The Cost of Inaction in the Middle East and North Africa (MNA)

Countriesby

Sherif ArifRegional Environmental Advisor

Middle East and North Africa Region (MNA)

The World Bank Presented at the 2nd International Expert Meeting on Sustainable Consumption and

Production Costa Rica, San Jose 5 September, 2005

MNA Environmental Strategic Tools

To increase decision-makers’ awareness of the need to conduct economic assessments to support policy formulation, particularly as they relate to strategic environmental decisions linked to environmental inter-sectoral planning, and sectoral planning (energy , water , waste ICZM policies)Assessment is at two levels:

MACRO LEVEL THROUGH • COST OF INACTION known as the Cost of

ENVIRONMENTAL DEGRADATION (COED) SECTOR LEVEL THROUGH:• THE ASSESSMENT OF IMPACTS OF ENVIRONMENTAL

MEASURES IN THE ENERGY , WATER and WASTE SECTORS

Why Calculating the Cost of Inactions

1. It allows comparison between various environmental categories (air, water, land, forest, waste etc.)

2. It represents an indicator of the present resource's assets 3. It enables comparison with other economic indicators4. It enables comparison between the “benefits” and the

“costs” of investing in natural resource management5. It raises awareness about environmental degradation

beyond the environment audience6. It gives “environment ministers” a tool to discuss the

importance of environmental protection using the same language as ministers of finance.

Mediterranean Environmental Technical Assistance Program

(METAP)

Established in 1990Beneficiaries: All Southern and Eastern Mediterranean CountriesSupported by: EC, EIB, UNDP, WB, Switzerland & Finland Objective: To bring together the Mediterranean countries to cope with and reduce the effects of environmental degradation.

COST ASSESSMENT OF ENVIRONMENTAL DEGRADATION

Objective: Estimate the Damage Costs resulting from environmental degradation.

Damage costs include: Impact on human health and on the

quality of life (morbidity, mortality, loss in recreational value, etc.)

Impact on natural resources (e.g. impact on ecosystem, deforestation)

Estimates reflect order of magnitude and therefore represent an indication of actual costs.

Financed through the Mediterranean Environmental Technical Assistance Program (METAP) by the Swiss Government

Conducted by a team of World Bank staff and local consultants under the task leadership of Ms Maria Sarraf

The Cost of Environmental Degradationin the MNA countries

Environmental Category: Percentage of GDP

0

1

2

3

4

5

6

Tunisia Jordan Lebanon Syria Algeria Morocco Egypt

Per

cent

age

of G

DP

Water

Soil

Air

Coastal Zone

Waste

2.1%

3.41%3.49% 3.67% 3.7%

4.8%

2.74%

Damage costs from Air Pollution

Annual damage costs from Air pollution as % GDP

0.00%

0.50%

1.00%

1.50%

2.00%

Egypt Syria Morocco Lebanon Algeria Tunisia

Outdoor

Indoor

Impact on the poorEgypt: Index of Per Capita Cost of

Environmental Degradation – Poor vs Non-Poor.

0

20

40

60

80

100

120

UrbanAir

IndoorAir

Water Soil Mun.Waste

Coastal

Poor

Non-Poor

Damage Costs in the Energy Sectorin Iran and Egypt

Damage costs were based on Western European estimates supplemented where possible with local studiesThe assessment of damage from air pollution was based on ExternE, a methodology used by the EU member states applied for power generation and transport, Results have been used to support EU legislation concerning:

incineration, the Large Combustion Plant Directive, the EU strategy to combat acidification, the National Air Quality Strategies

Damage Costs in Iran’s Energy Sector is 2.3 % of GDP

The main problem in Iran is the growth of pollution from private

gasoline vehicles

0

20

40

60

80

100

120

140

160

180

2001 2004 2009 2014 2019

10

^1

2 R

ls (

US

$1

bn

= 8

x1

0^

12

Rls

)

CO

NOx

SO2

PM10

Iran :Sectoral Measures and Price ReformCombined

The combined effect reduces damage substantially below the 2004 value by 2009 in all three cases. Even by 2019 the damage is less than in 2004. Only the combination of measures and price reform will achieve a cleaner environment in 2019 than now. Price reform by 2009 plus sectoral measures provides the cleanest environment over the period.

0

10

20

30

40

50

60

70

80

90

100

2004 No -09 -14 2009

-19 No -09 -14 2014

-19 No -09 -14 2019

-19

Da

ma

ge

co

st

(10

12 R

ials

)

CO

NOx

SO2

PM10

Egypt: Health Damage Costs due to Transport, Industry and Burning of Wastes

0

2

4

6

8

10

1999/00 2010/11

Lo

ca

l D

am

ag

e C

os

ts

(LE

bil

lio

n/y

ea

r)

CO

SO2

NOx

PM10

Egypt: Damage Costs 2010/2011 with

Price Reform & Sector MeasuresCompared with Business as Usual

0

2000

4000

6000

8000

10000

Actual(1999/2000)

BAU Price reform Sectormeasures

Combined

mn

LE

L.E

. M

illion

EGYPT: DAMAGE COSTS RELATED TO WATER QUALITY

Damage Costs of Components Under Actions as a % of National GDP

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

2003 2014 NoAction

2014CentralAction

2014Central +Decentral

Action

2014 FullCoverage

2014Hygiene

Promotion

% o

f G

DP

Water Treatment

Fisheries

Agriculture

Health

0

1

2

3

4

5

6

7

8

9

10

BAU Central measures Central + community-driven measures

Tota

l Cos

ts

LE B

illio

n/ye

ar

Forgone Benefits(damage costs)

Cost of addedtreatment/control

Comparing Inaction with Action: Action Cost vs. Forgone Benefits

(health + crops + fisheries)

Outcome of the Cost of Environmental Degradation (COED)

Within the World Bank, COED has been adopted in

Asia ( China)Africa ( Ghana)Latin America ( Columbia)

Within the MEDA countries, COED was recognized in the “Athens Declaration of 2002”as one of the mainstreaming tools for environmental integrationIn the MNA region, COED is used by other donors and national agencies in Algeria, Morocco and EgyptIn the Gulf countries, COED is used by ESCWA for economic evaluation

Outcome of COED in Algeria

The Government decided to provide in 2001 an additional US$ 450 million for environment-related investmentsMethodology used in other sectors

( cement and coastal zone management)

OUTCOME of COED in the Energy Sector in Iran

Damage costs assessment assisted in the policy formulation in the forthcoming fourth year development plan as follows:

Increase of the energy fuels ( gasoline, diesel, and electricity should reach their real market values by 2009; As of March 21 2006, The gasoline price above the subsidized quota (10 cents per liter) will be 2200 Rials/liter ( 25.6 cents per liter). It is expected that the price of gasoline should reach its market value in 2009.

Damage costs from Inadequate Waste Management

0.0%

0.3%

0.5%

Morocco Egypt Jordan Tunisia Algeria Syria Lebanon

Annual damage costs from inadequate waste management as % GDP

Damage costs from Inadequate Waste Management

0

50

100

150

200

Egypt Morocco Algeria Tunisia Jordan Syria Lebanon

Annual damage costs from inadequate Waste Management in million USD

The METAP Mashreq and Maghreb countries

• Host about 170 million people, of which more than 50% live in urban areas. • Produces about 40 million tonnes of municipal waste per year (254 Kg/cap/y)

• The projected urbanisation and economic growth in the region during the coming years is expected to result in a waste tonnage increase of 44 % by 2010, equivalent to 55 million tonnes per year.

• In all countries, most of the cities are characterised by high population densities and rapid growth and suffer from several forms of urban pollution.

• Across the region, countries currently spend between US$ 325 – 400 million annually to manage municipal solid waste.

Solid Waste Sector in the MNA Region: Key Numbers …

• Gaps in SWM policies and strategic planning

• Institutional and legal barriers

• Limited involvement of stakeholders and low environmental awareness

• Financial constraints and lack of appropriate municipal finance systems

• Deficiencies of technical and management capacity at the local and municipal level

• Inadequate cost accounting, financing and cost recovery

• Constraints for private sector involvement in the SWM market and its performance

Solid Waste Sector in the Region: Common MSWM Issues in the MNA Region

Launched: in January 2003

Ending: in March 2006

Beneficiary: Algeria, Egypt, Jordan, Lebanon, Morocco, Syria, Palestinian Authority and Tunisia

Supported by : European Commission with a grant to METAP for of EURO 5.0 million

Main Objective: Promote the adoption of sustainable integrated Solid Waste Management in the Mediterranean Eastern & Southern Countries

Specific Objectives:

• Assist target countries in designing, developing & applying main elements of ISWM;

• Promote regional exchanges of information & experience within the region and capacity building in the SWM field;

• Lay down the foundation and build up the necessary environment and conditions for international and regional financial institutions to invest in MSWM projects in the region

RSWMP OBJECTIVES

Concept of Guidance documents

Concept of Guidance documentsConcept of Guidance documents

Why is SWM important ?

Policy

Decision Maker’s Support Document

Introduction & User’s Guide

Glossary of Terms

Legal & Institutional

Finance & Cost Recovery

Private sector Participation

Public Awareness & Community Participation

Case Studies

Tools Training Manuals

Explanatory Documents

Examples

Guidelines

Training Manuals

Regional Centre

of Expertise

Antenna Cluster of ExpertsSWM professionals

Development of Regional and National Expertise

RSWMP Progress: Regional Information exchange and dissemination

• Design and development of a Regional Electronic Network (www.metap-solidwaste.org)

• Co organisation with UNDP/EC USWM Project of the first Policy Dialogue Workshop on ISWM in Cairo in July 2003 (70 participants from national and municipal institutions, donors, international and local experts, and the eight NCs of the RSWMP).

• Preparation & issue of a set of dissemination tools (CD ROMs; 2 biannual Newsletters; project brochure; technical brochures, etc.)

• Visits of regional experts and exchange of experiences among the region (Tunisia & Jordan).

• Establishment of Electronic database on key stakeholders, donors’ initiatives, applied technologies, regional and local expertise, etc.

• Organisation of the Regional NGOs Workshop

•ORGANIZATION OF REGIONAL FORUM ON SOLID WASTE MANAGEMENT IN CASABLANCA, MOROCCO IN NOVEMBER 14-16, 2005

Cash out

Cash in

Equity

Debt

Construction Capital for underlying climate friendly project

Yrs 0 1 2 3 4 5 6 7 8 …………………………………….15-20

Carbon Revenues for10-21 years

World Bank Emissions Reductions Purchase Agreement is bankable and additional revenue commitment helps bring projects to financial closure

= annual payments under carbon purchase agreement

= annual payments under power purchase or other source of revenues to underlying project

Carbon sales revenues are commonly in the range from 10-50% of total revenues for power and waste management projects

Construction

Operation

Understanding the impact of carbon finance on project financing and financial sustainability

 

  

Technology IRRfinancial

Hydro, Wind, Geothermal

0.5-2.5%

   

Crop/Forest Residues 3-7%

Municipal Solid Waste 5-15+%

 

Increases in Project Rates of Return as a result of additional revenues from sales of Emissions Reductions (“Carbon”) at $4/tCO2e

Carbon Economics

Combining Lending with Carbon Emissions Revenues

TunisiaIntegrated Solid Waste Management• IBRD Loan: US$ 22.2 million• Carbon Emissions Revenues: US$ 29.4 million

EgyptEgypt-Pollution Abatement Program

• IBRD Loan: US$ 20.0 million• Carbon Emissions Revenues: US$ 10 million ( est)

THANK YOU VERY MUCH FOR YOUR ATTENTION