their production technologies and upgrade the quality of their products that also result in significant energy conservation.
It guarantees the availability of loans for TVE-based energy conservation investments. Funding from the RCF is tied to co-funding from the ABC and other traditional sources of financing for TVE investments. Access to funding from the RCF is contingent upon satisfactory enforcement of laws and implementation regulations on the county level that are conducive to promoting energy efficiency according to the agreement reached between the PIC and the LPIC.

The basic RCF structure resembles that of an ordinary loan arrangement. However, the RCF structure buys down the risk for the participating commercial banks by reducing loan default risks. The integration of institutional strengthening activities on the borrowers’ side (including the preparation of bankable proposals), as well as the strengthened regulatory framework at the county level contribute to a substantial reduction of loan default risks on the lender’s side.

The fund is capitalised with a 1 mil USD grant from the GEF and a 1 mil USD grant from the MOA for the co-financing of eight phase II projects and reinvestment of loan repayments for additional projects. The Agricultural Bank of China manages the fund, matches fund contributions on a one to one basis (which means that for every GEF dollar, the MOA contributes one dollar and the ABC contributes two), arranges the overall financing package, handles loan disbursement and repayment. It will expand the scale of its operation after the project.

Figure 2: Operational Design of the RCF

The subcontractor will work with UNIDO, MOA and the ABC to finalise the arrangements to facilitate the efficient operation of the RCF, prepare its investment criteria/prospectus and provide technical and financial training to RCF in the start-up phase.

Activities:
-	Explore possible arrangements regarding co-financing/matching funds, the distribution of risks and disbursement of RCF funds
-	Develop investment prospectus for RCF, including:
-	Eligible project types
-	Project-specific, formal requirements for allocation of funding. (GEF/MOA/ABC)
-	Commercial requirements (ABC criteria)
-	Entity-specific requirements
-	Co-financing requirements risk allocation.
-	Arrange and conduct specialized training for RCF Manager and loan officers
-	assessment of industrial energy efficiency investments
-	risks associated with energy efficiency investments in TVE (lack of ownership transparency)
-	Fund management

Deliverables and outcomes:
Task 1: Written agreement between ABC, MOA and UNIDO regarding the structure of the RCF and its operation.
Task 2: Investment prospectus/criteria (using standard TOR)
Task 3: Training material for loan officers and two week training course

Estimated budget: 70,000 USD

Sub-contract title: 21-003.  Revision of PTPMC business plan & marketing campaign

Description:
Subsequent to the implementation of pilot projects, the operation of the PTPMC will be evaluated and adjustments made to prepare it for its post-project operation.  Based on the format of SC 21-001, this SC will revise the PTPMC business plan and facilitate the launch of a marketing campaign.  The SC will explore new sources of revenue for PTPMC operation including taking into account lessons-learnt from the SME business development experience elsewhere (such as ETSU in the UK). The objective of the marketing campaign is to attract new business for PTPMC members.

Activities:
-	Review recommendations from activity 5.1.4.
-	Revise business plan (based on the initial business plan from SC 21-001) according to key recommendations and lessons-learnt.
-	Identify potential new clients within the TVE industry, business development service providers, international private sector, government as well as donor communities.
-	Develop and implement a marketing campaign to promote the services of the PTPMC, including a company-to-company PR campaign (marketing material, web-site additions, road-show).
-	Facilitate PTPMC’s presence at investment promotion forum

Deliverables and outcomes:
Task 1: Revised, long-term business plan, including detailed long-term market assessment study
Task 2: Various elements of a marketing campaign, including materials for company-to-company marketing, road-show based on the results of market assessment study

Estimated budget: 70,000 USD

Sub-contract title: 21-004. Revision of investment criteria & marketing campaign to attract new sources of financing for TVE-based energy conservation and product quality improvement investments

Description:
In addition to the revolving funds from project loans, new sources of financing will be required to expand the amount of financing that is available to energy conservation and product quality improvement projects in the replication phase.  Based on the review conducted in 5.1.5 and lessons-learnt, SC 21-004 will explore ways and means to increase the amount of financing that is available for such investments within as well as outside the RCF and develop a marketing campaign to attract such new funds.

Activities:
-	Review recommendations from activity 5.1.5.
-	Revise investment criteria (based on the initial investment criteria of RCF from SC 21-002) according to key recommendations and lessons-learnt.
-	In consultation with pilot TVE and ABC, explore alternative funding vehicles for TVE-based energy conservation and product quality improvement investments based on lessons-learnt in phase 2.
-	Identify potential new investors within the national and international financial & industrial private sector, government as well as donor communities.
-	Develop and implement a marketing campaign to promote new investments (marketing material, web-site additions, road-show, participation at investment promotion forum)

Deliverables and outcomes:
Task 1: Revised investment criteria for RCF
Task 2: Detailed description of alternative funding vehicles for TVE-based energy conservation and product quality improvement projects
Task 3: Marketing campaign (incl. the identification of new investors) to attract new sources of financing to TVE-based energy conservation and product quality improvement projects (via RCF participation as well as support for other funding vehicles)
Task 4: Facilitating implementation of marketing campaign.

Estimated budget: 70,000 USD

Annex 9: 	Detailed description of the four sub-sectors

a) Brick industry
The TVE brick industry is highly decentralised and relies on small production units.  TVEs supply low quality solid bricks at low prices to local markets using locally manufactured, inefficient technologies.  They are the sole suppliers of bricks in rural markets and compete with SOE to a limited extent in urban and international markets.  In general, input and product prices are based on market principles.  There is some indication that informal price arrangements with township governments exist.  In the market, brick buying decisions focus largely on price with little consideration given to product quality.  Existing building material and construction standard regulations are often not enforced in rural areas and thus do not affect consumer and producer behaviour.

Brick is by far the predominant building material in China’s rural housing market and will continue to be so in the future.  At the same time, the Government has targeted the diversification of the rural building material industry to produce other modern building materials. This is also desirable from an energy use perspective. 

Problem statement: Primitive technologies throughout the production process result in high energy consumption during the production and usage of bricks. This leads to local and global pollution: 
•	outdated firing technologies without process controls require 20% to 50% more energy input compared to more advanced technologies used in China’s SOE sector,
•	insufficient clay preparation and clay/coal/additive mixing creates a non-homogenous raw material that gives rise to low and inconsistent quality characteristics and high break rates of the finished product (resulting in waste of energy), and higher than necessary energy consumption in the production process,
•	air drying, traditional brick-forming and processing technologies contribute to high breakage rates of in handling and transport. They require higher energy use in transport and handling because of their high weight. Moreover, the lower insulation efficiency of solid brick walls compared to other bricks leads to increased heating requirements, and
•	inferior physical/chemical characteristics of these solid bricks contributes to an undesirably short life-time of houses constructed with such bricks (the bricks  become soft and the houses unstable);  thereby increasing the need for new bricks and creating disposal problems.

Industry Outlook: Brick-making TVE own the clay resources in rural areas.  They are likely to remain the predominant suppliers of rural building materials.  Competition with other modern building materials will increase but not threaten the future of the TVE brick industry. TVE can implement technological improvements within existing production plants, begin to produce and promote high-quality bricks and start producing other modern building materials for consumers in rural markets.

b) Cement industry
The TVE cement industry is highly decentralised. They produce 25% of all cement made in China and are the predominant suppliers of low-quality cement in rural areas using outdated vertical shaft kiln technology.  The quality of cement is differentiated into different classes and prices; however TVE often do not produce qualities that meet the design specifications. In the rural market, competition is based on price with little attention paid to quality.  However, some TVE with more modern production technologies compete in more quality-driven oriented urban and international markets where pricing is competitive and production profitable.

Per capita consumption of cement is low when compared to more industrial countries, indicating that sustained sector growth in the future is more than likely (China’s cement consumption in 1990 is a third of the average in OECD countries).

Problem statement: Outdated production technologies used throughout the production process result in high energy consumption and create inferior quality products. This leads to local and global pollution:
•	TVE buy outdated production technology from SOE who have been forced to comply with production quality standards and have since moved upwards on the product quality ladder, whereas TVE have not yet faced serious regulatory compliance threats,
•	key components of such cement plants are poorly integrated; process control, including input preparation, mixing, homogenization, and temperature control is poor or not existing, leading to the production of low and inconsistent quality products,
•	small-scale production in vertical shaft kilns require more energy than bigger units using modern horizontal kilns, and
•	cost-effective control technologies to capture cement dust do not exist for the small-scale unit.

Industry Outlook: While TVE dominate market share in the rural building materials market, a few are experienced suppliers to the international markets.  TVE can be transformed by means of applying numerous techniques promoting energy conservation, by inducing technological advancement and promoting the use of higher quality cement in rural markets.

c) Coking industry
The TVE coking industry is geographically centred in two of China’s northern provinces but is highly decentralised. Producers are small-scale.  Currently used technologies cover a broad range of locally manufactured and backward technology types.  TVE are capable of producing high quality coking grades with these backward technologies, hence they are not forced to upgrade their technologies in order to compete.  TVE account for 45% of China’s coke production supplying to international and domestic markets alike.  The sector as a whole is likely to expand in the future.

Problem statement: Low-tech production technologies in the TVE coking industry lead to high energy consumption and material waste during production. This leads to local and global pollution:
•	backward technologies are too small-scale for cost-effective investment in pollution control, and
•	backward technologies do not allow the recuperation and use/sale of by-products such as process heat, heat for electricity cogeneration, tar, and coking gas.

Industry Outlook:  The market prospect for coking TVE is good.  However, only large production units can cost-effectively invest in technological improvement to increase energy efficiency and reduce environmental harm.  Existing large coking TVE will be able to advance technologically.  Increasing regulatory pressure might force small producers using backward technologies to close their operations.

d) Metal casting
China is the largest producer of metal-casts world-wide, more than half of which are produced by TVEs.  The TVE metal-casting industry is highly decentralised and uses a diverse set of often locally manufactured and not well-integrated technologies.  The character of production is very customer specific. The industry is not homogenous in terms of its technological capabilities: some metal-casting TVE supply to SOE customers in the domestic market as well as international customers.  They meet quality and quantity specifications when so required by customers.  However, they often struggle to meet predefined quality standards and their reject rates are high, which directly affects their profitability.

Problem statement: Low-tech production technologies and the lack of quality control mechanisms in the TVE metal-casting industry lead to high energy consumption and high reject rates. This leads to local and global pollution:
•	lack of quality controls (skill, process, equipment related) in various stages of production lead to very high rejection rates (more than 20%, compared to 2% in developed countries);
•	the use of inefficient melting, non-integrated production processes and the use of foundry coke of ill-defined properties and uncontrolled quality lead to high energy consumption; and
•	low profitability, small size and lack of enforcement of environmental regulations do not facilitate investments in pollution control equipment.

Industry Outlook: As metal-casting is a backbone of industrial development, the market for TVEs is likely to grow with China’s economy.  Metal-casting TVEs can invest in quality control and advance technologies in order to increase profitability and reduce environmental impacts. Unlike other TVE sectors, economies of scale are not necessarily important.

Annex 10: 	Detailed descriptions of 8 pilot project sites

Table 1 displays a summary table of the proposed eight pilot projects.  These projects were selected mainly because of the strong interest of these townships and TVE to participate actively in phase I of this project.  The project summaries included in this Annex are indicative and based on more detailed phase I project pre-feasibility analysis which is included in the reference documents.
Table 1: Project summary table for eight pilot projects
Project	Investment

(1,000 USD)	IRR

(%)	CO2 reduction  per annum.
(t CO2)	CO2 reductions as share of baseline
(%)	Total potential for project type
(t CO2 p.a.)	
Metal-casting I	1,335	9.4	1,173	11	205,735	
Metal-casting II	537	11.8	1,360	11	237,850	
Cement I	1,051	17	18,311	16	7,700,000 – 9,800,000	
Cement II	1,233	16	16,440	15		
Cement III 	1,200	19	17,510	15	7,700,000	
Brick I	805	20	10,070	24	21,300,000	
Brick II	442	21	3,863	20	10,600,000	
Coking I	2,827	48.5	16,133	17	5,400,000	

A	METAL CASTING

1) Metal casting I: Nanjing Moling Foundry Company

Location: Moling town, Jiangning county, Nanjing municipality, Jiangsu province.
Engineering consultant of existing plant: Nanjing Construction Design Institute.
Construction organization of existing plant: Moling Civil Engineering Company.
Pre-feasibility study for project: Tsinghua University and ERI.
Project description: The objective of the project is to reduce the reject rate from currently 14% to 6% and to reduce coke consumption.
 
Currently, the plant operates without a full sand-processing system, its cupola does not heat the melted iron to the required temperatures for proper casting while required coke input is relatively high.

The project adds components to the sand processing system, including upgrades to the moulding, sand-shakeout and cleaning room as well as additions to the test machinery in the laboratory. It would also retrofit the cupola and furnace and introduce quality control practices.

Table 2: Technical and economic indicators for the metal-casting I project
Item		
Investment requirement [USD]	1,335,000	
Capacity [ton casting p.a.]	7200	
Capacity use [%]	100	
Total revenue [USD p.a.]	4,070,000	
Gross profits [USD p.a.]	1,244,380	
Total costs [USD p.a.]
-	Energy
-	Other material inputs
-	Wages
-	Other	2,825,620
466,700
1,811,100
287,920
259,300	
IRR [%]	9.37	
Mechanization	   Semi-mechanization  	
Reject rate [%]	6%	
Employees	472	
Cupola	Hot cupola or cupola and
induce furnace duplexing	
Sand processing system	Good condition	
Annual emission reductions [t CO2]	1,173	
Emission reductions as share of baseline emissions [%]	11.3	
Total GHG emission reduction potential for this project type in the TVE industry [ton CO2]	205,773	

Table 3: Main investment components for metal-casting I project
Item	Investment  [USD]	
Sand processing system retrofit	246	
Cupola retrofit	207	
Far-infrared drying furnace	74	
Other core making retrofit	49	
Annealing furnace	86	
Molding retrofit	68	
Shakeout cleaning room	124	
Laboratory	99	
Civil engineering and power supply	250	
Pre-project and risk cost	131	
Total	1,335	

2) Metal casting II: Dalian Lvsang Foundry Company Ltd. 

Location: Longtang town, Lvshun district, Dalian city, Liaoning province.
Engineering consultant of existing plant: Dalian Lvshun Construction Design Institute.
Construction organization of existing plant: Lvshun Longtang Civil Engineering Company.
Pre-feasibility study for the energy-efficient technology retrofit project: Tsinghua University and ERI.
General description: The objective of the project is to reduce the reject rate from currently 14% to 6% and to reduce coke consumption. 
Currently, the plant operates without a full sand-processing system, its cupola does not heat the melted iron to the required temperatures for proper casting and the coke ratio is too high. The project improves the sand quality monitoring system, retrofits the cupola and improves the current storing facilities for the sand and coke.

Table 4: Technical and economic indicators for metal-casting II project
Item		
Investment requirement [USD]	537,000	
Capacity [ton casting p.a.]	7800	
Annual production [ton casting p.a.]	7800	
Total revenue [USD p.a.]	4,104,000	
Gross profits [USD p.a.]	1,306,740	
Total costs [USD p.a.]
-	Energy
-	Other material inputs
-	Wages
-	Other	2,797,260
397,500
1,988,800
204,960
206,000	
IRR [%]	11.8	
Reject rate [%]	6%	
Employees	336	
Cupola	Hot cupola or cupola and 
induce furnace duplexing	
Sand processing system	Good condition	
Annual emission reductions [t CO2]	1,356	
Reductions as share of baseline [%]	11%	
Total potential for project type [t CO2]	237,893	
Table 53: Main investment components
Item	Investment [USD]	
5T/h hot cupola	43,200	
Inductive furnace	74,100	
Bag filter cupola dust collecting system	37,000	
Coke store house	61,700	
Tapping temperature and carbon equivalent test device	37,000	
Microscope and hardness tester	24,700	
Return Sand cooler	135,800	
On line tester for clay-bonded molding sand properties.	37,000	
Raw sand store house	30,900	
Pre-project and risk cost	55,600	
Total	537,000	

B) CEMENT

1) Cement project I: Lufeng Cement Company Ltd.

Location: Tieshan town, Huangshi city, Hubei province.
Pre-feasibility study for the energy-efficient technology retrofit project: ERI.
General description: The objective of the project is to reduce energy consumption in various material preparation and process stages by 16% and improve the quality of the product.

The project improves the energy efficiency as well as the quality of the limestone crushing system, reduces energy consumption during calcination by homogenising, improved mixing and preparation of raw material balls and retrofitting the kiln body.  It also reduces dust emissions thus improving output.
Table 6: Technical and economic indicators for cement I project
Item		
Investment requirement [USD]	1,051,000	
Annual production [t cement p.a.]	118,300	
Total revenue [USD p.a.]	3,530,900	
Gross profits [USD p.a.]	765,000	
Operating costs [USD p.a.]
-	Energy
-	Other material inputs
-	Wages
-	Other	2,765,900
966,900
561,800
237,000
1,000,200	
IRR [%]	17.0	
Employee	382	
Annual emission reductions [t CO2]	18,311	
Reductions as share of baseline [%]	16%	
Total potential for project type [t CO2]	7,700,000 – 9,900,000	

Table 7: Main investment components
Item	Investment [USD]	
Project construction and installation	185,100	
Equipment purchase expenses	697,500	
Installation expenses	47,000	
Construction management 	9,900	
Trial operation expenses	6,200	
Other exploration and design	24,700	
Preparatory and unpredictable 	61,700	
Training of management personnel	18,900	
Total	1,051,000	

2) Cement project II, Lingqu Cement Company Ltd.

Location: Xin’an county, Guilin region, Guangxi province.
Pre-feasibility study for the energy-efficient technology retrofit project: ERI.
General project description: The objective of the project is to reduce energy consumption in various material preparation and process stages by 15% and improve the quality of the product.

The project improves the energy efficiency as well as the quality of the limestone crushing system, reduces energy consumption during calcination by homogenising, improved mixing and preparation of raw material balls and retrofitting the kiln body.
Table 8: Technical and economic indicators for cement II project
Item		
Investment requirement [USD]	1,233,000	
Annual production [ton cement p.a.]	108,900	
Total revenue [USD p.a.]	3,119,100	
Gross profits [USD p.a.]	730,000	
Total costs [USD p.a.]
-	Energy
-	Other material inputs
-	Wages
-	Other	2,389,100
834,800
421,700
188,400
944,600	
IRR (%)	16.0	
Employee	305	
Annual emission reductions [t CO2]	16,400	
Reductions as share of baseline [%]	15%	
Total potential for project type [t CO2]	Same type as cement I	

Table 9: Main investment components
Item	Investment [USD]	
Project construction and installation	302,100	
Equipment purchase	769,000	
Installation expenses	52,200	
Construction management expenses	9,800	
Trial operation expenses	6,100	
Other exploration and design	24,700	
Preparatory and unpredictable 	61,700	
Training of management personnel	7,400	
Total	1,233,000	

3) Cement project III; The Third Cement Plant of Enping County, Guangdong

Location: Encheng, Enping County, Guangdong Province.
Pre-feasibility study for the energy-efficient technology retrofit project: ERI.
General project description: The objective of the project is to reduce energy consumption in various material preparation and process stages by 15% and improve the quality of the product.

The project improves the energy efficiency as well as the quality of the limestone crushing system, reduces energy consumption during calcination by homogenising, improved mixing and preparation of raw material balls and retrofitting the kiln body.  

Table 10: Technical and economic indicators for cement III project
Item		
Investment requirement [USD]	1,200,000	
Annual production [ton cement p.a.]	115,000	
Total revenue [USD p.a.]	3,312,000	
Gross profits [USD p.a.]	731,170	
Total costs [USD p.a.]
-	Energy
-	Other material inputs
-	Wages
-	Other	2,389,100
939,930
480,100
216,200
944,670	
IRR (%)	19.0	
Employee	350	
Annual emission reductions [t CO2]	17,510	
Reductions as share of baseline [%]	15%	
Total potential for project type [t CO2]	Same type as cement I	

Table 11: Main investment components
Item	Investment [USD]	
Project construction and installation	302,100	
Equipment purchase 	769,000	
Installation expenses	52,200	
Construction management expenses	9,800	
Trial operation expenses	6,100	
Other exploration and design	24,700	
Preparatory and unpredictable 	61,700	
Training of management personnel	7,400	
Total	1,233,000	

C) BRICK MAKING

1)	Brick-Making project I, Yongxing Shale Brick plant

Location: Xinjin county, Sichuan province.
Pre-feasibility study for the energy-efficient technology retrofit project: Development Center for Energy and Environment-protection Technology and ERI.
General project description: The objective of the project is to reduce the breakage rate from 20% to below 10%, reduce energy consumption in the burning process by 24% and change production from solid to perforated, hollow and decorative bricks.

The project improves the raw material mixing, the control of raw materials, adds new equipment required for the production of perforated and hollow bricks and retrofits the kiln.
Table 12: Technical and economic indicators for brick-making I project
Item		
Investment requirement [USD]	805,000	
Annual production [10,000 pcs p.a]	10,925	
Total revenue [USD p.a.]	1,826,700	
Gross profits [USD p.a.]	544,600	
Total costs [USD p.a.]
-	Energy
-	Other material inputs
-	Wages
-	Other	1,282,100
630,900
26,000
528,100
97,000	
IRR [%]	20.06	
Employees	869	
Annual emission reductions [t CO2]	10,072	
Reductions as share of baseline [%]	24%	
Total potential for project type [t CO2]	21,300,000	

Table 13: Main investment components
Item	Investment [1,000 USD]	
Basic construction investment	172,800	
Investment of equipment	436,400	
Installation expenses	60,800	
Design fee	30,500	
Unforeseen and other cost	104,500	
Total	805,000	

2) Brick-Making project II, Yongxing Shale Brick plant

Location: Yongxing
Design unit of existing plant: Beijing Building Material Mechanised Plant.
Construction organization of existing plant: 
Pre-feasibility study for the energy-efficient technology retrofit project: Development Center for Energy and Environment-protection Technology and ERI.
General project description: The objective of the project is to reduce the breakage rate of 20% to below 10%, increase brick quality and reduce energy consumption in the burning process by 20%.

The project improves the quality and mixing of the raw materials, adds new equipment to increase the density of the raw bricks, improve air-drying and retrofit the kiln.
Table 14: Technical and economic indicators for brick-making II project
Item		
Investment requirement [USD]	442,200	
Annual production [10,000 pcs p.a.]	5,700	
Total revenue [USD p.a.]	774,100	
Gross profits [USD p.a.]	145,000	
Total costs [USD p.a.]
-	Energy
-	Other material inputs
-	Wages
-	Other	629,100
278,700
42,000
224,900
83,400	
IRR [%]	21	
Employee	350	
Annual emission reductions [t CO2]	3,865	
Reductions as share of baseline [%}	20%	
Total potential for project type [t CO2]	10,600,000	

Table 15: Main investment components
Item	Investment [USD]	
Basic construction investment	191,300	
Investment of equipment	177,200	
Installation expenses	18,400	
Design fee	36,800	
Unforeseen and other cost	18,500	
Total	442,200	

D) COKING

1) Coking project I, Shansheng Coking Company Ltd., Shanxi province.

Design unit of existing plant: Shansheng Coking Company Ltd.
Pre-feasibility study for the energy-efficient technology retrofit project: ERI.
General project description: The project increases the energy efficiency of coke making, replaces coal-based electricity and reduces local environmental pollution.

The project replaces an outdated coking oven with a newly developed design with higher thermal efficiency, better insulation and waste gas recovery.
Table 16: Technical and economic indicators for coking I project
Item		
Investment requirement [USD]	2,827,000	
Annual production [10,000 ton coke p.a.]	10	
Cogeneration capacity [kW]	1,500	
Total revenue [USD p.a.]	6,320,000	
Gross profits [USD p.a.]	1,526,420	
Total costs [USD p.a.]
-	Energy
-	Other material inputs
-	Wages
-	Other	4,793,580
3,293,700
18,500
234,600
1,246,780	
IRR [%]	48.5	
Employee	380	
Annual emission reductions [t CO2]	16,130	
Reductions as share of baseline [%]	17%	
Total potential for project type [t CO2]	5,430,000	

Table 17: Main investment components
Item	Investment [USD]	
Main body of coking oven	1,358,000	
Chimney of 2	24,700	
Tar recover system	24,700	
Coke quenching system	24,700	
Coal load on system	3,700	
Cogeneration	1,234,500	
Unforeseen and other cost	123,400	
Total	2,827,000	

Annex 11: Incremental Cost 
Broad Development Goal
The Government of China, specifically MOA and other concerned industrial ministries, seeks to strengthen the contribution of the TVE sector to sustainable economic development and to the implementation of the economic reform process in rural areas.  This means that TVE need to operate in a framework that gives them financial strength to invest in and access to modern technologies to be able to produce bricks, cement, coking products and metal casts at competitive prices, energy efficiently and with minimum environmental input.
Baseline
Currently, the regulatory framework in rural areas as well as the financial performance of TVE is weak, incentives for performance improvement do not exist, and the direct financial support from GOC to finance technology innovation decreases.  However, the GOC recently took up a number of new regulatory initiatives to induce technical innovation within non-agricultural TVE.  It established a new law applicable to the TVE industry, and improved the access of TVE to commercial credit. While the government is committed to remove policy, technology, market and financial barriers through policy intervention, no significant changes in the energy usage and production pattern are expected and little investment in energy conservation and product quality improvement are likely to occur.  However, project design takes into account the responsibility of the Chinese government to enforce existing laws considering the important contribution of law enforcement to environmental protection and sustainable development.
Global Environmental Objectives
This project seeks to reduce GHG emissions that occur in the production and use of bricks, cement, coking products and metal casts manufactured by Chinese TVE.  The project has been designed to be consistent with GEF Operational Program 5, Removing Barriers to Improved Energy Efficiency and Conservation.  Project intervention leads to the implementation of energy conservation investments and GHG emission reductions in eight TVE and creates a mechanism for the replication of such projects on a national-scale.
GEF Alternative Scenario
Phase II of this project will remove policy as well as project-level barriers within eight pilot counties, leading to the implementation of eight pilot project investments in TVE. The project design focuses on strengthening regulatory environments that are conducive to the implementation of win-win, profitable energy conservation investments within the TVE sector.  It provides the capacities that are required to meet investment criteria in order to obtain commercial financing for such projects, creates a financial mechanism that allows to channel funds into such projects and commercializes this project mechanism for large-scale replication.

System Boundary
Project benefits are measured in three systems:
a) 	TVE pilot-sites: project implementation will lead to production technology investment in eight pre-selected TVE and increased use of more energy efficient products; energy savings will occur in the production process, upstream, due to reduced factor inputs, and downstream, due to reduced energy use requirements in product use.
b) 	Reference TVE: in the context of developing a project pipeline for future replication, PTPMC will obtain data that illustrate the without project case or business-as-usual development.  
c) 	The four industries on the national level: PTPMC uses official sector-data to observe the trend within the industry as a whole on an aggregate basis.
Domestic Benefits
The project could be a crucial building block towards a) a wide-scale technology transfer in the context of the TVE industry, b) the production, use and export of energy efficient and high quality products from rural areas, and c) introducing incentive-based elements to the enforcement of existing laws and regulations on the county level.  Technology advancement provides significant and immediate local environmental benefits, improved welfare and employment prospects in rural areas considering the need for a more skill intensive and specialized manufacturing, as well as other benefits associated with know-how transfer and operation of advanced technologies in rural areas.
In the long-term, production, use and export of energy efficient and high quality products will create new economic rents for users, such as reduced heating bills for consumers of energy efficient bricks in house construction, and higher standard of living.  This will also improve rural employment prospects considering that more complex products (such as perforated bricks) require specialized skills in housing design and construction.  Considering that there are some economies of scale in production will also mean that such products need to be marketed and distributed in a larger market, creating new employment in the context of distribution and logistics activities.
Regulatory transformation leading to more transparency and independence of TVE is likely to stimulate new entrepreneurial activities with potentially significant rural development implications. 

 Incremental Cost Matrix
Component	Baseline	Alternative	Increment	
1 Creating the mechanisms for barrier removal	Business as usual
A regulatory, technical and finacial support structure for the promotion of energy efficiency within TVE is not in place.
Domestic benefits
TVE continue to grow using the high end of technologies that are currently used by TVE.
Global benefits
Energy efficiency improves marginally.	Proposed situation
The regulatory and technical supporting infrastructure is strengthened.
Domestic benefits
The incentive structure within the regulatory system and TVE support system is conducive to technology innovation and the reduction of environmental harm.
Global benefits
Changes in the regulatory system and TVE technical support system are conducive to energy efficiency investments.	New features
The government reorganizes the enforcement of laws on the county level; incentive and monitoring-based elements are added.
Domestic benefits
Technology innovation and law enforcement are molded into an integrated effort.
Global benefits
TVE have incentives and access to means to improve energy efficiency.	
Component 1 costs		PIC/LPIC setting up: 50,000 USD
PTPMC setting up and long-term plan: 300,000 USD
WCF setting up: 200,000 USD	GOC: 50,000 USD
GEF: 300,000 USD
GEF: 200,000 USD	
2 Strengthen the enforcement of existing laws and implementation regulations in eight townships and provide supplemental incentives and monitoring elements.	Business as usual
Traditional law enforcement instruments are used to improve environmental protection on the county level.
Domestic benefits
TVE are forced to shut-down dirty plants or pay environmental fees.  While there is some decrease of rural pollution, there is little effect on technological innovation.
Global benefits
Energy efficiency in the four TVE industries improves marginally.	Proposed situation
The PIC identifies best practices for relevant county level law enforcement and ties financial rewards to their implementation.
Domestic benefits
County governments obtain assistance to entice TVE to comply with relevant law and reduce emissions while obtaining access to financing.
Global benefits
The implementation of best practices creates an environment that is more conducive to investments in energy conservation.	New features
TVE react to market forces and regulation.
Domestic benefits
County governments can use added incentives to enforce laws and regulations.
Global benefits
Implementation of best practices in law enforcement creates added incentives to conserve energy and improve product quality. 	
Component 2 costs	Phase I capacity building support: 150,000 USD	Existing support: 150,000 USD
PIC operating costs for four years: 1,200,000 USD	
GEF: 500,000 USD, GOC: 900,000 USD	

 Incremental cost matrix continued…
3 Provide the capacity for implementation of TVE based energy conservation and product quality improvement investments	Business as usual
Pilot TVE do not have the technical and managerial experience to carry out technology advancement and product quality improvement activities.
Consumer demand does not change.
Domestic benefits
Pilot TVE continue to produce and expand their production with currently used technologies.
Global benefits
Pilot TVE continue to produce low quality products with energy inefficient production technologies.	Proposed situation
Pilot TVE gain access to expertise facilitating technology advancement and product quality improvement.
The enforcement of product standards and marketing activities increase demand for high quality TVE products.
Domestic benefits
Pilot TVE make informed technology and production decisions, meet the preconditions to access the capital market and are well positioned to carry out technology, product innovation and marketing activities.
Global benefits
Pilot TVE identify and prepare energy conservation and product quality improvement projects for implementation.	New features
An intermediary entity (PTPMC) enables pilot TVE to prepare technology and product innovation projects.
PTPMC activities demonstrate the benefits of higher quality products to rural consumers.
Domestic benefits
PTPMC activities enable the implementation of rural, industrial sustainable development in the pilot counties.
Global benefits
PTPMC enables investments in energy conservation and promote the use of energy efficient products.	
Component 3 costs	Phase I training support: 350,000 USD
	PTPMC operating costs, sub-contracts to training institutes and experts for capacity building to facilitate the implementation of pilot projects for four years: 3,750,000	
GEF: 3,400,000 USD	
4 Create access to commercial financing for TVE in the four industries	Business as usual
TVE have no access to commercial funds for technology and product innovation.
Domestic benefits
TVE can only finance expansion of production using “baseline” technologies from traditional funding sources.
Global benefits
TVE do not engage in energy conservation and product quality improvement investments.	Proposed situation
Pilot TVE receive access to commercial financing for eligible projects in return for county-level compliance with relevant law and regulations.
Domestic benefits
Pilot TVE implement technology and product innovation projects and domestic financial institutions become an important partner in financing technological advancement in the pilot counties.
Global benefits
Pilot TVE reduce GHG emissions by reducing energy consumption and producing more energy efficient products.	New features
A WCF provides commercial funds to pilot TVE projects and attracts funding from other sources to those projects.
Domestic benefits
WCF investments in technology and product innovation reduce local emissions and potentially change competition in the local market leading to replication of such activities.
Global benefits
WCF investments lead to GHG emission reductions.	
Component 4 costs		WCF overheads: 200,000 USD
Capitalizing the WCF for phase 2 activities: 4 mil USD
Local co-funding and equity: 6 mil USD	GEF: 200,000 USD
GEF: 1 mil, GOC: 1 mil, ABC: 2 mil USD
TVE, TVG, other commercial banks: 6 mil USD	

Incremental cost matrix continued…

5 Commercialize the financing of TVE based energy conservation projects and expand the application of best practices for county-level law enforcement to the national level	Business as usual
The implementation of energy conservation and quality improvement projects are limited to the eight pilot counties/TVE.
Domestic benefits
Besides some autonomous replication within the pilot counties, project benefits are confined to a very small share of the total potential within the four TVE industries.
Global benefits
GHG emission reductions are limited to the pilot counties, a very small share of the total potential.	Proposed situation
The phase II project mechanism is applied in a large number of counties creating a real momentum for industrial transformation within the four TVE industries.
Domestic benefits
The rural TVE industry shifts towards sustainable production, creates new employment opportunities and increases local welfare.
Global benefits
TVE technology transformation leads to the realization of a substantial portion of the total GHG emission reductions potential.	New features
The project creates a commercial intermediary mechanism that identifies a pipeline of projects and consults clients to facilitate project implementation and operation.
The project establishes a financial mechanism that channels commercial funds into these projects.
Lessons-learnt and best practices towards improved enforcement of relevant laws are recommended for adoption on the national level.
Domestic benefits
Large-scale modernization of the TVE industry.
Global benefits
TVE in the four sectors reduces their GHG emission intensity by roughly 30% industry-wide.	
Component 5 costs		PTPMC and pipeline development: 1.25 mil USD
WCF expansion activities: 850,000 USD 
PCG activities to promote best practices for county-level law enforcement on national level: 500,000 USD	GEF: 1 mil, GOC and PTPMC: 250,000 USD
GEF: 800,000 USD, TVG: 50,000 USD
GOC: 500,000 USD	

Annex 12: Logical Framework Project Planning Matrix
Project Activity/ Strategy	Objectively Verifiable Indicators	Means of Verification	Critical Assumptions	
Project Implementation
The project seeks to remove barriers to the utilization and dissemination of least-cost energy efficient technologies and products, leading to net reductions of GHG emissions by anthropogenic sources.	
Energy intensity per output value decreases in selected phase II TVE projects according to pre-feasibility studies while energy intensity remains constant for non-participants.
An increasing amount of funding becomes available for technology improvement projects.	
PTPMC monitors energy consumption and production for phase II TVE as well as aggregate sector data beginning with the data that was obtained in phase I surveys.
WCF and ABC lending data to TVE is made available to project management office.	
Barrier removal leads to implementation of energy conservation and quality improvement projects on a commercial basis.
	
Outcome 1
Mechanisms for barrier removal created. 	
PTPMC, PIC, LPIC and WCF are constituted.	
The business plan for the PTPMC, investment prospectus of the WCF, an inter-agency agreement constituting the PIC and reports detailing the composition of the eight LPIC are submitted to the national steering group.	
The modalities of operation and coordination agreement between relevant entities are clear and enforced.	
Outcome 2
Policy barriers removed by improved enforcing of relevant existing laws and supplemental incentives and monitoring on the county-level.
	
The PIC makes funding approvals for TVE investment projects contingent upon the observable enforcement of relevant laws.
	
LPIC submit progress reports and other documentation which are verified by members of the PIC.	
Action taken on the county level is not reversed after funding approval for TVE investments has been given.	

Annex 12 Logical Framework Project Planning Matrix
Outcome 3
Technology and market barriers removed by facilitating the assessment, access to commercial financing, and implementation of eight selected pilot projects and identification of a pipeline of future energy conservation and product quality improvement projects.	
Project feasibility studies are submitted to the PIC by PTPMC.  PTPMC assists with project implementation after PIC and WCF approval.
Pre-feasibility studies for a pipeline of post phase II projects are submitted to the WCF and PMO.	
Feasibility studies are reviewed by a third party, TVE submit project implementation progress reports and PTPMC submit operational performance information to PMO.

Critical expertise is available to PTPMC to conduct feasibility studies.
Data to monitor project performance is available to PTPMC.	
Outcome 4
Financial barriers removed by providing financing to eight selected phase II projects.	
Projects are approved by ABC/WCF and financed.	
ABC/WCF submit loan approval letters to PMO.	
Project feasibility studies and TVE balance sheets meet the eligibility requirements of ABC and WCF.	
Outcome 5
Replication facilitated by a) institutionalizing a commercial intermediary mechanism for the financing of energy conservation and product improvement projects within the four TVE sectors on a nation-wide scale, and b) recommending to policy makers best practices for the improvement and enforcement of relevant laws on the county level for national implementation.	
WCF attracts post phase II funding and PTPMC manages to operate on a commercial basis in the market. 
Policy makers take note of recommendation made by the PIC and initiate action.	
WCF reports funding pledges and PTPMC submits its financial data/balance sheet and annual reports to PMO.
Policy makers announce new initiatives to be implemented because of the recommendation by the PIC.	
Pipeline projects offer attractive rates of return and PTPMC manages to cover its operating costs plus profit from its clientele for its services.