Public Private Financing Mechanism for Chishui Watershed Protection

Client: Asian Development Bank

Duration: 2019-2022

Location: Guizhou Province, PRC

Contract Value: USD 311,290

Catalogue: Environment

Project Description

In 2014, the Guizhou Provincial Government issued the “Working Plan for the Pilot Reform of the Ecological Civilization System in the Chishui River Basin of Guizhou Province”, which includes 12 tasks including establishing an ecological compensation mechanism and exploring innovation in investment and financing mechanisms. More and more environmental protection projects are encouraged to seek private sector participation and multi-channel financing to ensure the sustainability of the project. Chishui river basin has always attracted attention and support from each level of governments and international development organizations, including Asian Development Bank. As a follow-up project of the previous stage supported by ADB, this knowledge and support technical assistance project intends to further help Guizhou province establish a pilot project using the public-private investment and financing mechanism, and explore a workable model. Also, the project is expected to establish a project library containing investable projects to provide a basis for the implementation of the public-private investment and financing mechanism.

Services Provided by NAREE

Development of a public-private financing mechanism for sustainable environmental protection - As the foundation of the public-private financing mechanism establishment, NAREE reviewed and analyzed the current constraintsand requirements of environmental protection work, so as to deliver the diagnostic assessment of the financing part, including regulations, policies, financing sources and institutional and capacity settings which areessential to establish a public–private financing mechanism. In terms of exploring financing sources for environmental protection popularized around the world, NAREE reviewed national and international cases, especially those involving both public and private sectors. In addition, attitudes, preferences, and willingness of stakeholders to participate in public–private financing mechanisms will form the basis of the proposed public–private financing mechanism. This would supplement the diagnosis work based on the effective interaction between the team and local stakeholders.

Establishment of the evaluation and selection toolkit for screening the projects - The toolkit developed by NAREE outlined the guidelines on the evaluation and selection process. The core idea is that environmental protection projects in Chishui River Basin should not only be supported by the public fund but also seek for investment from private sectors. By utilizing the toolkit, potential market-oriented projects will be assessed and selected, so a project portfolio will be prepared listing qualified projects. A road map was also designed for implementing the financing mechanism which will be supported by the project selection and evaluation toolkit.

Pilot study - By selecting one pilot project from the project pipeline, this will support the preparation of the financial management plan, as well as the selection of relevant financial instrument which is required by the financing mechanism. This will serve as an example for other projects in the preparation of their project proposals.