m global climate change unit a review of environmental ... · a review of environmental assessment...

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m Global Climate Change UnitGlobal Environment Division THE WORLD BANK

A Review of Environmental Assessment forGreenhouse Gas-Intensive Projects

February 1998

Akiko Yamamoto

Global Climate Change UnitEnvironment Department

The World Bank

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Table of Contents

TABLE OF CONTENTS ......................................................... 1

LIST OF TABLES ......................................................... 1

EXECUTIVE SUMMARY .......................................................... 2

1. INTRODUCTION .......................................................... 41.1. OBJECTIVE ........................................................................ 41.2. RELEVANT BANK POLICIES ........................................................................ 4

2. METHODOLOGY ......................................................... 62.1. PROJECT SELECTION CRITERIA ........................................................................ 62.2. SAMPLE PROJECTS ........................................................................ 62.3. ENVIRONMENTAL ASSESSMENT DOCUMENT REVIEW ............................................... 92.4. INTERVIEWS WITH TASK MANAGERS ........................................................................ 9

3. RESULTS AND ANALYSIS ........................................................ 113.1. RESULTS FROM THE EA REVIEW ....................................................................... 11

Depth of GHG Emissions Analysis ..................... 11.................................... l3.2. FINDINGS FROM INTERVIEWS ....................................................................... 163.3 NECESSARY CONDITIONS FOR CONDUCTING A PROJECT-LEVEL ANALYSIS ............... 173.4. FURTHER CONSIDERATIONS ....................................................................... 18

Environmental Screening ......................................................... 18Environmental Assessment Sourcebook ........................................................ 18Definition of a GHG-intensive project ........................................................ 19Sectoral EA, Regional EA, National Environmental Action Plan ............................. 19Public Outreach: Disseminating Project-level GHG Concerns ................................ 19International Disparity ........................................................ 20

4. CONCLUSION ................................................. 21

APPENDICES

List of Tables

Table I Distribution of Sample Projects ........................................................... 7Table 2 Sample Project List ........................................................... 8Table 3 Results of the EA review .......................................................... 1 ITable 4 Summary of GHG emissions analysis in the project EA ................................ 13

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Executive Summary

With the growth in awareness of the impact development activities have on theenvironment, the World Bank has increasingly required environmental impactassessments through project, sector, or country analysis. However, a project's climatechange externalities, such as greenhouse gas (GHG) emissions, are not studied asfrequently.

At present, two of the World Bank Operational Policies, OP 10.04 and OP 4.01, requirethat a project have its GHG emissions fully assessed and taken into account in projectdesign and selection. However, it is suspected that very few projects have GHGemissions analysis in the project EA. Concerns about the suspected low rate ofcompliance made evaluators question whether the importance of GHG emissionsabatement practice was underestimated, or if the Bank did not provide the appropriate forproject-level GHG emissions analyses. These questions led to this study.

The objectives of the study are to:

1. determine the compliance rate of GHG-intensive projects to those policies;2. investigate the reasons for apparent non-compliance;3. gather suggestions from operational staff to improve the level of compliance;

and4. establish specific recommendations.

The study used two methods: document review and interviews. The review of project EAdocuments was conducted for the first objective. The others were addressed throughinterviews with task managers.

A total of 34 energy, industry and transport project EAs were selected and reviewed inthe study to investigate their responsiveness to OD 10.04 and OP 4.01. The documentreview revealed that neither the compliance rate nor the degree of compliance wassatisfactory. Specifically, 24 projects out of 34 did not consider GHG emissions in theirproject EAs at all; four projects recognized their possible impacts (positive or negative)on GHG emissions but did not conduct any further quantitative analysis; and only sixprojects, of which three are GEF co-financed, had quantitative GHG emissions analysis.

Interviews revealed that both Bank staff and borrowers considered GHG emissionsabatement as an imperative in protecting the global environment, but could not clearlyidentify linkages between actual project planning and GHG emissions. The primaryreason that a GHG analysis has not been included in most reports was that it was not seenas a high priority.

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Task managers indicated little guidance was available for operations staff regarding howGHG emissions issues should be addressed at the project level. They suggested that inorder to encourage greater compliance in the GHG analysis the Bank should:

* Disseminate more scientific and statistical research that shows a strongcorrelation between global GHG emissions and individual project activitieswithin and beyond the Bank.

* Develop guidelines for GHG emissions analysis at the project operation level.* Train project staff to ensure consistent project-level GHG emissions analysis.* Disseminate examples of high-quality GHG emissions analyses.

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1. Introduction

With the growth in awareness of the impact development activities have on theenvironment, the World Bank has increasingly required environmental impactassessments through project, sector, or country analysis. However, a project's climatechange externalities, such as greenhouse gas (GHG) emissions, are not studied asfrequently.

At present, two of the World Bank Operation Policies, OP4.01 and OD 10.04, require thata project have its GHG emissions fully assessed and taken into account in the projectdesign and selection. However, it is suspected that very few projects have GHGemissions analysis in the project EA'. Concerns about the suspected low rate ofcompliance made evaluators question whether the importance of GHG emissionsabatement practice was underestimated, or if the Bank did not provide the appropriate forproject-level GHG emissions analyses. Theses questions led to this study.

1.1. Objective

The objective of the study is to investigate the responsiveness of project-levelenvironmental assessments (EAs) for GHG-intensive World Bank projects to BankOperational Policies, OP4.01 and OD10.04. Specifically, the study proceeds in thefollowing four steps:

1. to determine the compliance rate of GHG-intensive projects to those policies;2. to investigate the reasons for apparent non-compliance;3. to gather suggestions from operational staff to improve the compliance rate;

and4. to establish specific recommendations.

1.2. Relevant Bank Policies

Two Bank Policies relevant to this study are Operational Policy (OP) 4.01,Environmental Assessment, and Operational Directive (OD) 10.04, Economic Valuationof Investment Operations. OP4.01 and OD10.04 requires consideration of global issuesand global externalities as shown below respectively.

"The Bank encourages [global environment] issues to be considered in EAs where relevant andfeasible." (OP4.01, updated 1996.)

"Energy and Environment Strategy Discussion Paper Draft" dated July 22, 1997.

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"A project's global externalities - normally identified in the Bank's sector work or in theenvironmental assessment process - are considered in the economic analysis when (a) paymentsrelated to the project are made under an international agreement, or (b) projects or projectcomponents are financed by the Global Environmental Facility. Otherwise, global externalitiesare fully assessed (to the extent tools are available) as a part of the environment assessmentprocess and taken into account in project design and selection." (OD10.04, revised 1994.Emphasis added)

In addition to these Bank policies, the Environmental Assessment Sourcebook gives morespecific and practical guidance on the environmental assessment procedure; therefore, itis another key reference document for operations staff. GHG emissions and climatechange issues are discussed mainly in Chapter 2, Global and Cross-Sectoral Issues inEnvironmental Review. Additional limited description on the issues is also found inChapter 9, Transportation; and Chapter 10, Energy and Industry, which present sector-specific guidance for environmental assessment.

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2. Methodology

EA review used two approaches: document review and interviews with task managers.Document review determined the compliance rate of the sample projects to the twopolicies. It also examined how a project was related to GHG emissions and how GHGemissions-related issues were dealt with in environmental assessment documents for eachsample project. Interviews were conducted to investigate general and project-specificreasons for non-compliance and to gather task managers' opinions on what should bedone to improve the compliance rate. This section clarifies project selection criteria usedfor the study, lists selected sample projects, and explains the two approaches for the EAreview.

2.1. Project selection criteria

The following criteria were used to select sample projects:

* Projects with either loan(s) from IBRD or credit(s) from IDA.* Projects approved by the Board after October 19942 to date (June 1997).* Projects in EA category3 A or B4.* Projects in GHG-intensive sectors, namely, Electric Power & Energy, Oil

& Gas, Transportation, Industry, or Mining.* Projects in other sectors if considered GHG-intensive or GHG emissions

related.

2.2. Sample projects

Thirty four projects were selected based on the selection criteria. Their distribution isshown in Table 1. Nineteen projects were selected from the Electric Power & Energysector, four from Oil & Gas, ten from Transportation, and one from "others". No projectin either Industry or Mining sectors met the selection criteria. The list of sample projectsis shown in Table 2. Complete information on the sample projects is given in AppendixA.

2 The study was considered GHG-intensive Bank projects that were approved after the revisions toOD 10.04 became effective September 19943 EA category: According to OD 4.01, the EA category is assigned to a project by its task manager at theenvironmental screening. All Bank projects are categorized in one of the following three categories: A, B,or C, following the provisions in Annex. E of OD4.01:

Category A: A full EA is required.Category B: Although a full EA is not required, environmental analysis is required.Category C: No EA or environmental analysis is required.

Category B projects are chosen only from FY97.

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Table 1 Distribution of Sample Projects

Sector FY95 FY96 FY97 Total(after 10/94)

Electric Power & Energy 4 3 12 19(4A's, 8B's)

Oil & Gas 2 0 2 (1A, 1B) 4Transportation 2 6 2 10

Industry 0 0 0 0Mining 0 0 0 0Others 0 0 1 1Total 8 9 17 34

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Table 2 Sample Project List

Sector Project Name Country FY EA

I Energy Zhejiang Power Development ChCitnga o5 A2 Energy Lam Takhong Pump Storage Thailand 95 A

3 Energy Power Sector Rehabilitation & Expansion Vietnam 95 A4 Energy Private Sector Energy Cote D'Ivoire 95 A5 Energy Ertan II Hydro Electric China 96 A6 Energy Ghazi-Barotha Hydropower Pakistan 96 A7 Energy Power Development Vietnam 96 A8 Energy Inner Mongolia (Tuoketuo) Thermal Power China 97 A9 Energy Energy Sector Reform Kenya 97 A

10 Energy Quick Start Gas Turbine Hungary 97 ASenegal

11 Energy Regional Hydropower Development Mauritania 97 AMali

12 Energy Distribution Automation & Reliability Improvement Thailand 97 B13 Energy Electricity Market Development Ukraine 97 B14 Energy Power Sector Restructuring & Transmission Expansion Lebanon 97 B15 Energy Solar Home Systems Indonesia 97 B16 Energy Energy Services Delivery Sri Lanka 97 B

17 Energy Power Rehabilitation Georgia 97 B

18 Energy Metropolitan Distribution Reinforcement Thailand 97 B

19 Energy Renewable Energy Small Power Indonesia 97 B20 0 & G Gas Infrastructure Development Bangladesh 95 A21 0 & G Clean Fuels & Environmental Improvement Thailand 95 A22 0 & G Uzen Oil Field Rehabilitation Kazakstan 97 A23 0 & G Gas System Rehabilitation Azerbaijan 97 B24 Transp Highway Sector Croatia 95 A25 Transp Inland Waterways China 95 A26 Transp Shanghai-Zhejiang Highway China 96 A27 Transp Fifth Highway Sector Thailand 96 A28 Transp Second Shaanxi Provincial Highway China 96 A29 Transp Highway Sector Investment Program Ghana 96 A30 Transp Second Henan Provincial Highway China 96 A31 Transp Strategic Urban Roads Infrastructure Indonesia 96 A32 Transp Second Xinjiang Highways China 97 A33 Transp Second National Highway China 97 A

34 Others Greater Tunis Sewerage & Reuse* Tunisia 97 A* Water Supply and Sanitation Sector

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2.3. Environmental Assessment Document Review

The objective of the EA document review was to investigate the actual performance ofGHG emissions analysis5 in the project EAs. The performance was checked for twopoints: a) whether GHG emissions analysis was included in the EA documents, and if so,b) how extensively the analysis was conducted. The documents reviewed for each projectin the study included:

1. The Environmental Assessment Report (the full report),2. The Environmental Assessment Summary (EA summary), and3. The Staff Appraisal Report (SAR), in particular, the sections for

Environmental Assessment Summary and other Environmental Analysis.

Each borrower is responsible to prepare documents 1 and 2 and submits them to theBank. The quality of the documents should meet national environmental standards of thehost country or the Bank standards, whichever is stricter. Document 3 is prepared byBank staff before the project's Board approval. On its preparation, documents 1 and 2 arereviewed and further analysis is added if necessary 6 .

Although the inclusion of two other documents, the Environmental Data Sheet' andTerms of References for EA8 , would have made the study more complete, they were notincluded. Those two documents were not readily available for all the sample projects.

2.4. Interviews with Task Managers

Interviews with task managers followed the document review. The purpose of theinterviews was to find the followings:

* Project specific limitations (technical, financial, etc.) in conducting GHGemissions analysis,

"Analysis" and "assessment": 0D4.0 I defines environmental assessment and environmental analysisdifferently; in this report, GHG emissions assessment and GHG emissions analysis are usedinterchangeably.6 For example, if the Board reviews a project for its approval long after EA of the project was submitted,the focus of EA at the Board might be changed since the EA was first submitted to the Bank. In such acase, an additional EA will take place in order to improve quality.7 Environmental Data Sheet provides results of Environmental Screening. Environmental Screening is arequired process in the project cycle to determine the nature and extent of environmental work required toproceed with the project as well as the scope of project environmental assessment or analysis. EA categoryis also assigned at Environmental Screening.8 TORs for EA are prepared by Bank staff, taking into consideration outcomes of EnvironmentalScreening. It reflects the bank staff's awareness of the project's environmental aspects, and makes aframework for the project EA.

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* The level of involvement of Bank staff in the EA process,* The task managers' awareness of GHG emissions issues at the project level,

and* Their views on the project EA and GHG emissions analysis.

In addition, the interviews was intended to gather opinions and suggestions from taskmanagers - the Bank's operations staff - regarding project-level GHG emissionsanalysis. A questionnaire was prepared to outline the interviews, and is attached to thisreport as Appendix B.

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3. Results and Analysis

3.1. Resultsfrom the EA4review

The results of the EA review are presented in Table 3. It shows the number of projectswhich mentioned GHG emissions in their EAs compared with the total number ofprojects. Ten out of 34 sample projects mentioned GHG emissions to differing degrees insome part of the reviewed EA documents. By sector, seven out of 19 projects in ElectricPower & Energy, two out of four in Oil & Gas, no transportation project, and one projectin Others mentioned GHG emissions in their documents. By categories, six out of 25Category A projects and four out of nine Category B projects have mentioned GHGemissions in their EA documents.

Different trends were observed in different sectors. For example, in the Electric Powerand Energy Sector projects with GHG emissions analysis accounted for almost 40 percentof all the projects; whereas in the Transportation sector none had GHG emissions analysisin EA documents.

Table 3 Results of the EA Review

Sectors Categories TotalA B

Electric Power & Energy 4*/11 3/8 7/19Oil & Gas 1/3 1/1 2/4

Transportation 0/10 0/0 0/10Others 1/1 0/0 1/1Total 6/25 4/9 10/34

* indicates the number of projects in compliance** indicates the total number of projects in each category

Depth of GHG Emissions Analysis

The depth of GHG emissions analysis in project EAs varied from none to fully assessed.Full assessment for GHG emissions should include quantification of additional GHGemissions caused by the project, or those avoided in cases where the project would offeran environmental benefit in terms of GHG emissions; identification of a baseline scenarioand alternative scenarios; and consideration of mitigation measures with their timeframeand associated costs. Table 4 summarizes how expected GHG emissions impacts aredescribed in project EAs. It only lists those projects that have mentioned GHG emissionsin their project EA. The complete list including all the sample projects is found inAppendix C.

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Aside from GEF co-financed projects (three in the sample set), the Power SectorRehabilitation and Expansion project in Viet Nam and the Private Electricity Project inCote D'Ivoire, both of which are FY95 projects, had the EAs with the most detailed GHGemissions analysis. The other two projects had estimates of CO2 emissions expected tobe avoided and to be produced. The other three projects described their GHG emissionsimpacts, but no quantification was given.

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Table 4 Summary of GHG Emissions Analysis in the Project EA

Sector Project Name Country FY EA EA date GHG Emissions NotesCat. Implications

I Energy INNER MONGOLIA CHINA 97 A 1/96 Construction of a * The full EA report does not account for GHG emissions.(TUOKETUO) 1200 MW Coal-fire * Expected annual CO2 emissions estimated in the summary of projectTHERMAL POWER thermal power plant environmental issues in SAR.

2 Energy SOLAR HOME INDONESIA 97 B No EA Promotion of zero * GEF project. Positive GHG emissions impact fully analyzed andSYSTEMS GHG emissions quantified in economic analysis.

technology(positive impact)

3 Energy ENERGY SERVICES SRI LANKA 97 B No EA Promotion of * GEF project. Positive GHG emissions impact fully analyzed andDELIVERY renewable energy quantified in economic analysis.

(positive impact)4 Energy RENEWAL ENERGY INDONESIA 97 B Environ. Promotion of low * GEF-cofinanced project. Positive GHG emissions impacts fully

SMALL POWER Analysis level GHG analyzed and quantified.Reports emissions

technologiesI_______________I____ __________J______ (positive im pact)

5 0 & G GAS SYSTEM AZERBAIJAN 97 B No EA Promoting more * Direct or indirect effects on GHG emissions are described but notREHABILITATION efficient use of quantified.

natural gas. * Lower natural gas consumption and natural gas leakage reduction(positive impact) would directly reduce GHG emissions.

* Greater availability of natural gas as a substitute for more pollutingfuels would reduce potential GHG emissions indirectly.

6 Water GREATER TUNIS TUNISIA 97 A 12/96 Methane-driven * Methane, CO2, N2O emissions are expected to occur, but theSEWERAGE & REUSE generator for amounts are not estimated. Also, they are not explicitly recognized

aeration causing as GHG in EA or SAR.N2O and CO2 * Methane flaring (of negligible scale)emissions;_Methane flaring

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Table 4 (cont'd) Summary of GHG Emissions Analysis in the Project EA


7 Energy GHAZI-BAROTHA PAKISTAN 96 A 9/95 Methane production * The difference between future CO2 emissions with and without theHYDROPOWER through hydro power plant is recognized as environmental benefits of the

submergence at and project in the analysis of altematives and estimated in SAR.around reservoirs; * SAR states there are no significant negative extemalities. (MethaneMajor benefits from production due to submergence is not acknowledged as a negativea lower increase of extemality.)fossil fuelconsumption.

8 Energy POWER SECTOR VIET NAM 95 A 9/95 Conversion from * CO2 emissions during operation of the plant (both ug/J andREHABILITATION & open cycle turbines tonnes/annum) predicted.EXPANSION to a combined cycle * EA recognized as an environmental benefit of the project 50% less

unit. (positive CO, emissions from a combined cycle plant buming natural gasimpact through the than either a coal or heavy fuel oil fired generation unit (in terms ofincreased energy emissions per kWh generated).efficiency) * Energy efficiency is expected to be increased to 45 % from 30%

under the current operation.* very good EA; summary of WB and Vietnamese guidelines

relevant to the project included as an appendix in the EA report.The part of OPO.04 which describes global extemalities is,however, not cited.

9 Energy PRIVATE SECTOR COTE D'IVOIRE 95 A 10/92 Efficiency and * GHG emissions are fully taken into account in the wholeENERGY reliability environmental analysis of the project.

improvement of the * EA considered GHG emissions in the analysis of altematives.power supply; * Expected impacts of the project on greenhouse gas effect aretransition from the analyzed both quantitatively and qualitatively.use of liquid fuels * SAR states "positive global environmental impacts are .. expectedand biomass to from the project" as a result of efficiency and reliabilitynatural gas (both improvement and fuel switching.positive impacts) * CO2 emissions are recognized as an environmental impact of the

project and efficiency improvement of the plant is considered as a_______________________________ ___________________ _____ ________ __________________ m itigation m easure of the im pact.

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Table 4 (cont'd) Summary of GHG Emissions Analysis in the Project EA


10 O & G GAS BANGLADESH 95 A 5/94 Reduction of GHG * EA summary recognizes the increased substitution of natural gasINFRASTRUCTURE emissions through and LPG for currently used fuel sources will significantly lowerDEVELOPMENT increasing natural total air pollution levels.

gas supply and * No quantitative analysis of GHG emissions was found in EAsubstituting it for summary.other fuels. * EA states that flares will be operated and maintained to limit(positive impact); emissions; nonetheless emissions from flaring are not quantified orGas flaring accounted for as a GHG impact of the project.(negative impact) * No description of GHG emissions in EA summary of SAR.

* Reduced CO2 emissions by less consumption of petroleum productsand fuelwood resulting from increased gas supply and utilization isrecognized as a significant environmental benefit of the project inSAR (in the section of environmental and safety aspects).

* SAR states "[t]he reduction in CO2 emission offers a highlyeffective response to the greenhouse effect."

* No quantitative analysis or description included, except that SARindicated "gas used in combined-cycle power plants - the typicaltechnology for generation capacity addition, emits only half as

________ much CO2 as a oil-fired power plant."

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3.2. Findings from Interviews

The interviews with the task managers revealed important information and suggestionsarising from operations that should be considered by Bank management. The reasons forlow compliance rate were summarized in the following three points:

. A set of operational guidelines (more specific than existing Bank policydirectives) is necessary to simplify GHG emissions assessment and to make itmore relevant to project work. The Bank has not yet chosen any one particularmethod for estimating expected CO2 emissions and conducting economic analysis.Instead, analysis has been done on an ad hoc basis to the knowledge by a projectteam. The credibility of such ad hoc analysis is questionable and results are not easilycompared. A set of operational guidelines should a) specify a standard method ofGHG emissions analysis, and b) provide detailed information to carry out theanalysis.

* Lack of national or international GHG emissions standards make it difficult tocarry out quantitative analysis of GHG emissions 9 . Task managers agreed thatquantitative GHG emissions assessment would be meaningful only when anallowable level of CO2 emissions is set against which the assessment results would bemeasured.

* Project resources is not allocated for GHG emissions analysis because theimportance of project-level GHG assessment and abatement practice isunderestimated. At the onset of the study, resource availability was suspected to beone of the major constraints to conduct GHG emissions analysis. Contrary, theinterviews revealed that sufficient resource would be allocated for GHG emissionsanalysis if importance of assessment and the following abatement efforts at theproject level was firmly understood by everyone involved in a project.

For such reasons, even in cases where borrowers were aware of GHG emissions andclimate change issues, and both technology and tools for GHG emissions analysis werereadily available, quantitative GHG emissions analysis were not conducted.

As for practicing GHG emissions assessment in their project, task managers' opinions aresummarized as follows:

Sector difference should be acknowledged. Effectiveness of the project-level GHGemissions assessment varies significantly from sector to sector. For a power plantconstruction project that not only designs the power plant but also sets operationalmeasures, for example, project-level GHG emissions assessment can provide a

'The study was completed in September 1997, before the Kyoto Protocol on Climate Change was adoptedin December 1998. (see Appendix D for the Kyoto Protocol and the World Bank Group.)

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number of abatement alternatives, and therefore has significant impact on the projectdesign and operations. On the other hand, for a rural highway construction project,which usually does not set operational measures after completion of the project, anexpected increase of GHG emissions might be estimated, but providing an abatementalternatives are not as easy. Such difference should be considered in developing theguidelines for project-level GHG emissions assessment.

* Guidelines for Climate Change Global Overlays'" is a useful Bank document inestimating CO2 emissions. A task manager calculated C02 emissions avoided by ahydropower project he was involved to show all the information he needed for hiscalculation was provided in it"'.

3.3 Necessary Conditionsfor conducting a project-level analysis

The task managers who were interviewed have deemed the following as necessary forconducting GHG emissions analysis in the project EA:

* Scientific or statistical evidence that shows correlation between project activitiesand GHG emissions. It will convince a project team that they have to take GHGemissions abatement action immediately wherever possible in their project.Convincing facts will help put GHG emissions analysis on the priority list, andwould, in turn, help secure the allocation of funding.

* Development of guidelines to analyze GHG emissions. Specific guidelines thatcontain technical information and explain the GHG emissions assessmentmethodology are necessary for both Bank staff and borrowers to understand howGHG assessment is conducted.

* Dissemination of high-quality practice of GHG emissions analysis. Some taskmanagers expressed they would prefer learning how to practice the analysis throughdissemination efforts. Unlike following fixed guidelines, practicing high-qualityassessment learned through dissemination effort would not create additionaladministrative duties or costs. In addition, task managers are wary of uniform,inflexible guidelines set for projects that have varying conditions in different sectors.

* Training for Bank staff and borrowers. Training in GHG emissions analysis andthe abatement help Bank staff and borrowers utilize what is available in the mosteffective manner. Although borrowers hold the responsibility of conducting theproject EA, Bank staff should be trained equally so that they can give appropriate

'° Guidelinesfor Climate Change Global Overlays The World Bank, Environment Department Paper No.047, February 1997." The calculation was done only for the interview. No quantitative analysis was conducted in any actualEA documents of the hydropower project.

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technical support and supervision to borrowers. Technical assistance by Bank staff isimportant when borrowers do not have sufficient knowledge or tools within theircountries.

3.4. Further Considerations

The review has revealed additional issues to be considered that are related to project-levelGHG emissions assessment practices but not within the scope of project EAs. Thefollowing section presents some of these issues.

Environmental Screening

Environmental Screening is the first step to be taken for project environmental impacts,required of all Bank projects. It defines EA category and environmental scope of aproject. Project's GHG emissions impacts should be acknowledged as early as during theEnvironmental Screening in the project cycle. If the impacts are identified at the time ofEnvironmental Screening, corresponding assessment, and perhaps abatement, would takeplace more easily and less costly than at later stages of a project. Currently, only fewprojects have included GHG emissions or global warming issues in their environmentalscope, reflecting low awareness at the project level.

Environmental Assessment Sourcebook

Environmental Assessment Sourcebook acts as a supplement for Bank policies, providingdetailed guidance for the EA process. If more specific information and guidance on GHGemissions analysis were added, the EA Sourcebook would become more useful for GHGemissions analysis practices. To improve its usefulness, the EA sourcebook should:

* Include a list (not exclusive) of sectors or types of projects considered GHG-intensive by environmental specialists.

* Define what a complete GHG emissions assessment consists of. Examples ofwhat should be included in the assessment are identification of GHGspotentially emitted (or avoided); calculation of estimated GHG emissionsfrom the projects, both in net amount and in amount per unit of energyutilized; and analysis of possible alternatives.

* Provide specific guidelines with technical information to assist Bank staff orborrowers in conducting a full GHG emissions assessment.

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* Connect more clearly Chapter 2 - global and cross-sectoral issues - and theEA guidelines that are currently included in the Sourcebook.

Definition of a GHG-intensive project

A definition of a "GHG-intensive" project is necessary to determine whether or not aGHG emissions analysis is required in its project EA. Having no clear definition of a"GHG-intensive project," task managers are uncertain whether or not their projects mustinclude GHG emissions analysis in their project EAs.

Sectoral EA, Regional EA, National Environmental Action Plan

The roles of sectoral EA, regional EA, and national environmental action plans should bereevaluated and strengthened for GHG emissions assessment and analysis of abatementoptions. Because of their global nature, impacts of GHG emissions from a project couldgo beyond the scope of its project EA. Consideration of GHG emissions issues at themacro level would make up for the limitation of project EAs. Furthermore, it wouldensure consistency within project EAs.

Sectoral EAs could provide the appropriate approach to GHG issues in each sector takingsector differences into consideration. The outcomes from sectoral EAs would assist insetting sector-wide strategies for GHG emissions reductions and in outlining a scope forproject EAs. The sector-wide approach is inevitable for the transportation sector, inwhich cumulative impacts from many projects cause problems. The sector-wideapproach would also increase the effectiveness of project-level approaches.

Similarly, Regional EA and National Environmental Action Plan should include GHGemissions assessment and alternative analysis. They would help to coordinate region-wide GHG emissions reduction efforts and enable to consider cross-sectoral issues.Integration of project-level efforts and macro-level planning is the key for effective GHGemissions reductions.

Public Outreach: Disseminating Project-level GHG Concerns

Increased level of public awareness would create external pressure on practices of projectEA. The importance of project-level GHG emissions analysis is currentlyunderestimated. The interviews revealed that task managers had never received anyclaims from project reviewers (borrowers, Executive Directors) for not having GHGemissions analysis in their project EA or any requests to include the analysis. The GHGemissions analysis would more likely be included in the project routine if its importanceis acknowledged to a greater extent.

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International Disparity

Without industrialized countries having a firm commitment to reduce GHG emissions,borrowers might have felt it is unfair for the Bank to require that they include GHGemissions analysis in each project EA and following abatement actions. When borrowersdecide their GHG emissions-related actions at the project level, they are concerned howindustrialized countries handle their own actions. A binding international agreement toreduce GHG emissions would help facilitate such concerns due to internationaldisparity'2 . In turn, it would improve project level performance.

12 After the study was completed, the Kyoto Protocol was adopted at the Third Conference of the Parties tothe UN Framework Convention on Climate Change, held in Kyoto, Japan in December 1997. SeeAppendix E for the Kyoto Protocol and the World Bank Group.

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4. Conclusion

Through document reviews and interviews with task managers, this study concludes thatthe compliance rate to Bank policies, OP4.01 and OD10.04, was not satisfactory.Specifically, 24 projects out of 34 did not consider GHG emissions in their project EAs atall; four projects recognized their possible impacts (positive or negative) on GHGemissions but not conduct any further quantitative analysis; and only six projects, ofwhich three are GEF co-financed, had quantitative GHG emissions analysis.

The low rate of compliance was not due to ignorance of the policies or technicalconstraints. Instead, task managers indicated that analysis of GHG emissions from theirprojects was simply not a high priority and limited project resources were allocated tohigher-priority aspects of the projects. Further, little guidance was provided to operationsstaff about how to practice a project-level GHG emissions assessment.

In order to improve the compliance rate, task manager suggested disseminating scientificand statistical research throughout the Bank - and beyond - emphasizing a strongcorrelation between global GHG emissions issues and individual project activities. Thisinformation could highlight the importance of including GHG analysis in project EAs. Itwill, meantime, secure sufficient resources for the analysis. The information is especiallyuseful at dialogues between Bank staff and borrowers as a convincing evidence.

Specific recommendations on how to encourage GHG emissions analysis at the projectlevel include:

* Development of guidelines for GHG emissions analysis at the project operationslevel.

. Training of project staff to ensure consistent project level GHG emissionsanalysis.

* Dissemination of examples of high-quality GHG emissions analyses.

Through implementing the recommendations, both the compliance rate and the quality ofproject-level practices for GHG emissions reduction will be improved. Consequently, itwill enhance the Bank's GHG abatement efforts overall.

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Appendix A

Sample Project Data Sheet

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List of Sample Projects

Sector| ID | Project Name Country FY Board |EAI EA EA Loan/Cr ManagI_1 = 1 1 _ _ _ _ = Date date edit er

I Energy 3642 ZHEJIANG POWER DEVELOPMENT CHINA 95 2/28/95 A E143 Mar-93 L3846 EA21N2 Energy 4799 LAM TAKHONG PUMP STORAGE THAILAND 95 5/9/95 A E79 Mar-92 L3884 EA1 IN3 Energy 4836 POWER SECTOR REHABILITATION & VIETNAM 95 5/16/95 A E78*** Mar-95 C2724 EA1IN

EXPANSION4 Energy 1184 PRIVATE SECTOR ENERGY COTE 95 6/28/95 A E33 Oct-92 C2754 AFC1 1

___ D'IVOIRE I5 Energy 3507 ERTAN II HYDRO ELECTRIC CHINA 96 8/22/95 A E110 Mar-95 L3933 EA21N6 Energy 39281 GHAZI-BAROTHA HYDROPOWER PAKISTAN 96 12/19/95 A E106 Sep-94 L3965 SASE

G7 Energy 42236 POWER DEVELOPMENT VIETNAM 96 2/20/96 A x*** Aug-95 C2822 EAl IN8 Energy 3650 INNER MONGOLIA (TUOTETUO) THERMAL CHINA 97 5/27/97 A x Jan-96 L4172 EA21N

I ___ ____POWER

9 Energy 1344 ENERGY SECTOR REFORM KENYA 97 6/19/97 A E64*** Jan-95 C2966 AFC0510 Energy 45251 QUICK START GAS TURBINE HUNGARY 97 6/25/97 A E152 May-96 L4205 ECSE

_ __ _ _ _ _ _ _ _ _ _ _ _ __I _ G46648 SENEGAL C2972 AFC14

*

11 Energy 46650 REGIONAL HYDROPOWER DEVELOPMENT MAURITA 97 6/26/97 A Available in C2971 AFC15* NIA French

46651 MALI Feb-97 C2970 AFC15*

12 Energy 42268 DISTRIBUTION AUTOMATION & RELIABILITY THAILAND 97 7/16/96 B NO project EA L4067 EAlINIMPROVEMENT

13 Energy 44444 ELECTRICITY MARKET DEVELOPMENT UKRAINE 97 10/10/96 B NO project EA L4098 ECSEI__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ G

14 Energy 36087 POWER SECTOR RESTRUCTURING & LEBANON 97 11/26/96 B EA not available L4112 MN2PIITRANSMISSION EXPANSION _

24

15 Energy 35544 SOLAR HOME SYSTEMS INDONESI 97 1/28/97 B NO project EA L4132 EACID_A __

16 Energy 10498 ENERGY SERVICES DELIVERY SRI 97 3/18/97 B NO project EA C2938 SASELANKA G

17 Energy 35784 POWER REHABILITATION GEORGIA 97 6/3/97 B NO project EA C2958 ECSEG

18 Energy 37086 METROPOLITAN DISTRIBUTION THAILAND 97 6/24/97 B EA not available L4199 EAlINREINFORCEMENT _ _

19 Energy 42882 RENEWABLE ENERGY SMALL POWER INDONESI 97 6/24/97 B EA not available L4198 EACIDA

20 O & G 9533 GAS INFRASTRUCTURE DEVELOPMENT BANGLAD 95 5/9/95 A E138*** May-94 C2720 SASE_____________________________ESH

____ G21 O & G 4802 CLEAN FUELS & ENVIRONMENTAL THAILAND 95 5/23/95 A E70 Jun-94 L3889 EA1\IN

IMPROVEMENT22 O & G 8507 UZEN OIL FIELD REHABILITATION KAZAKST 97 7/2/96 A E93 Sep-94 L4061 ECSE

AN IIG23 O & G 8287 GAS SYSTEM REHABILITATION AZERBAIJ 97 9/19/96 B NO project EA C2923 ECSE

AN G24 Transp 8329 HIGHWAY SECTOR CROATIA 95 4/20/95 A E75*** |Feb-92 L3869 ECSIN25 Transp 3493 INLAND WATERWAYS CHINA 95 6/20/95 A E59(4/94)&E104 L3910 EA21N

_________________ _ (7/95)26 Transp 3569 SHANGHAI-ZHEJIANG HIGHWAY CHINA 96 8/1/95 A E69*** Nov-93 L3929 EA21N27 Transp 4800 FIFTH HIGHWAY SECTOR THAILAND 96 12/21/95 A E48 Mar-94 L3968 EA1 IN28 Transp 3652 SECOND SHAANXI PROVINCIAL HIGHWAY CHINA 96 3/21/96 A E98 Apr-95 L3986 EA21N29 Transp 957 HIGHWAY SECTOR INVESTMENT GHANA 96 5/14/96 A E68 Feb-95 C2858 AFC10

PROGRAM _30 Transp 40513 2ND HENAN PROVINCIAL HIGHWAY CHINA 96 5/30/96 A E109 Aug-95 L4027 EA21N31 Transp 4016 STRATEGIC URBAN ROADS INDONESI 96 6/25/96 A E135*** Apr-95 L4054 EA31N

INFRASTRUCTURE A32 Transp 3643 SECOND XINJIANG HIGHWAYS CHINA 97 10/10/96 A E140 11/95 L4099 EA21N

I_ I_ & 2/96 1

25

I 331Transpl 36541SECONDNATIONALHIGHWAYPROJECT ICHINA 197112/17/961 A |E146 IDec-951 L4124 | EA2INII 34|0thers| 57311GREATERTUNISSEWERAGE&REUSE ITUNISIA 1971 5/29/971 A |E158*** Dec-961 L4174 |MN1PI|

11 A's in the ELECTRIC POWER AND ENERGY * counted as oneSECTOR project

3 A's in the OIL AND GAS SECTOR ** Water Supply and SanitationSector

10A's in the TRANSPORTATION SECTOR *** EA summary only available, not afull EA report

1 A chosen from OTHER SECTORS9 B's in the Energy FY97 cohort (8 in Electric Power & Energy

and 1 in Oil & Gas)NO in the INDUSTRY SECTORA'sNO in the MINING SECTORA's

Total 34 projects

26

Appendix B

Questionnaire Used in Task Manager Interviews

27

Questionnaire

The recognition of climate change externalities* How concerned are you about global warming when your project affects GHG

emissions level (positively or negatively) ?* Do you consider the project as GHG intensive?* Were GHG emissions identified as an environmental impact of the project? Or, do

you think they should have been identified?

OP1 0.04

Recognition:* Do you know about the requirement?

Interpretation:* How was it interpreted in the case of your project?

Compliance:* How do you define compliance in this regard?* Do you think the project is in compliance?

If noncompliance:* what were the constraints? resources, technology, tools, institutional capacity, or

anything else?* how could/should those constraints be remedied in the future?

EA processHow much is Bank staff involved in the EA process at each of the following stages of EA:

* TOR for EA* Review of EA final report* Furnishing EA summary in the SAR

Limitation of the project EA:* what are the limitations of project EA as far as assessment of GHG emissions is

concerned?* what could have been done differently?* what should be done differently in the future?

Suggestions for improvement* How can the environmental guidelines for EA (e.g. the EA sourcebook) be improved?

Would it be helpful if they are more specific?* Any other measures that could facilitate integrating climate change concerns into the

project EA.

28

I-

Appendix C

Summary of EA Review

29

EA review* of all the sample proiects* The study reviewed all the environmental assessment documents for each project to the extent available including the full EnvironmentalAssessment report (EA report) prepared by borrowers; the environmental assessment summary (EA summary) prepared by borrowers; andanother environmental assessment summary and any other environmental analysis prepared by the Bank in the Staff Appraisal Report(SAR).

Sector Project Name Country Board EA EA Implications for GHG NotesDate Cat. date GHG emissions emissionsmentioned?

I Energy INNER MONGOLIA CHINA 5/27/97 A 1/96 1200 MW Coal-fire Yes a The full EA report does not account for GHG emissions.(TUOKETUO) thermal power plant (only in SAR) * Expected annual C02 emissions estimated at the summary of projectTHERMAL POWER environmental issues in SAR.2 Energy ENERGY SECTOR KENYA 6/19/97 A 1/95 75 MW diesel power No * GHG emissions not accounted for in the EA summary by the borrower orREFORM station; SAR.Geo gas disposal * EA report (full) is not available.(It contains C02 and * SAR does not include EA summary.

I methane.)3 Energy QUICK START GAS HUNGARY 6/25/97 A 5/96 Gas Turbine power N/A . The project wouldn't make a significant contributon to GHG emissionsTURBINE plant because the plant is for emergency use only and expected to have 200

hr/year of operation.* GHG emissions not accounted for in the EA report or EA summary in

______ ~~~ISAR.4 Energy REGIONAL SENEGAL 6/26/97 A 2/97 Methane producton No * The EA report is written in French.HYDROPOWER MAURITANIA through * GHG emissions not accounted for in the summary of environmental andDEVELOPMENT MALI submergence at and social assessment in SAR.

around reservoirs; * Suspected lack of awareness that hydro can contribute to GHGMajor benefits from emissions; nevertheless, hydro has generally posifive net GHG impacts.a lower increase of (compared to other power generafions)fossil fuel

I_____ _____ consumption.5 0 & G UZEN OIL FIELD KAZAKSTAN 7/2196 A 9/94 Gas flaring at the oil No * GHG emissions not accounted for in the EA report or SAR.REHABILITATION production site * SAR does not include EA summary.

* Concem about gas flaring and its reducton is out of the project scope asdefined.

6 Energy DISTRIBUTION THAILAND 7/16/96 B No EA Possible indirect N/A * The project's objective is improving distributon efficiency and does not

30

Sector Project Name Country Board EA EA Implications for GHG NotesDate Cat. date GHG emissions emissions

________________ _____________ m entioned?AUTOMATION & benefits from a have a direct impact on GHG emissions.RELIABILITY distribution * Indirect positive impact through increased efficiency can be expected.IMPROVEMENT efficiency_________________ _____________ _____ improvement.

7 Energy ELECTRICITY UKRAINE 10/10/96 B No EA Increased energy N/A . The project doesn't have a direct impact on GHG emissions.MARKET efficiency (positive * SAR states the project is expected to reduce emissions per unit ofDEVELOPMENT impact) electricity generated as a result of proposed improvements, while net

emissions are expected to increase compared to a 'without project'scenario as the project will increase availability of electricity.


I I mentioned?8 Energy POWER SECTOR LEBANON 11/26/96 B EIA No implication for N/A . No GHG emissions accounted for.

RESTRUCTURING (cann GHG emissions . Project's two elements are expansion of high voltage transmission system& TRANSMISSION ot get and insUtutional development. Neither has a direct impact on GHG

I_ EXPANSION it) emissions.9 Energy SOLAR HOME INDONESIA 1/28/97 B No EA Zero GHG emitting Yes * GEF project. Positive GHG emissions impact fully analyzed and

SYSTEMS technology (positive quantified in its economic analysis._~~ ~~~~~~~~~~~~~~~~ _ limpact)

10 Energy ENERGY SERVICES SRI LANKA 3/18/97 B No EA Promotion of Yes * GEF project. Positive GHG emissions impact fully analyzed andDELIVERY renewable energy quantified in its economic analysis.

I_I - (posifive impact)11 Energy POWER GEORGIA 6/3/97 B No EA Thermal power plant No * GHG emissions not accounted for.

REHABILITATION operation . Positive (indirect) environmental impact through improving efficiency of_______ ________________ _______ I the thermal power plant operation recognized. (no quantification given)

12 Energy METROPOLITAN THAILAND 6/24/97 B NoEA Distribution. No * The project is not directly related to GHG emissions.DISTRIBUTION efficiency . Positive impact through efficiency improvement is not recognized in SAR.REINFORCEMENT improvement;

Introducing DMS.L _ __ (__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ indirect benefits)13 Energy RENEWAL ENERGY INDONESIA 6/24/97 B Low GHG emitting Yes . GEF-cofinanced project. Positive GHG emissions impacts fully analyzed

I_ SMALL POWER I _I I technologies. I and quantified.

31


______ ________________ _____________ mentioned? _____________________________mentioned14 O & G GAS SYSTEM AZERBAIJAN 9/19/96 B No EA Promoting more Yes . Lower natural gas consumption and natural gas leakage reduction wouldREHABILITATION efficient use of gas. directly reduce GHG emissions.

(positive impact) * Greater availability of natural gas as a substitute for more polluting fuelswould reduce potential GHG emissions indirectly.

. Such direct or indirect effects on GHG emissions are described but not_______ .______ quantified.

15 Transp SECOND XINJIANG CHINA 10/10/96 A 11/95 Increase in vehicle No * GHG emissions are not identified as a possible environmental impact ofHIGHWAYS & 2/96 emissions. the project in EA.* Nothing re: GHG in SAR

_______ ______________ .______ ________________ * claims it is in compliance with OD 4.01 in Annex 5 of SAR.16 Transp SECOND NATIONAL CHINA 12/17/96 A 12/95 Emissions from No . No GHG emissions are accounted for in EA or SARHIGHWAY vehicle using the * Better vehicle maintenance is emphasized at the project's operation!_____ ______ expressway. phase.17 Water GREATER TUNIS TUNISIA 5/29/97 A 12/96 Methane-driven Yes . Methane, C02, N20 emissions are expected to occur, but the amount ofSEWERAGE & generator for those are not estimated. Also, they are not explicitly recognized as GHGREUSE aeration will cause in EA or SAR.

emission of N20 and . Methane flaring (the scale small enough to be negligible?)C02;Methane flaring.


mentioned?18 Energy ERTAN II HYDRO CHINA 8/22/95 A 3/95 Methane production No . No GHG emissions from the project accounted for in EA or SAR.ELECTRIC through . EA estimated potential C02 emissions associated with a coal-fire power

submergence at and plant that are avoided by constructing the Ertan hydro. (positive aspect)around reservoirs,Major benefits froma lower increase offossil fuel

________________ _____________ consumption.19 Energy GHAZI-BAROTHA PAKISTAN 12/19/95 A 9/94 Methane production Yes * The difference in future CO2 emissions between with and without theHYDROPOWER through hydro power is recognized as environmental benefits of the project inI.____ ._____ _____ submergence at and altemative analysis and estimated in SAR.

32


_____________ _______ _____ ________________ m entioned?around reservoirs; * SAR states there are no significant negaUve extemalites. (Methanemajor benefits from producton is not acknowledged.)a lower increase offossil fuelconsumption.

20 Energy POWER VIET NAM 2/20/96 A 8/95 The project covers No * No GHG emissions mentioned in SAR.DEVELOPMENT (could installafion of 2x150 * EA summary in SAR states the combined cycle plant buming natural gas

not gas turbines. like what proposed in the project is the most environmentally benign formobtain (thermal power of thermal power project, offering high efficiency (about 50%) and lower

it) plant) air emissions._______ .______ ___________I EIA requested, but not found.

21 Transp SHANGHAI- CHINA 8/1/95 A 11/93 motor vehicle No * No GHG emissions accounted for in EA or SAR.ZHEJIANG emissionsHIGHWAY

22 Transp FIFTH HIGHWAY THAILAND 12/21/95 A 3/94 strengthening N/A * The project won't alter GHG emissions.SECTOR environmental * No explicit concem on GHG emissions was shown in their environmental

management and assessment capacity building.assessment * EA is considered one of the first sectoral EA fumished under updatedcapacity (positive Bank procedures for Sectoral EAs, released in October 1993.impact)

23 Transp SECOND SHMNXI CHINA 3/21/96 A 4/95 motor vehicle No * No GHG emissions accounted for in EA or SAR.PROVINCIAL emissionsHIGHWAY

24 Transp HIGHWAY SECTOR GHANA 5/14/96 A 2/95 No implications for N/A * The project won't alter GHG emissions.INVESTMENT GHG emissions. * The project involves rehabilitation and periodic maintenance operationsPROGRAM The project is for on existing trunk roads and no new construcfion is intended.

_____________ _______ road maintenance.Sector Project Name Country Board EA EA Implications for GHG Notes

Date Cat. date GHG emissions emissions______ _______________ mentioned?

25 Transp SECOND HENAN CHINA 5/30/96 A 5/95 motor vehicle No * No GHG emissions accounted for in EA or SAR.PROVINCIAL emissions

_____ HIGHWAY

33


mentioned?26 Transp STRATEGIC URBAN INDONESIA 6/25/96 A 4/95 motor vehicle No * No GHG emissions accounted for in EA or SAR.ROADS emissions

INFRASTRUCTURE27 Energy ZHEJIANG POWER CHINA 2/28/95 A 3/93 Construction of No * No GHG emissions accounted for in EA or SAR.DEVELOPMENT three 600 MW coal-

__________ __ _ fire power plants28 Energy LAM TAKHONG THAILAND 5/9/95 A 3/92 reservoir No * No GHG emissions accounted for in EA or SAR.PUMP STORAGE construction * EA explicitly stated the project has no atmospheric impact anticipated

(methane during its operation period. (shows no recognition of methane emission)emissions)_~~~ef~~ ____29 Energy POWER SECTOR VIET NAM 5/16/95 A 3/95 Conversion from Yes * C02 emissions during operation of the plant (both ug/J andREHABILITATION & open cycle turbines tonnes/annum) predicted.EXPANSION to a combined cycle * EA pointed as an environmental benefit of the project that C02 emissions

unit. (positive impact from a combined cycle plant burning natural gas is predicted 50% lessthrough the than either a coal or heavy fuel oil fired generation unit in terms ofincreased energy emissions per kWh generated.efficiency) * The energy efficiency is expected to be raised to 45 % from 30% under

the current operation.* very good EA, summary of WB and Viet Nam guidelines relevant to the

project included as an appendix, although the part describing global________________ _____________ _______ ___________ extemalities is not included.30 Energy PRIVATE SECTOR COTE D'IVOIRE 6/28/95 A 10/92 Efficiency and Yes * GHG emissions are fully taken into account in the whole environmentalENERGY reliability analysis of the project.improvement of the * EA considered GHG emissions on altemative comparison.power supply; * Expected impact of the project on greenhouse gas effect are analyzedtransition from the both quantitatively and qualitatively.use of liquid fuels * SAR states 'positive global environmental impacts are.. expected fromand biomass to the project' as a result of efficiency and reliability improvement and fuelnatural gas (both switching.positive impacts) * C02 emissions are recognized as an environmental impact of the project

and efficiency improvement of the plant is considered as a mitigationf _____ _______________ l ___________ l _____ l______________ l__l_____ i m easure of the im pact.

34


mentioned?31 0 & G GAS BANGLADESH 5/9/95 A 5/94 Reduction of GHG Yes * EA summary recognizes the increased substitution of natural gas and

INFRASTRUCTURE emissions through LPG for present fuel sources will significantly lower total air emissionDEVELOPMENT increasing natural levels.

gas supply and * No quantitative analysis on GHG emissions was found in EA summary.substituting it for . EA states that flares wherever used will be operated and maintained toother fuels. (positive limit emissions; nonetheless emissions from flaring are not quantified orimpact); Gas flaring accounted for as a GHG impact of the project.(negative impact) * No description of GHG emissions in EA summary of SAR.

* That the project will reduce C02 emissions by less consumption ofpetroleum products and fuelwood resulting from increased gas supply andutilization is recognized as a significant environmental benefit of theproject in SAR (in the section of environmental and safety aspects).

* SAR states '[t]he reduction in C02 emission offers a highly effectiveresponse to the greenhouse effect."

* No quantitative analysis or description included except that SAR quoted.gas used in combined-cycle power plants - the typical technology forgeneration capacity addition, emits only half as much C02 as a oil-firedpower plant."

32 0 & G CLEAN FUELS & THAILAND 5/23/95 A 6/94 Reduction of No * No GHG emissions accounted for in EA summary of SAR.ENVIRONMENTAL atmospheric * Possible reduction of GHG emissions is not recognized as a project'sIMPROVEMENT emissions benefit.

attributable topetroleum fuelsthroughimprovement ofrefinery operations

_______ ________________ (positive impact) _________________________________________osifve_ipact33 Transp HIGHWAY SECTOR CROATIA 4/20/95 A 2/92 motor vehicle No * No GHG emissions accounted for in EA summary.

emissions; decrease * SAR doesn't include EA summary.of the forest area for * No GHG emissions accounted for in the environmental considerations in

_______ ________________ _____________ ______ _____ approx. 35 ha. x._35_ha._ SAR.34 Transp INLAND CHINA 6/20/95 A 4/94 Construction of 2 No . No GHG emissions accounted for in EA or SAR.

______ WATERWAYS & sets of a dam and

35


_ _ ~~~~~~~~~~~~~~~~~~mentioned?7/95 hydropower

generabon facility(240 MW for total).(both positve and

_______ .________________ ______________ _____ _ negative impacts) _________nega__ve_im pacts)

36

I

Appendix D

The Kyoto Protocol on Climate Changeand the World Bank Group

37

The Kyoto Protocol On Climate Change and the World Bank Group

Dissemination NoteFebruary 18, 1998

The Kyoto Protocol was adopted at the Third Conference of the Parties to the UN Framework Convention on ClimateChange, held in Kyoto, Japan in December 1997.

The Protocol has been called an "historic step" in protecting the Earth's climate system: when it enters into force, it willresult in binding emissions limitations in the so-called "Annex I" countries: thirty nine developed countries and countrieswith economies-in-transition (ElTs). These Parties agreed to ensure that their aggregate greenhouse gas (GHG) emissionsdo not exceed their assigned amounts, "with a view to reducing their overall emissions of such gases by at least 5.2 percent below 1990 levels in the commitment period 2008 to 2012." Without such commitments GHG emissions areprojected to increase significantly in the future (e.g. U.S. emissions could be 30% above 1990 levels by 2010).

What Does the Kyoto Protocol Provide?

Upon entry into force, the Kyoto Protocol would:* Institute legally binding emission levels on 6 greenhouse gases (CO2 , CH4, N2 0, HFCs, PFCs, SF6 );* Implement differentiated emission limitation targets for 2008-2012 in Annex I countries;* Allow quantification of emissions to take into account carbon sinks (e.g. forests;* Provide for possible carbon emissions trading amongst Annex I countries;* Allow for joint implementation (JI) project activities amongst Annex I countries;* Provide for the creation of a "Clean Development Mechanism" whereby Annex I countries can undertake joint

implementation projects in developing countries;* Commit all countries to cooperate in the development and transfer of climate-friendly technologies, industrialized

countries to help developing countries create a private sector-enabling environment, and Annex I countries toeliminete relevant market distortions;

* Enter into force after ratification by 55 countries that make up at least 55% of total Annex I CO2 emissions (Note:US constitutes 38% of Annex I CO2 emissions).

Differentiated Obligations:(Quantified emission limitation commitments in percentages of base year) a

Industrialized Countries ElTsAustralia 108 Bulgaria 92Canada 94 Baltics 92EU bubble b 92 Croatia 95Japan 94 Czech/Slovak 92Norway 101 Hungary 94Switzerland 92 Poland 94Iceland 110 Romania 92USA 93 Russia 100

Slovenia 92Ukraine 100

a The Protocol suggests that in implementing their commitments ElTs may be allowed a certain degree of"flexibility" (Art. 3, para. 6)

b Individual targets are to be negotiated amongst the 15 EU member states.

38

While significant progress was made in Kyoto, several issues -- in particular, details around joint implementation,emissions trading, the "Clean Development Mechanism", carbon sinks, and developing country obligations -- still remainto be resolved. For example, there was no agreement with respect to further commitments for developing countries.Many developing countries, particularly China and India, were opposed to even discussing this issue in the near future,and a number of them succeeded in deleting an article that would have allowed for voluntary commitments by developingcountries.

The Protocol is also vague on the notion of emissions trading: it includes a compromise article (Art. 16 bis), whichprovides a potential basis for developing a regime among Annex I governments to trade carbon emissions. On the otherhand, the Protocol provides for the transfer and acquisition of "carbon emission reduction units", or carbon offsets, on aproject-by-project basis, which can include private and public entities. This is widely known as "joint implementation".The modalities, rules and guidelines, in particular for verification, reporting and accountability for emissions trading andfor the "Clean Development Mechanism", were left for discussion at the Fourth Conference of the Parties to take place inBuenos Aires, Argentina in November 1998.

What Are the Implications of the Protocol For the World Bank Group and Its Clients?

The Kyoto Protocol contains several provisions of significant importance to World Bank Group operations. For example, theProtocol's concern with support for energy efficiency and renewable energy technologies underscores the importance of thenew World Bank Group environmental strategy for the energy sector and its implementation. Consistent with the objectivesof the Kyoto Protocol, the new sector strategy calls for increased emphasis on reduction or phasing out of marketimperfections, on energy efficiency, and on market-based mechanisms to encourage the widespread use of renewable energytechnologies. These policies and measures not only make economic sense, but also help protect the local and regionalenvironment, hence should be implemented even if there were no concern about climate change.

The Kyoto Protocol regime would imply the following:* Increased rationale for integration of climate change considerations in Bank dialogue and development planning;* Expanded mandate to transfer and implement efficiency and renewables technologies in client countries;* Required consistency of Bank lending with Annex I (i.e. EIT) country obligations;* Continued key Bank role in the GEF;* Expanded Bank role in financing climate change vulnerability/adaptation projects;* Near-term implementation of the Global Carbon Initiative (GCI) and the Prototype Carbon Fund (PCF) in Annex I

clients (EIT);* Possibility of GCI/CIF operating in developing country clients; and* Constrained use of HFCs in MP, GEF and Bank ODS phase-out operations.

It is essential for the environmental sustainability of the lending portfolio, and for the success of the GEF and theproposed Carbon Investment Fund, that the World Bank Group closely monitor Climate Change Convention-relatedactivities and the subsidiary bodies. It is equally important that the Bank disseminate information on the progress of thenew environmental strategy for the energy sector, including the Global Carbon Initiative, to the Parties to the Conventionand the Convention Secretariat and subsidiary bodies.

The full text of the Kyoto Protocol can be found at http://www.unfccc.de/.

39

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