23084 October 2001 It~~~~~~~W AiiJ3 ..~4 S.fTta > - ''I Making Sustainable Commitments An Env'ironment Strategy for the World Bank The World Bank MAKING SUSTAINABLE COMMITMENTS An Environment Strategy for the World Bank The World Bank Washington, D.C. Contents Preface ix Acknowledgments xiii Executive Summary xvii Abbreviations and Acronyms DDDcvii Introduction 1 Chapter 1: Development, Poverty, and the Environment -Tracing the Connections 3 T he Evolution of Thinking about Sustainable Development 3 Tradeoffs, Choices, and Priorities 4 Three Links between Environment and Development 6 The quality of life 7 The quality of growth 9 The quality of the regional and global commons 12 Changing Global Context 14 Increased private sector role 14 Political changes 14 Technological change 14 Population growth and demographic changes 15 Greater Scope for Markets with Effective Public Regulation and Oversight 16 Chapter 2: Lessons from World Bank Experience 19 Safeguard Policies and Procedures 19 Progress made in applying men tal assessment 20 Areas for further improvement 22 Emerging challenges 24 Hii Making Sustainable Commitments - An Environment Strategy for the World Bank Integration of Environmental Concerns and Economic Development 25 Setting environmental priorities 25 Lendinig for environmental activities 27 Lessons from environmental lending 31 Environmental aspects of adjustment lending 33 Addressing Regional and Global Environmental Challenges 34 Projects and programs for the global environment 35 Mainstreaming the global environment in the country dialogue 36 Partnerships 37 The Changing Bank Context 38 New strategic approaches 38 The need for selectivity 40 The Bank's comparative advantage as a basis for selectivity 41 The need for a cross-sectoral approach 42 The need for institutional realignment 43 Notes 43 Chapter 3: The Strategic Framework 45 Our Objectives 46 Improving the quality of life 46 Improving the quality of growth 48 Protecting the quality of the regional and global commons 50 Our Toolkit 52 Strengthening analytical and advisory activities 53 Addressing environmental priorities through projects and programs 56 Improving the safeguard system 60 Selectivity in Implementation 62 Chapter 4: Institutional Realignment 65 Strengthening Accountability and Incentives 66 Operational departments 66 The environment family 68 Senior management 71 Coordinating across Sectors and Networks in the Bank 71 Improving Skills 73 Continuing to realign the skill mix 74 Joint appointments, secondment, and training 75 Realigning Budgets 76 Managing the transition while exercising selectivity 76 Budget requirements 77 External Relations and Partnerships 78 Realigning with corporate priorities 79 Stocktaking and realignment 80 iv Contents Performance Monitoring and Reporting 81 Conclusion 82 ANNEXES A. Regional Strategies 85 East Asia and the Pacific 87 Europe and Central Asia 95 Latin America and the Caribbean 105 Middle East and North Africa 113 South Asia 121 Sub-Saharan Africa 129 B. Poverty and Environment 139 C. Environment and Health 147 D. Natural Resource Management 153 E. Urban Environmental Priorities 165 F. Climate Change 173 G. The IFC's Approach to Environmental and Social Issues - A Roadmap to Sustainable Investment 181 H. Multilateral Investment Guarantee Agency 187 I. The Environment Strategy and the World Bank-GEF Program 191 J. Consultation Process and Feedback 199 K. Selected Partnerships 207 L. World Bank Management's Response to OED's Environment Review and Recommendations 211 M. Mapping Environmental Conditions 215 Bibliography 221 BOXES 1 Key benchmarks for monitoring Bank performance in Strategy implementation xxvii 1.1 Goals for international development 4 1.2 Indicators of sustainable development 5 1.3 From protectionism to sustainable ecosystem management 6 1.4 Environmental degradation and economic productivity 7 1.5 What makes environmental problems different? 9 1.6 Industrial and developing countries have different perspectives on environmental challenges 1 1 1.7 Global environmental issues 12 v Making Sustainable Commitments - An Environment Strategy for the World Bank 1.8 Corporate responsibility: The triple bottom line 15 1.9 Poverty, population, and environment links 16 2.1 Community Driven Development: The challenges of acting locally 24 2.2 The FY99 Lesotho Country Assistance Strategy 27 2.3 Environmental adjustment lending 29 2.4 Improving livelihoods by better natural resource management in Nepal 29 2.5 Assistance to support payments for environmental services 31 2.6 Evaluation of the Bank's past environmental performance 32 2.7 IFC-GEF cooperation 36 2.8 World Commission on Dams 38 2.9 The Comprehensive Development Framework 39 3.1 Improving livelihoods through sound management of micro-watersheds 47 3.2 The South Asia Urban Air Quality Management Initiative 48 3.3 Strengthening national EA capacity: The METAP experience 49 3.4 Linking local and global benefits: Energy efficiency projects in China 51 3.5 Providing decisionmakers with scientific information: The Millennium Ecosystem Assessment and the Intergovernmental Panel on Climate Change 52 3.6 Strategic environmental assessments 55 3.7 Promoting good practice in environmental management 56 3.8 How we will work 57 3.9 Adaptable Program Loan for improving environmental management in Brazil 57 3.10 Capacity development activities by other international organizations 59 4.1 Collaborating with the energy sector: Fuelfor Thought 73 4.2 Partnerships review in the ESSD network 79 A.1 Analytical work shapes natural resource management in East Asia 89 A.2 Preparing an environment strategy for East Asia 94 A.3 Albania: Community-based forest management in a transition economy 99 A.4 The Clean Air Initiative in Latin American cities 107 A.5 A regional approach: The Mesoamerican Biological Corridor 109 A.6 Public consultation during preparation of the LAC Environment Strategy 111 A.7 Sustainable watershed management in India 123 A.8 NEAPs and ESPs in Africa 136 A.9 Partnerships for sustainable development in Africa 137 B.1 Poverty is multidimensional 139 B.2 The impacts of fuelwood scarcity on women's health 141 B.3 Environmental mainstreaming in PRSPs 145 D.1 Community-based natural resource management 157 D.2 Linkages between the Environment Strategy and the revised forest strategy 159 E.1 Supporting the global phaseout of leaded gasoline 167 vi Contents E.2 Environment in the Bank's urban strategy 170 F. 1 Strengthening environmentally responsible energy strategies through Energy Environment Reviews 177 1.1 World Bank-GEF projects demonstrate innovative approaches to financing sustainable natural resource management with global and local benefits 194 J.1 Environment Strategy consultation through the Internet 201 J.2 Results of an Environment Strategy questionnaire 202 FIGURES 1 What's new in the Environment Strategy xxviii 2.1 IBRD/IDA commitments by EA category, fiscal 1990-2000 21 2.2 Environmental and safeguard input into the Bank's decisionmaking and project cycle 23 2.3 World Bank environmental lending, fiscal 1990-2000 28 2.4 GEF and MFMP commitments, fiscal 1992-2000 35 4.1 Environment in the ESSD network 69 4.2 Environmental interface with other networks and families 72 4.3 Cross-sectoral affiliation of environmental staff 74 4.4 Realigning partnerships 80 B.1 Environmental links to the dimensions of poverty 140 B.2 Peru 1996 health outcomes 142 C.1 Burden of disease and environmental risks 147 D.1 The value of water and water-based ecosystems 160 J.1. Strategy consultations map 200 MAPS Regional East Asia and the Pacific 87 Europe and Central Asia 95 Latin America and the Caribbean 105 Middle East and North Africa 113 South Asia 121 Sub-Saharan Africa 129 Environmental 1 Gross domestic savings 216 2 Genuine savings 216 3 Health burden associated with waterborne diseases 217 4 Estimated ambient concentration of particulates (PM,,) in urban areas (1.g/m3) 217 vii Making Sustainable Commitments - An Environment Strategy for the World Bank 5 Population in areas of relative water scarcity 218 6 Areas of high biodiversity importance 218 7 Per capita CO2 emissions 219 8 CO2 emissions per PPP-adjusted GDP 219 TABLES 1 Strategic framework matrix xxx 2 Strategy implementation and monitoring matrix xxxiii 4.1 Institutional accountabilities for promoting environmental sustainability 83 A.1 Sub-Saharan Africa: Priority environmental issues 134 C.1 The burden of disease from major environmental risks 149 C.2 Health outcomes and environmental interventions 152 J.1 World Bank Environment Strategy consultation schedule 205 K.1 Selected partnerships 208 L.1 OED's recommendations and management's action response 212 viii .^-r ^,-~~~~~~~ ' ' ' \~N' Preface mm his Environment Strategy outlines how the World Bank will work with client countries to ad- dress their environmental challenges and ensure that Bank projects and programs integrate prin- ciples of environmental sustainability. The Strategy sets a vision, objectives, and a course of action for the longer term and suggests specific actions, targets, and institutional measures for the next five years, as described in Tables 1 and 2 of the Executive Summary. Table I links proposed measures with key development objectives, while Table 2 sets targets and monitorable indicators. The Strategy is the product of a multiyear effort, including an extensive evaluation of the Bank's past performance by the Banles independent Operations Evaluation Department (OED) and numerous work- shops and consultations with client governments, civil society, academia, multilateral and bilateral develop- ment agencies, and representatives of the private sector (see annex J for details). These consultations have played an important role in shaping the final document. We are profoundly grateful to all those who have taken the time and trouble to contribute to the process. Within a strategic framework, we recognize that one size does not fit all. The countries served by the World Bank differ enormously in their stage of development and in the nature of their economic, social, and environmental concerns. It would be both presumptuous and futile to define a small set of specific prob- lems that we would tackle in all or most of our client countries. A central theme of the Strategy, therefore, is the importance of working in collaboration with our clients and partners to identify the critical environ- mental issues that should be addressed in specific circumstances. Detailed country environmental diagnos- tic analysis based on National Environmental Action Plans (NEAPs) and other strategies and assessments, along with other country-specific assessments, is part of the input for the Bank's Country Assistance Strategies (CASs). This Strategy does not attempt to provide a detailed assessment of the state of the environment, natural resources, and ecosystems in our client countries or in the world. It draws on work undertaken by client ix Making Sustainable Commitments - An Environment Strategy for the World Bank countries, the World Bank, and many others. This Directors discussed Fuelfor Thought, an environ- work includes NEAPs, strategies and assessments, mental strategy for the energy sector. Th( Envi- the World Resources Institute's World Resources se- ronment Strategy builds on the analysis undertaken ries, the Workdwatch Institute's State of the World for Fuelfor Thought and incorporates that strategy's series, the United Nations Environment objectives and actions. The Bank is also preparing Programme's Global Environmental Outlook 2000, or planning to prepare strategies for its activities in and the Bank's WorldDevelopment Indicators series. a number of other fields, including forestry, water It also builds on a rich storehouse of analyticalwork resources, rural development, and social develop- that spells out a broader vision of development and ment. These strategies have implications for issues its environmental linkages and maps out options that are important concerns for the Environment for broadening the benefits of economic develop- Strategy, in particular, in natural resource manage- ment while reducing its adverse environmental ef- ment. The concerns, approaches, and conclusions fects. The results of such assessments-including of these strategies are reflected here, though they assessments prepared for the Intergovernmental are not discussed in detail. Panel on Climate Change (IPCC), the Orga- nisation for Economic Co-operation and Devel- The World Bank Group (WBG) includes four opment (OECD), the United Nations, and the closely associated but distinct institutions that sup- U.K. Department for International Development port development in low- and middle-incorne cli- (DFID)-are widely available. ent countries. The International Bank for Recon- struction and Development (IBRD) and the In- The 2003 WorldDevelopment Report(WDR), sub- ternational Development Association (IDA) have titled Sustainable Development with a Dynamic a mandate to lend to sovereign governments. To- Economy, will provide an opporrunity to take a com- gether, they are often referred to as the World Bank prehensive look at the various dimensions of sus- (WB).The WB, through its ongoing dialogue with tainable development. This Environment Strategy client governments on a wide range of issues and provides one of the building blocks for the WDR. its financial support to the public sector, is in a po- The Strategy is an operational document that sition to influence government policy directly. The guides the Bank's actions in the environment area International Finance Corporation (IFC) promotes and that recognizes that environment is part of the sustainable private sector investment as a way of sustainable development challenge; points to close enhancing economic growth and improving peoples' linkages with other areas of development; and em- lives. It operates principally through direct or indi- phasizes the need to integrate environmental issues rect support of private sector projects. The Mlulti- into sectoral and macroeconomic policies, strate- lateral Investment Guarantee Agency (MIGA) pro- gles, and actions, taking into account evolving in- vides guarantees against certain noncommercial stitutional conditions and capacity constraints in risks (primarily political risk insurance) to foreign client countries. investors for qualifying investments in developing countries. The Environment Strategy works in a complemen- tary fashion with other Bank strategies and action The four WBG institutions are aligned with the plans. For example, in 1999 the Bank's Board of core mission of poverty reduction-and, therefore, x Preface the overall vision, strategic framework, and objec- Strategy to linkages among members of the WBG, tives of this Strategy, as described in Chapters 1 and annexes G and H provide detailed informa- and 3, are shared by the entire WBG. Members of tion on the approach to supporting sustainable de- the WBG, however, are legally and financially in- velopment taken by the IFC and MIGA. dependent and have different sets of owners and clients, structures and mandates, staffs and toolkits. Strategy making does not end with the publication Accordingly, specific operational and institutional of the document. Continuous communication and implications differ and need to be spelled out sepa- collaboration with clients, partners, and World rately. The lessons learned and the operational and Bank staff in diverse sector and country units, as institutional details described in Chapters 2, 3, and well as systematic monitoring and assessment of 4 of this document apply specifically to the WB the Strategy's effectiveness, are essential to its up- (IBRD/IDA). References are made throughout the dating, improvement, and successful implementation. xi Acknowledgments he preparation of the Environment Strategy was overseen by the Environment Sector Board, chaired by Environment Director Kristalina Georgieva, and co-chaired by Robert Watson, Chief Scientist and Director of the Environmentally and Socially Sustainable Development Network (ESSD). Kristalina Georgieva guided the Strategy preparation process. All members of the Environment Sector Board played an active role in the strategy preparation process: Richard Ackermann (South Asia Region), Sherif Arif (Middle East and North Africa Region), Glen Armstrong (International Finance Corporation), Charlotte Bingham (Africa Region), Zafer Ecevit (East Asia Pacific Region), David Freestone (Legal Department), Jane Holt (Europe and Central Asia Region), Anupam Khanna (Development Economics Vice Presidency), Michele de Nevers (World Bank Institute), Maria Teresa Serra (Latin America and Caribbean), Martyn Riddle (International Finance Corporation), and David Wheeler (Development Economics Vice Presidency). Magda Lovei (ENV) managed the preparation of the Environment Strategy. The core Strategy drafting group also included Julia Bucknall (ECSSD), Gordon Hughes (Consultant), Stefano Pagiola (ENV), and Lars Vidaeus (ENV). Anjali Acharya (ENV), Kulsum Ahmed (LCSES), Sherif Arif (MNSRE), Aziz Bouzaher (SASEN), Gonzalo Castro (ENV), Kirk Hamilton (ENV), David Hanrahan (ENV), Martin Fodor (ENV), Hans-Olav lbrekk (ENV), Todd Johnson (ENV), Agi Kiss (AFTES), Stephen Lintner (ENV), Kseniya Lvovsky (SASEN), Ajay Mathur (ENV), Jean-Roger Mercier (ENV), Judith Moore (ENV), and Mahesh Sharma (ENV) all participated in the Strategy working group. Many others contrib- uted or provided advice and comments, including Gayatri Acharya (WBIEN), Motoko Aizawa (CTEED), Jo Albert (ENV), Mohamnmed Bekhechi (LEGOP), Rob Crooks (EASES), John Dixon (ENV), Giovanna Dore (EASES), Yoko Eguchi (ESDVP), Indumathie Hewawasam (AFTERS), Chn'stiane Kraus (WBIEN), Ken Newcombe (ENV), and Nightingale Rukuba-Ngaiza (LEGOP). Alethea Abuyuan (ENV) assisted the team with research and data. xiii Making Sustainable Commitments - An Environment Strategy for the World Bank General guidance was provided by the Operations lowing topics: Capacity Buildingfor Environmental Policy Committec, which is chaired by Shengman Institutions, led by Ina-Marlene Ruthenberg Zhang, and the ESSD Council, which is chaired (LCSEN) and Mohammed Bekhechi (LEGOP); by ESSD Vice President Ian Johnson. The prepa- Climate Change, led byAjayMathur,ToddJohnson, ration of the six Regional Environment Strategies and Mahesh Sharma; CountryAssistance Strategies was overseen by Regional Sector Directors and and Environment, led by Kirk Hamilton :ENV); Managers: Richard Ackermann (South Asia), Hans Donor Survey on Environmental Aid Effec.' iveness, Binswanger and Roger Sullivan (Africa), Kevin ledbyHans-OlavIbrekk(ENV);Environmentand Cleaver and Jane Holt (Europe and Central Asia), NaturalResources chapter in Poverty Reduction Strat- Zafer Ecevit (East Asia and Pacific), Doris Koehn egy Paper Sourcebook, led by Julia Bucknall and Salah Dargouth (Middle East and North Af- (ECSSD), Kirk Hamilton (ENV), Nalin Kishor rica), and John Redwood and Teresa Serra (Latin (WBIEN), and Poonarn Pillai (WBIEN); Health America and the Caribbean). andEnvironment, led by Kseniya Lvovsky (S ASEN) and Maureen Cropper (DECRG); Natural.Resource The main authors of Regional Environment Strat- Management, led byjan Bojo (AFTE1) and Stefano egies were Teresa Serra and Kulsum Ahmed (Latin Pagiola (ENV); Outcomes andIndicators, led byAziz America and Caribbean Region), Aziz Bouzaher Bouzaher (SASEN); Partnerships, led by Ken (South Asia Region),ToddJohnson (East Asia and Newcombe (ENV) and Nalin Kishor (W.BIEN); Pacific Region), Agi Kiss (Africa Region), Sherif Poverty and Environment, led by Julia Bucknall Arif and Maria Sarraf (Middle East and North (ECSSD) and Poonam Pillai (WBIEN); Reducing Africa Region), and Jane Holt and Konrad von Vulnerability to Environmental Variability, led by Ritter (Europe and Central Asia Region). Many Mahesh Sharma (ENV); Safeguards, led by Stephen others contributed, including Angela Armstrong, Lintner, Jean-Roger Mercier (ENV), and Glen Gabriela Boyer, Sergio Margulis, Kirsten Oleson, Morgan (EASES); StrategicEnvironmentalAssess- Rocio Sarmiento, and Laura Tlaiye (Latin America ments led by Olav Kjorven (Consultant) and David and Caribbean Region); Carter Brandon, Kseniya Hanrahan (ENV); UrbanAir Quality Management, Lvovsky, and Bekir Onursal (South Asia Region); led by Masami Kojima (COCPO) and Magda Carter Brandon, Rob Crooks, and Giovanna Dore Lovei (ENV); Urban Environmental Prior:ties, led (East Asia and Pacific Region); Anita Gordon and by Carl Bartone (INFUD) and David Hanrahan Marie-Claude Verlaeten (Africa Region); Hocine (ENV); Environmental and Water Resourc s Man- Chalal, John Bryant Collier, Nicole Glineur, Roger agement, led by Rafik Hirji and Hans-Olav Ibrekk Gorham, Samuel O'Brien-Kumi, Allan Rotman, (ENV); and World Bank and the Global Environ- Kanthan Shankar, Shobha Shetty, Manuel Shiffler, ment, led by Lars Vidaeus and Gonzalo Castro and Shatory Ueda (Middle East and North Africa (ENV). Several of these background papers are Region); and Marjory-Anne Bromhead, Julia summarized in the annexes. Bucknall, Amy Evans, and Vesselina Hekimova (Europe and Central Asia Region). Judith Moore (ENV) organized external consulta- tions in collaboration with regional coordinators: The Strategy draws on several background papers Gabriela Boyer (LCSES), Giovanna Dore and notes prepared by working groups on the fol- (EASES), Elena Heitman (Consultant), Vandana xiv Acknowledgments Sareen (ECSSD), Maria Sarraf (MNSRE), and environmental policies, procedures, and activities Marie-Claude Verlaeten (AFTE1), as well as Anita and their impacts; regional consultation meetings Gordon (Consultant) and Elke Nickel (Consult- with a range of stakeholders; and two electronic dis- ant), who worked on the North American and cussion forums. The Strategy team received valu- Western European consultations. Martin Fodor able comments from the following in OED: Rob- (ENV) managed the electronic web consultation ert Picciotto, Greg Ingram, Alain Barbu, Andres and coordination. Liebenthal, andJed Shilling. Annex L summarizes the OED's recommendations and the Bank re- The Strategy team is grateful for the guidance and sponses and actions outlined in the Strategy. comments from Marisela Montoliu Munoz (Op- erations Policy and Country Services). Many oth- The Strategy team is grateful for the constructive ers provided valuable comments, advice, and input discussions and comments provided by the Com- to the Strategy: John Briscoe, Csaba Csaki, Jim mittee for Development Effectiveness and the Douglas, Odin Knudsen, Robin Mearns, and Rob- Board of Directors. ert Thomson, (Rural Development); Steen Jorgensen (Social Development); Nemat Talaat Editorial support was provided by Bob Livernash Shafik (Private Sector and Infrastructure); Jamal (Consultant). Additional editorial advice was pro- Saghir and Lee Travers (Infrastructure, Water and vided by Nancy Levine, Daniel Litvin, andJenepher Sanitation); John Flora and Ken Gwilliam (Urban Moseley (Consultants). Jim Cantrell (ENV) man- Transport); Carl Bartone (Urban Development); aged desktop publishing, design, and production. Chas Feinstein and Richard Spencer (Energy); Administrative and logistical support were provided Mariam Claeson and Christopher Lovelace by Isabel Alegre, Sriyani Cumine, Nenuca Munoz (Health); Michael Klein and Syed A. Mahmood Robles, Vessela Radeva Stamboliyska, and Jason (Private Sector Development); Kiran Pandey, Jo Steele (ENV). Ritzen, Zuarak Shalizi, and David Wheeler (De- velopment Economics); Giovanna Prennushi (Pov- Many organizations and individuals outside the erty); John Todd (Corporate Strategy Group); Bank provided constructive oral or written com- Nicolette Dewitt (Legal); Manuel Penalvar- ments. These comments have been valuable inputs Quesada (South Asia Region), Kathleen in shaping the Strategy. We are indebted to the Stephenson (Resource Mobilization); Richard hundreds of people who participated in the meet- Caines, Gavin Murray, Andreas Raczynski, Bernard ings and who provided thoughtful comments in Sheahan, and Peter Woicke (International Finance person, by mail, or by e-mail. Because of space con- Corporation); and Harvey Van Veldhuizen and straints, we can only acknowledge a few of the or- Gerald West (Multilateral Investment Guarantee ganizations that helped organize meetings; how- Agency). ever, we thank all the individuals and organizations that participated. Their contribution was invaluable. The Strategy has also benefited from a review of the Bank's environmental performance undertaken We thank the governments ofJapan, Norway, Swe- by the Operations Evaluation Department (OED). den, and Switzerland for their financial support, This review included an analysis of the Bank's which made the consultations possible. We thank xv Making Sustainable Commitments - An Environment Strategy for the World Bank Monitor International (Annapolis, USA) for their Environment of Georgia organized regional meet- advice, convening and facilitation skills, and their ings. CEEWEB and the Georgian Center for the independent reports of a number of the meetings. Conservation of Wildlife provided independent We thank the members of the GEF-NGO network, reports on the meetings held in Hungary and Georgia. for their participation in most of the meetings, help- ing to identify and convene participants, and con- In the Middle East and North Africa, IUC N pro- tributing to reports on findings. We also thank vided assistance with the first consultation in Stratos, Inc. (Ottawa, Canada) for their advice and Amman, Jordan; for the second meeting, the Min- facilitation of the final joint OED/ENV workshop istriesofPlanningand E ronmentinjordanpro- held in Washington, DC. vided assistance. We are indebted to all of the government agencies, We would like to acknowledge the following orga- expert organizations, and individuals who gener- nizations in Latin America and the Caribbean: ously shared their time and knowledge with us. In Central American Commission for Environment each region some organizations assumed special and Development (CCAD, El Salvador), the roles in the process. In Africa, meetings were orga- Fundacin Futuro Latinoamericano (Quito), Ecua- nized by the Environmental Liaison Centre Inter- dor), the Fundaci6n Vida (Cartagena, Colombia), national (ELCI, Nairobi, Kenya); the World Con- Nouveau Promo§5es e Marketing Direto (Rio de servation Union (IUCN) Country Office in Pereatoria,outh Africa; aIUCNdtheIC Country OJaneiro, Brazil), and CEGESTI, a nonprofit orga- Pretoria, South Africa; and the IUCN Country nization that specializes in clean productlon and Office in Ouagadougou, Burkina Faso. EnerWise International submitted an independent report of environmental management (San Jose, Costa Rica), the meeting held in South Africa. as well as the United Nations Environment Programme (UNEP) for its active involvement in In Asia, the Japanese Foundation for Advanced each of the sessions. The Caribbean Conserva- Studies on International Development (FASID) tion Association and Fundacion Ecologica Univer- supported a regional meeting in Bangkok, Thai- sal provided independent reports on the meetings land; the Foundation for the Philippine Environ- in Costa Rica and Brazil. ment and Monitor International prepared reports of the meeting. In Japan, meetings were organized For assistance in Western Europe, we thank to by Keidanren (Japan Federation of Economic Or- Euronatur (European Natural Heritage Fund), the ganizations), the Environment Assistance Study German Federal Ministry for Economic Co-Opera- Group of the Japan International Cooperation tion and Development (BMZ), the Swiss State Sec- Agency, the Japan Bank for International Coop- retariat for Economic Affairs (SECO), and U.K. eration, the Economic Cooperation Bureau of the Department for International Development (DFID). Ministry of Foreign Affairs, the International Bu- reau of the Ministry of Finance, the Ministry of In North America, we would like to acknowledge the Environment, and FASID. the Bank Information Center (Washington DC, USA), Canadian International Development In the Europe and Central Asia Region, the Re- Agency (CIDA), the North-South Institute (Ot- gional Environment Center (Budapest, Hungary), tawa, Canada), and the World Affairs Council (San the Bank's office in Moscow, and the Ministry of Francisco, USA). xvi Executiv/e Summary Economic development has led to dramatic improvements in the quality of life in developing countries, producing striking gains unparalleled in human history. But the picture is far from entirely positive. Gains have been unevenly distributed, and a large part of the world's popula- tion remains desperately poor. At the same time, environmental factors such as indoor and outdoor air pollution, waterborne diseases, and exposure to toxic chemicals threaten the health of millions of people, and natural resources-land, water, and forests-are being degraded at alarming rates in many countries. Simultaneously, far-reaching trends-globalization, the increased role of the private sector and of civil seciety, and rapid technological advances-have been reshaping the world, causing development and envi- ronmental challenges to be ever more intertwined. As a development institution, the World Bank has been involved in addressing environmental issues for many years. This Environment Strategy draws on lessons learned on the basis of the Operations Evaluation Department's (OED's) environmental review (OED 2001); adjusts to a changing global context; and reaf- firms the Bank's commitment to environmental sustainability. It sets a direction for the World Banles future actions in the environment area for the longer term, as well as specific actions for the next five years- It emphasizes the need to tailor our assistance according to differences in institutional development and environmental management capacity in client countries. It is based on an understanding that sustainable development, built on a balance of economic growth, social cohesion, and environmental protection, is fundamental to the Banles core objective of lasting poverty alleviation-a link that has been recognized by international environmental conventions and in the International Development Goals (IDGs) set forth in the United Nations Millennium Declaration in 2000. ENVIRONMENT AS INTEGRAL PART OF THE DEVELOPMENT CHALLENGE Many view concern over environmental issues as a rich-country luxury. It is not. Natural and man-made environmental resources from agro- to freshwater, forest, and marine ecosystems represent an important xvii Making Sustainable Commitments - An Environment Strategy for the World Bank element of countries' wealth, and provide a foun- tivity is considered, they may disappear. Overfish- dation for economic growth and livelihoods. ing, for example, may temporarily improve people's income, making conservation seem costly. But these People in most developing countries are increas- costs will pay off if they help avoid the collapse of ingly concerned about their environment. They are fisheries, which deprives people of both nutrition particularly worried about the impacts of pollution and income in the longer term. Similarly, the con- and natural resource degradation on their health siderable social costs of pollution can jusrify the and on prospects for sustainable growth. While costs of measures that prevent and mitigate it. industrial countries have successfully addressed many of the environmental problems that directly While countries and societies may differ in their affect people's livelihoods, environmental factors choices about environmental priorities and other continue to impose considerable human, economic, aspects of sustainable development, these choices and social costs in many developing countries, have to be informed by good analysis and the par- threatening the foundation for sustainable devel- ticipation of the key stakeholders affected bv them. opment. The economic costs of environmental deg- The chaLLenge for the World Bank and other insti- radation have been estimated at 4 to 8 percent of tutions concerned with development assisl-ance is gross domestic product (GDP) annually in many to work with clients to develop and impLement developing countries. policies, programs, and investments that not only support continued economic development but also: Distorted policies, governance structures, institu- m Distribute the gains of development in a more tional frameworks, incentives, and pressures to ex- equitable manner, with a particular focus on re- port natural resources may favor a short-term fo- ducing poverty cus, making programs with a long-term horizon f Avoid sacrificing the interests of future genera- difficult to implement. The "grow now, clean up tions to meet the needs of the current genera- later" approach to development, however, imposes tion very high costs-costs that could be avoided by Build on the emerging global consensus that adopting policies and programs that prevent seri- natural resources and other valuable environ- ous environmental damage. mental assets must be managed sustainably. Although there are many "win-win" opportunities This Strategy discusses how we will support our to simultaneously achieve economic, environmen- clients and partners as they face these challenges. tal, and social objectives, balancing these aspects of development through everyday decisions inevita- OUR RECORD SO FAR bly involves value judgments and societal choices, which often require difficult tradeoffs. These During the past decades, the World Bank has de- tradeoffs-among generations, social groups, and veloped safeguard policies, procedures, and ex- countries-influence what different people see as amples of good practice for addressing the envi- sustainable development. These tradeoffs may only ronmental and social aspects of our projects, and be apparent-that is, when the time dimension is these have become internationally accepted refer- added and the full social cost of the economic ac- ences and models. We have helped client countries xviii Executive Summary develop National Environmental Action Plans tives, designing complex interventions, and tar- (NEAPs) and strengthen their systems of environ- geting tight deadlines, without giving sufficient mental regulation through institutional develop- attention to the complexity and practicalities of ment projects. We have built up a portfolio of in- implementation and the competing pressures in vestments devoted to environmental issues and have our client countries. made considerable progress in "mainstreaming" L The environment has yet to be fully environmental objectives into our sectoral lending mainstreamed into the Bank's operations. Al- programs. As an implementing agency for the fi- though Bank professionals in general are aware nancing mechanisms of international environmen- of the importance of environmental issues, they tal conventions and their protocols, specifically the often see them as a self-standing agenda and not Global Environment Facility (GEF) and the Mul- as an element of their core task of supporting tilateral Fund for the Montreal Protocol (MFMP), development and poverty reduction. Environ- mental professionals have an ongoing challenge we have taken on a key role in dealing with threats aogog g to the global environmental commons, such as cli- to make the "business case" for sustainable de- mate change, desertification, biodiversity loss, the velopment. de Similarly, awareness of the importance of envi- dfintepletionaof watherozo layer,andthedegradation ronmental issues is still evolving in manyof our of international waters. client countries. While they increasingly recog- nize that environmental concerns are important Ouriclients, proftens. wTheouryhe have medensig- for making development sustainable, our clients nificant progress. They have introduced environ- face difficult choices in allocating scarce re- mental policies, regulations, and institutions; imple- sources among pressing development needs, and mented projects and programs to improve environ- environment often has a hard time competing mental conditions; and heightened the public with other goals. awareness of environmental issues. Environment is now clearly a significant concern on peoples' minds, We have learned many lessons about complying and it is on the political agenda in many of our with safeguard policies, preparing and implement- client countries. Nevertheless, as was pointed out ing environmental projects, and undertaking policy in the OED's environment review, the Bank has dialogue. We have learned that in order to be ef- been only partially successful in supporting envi- fective, we have to demonstrate the benefits of en- ronmental sustainability in client countries. Our vironmental improvements and the links between achievements overall have fallen short of our own environmental and development objectives; listen high expectations and those of others, even bear- to people and respond to our clients' aspirations ing in mind that by itself, the Bank can never stem and concerns; and assist with building awareness, the tide of global environmental change. Several commitment, and capacity to help clients face their broad factors have constrained the Bank's effective- development and environmental challenges. Our ness in promoting sustainable development: Strategy applies these lessons to our future efforts. U Our commitments have sometimes outpaced our and our clients' capacity to deliver. We have been Our Strategy also responds to a changing global overoptimistic in setting environmental objec- context-globalization, rapid technological xix Making Sustainable Commitments - An Environment Strategy for the World Bank progress, the changing roles of private and public clients address the environmental challenges of de- sectors, and civil society-and to evolving new ap- velopment. In keeping with the World Baak's mis- proaches to development assistance-program- sion of reducing poverty within a framework of eco- matic, as well as bottom-up community-based in- nomic development, the Environment Strategy struments. The Bank has reaffirmed its commit- gives priority to issues where the links between ment to poverty reduction and the IDGs and has poverty and the environment are particularly strong. adopted the Comprehensive Development Frame- Therefore, the Strategy puts the environmental work (CDF), which emphasizes a long-term, ho- challenge into a local perspective, focusing on listic, client-focused, and participatory approach to people in client countries and on the wayenviron- development assistance. To respond to these mental conditions and resources affect them. The changes, we have been adjusting our lending and Strategy's overall framework, its objectives, and the nonlending instruments including those that sup- necessary adjustments in Bank instrumncrts and port community-driven development, poverty re- nesaradutnsinBkinrmntad ducticonmstrategdrieseandlone development, peroe- actions are outlined in matrix form in table 1 at the duction strategies and long-term development pro- grams. Our work on the environment must adapt end of this summary. to these changing conditions. Our objectives THE STRATEGIC FRAMEWORK In support of our goal, the Strategy sets thiree in- The Bank's mission of lasting poverty reduction terrelated objectives: improving people's q.lality of rcquires that devclopment bc sustainable. This life, improving the prospects for and the quality of means that proper attention has to be paid to the growth, and protecting the quality of the regional social and environmental aspects of development and global environmental commons. challenges, as stated in our mission statement: "To fightpoverty with passion andprofessionalismfor last- Improving the quality of life. We will focus on three ing results. To help people help themselves and their broad areas where environment, quality of life, and environment by providing resources, sharing knowl- poverty reduction are strongly interlinked: edge, building capacity, andforgingpartnerships in the M Enhancing livelihoods. Because poor people of- public and private sectors. ten depend heavily on the productivity Ind en- vironmental services of ecosystems and natural The goal of the Environment Strategy, therefore, resources, the World Bank will help improve the is to promote environmental improvements as a sustainable management and protection of these fundamental element of development and poverty reduction strategies and actions. The Bank will do resources. This includes helping communities this by helping our client countries set and address sustainably manage natural resources such as their environmental priorities and challenges, in- land, water, and forests; helping clarify and es- cluding those of a regional or global nature; and by tablish property rights; strengthening or reform- supporting sustainability through its operations. ing incentive systems that influence how re- sources are used; and building the analytical base This Environment Strategy outlines the priority and institutional capacity to improve natural actions the World Bank plans to take to help its resource management. xx Executive Summary * Preventing and reducing environmental health international competitiveness of our client coun- risks. Environmental factors, such as unsafe wa- tries. Recognizing the important changes in the ter and air pollution, are major contributors to respective roles of the public and private sectors, the total burden of disease and impose signifi- our interventions will focus on promoting better cant economic costs, particularly for poor people. policy, regulatory, and institutional frameworks for Our interventions will focus on cost-effective sustainable environmental management, on the one measures to prevent and reduce environmental hand, and harnessing the role of the private sector health risks through reducing people's exposure to become an engine for sustainable development, on the other: to indoor and urban air pollution, waterborne d1 Sucpporting policy, regulatory, and i nstitutional diseases, and toxic chemicals. Measures include improved access to cleaner commercial fuels by frameworksforsustainable environmentalmanage- ment. In cooperation with client countries and households, the phaseout of leaded gasoline and development partners, we will help client coun- the introduction of cleaner transport fuels, and tries (a) strengthen their environmental policy, improved design and coverage of safe water and sanitation services to increase health benefits.reuaoyanistuinlfamwksiha special focus on local environmental institutions; v Reducing peoples vulnerability to environmental (b) strengthen environmental assessment Sys- hazards. Millions of poor people are vulnerable tems and practices; (c) reinforce the positive role to natural disasters and cnvironmental hazards, of markets and the environmental benefits of a threat that is expected to increase as a result of sectoral and macroeconomic reforms; and (d) climate change. Our interventions will aim to support good governance, institutions for col- reduce this vulnerability and the cost of natural lective action, increased transparency, access to disasters by supporting upland resource manage- environmental information, and public partici- ment and payments for environmental services; pation in decisionmaking. assessing the impacts of natural disasters; im- a Supporting sustainableprivate sector development. proving weather forecasting and the dissemina- We will assist in harnessing the role of markets tion of weather-related information; providing and the private sector in promoting sustainable information to communities about the risks they development by helping clients introduce envi- ... . . ~~~~~~ronmental regulations that allow flexible mar- face; and stabilizing hillsides and coastal zones. ket mechanisms to achieve environmental ob- Imp roig h uaiy fgowh t sno nug o jectives and by helping to create markets for en- Improving the quality of grozvth. It is not enough to vironmental goods and services. As part of the improve the quality of people's lives today; we have World Bank Group, IFC and MIGA will pro- to ensure that short-term gains do not come at the mote, through their investments and guarantees, expense of constrained opportunities for future de- respectively, environmental and social responsi- velopment. Sustainable environmental manage- bilty and good environmental management in ment, therefore, is an essential condition for long- the private sector. We wll facilitate partnerships term economic growth and lasting improvements between the public and private sectors and civil in people's well-being. There is also increasing evi- society to resolve environmentally sensitive is- dence that attention to the environmental and so- sues and to agree on benchmarks for good envi- cial aspects of business development increases the ronmental management. xxi Making Sustainable Commitments - An Environment Strategy for the World Bank Protecting the quality of the regional and global com- As implementing agency of the GEF and MFMP, mons. The search for solutions to sustainability we remain fully committed to our mandate to help needs to go beyond individual countries. The dete- client countries address the objectives of interna- riorating quality of the regional and global com- tional environmental conventions and associated mons-climate change; the degradation of land, protocols including the conventions on climate forests, water resources, and biodiversity-threat- change, ozone, and biodiversity. We will engage in ens many developing countries. They face poten- these and other partnerships that help facilitate tial conflicts over shared resources, such as scarce technical assistance, the transfer of financial re- water resources and fertile land. They are also ex- sources and environmentally friendly technologies, pected to suffer most of the worst effects of cli- and the development of markets for enviror.mental mate change despite the fact that over 75 percent goods and services. of the cumulative greenhouse gas (GHG) emissions have been emitted by industrialized countries over Our toolkit the past 150 years, and per capita GHIG emissions Environment is not a sector or an add-on. It has today are still five times less in developing than in been long recognized that environmental consid- industrialized ~ ~ ~ ~ ~ ~ ee countries.thtenlrnenalcnsd industrialized countries. erations have to be reflected from the early stages of decisionmaking processes. The Environment A poverty-focused environmental agenda will re- Strategy emphasizes the importance of continuing quire an increased emphasis on the local aspects of our efforts to work with clients to integrate, or global environmental challenges, on reducing the mainstream, environment into investments, pro- impacts of the degradation of the global environ- grams, sector strategies, and policy dialogue mind- mental commons on developing countries, and on ful of the institutional requirements and capacity interventions that are carefully targeted to benefit constraints. This translates into actions through- developing countries and local communities. There- out the Bank. The Strategy stresses improvzements fore, in addressing global challenges, we will apply in three key areas: the following key principles: 1. Strengthening analytical and advisory activities- * Focus on the positive linkages between poverty the foundation for defining strategic environ- reduction and environmental protection mental priorities and informing policy d alogue * Focus first on local environmental benefits, and and decisions on projects and programs. A sys- build on overlaps with regional and global ben- tematic approach is needed to ensure that envi- efits ronmental considerations enter the development , Address the vulnerability and adaptation needs planning process at an early stage by taking a of developing countries multisectoral and long-term view of develop- * Facilitate transfer of financial resources to cli- ment. ent countries to help them meet the costs of gen- z Country-level environmental analy, is will erating global and environmental benefits not build on NEAPs and other country-led en- matched by national benefits vironmental work, as well as analyses under- * Stimulate markets for global environmental pub- taken by the Bank and development partners lic goods. to assess environmental trends and priorities, xxii Executive Summary policies, and institutional capacity in man- a Improving the design andperformance of envi- aging environmental resources and risks. ronmentalprojects and components. Our expe- Country-level environmental analysis work rience has shown that environmental projects will become part of our diagnostic tools that or project components work best when they inform country dialogue, poverty reduction are based on a good understanding of the strategies, and country assistance strategies causes of the problem, are expected to have a (CASs). major impact, and have the commitment and a Strategic-sectoral, regional, and policy- capacity of local stakeholders, so that project focused-environmental assessments (SEAs) outcomes are sustainable after the project is will be used more systematically as analytical Over We will continue to ensure that the les- tools through a structured learning program sons from our growing experience in envi- involving clients and partners for addressing ronmental projects are disseminated and ap- complex cross-sectoral environmental issues plied to new projects. and for integrating environment at early * Coordinating investments andpolicy reforms. stages in sectoral decisionmaking and plan- Some investment projects are unlikely to ning process. bring lasting results in a distorted policy en- a In our advisory activities, we will respond to vironment. At the same time, individual in- client demand, priorities, and capabilities and vestment projects may lead to a dialogue on build on the Bank's comparative advantage policy reform. We will consider carefully the in working across sectors and throughout the world to transfer good practices in policy and poe sequncingsof ic efor ef O ~~~~~~~~~and specific investments in each case. technical issues. We will help clients set and . . Bg. Atpplying a location-specfficfocus. Because the address their own environmental priorities la besc n and improve their environmental manage- ment and poverty are complex and location- ment capacity. We will pay particular atten- specific and because implementation capac- tion to poverty-environment linkages, the pep ity varies, efforts to integrate environmental economic valuation of environmental re- sources and of their degradation, and envi- considerations into investment projects, ad- ronmental policy analysis. justment lending, and programs will clearly vary from country to country. We will rely 2. Addressing environmentalpriorzites throughproject on enhanced analytical work and dialogue andprogram design. Addressing environmental with clients to assess the best location-spe- priorities that affect the long-term sustainability cific interventions in priority countries. of development requires a proactive approach. a Supporting capacity development. Capacity- Some environmental problems are best addressed building efforts will be targeted, based on cli- by dedicated projects, others by integrating en- ent demand, and tailored to existing environ- vironmental activities into sectoral projects and mental regulatory and institutional frame- programs. Depending on client demand and cir- work. We will collaborate with other devel- cumstances, we will work on both fronts with opment partners involved in environmental attention to the following areas: capacity development to improve overall de- xxiii Making Sustainable Commitments - An Environment Strategy for the World Bank velopment effectiveness. In a few cases where a Addressing short-term priorities. Our imme- strong commitment exists in the country to diate priority is to strengthen compliance undertake environmental institutional re- with the safeguard policies, establish an in- form, we will apply a programmatic approach. tegrated safeguard system, and improve re- Enhancing the environmental outcome of ad- sults on the ground. To this end, we will (a) justment lending. Considering the importance continue to strengthen the Bank's internal of the policy framework to environmental review, monitoring, and tracking systern to sustainability we will pay special attention improve corporate consistency and compli- to reinforcing the positive and minmizing to rnrntpsiadance in applying the policies; (b) integrate potentially negative environmental outcomes. environmental, social, and legal policies into Strengthened analytical work will inform an integrated safeguard compliance system policy dialogue, help identify environmental including the use of the Integrated Safeguard trends and resources at threat, assess country Data Sheet (ISDS); and (c) help improve in- institutional capacity to manage resources country capacity for safeguard implementa- sustainably, and prepare guidelines for good tion through enhanced training and techni- practice. Systematic upstream reviews and cal assistance. monitoring will help to ensure that environ- - Reforming the safeguard system. In parallel, we mental concerns are appropriately integrated mentoalh chancerng arendingprofiately inteseawill (a) respond to new challenges posed by a into the changing lending profile. These is- sues'wIll be further elaborated during the greater variety of lending instruments includ- sues wil befrhreaoae uinth ing programmatic lending and projects update and conversion of the Operationalinprgamtcldngndroes implemented at the grassroot levels; (b) help Directive on adjustment lending. move safeguard considerations earlier into the 3. Improvingthesafeguardsystem. The Bank's safe- decisionmaking process; (c) work with cli- ents and partners to coordinate and harmo- guard system is an essential tool for integrating niz god practic; and ( c reinl nize good practice; and (d) focus increasingly environmental and social concerns into devel- . . . ~~~~~~~~~on client ownership, capacity and safeguard opment policies, programs, and projects by pro- viding minimum requirements that all Bank- systems. We will prepare a medium-term plan for reforming the safeguard system to adapt supported operations must meet. We will con- to a changing lending profile, direct more tinue improving the quality and consistency of t a c l the application of our safeguard policies with attention to clients' own capacity for good increased attention to results on the ground, environmental management, and develop a where many issues are intertwined. Improving risk management system that takes into ac- the safeguard system is a dynamic process that count not only the risk characteristics of involves both the Bank and its clients in a series projects but also the capacity of countries to of actions designed to create better linkages be- comply with safeguards. Over the long term, tween policies and their application in projects the Bank seeks to develop a single unified and programs. We will follow a two-pronged safeguard policy to provide a consistent ap- approach: proach. xxiv Executive Summary Our ultimate objective is to help clients introduce INSTITUTIONAL REALIGNMENT and implement their own safeguards to manage Sustainable development is a long-term goal. Its their environmental resources sustainably. To this achievement requires a concerted pursuit of eco- end, we and our partners need to increase our em- nomic prosperity environmental quality, and social phasis on capacity development at the national and equity and calls for behavioral changes by individu- sub-national levels. We need to search for ways of als and organizations. Throughout the world, this assessing and helping develop in-country capacity change is occurring. to adopt and internalize the principles of sustain- able development, and create incentives and rewards Within the Bank, too, implementing the Strategy for~ ~ ~ ~ ~ ~~ ~~~~Wti good perormnc byo deleementin responsiategy for good performance by delegating responsibili- requires institutional change. We need to align our ties~~~W tborwrwihdmntaecpcity to ties to borrowers with demonstrated capacity to incentives, resource allocation, and skills mix to manage the environmental aspects in their own accelerate the shift from viewing the environment programs. programs. as a separate, freestanding concern to considering it an integral part of our development assistance. The need for selectivity We then need to put this understanding into prac- The action agenda described above is diverse and tice in our analytical work, policy dialogue, and challenging. In order to be effective, we will have project design. to be selective to guide implementation at three levels: In order to strengthen Bank staff's ability to man- 1. At the corporate level, the Strategy defines cor- age this shift, those working on environmental is- porate environmental priorities in detail, and sues have to be articulate advisors on the many link- guides their integration into Regional Strategies ages between poverty alleviation and environment and country-level programming. and play an active, supportive role in the formula- 2. At the regional level, Regional Strategies (sum- tion of country and sector programs. Table 2, at marized in annex A) show the linkages between the end of this summary, outlines indicators and the corporate strategic framework and the re- actions of an institutional nature that would ac- gional context, reflecting regional and sub-re- company the implementation of the Strategy. gional differences. 3. At the country level, the Strategy provides a Accountability and incentives. The Bank is review- framework for setting priorities for environmen- ing its accountability framework to establish clear tal assistance. Using the corporate strategic lines ofresponsibility and incentives throughout the framework, selectivity for environmental assis- institution. This framework has to be client-cen- tance at the country level will be based on a di- tered, acknowledging that our core responsibility is agnosis of environmental priorities and manage- to support the sustainable development of our cli- ment capacity, country demand, and consistency ents. Regional environment strategies and the an- with the CAS. At the same time, the Bank is nual business plans will help operationalize the committed to ensure the implementation of its Strategy Consistent with its mandate, the Envi- safeguard policies to all Bank operations in all ronment Board will be responsible for guiding and countries. overseeing the implementation of the Strategy and xxv Making Sustainable Commitments - An Environment Strategy for the World Bank will report regularly to senior management and, on ever possible, existing resources will be realigned request, to the Board (the specific responsibilities within existing work programs. For the Bank to are described in table 4.1). meaningfiilly address the objectives of the proposed Strategy, Bank budget funding would need to in- Training and skills mix. The increasing focus on crease over the next five years. Key elements of this cross-sectoral work and the shift in emphasis from incremental Bank budget would be for: project-level safeguards toward integrated portfo- X Improving the safeguards and compliance sys- ho-level risk assessment and quality enhancement tem, including the strengthening of compliance will require a gradual shift in staff skills. Environ- with policies and a comprehensive review of the mental staff will be trained to enhance their ability safeguards policy framework to fit the needs of to influence sector and country programs and will a changing Bank be assessed on their effectiveness in this area. In X Mainstreaming support, with special e:nphasis the assessment of the performance of environmen- on environmental mainstreaming in IDA coun- tal staff, particular attention will be paid to address- tries in accordance with IDA requirements; link- ing complex environmental challenges and imple- ing corporate environmental priorities and glo- menting the safeguard policies. At the same time, bal public goods with country programs, with a shift toward improved environmental skills among an emphasis on upfront work on preparation of noncnvironmcntal specialist staff will take place Poverty Reduction Strategy Papers (PRSPs) and through more systematic training in safeguard poli- CASs; facilitating cross-sectoral and cross-in- cies, poverty-environment linkages, and cross- stitutional approaches and work programs to sectoral issues. Tracking of training delivery will address environmental issues; and addressing be improved to better target and customize both subregional and regional environmental chal- mandatory safeguards training and training on cut- lenges. ting-edge environmental issues. "Green Awards" will create positive incentives for nonenvironmental The Bank will work with interested part ners to staff to mainstream environment into their opera- bring about the successful implementation of the tions and programs. Strategy and will avail itself of trust funds from bi- lateral partners and others. Nevertheless, the com- Budget. Better integration of environmental con- prehensive actions needed to address the environ- cerns into the Bank's work program is expected to mental challenges of economic development in cli- yield strong benefits in relation to all three objec- ent countries, as described in the Strategy, justify tives of this Strategy, anchored as they are in the adequate deployment of Bank resources. Bank's mission of poverty alleviation. Achieving these objectives, however, will require that resources Partnerships. Partnerships with other development be dedicated to the task. Such resource allocations institutions, civil society, and the private sector can are premised on the principle of exercising selec- contribute to our objectives and can effectively le- tivity at all levels and on the need to guide a transi- verage scarce Bank resources. Applying the prin- tion toward new ways of delivering development ciples of the Comprehensive Development Frame- assistance, including programmatic lending. Wher- work, partnerships at the country level are aimed xxvi Executive Summary at increasing development effectiveness and reduc- BOX 1 ing transaction costs through coordination led by Key benchmarks for monitoring Bank the countries and through the harmonization of performance in Strategy implementatiorn operational policies and practices of development a Country diagnostic studies carried out to as- partners. At the regional and global levels, we wll sess environmental priorities and manage- ment capacity to inform CASs and PRSPs engage in partnerships where strong international in 5-15 priority countries annually. Level of consensus exist for global action with the aim of environmental mainstreaming in CASs im- contributing to global public goods, where close proved. a Targeted environmental input (analytical links can be established with country assistance wr n riig n51 roiyPS ' ~~~~work and training) in 5-15 priority PRSP programs, and where significant resources can be countries annually. catalyzed. We will continue our constructive part- a Structured learning on SEAs based on 10- nerships in the framework of the GEF, the Multi- 20 SEAs carried out annually to inform sector projects and programs. Level of lateral Fund for the Montreal Protocol, and the mantrei nkyect ors ipved. 7 ~~~~mainstreaming In key sectors Improved. Prototype Carbon Fund (PCF) to help implemcnt a Systematic client training delivering 20,000- major international conventions. We are currently 25,000 "participant training days" annually. a Improved safeguard compliance indicators. engaged in numerous other partnerships in a range a Ninety percent of all operational Bank staff of areas. The Strategy provides a set of criteria for and managers trained in environmental safe- managing and evaluating partnerships, and we will guards. apply these to systematically review and align our partnerships with the Strategy. CONCLUSION Real progress toward poverty reduction and sus- Monitoring progress. To ensure accountability and tainable development requires changes in a chal- the capacity to learn from experience, we will in- lenging array of policies, tools, and institutional troduce a performance monitoring and reporting priorities. Figure 1 presents the key adjustments in framework that will track the Bank's performance the World Bank's approaches that are envisioned on the environment, monitor implementation of by the Environment Strategy and that are vital if the Strategy, and report regularly on progress. We the Strategy is to achieve its goals. will use the Internet and other means of commu- nication with key stakeholders to make available The Strategy builds on and internalizes lessons reports and information about the Bank's environ- learned in the past decade from our own efforts to mental performance, discuss issues, and receive support sustainable development, and from those feedback. The core categories of periodical institu- of our clients and others, and it proposes to adjust tional reporting to senior management and the our tools and institutional priorities to a changing Board will include (a) environmental projects and global context and to changing Bank priorities. It programs, (b) mainstreaming and policy integra- places strong emphasis on development-environ- tion, (c) safeguard compliance, and (d) training. (See ment links and on the environmental conditions box 1 for some of the key benchmarks for moni- that affect people's livelihoods, health, and vul- toring Bank performance in implementation.) nerability. xxvii Making Sustainable Commitments - An Environment Strategy for the World Bank Figure 1 What's new in the Environment Strategy KEY FACTORS STRATEGIC INSTITUTIONAL OF CHANGE FRAMEWORK TOOLS REALIGNMENT * Build on client * Emphasis on Systematic Emphasis on commitment poverty-environment country institutional * Set realistic targets links diagnostic commitmenti; . Focus on policy studies framework ' "Mainstreaming" (improving cross- * Globalization sectoral links) and Strategic Strengthenec * Increasing role of "Upstreaming" Environmental incentives for private sector (focusing on policy Assessments (SEAs) mainstreamirg * Stronger role of ( civil society framework) * Focus on overlaps * Programmatic *Transparent * Poverty focus between local and approaches monitoring a-id - Comprehensive global benefits reporting Development Framework (CDF) * Changing lending profile In implementing the Strategy, we will give priority efits, facilitating resource transfers for global ac- to certain aspects that are particularly urgent, such tion, and helping client countries benefit from glo- as integrating environmental considerations into the bal public goods generated by international action. PRSPs. Other elements of the Strategy, such as work toward systematic application of country en- To date, environmental issues have too often been vironmental analysis and the Strategic Environ- the concern of a small, specialized group. This is mental Assessments, will be undertaken gradually clearly insufficient. To make a substantial and last- focusing first on refining methodologies, coordi- ing difference, we must ensure that environmental nating with clients and partners, piloting, and learn- concerns are fully internalized-"mainstreamed"- ing. into all Bank activities. Internally we can strengthen our institutional commitment to the Strategy's ob- Our environmental assistance (including non- jectives, and we can play a leadership role in more lending and lending services) to client countries will precisely measuring the impact of envirornmental be tailored to country need and capacity based on interventions. demand, on a diagnosis of environmental priorities and environmental management capacity under- The success of the Strategy, however, depends on taken by client countries, development partners, and more than the Bank's actions. The Bank can help the Bank; and on consistency with Country Assis- develop capacity in addressing environmental tance Strategies. We will ensure that country as- issues in client countries, and it can become a role sessments and programs consider and reflect re- model in supporting environmental sustainability gional and global situations and priorities with a in its operations. But in the end, the commitment view to harmonizing local, regional, and global ben- of countries is needed if they are to take the neces- xxviii Executive Summary sary measures toward making their development by larger adverse changes. We are looking to long- sustainable. This is a gradual process that requires lasting achievements. That does not imply a lack time, perseverance, a concerted effort by different of action in the meantime. We are not beginning parts of societies, and the support of the develop- from a standing start; we have the advantage of a ment community. well-established work program and an ever-expand- ing body of expericnce in environmental issues. The Environment Strategy is clearly, and deliber- Building on this foundation, we will work with our ately, for the long term. After all, its ultimate goals- clients, together with development partners, to sustainable development and lasting poverty reduc- move forward toward creating a better and more tion-stretch into the future. Short-term gains, as sustainable world for all. has been experienced too often, can be overwhelmed xxix x Table I Strategic framework matrix x Strategic focus Adjustments in Bank instruments and actions j Analytical and advisory Development objectives Intermediate goals activities Policy integration Project design and lending Improve the quality of4Zife Enhance livelihoods of the poor * Reduce land degradation, combat * Provide training on * Enhance analytical work and . Reflect economic, social, and through improved natural desertification, and restore sustainability and resource cross-sectoral dialogue and ecological benefits in project resources management. degraded landscapes management issues in client training on poverty- design * Increase incomes * Promote sustainable forest countries environment issues in priority * Adopt a long-term perspective * Enhance long-temi management * Develop and apply practical PRSP countries and CASs on NRM by using long-term productivity * Reduce rates of biodiversity loss tools for measuring the value * Integrate environment-related lending instruments, e.g. APLs * Improve poor people's (genes, species, and ecosystems) of enviromnental services indicators into PRSPs * Integrate sustainable ecosystem access to natural resources * Improve land tenure systems and * Undertake studies on access * Help establish incentive management objectives into property rights and use of natural resources as frameworks that promote infrastructure and rural * Support communal natural impacted by macro policy and sustainable NRM, including development projects resource management political frameworks (a) removing policy-induced * Support participatory tenure and * Establish pilot systems of . Undertake studies on resource distortions that undemnine property right reform projects payments for environmental degradation and productivity sound NRM; and (b) using services and their linkages to poverty economic instruments to * Help assess the state of address extemality problems ecosystems and their links to * Promote institutional reform livelihoods in client countries focused on user organizations * Develop good practice in and cost recovery integrating economic and social factors into ecosystem management Protect people's health from * Improve air quality (particularly * Undertake cross-sectoral * Integrate environmental health * Design projects based on environmental risks and pollution concentrations of fine assessments of the key sources issues into PRSP dialogue, integrated air quality asscssment to reduce the disease burden. particulates and lead) in cities of environmental health training, and indicators in the urban, transport, and Reduce: * Increase the share of cleaner problems * Promote market-based energy sectors * Child mortality commercial fuels and improved * Identify cost-effective solutions to environmental * Support the switch to cleaner * Respiratory diseases cooking/heating systems in measures to reduce health problems relevant for fuels (e.g. biomass to LPG * Blood lead levels households to reduce indoor air environmental health risks in poverty reduction and growth conversion in rural households, * Deaths due to malaria pollution sectors, e.g. water, energy, * Integrate health and coal-to-gas in urban * Exposure to toxic substances . Phase out leaded gasoline transport, agriculture environmental linkages into households) * Increase the coverage of water * Undertake studies of policies the implementation of PRSPs * Support water supply and supply and sanitation and and options to reduce the and CASs sanitation, energy, and irrigation facilitate hygiene and behavioral health impacts of indoor air * Facilitate dialogue on policy projects that have specific change pollution refom3s and itivestutdcts c;; Viromiential health outcoImles * lmprove drainage in irrigation * Support lead phaseout programs that lead to least cost based on integrated water projects initiatives and actions, clean solutions to air quality resource management * Reduce the generation and fuel studies, Clean Air problems including the impacts of industrial wastes and Initiatives and programs, and coordination of transport, toxic materials information dissemination and environment and energy learning programs policies * Raise awareness among various stakeholders of environmental health issues Reduce people's vulnerability to * Raise awareness of the * Study the social and economic * Include disaster prevention and * Support community-based enviromnental risks, including potentially high economic and impacts of natural disasters management in policy ecosystem service initiatives to moderate and extreme natural social returns that investments in and assess the vulnerability in dialogue reduce the impacts of flooding events. vulnerability reduction can yield countries/sub-regions with a P he mtegration of (reforestation, conservation, and Minimize: * Strengthen regional institutions history of natural disasters vulnerability reduction restoration of wetlands) * Loss of life and livelihood to improve weather forecasting, . Develop a framework for measures in sectoral planning * Build and strengthen early dissemination, and verifications vulnerability assessments, and regulatory reforns warning systems, including * Injuries and disabilities systems disaster preparedness, and . . community-based systems for early warning systems * Support the integration of effective dissemination of * Temporary and permanent * Enable adoption and encourage disaster management into effection dislocation enforcement of building codes * Support the preparation of regional, national, and local information * Destruction of social, physical, and land use policies building codes, siting, and land land use and development * Support vulnerability reduction and natural capital a Promote resilience through better use guidelines plans and water resources investments, including and natural capltal* Promote reslllene through better .management policies, investments for adaptation to management and protection of * Develop learming programs on strategies and planning climate change the natural resource base planning, predicting, and adapting to climate change Improve the quality of growth Promote policy, regulatory and * Promote the introduction and * Strengthen client capacity * Strengthen the integration of * Increase support to priority institutional frameworks for enforcement of efficient through training, advisory environmental aspects into countries, identified in Regional environmentally sustainable environmental and NRM services, and techmical CDFs, PRSPs, and CASs Environment Strategies and growth. institutions, policies, and assistance in environmental * Emphasize the linkages business plans, to help * Improve the effectiveness of regulations assessment, policy, between public expenditure, strengthen environmental environmental regulatory * Increase national and local management and enforcement poverty reduction, and management framework frameworks in client countries capacity to adopt and implement a Enhance analytical work to environmental quality * Use policy-based lending to * Enhance the integration of environmental regulations and strengthen the application of * Emphasize sectoral reform address key environmental and environmental concems in EA systems safeguards in client countries projects that promote NRM issues sectors that affect the * Help integrate environmental * Undertake regional initiatives environmentally appropriate * Promote environmental environment, e.g. energy, concerns in projects and to strengthen and develop EA policies and instruments (e.g. responsibility and good agriculture, transport programs capacity water and energy sectors) environmental management * Promote sustainable financing * Promote the adoption of * Transfer good practices and * Promote policies that support practices in the private sector of environmental services independently verifiable good relevant lessons learned in private sector participation and through IFC investments and * Promote good environmental environmental management and environmental policy, sustainable natural resource MIGA guarantees practices in private sector natural resource use practices in management, and technical management in service * Support the establishment of development the private sector issues across Regions and provision (e.g. energy, markets for ecosystem services . Encourage the private sector's * Increase the flow of private countries transport, and water) and the adoption of independent participation in markets for sector investments to * Identify good practices and consistent with sound certification of sustainable environmental goods and environmental projects promote environmentally and regulatory frameworks for natural resource use x services socially sound private sector managing the resource development * Address environmental issues * Develop and apply systematically in privatization benchmarks and good and private sector development practices in environmental programs management for key areas of Bank operations x Table 1 Strategic framework matrix (continued) x =: Strategicfocus Adjustments in Bank instruments and actions l__ ___ ___ __ ___ ___ __ ___ ___ ___ __ ___ ___ _ Analytical and advisory Development objectives Intermediate goals activities Policy integration Project design and lending Protect the quality of regional and global commons Address transboundary, regional * Help client countries benefit * Build capacity among client * Help understand linkages * Focus interventions on and global environmental from global public goods country institutions to consider between global public goods improving local environmental problems. * Help countries to address local, the regional and global and national development quality and management that national, and regional dimensions of national strategies also provide regional and global * Reduce the impacts of environmental priorities in a sustainable development . Mobilizc external resources to benefits transboundary and regional manner that also results in global strategies help integrate global * Promote lending for environmental problems benefits . Support the assessment of the envirommental concerns into biodiversity through NRM * Promote equitable solutions to * Enhance countries' capacity to vulnerability of client sectoral strategies for forestry, projects that address sustainable global environmental problems participate in global countries' agriculture, forest, water, energy and rural use of ecosystems and their * Improve countries' capacity to environmental conventions water resources, coastal zones, development services adapt to changing global * Enhance capacity in countries to and urban infrastructure to * Link local and global . Support efforts to build capacity environments. reduce vulnerability to natural climate change as part of a environmental issues to and invest in international disasters and impacts of climate broader poverty reduction development and poverty waters, and pilot river basin change. strategy reduction strategies approaches to water resources . Help client countries to access * Support efforts by riparians * Link conservation and management markets for global public goods and littoral communities to sustainable use of biodiversity * Use GEF funds strategically to (e.g. trade in greenhouse gas diagnose, analyze, and plan with NRM and poverty better blend with and catalyze emissions) actions to address the dialogue Bank and other funding to help degradation of shared * Mainstream energy efficiency, enhance the livelihood of the ecosystems renewable energy, poor and reduce vulnerability * Support client capabilities to vulnerability-reduction, and * Support clients' participation in address Persistent Organic climate adaptation activities in and benefit from trade in Pollutants (POPs) and other relevant sectors environunental goods and toxic pollutants * Facilitate the phaseout of the services through the Prototype * Support client learning consumption and production of Carbon Fund and to better programs on understanding the ODS and POPs through prepare for the CDM. implications and national programs and use of responsibilities under global market-based instruments _____________________________ environmental conventions Table 2 Strategy implementation and monitoring matrix Objectives Medium-term target (5-year) Fiscal 2002 target: Realignment with the Strategv Strengthen analytical and advisory activities Strengthen country-level * Complete about 5-15 country diagnostic studies annually in connection with * Review good practice and refine methodology for environmental analysis CAS processes preparing country diagnostic studies in and advisory activities to . Improve environmental sustainability indicators and mainstream them into coordination with client countries and inform country dialogue country indicators development partners * Refine methodologies and mainstream economic assessment into project * Prepare country diagnostic studies in connection analysis including the assessment of climate change impacts with CASs preparation * Develop and disseminate good practice case studies and guidance notes on * Prepare good practice and guidance notes for a environmental policy and regulatory issues number of key issues . Strengthen client training and capacity development activities in * Develop and start implementing a client training environmental management and capacity development program Strengthen analytical * Provide analytical and capacity development support on demand to about 5-15 * Continue analytical work and development of work on poverty- PRSP processes annually in addressing environmental sustainability methodology, including enhanced use of environment linkages and . Improve the understanding of poverty-health-vulnerability linkages and household survey data and develop a typology of inputs to PRSPs improve assessment methodologies in countries where household survey data country-environment links are available * Develop training programs and a system to share . Systematically share knowledge with decisionmakers in PRSP countries on knowledge with dccisionmakers in PRSP poverty-environment issues and effective interventions to address them countries on poverty-enviromnent issues and effective interventions to address them * Support upstream environmental analytical work in at least 5 countries preparing PRSPs * Undertake an ex-post review of environmental aspects of PRSPs Use Strategic . Undertake a structured learning program on SEAs including the development * Develop and disseminate methodologies, Environmental and dissemination of good practice based on about 10-20 SEAs annually procedures, and guidance for SEA application Assessments (SEAs) * Use SEAs regularly as a tool for upstreaming environment into policy * Commence a series of priority SEA studies more systematically to dialogue and improvement in the quality of sector operations * Undertake Energy-Environment Reviews as part address environmental * Integrate the findings of Energy-Environment Reviews into project and of implementing Fuelfor Thought concerns early in sectoral program design decisionmaking and planning processes Improve project and program design Mainstream environment . Achieve satisfactory coverage of environmental issues in CASs where * Establish a process for identifying priority CASs into CASs environmental issues are strongly linked to country priorities and supporting CAS preparation a Undertake in collaboration with OPCS an assessment of environmental coverage in CASs Improve the performance * Achieve satisfactory or better QAG ratings for quality at entry and supervision . Maintain QAG quality at entry and supervision and development for at least 90 percent of the environment portfolio performance ratings for environmental projects x effectiveness of * Improve corporate envirommental portfolio tracking, quality assessment, and and programs x x environment projects and enhancement system * Establish a portfolio quality enhancement programs * Reduce the number of environment projects at risk mechanism . Review and improve the alignment of the environment portfolio with strategic priorities * Review the development effectiveness of environment projects and programs x Table 2 Strategy implementation and monitoring matrix (continued) x <- Objectives Medium-term target (5-year) Fiscal 2002 target: Realignment with the Strategy Mainstream environment * Increase the extent of measurable mainstreaming over current levels in * Establish cross-sectoral work programs into sector programs and selected sectors a Establish scorecards and a mechanism for portfolios * Improve the integration of GEF resources into project and program lending monitoring, review, and feedback on . Review environmental activities in other sectors and their alignment with the environment mainstreaming in key sectors Strategy * Implement joint work-programs with other sectors and networks to address priority environmental objectives Improve the safeguard system Strengthen the . Establish an integrated risk management framework * Establish and implement an integrated safeguard implementation of * Strengthen corporate consistency and oversight system and operationalize the Integrated safeguard policies, * Integrate safeguard tracking and reports on safeguard policy compliance into Safeguard Data Sheet (ISDS) including the use of a project management system * Establish and operationalize a corporate tracking system for . Adopt and use compliance indicators on a routine basis for the entire portfolio safeguard compliance tracking and monitoring safeguard compliance by * Establish and meet targets for safeguard performance during quality at entry system policy and supervision in QAG reviews . Strengthen corporate oversight * Achieve target ratings for the environmental aspects of quality at entry and supervision for the Bank's portfolio * Review all projects at risk and take measures to reduce risk . Establish systematic staff safeguard training program Review the current * Develop the medium-term workplan for reforming the safeguard system * Develop a medium-term workplan for reforming safeguard policies and . Address safeguard policy issues in a consistent manner by undertaking regular the safeguards system evaluate their application reviews to identify lessons * Identify good practice and guidance for to new lending addressing safeguard policy issues in sector instruments and changing adjustment lending and new lending instruments approaches to such as CDD projects development assistance Work with clients and * Engage with at least 10 countries in discussions on in-depth EA capacity * Agree on a methodology for client capacity other development assessment and strengthening assessment institutions to review and . Implement a comprehensive client safeguard training plan * Engage with at least two countries in discussions strengthen client on in-depth EA capacity assessment and safeguard capacity, and strengthening harmonize safeguard * Prepare and pilot a comprehensive client procedures safeguard training plan Support institutional realignment Improve incentives for * Establish a comprehensrve performance evaluation, inccntnvc arnd rward . Give speciflc attention. to eross-seccoral work in work on cross-sectoral system for cross-sectoral work annual results agreements for all environmental activities and policy staff issues. * Launch Green awards Achieve a shift in skill * Implement strategic human resource development * Define the needs in cross-sectoral skills and a mix through training, * Undertake targeted staff training on cross-sectoral issues plan for strategic human resource development strategic hiring and joint * Provide safeguard training to all managers of A and B rated projects and to * Develop targeted pilot staff training programs for appointments others on demand environmental mainstreaming in selected sectors a Train 90 percent of all operational staff, including managers, in safeguards * Continue to refine safeguard policies training policies program and launch safeguard policy training for * Provide environmental training for staff in other sectors on demand on managers development-environment issues * Provide training on demand Improve the funding * Operationalize the Mainstreaming Fund with regular reporting and feedback * Set up Mainstreaming Fund and develop mechanism for * Undertake an evaluation of the Mainstreaming Fund to assess its effectiveness procedures environmental activities * Align the use of trust funds with strategic priorities . Review the use of trust funds and their alignment in the Bank with the Strategy Leverage the role of * Realign partnerships with strategic objectives * Update and evaluate the partnership portfolio institutional engagements * Improve governance, management, and reporting on partnerships * Set guidelines for improving governance, and partnerships to management, and reporting on partnerships support the implementation of the Strategy Undertake systematic * Establish and operationalize an environmental management system * Develop a systematic performance monitoring monitoring and reporting and reporting framework on performance * Establish a performance monitoring and reporting unit in ENV * Start regular reporting on the implementation of I__ _ _ _ _ _ __ the Strategy x x x * ~/ f , /~~~ Abbreviations and Acronyms AAA Analytical and Advisory Activities ADB Asian Development Bank AEAP Annual Environmental Action Plan AfDB African Development Bank APL Adaptable Program Loan ARES Africa Region Environment Strategy ARI Acute Respiratory Infection AusAID Australian Agency for International Development BMZ Federal Ministry for Economic Co-Operation and Development, Germany BNPP Bank-Netherlands Partnership Program CAO Compliance Advisor/Ombudsman CAS Country Assistance Strategy CASE Country Assistance Strategies and the Environment CBD Convention on Biological Diversity CCAD Central American Commission for Environment and Development CCD Convention to Combat Desertification CDC Centers for Disease Control CDD Community-Driven Development CDF Comprehensive Development Framework CDM Clean Development Mechanism CDR Country Development Review CDS City Development Strategy CEDARE Center for Environment and Development for the Arab Region and Europe CEE Central and Eastern European Countries CEPF Critical Ecosystem Partnership Fund CESP Country Environment Strategy Paper xxxvii Making Sustainable Commitments - An Environment Strategy for the World Bank CGIAR Consultative Group on International Agricultural Research CI Conservation International CIDA Canadian International Development Agency CMU Country Management Unit CODE Committee on Development Effectiveness COPD Chronic Obstructive Pulmonary Disease CPF Collaborative Partnership on Forests DALYs Disability-adjusted Life Years DANIDA Danish International Development Assistance DBSA Development Bank of South Africa DECVP Development Economics Vice Presidency DFID Department for International Development (UK) DGF Development Grant Facility EA Environmental Assessment EAP East Asia and Pacific Region EB Environment Board EC European Commission ECA Europe and Central Asia Region ECLAC Economic Commission for Latin America and the Caribbean EER Energy Environment Review EIA Environmental Impact Assessment EIB European Investment Bank ELCI Environment Liaison Centre International ENV Environment Department EPSAL Environmental and Privatization Support Adjustment Loan EPU Environmental Projects Unit ESB Environment Sector Board ESCO Energy Service Component ESDVP Environmentally and Socially Sustainable Development Vice Presidency ESMAP Energy Sector Management Assistance Programme ESMRS Environment Strategy Monitoring and Reporting System ESP Environmental Support Program ESRP Environmcntal and Social Revicw Procedure ESSD Environmentally and Socially Sustainable Development ESW Economic and Sector Work EU European Union Euronatur European Natural Heritage Fund FAO Food and Agriculture Organization of the United Nations FASID Foundation for Advanced Studies on International Development FFT Fuel for Thought FMTI Forest Market Transformation Initiative xxxviii Abbreviations and Acronyms FUG Forest User Group GDP Gross Domestic Product GEF Global Environment Facility GHGs Greenhouse Gases GRI Global Reporting Initiative GTZ Gesellschaft fur Technische Zusammenarbeit (Germany) HD Human Development IBRD International Bank for Reconstruction and Development ID Institutional Development IDA International Development Association IDB Inter-American Development Bank IEM Integrated Ecosystem Management IFAD International Fund for Agricultural Development IFC International Finance Corporation IFI International Financial Institution ILWMVIAP Integrated Land Water Management Action Program for Africa IPCC Intergovernmental Panel on Climate Change IPRSP Interim Poverty Reduction Strategy Paper ISDS Integrated Safeguard Data Sheet IUCN World Conservation Union JEP Joint Environment Program JBIC Japan Bank for International Cooperation JI Joint Implementation projects JICA Japan International Cooperation Agency JSA Joint Staff Assessment KfW Kreditanstalt fiir Wiederaufbau LAC Latin America and the Caribbean LCR Latin America and the Caribbean Region LEGVP Legal Vice Presidency LIL Learning and Innovation Loan LPCD Liters Per Capita Per Day LPG Liquid Propane Gas MAP Mediterranean Action Plan MBC Mesoamerican Biological Corridor M&E Monitoring and Evaluation MEA Millennium Ecosystem Assessment MEF Middle East and North Africa Environmental Fund MEIP Metropolitan Environmental Improvement Program MELISSA Managing the Environment Locally in Sub-Sabaran Africa METAP Mediterranean Environmental Technical Assistance Program MFMP Multilateral Fund for the Montreal Protocol xxxix Making Sustainable Commitments - An Environment Strategy for the World Bank MIGA Multilateral Investment Guarantee Agency MNA Middle East and North Africa Region NEAP National Environmental Action Plan NEP II Brazil Second National Environment Project NGO Nongovernmental Organization NIS Newly Independent States NORAD Norwegian Agency for Development Cooperation NRM Natural Resources Management NSS National Strategy Studies OAS Organization of American States OD Operational Directive ODA Official Development Assistance ODS Ozone-Depleting Substances OECD Organisation for Economic Co-operation and Development OED Operations Evaluation Department PAGE Pilot Analysis of Global Ecosystems PAHO Pan American Health Organization PAL Programmatic Adjustment Loans PCF Prototype Carbon Fund POP Persistent Organic Pollutants PPAH Pollution Prevention and Abatement Handbook PREM Poverty Reduction and Economic Management PRGF Poverty Reduction and Growth Facility PROFOR UNDP Programme on Forests PROPER Program for Pollution Control, Evaluation, and Rating PRS Poverty Reduction Strategy PRSC Poverty Reduction Strategy Credit PRSP Poverty Reduction Strategy Paper PSAC Programmatic Structural Adjustment Credit PSAL Programmatic Structural Adjustment Loan PSI Private Sector and Infrastructure PV Photovoltaic QACU Quality Assurance and Compliance Unit QAG Quality Assurance Group QPM Quality Project Management RED Regional Environment Department REEF Renewable Energy and Energy Efficiency Fund RHA Respiratory Hospital Admissions RMT Regional Management Team RVP Regional Vice President SAL Structural Adjustment Loan xl Abbreviations and Acronyms SDP Strategic Directions Paper SDC Swiss Agency for Development and Cooperation SDG Solar Development Group SEA Strategic Environmental Assessment SECAL Sectoral Adjustment Loan SECO State Secretariat for Economic Cooperation of Switzerland SFP Strategic Framework Paper SIDA Swedish International Development Cooperation Agency SLRM Sustainable Land Resources Management SME Small and Medium-Size Enterprise SRI Socially Responsible Investing TACIS Technical Assistance for the Commonwealth of Independent States TF Trust Fund UNCCD United Nations Convention to Combat Desertification UNCED United Nations Conference on Environment and Development UNCHS United Nations Centre for Human Settlements (Habitat) UNDP United Nations Development Programme UNECE Unitcd Nations Economic Commission for Europe UNEP United Nations Environment Programme UNESCO United Nations Educational, Scientific, and Cultural Organization UNFCC United Nations Framework Convention on Climate Change UNFPA United Nations Population Fund UNIDO United Nations Industrial Development Organization UMP Urban Management Program URBAIR Urban Air Quality Management Strategy USAID US Agency for International Development VAF Vulnerability and Adaptation Facility VDC Village Development Committees WB World Bank WBG World Bank Group WBI World Bank Institute WCD World Commission on Dams WCED World Commission on Environment and Development WDR World Development Report WHO World Health Organization WIMO World Meteorological Organization WPA Work Program Agreement WRI World Resources Institute WSS Water Supply and Sanitation WWF World Wide Fund for Nature xli Introduction Economic development has led to dramatic improvements in the quality of life in developing countries. Higher incomes, better infrastructure, access to cleaner fuels, and improved access to health services have significantly reduced the toll on infant mortality and adult disease linked to exposure to indoor air pollution, contaminated water, human waste, and vector-borne diseases. Education, improvements in human skills and technical knowledge, and capital investments have permitted farmers and other rural communities to obtain much greater incomes from their land, water, and other natural resources. l'he striking gains in development in the past decades have been unparalleled in human history. But the picture is far from entirely positive. Gains have been unevenly distributed, and an unacceptably large por- tion of the world's population remains desperately poor. Approximately 1.2 billion people live on less than a dollar a day, and the gap between the richest and poorest countries has doubled in the past 40 years (World Bank 2000a). Growth has also been accompanied by an alarming rate of environmental degrada- tion, which has reduced its benefits and in some cases threatens the very foundations of economic activity. Environmental problems are complex, interlinked, and daunting. They are a fundamental part of the devel- opment challenge. THE ROLE OF THE ENVIRONMENT STRATEGY T'his Environment Strategy discusses how we will work wfith our clients and partners to help them address environmental problems as an integral part of their sustainable development strategies. The close relation- ships among poverty, environment, and development are increasingly understood. The links between pov- erty and environment are particularly close when poverty is viewed as a multidimensional phenomenon rather than simply a matter of income. This is reflected in the UN Millennium Declaration's International t Making Sustainable Commitments - An Environment Strategy for the World Bank Development Goals for 2015, which closely asso- cialized group. This is clearly insufficient. To ciate the goals ofpoverty reduction, health improve- make a substantial and lasting difference, we ments, and environmental protection. must ensure that environmental concerns are fully internalized throughout the Bank. The world's environmental problems are vast. We at the World Bank can best contribute to their so- If we are to help improve people's lives, develop- lution by focusing on those areas where we can ment opportunities, and prospects for a sustainable achieve the greatest results. The Strategy is intended future, it is critical for the Bank to steer this course to be realistic about what has to be done; about our successfully. The Environment Strategy emphasizes strengths and weaknesses; about how to utilize the the importance of integrating-or "mainstream- resources available to improve our performance; and ing"-environment into country development pro- about the potential for our assistance to have posi- grams, sector strategies, and investments. tive development outcomes. To help achieve its goals, the Strategy adopts a threefold approach: ORGANIZATION OF THIS REPORT * Learningandapplyinglessons. The Strategy builds on the achievements and lessons of both our own Chapter 1 begins by tracing the connections be- past efforts and those of others. It does not scck tween development, poverty, and the environment. to change the direction set at the Earth Summit A clear understanding of the problems being faced in 1992 and articulated in the 1992 World De- and of their causes is essential to any effort to ad- velopment Report, but to internalize lessons dress them. Chapter 2 then reviews the Bank's learned in the last decade, bolster commitments, record to date in helping its client countries ad- and accelerate progress toward integrating en- dress environmental problems. The last decade has vironment and development. seen some notable achievements, but there are also * Adapting to a changing world. A number of areas in which we have fallen short of our own ex- trends-often referred to under the common la- pectations and those of others. It is important to bel of"globalization"-have been reshaping the carefully examine these past efforts, and to incor- world. In response to these trends and to con- porate the lessons from them into our future ac- tinued learning from our past efforts, the Bank tivities. On this basis, chapter 3 sets out the Bank's has also been changing. It has reaffirmed its com- Environment Strategy. Of course, given the enor- mitment to poverty reduction and committed mous diversity of conditions and priorities among to a bottom-up, client-focused development, and our client countries, country-specific strategies will itis moving toward new lendingapproaches.Our differ substantially. Several common themes work on the environment must also adapt to emerge, however. Chapter 4 discusses the measures these changing conditions. we plan to take within the World Bank to ensure * Deepening our commitment. To date, the envi- that this strategy is implemented and how we plan ronment has been the concern of a small, spe- to monitor our progress. 2 t: 5 > ~~~~~~- ----- -- ----- - a--- -- Chapter 1 Development, Poverty, and the Environment - Tracing the Connections H] elping our client countries face the environmental challenges of development requires a clear understanding of the links between development, poverty, and the environment. This chapter reviews our understanding of these connections. THE EVOLUTION OF THINKING ABOUT SUSTAINABLE DEVELOPMENT The 1980s witnessed a growing recognition that a growth-based development model, by itself, was not sufficient to ensure long-term sustainability and an equitable sharing of economic progress. Our Common Future, the 1987 report of the World Commission on Environment and Development chaired by Gro Harlem Brundtland, then prime minister of Norway, suggested that sound development required con- certed efforts to protect the environment. Sustainable development, the Commission noted, "is develop- ment that meets the needs of the present without compromising the ability of future generations to meet their own needs" (WCED 1987). The 1992 United Nations Conference on Environment and Development (UNCED) took Our Common Future several steps further by formally endorsing the concept of sustainable development through the Rio Declaration on Environment and Development. According to the definition in Principle 3 of the Declara- tion, sustainable development would "equitably meet development and environmental needs of present and future generations." The sustainable development concept clearly calls for a more comprehensive, inte- grated, systemic approach that takes a long-term view of development and balances its different dimen- sions-economic growth, social equity, and long-term environmental sustainability. Stating the goal is easy; putting it into practice is not. Reaching it often implies difficult choices among competing develop- ment paths. A critical challenge for the world is to find an appropriate mix of policies, institutions, and technologies that will make these multiple dimensions of development compatible. Significant progress has been made since the UNCED Conference. In September 2000, key themes of the sustainability challenge were reiterated at the United Nations Millennium Summit. The Millennium Dec- 3 Making Sustainable Commitments -An Environment Strategy for the World Bank laration adopted at the summit by 150 heads of state BOX 1.1 or government included a series of concrete inter- Goals for international development national development goals to be achieved by 2015 The major international development nstitu- (seebox 1.1).Thesegoals havebeenwidelyaccepted tions-including the United Nations (UN), as key indicators of sustainable development. They Organisation for Economic Co-operation and are interdependent, and together they represent a Development (OECD), International Mcnetary Fund (IMF), and the Bank-are working to de- formidable challenge for countries and the devel-velop a c nd set ointernatonal d opmen velop a common set of international develoipment opment community. Achieving them requires a goals. The discussions, which are in progress, concerted effort by governments, civil society, and are focusing on integrating the Internationial De- a diverse range of development partners. The World velopment Goals agreed to by the OECD, UN, IMF and the Bank with goals set forth in WUe UN's Bank is developing its corporate strategy around . ' Millennium Declaration. these international development goals as a frame of reference for its mission of fighting poverty with The goals focus on key aspects of huma.n well- lasting results. being: poverty reduction, education, qender lasting resultsequality, health, and sustainable development. For each goal, indicators are specified to track TRADEOFFS, CHOICES, AND progress toward the goal. PRIORITIES There are seven broadly agreed goals: Sustainability is a long-term concept, but one that is E Eradicate poverty and hunger directly affected by short-term financial and politi- 5- Achieve universal primary education cal considerations. Arriving at a definition of a Reach gender equality and empower %vomen W Reduce child mortality sustainability and indicators for measuring it has been Rove matalhth XImprove maternal health a serious challenge (see box 1.2). Distorted policies, a Combat HIV/AIDS, malaria, and other dis- governance structures, institutional frameworks, and eases , ., , .~~~~~~~ Ensure environmental sustainability incentives, along with pressures to export natural resources, may favor a short-term focus, making pro- To monitor pregress toward the environmental grams with a long-term horizon difficult to imple- sustainability goal, there are three indicator tar- ment. The "grow now, clean up later" approach to gets: integrating the principles of sustainable development has imposed very high costs-costs that development into country policies and prc:grams and reversing the loss of environmertal re- could be avoided by adopting policies and programs rces ing the propmrtil of sources; halving, by 2015, the proporJlon of that prevent serious environmental damage. people without sustainable access to safe drink- ing water; and, by 2020, achieving a significant It may be rational to draw down stocks of natural improvement in the lives of at least 100 million slum dwellers. resources in order to finance investments in educa- tion, skills, infrastructure, and other productive as- sets.That, however, is different from mining stocks significantly lower benefits than are possible; in- of natural resources to support consumption with- deed, at times the benefits are lower than the costs out regard to long-term productivity-a practice of extraction. In these cases, it is essential to in- that cannot be sustained. Moreover, resource ex- crease the productivity of natural resource stocks traction is often undertaken in ways that yield by better management, since incomes cannot be in- 4 Development, Poverty, and the Environment -Tracing the Connections BOX 1.2 Indicators of sustainable development In order to pursue sustainability, it is important to measure it. A few examples of indicators proposed or used by countries, international and other organizations are listed here: * Genuine Savings (World Bank). Change in total wealth, accounting for resource depletion and environmental damage. * Genuine Progress Indicator (Redefining Progress, a nonprofit public policy organization), and Index of Sustainable Economic Welfare (United Kingdom and other countries). An adjusted GDP figure, reflecting welfare losses from environmental and social factors. * Living Planet Index (WWF). An assessment of the populations of animal species in forest, fresh- water, and marine environments. * Environmental Sustainability Index (World Economic Forum). An aggregate index spanning 22 major factors that contribute to environmental sustainability. * Ecological Footprint (Redefining Progress, WWF, and others). A measure of the land area re- quired to produce, in renewable form, the energy consumed by individual countries. • Resource Flows (World Resources Institute). Total material flows underpinning economic pro- cesses. v Environmental Pressure Indices (Netherlands, EU). A set of aggregate indices for specific envi- ronmental pressures such as acidification or emissions of greenhouse gases. • UN System of Environmental and Economic Accounts. A framework for environmental account- ing. • UN Commission for Sustainable Development Prototype sustainable development indicator sets for individual countries. creased or even maintained by current patterns of Balancing the various objectives and tradeoffs re- use. Especially for the rural poor, achieving the in- quires value judgments. The relative weights given ternational development goal of halving extreme to the various forms of wealth through everyday poverty by 2015 will depend heavily on improving decisions are political, social, and cultural choices, resource management. but they have to be informed choices, made with the participation of affected stakeholders. There are many "win-win" opportunities to simul- taneously achieve economic and environmental ob- Regardless of the specific environmental issue, three jectives. At times, however, there can be tradeoffs broad factors underlie many decisions and strate- between sustainable resource use and environmen- gies concerning environmental problems. All three tal protection. Conserving natural habitats, for ex- relate to equity and fairness in the use of environ- ample, may constrain their present use, which may mental resources over space and time. deprive resource-dependent people of their liveli- hoods. In a long-term perspective, this apparent a The tradeoffbetweenpresentandfuturegenerations. tradeoff sometimes disappears. Overfishing, for Exactly what and how much the present gen- example, may temporarily improve people's income, eration leaves for the future are important ques- making conservation seem costly. But if overfish- tions underlying many decisions about resource ing causes the collapse of fisheries, as has happened use and consumption. time and again, these same people will soon be de- X The issue of equitable access to resources and the prived of both nutrition and income. impacts of resource use and the differing im- 5 Making Sustainable Commitments - An Environment Strategy for the World Bank pacts of degradation between rich and poor, both implement policies and investment programs that within a country and among countries. not only support continued economic development, The perceived lack of overlap between actions that but also: address local and global environmental concerns. X Distribute the gains of development in a more These three issues have created tensions in the en- equitable manner, with a particular focus on re- vironmental analysis and management arena and ducing poverty in the minds of decisionmakers. They influence 0 Avoid sacrificing the interests of future genera- what different people see as sustainable develop- tions to meet the needs of the current genera- ment, and they have shaped key concepts about tion environmental protection and conservation (see box X Build on the emerging global consensus that 1.3). The challenge facing the World Bank and natural resources and other valuable environ- other institutions concerned with economic devel- mental assets must be managed sustainably. opment is to work with their clients to develop and Many of the easiest gains from introducing better water management, providing clean water and sani- BOX 1.3 From protectionism to sustainable tation, encouraging the use of cleaner fuels, and re- ecosystem management ducing the impact of floods and droughts have al- Conservation approaches have slowly evolved ready been captured. Yet millions of children still from a focus on species and strict protection to die each year, and many families lose their assets a focus on the sustainable use of biological re- and sources of income, as a result of diseases and sources and sustainable ecosystem manage- disasters that are linked to the quality of their envi- ment. ronment. There are indications that progress in the According to the Convention on Biological Di- 1990s was much slower than in previous decades. versity, "ecosystem management seeks to meet In some countries, the situation is clearly getting human requirements to use natural resources, worse, particularly in Sub-Saharan Africa, where whilst maintaining the biological richness and the effects of the AIDS epidemic and civil-wars are ecological processes necessary to sustain the composition, structure, and function of the habi- undermining past progress in reducing the burden tats or ecosystems concerned." of disease and promoting better managernenr of natural resources. Ecosystem management is the ecological pillar of sustainability, but its application in practical terms requires management approaches with THREE LINKS BETWEEN varying degrees of intensity. Modern conserva- ENVIRONMENT AND DEVELOPMENT tion approaches include protected areas, which themselves have been categorized by the World The key environmental concerns are associated Conservation Union (IUCN) along a continuum with three broad but interrelated aspects of from strict protection to intensive sustainable use; development: biological corridors; agrobiodiversity and pasto- ral systems; and heavily modified landscapes, 9 Quality of life-especially with respect to the live- as long as their configuration and impact are lihoods, health, and vulnerability of the poor compatible with broader ecosystem management a Quality ofgrowth goals. g Quality of the regional and global commons. 6 Development, Poverty, and the Environment - Tracing the Connections The quality of life depend on natural resource services for as much as Falling rates of infant mortality and increasing life 30 to 50 percent of their total income, are posed expectancy are important indicators of the substan- by: tial progress made over the past four decades in re- ducing the burden of disease associated with poor a Overuse, mismanagement, and contamination of environmental conditions. Even so, environmental freshwater resources. Almost one third of the factors have major effects on people, often falling world's population faces water scarcity or water disproportionately on the poor (see annex B for stress, especially in Africa, the Middle East, more detail about poverty-environment linkages). Latin America and the Caribbean, and large The effects of environmental conditions on poor parts of South Asia. Rapid degradation of wet- people can be grouped into three categories: liveli- lands and coastal zones is a major environmen- hoods, health, and vulnerability. tal management problem in many regions, in part exacerbated by over-abstraction of water and by Threats to livelihoods. Nearly a billion rural house- pollution. holds rely directly on the services of natural capital * Degradation ofsoil, caused by erosion, the buildup stocks and intricately interdependent ecosystems- of salts, and compaction brought about by poor water resources, land and soils, forests, and fisher- irrigation and cultivation practices or overgraz- ies-for their daily livelihood (see annex D for more ing, especially in areas with highly variable rain- detail on management of natural resources). As the fall. Erosion, salinization, compaction, and other availability of these resources decline and their qual- forms of degradation affect 30 percent of the ity deteriorates, these livelihoods are threatened (see world's irrigated lands, 40 percent of rainfed box 1.4). Collapsing ecosystems can undermine the agricultural lands, and 70 percent of rangelands. social fabric of societies and pose threats to secu- * Rapiddepletion offorests,fisheries, and biodiversity, rity. The major threats to the livelihoods of rural often as a consequence of unclear property rights households, especially poor households that often and perverse economic incentives and poor gov- BOX 1.4 Environmental degradation and economic productivity The Pilot Analysis of Global Ecosystems (PAGE): Agro-ecosystems is the first comprehensive as- sessment of the ability of the world's agriculture to provide sufficient food, goods, and services, which are vital for sustaining human life. The report notes that soil degradation, including nutrient depletion, erosion, and salinization, is widespread and has dramatically reduced crop productivity, with severe consequences likely for poor, heavily populated countries. Irrigation is draining more water than is being replenished, causing water tables to fall and threatening future water availability for irrigation and other uses. Moreover, many water sources are being polluted by excessive use of agrochemi- cals. The PAGE report sets the stage for the Millennium Ecosystem Assessment (MEA), launched by the World Resources Institute (WRI), the United Nations Environment Programme (UNEP), the World Bank, and the Global Environment Facility. Source: IFPRI, CGIAR, WRI 2000. 7 Making Sustainable Commitments - An Environment Strategy for the World Bank ernance. About 70 percent of the world's fisher- a Exposure to agricultural and industrial chemicals ies are either depleted, overexploited, or fully and waste is a modern environmental health risk exploited. Global rates of forest loss have reached that exacerbates the impacts of tradition al envi- alarmingly high levels, especially in the upland ronmental health risks in many developing coun- forests of the Andes, Central America, East and tries. Central Africa, and Southeast Asia . More than one fifth of the world's tropical forests have been The burden of disease associated with limited ac- cleared since 1960. cess to clean water and sanitation and with indoor air pollution falls disproportionately on the poor- Threats to health. Environmental degradation is an est 20 to 40 percent of households. In both rural important contributing factor to the burden of dis- and urban areas, the poor are less likely to be served ease, influencing the quality of life and economic by water and sanitation infrastructure and are more opportunities for many people (see annex C for likely to rely on dirty fuels for cooking. Urban air more detail on environmental health issues). Pre- pollution affects all urban inhabitants, but the poor mature death and illness caused by environmental tend to suffer more severely because its effects are factors account for one fifth of the total burden of worse for those in poor health and because poor disease in developing countries, which is compa- people have limited opportunities to protect them- rable to the toll from malnutrition (15 percent). selves or to move to less polluted areas. Preventing Millions of children and adults die every year from and reducing these environmental hazard;; would diseases that could be avoided by improving envi- make a major contribution toward meeting the In- ronmental quality. The primary environmental haz- ternational Development Goal of reducin. infant ards of concern in developing countries are: and child mortality by two thirds and maternal mortality rates by three quarters by 2015. * Water-related diseases, caused by lack of access to clean water and adequate sanitation, which claim Vulnerability. In 1992, Hurricane Andrew hit the an estimated 3 million lives each year-mostly southeastern coast of the United States and caused children under 5 years of age-and exacerbate 32 deaths. In the same year, a cyclone of similar exposure to vector-borne diseases. intensity hit Bangladesh and caused 100,000 deaths. * Exposure to indoor air pollution, causcd by burn- Poor people are particularly vulnerable to bo th natu- ing dirty fuels in inefficient stoves without proper ral disasters and changes in environmental condi- ventilation, which results in nearly 2 million tions. Changing patterns of resource use h,ave of- deaths of women and children annually, includ- ten undermined traditional arrangements f;)r man- ing about 500,000 deaths in India and about aging and sharing such natural risks as droughts, 300,000 in China. floods, fires, and earthquakes. Pressures on resource * Exposure to urban air pollution, primarily due to stocks have prompted many poor households to live fine particles emitted by households that burn and work in vulnerable zones such as floodplains, coal and other dirty fuels for heating and by two- drought-prone areas, or earthquake faults. Vulner- stroke motorcycles and poorly maintained die- ability is increased by specialization in the use of sel vehicles. Air pollution causes close to a mil- particular natural resources, so that households have lion premature deaths and severe respiratory few alternatives when disaster strikes. Furthermore, problems. the poor have less capacity to cope when disasters 8 Development, Poverty, and the Environment -Tracing the Connections occur. Access to credit is more difficult than for E Marketfailures. Markets for many environmen- better-off households, and the poor have fewer as- tal services often function poorly or not at all. sets to sell or consume in times of hardship. Natu- As a result, the observed "prices" for environ- ral disasters, therefore, often have catastrophic ef- mental goods or services often do not reflect their fects on the poor. value to society. In many cases, there is no ob- served price at all, making these goods and ser- The quality of growth vices appear to be either free, so that they tend to be overconsumed, or worthless, so that they Economic growth is essential if poverty is to be re- tend to be underprovided. Environmental regu- duced and welfare is to be improved. But it is a lations that correct such failures-for example, mistake to imagine that there is a simple dichotomy by making pollution costly-are necessary. Of- between "growth" and "no growth." Growth can ten, market failures are due to incompleteprop- take a variety of forms, and, as several recent stud- erty rights, where resources are not assigned to ies have shown, the quality ofgrowth matters (World an identified owner. Examples include the fish- Bank 2000b). A focus on maximizing growth- eries in international waters; nonexclusive prop- narrowly defined in GDP terms to the exclusion of erty rights, where many owners have rights to all other considerations-often BOX 1.5 imposes substantial costs and What makes environmental problems different? proves unsustainable. Environmental problems have several unique characteristics: X Delayed impacts. Many potential environmental changes have sig- Improving the quality of nificantly delayed impacts. This argues for long lead times in imple- growth is far from simple. In menting appropriate prevention or mitigation actions. the case of environmental is- a Spatial impacts. Sources and environmental impacts are often sepa- sues, improving incentives for rated in space (for example upstream/downstream or hills/valleys), making it necessary to have a framework that can address diverse the sustainable use of environ- stakeholder interests. mental and natural resources is a Cumulative impacts. Individual actions often have little effect on a key issue. When markets the environment, but the cumulative effect of many such actions wokwllc ihey can be substantial. work well, economic theory a Irreversible damages. A significant number of environmental out- and experience both tell us that comes are fundamentally irreversible, and the implications of such resource use will be "efficient." changes are hard to predict. But in practice, markets do not a Need for government intervention. Environmental problems are often a consequence of market failures. Without government in- tervention to introduce regulations and create markets where they ticularly true in the case of en- do not exist, the private sector alone cannot achieve optimal envi- vironmental goods and ser- ronmental outcomes. vices, which have special char- a Multisectoral links. Environmental problems reverberate across a range of sectors through many pathways, calling for coordinated acteristics (see box 1.5). Envi- policies and concerted efforts. ronmental problems are usually a Regional and global implications. Many environmental impacts have caused by market failures, broad cross-boundary and global effects that require international policy failures, or both. frameworks and agreements to deal with them. 9 Making Sustainable Commitments - An Environment Strategy for the World Bank the same resource, such as communal grazing tant distinction between cases dominated by on- lands; unenforced property rights, where, if re- site effects and those dominated by off-site effects: sources are stolen or damaged, there are no con- sequences; and nontransferable property rights, * In the case of on-site effects, resource users al- which cannot be sold or leased, as is common ready have powerfuil incentives to address any for land. resulting problems, since they are affected di- m Policyfailures. An important reason that prices rectly. Farmers, for cxample, tend to have strong of environmental goods and services may fail to incentives to manage the soil of their farms reflect their value to society is that government sustainably, as the condition of the soil affects interventions often distort these prices. Subsi- their current and future harvests and hence their dized prices, for example, often encourage the livelihoods. The main need in this case is to re- inefficient and excessive use of resources. Such move obstacles to the proper functioning of ex- subsidies are common for energy or irrigation isting incentives. This often involves the intro- water. In many countries, especially in Africa, duction of exclusive-use rights. government regulations such as export quotas, W Conversely, in the case of off-site effects, overvalued exchange rates, and artificially low decisionmakers usually have little or no incen- prices set for agricultural products by state mar- tive to address environmental problems, since the keting boards have created strong disincentives consequences do not affect them. Farmners, for for long-term investment in the productivity of example, have no incentive to help protect hy- resources; when the value of an output is low, drological flows because others, often far down- the value of natural resources used as inputs to stream, will enjoy the benefits in improved wa- its production remains also low. ter availability. In such situations, appiropriate incentives need to be created to (a) remove Addressing these market and policy failures is im- policy-induced distortions that undermine portant for improving the quality of growth. If such sound resource use; (b) complement market sig- failures persist, environmental goods and services nals with taxes/fees that reflect social opportu- will continue to be overconsumed and nity costs, or payments that reflect social ben- underprovidcd, imposing costs on those who dc- efits; and (c) selectively regulate the remaining pend on such goods, now and in the future. But the externalities. effects will also extend much further: infrastruc- ture investments will be different when water and Establishing an appropriate incentive and regula- energy uses are subsidized, for example, and the tory framework requires good governance struc- decisions made on such investments will have long- tures. At least three barriers stand in the way. First, lasting effects on patterns of development. Dis- difficult tradeoffs have to be evaluated and choices torted prices will also direct research efforts to fo- made. In the high-income market economies, it has cus on certain crops and agricultural practices and taken nearly five decades to agree on and imple- neglect others, limiting the technical options avail- ment policies that dramatically improved local en- able to future decisionmakers. vironmental conditions. Even now, many environ- mental issues remain highly contentious. Second, Improving incentives in the use of environmental achieving a more efficient use of environmental goods and services will have different implications goods and services will inevitably impose costs on in different cases. In particular, there is an impor- some members of society. Often, politically influ- 10 Development, Poverty, and the Environment - Tracing the Connections ential groups stand to benefit heavily from ineffi- Contrary to common belief, it is not necessary to cient use of resources, and they are likely to strongly sacrifice the interests of future generations in order resist moves to improve efficiency. Powerful elites to improve the incomes and welfare of those living can manipulate resource use to their own advan- today. Avoiding such conflicts should be the pri- tage and exclude the powerless and voiceless parts mary objective of the work to devise and imple- of society from its benefits. Third, "efficiency" is ment better policies and more effective regulatory not the only objective. There are many other im- arrangements. Much has already been achieved, portant social objectives-for example, social eq- especially in middle-income countries, and progress uity-and cultural and religious values that may can be accelerated in all countries as people become influence the way decisions and choices are made more concerned about their environment (see box by societies. 1.6). Our efforts must be focused on issues and in places where it is possible to play a catalytic role in Markets can become an essential part of an effec- suprtn poitv chne supporting positive change. tive environmental regulatory framework. Market- based instruments that allow flexibility in achiev- BOX 1.6 ing environmental objectives (such as environmen- Industrial and developing countries have tal charges and taxes, pollution offsets, tradable fish- different perspectives on environmental ing quotas and pollution permits), and mechanisms challenges that harness private initiatives in improving com- The fourth annual Intemational Monitorpublished pliance with environmental regulations (such as by Environics International, Ltd. outlines the re- voluntary compliance measures), have been increas- sults of the largest environmental public opinion ingsof environmental policy survey ever conducted, including interviews with igly important elements of ewold. some 35,000 people in 34 countries. The survey implementation around the world, found that the environmental divide is widening in the world. In industrial countries, most people One of the ingredients in good governance is in- rate the quality of their local environment as creased public awareness. People are frequently good; in poorer countries, most people rate it as unaware of the value and importance of healthy and poor. sustainable ecosystems, or of the causes and conse- As this and previous surveys indicate, in quences of environmental damage, including the wealthier countries people tend to take a longer- impacts of pollution on their health. Information term global view of environmental problems, while in poorer countries environmental concerns about the impacts of unsustainablenaturalresource are more focused on local issues. In half the use is often in the hands of central agencies, not of countries surveyed, particularly in the poorer the users themselves. Building on indigenous ones, the majority of people believe that envi- knowledge and empowering local communities to ronmental problems affect their personal health use such knowledge are invaluable in promoting a great deal. People are most concerned about the quality of their water and air, and there is good ru m egrowing concern globally about the depletion of example, play an important role in resource man- natural resources. Majorities of people in nearly agement but have little voice or access to informa- all countries, however, think that environmental tion.Thus, meeting the International Development protection laws, as currently applied, are inad- Goal of empowering women is also likely to help equate. improve natural resource management. Source: Environics International, Ltd. 2000. 11 Making Sustainable Commitments - An Environment Strategy for the World Bank The quality of the regional and global mate, the diversity of life, and shared water re- commons sources. These commons are being degraded at dis- Many environmental services are global public turbing rates in many places, indicated by the rapid goods, and their degradation affects people across deterioration of regional and global ecosystems (see the world (see box 1.7). Ecosystems and the envi- WRI 2000). ronmental impacts of development do not respect administrative boundaries. Many pollutants travel The management of the world's shared river ba- long distances and affect people's health and the sins, groundwater aquifers, and large marine eco- environment in neighboring countries and regions. systems poses a challenge for riparian and littoral The successful pursuit by individual countries of states. The major threats to the health, productiv- environmentally sustainable development, includ- ity, and biodiversity of these shared resources come ing poverty alleviation, will ultimately depend on from human activities on land. Some 80 percent of the protection of the global commons, such as cli- the pollution in the oceans originates fromn land- based activities. To combat pollution and arrest BOX 1.7 degradation it is essential for countries to find ef- Global environmental issues fective ways of cooperating in the management of Global environmental issues fall into one of two these shared resources. categories: 1. Global commons issues, which are directly The poorest countries are often the ones that are related to the maintenance of major components most threatened by the degradation of the regional of Earth's systems, include: and global environmental commons. Climate O Climate change change is projected to cause significant increases in * Ozone depletion ~~~~famine and hunger in many of the world's poorest X Accumulation of persistent organic pollutants f a (POPs) areas, in part because of decreasing precipitation in * Loss of certain biodiversity elements, such many arid and semi-arid areas, especially in Sub- as migratory species that cross national bor- Saharan Africa. It could also displace millions of ders and globally important genetic re- sources. people from small island states such as the Ivialdives, and from low-lying delta areas of Bangladesh, To address these issues effectively, all countries need to take coordinated action. China, and Egypt; increase the incidence of vec- tor-borne diseases such as malaria and dengue; and 2. Natural resource degradation at the global lead to rapid shifts in the distribution and produc- scale, including: ~a Most biodiversity issues not listed above tivity of terrestrial and aquatic ecosystems. result- X Degradation of international waters and ing in loss of blodiversity and livelihoods. marine ecosystems * Land degradation and desertification Loss of biodiversity also poses serious threats for * Degradation and loss of forest resources. developing countries. Genetic varieties, species, and Although these issues are largely national or plant and animal communities have critical uses as regional in nature, the severity of the problem food, sources of new crop varieties, commodities, often requires coordinated international action. medicines, pollinators, soil formers, attractions for 12 Development, Poverty, and the Environment - Tracing the Connections tourists, and moderators of climate and hydrology. out ozone-depleting substances (ODSs), progress Loss of biodiversity can thus undermine agricul- in the implementation of these conventions and tural productivity both now and in the future, re- their resource protocols has been slow. The politi- duce water quantity and quality, and compromise cal, scientific, and technical complexities of the economic benefits from recreation opportunities. challenge are at the root of this failure. In addition, many people consider biodiversity as having intrinsic value, for moral, religious, or cul- The great majority of the Bank's client countries, tural reasons. These various values have been rec- being parties to the global conventions, have com- ognized in the Convention on Biological Diver- mitted themselves to addressing the degradation sity, as well as the more targeted Ramsar Conven- of the global commons. They believe they will suf- tion on Wetlands. Despite these commitments, the fer, along with others, if insidious trends in global planet is losing species at a rate higher than at any environmental deterioration continue. They face, time in its history-an extinction spasm that un- however, difficult decisions in defining the appro- dermines future options. priate level of effort they should devote to global environmental management. In particular, devel- These outcomes occur because-in the absence of oping countries perceive real and critical tradeoffs enforceable international regulatory and incentive (a) between meeting short-term needs for food, systems-individual countries are unable to cap- water supply, and sanitation services for the poor ture the economic value of conservation and envi- and investing in environmental management for the ronmental protection measures that generate re- medium and long term; and (b) in deciding between gional or global benefits. While the benefits of allocating expenditures for local and regional pol- measures to reduce carbon dioxide (CO2) emissions lution abatement or for taking action on global and protect genetic resources accrue to mankind, environmental change and its local impacts. Ac- the costs of these measures have to be borne lo- tion is also impeded by a lack of adequate institu- cally. Similarly, riparian or littoral countries linked tional, policy, and management capacity to address to transboundary aquatic and terrestrial ecosystems either short- or long-term environmental concerns. are unable to capture the full value of national mea- Last, but not least, there is a realization that the sures to address resource degradation. impacts of global environmental problems will have a disproportionately adverse effect on developing Arresting global and regional environmental deg- countries. For example, developing countries are radation therefore depends squarely on international most vulnerable to climate change despite the fact cooperation. Following the UNCED Conference that their contribution to the problem has been in Rio, now almost 10 years ago, several interna- small compared to that of the industrialized world. tional conventions were created to promote such More than 75 percent of the cumulative greenhouse collaboration. These agreements cover climate gas (GHG) emissions have been emitted by indus- change, loss of biodiversity, desertification, and, trialized countries over the past 150 years, and per most recently, persistent organic pollutants. With capita GHG emissions today are still five times less the notable exception of the convention to phase in developing than in industrialized countries. 13 Making Sustainable Commitments - An Environment Strategy for the World Bank Involving developing countries in solutions to glo- many functions that were previously the domain of bal problems is critical. The Bank needs to be ready the public sector. The private sector is becoming a to assist client countries in their preparations for decisive factor in influencing environmertal per- effective participation in the global conventions and formance and long-term environ mental implementation of national programs in support sustainability (see box 1.8). External flows of pri- of the conventions' objectives. Bank support for vate resources to developing countries, which have national sustainable development can generate im- significantly surpassed official development assis- portant complementary regional and global ben- tance (ODA) during the 1990s, have con-ributed efits. Beyond that, special resource transfer mecha- to this process-especially in the middle-income nisms have been established in connection with countries, where these flows have been concen- international conventions to help developing coun- trated. tries finance the costs of generating global envi- ronmental benefits that are not matched by domes- Partnerships betwveen public and private sectors, tic benefits. The World Bank Group is one of the particularly for large infrastructure projects, are implementing agencies for two such global financ- likely to increase in many client countries, given ing mechanisms: since 1989, the Multilateral Fund the availability of private capital and governments' for the Montreal Protocol for the Phaseout of need to reduce their expenditures. As a result of Ozone Depleting Substances (MFMP), and, since these trends, the investment climate has become a 1991, the Global Environment Facility (GEF). crucial dimension of development. In turn, account- able and effective public sector governance is criti- cal to establishing a favorable investment climate. CHANGING GLOBAL CONTEXT Our strategy is tailored to reflect a rapidly chang- Political changes ing global context. Trade and private capital flows Decentralization of political and economic have increased dramatically, bringing substantial decisionmaking to subnational levels opens oppor- gains but also making countries vulnerable to events t ~~~~~~~~~~~~~tunities for broader institutional change, increased far beyond their shores. The cross-boundary and democratization, and participation and a greater international character of many environmental is- voice for civil society. Its desired effects, however, sues further accentuates the growing interlinkages may be constrained by lack of capacity to cope with between countries. Decisions about such natural an increasing set of responsibilities and the exist- resource management matters as forestry, water re- ence of unequal power structures at local levels. The sources, and the use of nonrenewable energy re- spread of democratization, the increasing role of sources in a single country have far-reaching me- civil society, and increased access to information in dium- and long-term implications for whole regions the developing world provide channels and mecha- and for the world. These trends pose new environ- nisms whereby environmental issues can more eas- mental challenges but also open new opportunities ily reach decisionmakers and influence economic for environmental stewardship. and sectoral policies. Increased private sector role Technological change The relative roles of the public and private sectors Rapid progress in science and technology has cre- are changing, with the private sector taking over ated opportunities for more efficient and cleaner 14 Development, Poverty, and the Environment - Tracing the Connections BOX 1.8 Corporate responsibility: The triple bottom line Many corporate leaders now recognize that social development, environment, and growth are not always in conflict. For a variety of reasons-reducing costs, creating new market development oppor- tunities, protecting and gaining consumers, and managing risks-companies are adopting sustain- able development as a management framework to build long-term value in line with shareholders' and society's expectations. Commitment to corporate social responsibility moves companies to a triple bottom line of financial excellence, social justice, and environmental superiority. Public information and comparative benchmarking influence consumers, investors, public interest groups, and govern- ments to put pressure on company performance to meet environmental and social standards. * Socially Responsible Investing (SRI). Institutional and individual investors are increasingly se- lecting investments that meet minimum standards for environmental and social criteria. In the United States alone, assets in SRI funds have grown to about $3 trillion. In Europe, enabling legislation, such as the UK requirement that pension funds disclose the social and environmental performance of their bond portfolios, provides a fruitful ground for SRI. As a group, Socially Re- sponsible Investors are active and vocal, frequently organizing internet-based public information campaigns to encourage investors to boycott companies whose actions or investments conflict with the principles advocated by the particular SRI group. * The Global Reporting Initiative (GRI), sponsored by the Coalition for Environmentally Respon- sible Economies and UNEP, seeks to make sustainability reporting as routine and credible as financial reporting in terms of comparability, rigor, and verifiability. Specifically, the GRI's goals are to (a) elevate sustainability reporting practices worldwide to a level equivalent to financial reporting; (b) design, disseminate, and promote standardized reporting practices, core measure- ments, and customized, sector-specific measurements; and (c) ensure a permanent and effective institutional host to support such reporting practices worldwide. * Product certification. Product certification efforts aim to create standards and use public informa- tion to harness consumer awareness and preferences in support of products produced in accor- dance with environmental and social standards. Certification standards are now under develop- ment or dissemination for forest products, shade-grown coffee, marine fisheries, tropical aquarium fish, and dolphin free tuna, among others. Source: WBCSD 2000. production, safer and healthier products and pro- to grow rapidly, despite recent reductions in fertil- cesses, the exploration of new resources, and easier ity, and is expected to reach 7 billion in 2013, 8 access to information. Advances in information billion in 2028, and 9 billion in 2054. The bulk of technology have created unparalleled opportuni- this growth wil occur in developing countries. Af- ties for a global knowledge network. A challenge for developing countries is to build the human, rica alone will grow from 0.8 billion currently to policy, and institutional capacity to use these op- 1.8 billion in 2050, and Asia from 3.6 billion to 5.3 portunities for harnessing their development efforts. billion. This growth will inevitably increase the pres- sures on, and the demand for, environmental re- Population growth and demographic sources (see box 1.9). changes In parallel with these relatively new trends are oth- The challenge this growth poses is enormous: ag- ers of long duration. Global population continues ricultural production will need to nearly double in 15 Making Sustainable Commitments -An Environment Strategy for the World Bank BOX 1.9 Population, poverty, and environmental degrada- Poverty, population, and environment tion are inextricably linked. A significant propor- links tion of high infant and child mortality (especially Population growth rates are often highest in the under-5 mortality) is caused by environmental fac- world's most sensitive ecosystems, including tors. High infant and child mortality are l:nked to drylands and tropical forests. The complex link- higherfertilitybecause mothers bear more ._hildren ages between poverty, population, and environ- mental~~ ~ derdto'edt b otpoone to ensure that at least some will survive. With many mental degradation tend to be most pronounced in regions with the following characteristics: children, however, poor families have difficulty in- High dependence on natural resources for vesting in education and proper nutrition. In de- subsistence veloping countries that have implemented effec- Scarcity of renewable resources such as tive family planning programs and have increased water their child survival rates and educational levels, fer- Vulnerability of soils to rapid degradation tility rates have declined. Lower fertility rates and Inadequate human and social development smaller families, in turn, can free women to take Inequitable access to natural resources Limited role of women in social and eco- part in other activities. nomic decisionmaking. Besides population growth, there are important Understanding these linkages has to be part of poverty reduction strategies. demographic changes that shape environmental and Source: UNFPA, UNEP, and IUCN 1993. development agendas. One of these is rapid urban- ization, particularly in the poorest regions of the world. Major cities are home to more than 50 per- the next 30 years, while land is becoming increas- - cent of the world's population today, compared with ingly scarce, and new land taken into cultivation is often marginal compared with that removed by ur- only 14 percent in 1900. Urban areas have ecome the engines of economic growth, but have created banization or due to degradation. Water use grew th at more than twice the rate of population increase growing environmental concerns. Environrmental during the twentieth century, and already many re- services, institutions, and policies have been often gions are chronically short of water. About one third failing to keep pace with rapid urbanization. As a of the world's population lives in countries experi- result, many cities in the developing world are char- encing moderate to high water stress, partly result- acterized by inadequate and deteriorating infra- ing from increasing demands from a growing popu- structure, high levels of air and water pollution, lation and human activities. By 2025, as much as slums, and poor waste management. These issues two thirds of the world's population is expected to pose considerable health damage and economic be under water stress. costs, which often outweigh the costs of preven- tion or mitigation. In terms of economic and environmental sustainability, recent analysis emphasizes the chal- GREATER SCOPE FOR MARKETS lenge posed by high population growth (Hamilton WITH EFFECTIVE PUBLIC 2000). It is estimated that in some 50 countries, R EGULATIVE PUBLIC the rate of growth of total wealth is less than the growth rate of population-a clear indication of In today's world, so strongly characterized by glo- unsustainable development. balization and the widening reach of the private 16 Development, Poverty, and the Environment -- Tracing the Connections sector, the rationale for public action is stronger than services to compensate upstream users for provid- ever. The public sector has traditionally played an ing these services. Governments can also facilitate important role as a steward of the environment and public access to environmental information and natural resources. This role is closely linked with participation in decisions affecting the environment. the special properties of environmental issues, es- An emerging area for public authorities involves pecially the existence of extensive market failures creating markets for environmental services through arising from the public goods nature of many envi- regulation and the development of new mecha- ronmental benefits and services, from externalities nisms, such as carbon sink funds, green certifica- such as pollution, and from the cross-sectoral, cross- tion, and ecotourism. boundary, and global nature of many environmen- tal issues. In parallel with the changing relative roles of the public and private sectors, the ongoing decentrali- Traditionally, the public sector has controlled the zation of regulatory functions from central to local exploitation of natural resources-forestlands, sub- government levels worldwide has increased the need soil minerals, and oceanic resources in coastal ar- for local government involvement in many areas of eas-as the owner of such resources and has pro- environmental regulation, and enhanced the role vided environmental infrastructure services through of civil society in influencing decisionmaking. The state-owned utilities. Recognizing the opportuni- new challenges created by decentralization for ef- ties for improved efficiency and financial fective environmental regulation and management sustainability through the private provision of en- at the local levels deserve special attention in ca- vironmental services and private management of pacity building efforts. resources, governments recently have been moving away from a role as owner and provider to one of Traditional command-and-control regulations and regulator and enabler. enforcement are often expensive and institution- ally unfeasible. Therefore, a wider range of policy The role of governments, however, remains espe- tools is needed to complement traditional regula- cially important in establishing a policy, regulatory, tory instruments; examples include methods that and institutional framework for sustainable resource encourage self-regulation and greater environmental management and environmental performance. responsibility in the private sector, such as increased Governments play a key role in introducing mecha- disclosure requirements and assurance-based com- nisms for addressing environmental externalities pliance programs. Market mechanisms often en- and cross-sectoral and cross-boundary environ- courage the private sector to achieve the same goals mental issues. They can regulate the management as under regulation, but often cheaper and in a of open-access resources such as fisheries by, for shorter time. Environmental regulation, therefore, example, issuing individually tradable quotas. The must harness the role of markets and the private protection of downstream users through better up- sector to support sustainability. stream management of a watershed involves large transaction costs and can be managed best by pub- Even with improved incentive structures, there will lic authorities. For example, public authorities could always be a need for regulation and enforcement. develop systems of payments for environmental The private sector typicallyresponds fastest to regu- 17 Making Sustainable Commitments - An Environment Strategy for the World Bank latory measures that threaten its license to operate. tary compliance with environmental laws and stan- Empty threats in the form of regulations that can- dards, then an effective regulatory agency can take not be adequately enforced send a counterproduc- action against the 20 percent who do not comply. tive message. Enforcement has to be consistent to An active civil society and a changing culture of create a level playing field; it has to promote good corporate responsibility in the private sector have operating practice; and it has to provide a predict- been important in improving compliance and con- able environment for investment. The so-called tributing to positive environmental change. The "80:20 rule of environmental regulation" holds true Bank's Environment Strategy will reinforce these even in the best-governed countries. This rule sug- positive developments. gests that if it is possible to get 80 percent volun- 18 Chapter 2 / / Lessons from World Bank Experience T he World Bank's environmental agenda has evolved gradually. The main focus in the 1970s and 1980s was on safeguards-on mitigating the potential environmental damage associated with projects, especially those that financed physical investments in infrastructure, energy, and agri- culture. Gradually, a more comprehensive and positive agenda has developed. The Bank's views on environ- mental sustainability were comprehensively expressed in the 1992 World Development Report, which high- lighted key environmental challenges and provided a framework for the integration of environment and economic development. Our environmental agenda has also been influenced by our mandate of helping to implement global environmental agreements and special financing mechanisms. This chapter describes our experience in these three key areas-safeguards, the integration of environment into development assis- tance, and global environmental issues. It then summarizes lessons learned building on the review of the Operations Evaluation Department (OED), and outlines how we can best assist countries in meeting their environmental goals (OED 2001). SAFEGUARD POLICIES AND PROCEDURES The Bank has 10 key safeguard policies, and the entire project pipeline is subject to systematic screening as a standard requirement of the project preparation and approval process.' The overarching objective of the safeguard system is to support the development efforts of our client countries in a manner that is environ- mentally and socially sustainable. TheWorld Bank's environmental and social safeguard policies and proce- dures provide guidelines for staff in identifying and preparing programs and projects. They serve as an important tool for integrating environmental and social concerns into the design and implementation of Bank-supported activities and promoting sustainable development objectives. Nine out of the 10 safeguard policies also apply to IFC and MIGA. Because of the private sector orientation of these institutions, OP/ BP 7.60 on Projects in Disputed Areas does not apply to them. IFC and MIGA policies also include a Policy Statement (dated March 1998) on Child and Forced Labor. Environmental assessment in IFC and 19 Making Sustainable Commitments - An Environment Strategy for the World Bank MIGA is guided by their respective Environmen- sustainability. The Operational Directive on Envi- tal and Social Review Procedures, which turn the ronmental Assessment (OD 4.01), issued in Octo- principles of OP/BP 4.01 into specific require- ber 1989, mandated a systematic screening of all ments. For further details on IFC and MIGA, see proposed projects and preparation of an environ- annexes G and H. mental assessment for projects that might Pave sig- nificant negative impacts on the environment.2 Our safeguard policies reflect the principles of in- Subsequently, Operational Directives were ipdated ternational and regional environmental agreements and converted into Operational Policy/Bank Pro- signed by client countries. The policies complement cedures (OP/BP) format, and a number of addi- national and local laws, and procedures concerning tional policies were added to further protect spe- environmental and social issues, as well as national cific aspects of the environment, potentially vul- requirements for environmental assessment. The nerable populations, and physical cultural property. safeguard policies were not developed as an inte- These new policies reflect the continually broad- grated set of procedures however, and this can ening scope of the safeguard approach, -rom an present a challenge for interpretation and applica- evaluation of potential physical, biological, and so- tion. Nevertheless, they share complementary ob- cioeconomic impacts using the environmental as- jectives, and their underlying principles provide a sessment process, to inclusion of complernentary sound basis for supporting development activities. instruments such as resettlement plans, indigenous They have become internationally recognized ref- peoples'development plans, and pest management erences and are often used as benchmarks for the plans. development of national environmental assessment systems in developing countries. In addition, many With the exception of occasional project-specific other development organizations and client coun- trie mak us of he ank' EnironentlAssss- problems, the scope of coverage and the quality of tries make use of the Bank's EnvironmentalAssess- ment Sourcebook and the Pollution Prevention and application of the safeguard policies at the project level have gradually improved over the past two Abatement Handbook 1998 (World Bank, 1999b) dcds ewe 90ad20,1 ret e as key references in undertaking their environmen- tal work. quired full environmental assessment (category A), and another 1,006 required less comprehensive en- vironmental reviews (category B). The share of cat- Progress made in applying environmental egory A projects varied between 4 and 24 percent assessment of the total annual lending volume, and that of cat- Environmental Assessment- (EA) has been a key egory B projects, between 26 and 43 percent (see instrument in helping the Bank and our clients to figure 2.1). More than 80 percent of lending com- incorporate environmental and social aspects of mitments in six sectors-oil and gas; electric power proposed investments into the decisionmaking pro- and energy; transport; water supply and sanitation; cess. EA provides a mechanism for evaluating the mining; and urban development-required environ- overall environmental and social soundness of pro- mental assessment or analysis. posed projects, assisting in the evaluation of alter- natives to the proposed project, and setting out Recent evaluations have concluded that Bank mitigation and monitoring actions to ensure project projects are usually well designed to avoid envi- 20 Lessons from World Bank Experience Figure 2.1 adverse environmental and social IBRD/IDA commitments by EA category, impacts, in advance ofproject ap- fiscal 1990-2000 35,000 Categor"o z *eher proval and implementation. 30,000 Equally important, our clients, *g25,000saf ndhv staff, and partners have acquired ": 20,000 - _ r _ X experience in usingEA as a tool i 15,000 [ for considering alternatives, con- ESloo ___,.0 sulting with affected stakehold- 5,000 - < 1 ers, and modifying the design of O _m _ 1 |11 T | | | T | T | | | | | Hprojects to avoid or mitigate 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 harmful environmental effects. In Fiscal year Note: A-lending subject to full environmental assessment; B-lending subject to environmental this respect, the experience of analysis; Fl-lending subject to environmental screening and assessments by financial intermedi- w o aries. Other-lending not subject to environmental assessment or analysis. working on Bank projects has contributed to strengthening lo- ronmental damage and have good environmental cal capacity to carry out EAs and to implement en- management action plans (see for example, vironmental management plans in many countries. Goodland and Mercier 1999; World Bank 1997b). According to the quality-at-entry assessment in The public consultation and disclosure mechanisms calendar year 1999 by the Quality Assurance Group of the EA process have become useful tools for (QAG), the EA process for investment lending is enabling societies to discuss alternative develop- now largely mainstreamed, and 90 percent of ment options and impacts from proposed programs projects receive satisfactory quality ratings. In many and for helping communities and individuals ben- cases, EAs have led to better project design, and efit more fully from development activities. The environmental management plans have introduced Bank's performance in following its disclosure re- improvements in project implementation, result- quirements has improved significantly over time. ing in greater attention to environmental issues in Bank-financed projects. For example, before 1989, EA is only one element of a larger environmental 60 percent of Bank-financed urban water supply management system used by the Bank and its bor- projects did not consider how the increased use rowers to both "do no harm" and promote good would affect water resources. Today, water supply environmental management. The implementation projects routinely consider sanitation and water of safeguard policies depends on the regulatory, in- pollution problems and look for innovative ways to stitutional, and incentive frameworks established address them (World Bank 1997a). by environmental legislation in countries where projects are planned, implemented, and operated. In part, improved performance reflects the increased In this respect, the Bank has assisted many coun- skill of our clients and staffin identifying-through tries over the past decade in introducing environ- the use of EA and related safeguard-mandated mental policies and procedures, including the in- studies-investments that might have significant troduction and strengthening of national EA ca- 21 Making Sustainable Commitments - An Environment Strategy for the World Bank pacity. In the framework of the Environmental main challenge in this area is to introduce at the Management Capacity Building Project in India, earliest possible stage of the project the safeguard for example, we are working with the Ministry of policies and related national requirements used both Environment and Forests to strengthen implemen- by the Bank and cooperating countries. Measures tation of India's Environmental Impact Assessment to support more cost-effective and more timely (EIA) policies. Similar actions are under way in the preparation of safeguard-policy-related stuLdies and Mediterranean region as part of the Mediterranean their implementation within projects is an area that Environmental Technical Assistance Program should continue to be a focus of attention for the (METAP), which is jointly funded by the World Bank and our clients. Bank, the European Commission (EC), the Euro- pean Investment Bank (EIB), and the United Na- Areas for further improvement tions Development Programme (UNDP). (See box 3.3 in chapter 3.) Early attention to environmental issuses. EAs are now routinely used at the project level by the Bank, its Notwithstanding improved capacity building, the clients, and its partners. It has been much more increasing costs of adhering to these safeguard poli- difficult to address environmental and social con- cerns when strategic decisions are being made at clesdurig prjectprearaton ad imlemeta- the sectoral and program levels. EA is of'ten nar- tion have become a concern for both the Bank and ourclieeconcerned about the chilling rowly viewed as something to be carried out only our clients. Some are aftendabu techlm effect safeguard policies could have on complex after a development option has been selected and a project is under preparation. A 1996 OEID review development projects, particularly in currently sen- pojecthis under prepara A GEr review sitive sectors and areas. There is a perceived rigid- found that many of the EAs prepared for Category ... . ~A projects did not adequately consider alternative ity in policy application despite the flexibility built into policy guidelines. There is room for enhanc- designs and technologies and that the EA process ing the benefits and development effectiveness of was often started too late to have sufficient influ- safeguard policies and reducing the costs by help- ence on the decisionmaking process (see figure 2.2 ing strengthen countries' own safeguard systems and for a description of the way upstream environmen- implementation capacity beyond individual projects tal input and safeguard issues are integrated into financed by the Bank. the Bank's decisionmaking and project cycle). This problem is not unique to the Bank or its clients. Experience also indicates that the costs and the time The recognition that better environmen-tal out- required for the preparation of EAs and other re- comes can be achieved at lower cost by integrating lated safeguard studies can be reduced by identify- such concerns at the planning and design stages ing these issues at the earliest phase of program or has spread slowly throughout the world. This rec- project development and fully integrating the ognition has led to an increased use of EAs at the studies into the overall planning, review, and strategic level (strategy, program, region, and sec- decisionmaking process. This approach also reduces tor, for example), complemented by project -specific implementation costs for compliance, since con- EAs or related types of environmental planning and cerns are directly factored into the decisionmaking management actions, so that decisionmakers can and design process rather than being added on. The evaluate development options and alternatives in a 22 Lessons from World Bank Experience Figure 2.2 during supervision is gener- Environmental and safeguard input into the Bank's ally weaker than compliance decisionmaking and project cycle during preparation. In fiscal Country diagnostic studies 19-00 6preto O [ ~~~~~~~~~~~~~1999-2000, 86 percent of Country dialogue on - NEAPs, nssds, SEAs m development strategy - Environmental indicators projects received at least a sat- a n and vision - Other analytical and advisory isfactory rating for supervi- (D - CDF services (AAA) - C PRSP sSPs sion, compared with 90 per- - Environment Strategy cent for preparation. Prob- O w - Environmental aspects of sector p - C% CASstrategies lems during project 'mple- U Safeguard review and mentation are usually due to a < / Safeguard review and categorization (ISDS) Safeguard inadequate performance in PCD I policies undertaking agreed mitiga- 0 .2 o EAMP/RAPIIPDP a tion, monitoring, and institu- o P tion-strengthening actions. M.. ] Problems also arise when o a project designs are adjusted in o prjc Lcdn|Evromna n a Loaunne Evirtonmenland the course of implementation m ~~Documents social covenat and safeguard policy issues are ._ 0 E PSRslmidterrn Safeguar d -v not adequately reexamined. o i review compliance as CL ___ie c.mianc The relative weaknesses in E In country implementation of environ- C Environmental and < capacity to F ICR social outcomes < i implement mental action plans and de- 0 l | i and monitor lays in addressing the envi- ia Environmental ad , . _ronmental and social aspects > ---oneta n , L L evaluation social outcomes of project implementation Note: EA: Environmental Assessment, EMP: Environment Management Plan, ICR: Implementation have been attributed to weak Completion Report, IPDP: Indigenous Peoples Development Plan, ISDS: Integrated Safeguard Data Sheet, PAD: Project Appraisal Document, PCD: Project Concept Document, PRSP: Poverty Reduction borrower commitment and Strategy Paper, PSR: Project Supervision Report, RAP: Resettlement Action Plan, SEA: Strategic Envi- ronmental Assessment, SSP: Sector Strategy Paper. capacity, and to inadequate allocation of resources for su- more comprehensive manner. A recent review re- vealed that during fiscal 1997-200 1, more than 20 pervision. Addressing this problem also requires careful evaluation of client countries' commitment, Strategic Environmental Assessments (SEAs) or access to resources, and skills needed to undertake strategic analyses have been completed in connec- tion with Bank projects in the transport, water, ur- the agreed environmental and social actions during ban, and energy sectors (Kjorven and Lindhjem the project implementation process. 2001). The application of SEAs in client countries is also evolving, with encouraging examples, as in Consistency in the application of safeguard policies. South Africa and Central Europe. Assessments by the Quality Assurance Group have highlighted weaknesses in the systematic applica- Increased emphasis on supervision duringproject imple- tion of the safeguard policies. Problems in the mentation. Implementation of safeguard policies implementation of policies have also been linked 23 Making Sustainable Commitments -An Environment Strategy for the World Bank to perceptions, by staff and management, of ambi- quality and ensuring compliance is still evolving. guities in the scope, intent, and requirements of the The challenge of developing an integrated safeguard policies (World Bank 2000f). Management is ad- system has been recognized by the Bank and its dressing these issues through a number of mecha- clients. Staff from the Bank's Environment, Rural, nisms, including the conversion and clarification and Social Development Networks and its Legal of policies, as well as management accountabilities. Department are working together in the Quality A major implication of new lending instruments Assurance and Compliance Unit (QACU) of ESSD will be an expanded need to increase country ca- to provide critically needed bridges between their pacity and to develop new types of monitoring ap- respective types of safeguard expertise. proaches for Bank supervision of the application of safeguard policies. Responding to a changing lendingprofile. The ongo- ing shift in the Bank's lending operation-s to in- clude an increased emphasis on policy and program- matic lending, use of innovative instruments, and Develsping an integrated safeguard system. Within the expansion of Community Driven Development the Bank, the application of the various environ- (CDD) poses new challenges and opportunLities for mental, social, and legal safeguard policies as an safeguard policies (see box 2.1). It shifts attention integrated suite of measures for promoting project from safeguard application in the context of indi- Oi ~ ~ ~ ~ ~ ~ _ BOX 2.1 Community Driven Development: The challenges of acting locally The World Bank has increasingly been working with communities, empowering them and assist ng them to steer their own course of development by defining their own priorities and managing ti eir own resources. This Community Driven Development (CDD) approach creates new challenges 3nd op- portunities for mainstreaming the environment. It provides the opportunity for those most affected by environmental degradation to take charge of reversing it for their own benefit. Given that most resource management decisions are ultimately made at the local level, CIDD is likely to play an important role. Working at this level poses many challenges, however, including tlie com- plexities of establishing or assisting local institutions. Capacity building is important but must take different forms than in the more traditional case of strengthening institutions such as ministrias. CDD is most likely to play a useful role in addressing environmental issues when both their causes and their effects are found within the communities involved, as may be the case, for exam: le, with management of communal forests or pastures. CDD is less likely to be useful where the conse- quences of degradation are felt elsewhere-for example, land use change within the commnu iity that affects waterflows downstream-although the institutions created for CDD could help in broader ef- forts to address these problems. CDD should not be seen as a panacea. An important question is how safeguard principles a-e to be applied under this approach. Under CDD, environmental issues must compete directly with th e many urgent short-term needs and priorities identified by communities. Thus, we need to develop an ap- proach that builds on the positive linkages between empowering communities to manage .heir re- sources and practicing due diligence in protecting the environment from undue harm. 24 Lessons from World Bank Experience vidual projects to entire sectors and sub-sectors. It and a regulatory framework for environmental man- requires a stronger focus on assessing and strength- agement; and providing assistance to improve en- ening country capacity to systematically implement vironmental conditions and managemcnt practices proper safeguards. in a range of areas. Expanding coordination with partners on safeguard Setting environmental priorities policies. Use of EA and other safeguard policies and Analytical work: Making it timely and relevant. instruments can be enhanced by expanding coor- Country -specific, thematic, and regional environ- dination and cooperation with our development mental studies and strategies have been prepared partners from other international financial institu- in many areas (see the bibliography for a selected tions, donor organizations, export credit agencies, list) and have been essential in shaping the Bank's and the private sector. The IFC is coordinating an effot tomapthe nvirnmetal nd oilsf portfolio and policy dialogue. A recent management effort to map the environmental and social safe- review of analytical work, however, notes an over- guard procedures and practices of international fi all decline of such work in the Bank and points to nance institutions, and the Bank continues to be engaged in regular meetings of multilateral devel- particularly disturbing statistics in the environment U ~~~~~~~~~~~~area. According to the report, environment is one opment banks with the aim of better harmonizing of the two areas in which analytical work is most their environmental assessment practices. Measures outdated. During 1995-99, analytical work less that support the use of common approaches to EA than five years old was available for only 14 percent and other types of studies enhance their utility in .. . . . . ~~~~~~~of countries (World Bank 2000b). decisionmaking, improve their quality, increase the efficiency of consultants and other specialists, and Fzocus-group discussions with environmentalex reduce the cost and time of studies. Development of coordinated approaches to safeguard policies at pet''iwn ateprineidct htaa of corinstitutnat app/oprohesto safeguardpoices a- lytical work can have a significant impact on client the institutional and/or project level avoids con- cute'plce n netetdcsospriu flicts over the nature and extent of analysis, pro- caryen: larlywhen: posed mitigation measures, procedures for consul- tation, and disclosure of information. m Environmental issues are part of a major national priority and the costs of inaction are recognized, INTEGRATION OF ENVIRONMENTAL as was the case with projects to reduce saliniza- CONCERNS AND ECONOMIC tion in irrigation schemes in Central Asia and DEVELOPMENT to improve water resource management in Beginning in the late 1980s, the Bank saw the need China, the Middle East, and North Africa for a more proactive approach to addressing the a Environmental issues are a key part of a larger Bank intervention with strong country interest, pressing environmental challenges of development.v Such an approach required a focus on identifying as was the case with environmental issues in the key environment-development linkages and envi- EU accession countries ronmental priorities; building capacity in client W The Bank team and key counterparts in the countries to develp s s pcountry have a shared view of and interest in countiles to develop strategies, policies, institutions, thobeivsftesud the objectives of the study 25 Making Sustainable Commitments -An Environment Strategy for the World Bank Local counterparts collaborate in the study, have cessful implementation when a range of stakehold- a high capacity to absorb, internalize, and dis- ers participates in their preparation. seminate its findings, and are able to influence public awareness and policymaking. According to the OED, however, NEAPs have of- ten been supply-driven, without substantial local Experience has also shown that analytical work ownership (OED 1997), and they did not succeed funded by external sources, such as trust funds, has in stimulating the integration of environ-imental a serious impact only if sufficient Bank resources considerations into economic and social are allocated for managing, discussing, and vetting decisionmaking and policy reforms (OED 1996). the work and linking the results with policy dia- Many governments initiated NEAPs primarily to logue and lending operations. comply with the requirements of the IDA and of donor countries. NEAPs have generally been con- National EnvironmentalAction Plans: The needfor sidered a product rather than a process that needs localparticipation and ownership. The Bank has sup- to be nurtured and integrated into development ported theprparatonofenviromentastraeg strategies. Pressure to accelerate the preparation of ported the preparation of environmental strategies 9 and N ational Environmental Action Plans NEAPs often reduced local participation and own- ership, and the lack of systematic attention to fol- (NEAPs) to identif5r countries' major envuronmen- low-up and implementation constrained th eir role. tal concerns and the principal causes of problems p p and to formulate policies and actions to deal with A remaining challenge is to build on the experi- ence and achievements of the NEAPs in strength- the problems. The preparation and implementa- ening mechanisms and capacity in client countries tion of NEAPs also included a variety of technical to support sustainability in their development. assistance programs to strengthen human and in- stitutional capacity for policy reform in support of Country Assistance Strategies: Integration of e nviron- sustainable development. ment into the process. To date, the recognition of environmental aspects has been uneven in Coun- NEAPs have been successful in raising general en- try Assistance Strategies (CASs), which form the vironmental awareness among important stake- central instrument for the Bank's development as- holders and in creating a framework for discussing sistance dialogue. The environmental component the environmental aspects of economic develop- of a typical CAS is often isolated from the rest of ment. In some instances, NEAPs have guided the the document, and little attempt has been made to allocation of domestic and donor financing for en- link environmental concerns to the core issues be- vironmental purposes. The impact of NEAPs on ing discussed in the CAS. Many CASs treat envi- environmental management capacity, however, has ronment as a distinct sector-with separate fund- been uneven (see, for example, box A.8 in annex ing, objectives, activities, and so on-rather than A). The later generation of NEAPs has often ben- as a cross-sectoral theme. Data and indicators rc- efited from a broad participatory approach. Les- lating to the environment and natural resou:rces are sons from The Gambia, Ghana, Madagascar, generally lacking, as is any analysis of environment Mauritius, and other countries suggest that envi- and natural resource issues and their linkage to the ronmental strategies have a better chance for suc- development process. Reviews of how CASs treated 26 Lessons from World Bank Experience the environment in 1997 and 1999 reveal that there and natural resource issues and other sectors- has been little improvement over this period. There such as agriculture, infrastructure, and tourism, are several good examples, however (see, for ex- as well as macro issues such as trade. ample, box 2.2). An inherent limitation of the CAS is that it is a BOX 2.2 medium-term document, setting priorities for Bank The FY99 Lesotho Country Assistance development assistance for the subsequent three Strategy years in individual countries. More recently, the The Lesotho CAS recognizes that rural poverty Comprehensive Development Framework (CDF) is linked to the serious environmental problems has rovided an oportuni to expand the time confronting Lesotho. The GAS makes a clear pp distinction betweenotho.The impActS ofkenv men- horizon of the Bank's and clients' strategy work in distinction between the Impacts of environmen- tal degradation on the urban and rural poor. Ur- coordination with the broader development com- ban problems are linked to health problems, while munity. rural environmental degradation is linked to a decline in income levels. Urban environmental degradation is managed through government Lending for environmental activities programs that upgrade the basic infrastructure Since the late 1980s, the Bank has complemented of the poor: potable water supply, and sewerage the application of safeguard policies by supporting and solid waste disposal. projects dedicated to improving environmental con- Rural environmental degradation is viewed as a formidable challenge to poverty reduction in ditions and management. The primary focus of Lesotho and is manifested in severe soil erosion, these environmental projects has been institutional resulting in diminished soil fertility and crop capacity development, sustainable natural resource yields, deforestation, and rangeland overgrazing. management, and pollution management. In addi- The government, with support from the Bank, the tion, as described in greater detail in the next sec- EU, and other donors, is developing a compre- hensive agricultural sector investment program tion, the World Bank Group acts as implementing to address these issues. agency for the majority of projects funded by the Source: Hamilton 2000. GEF and the Montreal Protocol (see annexes D, E, F, and I for a more detailed discussion of natural A pilot program on Country Assistance Strategies resource management, urban environmental priori- and the Environment (CASE) has produced sev- ties, climate change issues, and links with the GEF eral lessons on dealing with the environment and program). In mid-2000, the core environment port- natural resources in the CAS: folio (excluding GEF and MFMP projects) con- sisted of 97 active projects with combined lending t2 Integrating the environment into the CAS is of nearly $5.2 billion. This constituted 3.4 percent most successful when there is a strong connec- , of the Bank's active projects and 2.1 percent of to- tion to economic outcomes. w Environmental indicators are effective in rais- tal Bank lending. ing the profile of environmental issues with both country teams and national officials. Evaluating the quality of lending. OED ratings of a In selecting environmental priorities, it is essen- the performance of completed projects indicate that tial to identify linkages between environment the outcome, sustainability, and institutional im- 27 Making Sustainable Commitments - An Environment Strategy for the World Bank pact of environmental projects have improved over sectoral projects. Environmental components are time. During 1995-98,58 percent of closed projects increasing in many sectors, such as agricultare, en- had "satisfactory" outcomes; 50 percentwere judged ergy, urban development, and water and sanitation "likely" to be sustainable, or better; and 25 percent (see figure 2.3). had "substantial" institutional development impact. These ratings were lower than the Bankwide aver- Responding to the changing role of the priva:e sector. age ratings for the period, which were 71, 48, and In the past decade, our portfolio has gradually shifted away from sectors where the role of -he pri- vate sector has increased. This has had important ratings had improved substantially. Seventy-five implications for our approach to environmental is- percent of closed projects received "satisfactory" sues. For example, in the 1970s and 1980s we sup- ratings on outcome (compared with 73 percent ported several industrial pollution control projects, Bankwide); 50 percent were rated "likely" or better often implemented by public enterprises. As our on sustainability (compared with 57 percent involvement in the industrial sector declined, our Bankwide); and 50 percent had a "substantial" or approach to industrial pollution abatement has better institutional development impact (compared changed from financing investments to facilitating with 43 percent Bankwide). good industrial practices and helping establish the regulatory framework and incentives for improved The Quality Assurance Group has completed three environmental performance of the private sector. assessments of the quality-at-entry of active Bank The Bulgaria Environmental and Privatization projects. The second assessment (QAE2) evaluated Support Adjustment Loan, for example, supports the government's efforts to integrate environmen- nine environment projects, while the third (QAE3) tal issues into the large-scale privatizatiorn of en- assessed five projects. In these reviews, the quality- terprises (see box 2.3). at-entry rating for environment projects was 94 percent, second only after the urban sector. Three Involving stakeholders and local communities. Involv- rapid supervision assessments, however, indicated ing key stakeholders in setting priorities and imple- that supervision quality was lower than the Bank average, with a declining trend. Figure 2.3 World Bank environmental lending, fiscal 1990-2000 The core environment portfolio, however, 20,000 18,000 Environment portfolio represents only part of Bank lending with ,, 16,000 =Environmental components in other sectors r ~~~~~Total environmental objectives. Because environ- =14,000 E12,000 ment is not a traditional sector, most "envi- 1 0,000 ronmental projects" are implemented in a o 8,000 :6 6,000 :: _ sectoral context (rural and urban develop- W 46000 ment, water and sanitation, transport, en- 2,000 0 ergy, and so forth). Since 1992, lending 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 through self-standing environmental Fiscal year projects has gradually shifted toward envi- Note: Excluding GEF and MFMP lending, shown in figure 2.4. Environment compo- nents in other sectors include environmental components in the agriculture, energy, ronmental lending as a component of urban development, and water and sanitation sectors. 28 Lessons from World Bank Experience BOX 2.3 Environmental adjustment lending The Bulgaria Environmental and Privatization Support Adjustment Loan (EPSAL), approved by the World Bank Board in 2000, is one of the few Bank loans for environmental adjustment lending. The loan provides budgetary support to the government to cover the costs of integrating environmental issues into the large-scale privatization of enterprises (supported by a parallel financial sector adjust- ment loan). Specifically, EPSAL supports the introduction of an environmental policy, regulatory, and institutional framework; strengthens mechanisms for ensuring that privatized industries will comply with environmental regulations; and introduces a framework for integrating environmental concerns into privatization contracts. It also addresses environmental liabilities, including remediation for past damages. The EPSAL is a good example of mainstreaming environmental issues, optimizing the environmental benefits of privatization, and harnessing the role of the private sector in pursuing sustainable devel- opment. menting projects has been time-consuming but re- improve the management of water resources. In warding in terms of strengthened local ownership Colombia, the Natural Resources Management and commitment to project objectives. In the natu- Program assisted indigenous and Afro-Colombian ral resource management area, local communities communities on the Pacific Coast to prepare natu- are increasingly involved in the design and imple- ral resource management plans and financed the mentation of projects (see box 2.4). In Egypt, the collective titling of over 3 million hectares of land Matruh Natural Resources Project helped tribes (nearly a third of the land area of the Pacific Coast). BOX 2.4 Improving livelihoods by better natural resource management in Nepal Rural livelihood systems in Nepal depend heavily on forest resources for fodder, fuelwood, food, building materials, medicinal plants, and fertilizers. Non-timber forest products also provide a direct source of income and account for up to 50 percent of rural household income in certain areas. Improv- ing the management of forest resources is thus critical for rural welfare. The Hill Community Forestry Project aimed to establish community-based forest management sys- tems to conserve and expand forest resources. It is one of the most successful community forestry efforts in the world. The strategy involved turning over responsibility for management of forest re- sources to local communities through a program of transfer of rights and benefit sharing, supported by a sound policy and legal framework. The program has already established almost 9,000 forest user groups (FUGs), representing over 40 percent of rural households in the hills of Nepal. To date, usu- fruct rights over 400,000 hectares of forest have been transferred in perpetuity to local communities, and are now sustainably managed by the Nepali rural poor. Forest regeneration and community in- vestments have improved, and have generated significant income increases through higher produc- tion of non-timber forest products, fuelwood, fodder, and timber. The program has also helped im- prove agricultural production by reducing soil erosion, improving water availability, improving access to credit through user group revolving funds, and micro-enterprise development. The synergies with environmental conservation are also evident: large areas of formally degraded forests have been regenerated, with forest cover increasing by as much as 11 percent in some districts. 29 Making Sustainable Commitments - An Environment Strategy for the World Bank The participation and vast cultural knowledge of approached capacity development as organizational these local communities made possible the protec- engineering, focusing on improvements in formal tion of the region's fragile riverine ecosystems and organization and physical improvements. All too biodiversity. Consensus-building efforts have also often, such projects have sought to build capacity been successful in setting urban environmental without commitment and to do too mach too strategies and action plans; examples include the quickly. As a result, projects may have not been Metropolitan Environmental Improvement Pro- implemented adequately, or gains made during the gram (MEIP) and the URBAIR programs. The project may have been rapidly reversed once the Mauritania Rainfed Natural Resource Management project ended. Project, for example, is financing the first 5 years of a 20-year program to activate a process of natu- In recent years, our focus on capacity development ral regeneration of land fertility, rangeland vegeta- has shifted from self-standing technical assistance tion, and livestock and forest production by encour- projects to government agencies toward fostering a aging sustainable approaches to resource use (see constructive relationship between the public and box D. 1 in annex D). This lesson is also supported private sectors and civil society, as well as improved by work on the water and sanitation sector, which collaboration among the members of the develop- now often includes hygiene education and commu- ment community. We have supported projects nity involvement. aimed at establishing an incentive framework to improve the environmental performance of private Supporting capacity development. The lack of effec- companies. In Guadalajara, Mexico, for example, a tive institutions for environmental management is pilot project tested how large private companies can often an important constraint on achieving better help their suppliers improve their environimental environmental outcomes. In addition to analytical performance. In the framework of the Chief Ex- and advisory assistance, support for the develop- ecutive Officer's Initiative, enterprises holding tim- ment of environmental institutions has therefore ber concession over several million hectares in the been a key area in environmental assistance. Envi- Congo Basin have set up a structured framework ronmental institutional development (ID) projects for collaboration with govcrnments and interna- have been implemented in nearly 30 countries. Suc- tional NGOs to adopt a code of conduct tha t would cesses have been recorded in, for example, the Po- hold them accountable for environmental perfor- land Environment Management Project and the mance. It is likely that this effort will lead to plac- Chile Environmental Institutions Development ing over 10 million hectares of the Congo Basin's Project. In many projects, however, practical im- production forests under independent certifiable provements in the functioning of the institutions sustainable logging within the coming fiva years. concerned have been elusive. The reasons may be We have supported innovative environmental policy traced to familiar weaknesses with technical assis- and regulatory approaches in several countries (see, tance activities in many sectors. One lesson is that for example, box 2.5). ID projects often lacked a clear focus and encom- passed disparate components implemented by a Through our research and technical assista:lce ac- variety of agencies without a common goal and ef- tivities, we have helped promote the establishment fective coordination. ID projects have traditionally and dissemination of environmental information 30 Lessons from World Bank Experience BOX 2.5 Assistance to support payments for environmental services Many of the themes and actions discussed in the Environment Strategy come together in specific work plans, such as that on payments for environmental services. The services provided by many ecosystems, such as the regulation of waterflows provided by forests, are a key dimension of the link between environment and the livelihoods, health, and vulnerability to natural disasters of the poor. Because of market failures, these valuable services are often lost. The World Bank is working with several clients to develop systems of payments for environmental services that would help substitute for these missing markets. A system is already in place in Costa Rica, and work is under way in El Salvador. This effort is a good example of the complexity of addressing many environmental problems and of the Bank's comparative advantage in helping address them. Establishing a system of payments for environmental services requires both analytical work (to identify and quantify services such as regu- lation of hydrological flows) and investment projects (to assist client countries in establishing the system of payments). The work is cross-sectoral, touching especially on land management and water issues. It requires close attention to economic incentives and to local social and institutional dynam- ics, and close participation with a wide range of stakeholders, ranging from large municipalities to small farmers eking out a subsistence living on the steep slopes of upper watersheds. It involves a mix of site-specific characteristics and lessons that are applicable in a range of countries. disclosure programs such as PROPER-Program Thailand and the Philippines, we have produced for Pollution Control, Evaluation, and Rating-in Environment Monitors, which summarize trends in Indonesia. Based on the positive results in Indone- local environmental conditions and make them sia, a PROPER-type program (ECOWATCH) available to civil society. was established in the Philippines in 1997, and additional programs are under development in Lessons from environmental lending China and Vietnam, also with World Bank sup- The lessons from environmental lending, whether port. The Ghana Environmental Resource Man- in the form of self-standing projects or components agement Project developed a strategy for increas- in sector projects and programs, are broadly con- ing public awareness of environmental issues with sistent with the lessons of aid effectiveness (see box the help of government and NGOs, including the 2.6 for a summary of OED's environmental assess- Green Forum for Development, the Wildlife Clubs ment, and annex L for recommendations and the of Ghana, and the Ghana Wildlife Society. The Bank's responses in the Strategy). Madagascar Environment Project supported the training of environmental specialists and the pro- The importance of ownership and commitment. Lack motion of environmental awareness and education of government commitment and "ownership" is at all levels of Malagasy society. We have also been often cited as the greatest obstacle to improving working on making information on environmental environmental management and achieving sustain- conditions easily accessible. The annual World De- able natural resource use. While the Bank and other velopment Indicators report includes a large number donors often advocate environmentally related re- of environmental indicators, which are also avail- forms and have sometimes linked major budget able separately in the Little Green Data Book. In support operations to them, experience shows that 31 Making Sustainable Commitments - An Environment Strategy for the World Bank BOX 2.6 Focus on the policyframework. Weak environmental Evaluation of the Bank's past management is often a symptom of poor incen- environmental performance tives. Efforts to tackle the symptom will be rapidly In 1999-2001, the World Bank's independent undermined if little is done to alter the underlying Operations Evaluation Department (OED) car- constraints. Thus, for example, projects to intro- ried out a comprehensive assessment of the duce improved water management practices in it- Bank's past environmental performance. The assessment concluded that the Bank had made rigation may not be successful if the policy frame significant progress in safeguarding investments work tends to reinforce the wasteful use of water. financed by the Bank and in helping developing Careful thought must be given to how be;t to se- countries address their environmental chal- l f d quence po lCyV reforms and mnvestmenrs. At recur- lenges. It pointed out, however, that significant challenges remain on both fronts. The report rec- ommended emphasis on three key areas: form efforts into investment projects, but experi- ence has shown that investment projects often make Demonstrating the critical role of environ- ment in sustainable development and pov- poor vehicles for policy reform. Projects tl-at have erty reduction, and incorporating environ- focused on either policy reform or specific invest- mental objectives into its core strategy and ments have tended to do better than projects that operations. attempted to do both. On the other hand, environ- Improving the Bank's environmental safe- guard policies and their implementation mental projects often lead to policy dialogue and Making a shift in the approach to global is- changes in the policy and institutional frarnework sues by focusing on local-global overlaps. affecting environmental outcomes. Through lend- ing for sanitation in China, for example, dialogue Sowice: OED 2001 with the central government helped establish na- t:ionwide tariffs for wastewater collection an d treat- external forces rarely have a real and lasting impact ment. The example of the Bank's call and ;upport at the policy level. The infusion of external funds for The ehase of leae asolndemoupptrt may lead countries to follow institutional models .tha positiv eonmenal goutoes can0some- that positive environmental outcomes can some- that are neither realistically sustainable nor particu- times be achieved without Bank financing by larly efficient, may cause difficult decisions to be changing policies and building a consensus among deferred, and mayundermine rather than strengthen stakeholders (see box E.1 in annex E). government ownership and accountability. National environmental institutions become dependent on The importance of linking environment and develop- erratic donor financing rather than sustained pub- ment objectives. Environmental interventions that lie expenditure in support of national policy objec- are closely linked with development objectivzes and local concerns tend to be more successful than those tives.Transforming public concern about the envi- that attempt to pursue pure conservation objectives. ronment into political action has been most suc- Ae,that A recent OED review showed, for example, that cessful when it has been part of a larger reform, as, Bank-financed forest projects contributed to pov- for example, in two particularly successful cases of erty reduction and sustainable development in sev- environmental management projects, in Chile and eral countries, including Cambodia, China, and Poland. India. The same review noted that the conserva- 32 Lessons from World Bank Experience tion-oriented 1991 Forest Strategy was only par- such reforms fail to take into account market or tially implemented because the Bank was unable institutional failures. Trade liberalization, for ex- to maintain its presence in the forest sectors in ample, encourages timber exports in forest-rich countries such as Brazil and Indonesia. The review economies, but unsustainable deforestation may be called on the Bank to integrate forests more closely an undesirable outcome where policy failures leave into its overall mission of reducing poverty and to forested lands as effectively open-access resources. bring forest strategies into rural development pro- grams. Policy reforms may have additional-and often unpredictable-long-term environmental effects The benefits offostering integrated, cross-sectoralanaly- through changes in employment and income dis- sis and coordination. Environmental interventions tribution. Adjustment-induced changes often gen- have been more successful when they were guided erate new economic opportunities, thereby allevi- by a cross-sectoral strategic assessment of the most ating poverty and reducing pressures on the envi- critical environmental problems, their key causes, ronment caused by overexploitation of fragile re- and cost-effective remedies. Our role in fostering sources by communities living on marginal lands. cross-sectoral coordination and involving environ- However, while growth is an essential element of mental regulatory agencies in macroeconomic and sustainable development, without an effective en- sectoral policy dialogue is often more effective than vironmental regulatory and institutional framework self-standing technical assistance loans designed to it may intensify pressures on environmental re- strengthen environmental management capacity. sources. As structural changes take place, a mecha- Lending operations in infrastructure, rural devel- nism to assess and strengthen the environmental opment, forest management, transport, and other regulatory and management capacity of client coun- sectors have included capacity development com- tries is essential. ponents as part of Environmental Management Plans. Because these project components are closely Conditionality in adjustment lending Since the mid- linked with proj ect performance, they generally have 1980s, environmental components have been ex- more specific performance measures than generic plicitly included in adjustment lending operations, capacity development projects. particularly in the energy, forestry, infrastructure and industrial sectors. According to a recent review, the Environmental aspects of adjustment share of structural adjustment operations with en- lending vironmental conditionality averaged 23 percent in The environmental implications of adjustment the 1990s. Adjustment operations in the energy, lending have received increasing attention since the forestry, and water sectors had the highest share of late 1980s. Measures aimed at restoring macroeco- conditions with environmental focus (World Bank nomic stability and implementing structural re- 2001a). In the particular case of the forestry sector, forms, such as the removal of price distortions and a review by the World Resources Institute (WRI) the promotion of market incentives, often produce of selected adjustment operations incorporating simultaneous economic, social, and environmental forest sector reforms indicates that in a few cases- gains. Adverse effects may occur, however, when for example, in the forest sector in Papua New 33 Making Sustainable Commitments -An Environment Strategy for the World Bank Guinea-the Bank successfully influenced resource including support to a sustained medium-term pro- management practices. The review concludes, how- gram of parallel advisory work, capacity building, ever, that environmental conditionality in that sec- institutional reform, and integrated Bank and do- tor often resulted in easily reversible measures, and nor support of a single government program. On it has rarely succeeded in addressing the institu- the one hand, this trend presents opportunities for tional challenges that constrain the implementa- environmental improvement by strengthening the tion of systemic reform (Seymour and Dubash linkages between public expenditure, poverty reduc- 2000). tion, and environmental quality and by foc using on environmental policy and institutional improve- A 1999 review of quality-at-entry by the Quality ments. It also provides a longer time horizon and Assurance Group (QAG) showed an increase in the greater focus on institutional aspects. On the other coverage of environmental dimensions, with the hand, good practice suggests a systematic assess- share of operations rated "satisfactory" rising in that ment of the environmental aspects of adiustment aspect from 50 percent in 1998 to 77 percent in operations and an increased focus on environmen- 1999. Only a small share of adjustment loans, how- tal institutional capacity and interagency coordi- ever, included environmental indicators as integral nation. components of their monitoring and evaluation systems. In a few cases, sector adjustment loans were In 1999, when the Operational Directive on envi- able to draw on previous environmental analytical ronmental assessment was revised and converted work to define specific conditionality aimed at im- into OP/BP 4.01, sector adjustment loans became proving the environmental performance of the sec- subject to its requirements. OP/BP 4.01 requires tor. In the case of the Russia and Poland Coal Sec- environmental screening followed by an environ- tor Adjustment Loans, for example, extensive mental assessment, as appropriate. The policy ap- sectoral environmental assessments and parallel plies to all sector adjustment operations f')r which technical assistance activities addressed environ- a Public Information Document was first issued mental issues. In Indonesia, previous analytical work after March 1,1999. The existing Operational Di- on environmental issues in the water sector in- rective on adjustment lending, OD8.60, will also formed the Water Sector Adjustment Loan. be updated and converted into an OP/BIP format during fiscal 2002. New trends in adjustment lending. Adjustment lend- ing support has broadened over the last two de- ADDRESSING REGIONAL AND cades from an exclusive focus on short-term macro GLOBAL ENVIRONMENTAL issues and economic distortions in the 1980s to a CHALLENGES wider development approach in the 1990s. This Ten years ago, at a time of rising worldw-ide con- approach includes a complex institutional reform cern over the state of the environment, we began to agenda that requires a longer time horizon, greater help our client countries address regional and glo- adaptability, and support for programs owned by bal environmental objectives. Our initial role was the countries. Programmatic structural adjustment to act as an implementing agency for two global loans and credits, introduced in 1998, apply a more financing mechanisms: the Multilateral Fund for comprehensive approach to adjustment operations, the Montreal Protocol (MFMP) and the Global 34 Lessons from World Bank Experience Environment Facility (GEF). Since then, we have cus, the well-defined technical solutions, innova- multiplied and diversified our initiatives, partner- tive financing mechanisms, and the streamlining ships, projects, and funding sources in an effort to of internal Bank approvals. The GEF program has better help our client countries meet the objectives catalyzed funding for local action in support of glo- of the global conventions. Moreover, there has been bal environmental objectives, effectively engaged a slow but growing realization that global environ- NGOs and other elements of civil society in the mental concerns, such as long-term climate change country dialogue on environmental management, and loss of biodiversity, should be addressed as an and piloted innovative approaches to financing extension of the local, national, and regional envi- biodiversity conservation and renewable energy ronmental issues that underpin sustainable devel- development (see annex I for more detail). With opment. The Environment Strategy offers the op- access to GEF resources, we have also been able to portunity to implement this goal. help riparian countries and stakeholders agree and act on regional environmental priorities, support- Projects and programs for the global ing the development and implementation of re- environment gional conventions or agreements for the manage- A sizable portfolio that directly addresses global ment of a number of international river basins, environmental concerns has emerged over the last shared lakes, regional seas, and shared groundwa- 10 years. It supports efforts by our client countries ter aquifers. GEF resources have also been successful to contribute to global action to arrest the deterio- in catalyzing private sector financing for environ- ration of the global commons, such as climate mental improvements (see box 2.7). change and ozone-layer depletion, as well as the degradation or loss of biodiversity, forests, water, Because of its focus, the MFMP program has been and land resources, which is proceeding on a scale relatively independent from Bank operations. There that gives rise to global concern (World Bank are, however, untapped opportunities for GEF to 2000g). be mainstreamed with Bank operations in the rural (forestry and agriculture), energy, transport, and Since 1991, the Bank has committed more than water sectors. The Bank and the GEF are making $1.5 billion dollars in combined GEF and MFMP fuding, withassociatedFigure 2.4 and MFMP funding, with associated GEF and MFMP commitments, fiscal 1992-2000 funding of $5.0 billion for climate $1,400 change mitigation, biodiversity conser- $1,200 - GEF commitments IC . -- MFMP commitments, vation, the phaseout of ozone-deplet- E MP 000 I$1,000 ing substances (ODS), and protection E E .2 $800 of international waters (see figure 2.4). - =E n $600 i$400 The Bank's MFMP program has con- $ $20 tributed to the phaseout of more than $200 70 percent of the total amount of ODS $0 1992 1993 1994 1995 1996 1997 1998 1999 2000 targeted by the MFMP. Success is at- Fiscal year tributable to the narrow program fo- Note: Commitment amounts are based on World Bank management approvals. 35 Making Sustainable Commitments - An Environment Strategy for the World Bank BOX 2.7 IFC-GEF cooperation The IFC, with support from the GEF in some cases, has helped create a series of innovative invest- ment funds that support various environmental objectives, including The Terra Capital Fund, which invests in private ventures that can sustainably utilize or conserve biodiversity • The global Renewable Energy and Energy Efficiency Fund (REEF), which is designed to mnobilize equity and debt as well as to support smaller and riskier projects • The Solar Development Group (SDG), which builds on important lessons learned from IF ,'s SME investment and project development facilities as well as Bank/IFC experiences in solar :'V busi- ness finance With access to GEF and other donor resources, IFC has also been able to stimulate additional private sector activity and/or NGO partnerships in such areas as energy efficient lighting, advancer: renew- able energy technologies or applications, ESCO financing, sustainable forestry, ecotourism, organic agriculture, and carbon finance. Source: GEF and IFC dociments progress in integrating GEF resources with Bank The GEF and MFMP programs complement a sig- lending. The proportion of Bank-GEF projects nificantly larger share of Bank lending targeted to- with directly associated IDA or IBRD funding rose ward the conservation and sustainable use of steadily from 23 percent in fiscal 1995 to 65 per- biodiversity, the sustainable use of forests, the man- cent in fiscal 2000. The quality of association, or agement of fresh and marine water resources, and blending of GEF resources with Bank funding, the halting of land degradation. The broadercoun- needs to be improved to better harmonize global try and sector dialogue and consequent lending in- objectives with local environmental and develop- directly support such concerns. For example, lend- mental objectives (see annex I for a more detailed ing for energy pricing reform creates incentives for discussion). adoption of climate-friendly technologies. Assis- tance for agricultural intensification or rural non- The Bank has been working with GEE (through farm employment often serves to reduce pressures on natural habitats and biodiversity. Capacity build- the International W~~aters Program), the Global ing for management of local environment.1l issues Programme of Action, and other partners to ac- will help overcome barriers to addressing global tively support the development and implementa- < concerns. These impacts need to be better under- tion of regional conventions for the management stood and evaluated. of international river basins, shared lakes, regional seas and, recently, shared groundwater aquifers. It has also undertaken national projects to support the Mainstreaming the global environment in implementation of regional conventions through the country dialogue the control of non-point source pollution from ag- Continued progress in incorporating global envi- riculture, coastal zone management, and the con- ronfinental objectives at the project level depends servation of wetlands. on how well the environment and its global dimen- 36 Lessons from World Bank Experience sion are mainstreamed in the country dialogue. pendent, transparent multistakeholder verification Progress on this front has been mixed. The analy- of compliance with forestry management standards sis of CASs completed in fiscal 1999 showed that a that protect the livelihoods of the poor. Under the limited number addressed local environmental is- IUCN/World Bank-sponsored World Commission sues of global concern and that GEF activities, al- on Dams (WCD), government, NGO, and indus- though mostly identified, were only in part linked try representatives have laid out key considerations strategically to the CAS objectives. With a few governing the development of dams (see box 2.8). notable exceptions, CASs did not acknowledge a We have also helped catalyze new market mecha- role for the Bank in helping countries address their nisms, as in the case of the Prototype Carbon Fund responsibilities under global environmental conven- (PCF), which demonstrates the feasibility of trad- tions. ing greenhouse gas emission reductions under the emerging regulatory framework of the Kyoto Although operational policies and sectoral strate- Protocol's Clean Development Mechanism gies are largely responsive to global environmental (CDM). The World Bank/WWF Forest Alliance objectives, the analytical tools and skills for mea- was formed in 1998 as a result of both organiza- suring global externalities and understanding their tions' deep concern about the continuing depletion links to national sustainable development and pov- of forests around the world and the effect of this erty are not sufficiently available. Improved coun- depletion on many of the world's poorest people. try sector work focused on the global environment The goal of the alliance is to significantly reduce and linkages with local priorities is needed to in- the rate of loss and degradation of forests of all form the country dialogue. types. Other partnerships have engaged civil soci- ety in implementing projects with significant glo- bal environmental benefits. The Critical Ecosys- Partnerships tem Partnership Fund, for example, provides small The Bank has entered into numerous formal and grants to NGOs to manage ecosystem hot spots informal partnerships, which aim to address issues around the world (see annex K for a list of selected of regional and global importance that cannot be partnerships). addressed at the country level. These partnerships have provided an important adjunct to the tradi- Factors critical to successful partnering include se- tional Bank-government relationship by building lectivity based on alignment with sectoral strate- on the emergence of a vocal civil society and the gies; support for the Bank's country programs; re- increasing importance of private sector investments. alistic expectations of success; and the complementarity of capacity, skills, knowledge, and In a number of these partnerships, we have played competencies of partners. In addition, partnering the role of a facilitator to forge consensus between arrangements need to be based on a time-bound stakeholders on standards of good practice designed commitment (including a budgetary one), evalua- to improve the environmental performance of the tion, and an exit strategy. Finally, mainstreaming private sector. Through the CEO Forum on For- calls for transparency, communications, and feed- ests, we have sought to apply the process of inde- back mechanisms to country programs. 37 Making Sustainable Commitments - An Environment Strategy for the World Bank BOX 2.8 THE CHANGING BANK World Commission on Dams CONTEXT The Report of the World Commission on Dams (WCD), issued as A changing global context has Dams and Development: A New Framework for Decision-Making shaped the Bank and its approach (November 2000), was the product of an effort to bring govern- ments, the private sector, and civil society together to break the to development. Globalization and impasse in the dams debate-to review the development effec- the growing roles of the private sec- tiveness of large dams and develop a framework for options as- tor and civil society have altered the sessment, criteria, and guidelines to advise future decisionmaking. role of our traditional main inter- The Commission concluded that dams had contributed signifi- cantly to power and water supply, food production, and flood pro- locutors-national governrents in tection, but that shortfalls in technical, financial, and economic client countries-but have brought performance had occurred. These had been compounded by sig- new approaches and new vitality. nificant social and environmental impacts, the costs of which were This shift has been evident during disproportionately borne by poor people, indigenous peoples, and vulnerable groups-costs that could have been avoided, mitigated, the past decade, in our changing or compensated through better decisionmaking and benefit shar- lending profile, instruments for de- ing. livering development assistance, and The Commission's proposed framework for decisionmaking is our increased involvement in part- based on five core values-equity, efficiency, participation, nerships with the private sector and sustainability, and accountability. It proposes: civil society. X A rights and risks approach for identifying stakeholders in negotiating development choices and agreements. X Seven strategy priorities for water and energy resources de- New strategic approacies velopment: (1) gaining public acceptance; (2) comprehen- sive options assessment; (3) addressing existing dams; (4) g P sustaining rivers and livelihoods; (5) recognizing entitlements erty, the need to respond to a rap- and sharing benefits; (6) ensuring compliance and sharing idly changing global context, and rivers for peace; and (7) development and security. emerging lessons on development * A set of 26 guidelines for review and approval of projects at five stages of decisionmaking. effort to focus on the needs and as- The Report provides invaluable reference material. It is an im- pirationsofclientcountriesbysup- portant reference document that the Bank can use to assess dams porting broad-based growrh, bot- and discuss these issues with governments and other stakehold- ers. The Bank is developing and implementing an action program, in response, to promote good practices and support innovations partnerships with stakeholders af- that includes actions in the following areas: (a) work with borrow- fected by development decisions. ers in moving upstream, (b) support for institutional reform for Theseprinciplesareexpressedinthe more efficient use of water and energy, (c) effective implementa- tion of the Bank's safeguard policies, (d) support for borrowers in Comprehensive Development improving the performance of existing dams, (e) adoption of a Framework (CDF)-a new ap- more proactive and development-oriented approach to interna- proach to development assistance tional waters, and (f) support for innovative approaches for deal- outlinedbythe World Bank and en- ing with complex water resources and energy management. dorsedbythedevelopmentcommu- Source: WCD 2000. nity (see box 2.9). 38 Lessons from World Bank Experience BOX 2.9 Credits (PRSCs), which support the implementa- The Comprehensive Development tion of Poverty Reduction Strategies Papers. Framework The CDF favors a holistic approach to develop- The Bank's Strategic FrameworkPaper (SFP) iden- ment. It seeks a better balance in policymaking tifies two main pillars of our assistance to clients in and implementation by highlighting the interde- fighting poverty: (1) building a climate for invest- pendence of all elements of development-so- . j cial, structural, human, governance, environmen- tal, macroeconomic, and financial. This approach powering poor people to participate in develop- requires a transition from donor-led development ment. These pillars together embody key elements assistance strategies to the development of a of sustainable development. The SFP also calls for country strategy led by a country itself, with vig- selectivity (a) within countries based on the CDF orous participation by civil society and the pri- vate sector and with the support of multilateral priciples; (b) across countries, guided by income, and bilateral organizations. The key principles poverty, and performance-focusing on countries of the CDF are: where the overall policy environment favors aid ef- * A long-term comprehensive vision fectiveness; and (c) attheglobal level, based on clear a Ownership by the country linkages to our core institutional objective, our le- * Partnership with internal and external actors veraging and catalytic effect, and a balancing of re- • A focus on development outcomes. sources and risks. The CDF is meant to provide a compass-not a blueprint. How the principles are put into prac- Finally, this Strategy mustreflect important changes tice will vary from country to country, depending in the character of the World Bank Group's activi- on economic and social needs and the priorities of the stakeholders involved. ties. It is likely that programmatic and adjustment loans and/or credits and a more comprehensive cross-sectoral approach to development willac The CDF builds on lessons concerning develop- croun foral laprg cha to Bankloend wi som count for a larger share of Bank lending mn some ment-aid effectiveness such as the need for social client countries. The boundaries between the ac- inclusion, better governance, and understanding of tivities of the Bank and the IFC in promoting pri- the cooperative roles of civil institutions, the pri- vate sector development and financing investments vate sector, and donors. It offers an opportunity to in infrastructure are changing, as Bank projects fo- approach environmental challenges holistically, by cus more on supporting structural reforms while catalyzing local initiatives, taking a long-term per- the IFC plays a larger role in financing specific in- spective on development, and focusing on coordi- vestments. These shifts have important conse- nated strategies among development partners. quences for the nature and balance of the activities These principles require new ways of delivering of the environment community within the World development assistance. Traditional investment Bank Group. projects remain important, but they are supple- mented by new initiatives that can support long- These changes in the context and the way in which term programmatic approaches, such as Adaptable we work must be recognized and incorporated into Program Loans (APLs), Programmatic Adjustment our Environment Strategy. Improving the environ- Loans (PALs), and Poverty Reduction Strategy mental dimensions of investment projects-tradi- 39 Making Sustainable Commitments - An Environment Strategy for the World Bank tionally, the Bank's most important tool-is only countries as a mere rerun of what has happened part of the solution. We have to improve our ana- elsewhere in the past. Each country has to find its lytical work to provide the knowledge base for own balance between its many development goals moving environmental considerations upstream in and the constraints on development. The Blank and country and sector programs. New approaches also other development agencies may be able to help by mean that we need to adjust our tools to ensure providing advice and finance, but the role of out- that they continue to fulfill their functions. And side agencies will always be small in relation to do- these approaches must take advantage of the new mestic concerns and the broad incentives provided opportunities created by the active participation of by the external economic environment. a much broader range of actors. These considerations are important when design- The need for selectivity ing interventions in any sector. Lessons on- the de- . . . ~~~velo pment effectiveness of aid have shown that The Bank's environmental activities have to com- development interventions tend to be successful in pete for staff and budget with sectors such as health, circumstances where the client country has a rea- education, social welfare, and rural development, sonably good policy and institutional environment which more directly address issues of poverty. The (Dollar and Pritchett 1998). These general lessons expectations of clients, external groups, manage- have been confirmed by the experience of develop- ment, and operational staff are often at odds and ment agencies in the area of environment (Ibrekk greatly exceed what can reasonably be achieved by 2000). the Bank in assisting client countries in this area. The response has too often been to adopt overly The environment is a relatively new concern for ambitious plans, programs, and policies and to raise expetatons,leaing o dsappintent iththe many developing countries and is often seen as a particular concern of rich countries. Environmen- outcome on all sides. tal institutions within developing country govern- ments are usually new and weak, and their weak- What external assistance can and cannot do. Part of ness is compounded by the fact that they do not the gap between expectations and actual perfor- cnrlsgiiatfnnilrsucs niomn mance arises from different assessments ofwhat the tal concerns sometimes seem to conflict wilth the Bank can realistically achieve. Much of the exter- goals of short-term economic growth, partly be- nal and internal dissatisfaction reflects a belief that cause the benefits of environmental protection of- the Bank should help developing countries avoid ten appear only over the long term and help groups what are now perceived as mistakes made by rich that are different from those who bear the costs. countries and the consequent environmental dam- Our lending and nonlending services have to take age. This belief is reinforced by current knowledge into account these differences in client capacity and and modern technologies that seem to offer the priorities. opportunity for a much less damaging path of de- velopment-the "leapfrogging" discussed with such Setting prioritiesfor the World Bank. The situation enthusiasm in the literature. It is a mistake, how- outlined above highlights the hard choices faced ever, to interpret what is happening in our client by the Bank in allocating its limited budgetary re- 40 Lessons from World Bank Experience sources. If we get involved in too many issues or the importance of greater mainstreaming of envi- prepare too many projects in order to help as many ronmental sustainability and recognized the chal- clients as possible, resources become too thinly lenges of integrating the outcomes of NEAPs and spread, to the detriment of advice and projects. other participatory environmental planning exer- Environmental projects and programs have to be cises into country dialogue and CASs, and ulti- selective. Although it is important to adhere to the mately into lending operations. They recognized safeguard policies in implementing development the need for continued capacity development over projects and programs supported by the Bank, en- a sustained period of time in many poor IDA coun- vironmental objectives and programs, apart from tries-through nonlending activities as well as lend- safeguards, cannot be an important element of ev- ing operations, where possible-in order to build ery country assistance strategy. They have to de- support for environmental measures and the insti- pend on an assessmcnt of environmental prioritics tutional and regulatory infrastructure to cnsure thcir and capacity, county commitment and interest in implementation over time. Capacity development addressing them, and the Bank's comparative ad- has been important to ensure that resources are ef- vantage vis-a-vis other development partners in fectively used for projects and programs that elicit supporting them. the commitment of those who will ultimately be responsible for implementing them. Our primary commitment is, rightly, to our clients. In the case of Bank loans, clients are government The Bank's comparative advantage as a agencies who are ultimately responsible for either basis for selectivity repaying or guaranteeing repayment of project funds. In the case of IFC financing and MIGA The World Bank Group plays an important role in guarantees, clients are private sector entities. We global development. It is active in policy dialogue, can achieve our objectives only with our clients' provides lending and nonlending services to its cli- active participation in designing projects and their ents, and extends private sector financing and guar- commitment to implementing them in an effective antees through the IFC and MIGA. Through its manner. Our priorities and the focus of our assis- convening power and its capacity to mobilize sup- tance must therefore reflect our clients' concerns port and resources from a variety of sources, it can and capacity, as well as our understanding of the work with many development partners and orga- issues and of effective measures for addressing them. nizations toward common objectives. IDA credits and programs are executed with donor The Bank's comparative advantage in the environ- funds. IDA Deputies have consistently emphasized ment area lies in our ability to leverage policy dia- the importance of environmental action, and suc- logue, our comprehensive sectoral coverage, our cessive replenishments have seen a growing focus extensive project development skills, and our con- on environmental issues, including the institution- vening power and global presence. We should use alization of the EA process, the undertaking of these strengths to: NEAPs (initiated in IDA9), and follow-up activi- ties to implement selected NEAP priorities. In the a Encourage countries to adopt policies that cre- IDA12 replenishment, the Deputies emphasized ate appropriate incentives for the proper man- 41 Making Sustainable Commitments - An Environment Strategy for the World Bank agement and efficient use of environmental and framework for sustainable development. This ap- natural resources-for example, by reducing en- proach builds on the skills and role of the World ergy subsidies or adjusting taxes that encourage Bank and draws lessons from the evolution of en- the use of dirty fuels, or by pricing water to re- vironmental policies in countries that industrial- flect its scarcity ized earlier. g Work across sectors to enhance the environmen- tal benefits of projects and programs that pro- From the point of view of maximizing the impact vide access to infrastructure and basic services of our involvement, we should link the lev l of our or promote rural development-for example, by efforts to our clients' overall commitment to tack- combining good management ofwater resources ling environmental problems, and specifical-ly to the with the development of irrigation schemes, or effectiveness of the counterparts with whom we adjusting the design of water and sanitation work. Applying these criteria would result in more projects to increase their health benefits Bank involvement in middle-income countries, * Help countries develop and implement projects where analytical and advisory work have established that focus on critical environmental problems the basis for projects that reflect local priorities and that can be substantially improved or resolved capacity and where there is a strong commitment through specific investments and policy re- to address environmental issues as part of the de- forms-for example, by promoting the use of velopment agenda. clean fuels for heating to improve urban air qual- ity, or helping to establish schemes that give lo- To increase the impact of our activities, ive must cal populations both the incentive and the means find ways of working effectively in countries where to protect wildlife commitment and capacity are limited or almost U Bring together groups of countries and stake- nonexistent. In a few cases, this may be achieved holders to facilitate the transfer of good prac- by concentrating on very specific environmental tices and knowledge and to tackle common prob- concerns that can be addressed in stand-alone lems and issues of global importance in a coor- projects. Otherwise, the best approach is to work dinated manner that draws on worldwide les- through interventions in other sectors--mainly sons of experience, rural development, infrastructure, urban develop- ment, and health-so that environmental concerns This approach is consistent with the view that we are addressed as an integral part of programs to re- should focus increasingly on the broad goal of sus- duce poverty and improve the qualty of life. tainable development. It emphasizes, however, a somewhat different perspective. Our strength lies in mobilizing expertise, financial resources, and The need for a cross-sectoral approach government commitment to implement specific Our experience suggests that confining our ap- programs that are designed to achieve clear short- proach to environmental issues within a traditional and medium-term goals-for example, improve- sectoral framework can hinder the adoption of ef- ments in urban air quality. Delivering concrete im- fective solutions to many environmental problems. provements that matter to local populations can Projects and advisory services that focus exclusively provide a basis for developing a longer-term policy on environmental institutions and policies will usu- 42 Lessons from World Bank Experience ally have only a minor impact on the key environ- organization in 1996 positioned environment in the mental concerns in most countrics. Such activities Bank as a sector, and introduced country-based can sometimes be very productive when dealing programming and budgeting. This organizational with narrowly defined concerns-for example, large framework has provided few incentives for work- point sources of pollution or threats to specific natu- ing across sectors and toward outcomes that are ral resources or habitats. But the causes of and so- influenced by a multitude of interventions in a range lutions to the poor quality of the environment or of areas. As a result, environment units often pur- the degradation of natural resources lie in a combi- sue their own projects rather than influencing other nation of incentives, policies, and institutions that sectors, and there are few incentives for task man- arise out of broad economic and social factors. These agers in other sectors to integrate environmental can only be addressed by working across sectoral objectives into sectoral projects beyond the mini- boundaries to focus on specific outcomes or goals. mum safeguard requirements. For example, improving water management requires an integrated approach, including pricing policies The current allocation of resources is largely deter- that reflect the social value and scarcity of water; mined by the size of new projects rather than by coordination among the competing users of water the complexity of issues and risks. This leads to risk (including agricultural, industrial, municipal, and aversion and to disincentives to prepare complex recreational users); recognition of the value of the but small projects that may have significant envi- ecological functions of water that support liveli- ronmental benefits. Country-based budgeting pro- hoods and long-term development; and mecha- vides little opportunity to address complex nisms for stakeholder participation in decisions af- transboundary environmental challenges in a sys- fecting the availability and quality of water. This tematic manner. In the next chapters, we describe has to be based on a clear set of criteria for envi- how the Environment Strategy proposes to over- ronmental sustainability for the water sector, coor- come these disincentives and problems. dination among agencies that deal with urban and rural water supply and, when appropriate, public NOTES health interventions. 1. The 10 safeguard policies are Environmental The difficulty of pursuing a cross-sectoral approach Assessment (Operational Policy/Bank Proce- * * - ~~~~~~~~~~dures (OP/BP) 4.01), Natiiral Habitats (OP/BP to environmental issues is compounded by the fact d that our client countries are organized along tradi- 4.04), Forestry (OP/BP 4.36), Pest Management tional sectoral lines, and an integrated environmen- (OP/BP 4.09), Involuntary Resettlement (OD tal management approach presents serious institu- 4.30), Indigenous Peoples (Operational Direc- tional challenges for them and for the Bank as well. tive (GD) 4.20), Cultural Property (OP/BP Overcoming these difficulties is a long-term chal- 11.03), Safety of Dams (OP/BP 4.37), Projects lenge. in International Waterways (OP/BP 7.50), and Projects in Disputed Areas (OP/BP 7.60). These policies are complemented by OP/BP 17.50, on The need for institutional realignment Dslsr fOeainlIfrain Disclosure of Operational Information. There is an ambiguity as to whether environment 2. Several safeguard policies, however, existed even should be treated as a sector or a theme. The re- earlier: Operational Manual Statement (OMS) 43 Making Sustainable Commitments -An Environment Strategy for the World Bank 2.32 on Projects on International Waterways People in Bank-Financed Projects (1982); OMS (1977); OMS 2.33 on Social Issues Associated 2.35 on Projects in Disputed Areas (1983); and with Involuntary Resettlement in Bank-Fi- OMS 2.36 on Environmental Aspects of Bank nanced Projects (1980); OMS 2.34 on Tribal Work (1984). 44 Chapter 3 I / The Strategic Framework he Bank's mission of lasting poverty reduction requires that development be sustainable. This means that proper attention has to be paid to the social and environmental aspects of develop- ment challenges, as set forth in our mission statement: " To fight poverty with passion andprofes- sionalism for lasting results. To help people help themselves and their environment by providing resources, sharing knowledge, building capacity, andforgingpartnersbips in the public and private sectors...." The goal of the Environment Strategy, therefore, is to promote environmental improvements as a funda- mental element of development and poverty reduction strategies and actions. The Bank will do this by working with our client countries to set and address their environmental priorities, including those of a regional or global nature, and by supporting sustainability through our operations. This Environment Strategy outlines the priority actions the World Bank plans to take to work with its clients address the environmental challenges of development. In keeping with the World Bank's mission of reducing poverty within a framework of economic development, the Environment Strategy gives priority to issues where the links between poverty and the environment are particularly strong. Therefore, the Strat- egy puts the environmental challenge into a local perspective, focusing on people in client countries and the way environmental conditions and resources affect them. What is required is an approach that focuses on the ways the environment affects people's lives; that takes a long-term view of development and of the environmental factors that affect sustainability; and that con- siders the cross-sectoral and spatial dimensions of environmental challenges. Our approach builds on: a Learning and applying lessons. The broad goals of sustainable development are well established. This Strategy is not about setting new directions but about improving our effectiveness in making the jour- ney. It builds on the achievements and lessons of our past efforts and those of others, and on feedback 45 Making Sustainable Commitments - An Environment Strategy for the World Bank from our clients and development partners. It There is an enormous diversity among the envi- seeks to internalize these lessons, strengthen ronmental challenges faced by the countries assisted commitments, and accelerate progress toward in- by the World Bank. The specific actions required tegrating environment and development. Given to assist each country will vary substantially because the magnitude of the world's environmental they will be tailored to national and local needs and problems, the Strategy focuses on areas where priorities. Some of this diversity can be seen in an- the greatest results can be realized. It is intended nex A, which outlines the priorities for action in to be realistic about what has to be done; about each region. Within this diversity, however, several our strengths and weaknesses; about how to uti- common themes emerge. This chapter c-escribes lize available resources to improve our perfor- these common themes. mance; and about the potential for our assistance to have positive development outcomes. * Adapting toachanging world. Globalization and OUROBJECTIVES other trends have been reshaping the world. The The Strategy sets three interrelated objectives: im- Bank has also been changing in response to these proving people's quality of life; improving the pros- trcnds and learning from our past efforts. It has pects for and the quality of growth; and pr otecting reaffirmed its commitment to poverty reduction the quality of the regional and global environmen- and support for a holistic, client-driven Com- tal commons. As described in this section, our main prehensive Development Framework (CDF). objective is to improve the quality of people's lives- These same principles must be applied to the their livelihoods, health, and security-through Environment Strategy. We should also be pre- better environmental conditions. But it is not pared to respond to and utilize more program- enough to improve the quality of people's lives to- matic lending approaches and a changing Bank day. It is also important to ensure that the use of lending profile to promote environmental natural resources today does not underniine the sustainability. The Strategy has to guide this long-term prospects for development and irnproved transition. welfare in the future. This requires attention to : Deepening our commitment. To fight poverty policies, economic incentives, institutions, and so- through long-term sustainable development, we cial stnicture-the quality of growth. Fin ally, the have to promote a strategic shift from viewing search for solutions needs to go beyond individual environment as a constraint on development, or countries because deterioration in the quality of the as a separate sector, toward viewing it as an in- regional and global commons-including shared tegral part of development. Environment can no natural resources and climate change-th-ireatens longer be only the concern of a small, special- many developing countries and global ecological ized group. To make a substantial and lasting balances. difference, we must ensure that environmental concerns are fully internalized throughout the Bank. ~~~~~~~~~Improving the quality of life Bank. Environmental quality is inextricably linked with This chapter focuses on the substantive actions we the quality of people's lives. It plays a particularly plan to take; Chapter 4 discusses the institutional important role in the lives of the poor. It is the poor realignment necessary to implement these actions. whose health is most endangered by air and water 46 The Strategic Framework pollution, whose livelihoods are most affected by nities for interventions to stem degradation in the loss of forests and fisheries or by soil erosion, particular areas (see box 3.1 and annexes B and and who are most likely to be at risk from droughts, D for more details). floods, and environmental catastrophes. Efforts to o Prevent and reduce environmental health risks. achieve concrete environmental improvements that Environmental factors such as unsafe water and make a difference to people's lives must be an inte- pollution are key contributors to the total bur- gral part of economic development and poverty re- duction programs. Our first goal, therefore, is to BOX 3.1 improve the quality of life by focusing on environ- Improving livelihoods through sound mental improvements that affect livelihoods, health, management of micro-watersheds and vulnerability, especially of the poor: In Nigeria, a project under development (the Mi- cro-watershed and Environmental Management Project) would support community-managed in- kd ECnhance livelihoods by protecting the long-term vetnsinmcowerhdinixtas vestments in micro-watersheds in six states productivity and resilience of natural resources and within three macro-watersheds: the Niger ecosystems. Because poor people often depend Trough, the Upper Benue Trough, and the heavily on the productivity and environmental Anambra/lmo Trough. The project would support direct investments at the community level, giv- services of natural resources such as land, water, dinectisiomang autho community - . ing decisionmaking authority to community as- and forests, we will help improve the manage- sociations. The investments may include activi- ment of these resources. This means, for ex- ties to mitigate gully erosion, promote reforesta- ample, helping communities form local organi- tion, or provide basic water supply and sanita- tion and environmental education. zations to manage watersheds and forests; as- sisting farmers to invest in their land or in com- The project, which is a partnership with a Bank- financed Community Driven Development monly held areas; and granting or clarifying project, would also provide support to the fed- property rights. Community Driven Develop- eral, state, and local levels of government to (a) ment (CDD) projects and programs provide a develop an enabling environment; (b) reduce the framework for supporting such local initiatives. potential for conflict among the stakeholders; (c) provide incentives for long-term investments; and We will ncouage ad asist tereormoin- (d) develop capacity at all levels for environmen- centive systems that influence how resources are tal assessments. The project would promote part- used. This means help in strengthening or es- nerships and collaborative arrangements in wild- tablishing property rights, removing govern- life and biodiversity management, including in- centives for promoting sustainable use of ment-induced distortions, and piloting new biodiversity. Direct program benefits are ex- mechanisms, such as systems of payments for pected to include (a) decreased land degrada- environmental services, to deal with market fail- tion in upland areas; (b) reduction of downstream ures. Where our understanding of the linkages flooding; (c) increased production of fodder, fuelwood, and grasses; (d) increased agricultural between resource degradation and livelihoods is productivity on arable lands; and (e) improved inadequate,wewill build the analyticalbase and management and use of biodiversity and natu- institutional capacity to improve natural resource ral habitats. The project places special empha- management, and we will help governments de- sis on improving the economic and social condi- .. . . ~~~~tions of women and vulnerable groups. sign appropriate policies and identify opportu- 47 Making Sustainable Commitments - An Environment Strategy for the World Bank den of disease and impose significant economic suring the health outcome of individual inter- costs, particularly for the poor. Our interven- ventions is often not feasible, it is important to tions will focus on cost-effective measures to establish the pathways of impacts and use prox- prevent and reduce environmental health risks. ies to measure progress. Because our main ob- Specifically, we will concentrate on work with jective is to improve health outcomes, we will clients on reducing people's exposure to indoor establish baselines and monitor trends in envi- and urban air pollution, waterborne diseases, and ronmental health indicators when feasible. In toxic chemicals (see box 3.2 and box B.2 in an- addition to avoiding much human suffering, nex B). Our activities will include a cross-sectoral these measures will also reduce the high costs assessment of the key sources of environmental borne by many countries for expensive curative health problems; identification of cost-effective measures (see annex C for more details). solutions in a range of sectors, including water .Reducepeoples vulnerability to environmen.talhaz- and sanitation, energy, transport, health, and ards. Milons of poor people are vulnerable to agriculture; and projects and programs designed natural disasters and environmental hazards. to achieve specific health outcomes. While mea- Climate change, which is predicted to increase the frequency and severity of such events, may The South Asia Urban Air Quality further increase the vulnerability of many poor Management Initiative countries and areas (see annex F for more de- tai). Our environmental interventions will aim South Asia remains the only region in the world tal O where extremely high levels of urban air pollu- to reduce this vulnerability by assessing the im- tion show no sign of stabilization or improvement. pacts of natural disasters, supporting upland re- Regionwide, urban air pollution is estimated to source management and payments for environ- cause over 250,000 deaths and billions of cases mental services, improving weather forecasting of respiratory illnesses every year. The urban anthe disemiaonmfweather-relaten poor are especially vulnerable to the health im- pacts of urban air pollution. mation, providing information to the poor about The majority of policy interventions to date have the risks they face, and stabilizing hillsides and focused on controlling emissions from road traf- coastal zones. As in the case of environmental fic, but the actual contribution from road traffic is health risks, these measures will also help lessen not known with any degree of certainty. The the vast burden imposed on developing coun- South Asia Urban Air Quality Management Ini- tiative is aimed at addressing these issues. En- tries to repair the damage caused by natural di- vironment, energy, and infrastructure staff in the sasters. Bank are developing the strategy, in partnership with client countries and other donors. The strat- egy is aimed at supporting the regionwide pro- Improving the quality of growth cess of developing and adopting cost-effective The sustainable management of man-made envi- and realistic policies and efficient enforcement ronments and naturalresources-forests,land, and mechanisms to reverse the deteriorating trend in urban air quality in South Asian countries, and water-is an essential condition for long-term eco- particularly to reduce the ambient concentrations nomic growth and lasting improvements in people's of fine particles (the most serious threat to pub- well-being. Sustainable economic growth depends lic health in the region), on the effectiveness of government policies, regu- 48 The Strategic Framework lations, and institutional frameworks. The impor- BOX 3.3 tance of an appropriate policy environment that Strengthening national EA capacity: creates a climate conducive to investment has be- The METAP experience come even greater as the role of the private sector To improve the business climate while achieving has expanded. sustainable economic development, clear and transparent environmental rules, regulations, and legal liabilities are needed. In 1998, METAP ini- Recognizing the important changes in the respec- tiated an Environmental Assessment (EA) Insti- tive roles of the public and private sectors, our in- tutional Strengthening project, through the World terventions will focus on the environmental policy, Bank's Development Grant Facility (DGF), to as- regulatory, and institutional framework on the one sist Mediterranean basin countries in acquiring the necessary technical and policy tools to es- hand, and on the role of the markets and the pri- tablish credible and operational EA systems. EA vate sector in supporting sustainable development systems in Albania, Croatia, Egypt, Jordan, Tu- on the other. We will: nisia, Turkey, and the West Bank and Gaza were assessed, and the results were used to define Help improve the policy, regulatory, and institu- specific action plans to improve national EA sys- tems and to increase their coherence with inter- tionalframeworks for sustainable environmental national norms and World Bank and EC envi- management. Our interventions in this category ronmental guidelines. A second phase, initiated will (a) assist client countries improve their en- in 2000, established an EA Center in Tunisia; vironmental policy, regulatory, and institutional extended the assessment of EA systems to Al- geria, Morocco, Lebanon, Syria, and Yemen; un- frameworks at the national and sub-national lev- dertook collaborative workshops; and established els to ensure that their natural resources are ef- a network of EA directors. A third phase of the fectively managed and that people's health is project is now envisaged to test the feasibility of protected from environmental factors; (b) sup establishing full compliance with World Bank EA procedures so that responsibility for overseeing port client countries in strengthening their en- the EA process can be shared with national gov- vironmental assessment (EA) systems and prac- ernments in selected countries. This third phase tices including analytical and technical support would also build capacity to carry out strategic for moving environmental assessments to ear- impact assessments and to assess the implica- lier stages of decisionmaking (see box 3.3); (c) tions of international trade for the environment. reinforce the positive role of markets and the environmental benefits of sectoral and macro- programs and projects; its ability to transfer ex- economic reforms, such as those affecting en- perience from other developing countries; and ergy or water prices, property rights, fiscal and its work with development partners. trade reforms, and resource management; and W Support environmentally and socially sustainable (d) support better governance, increased trans- private sector development. The private sector is parency and access to environmental informa- becoming a major player in many areas previ- tion, public participation in decisionmaking, and ously controlled by the public sector, including environmental education in client countries. The environmental issues. The Bank will play a key Bank has a strong comparative advantage in this role in helping our clients improve the invest- area because of its long-term dialogue with cli- ment climate, so as to enhance investor confi- ent countries and involvement in investment dence and stimulate private investment. As part 49 Making Sustainable Commitments -An Environment Strategy for the World Bank of this effort, we will work to support incentives Global Environment Facility (GEF) and t he Mul- and programs that encourage the private sector tilateral Fund for the Montreal Protocol (MFMP). to become a driving force in sustainable devel- In moving the Environment Strategy into imple- opment. Increasingly, it is recognized that envi- mentation, we remain fully committed to these ronmental sustainability improves competitive- obliations. Simi tugou contit]ed work ness. As part of the World Bank Group, the IFC and MIGA will promote, through their invest- under the Prototype Carbon Fund (PCF) and other ongoin progrms we il be able to he'-p client ments and guarantees, environmental and so- ongoing programs, we wil cial responsibility and good environmental man- countries prepare for their effective participation agement practices in the private sector. IFC will in the Climatc Change Convention and in proposed also invest in environmentally friendly private carbon markets through instruments suchi as the sector operations (see annex G for more details). Kyoto Protocol's Clean Development Mechanism The World Bank will take a strategic approach and Joint Implementation Initiative. toward addressing the environmental aspects of programs supporting private sector development, Recognizing the potential synergy betwecn local, such as environmental issues in privatization programs. We will facilitate partnerships be- regional, and global environmental management, tween the public and private sectors and civil we will seek ways to improve the quality of the re- society to resolve environmentally sensitive is- gional and global commons, principally through sues and agree on benchmarks for good envi- interventions that simultaneously bring local ben- ronmental management. A critical part of this efits to developing countries (see box 3.4).'T1ogether agenda is to identify those areas in which a strong wvith WRI, UNEP, and the GEF, the Bank is sup- public sector role-for example, through regu- porting the Millennium Ecosystem Assessment to lation-remains ~ ~ ~ ~ porin theMilenspensastmblessen.t lation-remains indispensable, improve our understanding of the state of global ecosystems and links with development. (Box 3.5 Protecting the quality of the regional and provides background on the Millennium Ecosys- global commons . . tem Assessment and the related activities of the The degradation of regional and global environ- Intergovernmental Panel on Climate Change.) mental resources can constrain economic develop- ment. It often disproportionately affects develop- Our experience has shown that interventions with ing countries and poor people. Addressing such is- regional or global environmental objectivcs can only sues requires international policy dialogue and ac- be effective if such programs take into account the tion to resolve conflicting views and interests. development needs, local priorities, and constraints of countries and communities. Going beyond the As noted in the preceding chapters, the Bank has complementarity between national and glo'hal ben- accepted the mandate to help client countries ad- efits will require compensation from the global dress the objectives of the international environ- community and its financing mechanisms, such as mental conventions and their associated protocols, GEF and MFMP Accordingly, our global environ- including the conventions on climate change, mental interventions will build on the following five ozone, and biodiversity. It provides this assistance principles: in its role as implementing agency for the financ- 9 Focus on the positive linkages bet'ween poverty re- ing mechanisms of these conventions, including the duction and environmental protection. Many in- 50 The Strategic Framework BOX 3.4 Linking local and global benefits: Energy efficiency projects in China Local environmental benefits are a primary motivating factor for China in pursuing global climate change mitigation activities such as energy conservation, fuel switching, and renewable energy de- velopment. Industrial boilers, not including electric power boilers, account for some 30 percent of total coal consumption in China and together with small furnaces are responsible for some 45 to 50 per- cent of local air pollution impacts. The WB-GEF Fuel Efficiency Boilers Project is transferring ad- vanced, efficient, and cleaner international industrial boiler technology to China, which will dramati- cally lower the energy requirements of China's coal-fired boiler industry. For instance, the project is supporting "fluidized-bed combustion" boiler technology, which improves fuel efficiency and can lower sulfur emissions by 75 to 95 percent. The project also supported the transfer of advanced particulate control technologies to reduce particulate emissions and improve local air quality. Overall, the project is providing financial benefits by lowering the energy requirements of boilers, improving local air quality by reducing sulfur and particulate emissions, and lowering global CO2 emissions in a cost- effective way. terventions designed to reduce poverty by im- as climate change. The Bank will help assess the proving local environmental quality and sustain- long-term impacts of climate change on the vul- able natural resource management will also pro- nerability of people in client countries. These vide regional and global benefits. Our Strategy assessments will contribute to broader poverty focuses on these areas of overlap. For example, reduction strategies. community-based forest management projects U Facilitate transfer off nancial resources to client can support sustainable livelihoods while reduc- countries to help them meet the costs of generating ing forest loss and preserving biodiversity and global environmental benefits not matched by na- carbon sinks. tional benefits. In cases where actions designed * Focusfirst on local environmental benefits, and build to address regional and global concerns are not * ~~~~~~~~~in the short- and medium-term interest of de- on overlaps with regironal and global benefits. There veloping countries, the Bank will seek to engage are many areas of potential overlap between lo- vo g g g the GEF (see annex I for details), the MFMP, cal and global environmental benefits. For ex- ample, replacing low-quality biomass fuels with or other special financing mechanisms to com- modern and renewable energy sources in rural pensate countries for the incremental costs they incur to protect the global commons. In this re- and peri-urban households reduces indoor air gard, assistance with the phaseout of persistent pollution, mitigates respiratory diseases, and re- g , organc pollutants (POPs) Wi be an important duces greenhouse gas emissions. Similarly, new area in which we can put the lessons learned switching from coal to gas heating for urban under the MFMP program to work. We will also households yields both local and global benefits. facilitate the establishment of cooperative Our Strategy focuses on these areas of overlap. mechanisms for the joint management and de- • Address the vulnerability and adaptation needs of velopment of shared natural resources such as developing countries. Poor countries suffer dis- water. proportionately from the degradation of the glo- a Stimulate marketsfor global environmentalpublic bal commons and from its consequences, such goods. We will help our client countries develop 51 Making Sustainable Commitments - An Environment Strategy for the World Bank BOX 3.5 Providing decisionmakers with scientific information: The Millennium Ecosystem Assessment and the Intergovernmental Panel on Climate Change Significant international environmental conventions have been agreed on in recent years--among them, the UN Framework Convention on Climate Change (UNFCCC), the Convention on Biocliversity (CBD), the Convention to Combat Desertification (CCD), and the Wetlands Convention (Rarrsar). To assist policy decisions under these agreements, governments and the public need timely ard trust- worthy scientific, technical, and economic information. Two international bodies are charced with meeting this need. * The Millennium Ecosystem Assessment is a four-year international scientific assessment of the past, present, and future condition of Earth's ecosystems; the potential impacts of changes in ecosystems on their ability to meet human needs; and policies, technologies, and tools for im- proving ecosystem management. The MA will provide information not just on the biolocical as- pects of managed and unmanaged ecosystems but also on the economic values of the goods and services produced by ecosystems and the potential economic and health impacts of ecosys- tem changes. Assessments will be conducted at the global and subglobal (regional, natio ial, and local community) levels. X The Intergovernmental Panel on Climate Change (IPCC) assesses past, present, and future changes in the Earth's climate; the impact of climate change on human health; ecological sys- tems, and socioeconomic sectors; and technologies, practices, and policies for adapting to or mitigating climate change, with attention to estimates of the economic costs. The assessments emphasize the regional aspects of climate change and cross-cutting issues such as develop- ment, equity, and sustainability. To carry out these activities, more than a thousand natural and social scientists and technc:logists, drawn from academia, governments, and the private sector worldwide, are involved in info mation preparation and in peer-review. The MA and the IPCC will assist the implementation of the World Bank's environment, forestrM, water, and rural strategies. For example, the IPCC's vulnerability assessments identify ways of incorporat- ing climate variability and climate change considerations into sector (water resource managiement, agriculture, forestry, and health) planning. The indicators developed through the MA will expanc policy- relevant information on ecosystem goods and services available to clients, and strengthen clients' capacity to undertake critical assessments of ecosystem goods and services. and benefit from trade in environmentally cred- processes. The Environment Strategy emphasizes ible goods and services, such as greenhouse gas the importance of continuing our efforts to inte- emission reductions through the PCF, and from grate, or "mainstream," the environment into de- independently verified, sustainably harvested, velopment programs, sector strategies, and policy natural resources. dialogue, mindful of the institutional requirements and capacity constraints in our client countr:es. This OUR TOOLKIT emphasis will translate into actions throughout the Bank. A number of instruments-our "toolkit"- Environment is not a sector or add-on. It has been are available to the Bank in working toward its en- long recognized that environmental considerations vironmental objectives and mainstreaming environ- have to be reflected at early stages ofdecisionmaking mental considerations into programs and projects. 52 The Strategic Framework This section outlines the main elements of an ac- (PRSPs) is an urgent task. Work on this is currently tion plan for using this toolkit in implementing the being piloted, giving us an opportunity to ensure Strategy. We begin with our analytical and advi- that environmental issues are fully integrated from sory activities, which help identify and prioritize the beginning (see box B.3 in annex B). The pilot environmental problems and feed into the formu- program, which started in November 2000, entails lation of countries' development strategies and our (a) a systematic review of all interim and full PRSPs own assistance strategy. Once identified, key envi- from an environmental perspective to rate the de- ronmental priorities can be addressed in a number gree of mainstreaming (see box B.3 in annex B); of ways. The main tools are investment projects (b) workshops on mainstreaming for PRSP teams (stand-alone environmental projects, environmen- in client countries; (c) training for World Bank staff; tal components in sector projects, or improved (d) development of the Environment Chapter in project design), technical assistance, and policy- the PRSP Sourcebook; and (e) analytical work on based lending. Finally, in addition to addressing poverty-environment links. This program is actively environmental challenges through projects and pro- pursuing partnerships with other interested donors. grams, proper safeguards and good environmental management practices must be applied in all our Other elements of the Strategy, such as the work lending in order to avoid or mitigate significant toward systematic application of country environ- adverse environmental and social impacts. Improv- mental diagnostic analysis and the structured learn- ing the safeguard policies and their application, ing on applying Strategic Environmental Assess- therefore, is another important pillar of the ments (SEAs), will be undertaken gradually. Dur- Strategy. ing the first year of implementing the Strategy, we will focus on refining methodologies, coordinating The actions described here are a mixture of short- with clients and partners, piloting, and learning. term and long-term measures. Taken as a whole, Table 2 in the Executive Summary provides details the Environment Strategy is clearly-and deliber- about targets for implementing the Strategy in the ately-a long-term strategy that will require ad- short and medium term. justments in our programs, tools, and institutional incentives. It will take some time before all its ele- Strengthening analytical and advisory ments are fully in place. This does not imply a lack activities of action in the meantime. We are not beginning from a standing start; rather, we are building on a Analytical work is the foundation for defining stra- well-established work program. The Strategy pro- tegic priorities and integrating environmental con- vides a framework for refocusing our efforts and cerns into projects and programs. A systematic ap- realigning our programs, tools, and institutional proach is needed to ensure that environmental con- incentives to become more effective. siderations enter the development planning pro- cess at an early stage by taking a multisectoral and In implementing the Strategy, we will give priority long-term view of development. The country policy to certain areas that are particularly urgent. For dialogue, as well as the quality of lending and policy example, integrating environmental considerations related interventions, depends on a spectrum of into the new Poverty Reduction Strategy Papers information to influence decisionmaking. Some of 53 Making Sustainable Commitments - An Environment Strategy for the World Bank the critical questions in the policy dialogue con- tions) and that they are used routinely ir, CASs. cern setting priorities for environmental interven- We will work to improve the coverage of tife genu- tions, managing the assets (including natural as- ine savings indicator to include the impacts of air sets) on which development depends, and building and water pollution, soil degradation, and deple- up country capacity to implement, monitor, and tion of subsoil water. We will continue to p ublish a enforce environmental legislation and regulations. range of macro environmental indicators (for ex- ample, access to safe water and sanitation, rates of Country-level environmental analysis. A good over- deforestation, emissions of CO2) for all client coun- view of conditions in a country is an indispensable tries, as part of the World Development Lidicators first step toward designing an appropriate strategy series. We will work with clients and devel]opment to address the challenges it faces. The Bank regu- partners to coordinate assistance in preparing and larly monitors and reports on many aspects of con- making available the results of country-level envi- ditions in its client countries-through poverty as- ronmental analyses. sessments and public expenditure reviews, for ex- ample. Diagnostic work on environmental issues, Strategic Environmental Assessments (SEAs). by contrast, has tended to be sporadic. There is a SEAs-sectoral, regional, and policy-focuscd-will need to make it more systematic by building on and be applied as an analytical tool to address c omplex complementing NEAPs and other country-led en- cross-sectoral environmental issues; and to help vironmental work, as well as assessments by the integrate environmental aspects at an early stages Bank and development partners to inform and in the decisionmaking process of sector str ategies, deepen the Bank's country dialogue, particularly in programs, and projects (see box 3.6). We will de- connection with the preparation of PRPSs and velop a structured learning program on SEAs. We CASs. Country diagnostic work, including an as- will build on our experience with SEAs in energy- sessment of environmental policy, regulatory, and environment linkages (Energy-Environment Re- institutional capacity, will be also essential in con- views), urban air quality management, and river nection with the enhanced role of programmatic basin management and will gradually expa nd their lending in some countries. Monitoring environ- application to other areas (see box El in annex F). mental trends has to be an important part of coun- The Bank will play a catalytic role in building and try environmental diagnostic work. The Bank has strengthening SEA capacity in client ccuntries. developed macroeconomic sustainability indicators Over time, a more systematic application of SEAs such as genuine savings (saving rates adjusted by will reduce the costs of project-level safcguards, changes in natural capital and by damage caused improve compliance, and help integrate environ- by pollution), which are useful tools for monitor- ment into upstream policy dialogue and program- ing trends in the way economies use their resources. matic lending programs. We will make targeted efforts to ensure that key national environmental and sustainability indica- Advisory activities. Our advisory activities are es- tors become an integral part of the core country sential in helping client countries assess their envi- indicator set (the "Country at a Glance" tables that ronmental challenges, set priorities, apply effective appear in loan documents and other key publica- policies and regulatory instruments, and build en- 54 The Strategic Framework BOX 3.6 vironmental managcmcnt capacity. In addition to Strategic environmental assessments assistance with systematic assessments, these ac- Environmental Assessment (EA) has proved to tivities will include issue- and country-specific ana- be a powerful tool for minimizing the possible lyticalandadvisoryworkto support the policydia- adverse environmental impacts of specific logue with countries. Itwill focus on areas with the projects. It is limited, however, by its narrow greatest likelihood of having a significant impact scope-by the time an EA is conducted, funda- moental-poliy dhectimeanEAisions ha ene y bend on country policies or programs, and on countries mental policy decisions have generally been made, often involving far more significant envi- where our counterparts are committed and able to ronmental tradeoffs than the specific investment apply the results. The aim will be to build on in- itself. In addition, EA is essentially reactive, ig- digenous knowledge and in-country capacity and noring environmental problems that are not as- on work undertaken by others. This requires better sociated with planned projects. collaboration with clients and development part- Strategic Environmental Assessments (SEAs) ners and a mechanism for capturing and dissemi- can complement project-specific EA, providing n i a tool for proactively examining and prioritizing environmental problems at the national, regional, variety of mechanisms to provide advisory services subregional, or sectoral level. They make pos- including formal training, technical assistance, and sible an integrated approach to identifying the an enhanced use of the electronic media and dis- causes of environmental problems, applying an tance learning opportunities. Priorities for analyti- ecosystem approach, and suggesting areas in calandadvisoryassistanceincludeareaswherethe need of interventions-whether projects or policy changes (or targeted, in-depth analytical work). Bank has an advantage compared with clients and By examining a broad range of environmental development partners. The key themes to be cov- issues, SEAs can help in prioritizing, both among ered include: environmental problems and across sectors. And * Poverty-environment linkages. The linkages be- by moving environmental assessment upstream tween environmental degradation and poverty in the policymaking process, SEAs can ease the are often location-specific. A better understand- task of shifting from remedial to preventive ap- ing of these linkages is essential for influencing proaches in dealing with environmental prob- iof teseclinkagesiessEnti al ing lems. SEAs can also enable the assessment of p r s broad policies and programs that fall outside the sues need to be integrated into the analysis un- scope of traditional project-level EA. dertaken for PRSPs. Several environmental in- Unlike the formalized approach of project-level dicators are expected to be standard parts of EAs, SEAs consist of sets of guiding principles PRSPs, such as lack of access to clean water and and menus of analytical and consultative ap- adequate sanitation, and reliance on dirty fuels proaches that are applied flexibly and that are that cause indoor air pollution in many poor carefully tailored to the specific context of the countries-both major contributors to excess country, including its political, socioeconomic, and cultural setting. By their nature, SEAs are mortality and disease among the poor. Integrat- intended to be consultative processes, involv- ing environmental issues, particularly those re- ing stakeholders both at central policy levels lated to natural resource management, into pov- (government ministries, national assemblies) erty reduction strategies and policy lending will and in civil society. require analysis of household data and the in- 55 Making Sustainable Commitments - An Environment Strategy for the World Bank troduction into household surveys of new ques- assessment, management, and policy, and will tions on the use of environmental resources. We support this activity with appropriate training will support pilot studies and programs to inte- programs both for our clients and for our staff grate environmental questions into household (see box 3.7 for an example). surveys and will strengthen local capacity to understand poverty-environment linkages and Addressing environmental priorities design effective interventions. We will also sup- through projects and programs port the analysis of environmental health link- Addressing environmental priorities that affect the ages for poor households. long-term sustainability of development r,quires a Economic evaluation of environmental resources proactive approach to find and implement cost- andenvironmentaldegradation. The costs of en- effective solutions though investment projects and vironmental degradation are considerable, but addressing key policy issues through projects and they need to be better quantified to be of use to programs (see box 3.8 for the principles guiding our involvement). economic decisionmakers. The Bank has devel- oped methodologies and macroeconomic Investment projects have traditionally been the sustainability indicators, such as genuine saving Bank's main tool and remain an important vehicle rates, and methods for the economic valuation for pursuing development objectives and achieving of health damages and environmental services. results on the ground. All investment projects have Further work is needed to refine methodologies, to consider environmental aspects and adopt good to share them with clients, to extend the scope of assessments-including methodologies for BOX 3.7 assessing climate change aspects-and to main- Promoting good practice in environmental management stream their use into Bank project assessment and client practice. Considerable efforts have The Bank Group's Pollution Prevent on and Abatement Handbook 1998 (1999b) provides a also been devoted to capacity building in this comprehensive set of policy- and industry-spe- area, in collaboration with the World Bank In- cific guidelines for international good practice in stitute and other organizations such as IUCN, pollution management. It emphasizes pollution OECD, and CEPAL. prevention rather than control and underlines the Cross-country transfer ofgoodpractices i'n envi'ron- role of good management rather than sole reli- ance on technical solutions. mentalpolicy and management. The World Bank is in a good position to capture and apply rel- The Handbook was prepared jointly by tile Bank evant lessons among countries and regions in and the IFC, drawing on technical expertise and inputs from the UNEP and the UNDP. WIHO, bi- environmental policy, management, and tech- lateral governments, industry specialists, private nical issues and to identify and transfer experi- sector organizations, and civil society provided ence and good practices among developing coun- extensive comments. tries. We have developed a strong knowledge The Bank Group is making a special effcrtto dis- base and will build on it in our capacity devel- seminate the lessons and guidelines summarized opment efforts. We will also continue preparing in the Handbook and to continue preparing, dis- and disseminating good practice notes, guide- cussing, and disseminating policy and sector- specific guidance notes on emerging issues. lines, and papers in key areas of environmental 56 The Strategic Framework BOX 3.8 multisectoral, investments should be relatively How we will work simple and commensurate with the institutional In preparing and implementing our environmen- capacity of clients, and the outcomes should be sus- tal assistance, the World Bank will aim to ad- tainable after the project is over. Environmental here to the following guiding principles: investments also perform best where the lack of fi- * We will be selective and will work on the nance is a clearbarrier to improving environmental highest-priority problems. conditions. In addition, environmental projects or g We will promote cost-effective solutions. We will promote market-basedti solutions. t project components have been most successful when XWe wlill promote market-based solutions to environmental problems. local political and economic stakeholders are com- m We will consider the long term to promote mitted to improved environmental management environmental sustainability. and when local officials are exceptionally capable We will take an ecosystem-focused and cross-sectoral approach. of implementing the project. In designing environ- S We will set realistic targets. mental interventions, it is therefore important to s We will listen to and work with people in our measure them against four clear criteria (in addi- client countries and incorporate their views into our activities. BOX 3.9 Adaptable Program Loan for improving environmental management principles according to environmental management in Brazil the safeguard policies. In addition, priority envi- The Brazil Second National Environmental ronmental problems can also be addressed by dedi- Project (NEP II), approved in December 1999, cated projects or by including environmental ac- allows eligible states to receive grants from the tivities in sector projects. Depending on country Ministry of Environment for the protection or sus- tainable use of high-priority environmental re- conditions and demand, we will work on both fronts sources. Typically, grants are made available to but will focus particularly on ensuring that sectoral stakeholder coalitions consisting of municipali- investment projects take full advantage of oppor- ties, state and/or federal government agencies, tunities to incorporate environmental consider- private sector corporations, and NGOs. To be eligible for grants, states must demonstrate that they have carried out environmental manage- ply programmatic lending instruments to environ- ment policy reforms. As states attain higher lev- mental issues, for example, in support of long-term els of fulfillment, the grants are increased. environmental policy change (see, for example, box The NEP 11 is designed as an Adaptable Pro- 3.9). gram Loan (APL) with three phases. A scoring system measures the aggregate level of fulfill- Improvingthedesignandperformanceofenvironmen- ment of policy reforms by all the states. When talproject's and components. Our investment projects the aggregate score of all states participating in the system is reached, the next phase is trig- are most effective when they address specific as- gered, and new loan funding can be released. pects of a problem; when the problem can usefully States may apply for more than one grant, but be addressed by financing investments; when cli- only by progressing to a higher level on the re- ents have capacity to implement; and when the form matrix. The Ministry of Environment pro- project can be expected to have a major impact on vides technical assistance to help states under- take the selected policy reforms. the problem. Thus, while analysis should be take_the_selected_policy_reforms. 57 Making Sustainable Commitments - An Environment Strategy for the World Bank tion to the criteria the Bank normally applies to such as CDD will be a challenge in future work. any investments): Improving the design of these activities requires * Do we have a good understanding of the causes work on several fronts. of the environmental problem? Is the analysis multisectoral? Does it take a long-term view? Coordinating investments andpolicy reforms. Expe- * Have we identified implementable interventions rience shows that investment projects should be that tackle the most important part of the prob- considered not in isolation but in the context of a lem? broader strategy. In particular, investment projects ' Is lack of finance a major reason the problem are unlikely to bring lasting results in a ciistorted persists? Are we sure that money will make a policy environment. At the same time, experience difference? Is financing sustainable? also indicates that individual investment projects a Is the solution sustainable? Can we ensure that are often poor vehicles for policy reform-inter- the problem will not return or that the situation ventions tend to be most effective when they either will not revert once the project is over? attempt to change specific local environmental con- ditions in one geographic area or attempt to make These criteria will help project designers to assess broad pohiy or macro-level changes. Interventions what they are trving to achieve and how they should I ~~~~~~~~~that try to do both-that mix specific investments go about it. Exceptions will always be possible, but with broad policy changes-tend to be less success- using these criteria would put the onus on the team fid. This Strategy, therefore, promotes interventions proposing the investment to show why the particu- that are clearly in one category or another. The ac- lar activity should be carried out. In addition, we will apply the criteria set out under "Protecting the ented, as much as feasible, toward concrete, mea- quality of the regional and global commons" in this surable objectives. In each case, careful thought chapter to build on overlaps between local, regional, nest egvnt h rprsqecn fplc and global environmental benefits and to use grant reform e an spe iestents. financing through the GEF, MFMP, and other mechanisms to support interventions with global benefits. Applying a location-specficfocus. Because the link- ages between natural resource management and Imp roving the use ofproject-level indicators. As man- poverty are complex and location-specific, and be- dated by BP 10.00, outcome indicators are intended cause implementation capacity varies, the details dated~~~~~~~~~~~o effrt to integrat envionmnme consideraaremtende to influence the design and implementation of of effortstointegrateenvironmentalconsiderations projects. Guidelines for project indicators are cur- into investment projects, adjustment lending, and rently available in a second-edition note on Perfor- programs will clearly vary from country to country. mance Indicators for Environmental Projects In some cases, the links between environment, pov- (Segnestam 1999). Methods for indicator design erty reduction, and economic growth are already following the input-output-outcome-impact model reasonably well understood, thanks to data avail- are now well developed as part of the Logical ability and prior analysis. Such countries will pro- Framework process. Making better use of project- vide opportunities for early interventions, and the level indicators and extending them to instruments lessons could then be applied elsewhere. In some 58 The Strategic Framework cases, the lack of adequate data and analysis may BOX 3.10 mean that we can only raise questions and outline Capacity development activities by other what would be necessary to provide reasonable an- international organizations swers. Nonetheless, it is important to recognize the a United Nations Environment Programme limits of our knowledge and understanding. (UNEP). Capacity building is an integral part of UNEP's programs. Recently, UNEP and UNCTAD established a Task Force on Trade, Supporting capacity development. Improving coun- Environment and Development to assist de- try capacity to address environmental issues is a key veloping countries in better integrating their challenge. Capacity development requires commit- policies in these areas. m United Nations Development Programme ment to reform and positive change and long-term (UNDP). UNDP's flagship activity is the Ca- involvement in policy dialogue and institutional pacity 21 Program, launched at the 1992 reform. It cannot be effectively addressed by tradi- UNCED Conference, which supports capacity- tional short-term projects. The Bank's compara building programs and public-private partner- ships in developing countries. tive advantage lies in linking environmental capac- * Organisation for Economic Co-operation and ity development with its ongoing sectoral opera- Development (OECD). A Task Force estab- tions and policy dialogue, rather than in self-stand- lished following the 1992 UNCED Confer- ing technical assistance projects for general insti ence has published guidelines on Capacity Development in Environment. tutional development. In a few cases where strong U Asian Development Bank (ADB). The ADB commitment exists in the country to undertake has substantially increased its capacity- environmental institutional reform, we will apply a building portfolio in environment in the last programmatic approach and seek long-term in five years. Priority is given to environmental management and institutional strengthening. volvement to support the process and monitor its * Inter-American Development Bank (IDB). results. The Bank will collaborate at the country The IDB has a substantial portfolio of op- level with other development partners involved in erations in strengthening national environ- environmental assistance to improve overall devel- mental management. Under the auspices of the Forum of Environment Ministers of Latin opment effectiveness (see box 3.10). America and the Caribbean, the World Bank and the IDB have been engaged in promot- Enhancing the environmental outcome ofadjustment ing a south-south dialogue on experience lending. The basic structure of incentives in an with institutional development projects. economy should promote the sustainable use of natural resources and encourage activities that miti- duction Support Credits (PRSCs), which are based gate pollution and other forms of environmental on PRSPs, are emerging as key lending instruments. damage. The natural framework for pursuing this We will help enhance the positive environmental goal is by contributing to policy development outcome of programs supported by these loans. through integrating environmental considerations into adjustment operations where possible and ap- We are beginning the process of updating and con- propriate. In some countries, adjustment lending verting the Operational Directive on adjustment will be the most important lending instrument for lending (OD8.60) into an Operational Policy/Bank the Bank. In low-income countries, Poverty Re- Procedure (OP/BP) format. The broad issues to be 59 Making Sustainable Commitments - An Environment Strategy for the World Bank addressed during the conversion include both posi- with the safeguard policies, establishing an inte- tive actions with regard to the environment in ad- grated compliance system, and improving results justment loans, and the mitigation of negative con- on the ground, as follows: sequences. Initial considerations for good practice 5 Strengthening compliance with safeguara' policies. and, possibly, operational policy, include: We are placing increased emphasis on the imple- mentation of safeguard policies, primarily * Upsra reiws. One 'ssue for consideration Upstream reviews. One issue for consideration through greater attention to the consistency of is how Regional environment units may carry application across the Bank, strongeT central out upstream reviews of adjustment loans in or- der to improve the design of any environmen- . . . . ing and reporting. We will improve supervision, tally sensitive components. particularly the implementation of environmen- o Country diagnostic studies and assessments. tal management plans and other comrn:tments Strengthening analvtical work on country diag- relmated ect-leve safegrd willten- related to project-level safeguards. We will en- nostic analysis and SEAs maybe particularly im-p hance systematic training of operational staff and portant and useful in countries undergoing sig- nificant structural change; they can assist in iden- tifying resources at risk, defining strategic envi- mentation (see chapter 4 for more detail). ronmental priorities, and assessing environmen- 1 Building an integrated safeguard compliance sys- tal management capacity. tem. We will complete the process of integrat- * Mlonitoring. It is being proposed that resources ing the implementation of the safeguard poll- identified as being at risk be monitored during cies at both Regional and central levels. A ma- structural adjustment programs. jot focus of ongoing work by the Quality As- surance and Compliance Unit (QACU l and the Improving the safeguard system Regional Environment Units has been th-ie elabo- ration of an enhanced compliance system that The Bank's safeguard system is an essential tool for includes the use of a new instrument, the Inte- integrating environmental and social concerns into grated Safeguard Data Sheet (ISDS), as part of development policies, programs, and projects. It has the project identification, preparation, and ap- to reflect evolving international good practice in praisal process. The ISDS will provide for the environmental assessments and management, re- comprehensive review of the application of all spond to changing development contexts, and adapt 10 safeguard policies and will better capture to new lending approaches. Improving the safe- guard system is a dynamic and incremental process powthentalcumatv pimcts. T iswpr;c wi l that involves both the Bank and its clients in a se- lationship to each other, reduce the risk. of indi- ries of actions designed to create better linkages between policies and their application to projects vidual policies being overlooked in the project and programs. We will follow a two-pronged process, and provide for more effective disclo- approach: sure of information. Following the adoption of the ISDS, priority will be given to improving 1. Addressingshort-term priorities. In the short term, coordination between environmental and social our priority is to focus on improving compliance analysis of project impacts and risks. 60 The Strategic Framework X Improving results on the ground. Our objective is vation Loans (LILs), and Programmatic Struc- to improve project performance on the ground. tural Adjustment Loans and Credits (PSALs/ Fuller integration of safeguard principles within PSACs). Programmatic lending instruments project design, and especially in project imple- may involve lending for a series of projects (for mentation, ultimately requires greater reliance example, APLs), support for policy reforms (for on national-level safeguard systems. Thus, the example, PSALs/PSACs), or approaches for Bankwill strive to support in-country improve- low-income countries (for example, PRSCs) (see ment in safeguard capacity, effective implemen- World Bank 2000c for a description of lending tation, and transparency in processes. To this instruments). While most Bank projects and end, we will strengthen our capacity building programs are carried out by government enti- efforts through training and technical assistance, ties, CDD projects are implemented at the and encourage the participation of local com- grassroots level. These new types of lending op- munities and independent organizations in erations and instruments provide important op- monitoring activities. A comprehensive set of portunities and challenges for the innovative environmental indicators, which has been de- application of the principles of the safeguard veloped by the Bank over the years, will be in- policies in cooperation with clients and partners. corporated into operational work. In this context, the Bankwill develop and apply a systematic review system, enhanced analytical 2. Responding to new challenges. Over the long term, and diagnostic tools, guidelines for good prac- the Bank seeks to develop an integrated policy tice, and indicators to ensure that the environ- framework to replace the current 10 free-standing mental implications of the changing lending pro- safeguard policies. Development of a single unified file are properly considered. The use of new in- safeguard policy would strengthen performance, struments and the application of safeguard poli- provide for a consistent broad-based approach, al- cies to these activities will require a targeted low greater flexibility in application, and permit training program for Bank and client staff in- harmonization of requirements and processes with volved in these activities and evaluation of ex- client countries. This integrated framework would periences to develop good practices and to in- improve the Bank's performance in internalizing the ternalize the lessons learned. environmental objectives and principles embedded * Moving safeguard policies upstream in the in safeguard policies. We would systematically ap- decisionmaking process by integrating them into ply them in the program and project design, imple- the strategic planning processes used at the na- mentation, and evaluation processes. Specifically, tional, regional, program, and sectoral levels. an integrated framework would respond to a series This can be accomplished by improving the ana- of challenges: lytical underpinning as a routine part of Bank a Adapting to a changing lendingprofile. There is a and client development planning processes. In- gradual shift in Bank lending toward using pro- creased attention will be given to early identifi- grammatic lending instruments, such as Poverty cation of issues, evaluation of alternatives, and Reduction Support Credits (PRSCs), Adaptable assessment of risks at the country and sector lev- Program Lending (APL), Learning and Inno- els. Strengthened analytical work such as SEAs 61 Making Sustainable Commitments - An Environment Strategy for the World Bank will help evaluate complex short-, medium-, and mental resources sustainably. Success ful me- long-term environmental issues in critical sec- diurm- and long-term environmental arnd social tors. This approach will support integration of performance of clients, in both the puollic and safeguard policy issues during early planning private sectors, mandates mainstreamir]g of the stages and allow for cross-sectoral and ecosys- principles of safeguard policies, effective use of tem-based analysis. In the next five years, a struc- EA and other instruments, and client owner- tured learning program for SEAs will be intro- ship of the consultation and disclosure processes. duced to gradually increase SEA application, The Bank, therefore, will need to search increas- identify good practices, and disseminate lessons ingly for ways of making safeguards more uni- learned. form and accessible across donor programs, as- s Working with partners on coordination, dissemi- sessing capacity to adopt and internalize the nation, and harmonization. The Bank Group will principles of sustainable development and meet continue to take an active role in working with international good practice, supporting) capac- other international financial institutions to bet- ity development, and creating incentives and ter coordinate efforts on the development and rewards for good performance by delegating re- application of safeguard policies, dissemination sponsibility increasingly to borrowers with dem- of good practice, and specific measures to facili- onstrated capacity to manage environmental as- tate harmonization of policies and processes.The pects in their own programs. To achieve this, primary mechanism for this process is a Work- the Bank and its partners will need to increase ing Group on the Environment of International their emphasis on capacity development at na- Financial Institutions (IFIs), which has an on- tional and sub-national levels in governments, going work program that includes a compara- academic and applied research organizations, tive review of policies and procedures and iden- private sector and consulting firms, anc NGOs. tification of key elements of environmental man- These capacity-building measures should rec- agement systems. The Bank is actively cooper- ognize the importance of national policies, laws, ating to transfer experience between institutions and procedures and seek to adapt the applica- in addressing environmental aspects of opera- tion of safeguard policies to local conditions. tions that use financial intermediaries. Compa- Gaps between borrower and Bank requirements rable steps to improve coordination on safeguard will be narrowed through initiatives focused on policies with the private sector will be under- achieving greater levels of harmonization be- taken in cooperation with the IFC, MIGA, and tween Bank and client procedures. We will as- the IFI Working Group. sess the EA capacity and systems of our client X Focusing on client ownership, capacity, and safe- ' ' ~~~~~countries and consider such capacity in the re- guard system. In the longer run, environmental view, clearance, and monitoring process ofBank- assessments and safeguards, in general, will have funded projects. the greatest impacts if they are internalized by borrowers in their own development programs. Our ultimate objective is to help client coun- SELECTIVITY IN IMPLEMENTATION tries introduce and implement their own envi- The action agenda for the Strategy described in this ronmental safeguards to manage their environ- chapter is diverse and challenging on numerous 62 The Strategic Framework fronts. In order to be effective, we will have to ap- reform, the size of the economy, and access to ply the principle of selectivity to guide implemen- external finance and markets. The Strategy pro- tation. The Bank's Strategic Framework Paper vides a framework for setting priorities for envi- (SFP) and Strategic Directions Paper (SDP) pro- ronmental assistance at the country level. Using vide a framework for selectivity at three levels: the corporate strategic framework, selectivity for environmental assistance at the country levelwill 1. At the corporate level, priority is given to programs be based on a diagnosis of environmental pri- supporting global public goods that convey orities and management capacity, country de- shared benefits worldwide and to corporate ad- mand, and consistency with the CAS. At the vocacy in priority areas that enable the Bank to same time, the Bank is committed to ensure the fulfitl its poverty reduction mandate. Specifically, implementation of its safeguard policies in all these corporate priorities include the protection countries. Country capacity will be an impor- of global environmental commons (climate, wa- tant consideration in the allocation of Bank re- ter, forests, biodiversity, and ozone depletion) sources and attention to safeguard compliance. and corporate priorities for advocacy in a range of areas with strong environmental linkages in- This means that we will not work on all fronts of eluding environmental health, governance, em- the Strategy in all countries. Also, while new means for delivering our services to client countries are powerment, and conditions for good investment introduced, our engagement in other areas will di- climate. The Strategy defines corporate environ- mental priorities in detail, and guides their in- minish, taking the lessons on effectiveness to heart. On the lending side, this may well reduce our in- tevelpograt into regional strategiesandcountry- volvement in supporting large-scale end-of-pipe level programmi. °opollution control projects and traditional freestand- 2. At the regional level, Regional Strategies (sum- ing environmental institution-building projects. On marized in annex A) have set regional and sub- regional priorities reflecting critical assessments e onl Bank sistane in support of a icy 91 e~~~~~~~~~~~mphasis on Bank assistance in support of a policy of environmental constraints on poverty reduc- dialogue on poverty-environment linkages and tion and growth; outlined the Bank's compara- environment-growth linkages and a reduced in- tive advantage in supporting actions on agreed volvement in highly specialized technical studies. priorities; and selected cost-effective ways to deliver our support. Regional Strategies are es- Due to the great diversity among the Bank's client sential to show the linkages between corporate countries in their environmental challenges, envi- objectives and the regional context, reflecting ronmental policy and management frameworks, and regional differences and synthesizing corporate other country conditions, no simple guidelines can priorities with country-focused programming. be set for matching country types with priority Bank Annual business plans will further specify ac- assistance. During the implementation of the Strat- tions to be undertaken in accordance with the egy, enhanced country diagnostic work, the annual Strategy. business planning process, and its alignment with 3. At the country level, priorities and the mixture of the corporate Strategy framework will enable us to Bank assistance instruments will be determined improve the environmental input to country pro- by many factors, including progress in policy gramming and priorities. 63 Making Sustainable Commitments - An Environment Strategy for the World Bank The success of the Strategy depends on more than ferent parts of societies, and support of the devel- the Bank's actions. The Bank can help develop ca- opment community. pacity in addressing environmental issues in client countries, and it can support environmental Internally we have to strengthen our institutional sustainability in its operations. But in the end, coun- commitment to the Strategy's objectives, play a tries themselves have to become committed to take leadership role in measuring the impact of our en- the necessary measures toward making their devel- vironmental interventions, and become a role model opment sustainable. This is a gradual process; it in corporate responsibility. These issues are dis- takes time, perseverance, a concerted effort of dif- cussed in further detail in the next chapter. 64 Chapter 4 - - / .' 1 J / Institutional Realignment S ustainable development is a long-term goal. Achieving it requires a concerted pursuit of eco- nomic prosperity, environmental quality, and social equity. It calls for behavioral changes by indi- 1tw viduals and organizations. Throughout the world, this change is occurring. By virtue of our long-term development focus, World Bank management and staff are naturally expected to take the lead in making a commitment to corporate environmental responsibility and to ensure that this commitment is increasingly reflected at all levels of our organization. We understand that social and environmental issues are integral parts of development and prosperity and that overcoming associated costs and constraints requires true corporate commitment. Since it also requires institutional realignment, it would not be a sudden move but a gradual process. The global context in which we operate is rapidly changing. New directions of dcvelopmcnt assistance emphasize holistic, client-driven, and programmatic approaches to delivering lending and nonlending ser- vices and build on new alliances with a broad range of stakeholders. This means that, while we have to learn from past lessons to improve our performance in traditional lines of business, we also need to prepare for a transition to changing development assistance. This chapter defines how the above requirements translate into an institutional realignment that includes actions to (a) strengthen accountability and incentives, (b) coordinate work across sectors in the Bank, (c) adjust the skill mix, and (d) align resources with strategic objectives. It also calls for striving for partnerships with others-members of the UN family, conservation organizations, bilateral donor agencies, private sec- tor companies, and civil society groups-to ensure more efficient use of scarce development resources. Finally, it defines a transparent system for measuring and monitoring progress in implementing the strategy. 65 Making Sustainable Commitments - An Environment Strategy for the World Bank STRENGTHENING ACCOUNTABILITY responsibility for the Bank's environmenta3 activi- AND INCENTIVES ties has been on the Bank's environment profes- The Bank's Environment Strategy calls, first, for sionals alone. While the role of the latter remains an accountability framework that is client-centered, critical, properly addressing environmental prob- acknowledging that our core responsibility is to lems requires that environmental awareness be fully support sustainable development in our client coun- integrated into the work of the operational depart- tries. This framework has to distinguish between ments. actions depending on client demand and those for which Bank staff are responsible, so that we can The organizational structure varies significantly ensure that the proper incentives are in place and among Regions, including the place of envirninmen- that our staff performance can be measured accu- tal units, mechanism of cross-sectoral coordination, rately. Within the Bank, the Strategy underscores and the level of dccentralization to field offices. the importance of maintaining clear lines of respon- These differences-together with the large varia- sibility and a strong and consistent set of incen- tion among Regions in number of countries, de- tives applied throughout the institution. (Table 4.1, velopment and environmental challenges, and on- at the end of this chapter, summarizes key respon- going programs-make it impossible to have a one- sibilities in a matrix form). size-fits-all model. There are many common issues, however. This section describes the respective roles As with other strategies, implementation of the of operational and environment groups in imple- Environment Strategy will be closely monitored by menting the Strategy and how incentives will be senior management, and progress reports will be aligned with these roles. submitted to the Board periodically. To ensure that feedback is properly channeled to operational man- Operational departments agers, implementation reports will be disseminated to regional management and network teams. Regional Vice Presidents (RVP) and RegionalMan- agement Teams (RMTs). Regional Vice Presidents Given the Bank's organizational structure, imple- are responsible for resource allocation to the imple- menting the Environment Strategy will require the mentation of the Regional Environment Strategies collaboration of two overlapping groups within the and for aligning accountability for mainstreaming Bank: (1) the operational departments, including environment. RVTPs also share with the ESSD Vice the country management units that are responsible President (ESDVP), responsibility for compliance for formulating the Bank's assistance strategy in with Bank safeguard policies, monitored and over- each country and assigning budgetary resources, and seen by safeguard compliance teams in each Re- the regional non-environmental sector units that gion, and the Quality Assurance and Cornpliance support them, and (2) the Bank's environment pro- Unit (QACU) in ES SD. RVPs are accoun table for fessionals in regional sector departments, field of- overall compliance with safeguards in their regional fices, the central Environment Department (ENV), portfolio and pipeline, for ensuring adequate fund- and other parts of the Bank (see description of the ing levels for compliance, and for carrying out bi- environment family below). So far, the burden of annual safeguard risk assessments that identify spe- 66 Institutional Realignment cial-risk projects to be monitored at the corporate X Understanding the role ofthe environment. For the level. RVPs are jointly accountable with ESDVP environment to be fully integrated into Bank for corporate signoff for special-risk operations. In activities, constraints facing CMUs in incorpo- addition to safeguard compliance, achieving better rating environmental concerns into their pro- development outcomes requires that key environ- grams need to be fully understood. Because of mental priorities are identified at the regional, sec- their day-to-day interaction with clients and tor, and country levels and that RMTs have a mean- awareness of their problems, CMUs are aware ingful process in place to promote appropriate pro- that good environmental planning and manage- grammatic responses and support cross-sectoral ment are integral parts ofgood development, not collaboration, as needed. simply a bureaucratic requirement. Few country managers would disagree with the notion that Regional sector departments. Regional sector depart- environmental problems can play an important ments are responsible for undertaking the work role, but this understanding is not always ac- programs of their respective sectors based on coun- companied by a clear sense of how environmen- try-focused programming and budgeting. Environ- tal problems affect development issues in the ment is one of the regional sector departments (see countries they work on, what tools are at their discussion below). Any effort to integrate environ- disposal to address these problems, and what mental considerations into other sectors' activities institutional support they can draw on to de- will, therefore, require close collaboration with staff velop realistic options to address them. There from these units. As mentioned above, however, remains, therefore, an important place for ad- efforts will be needed to improve institutional in- vocacy and specialist support-although this sup- centives to work cross-sectorally. Working with re- port must be demand-driven, specific, targeted, gional sector units also raises issues of training, as and appropriately integrated into country-team discussed below. work, rather than generic or supply-driven-and for training that fully takes into consideration Country Management Units (CMUs). The strategy country conditions and constraints. The efforts calls for increased attention to mainstreaming en- discussed in the previous chapter to improve our vironment into country and sector programs, for knowledge of environmental problems through which country teams and other sectors are respon- enhanced analytical work and indicators will play sible. CMUs play a particularly important role, in a critical role in this regard. that they have the primary responsibility for coun- U Prioritizing interventions. The primary task of try and sector policy dialogue, designing lending CMUs is to respond to clients' poverty reduc- and nonlending services, prioritizing interventions, tion agendas. In doing so, they face many de- coordinating with sector units (see below), and al- mands on their scarce resources and must de- locating Bank resources to different activities. Un- cide how to allocate them across activities in their derstanding the constraints that country teams face client countries. With so many pressing concerns in properly integrating environmental consider- to address, it is inevitable that some worthy ac- ations into their work is critical to improving the tivities will have to be cut. Here too, attention Bank's role in addressing environmental problems. to environmental issues beyond the proper 67 Making Sustainable Commitments - An Environment Strategy for the World Bank implementation of safeguards cannot be decreed. The environment family CMUs, with their detailed knowledge of coun- Within the Environmentally and Socially Sustain- try conditions and priorities, are best placed to able Development Network (ESSD), the Bank prioritize interventions. This is a heavy respon- Group's environment professionals are organized sibility, and the temptation to micro-manage as a family, with members from Regional Environ- should be resisted. But CMUs will be unable to ment Departments, the central Environment De- properly assess the importance of environmen- partment, environment staff in the Legal and De- tal issues without adequate information on their velopment Economics Vice Presidencies, the World extent and severity, so here, too, the analytical Bank Institute (WBI), and IFC. It is led by the activities described in the previous chapter will Environment Board (EB), which consists (if direc- play a key role. The farther upstream in the tors and managers of these units (see figure 4.1). A decisionmaking process this information is avail- fundamental principle of this Strategy is to align able, the more useful it is-hence the emphasis the role of the environment family with common on country-level analysis, SEAs, and similar ana- practice. Its core functions ought to be to regulate, lytical tools. advise, and facilitate the activities of the rest of the Responding to institutional incentives. The incen- Bank to promote environmental sustainability. tive system-budgets, reporting, and perfor- mance evaluation-as it currentlv exists, does not REDs have three major roles: they (1) are respon- provide enough support to working on environ- mental isus atcual hnthyrqie sible for overseeing and providing technical guid- mental issues, particularly when they require anetimletevro etlsfgudpl- ance to implement environmental safeguard poli- cross-sectoral work. Thus, operational staff cies; (2) undertake analytical and advisorv activi- members need to be provided with enhanced in- ties; and (3) help prepare and supervise lending ac- centives and rewards for giving proper consid- tivities. The organizational structure of depart- eration to environmental issues. In order to rec- ments, and the relative importance they assign to ognize good performance, the environment these roles, varies across Regions. The Strategy is family of the Bank will institutionalize high- being translated into detailed annual business plans, profile "green" awards for staff and managers in to be approved and monitored by RVPs. The lead other sectors and areas of the Bank for their col- ro ility for facilitating the preparation of the responsibllt fo 1allam th rprhno h laboration in safeguards and for mainstreaming regional business plans rests with the environment environment into analytical work and operations. sector directors/managers. In these plans, particu- Emphasis will be given to recognizing contri- lar attention would be paid to integrating environ- butions to addressing priority environmental ment into the Bank's poverty agenda; moving en- challenges and effective supervision of projects vironment upstream in country strategy processes, with complex environmental and safeguard is- including CAS preparation; working with clients sues. The system of quality assessments and re- preparing PRSPs; and conducting early environ- wards will be reviewed and revised to focus on mental review of programmatic and policy-based best practice, due diligence, and results on the lending. As part of implementing the Strategy, ground. Regional environment directors /managers are ac- 68 Institutional Realignment Figure 4.1 vide technical guid- Environment in the ESSD network aneon policy appli- Environmentally and Socially Sustainable Development Network I I cation are better rec- ognized, and more RuralSociamily }weight is given in per- formance evaluation Environet J. to due-diligence ser- vice. In addition, Environment Boa^rd, I more attention is be- I l l l ing paid to corporate Regional Central Environment IFC accountability aspects environment Environment units in Environment Unit in performance evalu- units in Department WBI LEG DEC ation of staff and AFR LCR (Anchor) managers in other EAP MNA sectors. Likewise, ECA SAR greater weight needs Note. AFR - Sub-Saharan Africa; EAP - East Asia and Pacific; ECA - Europe and Central Asia; DEC - Development to be given in evalua- Economics; IFC - International Finance Corporation; LCR - Latin America and the Caribbean Region; LEG - Legal, MNA- Middle East and North Africa; SAR - South Asia Region; WBI - World Bank Institute. tions to cross-sectoral countable for their efforts to stimulate cross-sectoral work. For environ- coordination and for providing technical guidance ment staff, annual results agreements and perfor- for integrating environmental considerations into mance evaluations will be routinely used by envi- the CAS and sector policy dialogue. ronmental managers to assess staffperformance and reward staff for their effectiveness in influencing The annual business planning and reporting pro- sector and country programs. cess is expected to overcome the weaknesses of the current incentive structure, which favors project CentralEnvironment Department (ENV). ENV, like management and is not well suited for encourag- other central departments of the Bank, has several ing advisory services and cross-sectoral coordina- key functions. It (a) coordinates the Strategy prepa- tion. It is expected to enhance communication with ration and the monitoring of its implementation; other sectors, heighten management attention, (b) provides operational support to turn innova- strengthen accountability, and ensure consistency tions into reality and to help identify and transfer with corporate priorities. good practices in environmental management and project design across Regions (knowledge manage- Recent changes in the safeguard system have ad- ment); (c) facilitates quality enhancement oflending dressed other weaknesses of the current system- and non-lending activities; and (d) provides the the conflict between clearance and advisory func- public face of the World Bank on environmental tions, and inadequate corporate consistency and matters and coordinates corporateprograms andpart- oversight. They have also raised the profile of staff nerships. Three aspects, however, make ENV dif- performance in this area. Staff members who pro- ferent from other central departments: (1) its role 69 Making Sustainable Commitments - An Environment Strategy for the World Bank in ensuring the implementation of safeguard poli- ing the global environmental commons. In align- cies; (2) the need to coordinate with other sectors; ment with the Strategy, future work is plan ned on and (3) its role in fulfilling the Bank's global envi- poverty, growth, and environmental linkage s; envi- ronmental mandate. Some of these special func- ronmental performance indicators; and environ- tions have only recently been explicitly recognized. mental health issues. Additionally, the DECVP, in ENV will continue to fulfill these roles, focusing collaboration with ESSD, will undertake major re- on efforts to support the Bank's transition to fully search on sustainability issues in preparation for the integrating environmental concerns across all its 2003 World Development Report-Sustainable De- activities, and particularly on poverty alleviation velopment with a Dynamic Economy. efforts; assisting CMUs in dealing realistically with specific constraints that they face in addressing The World Bank Institute (WBI) is responsible for environmental programs; and adapting work on the developing and delivering learning programs and environment to changing conditions. This transi- promoting knowledge networks for clients and staff tion will not happen overnight; ENV will support on a broad range of sustainable developn:ient is- it through advocacy and technical support, by moni- sues. Most WBI programs target poverty-environ- toring progress and by working with other parts of ment linkages; social issues, such as conflicts over the Bank to adjust the Strategy in light of results. natural resource management; governance aspects of environmental policy, such as environmental en- The Legal Vice-Presidency (LEGVP) works closely forcement and compliance, international ernviron- with the environment family on implementation mental rulemaking, the international conventions; ofthe safeguard policies. LEG has primary respon- and safeguards. In recognition of the continuing sibility for 2 of the 10 safeguard policies (OP/BP challenges of mainstreaming, WBI is increasingly 7.50, Projects in International Waterways; and OP/ targeting non-environmental audiences, such as BP 7.60, Projects in Disputed Areas). In particu- economic policymakers and macroecononiists, to lar, the environmental law specialists in ESSD and highlight the linkages between environment and the International Law Group in the LEGVP pro- other issues central to poverty reduction and broader vide expertise to assist client countries in introduc- economic development. Learning activities in Af- ing environmental and natural resource policy and rica in support of the Poverty Reduction Strategy regulatory frameworks, including land tenure and (PRS) process focus on the interface of poverty- property rights regimes; in strengthening environ- natural resource management-environment issues. mental compliance programs; and in the implemen- In the next year, in support of the 2002 Earth Sum- tation of international conventions. mit, learning programs will focus on linking the PRS process and target of implementing national The Vice Presidency of Development Economics sustainable development strategies expressed in the (DECVP) carries out research and collaborative International Development Goals. work with operations in a number of key areas, in- cluding ongoing work on the role of market and Environment Board (EB). While responsibility for nonmarket instruments in addressing local and na- the implementation of Bank strategies rests with tional environmental externalities and on protect- senior Bank management, the EB plays a critical 70 Institutional Realignment role in leading and overseeing the Environment COORDINATING ACROSS SECTORS AND NETWORKS IN THE BANK Strategy implementation process. The EB will re- view the annual regional business plans to support Environmental problems are inherently cross- corporate consistency in regional strategic planning sectoral. The need to integrate work on environ- and to facilitate the sharing of experience across mental problems closely with sectoral work is a key Regions. At the corporate level, the EB, supported theme of this Strategy. The degree of overlap obvi- by ENV, plays a key role in establishing and coor- ously varies from case to case, but the widespread dinating a systematic strategy implementation recognition of the importance of environmental monitoring and reporting system. Its consolidated dimensions in other sector strategies, such as rural findings are the basis for reporting to senior man- and urban development, energy, transport, and wa- agement. The EB also oversees the strategic devel- ter, is an encouraging indication that environment opment and deployment of human resources, the is slowly becoming part of mainstream thinking. mobilization and allocation of resources in support of the Strategy, and the consistency and quality of Cross-sectoral coordination must, of course, go environmental work throughout the Bank. beyond implementing safeguards and recognizing the importance of environmental issues in sector strategies. There is also a need to coordinate ana- lytical and operational work. Cooperation between Certainly, the success of the Environment Strategy the environment and other sectors and networks will build on the continued commitment of senior occurs at the project level, and it is often focused Bank management. As mentioned earlier, imple- on country- or region-specific issues. At the cor- mentation of the environment strategy will be porate level, coordination andjoint workwith other closely monitored at the Managing Director level, networks is already under way in several areas (see for a number of reasons. First, the cross-sectoral also figure 4.2). nature of environmental issues requires senior over- sight to ensure coordination among a variety of Environmentally and Socially Sustainable Develop- actors. Second, success in integrating environmen- ment (ESSD). Within ES SD, environment and ru- tal considerations into Bank operations more sys- ral development families have joint programs un- tematically increases the sustainability of Bank-sup- dertaken by teams comprising specialists from the ported projects and programs. Third, improved environment and rural development families on environmental performance reduces corporate risk land, forest, and water resources management is- and improves the Bank's credibility in undertaking sues. Biodiversity specialists from the environment its development mandate. Past experience with family, with support from the GEF, are also inte- mainstreaming environment in the Bank clearly grated into joint teams. In land management, the indicates that the greatest progress can be made if rural development family is taking the lead in ad- senior management support is sustained, visible, dressing on-site productivity issues, while the en- based on a candid view of what can be attained at vironment family is taking the lead in addressing the country level, and supported by adequate re- off-site externality issues. Because, in practice, land sources within institutional resource constraints. degradation problems always involve both issues to 71 Making Sustainable Commitments -An Environment Strategy for the World Bank Figure 4.2 Environmental interface with other networks and families Environmentally sustainable Environmentally and Socially Integrated environment- management of forests, Sustainable Development Network social review and water, and land t 1 l safeguard system Biodiversity protection F I ,=' Public participation Desertification Involving local communitres Rural Social in ecosystem management UFamily Family Environment Human Development Network Finance Networ-k Environmental health issues Environmental risk management in Environmental education and awareness financial intermediaries Innovative environmental financing mechanisms Poverty Reduction and Private Sector and Economic Management Network Infrastructure Network Environmental indicators Urban environmental management Environmental issues in PRSPs Water resource management Design of household surveys in poverty Water supply and sanitation assessments Transport-environment issues Governance Energy-environment issues Empowerment Urban air quality management Environment issues in privatization Public-private partnerships for sustainable environment management varying degrees, close cooperation is necessary. The ment family's work on the economic costs of fuels practical outcome of this deepening cooperation is has contributed to setting priorities in the energy increasingly reflected in the rural portfolio. There sector. There is longstanding coordination between is close collaboration between the social develop- the environment family and the water and sanita- ment family on developing an integrated social and tion and urban families on such issues as urban environmental review and risk management system, environmental priorities, priority-setting n water on promoting social and environmental responsi- resource management, and cost-effective measures bility in operational programs, and on approaches to address environmental health priorities (see an- to enhancing the role of local communities in eco- nexes C, D, and E for more detail on environmen- system management. tal health, water resource management, and urban priorities). Urban air quality management h1as been Private Sector and Infrastructure (PSI). The envi- an area for collaboration between the energy, ur- ronment family is collaborating with the PSI net- ban transport, and environment families (see an- work in several areas. The environment and energy nex E for more detail). There is an emerging need families jointly prepared Fuelfor Thought, an envi- to collaborate more closely on private sector devel- ronment strategy for the energy sector, and they opment and disaster management. are working closely on its implementation, includ- ing the preparation of Energy and Environment Human Development (HD). Collaboration between Reviews; support for the preparation of projects the environment and HD on environmental health with environmental objectives; and integration of issues has begun, but relatively little formal collabo- climate-friendly approaches to energy development ration has been established at the corporate level. (see box 4.1 and box F. 1 in annex F). The environ- In South Asia, a joint work program is addressing 72 Institutional Realignment BOX 4.1 are estimated to result in over 20 percent of the Collaborating with the energy sector: Fuel health burden of many countries. This work is also for Thought building increased collaboration with external Fuel for Thought (FFT): An Environment Strat- health agencies such as WHO and the U.S. Centers egy for the Energy Sector is the product of col- for Disease Control and Prevention (CDC). There laboration between the environment and energy are obvious opportunities for increasing such col- sectors of the Bank Group to outline the strate- gic environmental priorities in the energy sector and to move from "do no harm" to a more proac- tive stance considering environment as an inte- Poverty Reduction and Econzomic Management gral part of energy development. Accordingly, the (PREM). PREM and ENV are working together work included an examination of ways in which the Bank could switch from mitigation of local and global impacts of energy use to actively seek- poverty-environment links as part of an effort to ing opportunities for integrating environmental integrate environmental considerations into PRSPs. considerations into sector planning and devel- There is clearly scope for much greater collabora- opment. tion on poverty-environment linkages, specifically A joint team of energy and environment staff was on integrating environmental considerations into formed to do the work. One of the most impor- household data analysis, updating guidelines for the tant findings of the stocktaking and analytical PRSP Sourcebook, and assisting countries to pre- work undertaken in support of the Strategy was that, to be effective at the energy-environment pare and implement PRSPs. Future collaboration nexus, cross-sectoral interventions were re- is also expected to improve in other areas, includ- quired. As a result, the Strategy makes operat- ing environmental aspects of public sector manage- ing in cross-sector teams a priority-an approach ment, public expenditure reviews, and governance that is strongly evident in the implementation of FFT. issues. Though the bulk of the interventions and collabo- rations are with staff from energy and environ- ment operational units, people from transport, been established on a case-by-case basis, particularly urban, health, and human development sectors in connections with financial intermediary lending. also participate in the implementation as needed More systematic collaboration in this area, as well as (for example, to work on the critical issue of in- door air pollution and its linkages with child and in relation to innovative environmental financing female health). Evaluation, training, and other mechanisms, will be needed in the future. activities now routinely involve both energy and environment staff. In each case, the environment family needs to be more proactive in seeking out areas of possible col- indoor air pollution, a key environmental health laboration and in converting them into meaning- issue. The link between sanitation and health is a ful operational programs. subject of discussions with the health and sanita- tion sectors, with the aim of trying to target inter- ventions to improve health outcomes. A broader effort is under way to better understand the full Staff skills surveys indicate that the Bank has a rela- range of environment and health linkages, which tively robust environmental skills base, especially 73 Making Sustainable Commitments - An Environment Strategy for the World Bank in natural resource management and biodiversity; client outreach, and development effectivenress will environmental policy and planning; environmental require a gradual realignment of environmental staff engineering; and water resource management. The skills. An enhanced role for programmatic lending Bank's environment professionals include some of instruments poses both a challenge and an oppor- the leading experts in their respective fields. As a tunity to integrate environmental considerations result of targeted training and experience, more than into macroeconomic and sectoral planning. Envi- one third of the current 253 environmental staff ronmental staff, therefore, must be able to make a members have developed expertise in environmen- stronger contribution to the upstream policy dia- tal assessment. Figure 4.3 provides information on logue. Such dialogue should be based on solid ana- cross-sectoral experience among environmental lytical work and effective communicaticon with staff based on a self-assessment survey. The figure country teams and other sectors, as well as an abil- indicates relatively low levels of cross-sectoral af- ity to work with clients and development partners filiation in macroeconomics, poverty, health, and and to provide high-quality inputs to the design of finance. programs and projects. Improving integration and cross-sectoral skill!. While Continuing to realign the skill mix technical expertise will remain important, the ca- The change in the lending profile of the Bank, the pacity to integrate across a wide range of develop- need to respond to new ways of delivering devel- ment issues will become critical. Environmental opment assistance, and a changing emphasis from staff, therefore, should enhance skills and knowl- project-level safeguards toward integrated portfo- edge in other areas-such as economics, health, lio-level risk assessment and quality enhancement, rural development, or urban management--in or- Figure 4.3 Cross-sectoral affiliation of environmental staff Education LIII Health fil j Infrastructure LiIiLLLIIIII1LIIIi [I LIIILLLLLLIIEIILIhhilh]IfI tfiLIIIIIIIiI Urban LLLLLLLIILLLLLLIliIiILUI lIILILELUITlIL IIIiIi R.ural 11f11ff1 1 fIfIlliifflIfflii lIJlfl i lM l tftgIllf DltflTffftlffIfflia llft}JL If TLLIL JI 1.fffJIII Social Development IilIfIlIllf Finance liLPIft PREM IfffIlll I liii 0 10 20 30 40 50 60 70 80 Number of staff Note: Environment staff is collaborating with a range of sectors and themes. This figure does not reflect all aspects and details of such cross-sectoral affiliation. 74 Institutional Realignment der to work as core members of teams in these ar- be given in external secondments to placing Bank eas. In particular, more policy, economic, institu- staff in developing country settings. tional, and process management knowledge will be needed to contribute to macroeconomic work and Staff and client training programs will be aligned decentralized activities such as community-based with the Environment Strategy to maximize un- development programs. Emphasis should be given derstanding of the key themes of the Strategy. Tar- to the ability to communicate effectively, not just get audiences will include both environment staff to manage self-standing tasks. in the Bank and officials from environment and related ministries in client countries, as well as key As work programs increasingly call for cross- economic policymakers in the World Bank and in sectoral expertise, the need for staff with both en- client countries. To the extent possible, staff and vironmental and sector-specific knowledge and client training will be integrated to encourage joint skills will increase, as noted above. At the same time, learning, foster closer teamwork between staff and a gradual shift toward improved environmental clients, and create a shared vocabulary and knowl- skills in non-environmental specialist staff is ex- edge base. pected to take place through operational experi- ence in using new approaches, formal training in Safeguard policies are a key area of emphasis in our integration of environmental issues into programs trainng program for staff and clients. In order to and project design, and new hiring of experienced . , improve the Banks performance in implementing professionals. Since sector boards play an impor- environmental safeguards, we propose to deliver a tant role in human resource issues, there will be a systematic and mandatory training program for all need to coordinate these functions across sector relevant Bank staff over a five-year period. Train- boards-for example, to facilitate joint appoint- ing for clients on Bank safeguard policies is in the ments or the rotation of staff. initial stages and will be increased over the next few years. Joint appointments, secondment, and training To support the integration of environment into The integration of environmental objectives into sector and adjustment programs, training will fo- country and sectoral programs and projects, and a cus on three conceptual pillars of the Strategy: shifting accountability for environmental perfor- improving the quality of life, the quality of growth, mance beyond the environment sector, assume a and the quality of the regional and global commons. cultural and institutional change. This shift will be A core course on sustainable development will be encouraged through joint appointments, staff ro- built around poverty-environment themes and will tation, and secondments with other sectors (rural support the integration of environmental issues into and urban development, energy, water), thematic Poverty Reduction Strategies. Modules will include areas (macroeconomic policy, poverty, public sec- linkages between poverty and health, between pov- tor management, and private sector development), erty and natural resources, and between vulnerabil- and, where feasible, partner organizations, private ity to natural disasters and management of natural sector companies, and consulting firms. Priority will resources, as well as the political economy of land 75 Making Sustainable Commitments - An Environment Strategy for the World Bank use changes-for example, conversion of forests to Managing the transition while exercising agriculture-and the effects of these changes on selectivity food security. The course will also include modules The cost of implementing the Strategy is inevita- on methodologies and analytical tools to enable en- bly increased by the fact that the strategy will sup- vironmental specialists to assess poverty impacts and port an adjustment of the Bank's environmental linkages. Staff training will focus, in particular, on policies and programs to meet the requirements of integrating environmental aspects into poverty as- a Bank in transition. Key themes of the transition sessment tools. are a greater focus on poverty, enhanced respon- siveness to client needs, and a shift toward more REALIGNING BUDGETS programmatic lending in many countries. Thits tran- sition, however, has to be carefully managed to make Increasing the integration of environmental con- sure that we honor current corporate commitments cerns into the Bank's work plan promises to bring and that we ensure environmentally responsible strong returns by improving livelihoods, reducing Bank performance in the application of current health risks and vulnerability, improving the pros- Bank assistance instruments and policies. At the pects for and the quality of growth, and improving . same time , we need to move forward on revisiting the quality of the regional and global commons- - . all objectives that are at the core of the Bank's mis- pes andrdevelo instrumentsstonres to new approaches to development assistance, while sion of poverty alleviation. But there is no free lunch. helping our developing country partnerS build the Achieving these objectives will require that re- . . ~~~capacity to manage such concerns through more sources be dedicated to the task. This is all the more important because the relative newness of environ- effective implementation of their own enhanced mental activities, their cross-sectoral complexity, regulatory frameworks. and global public policy aspects mean that they tend to be more costly than traditional single-sector Effectively addressing the diverse environmental operations. challenges in client countries requires selectivity at the corporate, Regional, and country levels. The This section presents the budgetary implications Strategy sets an overall framework for setting pri- of implementing the Environment Strategy. It is orities that are further refined in the Regional En- based on projected levels of key activities over the vironment Strategies and the corresponding annual next five years that would begin to have a mean- business plans. As discussed in chapter 3, the Bank's ingful effect on the objectives and could realisti- engagement is likely to diminish in some areas. At cally be delivered during this period, assuming avail- the same time, the Bank is facing emerging chal- ability of the required resources. Underpinning the lenges. This will be increasingly reflected in the budget realignment are two fundamental consid- Bank's external relations and partnerships (see be- erations: (1) the need to guide a transition toward low). adapting to new ways of delivering development assistance, including programmatic lending, and (2) Realigning our programs, tools, and partnerships the need to exercise selectivity in our programs and with the priorities described in the Strategy will be realign current budget allocations according to stra- a gradual process. Several activities in the first year tegic priorities. of the Strategy (fiscal 2002) will focus on prepar- 76 Institutional Realignment ing for this transition, starting to redeploy resources ESSD budget allocations. The two key components to the new uses emphasized by the Strategy, refin- of this incremental funding are: ing and disseminating methodologies, launching pilot exercises, and developing better tools and 1. Safeguards and compliance. In addition to long- mechanisms to influence the PRSP and CAS pro- overdue measures to improve the implementa- cess (see table 2 in the executive summary). tion of the compliance system, the incremental activities under the Strategy over the next five Budget requirements years include completing environmental man- Defining the Bank budget allocated for environ- agement capacity assessments in our client coun- tries and associated support for country capac- mental work precisely is not straightforward. En- ity building; introducing and expanding the use vironmental costs are an integral part of project of SEAs to upstream environmental consider- preparation and supervision, while environmental ation in decisionmaking; and conducting a cor- input is often integrated into analytical work pre- prehensiver revewofthe safeguards polhcyframe- pared by other sectors. With these caveats, the work to fit the needs of a changing Bank-all to Bank's current annual administrative budget for facilitate the transition to an environmental environmental is in the order of $25 million, cov- eringworkon te enironenta comonens of compliance system better suited to a changing eTing work on the environmental components of Baklnigpole Bank lending profile. projects, self-standing environment projects, ana- 2. Mainstreaming support. Additional resources will lytical work and advisory services to clients, as well be required to supplement current Regional op- as safeguard compliance tracking and monitoring for the entire Bank portfolio. Additionally, GEF bring about effective mainstreaming of the en- and MFMP resources in the amount of approxi- vironment in the country assistance dialogue and mately $28 million fund the administrative budget programs. A proposed new instrument, the of staff working on these programs and projects, Mainstreaming Fund for Environment, would while bilateral trust funds may be available to focus on mainstreaming environmental issues, supplement Bank budget for analytical work and with special emphasis on IDA countries in ac- non-lending services based on criteria established cordance with IDA requirements; linking for the trust fund. porate environmental priorities and global pub- lic goods with country programs, with an em- Some of the requirements of this Strategy can be phasis on upfront work on CAS preparation; met by realigning budget allocations in response to facilitating cross-sectoral and cross-institutional changes in work program priorities and by deliver- approaches and work programs to address envi- ing on such priorities more efficiently. Others have ronmental issues, particularly with respect to the to be met by allocating new and additional resources environment, health, and poverty interface; and or in combination with realignment gains. For the addressing subregional and regional environ- Bank to meaningfully address the objectives of the mental activities. proposed Strategy, an annual incremental Bank budget of $5 million to $7 million over the next In addition, if we are to successfully move toward five years would be needed through Regional and full compliance on safeguards and effective 77 Making Sustainable Commitments - An Environment Strategy for the World Bank mainstreaming, we need to invest in enhanced skills capacity to influence decisively all major develop- for our staff and, through training and capacity ment issues alone. The coordination of activities building, to raise awareness of the role of environ- across development agencies in the environment mental sustainability in addressing poverty reduc- area is particularly important because many envi- tion and sound economic growth. The incremental ronmental issues have strong global public aspects. costs of these activities will be reflected in the Bank's overall training program. The Bank, according to its Articles of Agreement, deals primarily with governments. However, in re- Systematic assessment of progress made, feedback, sponse to a changing development framework in and adjustment are essential parts of Strategy which civil society and the private sector are play- implementation and enhanced corporate environ- ing an increasingly significant role in man-y areas, mental responsibility. In the first year, we will plan including environment, the Bank has expanded its for phase-in of a significantly enhanced compre- dialogue and involvement in partnerships with civil hensive and transparent monitoring and reporting society organizations and the private sector. These framework. Establishing such a framework will take notions are expressed in the CDF, which under- time, cultural change, and adequate resources. lines the importance of participation of key stake- holders in the decisionmaking process and encour- The Bank will work with interested partners in ages partnerships to enhance developmen-t effec- bringing about the successful implementation of the tiveness. Strategy. This means that, wherever possible, the Bank will rely on work produced by partners that Partnerships are collaborative relationships based may have a comparative advantage in certain areas on a common vision and objectives, consideration and, in a strategic and cost-effective fashion, avail of the comparative advantages and roles of the vari- itself of trust funds from bilateral partners and oth- ous parties, and a division of responsibilities and ers. On the other hand, the comprehensive actions activities (see World Bank 1998). In many areas of needed to address the environmental challenges of environmental assistance, the Bank has limited comparative advantage and reasons for direct in- economic development in dlent countries described in the Strategy (including the prudential manage- volvement. Through its convening power and in- ment of trust fund resources and coordination of formal or formal partnerships, however, it can play analytical contributions from development part- a catalytic role. ners) will require adequate deployment of Bank re- sources. Our engagement has been substantial in interna- tional policy dialogue and through a wide variety of collaborative arrangements and partnerships in EXTERNAL RELATIONS AND the environment area. These have ranged from PARTNERSHIPS project-level to regional- and corporate-level rela- In an increasingly complex international and glo- tionships. Partnerships also differ by level of en- bal arena, no single public agency has the legiti- gagement, accountability, and allocation of finan- macy, credibility, and financial and organizational cial resources. A recent review in the ESSD Net- 78 Institutional Realignment work has identified the key types of partnerships The rapid rise in the number of partnerships in re- (see box 4.2). cent years has raised management concerns about spreading the Bank's resources and attention among Realigning with corporate priorities too many partnerships instead of focusing on only those partnerships in which we can most effectively Werecogn tyhatnessing ptnershs caneyeldpment m catalyze action and achieve results. Given the vis- benefits by harnessing the Bank's development ef- ibility and sensitivity of some of the issues addressed fectiveness. We also recognize, however, that they byprnshs,temaaloaieuesnbe by partnerships, they may also raise unreasonable require careful management attention, staff time, expectations about what the Bank can achieve or and a mechanism for linking partnerships with core contribute and expose the Bank to high reputational country programs and operations in order to be ef- risk. fective. BOX 4.2 Choosing which partnerships to invest in when Partnerships review in the ESSD network deciding how to allocate scarce staff, management A recent review has identified three types of part- time, and budget resources is critical. The Bank's nerships in the ESSD network: draft Strategic Framework Paper (SFP) and draft 1. Institutional engagements provide a framework Strategic Directions Paper (SDP) for fiscal 2002- for dialogue and coordination of activities be- 04 have outlined broad corporate priorities and cri- tween the Bank and development partners, but teria for selectivity. The preliminary framework for do not involve structured programs and specific corporate priorities distinguishes between corpo- commitments. Examples include collaboration with UNEP, WHO, OECD, IUCN, WBCSD, and rate advocacy and global public goods priorities, many others. including work toward solutions to environmental 2. Collaborative arrangements are formal agree- challenges. Corporate advocacy priorities are im- ments among partner organizations to address portant enablers ofpoverty reduction that the Bank a certain issue or implement a time-bound pro- is particularly well qualified to champion by shar- gram. Typically, participating organizations allo- ing knowledge, building awareness with clients, cate resources to achieve specific goals. Ex- ingekowlede buldng awaresthcliens, amples include the UNDP-World Bank Interna- development partners, and other stakeholders. tional Waters Partnership, the WWF-World Bank Forest Alliance, and the Mesoamerican Biologi- The SFP and SDP emphasize the importance of cal Corridor.., supporting the Bank's global mandate and its ca- 3. Corporate partnerships are entities legally es- pacity to implement global programs at the coun- tablished to address specific high-priority issues try level. They also call, however, for a stronger link- of global and corporate importance. They have age eve cor,ora strontrlmk- their own governance structure, and involve high age between corporate priorities and country ac- levels of institutional commitment. They can gen- tivities. A paper on Partnership Selectivity and Over- erate strong benefits but may also present high sight (World Bank 2000d), which was discussed by operational risks. They may address commit- the Board in April2000, listed common criteria to ments to implement international agreements (such as the GEF activities), new mechanisms be applied to assessing all potential partnerships. for targeting specific global issues, or new ap- The criteria are: proaches to creating global public goods (such E Clear linkage to core institutional objectives and as the Prototype Carbon Fund). country operational work 79 Making Sustainable Commitments - An Environment Strategy for the World Bank X A strong case for Bank participation in terms of agement practices in key sectors where the Bank comparative advantage has significant involvement ii Potential risks to the Bank, assessed at the out- a Working with multinational development banks set in harmonizing EA procedures m Thorough analysis of the expected level of Bank X Convening key stakeholders and development resources needed partners to address regional and global environ- n Guidelines for implementation and management mental problems of new commitments, time frame, and exit strat- a Building knowledge-sharing mechanisnis. egy . i A plan for communicating wvith and involvring A key focus for the Bank's external institutional key stakeholders and for informing and consult- dialogue and collaborative arrangementa in the coming year will be to collaborate with clients, other UN agencies, NGOs, and private sector lealders in These selection criteria and the priorities of the preparing for the next Earth Summit, to take place in Johaniiesburg in S epteimber, 2002. Environment Strategy provide a comprehensive organizing framework for realigning the Bank's environmental partnerships. As part of the implc- Stocktaking and realignment mentation of the Strategy, we will apply this frame- The current portfolio of partnerships has evolved over work rigorously to review and realign our current the past decade (see annex K for a list of selected partnerships in the various categories (see figure external partnerships).To enhance its effectiveness, 4.4). Some areas where the Bank has a strong com- we need to strengthen its consistency with corporate parative advantage to support corporate environ- criteria and strategic priorities by taking action in the mental priorities include: following areas: n Working toward multi-stakeholder agreements 9 Portfolio update and evaluation. During fiscal on good, socially acceptable environmental man- 2002, the environment family will finalize the Figure 4.4 Realigning partnerships WORL D B AN K P RI ORITI E S A N D E NVI RO N M E N TAL L I N KS Core competencies Corporate advocac Global public goods Examples: Examples: Examples: -Environmentally sustainable - Empowerment -Climate development - Investment climate *Water * Urban development * Governance * Forests *Rural development - Clean air Biodiversity Environment Institutional Collaborative Corporate Selection Strategy engagements arrangements partnerships criteria ;; zS jDPrffiorities . jaEKamples: Examples: Examples: - Quality of life :i < * Memorandum of * WWF/WB GEF - Linkages vith - Quality of growth understanding Forest Alliance * MFMP Countmpaork - Quality of regional with IUCN * Mesoamerican * PCF - Compararve and global commons Collaboration with Biological CEPF - Risks and resources WHO,UNEP, UNDPI Corridor 80 Institutional Realignment partnership portfolio review, evaluate it in rela- PERFORMANCE MONITORING AND tion to priorities outlined in the Strategy, and assess its effectiveness. Applying the partnership Both internal and external consultations on the typology established in the ESSD Partnership Environment Strategy have emphasized a focus on review to clarify oversight, the EB will define implementation and accountability for results. To more precisely monitoring, quality enhancement, ensure accountability and the capacity to learn from and reporting responsibilities, experience, we will introduce a performance moni- Realignment. The EB will apply the corporate toring and reporting framework that will track the priorities and directions of the Strategy to plan Bank's performance on the environment, monitor implementation of the Strategy, and support regu- for a gradual realignment of the partnership lr rptigoporesconstans an sep lar reporting on progress, constraints, and steps portfolio. It will review the exit strategies for ex- taken to overcome the constraints. It will use the isting partnerships to ensure effective transition, Internet and other means of communication with if necessary, and will avoid extending continu- key stakeholders to make available reports and in- ous support simply because a partnership already formation about the Bank's environmental perfor- exists. At the same time, the EB will be open to mance. creativity and innovation in identifying and cata- lvzing new partnerships that may contribute lyzing newpartnershipstatmay'contribute Performance monitoring and reporting will be powerfully to the Strategy's implementation. based onjoint reporting responsibilities of the ENV, The EB will coordinate with the Partnership RMTs, and REDs, overseen by the EB. A small Council to ensure that the transaction costs im- performance monitoring and reporting unit will be posed by ncw partnerships on operational staff set up in ENV, with the objectives of (a) collecting, are agreed upon and affordable. in collaboration with the Regions, relevant data on X Governance, management, and reporting. The EB key environment performance indicators; (b) pre- will set guidelines for improving the governance, paring quarterly Strategy implementation reviews management, and reporting of partnerships, in- for the EB and senior management; (c) supporting cluding donor communication, resource man- knowledge sharing and dissemination of good prac- agement, risk management, and accountability. tices; (d) in collaboration with the Staff Associa- Additionally, the Partnership Council of the tion, collecting data and reporting on our institu- Bank is in the process of identifying a corporate tional footprint; and (e) publishing Environment Performance Reports in Environment Matters, the framework for managing corporate partnerships, EniomtDeamn'sAulRvew which will be monitored and reviewed at the cor- porate level. With the EB's oversight, accurate The first tasks of the unit WIl be to examine the records will be kept on partnerships, their bud- menu of institutional performance indicators and getary implications, and their performance. The to assess the applicability, costs, and benefits of re- EB will initiate periodic reviews of the perfor- porting and the sustainability of data collection in mance of our current partnerships, their links order to ensure the efficiency and utility of the sys- with country programs, and their alignment with tem. The core categories of institutional reporting our strategic priorities. will include: 81 Making Sustainable Commitments -An Environment Strategy for the World Bank Safeguard compliance. Safeguard compliance will ing system to track and monitor the environ- be carried out jointly with QACU. A unified mental components of key sector portfolios. monitoring and tracking system is being intro- These data will be shared and discus,ed with duced to track projects and trigger safeguard the relevant Sector Boards and Regional sector policies. Biannual risk assessments will be un- units and reported as part of the annual Envi- dertaken by all Regions. Additionally, the review ronment Strategy implementation reports. of safeguard-related issues by the Quality As- a Training. ENV and WBI will report on progress surance Group (QAG) will be strengthened in in delivering management, staff, and client- the areas of quality-at-entry and supervision. training programs. Tracking of training deliv- QAG ratings will be monitored and targets set ery will be improved to better target and cus- for satisfactory ratings in the next fiscal year. tomize both mandatory safeguards train-ing and Compliance reporting wil also include a GHG training on cutting-edge issues of sustainability, emissions review, to be carried out by the Cli- environmental policy, and poverty and environ- mate Change Team, in response to Bank policy ment. requirements to estimate and report GHG emis- sions from Bank-funded projects. CONCLUSION = Mainstreaming and policy integration. ENV, in As the Strategy suggests, making real progress to- collaboration with the Regions, will undertake ward poverty reduction and sustainable develop- regular reviews of CASs, PRSPs, adjustment ment requires changes in a challenging array of loans, and the environmental aspects of key sec- policies, tools, and institutional priorities. tor strategies and programs to assess how envi- ronmental issues have been addressed. The re- It means looking back at the past and ahead to the sults will be shared and discussed with RVPs and future. Based on past experience, we know that we RMTs and reported to senior management as need to build on our clients' commitment, set real- part of annual Environment Strategy implemen- istic targets, and focus on the policy framework. tation reports. The environmental review of Looking ahead to the future, we need to under- CASs will be coordinated with Bankwide CAS stand the implications of globalization and of rapid retrospective reviews prepared every 18 months changes in science and technology, increase the role for review by the Bank's Board of Directors. of the private sector, and strengthen the role of civil PRSP-environment reviews will be carried on a society. regular basis. Environmentalprojects and programs, including It means sharpening our strategic framewxork by analytical and advisory activities. The environ- increasing the emphasis on poverty-environment ment portfolio, including analytical and advi- links; raising environmental issues at the earliest sory activities, is monitored by REDs, which are possible stage of new development projects; more responsible for their performance and quality, effectively merging the environment and clevelop- ENV will provide the EB with cross-Regional ment mindsets; and seizing every opportunity to assessments of portfolio quality. Additionally, link local action with global benefits and enhance ENV will set up a corporate portfolio monitor- global public goods. 82 Institutional Realignment It means adjusting our tools to respond to chang- sues into development; and a more transparent ing approaches to development assistance- monitoring and reporting system. through a greater use of strategic assessments; a more systematic review of adjustment lending; and Most fundamentally, it means a serious comritment more programmatic approaches. to the role of environmental issues in poverty reduc- tion and development, and a wholehearted institu- It means institutional changes, including a greater tional commitment to see that the future of devel- emphasis on institutional commitments; strength- opment and the effort to end poverty in this century ened incentives to incorporate environmental is- will not be undone by environmental degradation. Table 4.1 Institutional accountabilities for promoting environmental sustainability Position Responsibilities President * Provides overall leadership on sustainable development * Oversee the implementation of the Environment Strategy through regular implementation Reviews Senior . Hold RVPs accountable for implementation, including compliance with safeguard policies Management And mainstreaming * Ensure that, when justified in light of competing corporate priorities, Corporate Incentive Funding be available to help leverage resources needed to implement the Strategy. Monitor that budget management in ESSD and the Regions takes into account the costs of implementing the strategy. * Oversee the implementation of the corporate strategy through Regional Environment Strategies and annual business plans including compliance with safeguard policies and Mainstreaming Regional Vice . Ensure that Regional budget allocations are adequate for implementing the Strategy Presidents . Hold CDs accountable for timely completion or update of environmental diagnostic work in preparation for PRSPs and CASs, adequate mechanisms for involving environmental stakeholders in CAS consultations a Hold SDs/SMs accountable for integrating environmental issues into sectoral programs and Projects . Ensure the timely completion or update of environmental diagnostic work in preparation for Country Directors PRSPs and CASs including the use of environmental indicators to monitor trends * Ensure that priority environmental issues are addressed . Involve environmental stakeholders in CAS consultations and country programming . Support CDs' environmental mainstreaming efforts and ensure that lessons and guidance from SSP work are transferred in a timely fashion to CASs and other task teams. Regional * Undertake analytical and advisory activities and ensure that priority environmental issues Environment Are addressed through policy dialogue and sectoral operations Departments . Review Regional portfolios and clear projects and programs for safeguard compliance . Coordinate with QACU to ensure corporate consistency in safeguard policy implementation . Help prepare and supervise lending activities . Contribute to corporate reporting on the implementation of the Strategy * Through representation in the EB, ensure corporate consistency in Strategy implementation . Takes responsibility-together with RVPs-for compliance with safeguard policies, and for oversight of the Quality Assurance and Compliance Uh (QACU) * Manages, through QACU, the integrated corporate safeguard system and corporate risk ESSD Vice projects, and provides advice to the Regions to resolve disputes about safeguard issues President . Monitors quality indicators of compliance with safeguard policies . Coordinates sustainability issues with other networks . Oversees corporate partnerships and ensures timely submission of partnership issues to the Partnerships council . Ensures cost-effectiveness of resource allocation within ESSD and timely deliverables. Central * Coordinates, monitors, and reports on strategy implementation Environment Provides operational support to the Regions to help mainstream environmental issues- Department including global issues-into operations * Oversees quality assessment of environmental lending and nonlending services . Liaises with partners and coordinates corporate partnerships (continued) 83 Making Sustainable Commitments - An Environment Strategy for the World Bank Table 4.1 Institutional accountabilities for promoting environmental sustainability (continued) Position Responsibilities . Reviews annual environmental business plans and strategy implementation reports Environment . Oversees strategic deployment of resources including human resource management Board . Oversees the quality of the environment portfolio, and the compliance of the Bank portfolio with safeguard policies . Oversees environmental mainstreaming and coordinates with other Sector Boards Legal Vice * Responsible for the implementation of 2 of the 10 safeguard policies Presidency . Assists in client capacity building and institutional development projects and activities Development * Carries out research in environmental and sustainability issues Economics Vice . Prepares the 2003 WDR: Sustainable Development with a Dynamic Economy Presidency World Bank * Allocates staff and budget to support training on environmental safeguards and Institute Vice mainstreaming Presidency . Ensures that effective environmental training is delivered to staff and clients Other Sector * Integrate environmental objectives into sector strategies Boards . Oversee the implementation of environmental aspects of sector strategies . Coordinate with the EB on priority environmental issues in the sector . Refines methodology and carries out regular assessments of the safeguard compliance Quality Assurance at quality at entry and supervision of selected projects Group . Carries out regular quality at entry and quality of supervision assessments of the environment portfolio, and quality assessment of environmental ESW Operations . Evaluates and provides independent advice to the Board on the effectiveness Evaluation (outcome, sustainability, and institutional impact) of Bank projects and processes. The Department evaluation considers environmental aspects and compliance with relevant safeguard policies. 84 Annex A i f2/ / ,, / Regional Strategies he countries andgeographic regions assisted by the World Bankface a wide range of also vary substantially. The Banksprimary contact with clients is through the Bank's six Regions-EastAsia and the Pacfic, Europe and CentralAsia, Latin America and the Car- ibbean, the Middle East and North Africa, South Asia, and Sub-Saharan Africa. As part of the Strategy preparation process, each Region prepared its own strategy applying the corporate stra- tegic framework and reflecting the specific needs andpriorities of its client countries. This annex summarizes these regional environmental strategies. Complete documents are available at . 85 Dast Asia and the Pacific f East Asia and Rtp;aF Pacific Region TlwMnd V.etnam -$ Ces h+dia - . Marshall Phi . pF~Iv- Islands . .,Malaysia :>. >. Palau Fed. States ot Micronesia indon-esia Pu Solomon -East Ti mar Samoa IBRD 31539 JULY 2001 Ts map s produced by Iho Mop Dogn U~m of The Woi4d b, Thobon,odo,,ecoIop , doooo donvofon Vaneatu Fiji Th.o,, boopdono p -d u ThoWoHn Gop l. any judgment on he of any _m y, ony _,d ,-tor REGIONAL CONTEXT AND KEY In spite of the economic crisis of the late 1990s, ENVIRONMENTAL ISSUES the EAP Region has experienced the fastest rate of The countries in the East Asia and the Pacific Re- economic growth in the world over the past 25 gion (EAP) confront a wide variety of environmen- years. In some ways, this growth created the po- tal problems. Two distinguishing features of the tential to benefit the environment by introducing region have implications for the environment: ex- cleaner technologies and generating new sources tremely high population densities, and relatively of revenue for addressing environmental externali- rapid rates of economic growth. The region is home ties. However, rapid industrial growth and expand- ra. . .ing urban populations have generally outpaced the to about 1.8 billion people, and this number is ex- ability of new technologies and pollution abatement pected to reach 3 billion by 2015. About 1.2 billion investments to reduce overal pollution loads, re- people-nearly two thirds of the region's total- sulting in deteriorating air and water quality and live in rural areas, with farming or other resource- increased sold waste pollution in most countries dependent occupations as their primary means of of the region. livelihood. Between 1980 and 1998, the urban population nearly doubled, from 310 million to over Pollution. In terms of immediate socioeconomic 600 million people, placing additional strains on costs, air and water pollution stand out as the the environment. region's most serious environmental issues. 87 Making Sustainable Commitments - An Environment Strategy for the World Bank 1 Water pollution. Studies show that more than the sustainability of key natural resource-based ac- 500,000 infants die each year in the region as a tivities, such as agriculture, fishing, and forestry, and result of waterborne diseases linked to polluted of human settlement patterns. Two issue; in par- water. Deficient rural water supplies account for ticular stand out: about 60 percent of these deaths, and lack of W Deforestation. In the early 1990s, deforestation sanitation in urban areas for another 30 percent. rates in East Asia were the highest oi- any re- These impacts are equivalent to shortening the gion. Indonesia alone lost about 20 million hect- average life expectancy of everyone in the re- ares of forest cover between 1985 and 1998. In gion by nearly two years. the Philippines, nearly 90 percent of productive 1 Air pollution. Air pollution impacts are serious old-growth forests has been lost since the 1960s. in many megacities of the region (Jakarta, Ma- X Degradation of marine and coastal ecosyitems. In nila, and Bangkok, for example) and are ex- Southeast Asia and the Pacific island nations, tremely costly in China. In terms of human marine and coastal ecosystems such as coral reefs health, the most damaging air pollutants are fine and mangroves, on which many people depend, particulates, produced primarilyby fuel combus- have been permanently damaged and are being tion. Air pollution in China is estimated to cause progressively destroyed. Climate change will over 200,000 premature deaths each year, with exacerbate many of these natural resource prob- total health damages in some cities equivalent lems, and it is a major threat to small islands, to 20 percent of annual income. coastal areas, and dryland and nonirrigated ag- Indoor air pollution. As long as solid fuels, such ricultural systems. as coal, charcoal, and biomass, remain a signifi- cant part of residential energy supplies, indoor THE BANK'S RECORD AND FUTURE air pollution will continue to pose a large health CHALLENGES pzroblem, especially to women and children. Pollution abatement. The Bank has been an impor- tant source of finance for environmental infrastruc- Despite high economic and social damages, pollu- ture in the EAP Region. In the sanitation sector, tion impacts are largely reversible, as evidenced by the Bank has promoted the creation of autonomous the vast improvements in air and water quality in the region's most developed countries, Japan, the Republic of Korea, and Singapore. Nonetheless, ment of tariffs and pollution charges-both to re- large economic and social gains can be achieved by duce emissions and as a means of financing opera- addressing pollution problems earlier ntion and maintenance to guarantee long-term sustainability. By far the largest share of the Bank's Natural resources. The growing pressure on natural pollution abatement investments in the region has resources, and irreversible damage to them as mani- been for water pollution. This holds true for China, fested in loss of ecosystems, species extinctions, and where damages from air pollution have been iden- permanent damage to groundwater supplies, are tified as exceeding those from dirty water Future long-term environmental concerns. Although these public investments for water and air pollution man- costs are more difficult to measure than pollution agement will depend on solutions being found for costs, the stakes are high, since what is involved is recurrent financing issues, which in turn requires 88 Annex A - Regional Strategies political commitment to the adoption and reform ment initiatives away from individual agricultural of environmental and resource policies. production projects and toward sustainable NRM4. Ntural resource management (NRM). Despite more Institutionaldevelopment. The World Bank has pro- than a decade of attention, policymakers in the re- vided technical assistance to strengthen national gion are just beginning to recognize the importance environment agencies in the region as a way of en- of NR1M4 issues for sustainable economic develop- hancing the importance of environment issues. ment. Most Country Assistance Strategies (CASs) Through their role as implementing agencies for have not been effective in highlighting the macro- Bank-supported environment projects, many pro- economic, policy, and institutional factors that af- vincial and municipal agencies (environment, trans- fect a country's environmentally sustainable devel- port, construction, and utilities) have improved their opment. Over the past 10 years, the region has pre- technical, financial, and assessment capabilities in pared strategy studies on forestry, watershed man- the environment field. To be effective over the agement, and biodiversity. Some studies, including longer term, Bank support for environmental ca- those for the Philippines, Indonesia, and Vietnam, pacity must emphasize strengthening local environ- have been instrumental in shaping natural resource ment systems, community participation, environ- management programs in those countries (see box mental education, and the importance of institu- A. 1). While many agricultural development tions other than environment agencies (for example, projects, particularly those in China, have been suc- those dealing with forestry, agriculture, and indus- cessful in raising farm-level incomes, they have not try) in order to promote policy reform and to fol- generally been effective in promoting sustainable low through on implementation. Institutional ca- NRM. The challenge is to redirect rural develop- pacity building is a necessary component of overall BOX A.1 Analytical work shapes natural resource management in East Asia Several recent studies have helped shape the Bank's natural resource management (NRM) program in East Asia. Philippines. Forestry, Fisheries, and Agricultural Resource Management. Led to investments promot- ing decentralization and community-based development to address problems in fragile uplands and improve protection of nature conservation areas. Examples include the Environment and Natural Resources Sectoral Adjustment Loan and the Conservation of Priority Protected Areas Project. Indonesia. Forest, Land, and Water: Issues in Sustainable Development. Led to substantial changes in the Bank's rural development portfolio, including a variety of experimental and innovative approaches to biodiversity conservation and integrated pest management. Pilot river basin management pro- grams are being supported under the Java Irrigation and Water Resources Management Project, while water users' associations and the introduction of irrigation service fees are being promoted under the Irrigation Subsector II Project. Vietnam. Environment Program and Policy Priorities for a Socialist Economy in Transition. Led to projects for the protection of nature conservation areas (Forest Protection and Rural Development Project) and coastal wetlands (Coastal Wetlands Development and Protection Project). 89 Making Sustainable Commitments - An Environment Strategy for the World Bank environmental improvcment and must bc done in surcs. In the transport arca, interventions promote tandem with environment and policy development, a switch to unleaded gasoline (Indonesia, Vietnam), environmental infrastructure investments, and improvements in fuel quality (Indonesia), improved awareness-raising. traffic management (China, the Philippines, Viet- nam), introduction of cleaner vehicle technologies STRATEGIC PRIORITIES AND and improved maintenance and inspection (Thai- ACTIONS land), and urban planning that is less traffic-inten- sive (the Philippines). In three areas-quality of life, quality of growth, and quality of the regional and global commons- As long as solid fuels such as coal, charcoal, and the Bank can promote both poverty reduction and biomass remain a significant part of residential en- environmentally sustainable development in the ergy supplies in the region, indoor air pollution will EAP Region. continue to pose a large health problem, especially to women and children. A pilot indoor air pollu- Quality of life tion project has recently begun in Mongolia to re- Pollution management. Nearly all client countries in duce health impacts associated with intfficient the region are experiencing severe health problems home heating and cooking stoves.The Bank should related to water pollution. The Bank will continue continue to discuss assessments and potertial in- to support activities to improve urban drainage and terventions in China, where several hundred mil- lion people still rely on solid fuels for cooking and sanitation, as well as rural water supply and sanita- tion. Health and hygiene education is one of the heating. most cost-effective interventions for reducing Natural resource management (NRM). Better man- health impacts. New and increased support for ur- o ban sanitation and drainage investments and for agmnofatrlesuc-hoghoiad water conservation, forest protection, coastal zone rural and periurban water supply and sanitation and marine management, and ecosystem and activities is envisaged in most countries in the re- biodiversity conservation-is essential for enhanc- gion. ing rural livelihoods in the EAP Region. To effec- tively address these issues, a long-term, concerted Many parts of the region face serious air pollution effort is required, including integration of natural problems. In their impact on human health, the resource policy within the macroeconomic policy most damaging air pollutants are fine particulates, and agricultural development agendas of national produced primarily by fuel combustion. The Bank governments. A priority for the Bank is to identify is supporting a number of cost-effective approaches critical NRM issues in countries of the region and to urban air quality management in EAP through to ensure that policies supporting sustainable re- its lending and nonlending services. Among the source management are incorporated within the interventions are the expansion of the use of natu- CAS, Comprehensive Development Framework ral gas and other clean fuels in residential, com- (CDF), and Poverty Reduction Strategy Paper mercial, and industrial activities (China, Vietnam), (PRSP) processes. The Bank will also support ad- improvements in space heating in northern climates ditional investments in high-quality analytical work (China), and reduction of transport sector expo- on natural resource issues. 90 Annex A - Regional Strategies The Bank is developing regional and country wa- reduction and mitigation measures as part of its ter strategies to address water resource management advisory assistance and investment operations. Ex- (in both river basins and aquifers), water scarcity, amples include flood control, preparedness, and water pollution, and watershed management. Op- prevention initiatives in China and Vietnam and, erations to strengthen water resource management in the Pacific, measures for risk reduction and for are under way or planned in China, Indonesia, the adaptation to climate variability and extreme Philippines, and Vietnam. A water strategy study weather events. for China, now being prepared, will highlight wa- ter stresses in several northern river basins and the Quality of growth need for effective river basin management, water .. . . ~~~~~~~~~The World Bank will support environmentally sus- pricing, and conservation options for agricultural, tamable growth in the region by promoting mac- industrial, and residential users. The Bank is also roeconomic and sector policy reforms that strike a supporting pollution control investments in several balance between growth and environmental pro- water-scarce river basins in northern China tection; by working with clients to build environ- mental assessment and regulatory capacities; by Aside from the "5 million hectare" afforestation supporting efforts to increase public participation program in Vietnam, the Bank wVill primarily, sup- and environmental awareness; and by effectively port smaller-scale community forestry programs, with an emphasis on conservation and sustainable imprlin hes B forestry development. Sustainable forestry programs are under way or planned in China, Laos, Papua Policy environment In the macroeconomic and sec- New Guinea, and the Solomon Islands. In Indo- t tor policy arena, the Bank will promote policyre nesia, the Bank and other donors have linked for- forms that improve natural resource use and reduce estry (and water) policy reforms to discussions of overal ecnomi refrm. Aresuptio of ank nollution externalities. In addition to investment overall economic reform. A resumption of Bank prjcslh akcnpooeevrnetU support to the forestry sector in Indonesia is de psound policies within the context of sectoral ad- pendent on progress on two issues: broadening the dialogue on forestry policy and management to justment loans, as exemplified by the ongoing dis- nonforest agencies, and delegating management cussions in Indonesia on forest and water policy authority over degraded forests to parties outside reforms. the forestry bureaucracy, such as local communi- ties, nongovernmental organizations (NGOs), the Institutional development. Throughout the region, private sector, and other natural resource agencies. the Bankvwill continue to provide support for envi- ronmental assessment and regulatory capacities. In Reducing vulnerability to natural disasters is a criti- Thailand, for example, an environmental institu- cal issue in the region. The Bank has provided sup- tional development project will strengthen local port for relief and reconstruction following floods, environmental planning and regulatory capacities, volcanic eruptions, and earthquakes. Moving from support regulatory reforms to improve compliance, curative to preventive actions, the Bank plans to and improve environmental financing. Similar ef- become more involved in addressing long-term risk forts are needed elsewhere, especially in the poor- 91 Making Sustainable Commitments - An Environment Strategy for the World Bank est countries. The Bank will cooperate with other mentation of safeguard policies. Finally, there is a donors and partners to provide such assistance. need for harmonization of safeguard policies among countries and in the donor community. The EAP The Bank is actively promoting new approaches in Region is funding several country reviews to iden- environmental regulation through both lending and tify differences in World Bank and country safe- nonlending policy dialogue. Public disclosure of guard requirements, especially in the area of social environmental information is an indirect but prom- safeguards. ising measure for encouraging pollution prevention and abatement. Rating systems, such as PROPER in Quality of the regional and global Indonesia and the EcoWatch Program in the Phil- environment ippines, make public the environmental perfor- Regional environment issues. As a multilateral insti- mance, both good and bad, of industrial enterprises. tution, the Bank can play an important role in help- Even in countries with significant public owner- ing address regional environment issues, such as ship of industries and limited environmental regu- latory capacities, this type of program has the po- thesis havaleady and the atntion of tential to improve environmental performance at poeicyaes inte regin. dthe alteiron- low cost. The Bank recently initiated pilot envi- pentcFaciity e recent approved supprtor ment Facility (GEF) recently approved suFpport for ronmental information and disclosure programs in the Mekong River Commission to establish mecha- Hanoi (industrial water pollution) and in Hohhot nisms to promote and improve coordinated and and Zhenjiang, China. It has also collated and pub- sustainable water management, including reason- lished environmental indicators in Thailand and the able and equitable water utilization by thc coun- Philippines, with the aim of increasing their acces- tries of the Mekong basin, and to protect thel basin's sibility to civil society. environment, aquatic life, and ecological balance. Since 1991, the Bank has supported research and Another area of work concerns strengthening the training on acid rain issues, through the RAINS- application of safeguard policies, both within the Asia program, and it recently began a technical as- Bank and within our client countries. This is an sistance project in China to assess direct and indi- important precondition for expanding the role of rect impacts of sulfur emissions and cost-effective the private sector Recent reviews of the Bank's safe- mitigation options. guards record indicate that increased attention needs to be paid to building local environmental Climate change. In the climate change area, the Bank management and environmental assessment capac- will support mitigation efforts that yield larg,e local ity, improving public consultation, and integrating economic and environmental benefits, as well as environmental and social assessments. The other global benefits. In addition to energy sector reform, area of concern is the need to focus on the imple- which can have the largest impact on the eff'iciency mentation of environmental management plans.To of energy production and use, and thus on green- date, safeguards measures have been biased toward house gas reduction, the Bank will support energy preparation and appraisal of projects. Continued efficiency and fuel switching (including greater use emphasis on thematic reviews of projects in the of renewables) through the GEF and other .EAP region is needed to improve effective imple- concessional resources (see also box 3.4 in chapter 92 Annex A - Regional Strategies 3). The EAP Region has considerable experience recently been supplemented with the chlorofluo- in supporting energy efficiency and renewable en- rocarbon (CFC) phaseout program to further ad- ergy projects through the Asia Alternative Energy vance China's efforts toward accomplishing the Program. Many of these investments also target the goals of the Montreal Protocol. Given the region's poor-for example, by increasing access to energy intensive industrialization and widespread use of for the rural poor through development of renew- agricultural chemicals, there are plans to develop a able energy. New operations to support climate major program to address persistent organic pol- change mitigation are planned for Cambodia, lutants (POPs). China, Mongolia, the Philippines, Thailand, and Vietnam. Given the importance of climate change IMPLEMENTATION ARRANGEMENTS impacts to the region, the Bank also plans to sup- portvulerailiy an adptaionassesmets,be- To effectively implement the strategy, both inter- port vulnerability and adaptation assessments, be- nladetra oria'nsnee.Wti h nal and external coordination is needed. Within the ginning with pilots in countries with a history of climate disasters, such as Vietnam and the Pacific Bank, the strategy has the support of the country departments and will be led by the key sector units island nations.I involved in environment-related projects, especially the Rural Development, Urban Development, and Biodiversity. In the face of serious threats to eco- nergy units. Externally, the strategy framework systems and biodiversity in the region, the Bank has been broadly endorsed by client countries in will raise these issues country by country in the the region. It is now necessary to develop a sound context of natural resource and development poli- implementation plan with countries and with other cies. The Bank will mainstream biodiversity con- development partners, including international and cerns in both policy and investment activities, with bilateral donors and the private sector (see box A.2). the assistance of GEF and other grant resources. The EAP Region has an extensive portfolio of Partnerships. The Bank is developing a number of biodiversity projects, most of which take an eco- formal and informal partnerships in the EAP Re- system approach to conservation, and focus on gion to address both pollution and natural resource biodiversity management, both within protected issues. Most of these partnerships are related to areas and beyond their boundaries into the produc- specific project interventions. A number of forestry tion landscape. Increasingly, biodiversity projects activities in the region-including the policy dis- in the region will be more closely related to natural cussions in Indonesia-are being undertaken as part resource management interventions, which in turn of the World Bank/World Wide Fund for Nature will emphasize community participation and im- (WWF) Global Forest Alliance. The Bank is also proved livelihoods. Biodiversity projects in Indo- partnering with The Nature Council, Birdlife In- nesia, the Philippines, Thailand, and Vietnam will ternational, and other conservation NGOs on support sustainable forestry, coastal zone and ma- biodiversity conservation initiatives in Indonesia, rine protection, and river basin management. Papua New Guinea, and Vietnam. ODSandPOPs. Supporting the phaseout of ozone- Following up on work in the region on acid rain depleting substances (ODSs) is a continuing pri- and urban air pollution, a regional initiative to im- ority in the region. The China ODS program has prove air quality management is getting under way. 93 Making Sustainable Commitments - An Environment Strategy for the World Bank BOX A.2 Preparing an environmental strategy for East Asia This strategy paper reflects the results of nine months of stocktaking and consultations by EAP staff to realign its environment work so as to more directly address poverty reduction and sustainable development. It builds on a number of recent environment and sector studies; internal consultations within the World Bank among key sectoral units (rural development, urban development, energy and mining, transport, and environment); and external consultations with regional stakeholders in Tokyo (May 2000), Singapore (June 2000), Bangkok (October 2000), and Beijing (February 2001). The key studies are: X "Natural Resources Management: A Strategic Framework for East Asia and the Pacific" Crooks and others 1999) * Clear Water, Blue Skies: China's Environment in the 21st Century (Johnson and others 1997) * Can the Environment Wait? Priorities for East Asia (World Bank 1 997a) "Indonesia Environment and Natural Resource Management in a Time of Transition" (World Bank 2001 c) f "China: Environment Sector Strategy Update" (World Bank 2001 b). Under this Clean Air Initiative, the Bank will col- to the region, such as forestry, wetland protection, laborate with multilateral and bilateral donors, the and river basin management. private sector, and regional governments to share lessons on effective air quality management. The Next steps. To begin implementing the strategy over Bank is also developing a cooperative program un- the next six to nine months the Bank will dissemi- der the Knowledge Partnership with Korea to share nate the framework within the Bank and to exter- that country's environmental experiences with other nal stakeholders; refine the medium- and longer- countries of Asia, specifically China and Vietnam. term priorities for implementing the strategy by key Bank-Korea cooperation, currently focused on in- sectors, countries, and Bank instruments; and as- dustrial pollution and environmental management, sess to what extent staff and budgets need to be could expand to cover other issues of importance realigned to achieve the desired outcomes. 94 Europe and Central Asia -4~~~~~~~~O =* > s Iover3< iiarv [BRD31540 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~> JUL200 This p wa? roduced by ir Map Desin Unif of Te World 8rn ro~~~~~~~~~~~~~~~- Tll bxudaff coor, enm lot0o Ond any ode mom/ EGOA AN ENIOMNALba fantr nCnrlAi,teBlas n h A~ -Zwt7t ~ Wd -. A. -fh~ p ~,P' 1. ~. 6 , n-,' G7, CONTEXT Caucasus. The Europe and Central Asia (ECA) Region com- prises 27 countries. All but Turkey are in various Changes in environmental performance have been stages of transition from centrally planned econo- closely linked with the economic reform process. mics. Some are well on the way to joining the Eu- Important structural reforms related to the envi- ropean Union (EU), while others have a large, un- ronment sector include the introduction of incen- finished reform agenda that encompasses profound tives for efficient energ,v use (for example, by elimi- and far-reaching economic and social changes. nating fuel subsidies and making the energy sector Regionwide, poverty increased from 16 million in competitive); reform of municipal utilities through 1987 to 90 million in 1998, particularly in the newly such measures as eliminating subsidies and raising independent states (NIS) and the Balkans, although tariffs; privatization of the consumer and industrial it remains low compared with other regions. Pov- sectors; promotion of free trade; establishment of ert,v rates var,v significantly, from below 10 percent basic environmental protection and management in countries in Central Europe to 68 percent in systems; improvement of natural resource manage- Tajikistan. Civil conflicts, natural disasters, refu- ment; and public participation in environmental gees, and ethnic problems are major complicating issues. 95 Making Sustainable Commitments - An Environment Strategy for the World Bank The political dynamics in the region often make it KEY ENVIRONMENTAL CHALLENGES difficult to implement the necessary reforms. Gov- ECAs key environmental challenges vary signifi- ernments are reluctant to eliminate energy subsi- cantly, depending on the stage of progress in mov- dies or raise tariffs for fear that populations cannot ing to a market economy and differences i n topog- afford the increases. Wage arrears, barter payments, raphy, geology, climate, natural resource availabil- lack of metering, and the relative insolvency of many ity, development patterns, and per capita income. municipalities complicate utility reforms. Where In comparison with most other parts of the world, acceptable, privatization with effective regulation pressures on the environment and natural resources are not high, except in Central Asia. Popujlations is proving more successful than attempts to reform municipal enterprises through traditional techni- are decreasing, and the general decline in economic activity has significantly reduced air pollutic n. Nev- cal assistance and investment projects. ertheless, there are problem areas. Environmental challenges stemming from past liabilities remain an Lack of domestic energy supplies is driving a rush for new strategic alliances and generating propos- cs, petoce ic andumtrgy. In an ar- cals, petrochemicals, and metallurgy. In many ar- als for new oil and gas pipelines that raise environ- eas, access to clean water is endangered by the de- mental concerns associated with construction and teriorating financial condition of municipal water potential oil spills. In energy-rich countries such and wastewater utilities. In Central Asia, the poor as Russia and Kazakhstan, the desire to maximize condition of irrigation infrastructure and bad agri- export earnings of oil and gas places renewed pres- cultural practices threaten livelihoods and contrib- sure on domestic users to burn dirtier fossil fuels, ute to land degradation. Natural resource manage- particularly coal. For energy-poor countries, the ment and preservation of coastal ecosystems are increasing prices of energy inputs and the absence important issues in some countries. of reforms at the distribution level have led to the collapse of district heating plants, the burning of Differing situations by country group. In summariz- alternative dirtier fuels, and the installation of less- ing the key challenges, it is useful to group coun- tries as follows: n The Baltics, Central and Southeastern Eurcpe, and Turkey includes a range of countries, froni those Although most ECA countries have a relatively thtavimlendsuanberfosad good legal and regulatory framework for environ- developedegoodeinsutinala regory a- developed good institutional and regulatory ca- mental management, institutional capacity to pacities for managing environmental issues (for implement and enforce regulations is weak, and e E examplc, Estonia, Hungary, Poland, and government officials do not always agree on the Slovenia) to others where the reform process has importance and urgency of environmental issues. been sharply interrupted in the past or the in- On the positive side, expanding freedoms have led stitutional and regulatory framework for deal- to an increasingly vocal and influential civil society, ing with environmental issues is still developing including NGOs and independent journalists, who (for example, Albania, Bosnia and Herzegovina, are pressing for the laws to be upheld. Macedonia, and Romania).' Some countries 96 Annex A - Regional Strategies have generally higher per capita income and cent of the world's forests), and greenhouse gas strong capacity to manage the environment and emissions (17 percent of the OECD total). Its can rely largely on private sector financing to forest management and carbon balance are con- fund environmental investments. Others have sequently of enormous relevance globally as well particularly difficult challenges related to depen- as nationally. Another problem particular to dence on large energy imports or emergence Russia is the deteriorated condition of many of from conflicts. Where substantial progress in re- its oil pipelines, which represent a disaster wait- structuring industry and realigning the roles of ing to happen. Sound management of arctic and the public and private sectors to better fit a mar- riparian ecosystems and preservation of ket-based economy has occurred, pollution in- biodiversity and unique areas such as Lake Baikal tensity has been reduced as industry modern- are other important challenges. izes, incorporates proper pollution abatement U Central Asia and the Caucasus includes three of techniques, or shifts to less-polluting sectors. In the poorest countries in ECA and some of the general, however, environmental issues include slowest reformers.3 All suffer from many of the the potential collapse of water and wastewater same issues as the Western NIS countries, but services where reforms are weak; water contami- this region has a larger share of rural popula- nation from agricultural or industrial pollutants; tion. The Caucasus faces coastal and land deg- energy inefficiency; threats to natural resources; radation issues, as well, and oil-rich Azerbaijan coastal, forest, and landscape management; and and Kazakhstan are concerned with oil drilling, some residual hazardous waste hotspots, includ- pipeline construction, degradation, and oil spill ing land mines and other residues from war. prevention and cleanups. For the Central Asian * The Western NIS countries have made substan- countries, water resource management is the top tially less progress on reforms than the Central environmental priority. These countries are situ- and Eastern European countries.2 They have ated in an arid zone, where cultivation is impos- highly urbanized populations, localized ambi- sible without irrigation. An elaborate irrigation ent air pollution in selected cities, and water system was built by the Soviet Union, diverting pollution from municipal and industrial waste, water on such a scale that the Aral Sea nearly and they are threatened by the potential collapse dried up. The system depended on complex ar- of water and wastewater services. Hazardous rangements for trading crops, energy, water, and waste contamination and other existing environ- agricultural inputs, and these arrangements have mental liabilities are an issue in highly polluting collapsed. The irrigation system infrastructure industries such as chemicals, petrochemicals, and is now crumbling as a result of a chronic lack of metallurgy. Large areas in Belarus and Ukraine maintenance, and poor irrigation practices have were affected by radioactive fallout from the led to salinization of the soils. The result is some Chernobyl nuclear accident. of the worst poverty in the region. Safe drink- * Russia shares the characteristics and environ- ing water is also an issue in some rural areas, as mental problems of the NIS subgroup but mer- groundwater is often polluted by runoff from its special mention because of its enormous en- agriculture and mining. Better price incentives ergy resources, land mass, forest cover (22 per- for farmers and restructuring of water user as- 97 Making Sustainable Commitments - An Environment Strategy for the World Bank sociations could partially help, but it is likely that water and to sanitation facilities. The Bank has only a fraction of the irrigation system can be addressed environmental issues through a wide va- made sustainable over the long term. An uneven riety of instruments, including adjustment opera- distribution of water resources among countries tions, investment projects, technical assistance, as- exacerbates these problems and raises sistance to policy reform, and analyticalwork,which transboundary tensions. Efforts to sustainably have both a direct and an indirect bearing :)n envi- link energy supplies with water releases and to ronmental issues. agree on an overall water management system for the riparian countries have not yet succeeded. Settingpriorities. Considerable effort has l een de- voted to developing a broad consensus on environ- Regional waters. The management of regional seas mental issues among governments, donors, NGOs, and rivers is an important challenge for virtually all and civil society. The Bank led the preparation of countries in the region. In addition to the an Environmental Action Program for Europe dessication of the Aral Sea, the Caspian Sea is (later adopted by the Lucerne Ministerial Confer- threatened by pollution from the Volga and other ence in 1993), which emphasized synergies between rivers, pollution and accidental spills from the oil reform and the environment. Subsequently, the industry, and uncontrolled poaching, which threat- Environment for Europe ministerial conferences, ens biodiversity, especially the sturgeon fishery. in Sofia in 1995 and in Arhus in 1998, took up Regional agreements on management of the several priority issues. The Arhus Conference Caspian and Aral Seas remain difficult, making adopted the broad recommendations and agenda Bank-assisted programs hard to implement. The for environmental improvement laid out for the Black Sea is affected by nutrient and wastewater NIS. Most countries have prepared some form of discharges carried by the Danube River. The expe- National Environmental Action Plan (NE.AP) or rience of the Baltic Sea, where similar problems with environment strategies, often with active Bank sup- pollution and oil spills are being reversed by regional port. Many are now preparing second-generation cooperation, shows the potential for improvement. NEAPs to correct earlier deficiencies, better pri- oritize investments, and develop least-cost options. LESSONS LEARNED Efforts to prioritize environmental issues have also been made in numerous Country Assistance Strat- The Bank initially focused on the environmental egies (CASs) and, more recently, in PRSPs. implications of shifting from a command to a mar- ket economy, emphasizing the removal of distorted Sector studies and analytical work. Sector studies incentives and subsidies in agriculture, energy, and undertaken by the Bank include efforts to under- water and the establishment of a regulatory frame- stand the links between environmental problems work and institutional capacity for environmental and health; to evaluate the links between energy management. More recently, this agenda has been and environment; to argue the case for phasing out broadened to include assistance with natural re- leaded gasoline, adopting cleaner fuels, improving source management, biodiversity conservation, glo- traffic flow, and promoting more fuel-efficient ve- bal commons concerns, agricultural and irrigation hicles; to quantify the fiscal and environmental practices, and access of rural populations to clean impacts from better natural resource management, 98 Annex A - Regional Strategies particularly management of forests; to link in- BOX A.3 creased tourism with better coastal management; Albania: Community-based forest and to link agricultural productivity and rural management in a transition economy livelihoods to better agricultural practices and Forests cover 38 percent of Albania's land area, with irrigation restructuring. broad-leaved forests, mainly oak and beech, predomi- nating. Fuelwood accounts for over 40 percent of re- corded timber production. Pastureland covers 15 per- Capacity development. Capacity development has cent of land area, and 60 percent of the population is been supported throughout the region. A num- dependent or partially dependent on pastoralism. For- ber of countries have received institutional de- ests and pastureland are owned by the state. Since 1990, Albania has moved rapidly toward market- velopment grants, GEF grants for enabling ac- based reforms, but there have been increasing prob- tivities, and, in the cases of Russia and Poland, lems relating to governance and law and order, in- major technical assistance loans. However, gov- cluding illegal timber harvesting. ernments are generally unwilling to borrow for The Community-Based Forest Management Project technical assistance, and even grant assistance is aimed to restore degraded state-owned forest and often ineffective unless it is genuinely desired pasture areas and promote their sustainable use; pro- by the recipients and well integrated with local mote conservation of natural forest ecosystems; and initiate a transition of the forestry and pasture sector expertise. to a market economy-separating commercial from regulatory functions and establishing mechanisms for Environmentalinvestments. Bank investment fi- self-financing of the commercial activities. In addi- nancing has focused on industrial pollution man- tion to assisting with improving forest management at the local level and reorganizing forest sector insti- tutions, the project is improving trade, marketing, and utilities, energy efficiency, rehabilitation of wa- pricing policies to enhance revenue; implementing, ter supply and irrigation infrastructure, water in collaboration with local governments and the Min- resource management, land and coastal zone istry of Finance Tax Inspection, an action plan to re- duce illegal harvesting; and supporting community mnen,osreit (forestry by providing local communities with legal user A.3 for an example). With GEF support, the rights for communal and forest pastures, with assis- Bank has assisted ECA countries to cease pro- tance to improve their management, and with mecha- duction of ozone-depleting substances. The nisms for reinvesting user fees in improved manage- ment and in training forest specialists in the public GEF has also financed several geothermal adpiaescos and private sectors. projects, including the first one to use the Bank's Prototype Carbon Fund (PCF). Because of broader poverty, law and order, and gov- ernance issues, controlling illegal harvesting and im- proving forest management on publicly managed land Policy adjustments. Structural Adjustment Loans has been difficult. The transfer of user rights and man- (SALs) and energypolicyadvice, with theirem- agement to local communities has, however, worked phasis on ending energy subsidies and on restruc- very well; user rights have been transferred for 10 years. Local communities have been assisted with turing, have helped improve energy efficiencyv eeomn fmngmetpasadhv n development of management plans and have in- and air quality. Ending subsidies of communal vested user fees in improving the resource. This com- services, improving cash collection, increasing ponent is being expanded and may form the basis tariffs,andfurtheringhousingprivatizationhave for a follow-on natural resources and environment project. improved the viability and prevented the col- 99 Making Sustainable Commitments - An Environment Strategy for the World Bank lapse of some district heating companies and water a Improving access to safe drinking water by (a) utilities. rehabilitating or expanding urban infras tructure, in conjunction with utility reforms and Supportforprivate sectoractivities. Recognizing that privatization efforts, and (b) supporting com- environmental investments in a market economy munity-developed water supply and sanitation are made primarily by the private sector, the Bank investments in rural areas has promoted policies that help the private sector a Mitigating health threats from toxic substances address past and future environmental liabilities. In and industrial accidents by (a) assisting effec- Bulgaria, as part of the privatization process, the tive environmental management and protection Bank helped finance government costs associated systems and (b) financing cleanups, where ap- with historical environmental liability (see box 2.3 propriate in chapter 2). The Russia Forestry Guarantee a Reducing health problems associated with air Project offers political risk guarantees for private quality by promoting (a) conversion to less-pol- sector investors in timber companies that abide by luting sources of heat and. in part, by ir-creased sustainable forestry and timber processing practices. metering and privatization of housing, (b) higher In several instances, the Bank has attempted to pro- fuel standards, increased vehicle inspections, and vide financing for pollution abatement investments improved traffic management, and (c) energy re- through financial intermediaries, but high foreign forms that will reduce power plant emi,sions exchange risks, the financial risks of borrowing en- - Improving livelihoods through sustainable terpis lNRM by (a) assisting sustainable forest man- terprises, limited demand for environmental projects, and weaknesses in the banking sector have agement and community-based watershed man- limited the success of these projects. agement, (b) promoting an integrated water ba- sin approach in Central Asia, and (c) promot- ing energy conservation and efficient use STRATEGIC PRIORITIES AND E Improving security though prevention atd miti- ACTIONS gation of natural disasters by (a) assistng cli- ECAs Environment Strategy is shaped by the ECA ents in mitigating the impact of natural disas- Region's broader priorities of (a) facilitating EU ters, such as earthquakes in Turkey and Arme- accession for the fast-reforming countries of Cen- nia, droughts in Central Asia, and floods in Po- tral and Eastern Europe, (b) reversing poverty and land, and (b) assisting clients to improve dam reviving growth in the NIS, (c) helping to bring safety. about peace and prosperity in the Balkans, and (d) fostering cooperation on regional and global envi- Quality of growth ronmental issues. The strategy aims at ensuring the quality of growth through the following priority actions: Quality of life v Integrating environmental considerations into The Strategy aims at improving the quality of life macro and sector policies and public sector man- through environmental interventions. Priority ac- agement by (a) building local capacity to assess tions include: the environmental impact of policies, 100 Annex A - Regional Strategies (b) conducting economic valuations of environ- ing and multicountry consensus building regard- mental degradation, (c) supporting a transpar- ing the competing demands of irrigation, en- ent legal and regulatory framework, and (d) im- ergy, and other uses of scarce water resources. proving environmental regulations by strength- a Complete programs to finance the phaseout of ening environmental review capacity residual production and consumption of ozone- U Removing environment-related impediments to depleting substances. investment by helping governments address en- vironmental liability issues within the context The specific priorities clearly vary across the re- of privatization. gion. The EU accession countries need Bank ad- vice on cost-effective ways to meet the requirements Quality of the global commons of EU environmental legislation. To a limited ex- tent, we will continue promoting air quality im- To improve the quality of the regional and global provements, mainly through interventions in dis- commons, the priorities for action in ECA's Envi- trictmeatin and rewal energynwioca and ronment Strategy are to: ~trict heating and renewable energy with local and ronmenst Strategyren to: address climate change global benefits that are eligible for GEF financing. and Assisthgvermn toe address climate Kyot tch e In Turkey, we expect to sharpen the focus on disas- and to achieve the aims of the Kyoto Protocol. ter prevention, water resources, and watershed and ECAwountries gr emituse gabut 20mpet of the Ban landscape management. In southeastern Europe, wzorld's greenhouse gases-the most of any Bank oeain ilb lge ihteSrtg o region. We will assist governments to complete StabilitysandlProsperityei Soth eastern uro and update their national strategies; we will pro- developed joinl rith th Euth Danubea developed jointly with the EU. The Danube and vide technical assistance; and, if requested and kS P w v f f vi ~~~~~~~~~Black Sea Program wi provide the framework for if the projects are consistent with the relevant activities aimed at reducing agricultural and indus- CASs, we will support projects with local and trial pollution, restoring wetlands, and improving global benefits via GEF, the PCF, and Bank fi- wastewater management. In Russia, we will offer nancing. support for managing urban air quality related to S Support biodiversity conservation by (a) help- the transport and energy sectors, which poses an ing to protect fragile or endangered ecosystems increasing threat to health. Because ofthe country's and involving local communities in the manage- large GHG emissions, climate change issues are of ment of biodiversity and protected areas, and (b) great importance in Russia, and we will seek syner- identifving and supporting areas where global gies with local air quality programs and forestry and local benefits overlap. policies. In addition, we will seek to promote U Promote corporate management of international sounder environmental management in the oil sec- waters by (a) assisting regional bodies to develop tor. In the Western NIS and Caucasus, we are ad- regulations for use and protection of interna- dressing issues of fisheries, tourism, wetland pro- tional waters and their flora and fauna, (b) help- tection, oil transport, and oil spill prevention; sup- ing to preserve the Caspian sturgeon, (c) work- porting efforts to rationalize and rehabilitate irri- ing for reducing nutrient discharges into the gation systems, in conjunction with agricultural Black Sea, and (d) help arresting the deteriora- reforms; and working with rural communities to tion of the Aral Sea. We will support monitor- create sustainable community-developed rural wa- 101 Making Sustainable Commitments -An Environment Strategy for the World Bank ter supply projects. In the Central Asian countries view safeguard policies implemented by financial and Azerbaijan, water supply and water resource intermediaries in client countries with credit-line management are the overriding priorities. Through projects. These efforts, along with direct assistance, regional mechanisms such as the Aral Sea Program, will strengthen the capacity of client countries to we will assist the subregion in rationally allocating conduct environmental assessments and piotect the water resources to energy, agricultural, urban, and environment. ecological uses. To address the related concern of soil salinization, we will offer assistance to improve Project design and selectivity. Project development irrigation and drainage management. We are sup- will use a participatory approach where appropri- porting the development of community-driven ru- ate, follow best practices, take into account lessons ral water supply and sanitation projects, as well as learned, and focus on results and how to measure reform of urban water supply enterprises. them. To this end, result-oriented indicators will be devised and built into project design. We also IMPLEMENTATION OF THE intend to workwith clients to cancel or restructure STRATEGY poorly performing projects, as warranted. We will increase our efforts to be selective and to leverage Cross-sectoral linkages. Given the manylinkages be- limited resources through partnerships. GEF and tween environmental issues and other sectors, Post-Conflict Program (PCP) funds will be linked implementation of this Strategy will require strong t B cross-sectoral alliances with colleagues working on orian for ets limte indsfie in to re- ornty for these limited funds will be given to re- energy, infrastructure, as well as agriculture, rural development, and forestry. Social assessments will gonlpjet,heNSadteBlkncuris dt emWe plan to make more use of International Finance be integrated into efforts to develop rural commu- Corporation (IFC) and Multilateral Investment nity-based improvement projects in water supply, Guarantee Agency (MIGA) instruments in mobi- irrigation, and agricultural practices. Close collabo- lizing private sector investments for environmental ration with our colleagues in the poverty reduction management, particularly to help reform urban and human development groups will be required, water and solid waste services, modernize refiner- particularly to better assess linkages between pov- ies, and promote energy efficiency. We envisage erty, health, economic growth, structural reforms, working with the World Bank Institute (WVBI) to and environment; to assess the environmental im- assist in conveying best practices and in developing pacts ofproposed structural and policy reforms; and avenues for clients to learn from each other-for to incorporate environmental agendas and priori- example, through the Clean Air Initiative, which ties into CASs and PRSPs. will enable selected cities to learn from best prac- tices and from each other regarding measures for Safeguards. The region will continue to apply safe- combating local air pollution. guard policies to avoid negative impacts of projects in all sectors, promote implementation of project- Mainstreamingenvironment. Working with experts specific environmental management plans, and in the Bank and in core ministries in our client gov- improve oversight of safeguard policy compliance ernments, we plan to develop broad-based indica- during project implementation. We intend to re- tors that will better monitor country performance 102 Annex A - Regional Strategies on general environmental issues, including environ- coordination efforts among bilateral and multilat- mental management, greenhouse gas emissions, local eral donors and interested parties. In Central Asia, air pollution, land degradation, carbon sequestration we will work particularly closely with the Asian and conservation, and biodiversity conservation. Development Bank. We will strive to maximize use of mechanisms such as the Joint Environment Pro- Leveraging resources and buildingpartnerships. Build- gram (JEP) to better utilize Tacis grant needs for ing on established relationships, our strategy will project preparation costs. On specific environmental call for avoiding duplication of other donors' ef- issues, we will work closely with NGOs and global forts, simplifying collaborative mechanisms, and funds such as the GEF, the PCF, the WWF, and reducing transaction costs. In the EU accession the Alliance for Forests. We will continue to con- countries, we will defer to the EU. In the Baltic sult with these partners as well as with our clients countries, we will work closely with the Nordic to ensure that our regional strategy and annual work countries and their development institutions. In the plans are clear, complementary to the efforts of Balkans, we will continue our already substantial other donors, and responsive to client priorities. 103 Latin America and the Caribbean 'a q ~ ~~~TeHaiti 'Bahamas 1 Dominican Rep. St. Kitts and Nevis Antigua and Barbuda Giiast9ct Bize Jamaica Domt.ica El Salvador-S- $`nduras St. Lucia Nicaraguae`'` Barbados Casta RicStir."t. St. Vincent and the Grenadines Panamca Grenada orrigme Trinidad and Tobago Ec~~~~~~~~c Chile Uruguay IBRD 31541 JULY 2001 T6_~_ .. qyi- ooneathn thsAC)op d i at n eclu conondethioeeh Teot WnVIR ONn sit term eneLInStsEin end formidable task of making cities more hospitable within and across countries; increasing integration of economies into the world economy; the forma- venues for economic development while improv- ing the living conditions of the poor. Most coun- tion of regional trading blocks such as Mercosur; a tries in Latin America have been pursuing macro- high degree of urbanization, with 75 percent of the economic stabilization and liberalization policies. region's 500 million inhabitants living in cities and The impacts of these policies are still uncertain, but making a living in the industrial and service sec- they will have both positive ramifications, such as tors; and a deepening of democracy, coupled with a higher environmental standards, and negative ones, trend toward increasing decentralization and im- such as continued or even increased reliance on the natural resource base. In the coming decade, it is proved governance. These factors and trends will likely that democracy will deepen and civil society influence environmental conditions and manage- will become more proactive. This should lead to ment policies and will shape the challenges to be calls for continuous integration of environmental faced in the coming years. concerns into public sector policies, notably in the 105 Making Sustainable Commitments -An Environment Strategy for the World Bank fight against poverty and the creation of develop- rine biodiversity rank high on the environmental ment opportunities. agenda. According to UNEP's recent State of the Environmentreport (UNEP 2000),6 million hect- The key environmental issues in LAC include (a) ares of natural forest cover were cleared or went up urban-industrial pollution, (b) mismanagement of in smoke per year between 1990 and 1995; 822 ver- natural resources in areas of existing and new settle- tebrate species are currently in danger or extinc- ment, and the consequent loss of terrestrial and tion; and over 300 million hectares of landhas been marine biodiversity, and (c) high vulnerabilitv of degraded, mainly due to soil erosion caused by de- urban and rural populations to natural disasters. The causes of degradation include the poor socioeco- foetin,vrgangrporgiclulpa- tices. Forest loss seems to have stabilized in much nomic condition of large segments of the region's population, the high dependence of many econo- in Jamaica and slightly in Central Arnericl.. mies on the exploitation of natural resources, lim- i a ited institutional capacity to enforce environmen- tal regulations and policies, inappropriate pricing Vulnerability to natural disasters is at the f0refront and subsidies and unclear property rights, weak of environmental problems in the region. Such risks economic incentives, limited participation by stake- include droughts in northeast Brazil and upland holders, few partnerships with polluters, and lim- areas in Mexico, floods and volcanic eruptions in ited data and planning methodologies. Central America, and floods and associated land- slides in slums of most metropolitan and periurban The strong links between urban environmental deg- areas throughout LAC. Natural disasters closely radation and poor socioeconomic conditions, associated with climate variability have increased coupled with high levels of urbanization, suggest in frequency and intensity over the past decades, that urban and industrial pollution disproportion- and economic losses attributable to these events are ately affects the poor (see figure B.2 in annex B). For the most part, urban populations in LAC have 191-0and 1986-95 in bothuraad ruraear 1961-70 and 1986-95. In both urban and r-ural ar- good access to safe water, generally in the 70 to 90 percent range. By contrast, the rural populations' eas, theo are far-morevlrontad access is typically 20 to 50 percent. Urban popula- tions also generally have much better access to sani- tation-70 to 80 percent in most LAC countries- THE BAN K'S RECORD AND FUTURE but the United Nations Environment Programme CHALLENGES (UNEP) estimates that only about 2 percent of The Bank's Latin America and Caribbean Regional wastewater is adequately treated. Access to clean Office (LCR) has not had an explicit environmen- water, sewage collection, solid waste collection, and . . . . tal strategy in the past. The implicit strate gy has air pollution control in large cities are at the top of the environmental agenda, especially because they r ~~~needs, and priorities. There are 81 active projects, more intensely affect the poor segments of society. totaling $ 2.35 billion, in which environment is a The region is also particularly rich in natural re- primary objective. The main areas of environmen- sources and biodiversity, and mismanagement of tal activity in the current portfolio are institutional natural resources and threats to terrestrial and ma- development, biodiversity, natural resource manage- 106 Annex A - Regional Strategies ment (NRM), water resource management, pollu- tion and consultation; (d) increased use of strategic tion management, and disaster management. In (sectoral or regional) environmental assessments; addition, there are a number of nonlending activi- and (e) increased recognition of linkages between ties, including policy and strategic dialogue such as local and global environmental issues, entailing, the Mexico Policy Notes and the Mesoamerican among other things, assistance to countries to meet their commitments under various international and Biological Corridor Strategic Framework Paper; glblcnetos analytical work such as the Ecuador Land Admin- global convenfons. istration Study; and initiatives such as the Clean Mainstreaming environmental concerns across sec- Air Initiative (see box A.4). Misraigevrnetlcnen cossc tors is a key tenet of the corporate and regional strat- egies. Some examples of areas where sector-envi- In recent years, Bank assistance to the region has ronment linkages are being explored in Bank-fi- been characterized by (a) diversification of the en- nanced activities are (a) in the energy sector, re- vironmental agenda from green to brown issues and newable energy and energy efficiency, (b) in the from sectoral to integrated approaches through use urban sector, solid waste management and slum of the CDF and regional (landscape-based) initia- upgrading, (c) in the transport sector, air quality tives; (b) better integration of social concerns into management through monitoring networks, tech- environmental management through promotion of nical assistance, and better traffic management, (d) community-based initiatives, greater focus on in- in the water and sanitation sector, wastewater man- digenous communities and increasing attention to agement and water quality standards, and (e) in the mining sector, cleanup of contaminated sites, de- resettlement and other social impacts of develop- velopment of regulations, and institution building. ment projects; (c) greater emphasis on participa- Within the Bank, a better economic case needs to be made for environmental management and for BOX AA strengthening the linkages between natural resource The Clean Air Initiative in Latin management and poverty aJleviation. Other priori- American cities ties are to strengthen the linkages between the The Clean Air Initiative in Latin American Cities health and environment agendas and to include is seen as a complement to conventional lend- environment as an integral subject in early educa- ing operations in urban transport and air quality tion programs. management. Its objective is to help raise aware- ness and increase capacity to manage air qual- ity problems in urban areas. The initiative is a STRATEGIC PRIORITIES AND partnership between the World Bank, city gov- ACTIONS ernments, private and public institutions, devel-l- . opment banks and agencies, and NGOs inter- Key strategic prnorities are linked to the quaity of ested in collaborating to improve the understand- life, the long-term sustainability of growth, and the ing of these problems and provide city leaders quality of the regional and global commons. with tools for making the difficult choices involved in addressing air pollution and mitigating its health impact. The World Bank acts as Techni- Quality of life cal Secretariat and provides overall management There are three particularly critical areas in which of the initiative. Management will eventually be the Bank can help improve the quality of life: im- transferred to institutions in the region. proving livelihoods through the sustainabte man- 107 Making Sustainable Commitments - An Environment Strategy for the World Bank agement of natural resources; reducing the impact a Financing wastewater treatment for highly pol- of environmental degradation on human health; and luted or sensitive water bodies, particularly those reducing vulnerability to natural disasters. that affect the health of downstream Inhabit- ants and the quality of water used for agricul- In the livelihoods area, priorities include: tural, recreational, or municipal water supply * Developing a better understanding of environ- purposes ment-poverty-economic growth linkages and a Financing air quality improvement in critical tradeoffs, including the long-term and short- urban areas, industrial corridors, and areas of term implications of natural resource use, and agricultural burnoff incorporating environmental issues into the * Reducing exposure to toxic substances, r,articu- policy dialogue and into CASs, poverty assess- larly in industry, agriculture, and mining. ments, and PRSPs * Promoting sustainable integrated natural re- Toward the goal of reducing vulnerability, priori- source management of land, freshwater, and ma- ties include assisting clients to better prepare for rine ecosystems (for example, forestry and fish- and respond to natural and human-induced disas- ters and accidents-for example, by developing early ernes), with a focus on highly degraded or threat- wangsytm-aalzgpoeilhzrcsid- enedecosstes an diaste-proe aeas,and warning systems; analyzing potential hazards; iden- enedecosstes an diaste-proe aeas,and tifying suitable prevention and contingency plan- ensuring the generation of benefits for indig- ning techniques; preparing disaster response and enous and poor communities, preferably through disasterhmitiato plarns devel reisk ana community-based approaches, using strategic dentervicesasuch as insuranc sc ninanc- ment services such as insurance schemes; financ- implementation tools such as property rights, i c inmg critical infrastructure, and using urban eriviron- appropriate technology, and tradable develop- mental land use planning as a preventive tool. ment rights. In the health area, priorities include: Quality of growth & Developing a better understanding of environ- With the private sector playing an increasingly large ment-health linkages through analytical work economic role in the region, the Bank can help en- and implementation of health surveillance sure that private sector growth is sustainable and contributes to povertv alleviation. In addition, we pro ects to improve project design and pol'c I can play an important role in helping our clients dialogue, resulting in more strategically focused projects i~~~~~~~~~ncorporate environmental concerns into macroeco- projects nomic and sector policies. Priority actions in LCR U Improving access in the near term to safe water; include: improving collection and disposal of sewage and Developing environmentally appropriate mac- primary treatment of wastewater, in conjunction r p a roeconomic policies and instruments, including with a plan for future wastewater treatment; and growth, trade, and regional integration strate- improving solid and hazardous waste manage- gies; fiscal incentives for sound environmental ment (avoiding exposure of the poor, who often management (for example, full-cost pricing that live physically on and economically off poorly reflects environmental externalities, and reevalu- managed solid waste landfills) ation of subsidies to ensure meaningful target- 108 Annex A - Regional Strategies ing); and natural resource and expenditure ac- a Promoting biodiversity conservation in critically counting frameworks (see box 3.8 in chapter 3) threatened ecosystems, with a focus on compre- i Supporting targeted institution building, includ- hensive approaches such as systems of protected ing regulatory and enforcement frameworks and areas, hotspots within a subregion, and biologi- decision support; promoting comprehensive ap- cal corridors, on promotion of current or near- proaches to environmental management, includ- term financially sustainable national biodiversity ing watershed management and urban develop- strategies, and on generation of positive impacts ment/land use planning; promoting sectoral on local livelihoods (see box A.5) mainstreaming and gradual decentralization, A Assisting client countries to prepare for and re- with a focus on targeted assistance for highly spond to climate change, through mitigating polluting sectors or critically polluted cities and greenhouse gas emissions, ensuring and protect- industrial corridors; and promoting sustainable ing carbon sequestration functions of forests and financing of environmental initiatives through rangelands, promoting renewable energy and en- the use of fiscal instruments, appropriate pric- ergy efficiency options, and facilitating LAC ing of natural resources and of environmental countries' participation in international carbon services, and positive and negative subsidies (see markets (for example, through national strategy box 2.5 in chapter 2) studies on greenhouse gas offset potential and * Strengthening awareness and building environ- through preparation of PCF projects) mental constituencies through education and a Phasing out ozone-depleting substances training U Protecting and restoring international waters. * Developing mechanisms for effective participa- BOX A.5 tion, negotiation, and conflict resolution, includ- A regional approach: The Mesoamerican ing greater stakeholder involvement in the En- Biological Corridor vironmental Impact Assessment (EIA) process The Mesoamerican Biological Corridor (MBC) is (for example, through public hearings); appro- a continuous ecosystem band extending from priate consultation on policy and program de- southeast Mexico to the northern departments sign; and use of market-based instruments, in- of Colombia. The Atlantic coastal areas of this zone include the second largest barrier reef sys- formation disclosure schemes, and voluntary tem in the world. The MBC was recently identi- compliance schemes, in addition to traditional fied by the international scientific community as command-and-control approaches one of 25 critical biodiversity areas of the U Promoting clean industrial production, includ- planet-one of the global biodiversity hotspots. For the past few years, the World Bank has worked with the GEF, national governments, re- and medium-size enterprises. gional organizations, civil society, bilateral and multilateral donors, and technical cooperation agencies in supporting the MBC initiative as a Qualitymof the regional and global unique ecosystem approach for the conserva- commons tion and sustainable use of biodiversity and for- The LAC Region is particularly important as re- est resources in Central America and as a plat- gards the quality of the regional and global com- form for the sustainable development of the mons. In this area, the priorities include: region. 109 Making Sustainable Commitments - An Environment Strategy for the World Bank Subregional priorities subregional level, indicate potential future areas of Environmental problems vary across the region, and work for the Bank provided that they are supported priorities should vary accordingly. LCR sees itself by the individual country dialogues and the corre- as having a comparative advantage in the following sponding CASs. areas: wastewater treatment of highly polluted or sensitive water bodies, which is important in IMPLEMENTATION OF THE Mexico and the Caribbean; air quality improve- STRATEGY ments in critical urban industrial corridors and ar- , Goals. LCR's proposed neat-term goals are to avoid eas of agricultural burnoff in Brazil, Mexico, and negative impacts of projects; to mainstream envi- the Southern Cone; disaster preparedness in ronment in other sectors as well as generate critical Mexico, Central America, and the Caribbean; pro- mass in selective environmental operations; to work motion of clean industrial production in the Andean more effectively with our client and donor coun- countries; strengthening of awareness and manage- tries; and to become increasingly results-onented. ment capacity through environmental education Specifically, we will: and vocational training in the Andean countries; C Avoid negative impacts of projects by improving assistance to countries' preparation for and response screening and facilitating upstream guidance to climate change in the Caribbean and Central with respect to safeguard policies in operations; America; and targeted institution building in the ensuring environmental due diligence i. opera- Andean countries, Mexico, and the Southern Cone. tions as required under Bank policies f:r envi- ronmental assessment and adjustment lending; At the same time, there are numerous regionwide emphasizing thematic supervision; and i-ncreas- priorities: developing a better understanding of ing the use of strategic environmental assess- environment-health linkages and environment- ments poverty-economic growth linkages and tradeoffs; 0 Mainstream andgenerate criticalmass by improv- promotion of environmentally appropriate macro- ing understanding of poverty, growth, and envi- economic and sectoral policies and instruments; ronment linkages; preparing backgroundapapers provision of access to safe water, collection and dis- as input to CASs with critical environment prob- posal of sewage, and solid waste management; sus- lems; providing operational support for moni- tainable natural resource management with a focus toring implementation of PRSPs, including en- on threatened ecosystems, on disaster-prone areas, vironment in sectoral strategies; developing and on indigenous and poor communities; targeted GEF, Montreal Protocol, and Climate Change institution building; biodiversity conservation fo- strategies in countries and the region; empha- cused on comprehensive approaches to the genera- sizing a programmatic approach; prornoting tion of positive impacts on local livelihoods, and mainstreaming by developing cross-sectoral sustainable financing and strengthened mechanisms products (for example, environment/infrastruc- for effective participation, negotiation, and conflict ture, environment/health); and improving selec- resolution. tivity in new environmental projects % Work more effectively with clients and donors by It should be noted that these priorities, which are making a case for environmental management based on extensive and internal consultation at the that is convincing for finance ministers and leg- 110 Annex A - Regional Strategies islators; by promoting greater collaboration sure complementarity with our mutual work pro- within the public sector and between the public grams and a flow of information between parties. sector, the private sector, and civil society; and With respect to the GEF, our main thrust in com- by seeking complementarity with respect to ing years will be to help our clients integrate global other donors'programs, given the Banks cor- environmental concerns into their national devel- parative advantage (for example, using CDF as opment strategies. Finally, in addition to our coun- a tool) try clients, we expect the private sector and NGOs a tool) . . to play an essential role in realizing the strategy (see a Become increasingly results-oriented by develop- box A.6). ing and incorporating impact indicators in project design and implementation, improving BOX A6 the results of operations under implementation, Public consultation during preparation of and being at the forefront of best practices. the LAC Environment Strategy A draft of the LAC Environment Strategy was Operationalimplications. In implementing this strat- posted on the Web in early August 2000, and an egy, LCR proposes to work across different sectors e-mail campaign promoted its widespread dis- in the Region. In particular, we envisage close col- semination. Throughout the fall of 2000, partici- pants could read the Strategy, answer a short laboration between the Environment Group, the questionnaire online, and engage in a forum for Poverty Reduction and Economic Management comments and questions. Three subregional Group, and the Human Development Group, par- consultations were held in the fall of 2000: in ticularly given the emphasis on better understand- Cartagena, for Andean countries; in Rio de Janeiro, for the MEROOSUR countries; and in ing the linkages and tradeoffs between poverty, eco- ane Co R, fortMexico and t n San Jose, Costa Rica, for Mexico and the Cen- nomic growth, and environment and between health tral American and Caribbean countries. Com- and environment. We envisage continued close col- ments from more than 200 external participants laboration between the Environment Group and have been received via the various consultations. the Finance, Private Sector, and Infrastructure More than 2,000 people from the public and pri- vate sectors, NGOs, civil society, and academia Group to build on the work that has already been haelgdontradheSaey.Fdbc have logged on to read the Strategy. Feedback undertaken. Within the Environment Group, we was heaviest from the more than 100 NGOs con- propose greater selectivity with respect to self- tacted and from the private sector. The dialogue standing environmental projects. was very constructive, and input from all partici- pants helped fine-tune the environmental priori- ties, criteria for decisionmaking, and lessons learned. The Strategy was also presented in rate with our extemal development partners, includ- Mexico City in October 2000 at the Intersessional ing the Economic Commission for Latin America Committee of the Forum of Environment Minis- and the Caribbean (ECLAC), the Food and Agri- ters. Shortly thereafter, numerous development culture Organization of the United Nations (FAO), partners, including the FAQ/OF, the IDB, the OAS, the Pan American Health Organization the Inter-American Development Bank (IDB), the (PAHO), the UNDP, and the World Health Orga- Organization of American States (OAS), the nization (WHO) attended a similar presentation United Nations Development Programme and affirmed their interest in collaborating in the (UNDP), the UNEP, and bilateral agencies, to en- implementation of the strategy. 111 Making Sustainable Commitments - An Environment Strategy for the World Bank Safeguards. We propose to enhance the effective- and targets with the regional management team; ness of the regional Quality Assurance Team (QAT) (b) working out the implications for a gradual shift by emphasizing a collaborative, problem-solving in the assistance strategy, with its effects on bud- approach in the safeguard review process. This im- gets, strategic staffing, and partnerships; (c) estab- plies upstreaming the dialogue on safeguards to lishing the proper incentive structure to support early stages of project preparation and to sectoral implementation of the strategy, especially discussions, issuing technical guidelines, and dis- mainstreaming (for example, joint products and seminating best practices to sectoral project pro- increased cross-support); (d) ensuring coripatibil- ponents and client countries; increasing the use of ity with other sector strategies, including Fuel for strategic environmental assessments; putting greater Thought and the forestry, water, rural, and urban emphasis on compliance during implementation transport strategies; (e) incorporating this program (for example, through thematic supervision and into CASs; and (f) developing instruments and periodic reviews for specific safeguard policies); and funding mechanisms for regional initiatives and carrying out due diligence in adjustment and fi- nonlending services, such as the Mesoamerican nancial intermediary lending (in addition to stan- Biological Corridor, the Clean Air Initiative, and dard investment operations), as required under Bank the Regional NGO and Ministerial Dialogue. We policies for environmental assessment. propose to adopt annual work plans as a mecha- nism for implementation of the strategy, allowing Challenges and risks of implementation. The chal- flexibility for the Region to best respond to evolv- lenges of implementing this first LCR Environ- ing client demand and complementary activities on ment Strategy include (a) agreeing on realistic goals the part of other development partners. 112 Middle East and North Africa L~~MaIta ~~LebOrion,'JI West Bank anid Gaza Djibouti IBRD 31542 JULY 2001 - . [S;s rnap WU6 producsl ,o,o o She Ma DesignUoll of TA0 World Sank -ebound , cWo , oden ominations d odlr inor . _ho n onh t map do o l,' on ip`toFrhe World B Grou ~~~~~ -~~~~~~~ or cceptonc of such fonae In 1995, the Middle East and North Africa (MNA) progress, lowering population growth from 3.2 to Region completed its first regional environment 2.1 percent per year, reducing infant mortality from strategy, Towards Sustainable Development: An En- 95 to 49 deaths per 1,000 live births, increasing life vironmental Strategyfor the Middle East and North expectancy from 59 to 67 years, and increasing sec- Africa Region. The strategy outlined in this paper ondary school enrollment from 42 to 64 percent. updates the 1995 strategy, the objectives of which Declining population growth, accompanied by in- remain valid today. creasing gross national product (GNP), contributed to a reduction in poverty. Between 1987 and 1998, REGIONAL CONTEXT AND KEY the population living on less than $2 per day fell ENVIRONMENTAL ISSUES from 30 to 20 percent. However, the region still The MNA Region includes 20 World Bank client faces large income gaps. On average, the richest 20 countries with a combined population in 1997 of percent accounts for more than 45 percent of total countries with a combined population in 1997 of 279 million. The substantial investments made income, compared with less than 7 percent for the since the 1960s in health, education, basic infra- poorest 20 percent. structure services, and, more recently, family plan- ning have begun to show positive results. Between MNA's endowment of natural resources is uneven: 1980 and 1997, the region made impressive the region is the world's richest in oil and gas re- 113 Making Sustainable Commitments - An Environment Strategy for the World Bank serves, and the poorest in renewable water and ar- line and high-sulfur fuel oil, a strong reliance on able land. It continues to rely excessively on natural polluting fuels in power generation, and particu- resources as a development strategy, and water and late and sulfur oxide emissions from various in- oil are being used at unsustainable levels. MNA dustries. Solid waste collection systems are gen- countries have the following long-standing envi- erally well developed, but proper disposal is ronmental issues, which differ among countries only largely lacking, especially in rural areas. Indus- in magnitude and severity: trial hazardous waste is rarely treated adequately. m Water scarcity and quality. Annual renewable Major cities bear the brunt of MNA's pollution water rcsources per capita arc expected to fall problems. from 1,045 cubic meters per year in 1997 to 740 o Weak institutional and legalframeworks. FInviron- cubic meters per year by 2015. Water allocation mental problems are aggravated by weak regu- is a major concern for governments. In part be- latory and enforcement mechanisms. Although cause of policies designed to increase food self- the region has made progress by establishing sufficiency, 88 percent ofMNAs water resources ministries of the environment, preparing or en- is allocated to the agricultural sector, as against acting environmental legislation, and preparing 7 percent for domestic use. The degradation of NEAPs, the institutions are understaffed and underfunded and generally lack credibility and water quality is aggravating the water scarcity problem. political power. Cross-sectoral linkages between a Land degradation and desert~fication. Arable and ministries and public institutions are weak. The o ~~~~~~~~~~legal framework is based on a command-and- permanent cropland in the region currently rep- cotrl appro it wea moiringand resents less than 6 percent of total land area and enforcement regimes. The role of civil society in is shrinking as a result of serious land degrada- environment mngemenT reman civiite in environmental management remains linmited, in tion and recurrent droughts. Unsustainable ag- ricultural practices on rainfed lands, combined part baure eitin NGOs ar tal youg local in nature, and often dependent on the gov- with natural factors such as wind and floods and eminment and international donors for budget- with excessive fuelwood removal, have contrib- ary support. uted to a substantial loss of productive land and to desertification. These environmental issues result in a heavy drain Coastal degradation. Major coastal cities in MNA on the region's economies. NEAPs estimate that are attracting local population and tourists faster the annual cost of environmental damage varies than inland areas. Lack of integrated coastal zone from 4 to 9 percent of gross domestic product management is exacerbating the increased com- (GDP)-higher than the 5 percent estimated for petition over the allocation of land and marine Eastern Europe, and substantially higher than the resources. estimated 2-3 percent in member countries of the u Urban and industrialpollution. Urban and indus- Organisation for Economic Co-operation and trial pollution causes significant public health Development (OECD).The cumulative impact of problems in the region.The transport, industry, land degradation is estimated to have reached a cost and energy sectors have substantial impacts on of about $1.15 billion ayear in lost agriculturalpro- human health through the use of leaded gaso- ductivity. The environmental health burden is esti- 114 Annex A - Regional Strategies mated at about 14 percent of the region's total health ing $2.3 billion allocated to water-related projects. burden. Of this total, about 8 percent is attribut- MNA also increased its emphasis on poverty able to inadequate water supply and sanitation and through social finds, community development pro- about 3 percent to urban air pollution. The rural grams, rural development, natural resource man- and urban poor suffer the most, since low-income agement, and basic health projects, which together housing is often plagued by unreliable drinking totaled $650 million. Notable progress was made water supplies, inadequate sewerage, poor solid in protecting natural resources in Algeria, Egypt, waste management services, and location on lands Morocco, and Tunisia. Efforts to control indus- subject to floods and other natural hazards. trial pollution are continuing in Algeria and Egypt, and initiatives to reduce urban pollution are being Emerging issues. As MNA countries struggle with implemented in Lebanon, Tunisia, and Yemen. In their long-standing environmental problems, they Algeria, Egypt, and Morocco, projects are under must also confront the cnvironmental dimensions way that would strengthen environmental institu- of their own economic liberalization, as most are tions and encourage greater public participation. committed to market-based economic reforms, free The GEF has financed nine projects in the region. trade agreements with the European Union, and globalization. Improving economic growth while Nonlending activities. The Mediterranean Environ- maintaining a sustainable natural resource base and mental Technical Assistance Program (METAP), remaining competitive in international and domes- sponsored by the World Bank, the EC, the Euro- tic markets is a fundamental challenge for the re- pean Investment Bank, and the UNDP, played a gion. As countries move forward with trade liber- major role in evaluating national environmental alization, private sector development, and strategies and helped establish environmental im- privatization, the challenge is to assist them in these pact assessment units in various countries (see box transitions while ensuring a sustainable use of their 3.3 in chapter 3). Regional training helped natural resources. strengthen the capacity of environmental institu- tions. The NGO small grant program and other THE BANK'S RECORD AND FUTURE regional initiatives sought dialogue and participa- CHALLENGES tion with NGOs in the design and implementa- tion of environmental activities. Efforts to promote regional collaboration included the water, deserti- jor milestone in guiding MNA countries, the do- fication, and trade and environment initiatives. nor community, and the Bank toward promoting sustainable development in the region. It empha- sized three key strategic objectives: improving natu- LESSONS LEARNED ral resource management; arresting emerging pol- Progress has been slower than anticipated. The lution problems; and strengthening environmental objectives of the 1995 strategy were too broad and institutions and increasing public participation. were overly optimistic. Important substantive les- sons have been learned: Lending activities. During the first five years of the a Be realistic aboutwhat countries can achieve over strategy's implementation, investments in environ- the next five year period, especially given that ment-related projects totaled $3.4 billion, includ- most countries are now facing the impact of glo- 115 Making Sustainable Commitments - An Environment Strategy for the World Bank balization, in addition to long-term environ men- quality of growth, and quality of the reg-onal and tal and social issues. This strategy update will global commons. The actions proposed in this En- focus on a few high-priority actions, accompa- vironment Strategy update are not intended to be nied by outcome indicators that can be identi- add-ons or isolated actions in sectors already being fied and monitored by the countries themselves. addressed. Rather, they are intended to reinforce U Mainstream environmental issues in the Bank the mainstreaming effort currently under way by and in client countries to a greater extent. Ef- focusing on specific actions that are essential for forts have been made to mainstream environ- ensuring sustainable development. mental issues in the Bank's core work. For ex- ample, the environment has been integrated into the latest CAS for Tunisia, the CDF for est Quality of life Bank-Gaza, and the Country Development In the MNA region, action in three critical areas Review (CDR) for Yemen. Additional efforts are can help improve the quality of life: improving wa- needed in the coming years to move away from ter resource management, controlling ltnd and stand-alone environmental projects toward in- coastal zone degradation, and reducing urban pol- clusion of strong environmental components in lution. other sectors, such as transport, energy, educa- tion, urban development, and rural development. Improving water resource management. Water scar- city and water quality stand out as particula.-ly chal- The World Bank is not alone in offering assistance lenging issues in this mainly arid region. The pro- to MNA countries. Since 1990, the region has wit- posed actions are to: nessed a rapid surge of international and regional E Focusonintegratedwaterresourcemanagement, activities. Multilateral and bilateral donors increased their assistance in areas identified in the 1995 MNA emphasize demand-side management and wa- ter conservation, and facilitate the introduction environment strategy and in the NEAPs, drawing of technologies that improve efficiency of wa- clients away from Bank lending. Clients prefer to ter-use borrow from the EIB because of the availability of s Finance wastewater treatment plants and de- a 3 percent EU subsidy on environment-related velopguidelinesforwaterreuse,especiallyinag- projects. In addition, the EU, Germany, Japan, and velouie riculture the United States have increased their grants and M Finance cost-effective sanitation measures and concessionary lending to the region. This change in the regional context has severely affected Bank hygiene education activities, especially n poor financing of environment-related projects. Bank rural areas financing, which totaled $3.4 billion during the X Integrate monitoring and enforcement compo- 1995-2000 period, is expected to decline in the l a water-related projects, strengthen the in-volve- coming years. ment of local communities in this monitoring process, and ensure widespread sharing of in- STRACTEGI PRIORITIES AND formation on water quality. ACTIONS Strategic priorities and actions are grouped by three Controlling land and coastal zone degradation. Pro- interrelated aspects of development: quality of life, posed actions include the following: 116 Annex A - Regional Strategies * Establish reliable baseline data for water and soil Capacity building. Proposed actions include contamination stemming from agricultural run- strengthening national legal frameworks to include off and develop effective methods of control- environment and social safeguards and improve self- ling agricultural pollution; improve land man- monitoring and enforcement mechanisms; harmo- agement and mitigate the impacts of urban en- nizing national environmental assessment (EA) croachment into agricultural areas; work with regulations with international requirements; assist- Bankwide natural resource management net- ing countries to shift from project-specific EA to works to pursue a unified program on land man- sector EAs whenever appropriate; working with the agement; and provide a framework for real par- public and private sectors to promote clean tech- ticipation by local communities and stakehold- nologies; increasing public consultation and infor- ers in the management of the natural resource base~~ mation dissemination through such means as an base environmental awareness component and by a Develop coastal zone management strategies and e a programs that emphasize coordinated and pre- strengthening the role of governance in appropri- ate projects; involving NGOs, civil society, and com- ventive measures to combat coastal zone degra- O dation. munity leaders in the design and implementation of projects; encouraging women's participation; and Reducing urban pollution. To improve the quality of building the capacity of institutions to develop early life in urban areas, the Bank proposes to focus on warning systems and preparedness plans for floods the following areas and actions: and droughts. i Air pollution. Conduct energy-environment re- views; develop environmental guidelines for the Strengthening the private sector The manufacturing energy sector; develop proper legal and institu- and service sectors are expected to be the primary tional frameworks to address market failures in engines of economic growth in MNA. The private the energy sector; encourage the phaseout of sector must therefore assume an expanding role in leaded gasoline; implement public awareness environmental management, assisted by an effec- campaigns on the health impact of leaded gaso- tive public policy regime. Activities to improve the line; and introduce inspection and maintenance environmental capacity of the private sector would programs for vehicles be designed through METAP or the Development * Waste management. Develop the institutional and Grant Facility (DGF). Such activities would in- legal frameworks necessary to support integrated dude (a) assisting domestic banks in managing new waste management; introduce affordable financ- risks and exposures to environmental regulations, ing mechanisms for the collection, treatment, and formulating reasonable and transparent envi- and disposal of waste; and increase awareness of ronmental regulations that support both environ- and participation of communities in all aspects mental objectives and private sector development, of solid and hospital waste management. and (b) continuing the work on environment and trade begun under METAP. The latter work would Quality of growth include rapid co3untry assessments to identify the The World Bank will support environmentally sus- sectors most sensitive to changes in environmental tainable growth in the region in two areas: capacity regulations; case studies and training to assist building, and strengthening the private sector. policymakers in understanding the implications of 117 Making Sustainable Commitments - An Environment Strategy for the World Bank environmental standards for trade; assistance to GEF resources in transport, urban planning, and countries in adapting to a new domestic regulatory integrated rural development projects. A more sys- environment and to international business practices; tematic approach is needed to mainstreom global promotion of reasonable and transparent environ- environment issues into lending and nonlending mental regulations and standards; development of activities and to assist countries in meeting their guidelines to incorporate environmental consider- commitments under international treaties and con- ations into privatization transactions; and formu- ventions. An analysis of the lending program, lation of clear environmental performance objec- matched with country priorities, should be con- tives to deal with past environmental liabilities. ducted to estimate the potential for GEF projects, establish priorities in every country, and develop Quality of the regional and global an action plan. environment To promote the quality of the regional and global IMPLEMENTATION ARRANGEMENTS environment, the Bank will continue to support its Given the diversity among the countries In the re- regional initiatives in the MNA region and will in- gion, actions to implement this strategy update tegrate global environmental issues into its opera- must be specified at a country level. Bilateral grant tions. financing will be instrumental in accelerating the implementation of these actions. Regional initiatives. The Bank's involvement in three regional programs-METAP, the Desertifi- Mainstreaming the environment. The following four cation Initiative, and the MNA Regional Water methods wil be used to mainstrcam environment Initiative-will continue. METAP will remain the into the development agenda: main instrument for providing technical assistance 1. Enhance the quality and effectiveness .f coun- to strengthen the Bank's environmental work. Spe- t tries' environmental and social assessnaents by cific programs for water quality improvement, mu- (a) strengthening national project approval sys- nicipal and hazardous waste management, environ- tems, (b) introducing strategic environmental as- mental safeguards, trade and finance, knowledge sessment of macroeconomic and microeconomic management, and development oflocal capacitywill policies and sector environmental assessments, be presented to potential donors for financing. The (c) training client countries to use these assess- Bank will also continue to strengthen partnerships ments, and (d) exchanging lessons learned about with regional and international agencies in design- the implementation of these assessments ing and implementing its regional initiatives. 2. Demonstrate the economic importance of a clean environment by (a) undertaking studies to Global environmental issues. The pipeline includes assess the cost of environmental degradation in six projects that address greenhouse gas reduction, MNA countries, (b) conducting analytic al work three projects on biodiversity conservation, and two to identify linkages between environment and on coastal zone management. New GEF opera- trade, and (c) mainstreaming the environment tional programs in transport and integrated eco- into PRSPs. This analytical work will be used system management offer new opportunities to use to identify priority environmental intervention 118 Annex A - Regional Strategies in the CAS. Within the scope of this strategy, convene a donor-country coordination group on the countries targeted for mainstreaming the environment to achieve greater integration of ef- environment into the CAS are Algeria, Egvpt, forts and reduce overlaps. The CAS and the CDF and Lebanon. will be the instruments for highlighting government 3. Integrate environmental components into tar- and bilateral donor policies in undertaking the ap- geted sectoral projects in water resources man- propriate strategic actions. The Bank would con- agement, wastewater management, solid waste tinue to seek cofinancing and to mobilize grant and management, the transport and energy sectors, concessionary lending resources with bilateral and and the health and education sectors. Efforts to multilateral donors such as the EU, Japan, and the integrate global environment issues into the U.S. Agency for International Development Bank's operations will involve activities for the (USAID) and with international and regional fi- protection of biodiversity in natural resource nancial institutions such as the EIB, the German management, community development projects, KfW, and the Islamic Development Bank. At the and the reduction of greenhouse gases in trans- regional level, the Bank would seek collaboration port, energy, and waste projects between METAP activities and other regional or- 4. Develop a monitoring and evaluation (M&E) ganizations such as the Mediterranean Action Plan system, as well as indicators to measure progress (MAP), the Centre for Environment and Devel- at the project, program, strategy, and policy lev- opment for the Arab Region and Europe els. To support the M&E systems, environmen- (CEDARE), various NGO networks, and the En- tal profiles for each MNA country will be de- vironment-Development and Actions of Maghreb. veloped. Subject to availability of funds, a re- gional consultation meeting of all stakeholders Selectivity. The Bank will refocus some of its ac- will be convened every two years to monitor tivities by: progress in achieving the strategic actions. In E Gradually shifting from stand-alone environ- addition, the environment cluster will submit to mental technical assistance projects to integra- the MNA Regional Management Team and to tion of environmental technical assistance com- the Environment Sector Board an annual report ponents into sector operations with well-defined on the Region's environmental performance. outputs X Discontinuing the preparation of additional en- Partnerships. The implementation of the proposed vironment sector notes or NEAP updates strategic actions would require important leader- X Refocusing the functions and responsibilities of ship, collaboration, and coordination activities in- the Region's environment staff toward provid- volving various stakeholders, including NGOs, bi- ing upstream technical and policy support, en- lateral and multilateral donors, and international suring compliance with the Bank's environment financial institutions. Partnerships will become an and social safeguard policies, and improving the important cornerstone for the Bank's environmen- implementation of environmental components tal assistance in the MNA Region. At the country in various projects. level, the Bank would be prepared to participate or 119 South Asia South Asia Region Bkutan . Sri Lanka -Maldives IBRD 31543 JULY2001 Th~s map as pr odue by the Mop Desbn Ua,t =f The Work! Bank.t. The boadndnes. colors, danosin=otons and any th=er aio,,asioa' , Dn on title an4do no mply, on the paor t TIhe Wnrtdhnak Group * =ny jl/dg-en =n Ihe bp= siolus of =ny terriboy, on any eodotsent REGIONAL CONTEXT AND KEY ciendy integrate environmental and social devel- ENVIRONMENTAL ISSUES opment considerations into economic policy For the past decade, South Asia has been the sec- objectives. ond fastest growing region in the world, after East Asia. Economic growth averaged over 5 percent. Despite progress since the early 1990s on economic Yet the region is home to 40 percent of the world's reforms and developments in environmental insti- poor, most ofwhom live in rural areas. Despite con- tutions, countries in the region are still plagued by siderable progress, the region continues to face fun- huge problems. Among them is the limited progress damental constraints on sustainable development, made on trade liberalization; on enabling environ- including inequitable economic growth; persistently ments for private sector participation, including the low levels of human development; low status for rule of law; on fiscal and financial policies; and on women; feudal social structures that are reflected openness and accountability of public institutions. in political power relationships; the absence or Poor economic management is also reflected in the weakness of local government and the exclusion of large subsidies and the lack of economic pricing of most of the population from decisionmaking and natural resources, including water, energy, agricul- access to basic services; unabated environmental tural land, and other inputs. In addition, many state- degradation; and failure of institutions to suffi- owned industries-for example, in steel, fertilizer, 121 Making Sustainable Commitments - An Environment Strategy for the World Bank and petrochemicals-and private manufacturing Many of these issues are particularly important for industries, such as leather, textiles, sugar, and pulp the rural poor and disadvantaged groups, who de- and paper, have prospered as a result of strong gov- pend heavily on renewable natural resources. ernment protection policies and lack of compliance with environmental regulation. In this context, re- South Asia stands out as the region most vulner- form agendas, including deregulation and fiscal ef- able to natural disasters such as floods and ,yclones, ficiency, often conflict with political institutions and which affect the region regularly. From 1990 to interests. 1998, the region accounted for over 60 percent of disaster-related deaths worldwide. Over the 1965- The region's environmental problems are enormous. 98 period, India accounted for about 64 percent They include resource depletion and ecological deg- and Bangladesh for 25 percent of the damages aris- radation, indoor and urban air pollution, lack of ing from natural disasters. Floods, cyclones, hurn- access to clean water supplies and sanitation, toxic canes, and typhoons were responsible for 86 per- and hazardous agroindustrial waste generation and cent of the damage in those countries during this disposal, and vulnerability to natural disasters. These problems, magnified by the inadequacy of period. governance structures in every country of the re- The causes of resource depletion and environmen- gion and at all levels, threaten or cause losses of life and livelihoods of millions of people. Estimates source conservation and protection, lack of insti- suggest that premature deaths and illness linked to tutional frameworks for the integrated management major environmental health risks account for one fifth of the total burden of disease in the region. of natural resources, inadequate legal and policy This is comparable to malnutrition (15 percent) and frameworks, weak governance, low institutional is larger than the toll from any other preventable capacity subsidies and policy distortions. lack of risk factor. In India, inadequate water supply and public awareness of the value of healthy and sus- sanitation are estimated to account for 9 percent tainable ecosystems, and limited data on resources and indoor air pollution for 6 percent of the envi- and environmental quality. ronmental health burden. It is estimated that air pollution causes 168,000 premature deaths annu- THE BANK'S RECORD AND FUTURE ally in Pakistan (60 percent of them attributable to CHALLENGES indoor air pollution) and 132,000 premature deaths in Bangladesh (70 percent from indoor air pollu- In the early 1990s, most environmental projects in tion). the region dealt with natural resource issues. They included water resource management projects in Significant natural resource concerns in South Asia Bangladesh and India (see box A.7), forestry and include water quality degradation and local and re- fisheries projects that addressed both production gional water scarcity; dwindling forests, coastal and resource degradation issues in Bangladesh, In- wetlands, freshwater bodies, and fisheries; soil deg- dia, and Pakistan, and irrigation and drainage radation resulting from nutrient depletion and projects that focused on soil salinity and land deg- salinization; and poorly managed water resources. radation in India and Pakistan. As pollution con- 122 Annex A - Regional Strategies BOX A.7 Sustainable watershed management in India The South Asia Region is implementing a new generation of NRM projects focusing on the needs of the poor living on marginal lands and degraded watersheds. These projects integrate community-led development with innovative social, technical, scientific, and Geographic Information System (GIS)- based monitoring and evaluation approaches. The Integrated Watershed Development Project (Hills II) in India uses participatory approaches to increase productive potential and promote sustainable watershed management in five Indian states (Haryana, Himachal Pradesh, Jammu and Kashmir, Punjab, and Uttar Pradesh) in the fragile and highly degraded Shivaliks Hills. The project covers 2,000 villages in a 200,000-hectare area. Village development committees (VDCs) have been formed and given the responsibility for identifying and implementing priority watershed interventions in their villages. Multidisciplinary government teams assist the VDCs to prepare and implement village watershed development plans. Project activities include microwatershed treatments such as vegetative barriers, improved cropping systems, horticul- ture, and silvipasture; fodder and livestock development (artificial insemination for genetic improve- ment; veterinary health improvement; and fodder production); and rural infrastructure. The medium-to-long-term aim of these investments is to improve rural livelihoods through stronger community management of natural resources on a sustainable basis. Some villages are already ex- periencing increased water availability, reduced soil erosion, improved vegetative and forest cover, higher crop and horticulture yields, and increased milk production. Project activities also help reduce risks from natural and environmental disasters. For example, improved water management reduces vulnerability to droughts. The participation and empowerment of villages, the reorientation and training of public agencies to facilitate community-driven watershed development approaches, and an enabling policy and institu- tional environment for sustainable natural resource management will all require close attention through- out the duration of the project and beyond. cerns worsened, an increasing share of projects dealt marine ecosystems, and coastal zone management with urban and pollution problems. in and around the Bay of Bengal, involves numer- ous riparian countries. In the mid-1990s, the Bank increased its emphasis on improving environmental management by sup- The Bank is currently emphasizing development porting more effective policies, regulations, and outcomes and, specifically, ensuring that environ- procedures, as well as pollution prevention and con- mental programs benefit the poor. Programs and trol in Bangladesh, India, Pakistan, and Sri Lanka. policy reforms are increasingly focused on reduc- The Bank sought to integrate environmental issues ing environment-related health risks; improving into other sectors, including transport, fisheries, and livelihood systems, particularly in rural areas; re- education. The mid- to late 1990s also saw increased ducing vulnerability to natural and environmental attention to projects that focused on global and disasters; and improving governance. The Bank has transboundary issues. For example, the Bay of Ben- continued to promote a coordinated and holistic gal Environment Program, which addresses fish- approach to development assistance, by building eries research, environmental emergencies, large partnerships and integrating environmental issues 123 Making Sustainable Commitments - An Environment Strategy for the World Bank into sectoral and thematic strategies. The environ- rural areas); and (c) governance (since public sector mental portfolio is thus beginning to reflect issues performance, rather than additional financial re- highly relevant to poverty outcomes. This can be sources, is the key to improving envircnmental seen in two major areas. First, the Bank is support- management). ing innovative analytical work on the role of water supply and sanitation and reduced air pollution in Because South Asia is among the most populated achieving health outcomes in urban settings. For and impoverished regions in the world, our Strat- example, a study in Andhra Pradesh, India, designed egy focuses on contributing to making a difference to assist in the preparation of a State Environmen- in the quality of life of poor people by improving tal Action Plan, is assessing the overall burden of their health and livelihood systems and reducing ill health associated with lack of water and sanita- their vulnerability to changes in environmental con- tion infrastructure and with exposure to indoor air ditions. In addition, since equitable and sustained pollution as a result of the use of wood and dung economic growth remains essential for subs-antially for fuel. Second, there is a sharperfocus in all project improving the quality of life of poor peopl e in the development objectives on poverty impacts; ex- region, our Strategy contributes to the development amples include projects on sodic lands reclamation, of policies and enabling conditions that support joint forestry management, integrated watershed long-term quality of growth. Finally, our Strategy development, and fisheries management. seeks to improve the quality of the regional and global commons in order to capture a significant STRATEGIC PRIORITIES AND part of their benefit flows locally, with the help of ACTIONS international financing mechanisms, and contrib- Consistent with the principles of the CDF, the ute to lessening the vulnerability ofthe region's poor present Stratey builds on the results of three years to the effects of global environmental deneriora- of realignment of environmental work in South Asia tion-for example, climate change. to focus primarily on development outcomes and the quality of operations and business procedures. Improving the quality of people's lives The Strategy, while supported by a number of coun- through better environmental conditions try and regional studies, also incorporates the re- Our Strategy will continue the Bank's efforts over sults of continuous learning and interaction with the past three years to promote environmental im- clients and partners, including the recently held provements as a fundamental part of development consultations in South Asia on the emcrging Bank outcomes by supporting initiatives, progranis, and Environment Strategy. The Strategy has extensive policy reforms designed to: overlaps with all of the main pillars of the Bank's * Improve livelihood systems, particularly in ru- development approach, including (a) efficiency ral areas, through (a) better management and (with a particular focus on power, water, and pe- improved productivity of the natural resources troleum sector reform measures); (b) poverty (given on which the poor depend (see box 2.4 in chap- that economic and social savings gained through ter 2); (b) support for institutional reforms, in- improved environmental management have been centive structures, and improved governance, shown to be highly progressive in both urban and particularly decentralization efforts; (c) improved 124 Annex A - Regional Strategies infrastructure, including access to markets, ac- tal institutions in the region are particularly weak cess to safe drinking water, and access to water and inefficient and would require reform and con- for agriculture; (d) improved access to agricul- tinued strengthening in order to become contribu- tural technology, such as more productive, tors to development outcomes. drought-resistant cropping systems; (e) im- proved access to credit (for example, through Improving the quality of growth to microfinance); (f) improved access to energy and support long-term sustainability to alternatives to solid fuels; (g) improved edu- Because of the region's enormous environmental cational and information services, including fe- challenges and continued pervasive poverty, equi- male education and extension services; and (h) table and sustained economic growth is essential support for initiatives to eliminate the gender for producing lasting improvements in quality of gap and foster inclusive institutions life, particularly among the poor. In this context, * Reduce environmentally related health risks by policies and enabling conditions have been a major (a) reducing exposure to indoor and outdoor air focus of every country program. Our interventions pollution (see, for example, box 3.2 in chapter will focus on two main areas: 3); (b) providing access to a safe and reliable 1. Integrating environmeizt into Country Assistance drinking water supply; (c) providing access to Strategies. This will be accomplished in three sanitation and solid waste services; and (d) sup- ways: (a) deepening macroeconomic and sectoral porting mass hygiene and education programs. reforms; (b) mainstreaming the environment Among the key areas of our focus will be insti- into sector operations, including provision of op- tutional reforms to improve service delivery, fis- erational support for the implementation of the cal sustainability, and public-private partnerships safeguard policies; and (c) strengthening the * Reduce vulnerability to natural and environmen- analytical and empirical basis of our operational tal disasters through support for changes in land- work. Recent and ongoing CAS work in India, use planning, disaster preparedness, community Nepal, and Pakistan provides examples of this involvement and education, water conservation approach. and management, and emergency-phase inter- 2. Enhancing project quality through strengthened ventions. We will also intensify our work on so- implementation of safeguard policies. The overall cial protection measures to protect people who emphasis in the region is on enhancing project are vulnerable to natural disasters. quality by aiming for the most appropriate en- vironmentally sustainable outcomes. Although Refocusing our strategy in order to contribute to a strong emphasis on safeguard policies may have poverty reduction outcomes will also require ad- a constraining effect on efforts to mainstream dressing issues related to governance and support- the environment, the focus on overall quality ing the emergence of institutions that can help would not only ensure compliance on environ- empower the poor. Recent experiences with Bank mental safeguards but would also enhance envi- projects and local success stories are providing evi- ronmental management in South Asia. dence that social capital and participatory processes are as crucial to poverty reduction as are financial The shift in Bank lending operations toward a resources and development programs. Environmen- greater emphasis on programmatic lending has en- 125 Making Sustainable Commitments - An Environment Strategy for the World Bank hanced the promotion of strategic sectoral and re- basin. The region could derive substantial ben- gional environmental assessments to ensure ad- efits from greater cooperation among riparians equate attention to environmental safeguards and on other internationally shared river basins, pri- good practice. Examples include sectoral assess- marily the Ganges-Brahmaputra-Meghna ba- ments for energy reform projects in India and re- sin. gional assessments for watershed projects in India a South Asia is important from a climate change and Pakistan. In addition, more attention is being point of view in two respects. First, it is poised given to integrating social and environmental as- to become a major contributor to greenhouse sessments because of the intertwined nature of the gas emissions. Although per capita emissions in issues involved. Combined environmental and so- the region are currentlyvery low, with total pro- cial sectoral assessments for transport, urban, and duction of carbon dioxide representing only rural development projects are now routinely being about 5 percent of global emissions, they are conducted in South Asia. Furthermore, there is in- increasing at a rate of about 7 percent per year- twice the average rate. Second, the impacts of creasing emphasis on environmental monitoring c and evaluation, taking advantage of modern infor- gion, especially because of its extensive low-ly- mation management tools and human resources. ing areas. Small-scale renewable energy supplies Finally, the Bank is placing a strong emphasis on may be the most cost-effective solution to pro- local ownership and consensus building amona its viding reliable electricity in rural areas riot con- clients in South Asia to help them strengthen their nected to the grid and in some urban areas, and environmental safeguard systems and practices. For the use of cleaner fuels could have a concomi- example, the Bank is working collaboratively within tant impact on indoor air pollution. In the me- the region and with the Asian Development Bank dium term, opportunities exist for building con- on the development of new resettlement polices in sensus on reform in the power sector that would Pakistan and Bangladesh. promote energy efficiency and conservation and the application of renewable energy for rural and Enhancing the quality of the global and urban communities and industrial uses. regional commons w The custodians of South Asia's biodiversity are The degradation of the region's global commons largely the rural poor, who often dcpend directly can constrain economic development because of its on these resources for their livelihood and sus- huge opportunity cost and threat to political secu- tenance. Efforts will therefore focus on finding rity, The region's water resource systems, for ex- effective mechanisms to channel available glo- bal resources-including GEF-ro local corn- ample, are highly interdependent. Our focus is on munities in order to provide adequate incentives achieving global environmental objectives as a by- q product of promoting local development benefits. or changes in their patterns of resource use, and on broadening the scope of the GEF portfolio a The management of shared river basins and seas to promote biodiversity conservation over whole poses an important challenge for the South Asia landscapes. Region. The Bank has been involved in the past in helping to facilitate a robust agreement be- To enhance the quality of global and regiona com- tween India and Pakistan on the Indus Rivei- mons in South Asia, areas of focus will include: 126 Annex A - Regional Strategies a Enhanced use ofinternationalfinancialassistance. ticularly in urban water supply, independent The integration of GEF into the Bank portfo- power production, and transport; and (c) using lio includes cofinancing arrangements, as in the GEF resources, when appropriate, to support the Bangladesh Fisheries IV Project and the Paki- sustainable management of natural resources on stan Protected Area Management Project. Seri- which vulnerable groups depend (protected area ous efforts are under way to better understand management, medicinal plants, and solar ther- the tradeoffs and synergies between local and mal power). global environmental outcomes and to enhance a Enhancing project quality by implementing the the effective use of GEF resources to support Bank's safeguard polices-a key pillar of Strat- mainstream Bank environmental activities. egy implementation. To this end, we have al- a Montreal Protocol activities. The ongoing ready initiated the following activities: (a) es- Montreal Protocol Program in South Asia has tablishment of an independent safeguard review continued to expand. In India, as the Bank's and compliance monitoring team; (b) system- portfolio of subprojects has matured, approxi- atic upstream review and input into project de- mately 3,000 tons of ODS chemicals have been sign beginning with the project concept stage; phased out, of which sub-project completions (c) a project risk management and compliance in 1999 accounted for 580 tons. In addition, a monitoring system, linked to the Bank's project major initiative to phase out production of all document system; (d) thematic joint social and CEFCs in India (one of the world's largest re- environment reviews focusing on specific sec- maining producers of these chemicals), was tors such as water resources, transport, and agreed and began implementation in 2000. health, (e) periodic skills enhancement for all regional staff; (f) enhancement of local owner- IMPLEMENTATION ARRANGEMENTS ship and consensus building; and (g) strength- The present Bank Environment Strategy for South ening of our clients' capacity through policy dia- lThe present Bank Environment Strategy for South Asia applies to the work being done by sector units logue and training throughout the Region, as well as to the work of a Intensffying the use of sectoral-regional environ- the regional environment unit itself. More specific mental and social assessments by building on the arrangements for effectively implementing the experience of the past three years in the water, strategy include: roads, and power sectors to enhance the envi- s Exercising selectivity in investment operations by ronmental content of sector policies and insti- (a) relying less on stand-alone environmental tutions. management projects implemented by central -M Strengtheninganalyticalandadvisory activities- government agencies and more on (a) filling critical gaps in knowledge and infor- mainstreaming the environment into sector op- mation by undertaking new analytical work on erations; (b) promoting participatory and com- indoor air pollution (in at least two countries), munity-driven development approaches (par- clean fuels (in at least two countries), and NRM ticularly in watershed management, irrigation and rural livelihoods (in at least one country), in and drainage, and area-based poverty reduction collaboration with the Energy and Rural De- initiatives), and private sector participation, par- velopment Units; (b) addressing institutional 127 Making Sustainable Commitments - An Environment Strategy for the World Bank priorities by focusing on helping build client ing on the new merger of the Environnent and capacity in critical areas such as policy, incen- Social Development Units in the region and in- tives, and monitoring and enforcement; and (c) creasing our participation in project, sector, and promoting techniques that foster cross-sectoral country teams. In particular, we will launch a integration, such as improved monitoring and regional network on Community-Driven De- evaluation of poverty impacts and spatially based velopment (CDD) and will acquire staff skills analysis of projects and policies in public health and support for the Formula- U Strengthening our input into CASs and support to tion and implementation of poverty reduction our clients'PRSP developmentprocesses, by build- strategies. 128 Sub-Saharan Africa Cape Verde The amrbia , Guinea Bissa Equatarital Guie Saa Tame and Pr incp _-mSeychelles "-Ccmoros tt eZ C~~~~~~~~~~~Mauiti . I > azland IBRD 31544 JULY 2001 , . h,o gop Zeeprd~ ,dh eMp Doe-gn tid of h. We.dS B&C I Th'$$~~~~~~onaSRdoo oAther PDlmdnifonTne,hWongBmA sA on this The Wortd Gyoup, cny judg- ent- ?nt th.lspl 5 bhsof any te --h y,onyendo-eem enty-d-m In Africa, perhaps more than in any other region, loss of forests, rangelands, wetlands, and fish and the World Bank's mission of fighting poverty with wildlife populations. lasting results is inescapably linked to cnvironmental protection and improved management of renew- REGIONAL CONTEXT AND KEY able natural resources. African livelihoods and na- ENVIRONMENTAL ISSUES tional economies rely mainly on agriculture and on Sub-Saharan Africa faces many challenges to sus- extraction of mineral and biological resources, and tainable development, including some of the high- there are few alternatives or options to compensate est population growth rates in the world, widespread when these are lost. In both rural and urban set- poverty, an HIV-AIDS crisis that is decimating the tings, it is the poor who are most affected by the most productive segments of society and creating loss of natural resources and the deterioration of vast nuimbers of orphans, a high degree of political environmental services and who are most at risk fragmentation and instability, and historically low from natural disasters that can be aggravated by levels of investment in human resources and devel- environmentaldegradation.Yetthenaturalresource opment. There are an estimated 35 million base is steadily deteriorating, with some of the transboundary migrants, many of them refugees world's highest rates of soil degradation and with from conditions and conflicts triggered by scarcity 129 Making Sustainable Commitments - An Environment Strategy for the World Bank and decline of natural resources, particularly land percent of Africa's cropland, and over 20 million and water. Rapid and unplanned urbanization, no- hectares of forest has been lost since 1980. Land tably in fragile coastal areas, is creating new envi- degradation and desertification, the scarcity and ronmentally related problems. Extreme climate deterioration of surface and groundwater; and the variations already present a serious threat in much decline of economically important biological re- of the region in the form of frequent droughts and sources such as fuelwood and fish are widely rec- floods, and global climate change could increase ognized problems. both the frequency and the severity of these events. Natural systems in the region are losing their ca- Less appreciated is the impact of the loss of pro- pacity to produce the goods and services on which ductive natural ecosystems. Forests, wetlands, and livelihoods and development depend. Improving rangelands are all being converted or degraded at a environmental management in Africa is not only rapid rate across much of Africa. This has major about preserving nature: it is a matter of survival. consequences for the poor, who lose access to es- sential goods and services, often without sharing Natural resources such as soil, water, forests, and substantially in the benefits of the activities caus- fish provide the basis for livelihoods and for eco- ing these losses. At a national level, direct and im- nomic growth at both local and national levels, mediate impacts include flooding, siltation of dams, while ecosystem services such as water supply and a deepening fuelwood shortage, and the loss of in- absorption of pollutants are essential for maintain- digenous natural products such as medicinal plants, ing human health. Many of the same natural eco- foods, and building materials. systems that provide these critical human services also contain some of the world's richest and most Threats to health. Africans suffer a higher total bur- unique biodiversity assets, as well as storing vast den of disease than their counterparts in other re- amounts of carbon within their biomass and soils. gions, with about 25 percent of the total attribut- Negative environmental impacts ofpoorly managed able to malaria, diarrheal diseases, and respiratory economic growth-such as water pollution, soil ero- infections. Environment, health, and poverty over- sion, burning of forests and rangelands, and lap extensively in Africa because many of the most overexploitation of resources-directly undermine widespread and debilitating diseases, particularly peoples' health and their ability to earn a livelihood those that affect the poor disproportionately, stem and threaten these global environmental assets. from environmental conditions or changes. Water and air pollution from domestic and industrial Threats to sustainable livelihoods. Given the predomi- sources affects hundreds of millions of people in nance of the rural poor and the increasingly pre- the region, particularly along coastlines, in the larg- carious nature of rural livelihoods in much of the est cities, and in mining areas. While African in- region, the decline of the rural natural resource base dustries tend to be smaller than in other Darts of is widely recognized as the highest-priority envi- the world, they are often particularly poorly regu- ronmental problem. Only about 20 percent of lated, and their additive and cumulative impacts can Africa's total land area is arable, and much of it is be significant. Waste disposal problems-among under pressure. Soil degradation has affected 65 them, the lack of suitable disposal facilities for bio- 130 Annex A - Regional Strategies medical waste, including disposable syringes and water bodies to agriculture and other uses, followed other items used in efforts to stem the HIV-AIDS by commercial logging and hunting. The underly- crisis-are widespread and pose a growing hazard. ing cause is that destruction of biodiversity often The loss of medicinal species and indigenous yields immediate individual benefits, whereas the knowledge is of particular significance in Africa benefits of conservation are generally long term and because in many countries a large proportion of the diffuse. population continues to rely on traditional medicine. Although Africa is not a large-scale user of fossil fuels, it could nevertheless suffer significant dam- Threats to security. Much of Africa is vulnerable to age from the predicted effects of climate change. recurring droughts and floods. Between 1965 and Africa's forests and rangelands represent an enor- 1999, 330 droughts caused an estimated 880,000 mous reservoir of carbon in their biomass and soil; deaths. Droughts and floods reflect the natural vari- if released through burning or other destructive ability of rainfall in the region's extensive arid and practices, this could contribute substantially to the semiarid lands, but their intensity and impact is concentration of greenhouse gases. As for impacts, often aggravated by environmental degradation Africa may be the region most vulnerable to cli- such as deforestation of hillsides and erosion or mate change. Greater variability of rainfall and the compaction of topsoil. Again, the impacts are great- associated droughts and floods, along with increases est for the poor, who typically reside on the most in average temperatures, may make some currently susceptible marginal lands, are dependent on an- important areas uninhabitable or uncultivatable and nual production from rainfed agriculture, and have further aggravate existing hydropower shortages. few economic resources or safety nets to cope with There is already evidence that vector-borne diseases catastrophic events. The frequency and severity of such as malaria are spreading into new areas as a these events are expected to increase as a result of result of climate shifts. Climate change may also global climate change. Countries with extensive increase the number of "environmental refugees"- coastlines and small island nations such as Cape people forced to migrate because of environmental Verde, the Comoros, and Sao Tome are particu- degradation in their home areas-thus aggravat- larly vulnerable to the effects of climate change. ing political conflicts and further stressing weak government budgets. Threats to the global environment In addition to being an essential resource for African peoples and Development trends and challenges. Sub-Saharan economies, the region's vast and unique biodiversity Africa is a region with great diversity in its resource endowment is an invaluable world heritage. This endowments, which makes generalizations for the includes remaining natural habitats-such as the region as a whole difficult. Nevertheless, a number Congo basin forest, the world's second largest con- of common development trends present challenges tinuous tropical rainforest-as well as wild relatives and opportunities across the region. These trends and "landraces" of important crop and livestock include decentralization, democratization, a grow- species. The direct cause of most biodiversity loss ing demand for transparency and accountability in in Africa is the conversion of natural habitats and the management of public assets, increasing pri- 131 Making Sustainable Commitments - An Environment Strategy for the World Bank vate sector investment, and globalization. Depend- regard EA and safeguard policies as externally im- ing on how they are managed, these trends have posed rules and obstacles. The Bank is responding the potential for either positive or negative impacts to these lessons by putting substantial efforts into on the region's people and environment. A grow- building in-country understanding, commitment, ing interest in and commitment to subregional in- and capacity into EA principles and procedures. A tegration can provide opportunities for coordina- particularly important challenge is to adapt EA to tion and cooperation in the management of eco- the Community-Driven Development (CDD) ap- systems that span political boundaries. Institutional proach, which is a priority for the Bank: n Africa structures and human resource capacity will deter- (see box 2.1 in chapter 2). mine how these trends affect environment and pov- erty. At present, Africa's institutions are poorly The GEF has also been important in introducing equipped to deal with these challenges and must environmental elements into Bank-financed pro- be reoriented and strengthened. grams and operations. While some freestanding GEF projects remain, GEF, IDA, and other donor THE BANK'S EXPERIENCE AND resources are increasingly blended to support pro- SOME EMERGING LESSONS grams that generate both national-local and global benefits. The most common are communi ty-based The Bank's environmental program over the past few decades has included both direct investment in natural resource management projects, which also promote biodiversity conservation. Increased em- tnironsamedtat imainsreaming envindironmeinterent phasis is being placed on incorporating sustainable deeopsaimen and ceatingtrcapacit andianmenabingo land management and ecosystem-level rnanage- development and creafing capacity and an enabling metfrmbhabldvsiyndacbnsor environment for better environmental management. ment, from both a biodiversity and a carbon-stor- The experience from these efforts has been mixed, age perspective, which can offer substantial win- with some promising models and pilot initiatives win opportunities for the region. and important lessons for a forward-looking strategy. Mainstreaming environment into the Bank's over- all operations remains an important challenge. Re- Environmental assessment (EA) and the related views of efforts to integrate environment into coun- safeguard policies have provided an important en- tries' economic development programs have pro- try point for introducing environmental consider- vided important lessons, including the rieed for ations into sector operations and for triggering en- longer time frames to support institutional devel- vironmental investments. As it is currently used, opment and environmental action; the need for in- however, EA has significant limitations. It is gen- stitutional capacity building to take into account erally project specific, introduced too late in the the changing roles of government, civil society, and project cycle to affect project design, and followed- the private sector; the need to continue the ]"A pro- up inadequately during implementation. Existing cess into the implementation phase by strengthen- EA procedurcs arc poorly suited to the Bank's ing implementers' capacity to carry out eniviron- nonlending programs, which represent a growing mental management plans and by monitoring im- proportion of its interventions. Most significantly, pacts; the risk of isolating the environmental agenda client governments, agencies, and citizens often from overall development priorities by 132 Annex A - Regional Strategies "sectoralizing" it through isolated environmental U Protect peoples' health from environmental bur- planning processes, programs, and funds; the risk dens by (a) reducing pollution, including water of creating a "supply-driven" mentality by impos- pollution and indoor and outdoor air pollution, ing external conditionalities rather than building (b) improving access to potable water, (c) reduc- local constituencies; and the risk of creating overly ing vector-borne and water-related diseases, (d) ambitious and ultimately ineffective institutions by improving disposal and management of hazard- providing temporary external funding at levels that ous wastes, and (e) maintaining traditional medi- cannot be sustained. These lessons have been in- cine species and knowledge corporated into this Strategy. W Reduce people' vulnerability to environmental risks and natural disasters through (a) watershed STRATEGIC PRIORITIES, protection, (b) land use planning, (c) improved APPROACHES, AND ACTIONS infrastructure design and construction, (d) cli- mate forecasting and early warning systems, and In the Africa Region, actions to improve the qual- (e) safety nets, with emphasis on facilitating res- ity of life, the quality of growth, and the quality of toration of livelihoods. the global commons are inextricably linked by the common challenge of achieving sustainable man- agement of ecosystems and natural resources. Al- Quality of growth though short-term, direct action is urgently needed, To improve the quality of growth, ARES will pro- it is equally important to establish an enabling en- mote policy, regulatory, and institutional frame- vironment and to build the capacity to continue works for environmentally sustainable economic environmental management over the long term. growth. Priorities include (a) building environmen- tal management capacity at national, district, and Quality of life local levels, (b) strengthening in-country environ- mental constituencies, (c) increasing public aware- The priorities for action in the Africa Region En- ness and education, (d) strengthening incentives for environmentally friendly private sector investment, = Enhance livelihoods through sustainable natural resouce mnageent (RM),inclding (e) supporting environmentally oriented tourism, (f) building regional information networks, and (g) (a) community-based NRM-policy reform, developing appropriate financial instruments and empowerment, and capacity building (see box sustainable funding mechanisms. D.1 in annex D), (b) maintenance of productive natural ecosystems and wild resources, (c) envi- ronmentally sustainable agricultural intensifica- Quality of the global commons tion, (d) land, soil, and desertification manage- To address transboundary, regional, and global en- ment, (e) water resources iiianagement and pro- vironmental problems, ARES will work on the fol- tection, (f) sustainable energy, including lowing themes: (a) transfrontier biodiversity con- woodfuels management, (g) integrated coastal servation areas and initiatives, (b) transboundary zone management, (h) fisheries management inland water resource management, (c) and aquaculture, and (i) rangeland management transboundary coastal zone management, (d) cli- and support for pastoral communities mate change prediction and adaptation, and (e) 133 Making Sustainable Commitments - An Environment Strategy for the World Bank capture of global markets for environmental ser- subnational levels. There are also cross-cutting is- vices. sues, such as land tenure and property rights, that are significant in all subregions and affec:t most of Subregional priorities these issues. While the above priorities provide an overall pic- ture, Africa is too diverse ecologically and socially Sectoral priorities to be treated as a single unit for purposes of priori- While environment is intrinsically cross -sectoral, tizing environmental action. The continent can be most direct environmental action will have to be divided into six subregions characterized by sirni- achieved through sectoral programs. Sec-tors tar- lar environmental conditions and challenges and, geted for their high significance for envir:)nmental therefore, similar priorities (see table A. 1). maniagement include agriculture and rural devel- opment, natural resource management, energy, ur- These priorities emphasize issues that affect the ban development, water resource management, livelihoods, health, and security of the poor, the transport, health, and private sector development. opportunities for economic development based on environmental resources, and the unique global as- IMPLEMENTING THE STRATEGY sets under threat. Because of the considerable varia- tion even within these subregions, specific priori- Mainstreaming environment. Rather than pursue a ties must be identified at the national and freestanding environmental agenda, the ARES Table A.1 Sub-Saharan Africa: Priority environmental issues Subregion Priority environmental issues Sudano-Sahelian Belt "Drought preparedness"; integrated water resource management; halting/reversing land degradation (desertification); sustainable fuelwood supply; migratory pest outbreaks Humid West Africa Integrated coastal zone management (sustainable management of fisheries resources, urban and industrial environmental waste management and sanitation, tourism development impacts, etc.); land tenure and land management; rain forest conservation; protection for the high watersheds of major river systems Congo Basin Rain forest conservation (through a combination of core protected areas and improved management of forest production areas); coastal zone management, particularly in areas with intense urban development Eastern Africa Reversal of land degradation caused by inappropriate agricultural practices, particularly in arid and semiarid areas; integrated water resource management in areas of growing local scarcity (including adaptation to climate change); linkage of biodiversity conservation with environmentally sustainable and socially equitable tourism; urban and industrial environmental management in coastal areas Southern Africa Water resource conservation and management; drought preparedness and adjust- ment to climate variability; balancing agricultural development and nature-based tourism development; urban environmental management in highly urbanized and rapidly urbanizing areas; maintenance of environmental resources while meeting growing energy requirements Indian Ocean Islands Reversal of land degradation; biodiversity conservation (high degrees of endemism); pollution control and industrial environmental management, addressing both public health and tourism development needs; adaptation to climate change (anticipated rises in ocean levels) 134 Annex A - Regional Strategies seeks to integrate environment into the strategies emphasis on building environmental objectives into and programs that are considered priorities by Af- programmatic lending (PRSCs, Structural and rican stakeholders, and the Bank as a whole. Imple- Sectoral Adjustment, and Public Expenditure and mentation of the ARES will therefore focus on Reform Loans and Credits), which is a growing building specific environmentally related outcomes, part of the Africa Region portfolio. For example, outputs, actions, and targets into country strate- in Benin environment has already been identified gies, development plans, and sectoral programs on as one of five focal areas for support under the Pub- a country-by-country and sector-by-sector basis. lic Expenditure Reform and Adjustment Credit. Given the large number of countries in the Region, Similarly, beyond EA and the application of safe- focal countries will be selected on the basis of cri- guard policies at the project level, Strategic Envi- teria such as strong and clear linkages between en- ronmental Assessment (SEA) will increasingly be vironmental problems and opportunities, the emphasized as a tool for addressing environmental sources of poverty, and the prospects for alleviating impacts and opportunities more proactively and on poverty; demonstrated interest on the part of cli- a larger scale. The priority will be to identify area- ents and country teams, and the scale of the Bank's based and sectoral development programs at a rela- involvement in the country. Results will be mea- tively early stage in order to help guide develop- sured by the extent to which these vehicles incor- ment onto environmentally and socially sustainable porate and achieve goals relating to environmental paths. The emphasis will be on important ecosys- sustainability and social equity. An immediate chal- tems under threat from rapid development (for ex- lenge is to develop suitable indicators to measure ample, Mozambique's Maputo Province and South whether environment is being incorporated in spe- Africa's Eastern Cape Province) and on sectoral cific lending programs and in country development investment programs in key areas such as transport, and portfolio assessments. irrigation, water supply, energy, infrastructure, min- ing, and forestry. For example, an SEA is being Key instruments at the strategic level will be CASs, developed for the transport sector in Benin, and PRSPs, and the CDF, which provide an umbrella discussions are under way on prospective SEAs re- for donor coordination (see box 2.2 in chapter 2 lating to mining in Madagascar, health and envi- and box B.3 in annex B). Criteria for selecting coun- ronment in South Africa, and rural water supply in tries on which to focus include demonstrated cli- Tanzania. ent and country team interest, the significance of environmental problems, opportunities for poverty Building capacity and an enabling environment. To alleviation, and the level of World Bank involve- be sustained in the long term, maintaining a healthy ment. Priority countries for attention at this level environment must be the goal of all actors, not only are Benin, Burkina Faso, Cameroon, Chad, Cen- environmental agencies and advocates (see box A.8). tral African Republic, Ethiopia, Ghana, Kenya, The essential elements include a broad consensus Madagascar, Malawi, Mozambique, Nigeria, Tan- on and support for environmental and sustainable zania, Uganda, and Zambia. development objectives; strong policy and legal frameworks; effective institutions; information sys- At the operational level, project-level interventions tems for tracking environmental status and impacts; will continue but will be complemented by a new and informed, committed, and capable people at 135 Making Sustainable Commitments -An Environment Strategy for the World Bank BOX A.8 mental institutions. However, building on the mixed NEAPs and ESPs in Africa cxperiencc of previous environmental support pro- * National Environmental Action Plans grams, our emphasis will be on defining and sup- (NEAPs) have proved useful in raising porting the appropriate roles of both public and awareness about environmental issues, par- private sector institutions, establishing appropri- ticularly in those countries where the prepa- ate policies and incentive structures, and promot- ration process was highly participatory. In general, they have been less useful in iden- ing decentralized and community-level planning tifying priorities for action and generating the and implementation. Other strategic principles in- necessary resources and political commit- clude adopting "people-focused ecosystem manage- ment, particularly when environmental ob- ment" as the organizing framework for .lanning jectives compete or conflict with short-term economic or political objectives. and action, and finding ways to meet the institu- * Environmental support programs (ESPs), tional challenges presented by the need for cross- intended to support implementation of the sectoral and cross-boundary collaboration. Devel- actions identified in the NEAPs, have had mixed success, often suffering from overly ambitious and overly complex designs as for capacity and institution building is one of the they sought to address the multisectoral main challenges for implementing the ARES. Ex- nature of environmental management isting guidelines and tools for monitoring policy through a wide range of activities imple- reform, institutional structures, and returns on in- mented by multiple actors. They are also typi- cally supported by numerous donors, which vestment need to be adapted to cncompass the spe- is beneficial in mobilizing funds but can cre- cial characteristics of environmental management, ate problems with donor coordination. ESPs including its cross-sectoral nature and relatively long in Africa have had their greatest success in developing core environmental policy and time horizon. regulatory systems, including EA legislation and procedures, usually centered in an en- Integrating local andglobal environment. The GEF vironment department or semi-autonomous will continue to represent an important source of agency. They have been less successful in mainsreami ngenvionmenal ojectves, support for environmental action, used strategically mainstreaming environmental objectives. Challenges for the future include (a) greater to maximize local-global linkages. Linking the re- mainstreaming, going beyond the dedicated versal of land degradation trends with biodiversity environmental agencies to build environment conservation and carbon sequestration is a priority into the mandates, programs, and human resources of sectoral and other national in- i A stitutions; (b) decentralization of systems gic principles and GEF operational guidelines, the and capacity for local-level environmental emphasis will be on an Integrated Ecosystem Man- management; and (c) enhancement of the agement (IEM) approach. The Integrated Land- sustainability of these environmental man- agement institutions and structures, most of which remain heavily dependent on exter- (ILWMAP), currently under development. will be nal donors. an important vehicle for coordinating resources from the World Bank, the GEF, and other multi- all levels. The Bank will continue to emphasize ca- lateral and bilateral donors. Examples of planned pacity development and strengthening of environ- projects and programs include the Nigeria 136 Annex A - Regional Strategies Microwatershed and Environmental Management in a wide range of important partnerships relating Project (see box 3.1 in chapter 3), Phase 2 of the to environmental priorities in Africa, with a great Mozambique Transfrontier Conservation Areas diversity of UN agencies, bilateral donors, regional Project, the CAPE Program in South Africa, the development banks, and NGOs, as well as African Namibia National Conservancy Program, and the governments. In addition to African elements of Burkina Faso National Natural Ecosystem Man- many Bankwide initiatives (such as the WBV-WWF agement Program. Other countries that have been Forest Alliance and the Critical Ecosystems Part- identified as priorities for developing globally sup- nership Fund), there are several important arrange- ported IEM projects include Chad, Mali, ments specific to Africa. The relevance and diver- Mauritania, Niger, and Senegal. sity of these partnerships is illustrated in box A.9. Partnerships such as these provide vital, comple- Partnerships. Partnerships are vital to implementa- mentary financial and technical resources to help tion of the ARES, as its challenges transcend the achieve the objectives of the ARES. They carry, Bank's own capacity. The Bank is currently engaged however, administrative and other costs that must BOX A.9 Partnerships for sustainable development in Africa a Integrated Land and Water Management Action Program: regionwide; World Bank with the UNDP, the UNEP, the GEF, the African Development Bank, the FAO, the CCD Secretariat, and the IDB a Soil Fertility Initiative for Sub-Saharan Africa: projects currently in eight countries; World Bank with the FAO, the International Fund for Agricultural Development (IFAD), and the Consultative Group on International Agricultural Research (CGIAR) a Nile Basin Initiative: all Nile Basin countries; World Bank, the Swedish International Development Authority (SIDA), the German Agency for Technical Cooperation (GTZ), and the Canadian Inter- national Development Agency (CIDA), and financial contributions from the GEF, the FAO, and nine bilateral donors * Regional Environmental Information Management Program: a network of public, private, and NGO participants in Central Africa; WB with the EU, the IFAD, Belgium, Canada, and France; hosted by Gabon a Clean Air Initiative in Sub-Saharan African Cities: targets eight cities across the region; WB with the EU, the African Development Bank, the U.S. Environmental Protection Agency (USEPA), Fonds Frangais pour l'Environnement, and an international petroleum industry association, among others a Regional Traditional Energy Sector Program: regionwide; cofinanced by the GEF and the Norwe- gian and Danish trust funds, with the African Development Bank (AfDB), the WBI, MNA and the IFC as strategic partners a Program for Capacity Development and Linkages for EA in Africa: based at Ghana's Environmen- tal Protection Agency; other current and prospective partners include the EU, the Netherlands, Norway, and the AfDB a African Water Resources Management Initiative: regionwide, at country and river basin levels; co-financed by the U.K Department for International Development (DFID), Norway, Netherlands and Sweden; other partners include the UNDP, the UNEP, the FAO, the World Conservation Union (IUCN), the GTZ, France, Japan, Switzerland, USAID, and the Development Bank of South- ern Africa. 137 Making Sustainable Commitments - An Environment Strategy for the World Bank be adequately provided for under regional and/or vak Republic and Slovenia-as well as Albania, country budgets if they are to be effective. Bosnia and Herzogovina, Croatia, Macedonia, and Turkey. NOTES 2. The Western NIS countries are Belarus, Moldova, and Ukraine. 1. This group includes the ten EU accession coun- 3. This group includes Armenia, Azerbaijan, Geor- tries- Bulgaria, Czech Republic, Estonia, Hun- gia, Kazakhstan, the Kyrgyz Republic, Tajikistan, gary, Latvia, Lithuania, Poland, Romania, Slo- Turkmenistan, and Uzbekistan. 138 Annex B / Poverty and Environment E nvironmental conditions often have a major influence on the livelihoods, health, and security of poor people. Improving environmental conditions can be an effective way to increase their in- come, improve their health, empower them, and reduce their vulnerability. Natural resources are crucial to the routine functioning of rural households and also provide a safety net in times of unexpected shocks. The varied links between poverty and environment, which have been extensively documented, provide a compelling rationale for a poverty-focused Environment Strategy and for mainstreaming envi- ronment into countries' strategies for reducing poverty (see the Bibliography). A FRAMEWORK FOR UNDERSTANDING POVERTY-ENVIRONMENT LINKS Economists have traditionally used a household's income or consumption as a proxy for well-being. A broader definition of poverty, however, goes beyond that to include inequality, health, education, and vul- nerability. These, in turn, can influence different elements of well-being: security, empowerment, and op- portunity (see box B.1). We use this broader defi- nition. BOX BA1 Poverty is multidimensional We also define environment broadly to include a "Poverty is pronounced deprivation in well-being.... natural resource base that both provides sources To be poor is to be hungry, to lack shelter and cloth- (such as materials, energy, and water) and per- ing, to be sick and not cared for, to be illiterate and not forms sink functions (such as absorbing pollu- schooled. But for poor people, living in poverty is more tion).- These items could be public or semipubic than this. Poor people are particularly vulnerable to adverse events outside their control. They are often goods, such as open-access watersheds or com- treated badly by the institutions of state and society mon-propertygrazingland;orprivategoods,such and excluded from voice and power in those institu- as the air inside a house or workplace or house- tions." hold drinking water. Here, the term "environmen- Source: World Bank 2000h. 139 Making Sustainable Commitments -An Environment Strategy for the World Bank tal degradation" covers pollution and depletion opment (DFID). The sustainable livelihoods ap- (damage to a natural system that affects present or proach focuses on the capabilities, assets, and ac- future human needs negatively). tivities required for a means of living witlhout un- dermining the natural resource base. It analyzes the A useful, though simplified, way of looking at the strategies people use to make a living while sus- links between poverty and environment is suggested taining the local environment. in figure B.1. The figure shows how different envi- ronmental factors can influence different dimen- The following discussion describes how environ- sions of poverty and well-being in a given set of mental factors influence different elements ofwell- circumstances. These linkages are context-specific being: natural resource-based livelihoods and op- and play out differently depending on numerous portunities; environmental health and security; and factors, including the nature of local communities empowerment. and civic organizations, macro- and microlevel in- stitutions such as property rights, gender relations, Environment and opportunity and the role of the state. The literature provides The literature on the relationship between poverty extensive empirical evidence showing how links and the environment is extensive, particu:larly re- between poverty and the environment vary in dif- garding rural livelihoods. Hypotheses abound, such ferent contexts. as the theory that there is a vicious cycle of poverty, pzopulation growth, and environmental degradation. This analysis of environment and poverty is con- p Some cases support that theory; others show quite sistent with the sustainable livelihoods approach the opposite. We have little empirical evidence that adopted by a number of institutions, in particular, allows us to conclude with certainty that, in any by the U.K. Department for International Devel- particular circumstance, Figure B.1. causality will go in one di- Environmental links to the dimensions of poverty rection rather than another. Examples of Several local factor,-such environmental determinants Dimensions as macroeconomic policies, Natural resource f poverty Elements of the effectiveness of local in- base Rural and urban well-being stitutions and property re- Access to water livelihoods and sanitation Opportuniq gimes, and gender rela- Air quality Health tions-decisively influence Air qual\ty Health the extent to which the Ecological poor have access to and Vulnerability to Securit control over natural re- environmental Ukelihood o change sources and the potential to natural disasterspoeta derive income from them. Property rights Paticipation in _1 decisionmaking Ac.ess to environ- decisionmaking Empowerment Although the causality may mental information vary in different cases, re- 140 Annex B - Poverty and Environment search shows that links between the natural envi- BOX B.2 ronment and the livelihoods of the poor can be very The impacts of fuelwood scarcity on strong. Poor rural households often derive a sig- women's health nificant share of their incomes from natural re- In Nepal, rural women and children spend long sources. One study of 29 villages in Shindi Ward, hours collecting biomass as fuel, leaving them southern Zimbabwe shows that environmental re- very little time to care for children. The children's sources account for roughly 35 percent of average health suffers, and they have a high rate of total household income, and the poorer the house- chronic lung disease. Carrying heavy loads of fuelwood also affects women's health. Nepalese women suffer a high incidence of uterine pro- ronmental resources (Cavendish 1999). However, lapse, affecting their general health and causing even though the poor are more resource dependent, complications with future pregnancies, probably they generally use less of these resources than the as a result of carrying heavy loads of wood soon better-off. The poorest households use three to four after childbirth (Pandey 1997). times less in quantity terms than the richest A 1996-97 study involving over 1,000 women in (Cavendish 1999). 10 locations across 12 districts in Uttaranchal, India, found that the proportion of miscarriages Poor rural women in developing countries tend to was 30 percent-five times higher than the av- . disproportionately affected by the degradation erage rate reported in the National Family Health be disproportionately affected by the degradation Sre f19-3 uigpenny h of natural resources because it is they who tend to womey heavy loads owodmanur, and - ~~~women carry heavy loads of wood, manure, and be primarily involved in the collection of fuel, fod- grass, and this contributes to the high rate of der, and water. Depending on the availability of miscarriages. Of the women interviewed, 17 per- biomass resources, collection of fuel and fodder may cent had some form of uterus descent (Dasgupta take anywhere from 2 to 9 hours. In Lombok, In- and Das 1998). donesia, and in some areas of Kenya, women spend 7 hours each day on cooking and collecting dead and short-term benefits, between the local and glo- wood or agricultural residues as fuel (Aristanti bal consequences of public actions, between the 1997). As a result of deforestation, they may have effects on men and women; and so on. Particular to walk longer distances and spend more time and policies will influence the processes by which idi- energy to collect fuelwood. This reduces time spent viduals make their choices about trading one set of on income-generating activities, crop production, issues off against another. and household responsibilities and may have a nega- tive impact on health (see box B.2). As discussed in annex C, extensive research has In urban areas, the links between environmental shown that environmental problems can damage factors and poverty are strong, although different the health of people in developing countries. On from those in rural areas. The urban poor suffer average, 19 percent of the illness and death in the from tenure insecurity, ghettoization, overcrowd- developing world is associated with environmental ing, inadequate sanitation and water facilities, vio- factors-access to safe water and sanitation, vec- lence, and changes in the labor market. tor-borne diseases, dirty air inside the home and in urban areas, and exposure to toxic substances. In The linkages between poverty and environment Sub-Saharan Africa, the proportion is as high as often involve difficult tradeoffs between long-term 27 percent. 141 Making Sustainable Commitments - An Environment Strategy for the World Bank The extent to which the poor suffer disproportion- Environment and security ately from exposure to environmental hazards has In addition to the link between environment and been less extensively documented. Health outcomes security through health, poor people are also dis- are consistently worse for the poor than for the proportionately vulnerable to natural disasters.This nonpoor. A poor child in Brazil is six times more higher risk is caused by a variety of factors. Among likely to die than one born into a wealthy house- them are that poor people tend to lack access to hold. Figure B .2 shows health outcomes for Peru; secure housing, to live on marginal land mc re prone the pattern-if not the magnitude of the differ- to the effects of drought, flood, or landslides; and ence-is broadly the same worldwide. to lack the ability to smooth consumption in times of crisis. Exposure to hazards in the environment seems to be a major contributor to this inequality in health The vulnerability of the poor to natural diz,asters is outcomes. Respiratory infections and diarrheal dis- compounded by the generally weak capaciti; of gov- eases are the two biggest causes of death among ernment agencies to predict and respond to disas- the poorest fifth of the world's population, as ranked ters and by the lack of social safety nets that would by national gross domestic product per capita. To- protect the incomes and consumption of the poor gether, they caused 24 percent of deaths in 1990, during and after disasters. Analysis of the recent but only 4 percent of deaths among the richest fifth. economic crisis in the Philippines, for e xample, Environmental factors are associated with 60 per- found that the extreme weather associated with El cent of illness and 90 percent of deaths from these Nifio was responsible for a greater share of the over- two factors. Malaria, 90 percent of which is related all increase in poverty (47-57 percent of the total to environmental exposure, similarly hits the poor impact on the incidence, depth, and severit) of pov- disproportionately. erty) than the labor market shock, which by itself accounted for 10-17 percent of the Figure B.2 total poverty impact. The labor mar- Peru 1996 health outcomes ket shock was progressive (it reduced ., 100 50% inequality), but the El Nifno shock was 90 U5 Mortality 45% , regressive (it increased inequality). ° 80 --% Stunted 40% ° Moreover, the study found that 3 703 N 2 household and community character- v 60 30%o. istics influenced the impact of the r-50 25%e.ja4' I5. - v 0m shocks. The ability of the poor, for X40 -> .20% 0 L. ° 0 e% instance, to protect their consumption 0 30 ~~~~~~~15% °6 20=- \ ~ 10 X s was more limited than that of the j~~it______________ 5% ~~~~4 nonpoor (Datt and Hoogeveen 2000). ASco- I I I .0% Poorest 2 3 4 Richest When ecosystems collapse, the social 20% 20% systems built to manage and use them Wealth quintiles come under threat. This can lead to Source: World Bank analysis of Demographic and Health Survey data. conflicts, particularly over environ- 142 Annex B - Poverty and Environment mental resources such as water and fisheries. When tect the environment. For the first time in the re- such resources are shared among several countries, cent history of these villages, in 7 villages there was the threats to security may escalate into political sufficient safe drinking water during the summer conflicts. months of 1997 (Devasia 1998). Environment and empowerment Communities are marked by social differences and Environmenta activitie ca contributetorelations of power along lines of gender, race, caste, E nviro nmental activitie s c an co ntribute to the em - and class. Any attempt to empower local commu- powermcnt of poor people in at leastbt ways. nities and target public expenditures should take First, poor people can use knowledge about envi- into consideration these relations of inequality. ronmental resources to organize themselves. Sec- ond, the ability of local communities to participate in decisionmaking about environmental resources HOW HAVE BANK INTERVENTIONS can help them maintain their livelihoods, gain eq- TLRNEASTED POVERTY-ENVIRONMENT uitable access to resources, and use these resources in a sustainable way. As part of the background work for this Environ- ment Strategy, the Bank assessed the extent to For instance, in villages in the arid region of whichourinvestmentprojectsbenefitthepoor.The Vidarbha, Maharashtra, India, women and girls review analyzed 61 environmental projects in four make several trips per day, often walking long dis- regions (see Bucknall and others 2000). Although tances, to fetch water. The village recently formed poverty reduction was not an explicit objective of women's organizations (mahila mandals) that al- the projects-which tackied the highest-priority lowed women to share knowledge about the time environmental problems-the review aimed to un- they spent fetching water and about possible links derstand whether particular types of environmen- between the quality of water and their health. tal investment were better at reaching the poor, and Through these organizations, they realized that the whether any region treated the issues differently. problem of access to safe water was not limited to themselves and their neighbors but was pervasive The review found little systematic difference be- in all 10 villages in the area. This created strong tween regions or between types of environmental communityawareness.Thewomenformedalliances projects, although some water and sanitation with the female members of the local village coun- projects were slightly more likely to target poor cil (panchayat), held protest marches, and performed beneficiaries. The extent to which projects benefited street plays. One result of their efforts was to pres- the poor-or could demonstrate such benefits- sure the panchayat to repair malfunctioning depended more on the design of the individual tubewells and revive a scheme for supplying run- project than on the country or subsector it was in. ning water. As a result of the women's efforts, within six months, 17 community wells were deepened in In general, projects benefited the poor when they 8 villages, and pipelines were laid for drinking wa- targeted private benefits to low-income groups or ter in 2 villages. The women also initiated programs when they located investments with public benefits for social forestry and rainwater harvesting to pro- in areas with higher-than-average poverty rates. 143 Making Sustainable Commitments - An Environment Strategy for the World Bank Very few projects made any attempt to quantify The Bank is helping to build the analytical base their effects on the poor. Environmental benefits needed to quantify the links and prioritize poten- were seen as good outcomes in their own right, or tial environmental interventions compased with perhaps as part of a framework for making eco- those in other sectors. Guidelines were prepared nomic growth sustainable. An increased focus on for the PRSP Sourcebook. Because poverty-environ- poverty will require the Bank to make a greater ef- ment links are location specific, the Bank has taken fort to document and monitor the distributional a three-pronged approach toward helping integrate impacts of its investments. environmental issues into the PRSP process in in- dividual countries: INTEGRATING ENVIRONMENT INTO POVERTY REDUCTION STRATEG I ES Analytical wvork. Analytical work in pilot studies will As of September 1999, all low-income countries quantify the relationships between natural resource use participatory processes to prepare their own management and the livelihoods of the poor and Poverty Reduction Strategy Papers (PRSPs) in or- will document the extent to which poor environ- dcr to obtain debt relief or concessoional lending mental conditions can damage the health of poor from the International Development Association people. (IDA) or the Poverty Reduction and Growth Fa- cility (PRGF). Typically, the preparation of PRSPs training. In a small number of key countries, in- tensive training of counterparts in important see- involves three stages: 1. Developing a comprehensive understanding of tors-water and sanitation, agriculture, health, en- vironment, and natural resource management-in 2.pChoosertyanding th termxopbicnactis tht a te collaboration with the World Bank Institute (WBI) 2. Choosing the mix of public actions that has the adetra ates(o xml,DI)wl , . . ~~~~~~~~~and external partners (for example, DFID) will hihest impact on poverty reduction 3.gSeletingadt outcomedictor,equip decisionmakers with the knowledge and ana- 3. Selecting and tracking outcome indicators.lyiskUtodigmrefecvenevninsa lytic skills to design more effective interventions as Because of the links between environment and pov- part of PRSPs. erty, and because a poverty reduction strategy must Review. All PRSPs and related documents are sys- be environmentally sustainable over the long term, t the Bnk an theInterationl MoetaryFund tematically reviewed to assess issues of enviro)nmen- the Bank and the International Monetary Fund v (IMF) have encouraged governments to consider tal sustainability and identify best practices in in- environmental factors in their PRSPs (see box B.3). tegrating environmental considerations into PRSPs. 144 Annex B - Poverty and Environment BOX B.3 Environmental mainstreaming in PRSPs Because environmental issues are closely linked with poverty reduction, a review of 25 interim and full PRSPs was undertaken to assess how they reflect environmental issues, capture good practice, and inspire teams working on forthcoming PRSPs to enhance the integration of environmental con- siderations and opportunities in the future. The review considered a total of 17 points, organized in four groups: issues; poverty-environment links; responses in terms of policies, institutions, and actions; and process, including the degree of public participation. Several key points emerged: a Issues. Even though the poor in most PRSP countries are overwhelmingly and directly depen- dent on natural resources, this is not explicitly brought out in many cases. Considerations of poor (environmental) health are generally better addressed. L Poverty-environment links. Most PRSPs that did recognize the significance of natural resources and environment did not focus on elaborating poverty-environment links. However, countries that have systematically analyzed poverty-environment links have been more successful in incorpo- rating environmental concerns as part of the poverty reduction objective. The analysis of how macroeconomic policies and programs influence environment is particularly poorly developed across PRSPs. a Responses. Most PRSPs do not explicitly present the legislative, institutional, and regulatory innovations needed for poverty reduction through environmental management. An important is- sue that is generally not covered is the cost of environmental interventions and the sources of funding. a Process and public participation. Although many PRSPs generally describe the processes of discussion, stakeholder participation, and consensus building in PRSP preparation, there is little discussion at this stage on the proposed implementation of the PRSPs. It is also difficult to deter- mine to what extent environmental constituencies have been included and to what extent poor people in general have voiced environmentally related concerns. The key findings of the report can be summarized as follows: a There is considerable variation across counties in the degree to which environment is mainstreamed. Although this is to be expected, it is not systematically related to the environmen- tal status of a country m The average score is relatively low, indicating considerable room for improvement a Full PRSPs rank relatively high compared with interim PRSPs, indicating improvement in the process a Several good practices do exist, especially in countries where linkages between environment and poverty were systematically analyzed earlier. Source: Bojo and Reddy 2001. 145 --- - - ---*-i-- Annex C Environment and Health t has long been recognized that the environment in which people live-from the household level to the global level-significantly affects their health. Until recently, however, the actual magnitude of health impacts from exposure to various environmental risks was not known, nor was it possible to compare the cost-effectiveness of preventive measures to reduce such exposure with health-sector activities that cure the resulting illnesses. Quantitative estimates of the impact of environmental risks on health have emerged recently in the course of research on the global burden of disease, which uses a standardized measure of health outcomes- disability-adjusted life years, or DALYs-across various causes of illness and death. DALYs combine life years lost due to premature death and fractions of years of healthy life lost as a result of illness or disability. The use of DALYs as a measure of the burden of disease has provided a consistent basis for systematic comparison of alternative interventions. It enables health specialists to identify development programs that have the potential to generate significant improvements in the health status of poor households in the developing world (see Murray and Lopez 1996). Figure C.1 Recent estimates suggest that premature death and ill- Burden of disease and , environmental risks ness due to major environmental health risks account mL for one fifth of the total burden of disease in the devel- '_ 2 0 200 - F- Av oping world-comparable to malnutrition and larger c oI than any other preventable risk factors and groups of @ ° disease causes. The total burden of disease per million 0 -i < Developing Developed people in rich countries is about half that in develop- countries countries ing countries, but the disease burden from environmen- H Other causes f Environmental factors tal risks is smaller by a factor of 10 (see figure C.1). Source: Lvovsky and others 1999. 147 Making Sustainable Commitments - An Environment Strategy for the World Bank ENVIRONMENTAL HEALTH AND Modern hazards caused by development without en- POVERTY vironmental safeguards include urban (outdoor) air Environmental health risks fall into two broad cat- pollution and occupational and other exposure to egories: agroindustrial chemicals and waste. Traditional hazards, related to poverty and lack of de- velopment include lack of safe water, inadequate Traditional environmental hazards affect develop- sanitation and waste disposal, indoor air pollution, ing countries most. Their impact exceeds that of and vector-borne diseases such as malaria. modern health hazards by a ratio of more than 10 X Worldwide, an estimated 3 million people in for Africa, 5 for Asian countries (except for China), developing countries die every year from water- and 2.5 for Latin America. Modern threats to hu- related diseases caused by exposure to microbio- man health prevail in rich countries and the Euro- logical pathogens resulting from inadequate pean economies in transition. sanitation and waste disposal, water supply in- adequate for personal hygiene, exposure to un- Inadequate water supply and sanitation pose the safe drinking water, and bacteriological contami- largest threat to human health in most of the Bank's nation through a variety of other water uses, such clent countries except for China and the transi- as cooking and bathing. The majority of fatali- tion economies of Europe, where air pollution ties are children under age 5. Water-related dis- causes the most damage. Indoor air pollution is eases impose an especially large health burden in the Africa, Asia and Pacific regions. In India highest in Asia and Africa. Malaria has taken a heavy toll on the population of Sub-Saharan Af- alone, nearly 1 million people die annually as a result of water-related diseases. rica. Even though malaria is not nearly as signifi- More than half of the world's households use cant in other regions, it ranks third globally among * M\ore than half of the world's households use unprocessed solid fuels, particularly biomass all environmental health threats (see table C.1). (crop residues, wood, and dung) for cooking and heating, in inefficient stoves without proper ven- FUTURE TRENDS tilation; the outcome is that people-mainly Urbanization is a major factor in Africa, Asia, and poor women and children in rural areas and ur- Latin America, and it is changing the landscape of ban slums-are exposed to high levels of indoor environmental health concerns and posing signifi- air pollution. It is estimated that nearly 2 mil- cant new challenges (see annex E). Rapid urban- lion children and women die every year in de- lion children an oeization and the uncontrolled growth of urban slums veloping countries as a result. About half of these create a double burden for the urban and semiurban deaths occur in India and China. ~1 Vector-borne diseases are affected by a range of poor. These groups are increasingly exposed to tran- environmental conditions and factors, including sition risk-both traditional hazards, such as dirty inadequate drainage from drinking water and cooking fuels, primitive stoves, crowding, and poor from irrigation; polluted and standing water; access to water and sanitation, and risks associated from~~~~~~~~~~~~ hrlaln mollute trnsdr anddm inusriler;ut clogged storm drains; floods; and open sewers with modern transport and industrial pollution. and certain types of sanitation. In Africa alone, Furthermore, in some parts of the world malaria is malaria is responsible for about 800,000 deaths becoming an urban issue, in part because of infra- annually. structure failures. Climate change is likely to worsen 148 Annex C - Environment and Health Table C.1 The burden of disease from major environmental risks Percentage of total DALYs in each country group Asia and Environmental health group AFR India China Pacific LAC FSE LDCs EME Water supply and sanitation 10 9 3.5 8 5.5 1.5 7 1.0 Malaria 9 0.5 0 1.5 0 0 3 0 Indoor air pollution 5.5 6 9.0 4 0.5 0 5 0 Urban air pollution 1 2 4.5 2 3 3 2 1 Agroindustrial waste 1 1 1.5 1.5 2 2 1 2.5 Allcauses 26.5 18.5 18.5 17 11 6.5 19 4.5 Note: Regions in the table slightly differ from World Bank Regions (see the definition in World Bank 1992 and in Murray and Lopez 1996).Definitions are as foflows: AFR, Sub-Saharan Africa; Asia and Pacific, countries of East and South Asia, except for China, India and Pakistan; LAC, Latin America and Caribbean; FSE, former socialist economies of Europe (does not include Central Asia); LDCs, less developed countries (all regions and countries in the first six columns); EME, established market economies. Source: Lvovsky and others (1999) based on Murray and Lopez (1996), Smith (1998), and World Bank estimates. this situation, and globalization and the liberaliza- verification by further studies, illustrates several tion of trade may exacerbate the transmission of important points: some diseases. a Health, especially environmental health, is a principal outcome of many interventions and IMPROVING ENVIRONMENTAL project activities outside the health sector. HEALTH a Measures to mitigate such traditional health hazards as indoor air pollution, inadequate sani- Bctter infrastructure and energy services for house- tation, an insect crs appearton beqver cst- holds and communities, along with improved hous- tto,adisc etr pert evr ot holdsand ommunties alon wit imprved ous- effective. This finding, coupled with the signifi- ing and vector-control interventions, are key mea- cant impact of these hazards on the health of sures for mitigating traditional environmental risks. l the poor, calls for greater attention to traditional Reducing modern risks calls for pollution preven- hehold and omuiyea lth ritin tion and abatement measures, which in turn require ronmentld wor.Sncintyerethios to reduc ronmental work. Since interventions to reduce setting and enforcing environmental standards, de- veloing culureof eviromentl cmplince,and these risks fall in the domain of the energy and veloping a culture of environmental compliance, and ifatutr etr,teei edfrcoe creating effective incentives. In Sub-Saharan Af- rica, for example, remedial measures outside collaboration with these sectors to achieve health healthcare systems-such as improved water and outcomes. sanitation, household energy, housing, vector con- a Large variations in the cost-effectiveness ofvari- trol, and pollution management-could reduce the ous interventions-across hcalth hazards and total burden of disease by 23 to 29 percent. Health within individual types of hazard, such as urban care interventions aimed at the same clusters of air pollution-point to the need for rigorous diseases affected by environmental factors-diar- analysis and skillful design of environmental rhea, respiratory symptoms, eye diseases, malaria, health projects to maximize health benefits cost- and so on-can reduce the disease burden by a fur- effectively. ther 23 to 28 percent (Listorti and Doumani 2001). a The key development objective of improving people's health requires a holistic, multisectoral An assessment of measures to improve environmen- approach to mitigating major risks by integrat- tal health, although limited in scope and subject to ing cost-effective efforts inside and outside 149 Making Sustainable Commitments - An Environment Strategy for the World Bank health care systems. A holistic approach is par- X Future environmental health work in the Bank ticularly important for improving the health of should aim at assisting Bank staff in developing the poor, who are most vulnerable to both ma- key performance monitoring indicators. jor environmental hazards and deficiencies in the provision of health services. The most important Bank-supported interventions addressing indoor air pollution were large-scale LESSONS FROM BANK EXPERIENCE programs for improved stoves in India and China in the late 1980s (although these were motivated The Bank's experience with environmental health by energy-efficiency, rather than health goals). has been limited, as have been the lessons learned. Major lessons were (a) the need to target efforts Many important environmental health issues fall toward the most-affected communities, (h) the need through the cracks of development agencies because to complement financial support with local capac- both environment and health are cross-sectoral and because institutions commonly lack clear directives ity building, training in maintenance, and health for the multisectoral dimensions of their work. awareness programs, (c) the need for a greater role for local authorities and communities, and (d) the importance of sustainable financial arrangements. In the water suwpply and san itattzon sector (WS S), an array of lessons has emerged after nearly 25 years of research devoted to low-cost, appropriate tech- w g nology and an International Decade dedicated to air quality management projects, such as the Mexico making drinking water and sanitation universally CityTransport Air Quality Management Project, available. The lessons point to the value of an inte- the Slovenia Environment Project, the Dhaka Air grated approach to environmental health interven- Quality (LIL), and discussions on proposed urban tions-for example, integrating water supply with air pollution projects for the Bangkok and Katowice sanitation, drainage, community education, and metropolitan areas. A recent and quite successful hygiene practices (Listorti 1996). experience in which the Bank supported the global phaseout of leaded gasoline highlighted the. crucial A recently completed study by the Bank's Europe role of political commitment, public awarerness, and and Central Asia Regional Vice Presidency (ECA) partnership with the private sector (see box E. 1 in on the health and hygiene dimensions of water and annex E). sanitation projects found that at least half of WSS investments are embodied within non-WSS FUTURE CHALLENGES projects, notably Social Funds. This finding shows the high priority attached by communities to envi- WSS and urban projects represent the largest por- ronmental health-related activities and cross- tion of the current environmental health--related sectoral links to environmental health (Klees and portfolio. Maximizing health benefits through these others 1999). The study concluded that: projects requires morc analytical work and a better X An intersectoral approach to WSS projects, in- understanding of specific linkages between project corporating hygiene education, health, and wa- design and health outcomes. Another challenge is ter quality issues, is needed to realize the maxi- indoor air pollution, which has clearly emerged as mum impact from investments in infrastructure. an overlooked problem in a number of regions; no 150 Annex C - Environment and Health projects were associated with this significant pub- nutrition and education, health issues associated lic health concern. Urban air pollution remains high with the localized impact of solid waste disposal, and is even worsening in some countries, but to and occupational and traffic safety. Among the sug- date, Bank activities to address the problem in a gestions proposed by regional staff were to: comprehensive way have been limited (see Kojima B Better integrate environmental health into and Lovei forthcoming). Country Assistance Strategies (CASs) FM Embark on new analytical and advisory activi- Still another key concern is the lack of indicators, ties in environmental health while strengthen- baselines, and low-cost monitoring of environmen- ing capacity to increasingly apply existing knowl- tal health projects or components. It is uniformly edge in the field felt that increased monitoring of environmental U Define the scope for intersectoral collaboration health outcomes would improve the projects. Such on environmental health work that will best meet monitoring would also be helpful to economic needs analysis of environmental health projects, especially U Include environmental health analysis in the to cost-benefit analysis, which is rarely undertaken environmental assessment process at present. Yet the desirability of improved moni- in Devise low-cost ways of tracking and monitor- toring and evaluation of environmental health out- ing indicators of health outcomes through "rea- comes of infrastructure projects needs to be weighed sonable" proxy indicators (see table C.2) against the costs of conforming with these require- B Develop case studies on specific priority issues ments. The Bank has been working on this issue in and pilot project activities. water and sanitation projects. Operational experi- ence indicates that the costs of developing high- STRATEGIC DIRECTIONS quality, project-level baseline information and complementing it with equally high-quality moni- ous attention to environmental health by promot- toring and analysis usually exceed reasonable project budgets and client capacity. The difficulty and cost ing three major types of activities: of measuring the impact of a project on health are 1 Improving knowledge of environmental health exacerbated by the fact that environmental factors problems and developing an appropriate re- are only one of many causes of disease. If other dis- sponse that takes into account institutional, fi- ease causes change over time, it is necessary to nancial, and social constraints; launching advo- monitor health outcomes for a control group, as cacy and dissemination activities; and strength- well as for the group receiving the environmental ening collaboration with strategic partners such intervention. This limits the possibility of making as the World Health Organization (WHO), improved health outcomes a stated objective of other UN agencies, and bilateral organizations many Bank projects that do, in fact, have an im- with experience in environmental health pact on health. 2. Integrating critical environmental health issues into the operations of relevant sectors-for ex- Regional staff also stressed the need for linking ample, as health considerations and hygiene pro- environmental health issues with other sectoral ef- motion in WSS projects, indoor air pollution in forts in an interdisciplinary manner; for example, energy operations, urban air pollution in trans- 151 Making Sustainable Commitments - An Environment Strategy for the World Bank port projects and city development strategies, in human health and facilitates cross-;ectoral and fuel quality in petroleum sector restructur- collaboration within the Bank and in client ing work countries. 3. Adopting a holistic approach to development impacts that focuses on tangible improvements Table C.2 Health outcomes and environmental interventions Environmental Associated Health Examples of monitorable risk factor sectors/projects Health outcomes indicators proxy indicators Indoor air Energy (cleaner Child mortality Child deaths Estimates of exposure levels pollution fuels, improved Chronic obstructive due to to indoor air pollution stoves) pulmonary disease respiratory Percentage of households (COPD) illness using clean fuels or improved Rural Acute respiratory Cases of ARI stoves development infections (ARls) Incidence of Type of housing COPD Cooking practices Outdoor air Energy Mortality Deaths (adult) Annual mean levels of PM,o pollution Transport COPD Incidence of (pg/m3) ARI COPD Annual ambient concentrations Respiratory hospital Cases of ARI of lead in the atmosphere admissions (RHA) RHA (pg/in3) IQ impairment (lead) Lead level in blood, particularly among children (pg/dl) Vector-borne Irrigation Malaria mortality Deaths due to Application of bednets disease Reforestation Malaria morbidity malaria Application of insecticides Infrastructure Malaria cases Indicators related to the (drainage) development and maintenance Health (vector of irrigation and drainage control) infrastructure Lack of water WSS Mortality due to Child deaths Relevant indicators of access and sanitation Infrastructure diarrheal disease due to diarrhea to water and sanitation (for Social funds Diarrhea incidence Diarrhea cases example, percentage of (child) households with in-house connections, LPCD, percentage of community coverage with sanitation facilities) Indicators of sustained and effective use of WSS facilities Quality of water in the source Hygiene/behavioral change indicators Pesticide Agriculture Acute poisoning Cases of acute Application norms residues Cancers poisoning Storage and handling Fetal defects Cases of cancer practices Other toxic Control of Cancers Cases of Environmental performance substances industrial and 10 impairment (lead) cancer; blood- Waste management codes transport lead level Land zoning regulations pollution, change Market share of leaded in fuel quality gasoline Note: LPCD, liters per capita per day; WSS, Water supply and sanitation. Source: Lvovsky and others 2000. 152 Annex D / Natural Resource Management NATURAL RESOURCES, POVERTY, AND SUSTAINABILITY N | atural resources provide fundamental support to life and economic processes. Soils are the foun- dation of agriculture, which in turn is the basic building block in the livelihoods of all people. Forests help protect water sources, reduce the risks of natural disasters such as landslides and flooding, are home to at least 80 percent of remaining terrestrial biodiversity, and are a major carbon sink that mitigates climate change. More than 1.6 billion people depend on forests for their livelihood in some way. Water is essential for the sustenance and health of humankind and indeed of all species. It is an important input for agriculture and many industries and a significant sink for waste discharges. Coastal and marine ecosystems include some of the most diverse and productive habitats on earth. Marine fisheries are an important part of the world's food supply. Fcological processes maintain soil productivity, recycle nutri- ents, cleanse air and water, and regulate climatic cycles. At the genetic level, diversity found in natural life forms supports the breeding programs necessary to protect and improve cultivated plants and domesticated animals and thus helps safeguard food security. Properly managed, natural resources provide the foundation for maintaining and improving the quality of life of the world's population and can make invaluable contri- butions to sustainable growth. This foundation is coming under increasing pressure from mismanagement, a growing population, higher levels of economic activity per capita, and the complex interactions of these phenomena. Evidence of the resulting degradation of natural resources is all around us. Eleven percent of the earth's vegetated surface (1.2 billion hectares) has been significantly degraded by human activity over the past 45 years, affecting more than 900 million people in 100 countries. Erosion, salinization, compaction, and other forms of degradation affect 30 percent of the world's irrigated lands, 40 percent of rainfed agricultural lands, and 70 percent of rangelands. More than one fifth of the world's tropical forests has been cleared since 1960. Globally, 12 million to 15 million hectares of forest are lost every year, in addition to substantial areas of grasslands and wetlands. In 1990, 28 countries, with a total population of about 335 million, experienced 153 Making Sustainable Commitments - An Environment Strategy for the World Bank "water stress"-availability of less than 1,700 cubic gated areas have offset many of the productivity meters per person per year. By 2025, this figure is gains resulting from the Green Revolution. Defor- expected to grow to around 50 countries, affecting estation is harming growth even from the narrow some 3 billion people. Country figures, moreover, perspective of the timber industry; in countries that mask widespread localized water shortages. The have mismanaged their forest resources, mills soon world's oceans are threatened by nutrient and heavy find themselves bereft of supplies. The balance sheet metal pollution, severe overfishing, and disease. becomes even bleaker when the costs imposed on Coral reefs are being degraded at an unprecedented other sectors are added-higher risk of floods, sedi- rate-as much as 40 percent of the world's reefs mentation that reduces hydroelectric pow-er gen- will be lost in the next 10 to 20 years at current eration and availability of water for irrigation, and rates. loss of fisheries. Many inland and marine liisheries have collapsed completely, and in many ccuntries, Degradation of the natural resource base is having the sector only survives with massive and onerous a substantial impact on the economies of develop- government subsidies. Taking this depleti-on into ing countries. It threatens the quality of life directly. account can subtract several percentage points from Deforestation increases vulnerability to natural di- gross domestic product (GDP). sasters, as shown by the devastating impacts of Hurricane Mitch in Central America. Even in the The impact of this degradation is particularly se- absence of hurricanes, flooding and landslides have vere for the poor, who tend to rely heavily on frag- been regular events, causing widespread loss of life ile natural resources for their livelihoods. Moreover, and damage to crops and infrastructure. The in- their claim to these resources is often tenuous. Be- creasing scarcity of water and fuelwood forces cause they are at a social and economic disadvan- many-primarily women and children-to walk tage, the poor often reside in fringe areas, where long distances to collect their daily supplies. The access to potable drinking water and adequate sani- World Health Organization (WHO) estimates that tation facilities is limited and higher mortality, more than 5 million people die each year from dis- morbidity, and disease rates prevail, or in highly eases caused by unsafe drinking water and lack of vulnerable areas such as floodplains, coastal areas, water for sanitation and hygiene. Smoke from fires and degraded hillsides, with a diminished capacity set to clear forest areas causes widespread respira- for buffering against natural and man-made shocks tory problems. These are real economic, social, and and disasters. human costs, even though they seldom appear in national accounts. ENHANCING THE SUSTAINABILITY AND THE POVERTY IMPACT OF NRM: Degradation of the natural resource base also KEY STRATEGIC CHOICES threatens long-term growth. Improving agricultural Natural resource management (NRM) refers to the productivity is an essential part of development and utilization of natural resources such as land, water, poverty alleviation strategies in many countries, but air, minerals, forests, fisheries, and wild flora and degradation of soil and water resources threatens fauna. This discussion begins by identifying key this objective. In parts of the Pakistani Punjab, for concerns and policy approaches to improving NRM example, salinization and other problems in irri- and ameliorating the impact of natural resource use 154 Annex D - Natural Resource Management on poverty. It then reviews the key issues arising in tions created by macro policy and political frame- the context of some of the most important natural works. This lens broadens the analysis of local op- resources: land, forests, and water. The perspective tions for resource management away from NRM taken by the strategy is that NRM should contrib- and agricultural strategies, to look at the multiple, ute to poverty alleviation and that natural resources flexible livelihood strategies that people pursue and should be used in a sustainable manner to enhance the institutional and cultural context in which they human welfare. live. (The U.K. Department for International De- velopment, or DFID, has described this approach Sustainable NRM and poverty alleviation are gen- as the "livelihoods approach.") It also explicitly as- erally highly compatible. The poor are usually most sesses the local institutions and political economy directly dependent on natural resources for their that determine who in the society-men, women, livelihoods, and most vulnerable to the conse- indigenous people, farmers, or industrialists-have quences of natural resource degradation. Improv- resource entitlements and access to resources and ing NRM can thus make substantial contributions capital. to helping improve the welfare of the poor. Sus- tainable intensification of agriculture can improve Studies using this approach have documented the the income of poor farm households in both the importance of social capital at multiple institutional short and long terms. It can also help reduce pres- levels; the role of environmental entitlements, in- sures to expand into remaining forest areas, thus cluding land and resource tenure; the values of so- avoiding increased downstream damage from flood- cial and cultural preferences; the income strategies ing and sedimentation and preserving biodiversity. that factor in vulnerability to cyclical events or po- Nevertheless, difficult tradeoffs maybe encountered litical risks; and the dynamics of urban-rural re- at times. Reducing downstream damage may re- mittances from migrants still culturally tied to ru- quire restricting the land-use options of poor farm ral areas. These studies offer a rich set of examples households in the upper watershed. Unless means of ways in which local people mitigate poverty in- are found to compensate these households, such duced by environmental degradation or limited re- restrictions are likely to be either ineffective or in- source access. They also show how local people have equitable. Improved NRM can result in substan- reversed patterns of degradation despite less-than- tial economic gains, and these gains will often ben- perfect policy and legal conditions. efit the poor directly. But when they do not, the poor should not be asked to pay for them. These lessons point to three main strategic themes that need to be addressed to enhance the New evidence supports a shift in the way we un- sustainability and poverty impact of NRM: derstand NRM and the links between poverty and environmental degradation-toward a focus on how 1. Incentives. Decisions on NRM are not made by microlevel institutions mediate the impacts of the governments or international organizations; they macro environment to foster sustainability. This are made by millions of individual approach starts with an analysis of how people ac- decisionmakers-by farmers who decide what cess and use resources as part of their overall liveli- crops to plant and what inputs to use, or who hood strategy, and how they adapt to the condi- decide whether to increase their cultivated area 155 Making Sustainable Commitments - An Environment Strategy for the World Bank by clearing forests; by developers who decide pie" than theoretically possible and a 'nsmaller where to locate housing or industry; and by fish- piece of the pie" for the poor. Although secure ers who decide what type of fishing gear to use, property rights do not guarantee greater r esource where to fish, and how many days to spend at conservation, in many circumstances they can sea. The incentives faced by these decisionmakers play an important role. Policymakers' first order are critical to NRM. Inefficiencies in the utili- ofbusiness should be to (a) clarify property rights zation of natural resources often arise because where they do not exist, are obscure, or are in private and social prices differ and markets are dispute; (b) enforce property rights to support incomplete or distorted. The result is lower to- better NRM and thereby contribute to poverty tal welfare, particularly for the poor. A funda- alleviation; and (c) selectively regulate the re- mental distinction needs to be made between maining externalities, using the right incentives. the on-site and off-site effects of natural resource 3. Empowerment. Inefficiences and inequities in problems. the utilization of natural resources often arise m On-site efects. In the case of on-site effects, because many important stakeholders have Ittle decisionmakers already have powerful incen- tives to address natural resource problems, are required to build social capital and support since they are affected directly. The main need for honest and transparent institutions that have in this case is to remove obstacles to the the confidence of the local population. Particu- propr fuctioing f eistig inenties. lar care is needed when natural resources are This often includes the introduction of ex- clusive use rights, as discussed below. managed by indigenous peoples. RI Off-site effects. Conversely, in the case of off- site effects, decisionmakers usually have little KEY NATU RAL RESOURCE ISSUES or no incentive to address natural resource Land problems, as the consequences do not affect them. In such situations, incentives need to The land resources of the world are limited and at be created. Policymakers should (a) remove constant risk of being further degraded. Lai-d deg- policy-induced distortions that undermine radation affects agricultural productivity and is sound NRMf; (b) complement market signals therefore a major factor in food security and rural with taxes or fees that reflect social opportu- poverty. Although productivity trends indicate that nity costs, or payments that reflect social ben- aggregate global food supply is not seriously threat- efits; and (c) selectively regulate the remain- ened in the short term, some regional trends are of ing externalities. great concern: per capita food production in Africa 2. Property rights. Unsustainable and inefficient uti- has been slowly dropping during the last 30 years, lization ofnatural resources often occurs because and in the former Soviet Union food production property rights are not complete, exclusive, en- has decreased significantly since 1990. Problems are forced, and transferable. The issue of property particularly acute in dryland areas. Doubling food rights is particularly salient in the case of open- production by 2050 to meet human needs will cre- access resources, such as fisheries. In addition, ate new pressures. It should also be noted that in- property rights that do fulfill these conditions creases in global food supply often come at a heavy are often quite skewed. The result is a "smaller environmental cost: pesticide pollution, water table 156 Annex D - Natural Resource Management depletion, biodiversity losses, and land degradation BOX D.1 as a result of inappropriate land-use systems. Community-based natural resource management A major change toward sustainable land resources Natural resource management projects increas- management (SLRM) is needed to protect and ingly try to incorporate a role for communities in the desigln and implementation of NRM projects. enhance the productive base of land resources and For dexample themartania Rainfe Natua For example, the Mauritania Rainfed Natural the livelihoods of the people who depend on them. Resource Management Project (fiscal 1997) is To achieve this in countries with high poverty rates financing the first 5 years of a 20-year long-term requires addressing a wide range of issues, includ- program to activate a process of natural regen- eration of land fertility, rangeland vegetation, and ing land policy issues (property and access rights, livestock and forest production. It will do this by and land-use planning); key sector policies (includ- encouraging the emergence of better-adapted ing price policies and other policies that affect in- and more sustainable approaches to resource centives, as well as infrastructure policies and in use. This is likely to result in greater biodiversity conservation while generating more income and vestments); and changes in governance processes a better quality of life for the local people. The (decentralization and empowerment of local com- project, which will provide rural communities with munities). effective empowerment in the management of their natural resources, is active in 47 villages in three regions of the country. A number of micro- The United Nations Convention to Combat De- projects (dikes, small dams, wells, women's veg- sertification (CCD) places primary responsibility etable gardens, nurseries of indigenous tree spe- for action on land degradation with the govern- cies) are under way with the active participation ments of affected countries. Effective action re- of local communities. quires government commitment, political will, and capacity. Environmental issues, including follow- effective, policies must be based on the knowledge, up to the CCD, are often the domain of special- needs, priorities, and decisions of people living on ized environmental agencies rather than line min- and using the land. These communities, many of istries such as ministries of agriculture. As a result, them very poor, have a strong interest in preserv- these issues often have little impact on macroeco- ing the resources that provide for their survival, but nomic and sector policies. Focusing more attention they are often constrained by inappropriate gov- on how government commitment is created and ernment or donor policies. Identifying local pref- sustained-the political economy of land manage- erences through direct consultation and incorpo- ment-is therefore critical. An efficient land policy rating indigenous knowledge are particularly im- framework is needed, including security of land portant in cases involving indigenous peoples. rights and land access, establishment of the insti- SLRM hinges on a new approach of agricultural tutional infrastructure to administer land rights, and intensification that combines three basic principles: facilitation of land markets and transferability of integrating the biophysical and socioeconomic driv- land rights. ing forces involved; fostering a people-centered learning and participatory approach; and bringing Participation by rural communities is crucial to recognizable and early productivity benefits to improved land management (see box D.1). To be farmers ("SLRM for business"). 157 Making Sustainable Commitments - An Environment Strategy for the World Bank A strategy for land resources management should halting deforestation in the tropics, at the expense be based on a fourfold approach: of focusing on poverty alleviation and the b:'roader 1. Support the new approach to agricultural intensi- spectrum of forest types. Specific policy require- fication and environmental protection by ments created risk-averse behavior and avoidance (a) managing biological interactions that favor of difficult problems in the sector, and this short- crop and animal productivity in a profitable and coming was compounded by the lack of a cl]ear and ecologically sensitive manner, and (b) empow- implementable strategy. The OED recomrnended ering rural producers and their organizations or that the Bank modify its policy objectives for for- communities through knowledge acquisition and ests and expand its coverage. As a multisectoral capacity building agency with major activities across econornies, the 2. Change the role of state and public services by Bank needs a strategy that comprehensively deals implementing a decentralization process with with all potential impacts on forests andl forest full participation of the main stakeholders in land peoples, rather than one focused only on its fairly use and land management small forestry investment portfolio. To be effective, 3. Contribute to and implement international agree- the Bank will also need to review its objectives for ments such as the CCD, which are conducive to and approaches to forests and forest peoples. If it this change in mindset and institutional shift does not, it wil fail to generate significant inprove- 4. Monitor downstream and Off-site im acts from 4 o ra ff imp ments in forest outcomes and will fall far short of land use practices so that a more complete as- its larger institutional goals of poverty alleviation sessment of their costs and benefits can be made and sustainable economic growth. It will aLso miss and measures can be taken to encourage benefi- its opportunity to make a major contributicn to the cial uses and discourage harmful ones. protection of the important global values embod- ied in the world's forests. Forests Forests have a major role to play in poverty allevia- On the basis of the OED review, specially com- tion, sustainable economic growth, and the provi- missioned analytical studies of key issues, a major sion of ecosystem services. Of the world's 1.2 bil- process of consultation with stakeholders, and the lion extreme poor-those living on $1 or less a input of Bank's forest sector operational staff, a new day-90 percent depend on forests for their income strategy has been formulated. The three basic ob- or are significantly dependent on forest resources, jectives of the new forest strategy are closely linked including agroforestry and tree crops. The Bank's with the key objectives of the Bank's Environment 1991 forestry strategy and 1993 policy sought to Strategy (see box D.2.). The three goals are as fol- protect forests by adopting a conservation-oriented lows: approach. A review of the Bank's performance by 1. Harness thepotential offorests to reducepoverty by the Bank's Operations Evaluation Department creating opportunity, empowerment, and secu- (OED) concluded that although the overall goals rity for rural people, especially the rural poor and set out were laudable, they were misplaced to some indigenous groups, in the use and management extent and that implementation has been only mod- of forests. Especially important are joint and col- est. The strategy overemphasized the objective of laborative forest management systems and the 158 Annex 0 - Natural Resource Management BOX D.2 Linkages between the Environment Strategy and the revised forest strategy The World Bank's Environment Strategy is closely linked with sector strategies, such as forestry, rural development, and water resources management. For example, the main elements of the revised forest strategy correspond closely with the main objectives of the Environment Strategy. Both strate- gies focus on poverty, growth, and global issues. Environment Forest Strategy Objectives Strategy Objectives Improve the quality of life i 0 Harness forests to reduce poverty Improve the quality of growth 5 0 Integrate forests into sustainable economic development Improve the quality * , Protect global forest values of global commons Other common links exist between the strategies in their recognition of cross-sectoral issues, mainstreaming into policy dialogue, governance, selectivity, and better cooperation with development partners. identification ofpriority areas in which the Bank Water, coastal, and marine resources will seek to have maximum impact on poverty. The world is experiencing a systemic water crisis 2. Integrateforests into sustainable economic develop- as a result of unsustainable use and management of ment. The approach described here is based on water resources. A rapidly increasing population is the fact that forests are seriously undervalued- exacerbating the traditional problems of providing and are utilized wastefully and unsustainably- water supply and sanitation services. More than 1 in many economies, largely as a result of gover- billion people do not have access to potable water nance failures and perverse incentives. The ma-and 3 billion do not have adequate sani- jor directions to be followed Wil be to develop upis n iind o aeaeut ai jotadirkectios tor benvfrollwedn l ber to develop tation. The world's major lakes, rivers, and aquifers markets for environmental services; to encour- are under severe stress. The water sector also faces age good forest management; to improve gov- ernance (including control of illegal activities); new threats and challenges, including urbanization; to promote active participation in management overabstraction and regulation of surface water, to participation invrpupig management;polutonfro pin decisionmaking by all stakeholders; and to man- overpumping of groundwater; pollution from point age adverse cross-sectoral and macroeconomic and nonpoint sources; loss of aquatic biodiversity; impacts on forest resources. conversion of wetlands, mangroves, and other 3. Protect vital global forest values. The most im- coastal habitats; introduction of alien and exotic portant challenge in this area is to create effec- species and invasive weeds; emergence of disease tive markets for global values and other exter- and other marine pathogens; and increasing nalities from forests so that local and national interbasin water transfers. These threats, and the stakeholders will benefit from protecting and resulting degradation, are having a severe impact managing the resource. on quality of life and on growth prospects. The 159 Making Sustainable Commitments - An Environment Strategy for the World Bank impact is disproportionately felt by the poor, who Demand management is part of water supply and directly or indirectly depend on terrestrial and sanitation policy and is an area of increasing em- aquatic ecosystems for income generation and are phasis in irrigation activities; most water supply and least able to adapt to reductions in water quality sanitation projects and many irrigation projects and availability. emphasize some elements of demand management. But in a number of areas, such as sanitation, drain- The key future challenges include promoting a age, and water qualiy management, considerable sound~~~~~~~~~~ae andiuioa waternent qualityn maaemn,cosdeal sound institutional environment; improving eco- work remains to be done. Water allocation require- nomic analysis of management options; improving ments for environmental uses, including the pro- transboundary water management; addressing so- cial and sustainability issues in new dam construc- priority in light of rising demands for water and tion; halting degradation and loss of ecosystem frequent problems resulting from degradation of functions and the deterioration of freshwater lakes and reservoirs, wetlands, mangroves, and coral reefs; water quality (see figure D.1). improving drainage; and addressing the water re- sources implications of climate change. The Bank's Strategic Framework for Action on water provides a basis for achieving the broad ob- Environmental sustainability is a fundamental ele- jective of systematically mainstreaming environ- ment of sound water resource management. The mental quality objectives into water resource plan- integration of environmental quality objectives re- ning, development, and management programs and mains an important challenge in the water policy investments. It calls for a set of complementary reform and management pro- cess. Environmental assess- Figure 0. The value of water and water-based ecosystems ments have proved to be a useful tool for screening and 4 _ _ predicting potential impacts. However, lack of clear envi- ronmental sustainabiitycrite- V' A ITE APE D V'IME A -DA r JEYJ AD 0 r YBJTEiV] F5 ria for the water sector, capac- ity constraints, and lack of lty onsralns, nd lck f DIECTVALUES INDIRECT VALUES OPTION VALUES NON-USE VALUES commitment to follow Consumptive Ecosystem Premium Intrinsic . . . ~~~~~and non- functions and placed on significance in through with politically diffi- consumptive services such as: possible future terms of: cult decisions hinder the effec- use of resources Water quality uses and Cultural v:.lue Domestic use Water flow applications, Aesthetic Nralue tive integration of environ- Industrial input Water storage including: Heritagev slue Water purification Pharmaceutical Bequest v ilue mental issues in water projects. Irrigating crops Water ricatio armctical R v e Watering stock Water recharge I AgriCultLural As a result, the influence of Hydro-power F cntrol Industrial Wild plants Storm protection Leisure these studies on project Wildanimals Nutrient retention Water use Fishing Micro-climate etc. .. decisionmaking, especialiy the Transport Shore stabilzation analysis of alternatives, is of- Recreation etc. ten limited. 160 Annex D - Natural Resource Management measures to strengthen environmental management tal management capacity, use of interdisciplinary capacity, as follows: teams, knowledge sharing, analytical work, and stra- • Promote a comprehensive approach to water tegic partnerships. To accomplish these objectives resource management that includes (a) treating will require a long-term commitment by the Bank water as a unitary resource; (b) supporting a shift and allocation of resources for promoting policy from curative to preventive actions; (c) improv- dialogue, for cooperatively undertaking sector stud- ing the integration of environmental quality ies, and for preparing and supervising lending op- objectives into regional and national water re- erations and providing nonlending services. source management strategies, river basin plan- ning, investment projects, and policy reforms and Biodiversity actions, and changing the safeguard policy ori- The vast array of the world's animals and plants, entation from "do no harm" to "promotion of the genetic information they contain, and the dy- improved development"; and (d) adopting en- namic and interacting communities they form are vironmental sustainability criteria for the water known collectively as biodiversity. Biodiversity sector. therefore permeates all levels of NRM, since its a Support actions to more fully integrate water individual elements interact in intricate ways to quality concerns into water supply and sanita- r form forests and grasslands, maintain soils, and tion efforts. Water sector reforms should be provide ecosystem services, among other fiindamen- complemented by an effective regulatory frame- tal fumnctions. Most biodiversitv is uncataloged. work and incentive structure for managing the Some of the known genes, species, and communi- water resource base and ensuring its... ties have critical uses-as food, commodities, medi- sustainability. sustainability. ~~~~~cines, moderators of climate and hydrologv,pli a Recognize the ecological uses of water. Envi- , polli- nators, or soil formers-but the contributions made r-onmental flow assessments should be conducted by others are insufficiently known. The planet is asudintegral pavirtsofwtat resorent operations (in losing species at a rate higher than at any time in cluding environmental assessment). its history-an "extinction spasm" that undermines a Improve transboundary water management. * ~~~~~~future development options. Numerous river basins, groundwater aquifers, and coastal and marine environments cross na- tional boundaries, creating a need for coopera- The sharp distinction often made between "local" tive management. Transboundary waters have and "global" environmental issues is an artificial often been a source of conflict, but they can also construct (see annex I). Understanding the link- stimulate joint efforts. The primary management ages between various issues and properly identify- challenges include allocation and sharing of ing their influence on the local-to-global continuum water, management of water quality, navigation can help diagnose problems, identify solutions, and and flood control, and halting the degradation find common ground between advocates of vari- of aquatic ecosystems. ous approaches. Biodiversity provides two special challenges for NRM: (a) most of its benefits are Effective implementation of the Strategic Frame- economic externalities, that is, they do not appear work for Action calls for strengthened environmen- as financial values on a market where they can be 161 Making Sustainable Commitments - An Environment Strategy for the World Bank easily observed, and (b) some benefits ofbiodiversity have been taken into account in the strategy, em- accrue over the long term, while the cost of conser- phasizing positive linkages and the opportunities vation may be more immediate. Another consider- to reduce poverty that these commitments offer. ation is that many people consider biodiversity as having intrinsic value, for moral, religious, or cul- FUTURE DIRECTIONS FOR THE tural reasons. WORLD BANK The analysis summarized above points tc several The perception that biodiversity is a global issue key new directions for better addressing thle links stems from the fact that its widespread decline has bew povertyond NrI as: cumulative consequences at the global level. Most of the benefits and costs resulting from biodiversity Take a holistic approach. Clearly, there is a need for a conservation, however, accrue primarily at the lo- holistic approach that can (a) integrate economic cal and national lcvels. Important national benefits and social factors into ecosystem management goals Justify many interventions-such as protection of and address poverty alleviation and environmental watersheds with natural forests, which reduce river cnse ssues simtan and (b) oider 'ltaion nd uppot fih ppulaionshareste by conservation issues simultaneously, and (b) . onsider siltation and support fish populations harvested by NMpolm tteaporaemngmn si ~~~~~~~~~~NRM problems at the appropriate management riparian peoples-even in the absence of interna- scale. Lessons from NRM projects show that it may tional financing. Pollination, for example, is impor- be necessary to define the management scale be- tant for local crops, and wetland ecosystems can play an important role in purifying water. Nature- yn h onaiso diitaieuist n compass an entire ecosystem or other natural unit, oriented tourism has the potential to be an impor- such as a watershed. For example, wateris a uni- tant source of income and already is in countries tary resource that needs to be addressed in a com- such as Costa Rica and Kenya. Dive tourism is a growing Cosemta fca thdKenyve tourismm t in coal prehensive manner, recognizing and operationalizing growing segment of the tourism market in coral thimoanlnkgsbwenutrrracos ° ° ~~~~~~~~~~the important linkages between upstream actions reef nations, particularly in the Caribbean and the and their downstream consequences for r iver ba- Indo-Pacific. But some of the benefits of improv- ing biodiversity conservation and its sustainable sins, lakes, and coastal and marine environments. use-such as medicines and crops developed as a Take a long-term perspective. NRM problems are result of access to new genetic resources-accrue in pincile t makindas awhoe. Wen tese almost always long-term problems and require both in principle to mankind as a whole. When these global benefits cannot be easily internalized, global a long-term perspective and suitable tools. Such financing mechanisms such as the Global Environ- tools include Adaptable Program Loans (APLs) ment Facility (GEF) can be used to support the and the creation of trust funds and other innova- path toward sustainability. tive financial mechanisms that can finance NRM activities and recurrent costs in perpetuity (see box The World Bank recognizes the need to support 1.1 in annex I). the obligations that its clients have assumed under the Conventions on Biological Diversity and Cli- Movefrom curative to preventive actions. TIhe costs mate Change, and it is also committed to serving of preventing resource degradation are often small as an implementing agency for the GEF. These facts compared with the costs of remediation and reha- 162 Annex D - Natural Resource Management bilitation. A major challenge for NRM organiza- Build on 'globalto local"synergies. As an implement- tions and programs is to increase the level of effort ing agency of the GEF, the World Bank is in a good for preventive measures while maintaining support position to support interventions that simulta- for curative interventions in degraded areas. neously generate local benefits (that can be sup- ported by the Bank and IDA) and global benefits Let communities drive implementation. As in other (that can be supported by the GEF on an incre- sectors, more efficient and equitable ways of imple- mental cost basis). The growing mainstreaming of menting NRM projects are necessary. In light of the GEF's biodiversity portfolio within productive the site-specificity of NRMVI problems and the need sectors, and its increased association with NRM to consider the incentives of local stakeholders and loans, provide concrete examples of this approach. empower them to take action, Community-Driven Development (CDD) has substantial promise as Carrying out monitoring and evaluation. Monitor- an approach to implementing programs (see box ing and evaluation is indispensable, both at the 2.1 in chapter 2 and box A.3 in annex A). An im- micro level of individual interventions, to assess portant caveat is that when off-site impacts are their effectiveness and allow for course corrections considerable, external transfers may be necessary if necessary, and at the broader macro level of over- to complement local management. all trends, to diagnose problems, identify the need for interventions, and prioritize interventions. Increase the role oftheprivate sector. Improving NRM Monitoring can also help ensure that environmen- tal concerns are better integrated into economic requires a careful assessment of which functions need to be fulfilled by governments and which can policymaking by showing more clearly how envi- ronmental quality and NRM affect welfare and eco- be undertaken more effectively by the private sec- l q nomic development. tor. It is essential, however, to ensure that greater private sector involvement is complemented by an effective egulatory ramework.Together, these aspects of implementation present a formidable agenda for NRM operations. They can only succeed in a policy environment that has ad- Generate multiple benefits. Shifts in market forces, desdtefnanalofpvryleito: globalization, and demographic forces present new clear poe rigtstontal rerces,acond clear property rights to natural resources, condu- opportunities for enhanced NRM. Some of these cive incentives, and local empowerment for NRM. opportunities relate to the preferences of rich- At the same time, they need to build on the strate- country consumers for commodities that have bebeen. gic shifts and opportunities provided by holistic and produced in an environmentally benign manner, long-term approaches, community-driven imple- while others build on the overlap that often exists mentation, generation of multiple benefits, and the between better soil management, maintenance of exploitation of synergies in the local-to-global con- forest cover, and reduced pesticide use. For example, tinuum. shade-grown coffee provides greater social benefits related to employment and health, increases farm To properly promote these policy and program- economic returns, and enhances habitats for matic shifts, the World Bank itself needs to make biodiversity conservation. shifts that reflect these challenges. These alignments 163 Making Sustainable Commitments - An Environment Strategy for the World Bank need to be supported by the proper enhancement i Strengthen selectedpartnerships. The World Bank of financial resources, management buy-in, and is well equipped with the tools to support the staffing. The following lines of action were identi- policy and programmatic shifts presented above. fied as prerequisites for the promotion of the stra- Nevertheless, there will be instances in which tegic shifts identified in the strategy: our impacts can be enhanced through stronger a Increase internal awareness. It is important to partnerships in which clear and measurable out- demonstrate, through action and generation of comes can be identified and which support the overall direction of the Strategy. One such part- experience, that these shifts indeed provide pov- erty reduction impacts and enhance social, en- nership (the GEF) places the Bank in an excel- lent position to support the dual local-global vironmental, and economic sustainability.letpsiotouprthedalca1gbl ainsromentam and h economicsustainablita . agendas demanded by our clients (see annex I). Mainstream with mustbeasuramoteddlblerataets. In other cases, innovative approaches, a; exem- MIainstreaming must be promoted deliberately, with m u latplified by the recent launch of the Critical Eco- with measurable targets and built-in account- system Partnership Fund (CEPE), can provide abilities. Staff time needs to be made available lev iact-effcive mnEr. (anne leverage in a cost-effective manner. (See annex to systematically evaluate and strengthen the K for a list of external partnerships.) existing toolkit (economic and sector work, Monitor progress. Mainstreaming needs to be CASs, loans, and grants). Such proactive promoted against a backdrop of measurable in- mainstreaming can only be possible through in- dicators of progress and monitored periodically ternal incentives for staff to participate more There is a need to develop methodologies to actively in learning, awareness raising, research, measure mainstreaming and to strengthen the exchange of lessons learned, and quality en- management of knowledge that can support the hancement. goals of the strategy. 164 T-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~N Annex E X/ Urban Environmental Priorities T = he 20th century witnessed a dramatic increase in urbanization. Major cities are home to more than 50 percent of the world's population today, compared with only 14 percent in 1900. The highest rates of increase are observed in the poorest regions of the world. In East Asia, Sub- Saharan Africa, and the Middle East and North Africa, urbanization is proceeding rapidly, with urban growth exceeding 4 percent a year. Most of this growth is explained by natural population increase within cities and by the structural transformation and incorporation of formerly rural areas at the urban periphery. In some countries, however, rural-to-urban migration is an important factor; individuals come to cities in search of education, jobs, and better lives for themselves and their families. In many countries, the most rapid population growth is occurring outside the boundaries of existing primary or secondary cities. Mush- rooming periurban areas in Africa and Latin America are becoming massive slums. THE ENVIRONMENTAL CHALLENGES OF URBANIZATION Cities are powerful socioeconomic units, the engines of economic development. Their attractiveness, which has led to rapid urbanization, has also contributed to pressing urban environmental problems. Basic envi- ronmental services often cannot keep pace with rapidly rising demands, and growing economic activities create new pressures. Many cities and towns in the developing world are already characterized by high levels of air and water pollution, slums, deteriorating infrastructure, and poor waste management systems. The resulting exposure to microbiological pathogens due to unsafe drinking water, inadcquate sanitation, and poor waste management is one of the most serious environmental health threats in developing countries. It is estimated that every year between 0.5 million and 1.0 million people die prematurely in developing countries as a result of exposure to urban air pollution, especially fine particulates from vehicles, house- holds, and municipal sources, as well as industries and power plants. Besides fine particulates, lead is among the most serious environmental health threats in cities where leaded gasoline is still used, contributing to behavioral problems and learning disabilities in young children even at low levels of exposure. (See annex C for more detail on environmental health issues.) 165 Making Sustainable Commitments - An Environment Strategy for the World Bank Poverty and environmental conditions tries means either primary materials processing or Environmental problems exacerbate urban poverty, secondary industries. Such industries provide em- Poor cities and poor neighborhoods suffer dispro- ployment but are often unsafe and highly pollut- portionately from inadequate water and sanitation ing, releasing high levels of air and water pollution facilities and indoor air pollution. Poor people are or generating toxic industrial waste. As a conse- often forced to live in environmentally unsafe ar- quence, the price paid for economic opportunities eas-steep hillsides and flood plains or polluted sites may be serious air and water pollution fron-m indus- near solid waste dumps, open drains and sewers, try, adding to the problems created by unprotected and polluting industries. The poor may have less sewage from domestic sources. fear of eviction in such marginal areas, but they are at much greater risk from natural and man-made Cleaner technologies and good practice in the adop- disasters and from pollution. tion of pollution prevention and abatement tech- niques offer important opportunities for in dustries Poor environmental conditions lead to poor health, to improve their environmental performanLce. The which aggravates poverty and often results in lower World Bank Group's Pollution Prevention and educational levels, as well as loss of income owing Abatement Handbook 1998 (World Bank 1999b) to sickness, disease, and increased spending on summarizes preventive and abatement approaches health care, which may deplete household savings. and good practice in a range of industries (see box Povertyprevents people from moving to safer areas 3.7 in chapter 3). or investing in improved environments where they live. Hence, it is necessary to improve the environ- Air pollution from transport mental conditions of the urban poor in order to Development allows some industrial and munici- enhance their chance of "breaking the cycle" and pal problems to be brought under control, but such eventually moving out of poverty. improvement is often offset by the effects of in- creasing levels of vehicular transport-particularly air Population growth and physical expansion, how- poltn.Aicmeevsrs,maydeoig pollution. As income levels rise, many developing ever, are outstripping the ability of many cities to cdincreases in vehicle own- countnes expenence rapid 1eessmvhueon provide basic health and environmental services. By ership and motorization, especially in urban areas. 2025, it is estimated, almost 65 percent of the Most vehicle emissions occur near ground level and world's population (and an even larger share of to- in densely populated areas. Humans are therefore tal national economic wealth) will be concentrated exposed much more readily to harmful pollutants in cities and towns, making it an enormous chal- from transport than to those from sources, such as lenge to ensure that such growth is managed with- power plants, that are situated at elevated levels and out seriously damaging the urban environment or at greater distances from densely populated cen- the health of urban residents... ters. In addition, vehicle exhaust particles are small, profuse, and readily inhaled, so that they are ex- Industrial development and pollution pected to cause widespread damage to human Economic growth in urban areas is often based on health. Pollution abatement in the transport sector industrial activity, which for many developing coun- is therefore likely to become increasingly impor- 166 Annex E - Urban Environmental Priorities tant in urban air quality management strategies in ternative fuels-have to be carefully coordinated to the coming years. be effective and generate the desired improvement in air quality (Kojima and Lovei 2001). Measures such as improved traffic management and demand management, undertaken to reduce con- Growing effects of cities gestion and improve traffic flow, often bring envi- Linkages between environment and development ronmental benefits. Land-use planning is often seen are not limited to conditions within cities. Urban as an important tool for influencing the long-term envionmnta imlicaion ofcit devlopent Of growth can have profound effects on surrounding envionmetalimplcatons f dy deeloment Of areas, particularly in relafion to land conversion, the targeted pollution abatement measures, the first areas,rarticularly iirelationtoflandecnversion water abstraction, and discharges of wastewater and priority for developing countries is to phase out lead solid waste. Urban environmental strategies need from gasoline (see box E.1). Other policies and to address the effects of urbanization on periurban measures-including vehicle emissions standards, and rural populations, as well as the likely effects improved vehicle technology, vehicle inspection and of urban and mrura economic decisions on each other. maintenance programs, programs for retiring or VVN'ater resources illustrate the scale on which cities scrapping vehicles, and fuel improvements or al- BOX E.1 Supporting the global phaseout of leaded gasoline The World Bank recognizes that the phaseout of lead from gasoline is a very effective and technically feasible measure for reducing a serious environmental health threat. It has called for the complete phaseout of lead from gasoline and has undertaken a number of activities to that end. The Bank has initiated and participated in several regional lead phase-out initiatives, including elimi- nation of lead in gasoline in Latin America and the Caribbean, funded by the joint United Nations Development Programme (UNDP)MWorld Bank Energy Sector Management Assistance Programme (ESMAP); the preparation of a pan-European strategy to phase out leaded petrol under the leader- ship of the United Nations Economic Commission for Europe (UNECE) and the government of Den- mark; the national commitment building program to phase lead out of gasoline in Azerbaijan, Kazakhstan, and Uzbekistan, funded by the Danish Environmental Protection Agency; and the ESMAP- funded program for the elimination of lead in gasoline in the Middle East and North Africa. The Bank has also helped individual countries to introduce appropriate policies, to conduct feasibility studies, and to implement policies. These countries include Bangladesh, Bulgaria, China, the Domini- can Republic, El Salvador, Haiti, Indonesia, Jamaica, Malaysia, Romania, Thailand, and more re- cently, Pakistan, Sri Lanka, and Vietnam (which have programs in progress). In all these activities the Bank has played the catalytic role of building consensus among a wide range of stakeholders and development partners, in transferring experience from other countries and re- gions, and in dispelling myths about lead phaseout. To ensure that refinery modernization schemes (which may be required to phase out lead) are optimally designed, the programs have stressed the importance of addressing comprehensive fuel quality issues as part of lead phaseout plans. By 2001, 29 developing and transition economies had eliminated the use of lead additives in gaso- line, and several others plan to follow suit. Source: Kojima and Lovei 2001. 167 Making Sustainable Commitments - An Environment Strategy for the World Bank can influence surrounding environment, through, Methodologiesfor assessing urban environmenalzprob- for example, the effect of wastewater discharges on lems. These methodologies include rapid assessment downstream communities, users, and ecosystems procedures to evaluate the comparative risks of en- and competition for water between urban, rural, and vironmental problems; a decision support system other uses and among cities. As urban centers grow for integrated pollution management; methods of in size and number, their external effects begin to estimating dose response in individuals in order to overlap. evaluate the effect on health of specific pol'Lutants; and methods for assessing and selecting cost-ef- These effects are intensified by the global phenom- fectivc improvements to urban environments. Bank enon of increasing migration to coastal areas. Sixty sponsored country studies and assessments have percent of the world's population lives within 100 addressed urban environment issues in many coun- kilometers of the coast, an area that accounts for tries, including Argentina, Brazil, China, India, and only about 25 percent of the land mass (WRI 2000). Indonesia. The Environmental Action Program for By 2025, over 80 percent of the largest 30 cities in Eastern and Central Europe, supported by the the world will be in developing countries, and the Bank, focused attention on development in urban majorityvwill be coastal megacities (United Nations and industrial areas and analyzed the effects on 1995). Coastal areas are often used as a dumping health and the environment, particularly with re- ground for sewage, garbage, and toxic wastes, pol- spect to air pollution. Subsequent applications of luting both the land and the coastal seas. An ex- these analytical approaches found that the costs of ample is the formidable environmental stress along environmental damage in Asian cities (largely for the West African coastline, where rapid population air pollution) were equivalent to 5-10 percent of growth, combined with industrial and urban de- urban income and will continue to rise unless sig- velopment, has increased pollution in marine and nificant pollution management changes are imple- coastal ecosystems to alarming levels, often ob- mented (World Bank 1997a). structing the development of a profitable tourism industry. Mechanismsfor setting and addressing environmental priorities. The Bank has supported several programs and partnerships to help build mechanisms for con- THE WORLD BANK'S EXPERIENCE.. sensus building, for consultation among a range of The World Bank has been active in helping client stakeholders, and for the coordination of cross- countries address urban environmental problems, sectoral policies and measures. The Urban- Man- using a range of lending and nonlending services. agement Programme (UMP), sponsored by the Many efforts are jointly undertaken with other de- World Bank, the United Nations Development velopment partners.The activities and services the Programme (UNDP), and the United Nations Bank has helped to develop include methodologies Centre for Human Settlements (Habitat), supports for assessing urban environmental problems, case studies, research, and partnership activities to mechanisms for setting and addressing environ- assist cities and towns in developing countries. The mental priorities, and lending for urban environ- Metropolitan Environmental Improvement mental improvements. Programme (MEIP), established by the UNDP and 168 Annex E - Urban Environmental Priorities the Bank and supported by several donors, has as- years. The Strategic Solid Waste Management sisted several Asian cities to find and implement Program has generated a range of practical and practical solutions for rapidly growing environmen- analytical tools for planning, and there have been tal problems. The MELISSA program, developed investments for waste management activities by the Bank's Africa Region, supports and facili- across the Bank's regional vice presidencies. The tates the improvement of the local environment latter investments often address waste collection through partnership development and knowledge and disposal problems but now increasingly sup- management. The urgency of urban air quality port more comprehensive approaches to waste problems and the complex mix of actions required management. to tackle them led to the Urban Air Quality Man- a Watersupply, sanitation, and wastewater manage- agement Strategy (URBAIR) in Asia, which as- ment These issues are central to the environ- sisted in the design and implementation of air qual- mental agenda, especially in urban areas. Much ity management policies and in monitoring and of the work has been at the site-specific or project management intended to restore air quality in Asian level. A recent review showed that the urban de- metropolitan areas (see also box 3.2 in chapter 3). velopment and water supply and sanitation port- The Bank's call for the global phaseout of leaded folios include significant environmental compo- gasoline and its support for regional and national nents and investments. Issues of particular con- lead phaseout programs have been effective in har- cern include the health and environmental ef- nessing client commitment and action. A set of fects of inadequate sanitation coverage and im- follow-up activities has been undertaken in the proper sewage disposal, particularly in poorer framework of clean fuels programs. More recently, urban areas. These issues, with others, are being the Clean Air Initiative, originally developed by the addressed in a multidonor water and sanitation Bank for Latin America and now under way in program. Analytical work has been undertaken other regions, is fostering regional partnerships that to assess the health aspects in more detail and develop action plans to address worsening air qual- to find effective ways to establish site-specific ity problems (see box A.4 in annex A). requirements for wastewater treatment. a Industrialpollution management Using a range Lendingfor urban environmental improvements. The of instruments, the Bank has supported indus- Bank has extended lending to support urban envi- trial pollution abatement and waste management ronmental improvements in many countries efforts in many countries, often dealing with through projects touching all aspects of the need: implementation issues at both the national and urban development, environment, water supply and city levels. In the 1970s and the 1980s, the Bank sanitation, urban transport, and energy. The most supported several industrial pollution control typical areas of Bank support have been the fol- projects. However, its approach has changed in lowing: parallel with its declining involvement in the a Solid waste management. This is a key responsi- industrial sector and with the increasing role of bility of many city governments and has been the private sector in this area. Recent efforts have an area of Bank assistance in the form of ana- focused on guidance for good practice in pollu- lytical work and urban investment for many tion management, on support for integrating 169 Making Sustainable Commitments - An Environment Strategy for the World Bank environmental elements into the privatization BOX E.2 of highly polluting industries, and on facilitat- Environment in the Bank's urban strategy ing the application of innovative regulatory in- In the Bank's recent Urban and Local Govern- struments. The Pollution Prevention andAbate- ment Strategy (World Bank 2000a) the concept ment Handbook 1998 summarized lessons in of the "livable" city is defined in terms of a healthy good practice and provided guidelines for indus- and dignified living environment. Makin. cities trial facilities. Ne approachesItosupportfr livable requires addressing the sources of envi- tifcii.etsu f ronmental degradation, enabling access to ba- the regulatory framework, which is often weak, sic shelter and environmental services for the were captured in the recent Bank report "Green- urban poor, and reducing the vulnerability of poor ing Industry" (World Bank 1999a). people to environmental hazards. The strategy Cleanerfuels. In several projects, the Bank has proposes an agenda for working with both na- tional and local governments to develop cities supported the transition to cleaner fuels in that are livable, well governed and managed, and households, power generation, and transport. In financially sustainable. many Central European countries and elsewhere, A key tool for viewing the city holistically and in- switching from coal to gas in household heating tervening selectively is the City Development has been effective in improving air quality. The Strategy (CDS), which can be seen bo-h as a Bank-supported Slovenia Environment Man- process and as a product emanating from the process. Where environmental problems are agement Project, for example, provided financ- pr iore enviro r men identified as priorities, an urban enviror mental ingto support and accelerate such a switch.The management strategy can be developed, lead- transition to cleaner fuels has been an impor- ing to issue-specific action plans. A common tant element in implementing Fuel forThought, approach for achieving this objective is aid out in Toward Environmental Strategies for Cities the Bank's environment strategy for the energy (Bartone and others 1994), as well as n other sector. key publications (see the Bibliography). FUTURE CHALLENGES 1. Provision of basic environmentalservices, especially As cities continue to grow and increase in popula- for the poor, in a way that most effectively pro- tion and in economic importance (both relatively tects health. These services include the follow- and absolutely), environmental pressures are likely ing: to increase, and the Bank has to be prepared to as- a Access to safe water supply, sanitation, drain- sist its clients in facing the challenge (see box E.2). age, solid waste collection and disposal, and This is the rationale for the focus on enviromnen- health education tal infrastructure services and pollution manage- 0 Improved municipal and industrial waste dis- ment commonly found in urban projects. It is also posal important to address concern about the environ- A Reduced indoor air pollution. mental sustainability of the ecosystems that sup- 2. Implementation of integrated approaches to ur- port urban areas, such as freshwater aquifers, ban air quality management and waternhed and greenbelts, airsheds, and watersheds. Thus, meet- aquifer management to prevent and manage the ing the urban environmental challenge requires a impacts of pollution and degradation. These focus on two basic areas: activities include: 170 Annex E - Urban Environmental Priorities a Ambient air quality management regions, including analytical work; initiatives to * Surface water and groundwater management phase out leaded gasoline and introduce clean * Land and ecosystem management to preserve ftiels; mechanisms for consensus building among resource loss to pollution, particularly in coastal stakeholders; passing on of lessons learned from zones. programs as such as the Clean Air Initiative. * Waste management. Support for ongoing munici- Regardless of the problems being addressed, con- pal waste management efforts currently led by tinuing efforts are required to strengthen institu- the urban sector; increased attention to indus- tional capacity, improve governance, and reform trial waste management, including hospital environmental, economic, and financial policies. All waste. such efforts can produce important environmental * Basic services. Strengthen inputs to programs and benefits. projects designed to increase coverage of basic environmental services, especially for poorer STRATEGIC DIRECTIONS FOR BAN K communities, with special attention to water and OPERATIONS wastewater. In dealing with urban environmental problems, the a Sustainable private sector development Develop- Bank needs to work at several levels-national, re- ment, working with the private sector and the International Finance Corporation (IFC) of sys- gional, and local-and focus on a mixture of cli- l a ent-oriented and issue-oriented activities. The fol- lowing are areas in which it is important to mental outcomes of privatization. Other public strengthen the Bank's continuing environmental and private organizations can be encouraged to build on the good practice examples already engagement:ll * Environmental management. Identify, in conjunc- available to influence the environmental behav- tion with the urban sector, opportunities for in- ior of the private sector. troducing environmental good practiceainto city n Response to urban expansion. Identification of management or sectoalaciviteinstitutional mechanisms to address the ecologi- managmentor sctora actvitis; paticuarly cal effects of urban expansion, especially the con- in connection with city development strategies and similar programs. sequences of development in watersheds or the * Air quality management. Support for efforts to coastal zone. improve urban air quality in selected cities and 171 Annex F - . I~. / / Climate Change M A ost scientific experts agree that climate change induced by human activity is occurring and that further change is inevitable. The ThirdAssessment Report of the Intergovernmental Panel on Cli- mate Change (IPCC 2001) predicts that average global temperatures will rise between 1.4 and 5.8 degrees Celsius over the next 100 years, a rate of warming higher than any that has occurred over the past 10,000 years. The World Bank's work on climate change is predicated on IPCC's report that concludes that "most of the observed warming over the last 50 years is likely to have been due to the increase in greenhouse gas (GHG) concentrations." About 75 percent of the cumulative GHG emissions during the past 150 years have been emitted by industrialized countries. As a result of this energy-led development, their per capita GHG emissions today are five times higher than those of developing countries who now face the daunting task of enhancing energy utilization while protecting the environment. At the same time, the IPCC also concludes that "most less-developed regions are especially vulnerable" to the projected ad- verse impacts of climate change. These developing countries, therefore, would need to consider these im- pacts and adapt their development paths. The World Bank recognizes the threat posed by climate change to the development process, and seeks to support and facilitate the mainstreaming of climate change con- cerns in the development agenda. DEVELOPMENT CONTEXT Despite uncertainties about where changes in climate will occur (the regional patterns), by when (the rate of change), and by how much (the magnitude), there is little debate on at least two key points: -Because of the rapid build-up of GHGs, the earth's overall temperature will warm significantly, precipi- tation patterns will change, and sea levels will rise. g The adverse impacts of projected changes in climate conditions will pose major development challenges for most developing countries in the tropical and subtropical zones. In developing countries, where human activities are already close to the margin of tolerance for current variations in climate, the impacts of the projected changes are expected to be far reaching, adversely affect- 173 Making Sustainable Commitments - An Environment Strategy for the World Bank ing virtually all aspects of social and economic life country counterparts and to support the transfer for the poorest of the poor. For instance, in coun- of technology on beneficial terms, though initially tries where yields from dryland, nonirrigated agri- only for GHG mitigation. A decision on similar culture are already near their maximum tempera- support for vulnerability and adaptation was de- ture tolerance, even small changes in temperature ferred pending a better understanding of the im- could have a devastating impact on agricultural pacts of climate change.The UNFCCC regime and output, with attendant consequences for food se- instruments are, as a result, expected to evolve in curity. Similarly, changes in precipitation patterns response to progress in understanding of :he cli- associated with climate change could adversely af- mate change phenomenon. The Bank will continue fect the availability and quality of water, especially to review global experience, to learn from it, and to in areas where scarcity is already a problem. Sea develop innovative instruments that meet the needs level rise could displace millions of people living in of its clients. low-lying areas of the Ganges River and the Nile delta and threaten the existence of small island LESSONS FROM EXPERIENCE states. Assisting clients to prepare for climate change is therefore inextricably linked to the Bank's The ban invoveen in the eaolimate missin ofsustinabe povrty educion,change began in 1991, with the establishment of the Global Environment Facility (GEF), and ex- Developing countries fully recognize the implica- panded following the designation of the GJEF as the financial mechanism of the UNFCCC'. Since tions of global climate change and the need for all tefnnilmcaimo h NCC ic nations to gasume repnsl fp c then then, the Bank has focused primarily on assisting nations to aclients to reduce GHG emissions, as clients have global atmosphere, as reflected in their decision to ratif theUnitd Naions rameork onvetion been reluctant to borrow for vulnerability anmd ad- onaCliathe angted (UNationsFCCC)wok How ver,tb e aptation activities, in the expectation that support on Cimae Chnge(UNFCC) Howver becuse would be forthcoming on concessional terms un- these countries' contribution to the cumulative in- crease in atmospheric concentrations of GHG der the UNFCCC. In particular, to achieve GHG emissions has been small relative to that of indus- outcomes without compromising national devel- opment priorities, the Bank has assisted its clients trial countries, and because of the urgency of their o p short-term needs of providing food, energy, and to mobilize additional grant resources for opera- other vital services for the poor, it was recognized tional support, mainly in the energy sector. The that developing countries and economies in transi- World Bank Group-GEF portfolio today includes tion (non-Annex II parties to the UNFCCC) 62 projects, for which $6.2 billion has been mobi- would be unwilling and unable to invest their scarce lized-$730 million from the GEF and the bal- resources in measures yielding benefits in the dis- ance from the World Bank Group, donors, private tant future or outside their boundaries.i investors, and government counterparts. For that reason, based on the principle of common This decade-long involvement, representing first but diferentiated responsibility, industrial country generation work in GHG mitigation, has been in- parties (Annex II parties) agreed to provide new strumental in opening up new prospects for energy and additional grant resources to their developing efficiency, distributed supply, and off-grid service 174 Annex F - Climate Change delivery, especially in remote rural areas. In addi- regulatory reforms, as these tend to have large and tion, it has generated a number of key lessons of sustainable impacts on improving the efficiency of experience. In particular: resource use and, consequently, reducing GHG * Policy reforms are essential for mobilizing pri- emissions. In the context of these reforms, the Bank vate capital for efficient energy development, for will mobilize resources from the GEF and the Pro- creating a level playing field to foster competi- totype Carbon Fund (PCF) to support GHG tion, and for promoting alternative approaches abatement measures that simultaneously address to energy service delivery, including incentives poverty reduction and sustainable development for service providers to diversify and innovate goals. In the area of vulnerability and adaptation, and to enable clean technologies and fuels to where the decision on UNFCCC support is pend- compete on equal terms. ing, the Bank will mobilize donor financing for a * Many cost-effective options for reducing GHG Vulnerability and Adaptation Facility (VAF) to emissions in developing countries also have sub- better prepare for climate change. Over the me- stantial economic and local environmental dium term, the Bank will focus on improving the benefits. understanding of the potential impacts of climate change and on identifying and implementing no- STRATEGIC PRIORITIES regrets measures to reduce vulnerability to current climate and to climate change. Finally, the Bank The Bank recognizes that achieving objectives re- will assit clients bidng the i ne lated to climate change will be a long-term process with GHGiabatement and cith neraid to deal with GHG abatement and with vulnerabil- that will require integration of the GHG mitiga- ity and adaptation. tion and the vulnerability and adaptation agendas into mainstream operational work. In this regard, the differences in the relative priorities and needs GREENHOUSE GAS MITIGATION of the developing countries are also recognized, as To provide a strategic focus for the Bank's work on is the need for an array of supporting instruments. the energy-environment nexus and to consolidate These instruments include planning, policy dia- the gains of the decade-long association with the logue, generation and dissemination of knowledge, GEF, in July 1999 the Bank's Executive Directors and investment lending, all of which are primarily discussed Fuel forThought (FFT), an environment aimed at promoting national development priori- strategy for the energy sector (see box 4.1 in chap- ties. Striking the right balance between national ter 4). This strategy highlights the importance of development priorities and protecting the global getting the policy fundamentals right. In that con- commons will therefore be critical. text, it explicitly recognizes the need to help clients tackle global climate change by capturing win-win Bank support to clients for better managing cli- opportunities for improving energy efficiency and mate change is envisaged in three key areas: (a) promoting distributed and off-grid electricity sup- mitigation of GHG emissions; (b) reduction of ply in rural areas, using clean technologies and fu- vulnerability, and adaptation to climate change; and els. In addition, the strategy recognizes that there (c) capacity building. In the area of GHG mitiga- are valuable opportunities beyond win-win inter- tion, the Bank will continue to promote policy and ventions for combating regional and global prob- 175 Making Sustainable Commitments -An Environment Strategy for the World Bank lems. It calls for incorporating these opportunities about human health and livelihood benefits, es- into Bank programs to promote sustainable devel- pecially for the poor, in addition to reducing opment and reduce the marginal cost of GHG miti- GHG emissions gation through the use of external resources, par- a Forest regeneration through community partici- ticularly those of the GEF, the PCF, and the pri- pation, with the aim of offering substantial eco- vate sector resources stimulated by the carbon-trad- nomic benefits to millions of poor households ing mechanisms of the Kyoto Protocol. while increasing forest cover, sequestering car- bon, and reducing pressure on natural forests FFT remains consistent with the Bank's evolving agenda in the energy sector and will continue to Energy Environment Reviews (EERs) hav e been underpin work on GHG abatement, but the scope of support will be expanded to include sectors such pplied as an int str l, oftensp ported by the joint UNDP-World Bank DEnergy as transport, urban development, environment, ag- riculture, and forestry. There can be tradeoffs be- tween local and global environmental benefits. One (EMAP) (see box El). The Bank will continue to of the Bank's key goals, however, will be to identify work with the GEF in identifying and supporting and support GHG reduction when it is an ancil- cost-effective GHG mitigation investments, in- lary benefit of improving the quality of life or creasingly stressing the need for synergy wnth na- achieving other development objectives at the lo- tional economic and environmental concern-s in all cal and national levels. These efforts will thus serve climate change interventions. In addition, in con- to initiate and consolidate low-carbon development trast to past support for one-off projects, the Bank paths. The interventions envisaged include: will support larger regional or global efforts to cata- * Energy sector reform and restructuring, which lyze market development for GHG reduction: are key to improving supply- and demand-side ' The Bank-GEF Strategic Partnership for Re- efficiency, as well as to creating a level playing newable Energy will focus on long-term devel- field for alternative energy sources, including opment of the most promising technologies and renewables market opportunities for renewable energy, in- * Energy efficiency improvements and fuel switch- cluding grid-connected and off-grid technolo- ing (for example, from coal to gas), which can gies (see, for example, box 3.4 in chaptei- 3). reduce urban and indoor air pollution, improve The Bank will explore opportunities for a more thermal efficiency, and reduce GHG emissions programmatic approach to improving energy Improved access to modern energy in rural or remote locations through renewable energy tech- efficiency. Through the support of the GEE ESMAP, and other donors, the Bank will look nologies for household lighting, water pump- to replicate the model used in China of support ing, grain processing, small cottage industries, clinics, and schools, all of which yield direct eco- for energy efficiency improvements. - , ~~~~~~~~~Two new GEF operational programs provide nomic and social benefits to rural residents Reduction of energy intensity in the transport opportunities to promote environmentally sus- sector, through land-use planning, traffic man- tainable options in the transport sector and sus- agement, promotion of nonmotorized transport, tainable development of multiple ecosystems, in- and more efficient technologies, which brings cluding forestry, which has a significant carbon 176 Annex F - Climate Change BOX F.1 Strengthening environmentally responsible energy strategies through Energy Environment Reviews Energy Environment Reviews (EERs) extend traditional Bank energy sector work by addressing the cross-sectoral environmental impacts associated with energy production and consumption at the lo- cal, regional, and global levels. EERs are an important tool for supporting the implementation of Fuel for Thought, the Bank's environmental strategy for the energy sector. Through their emphasis on upstream analysis, EERs aim to: a Ensure that fuel and technology choices are considered before they are frozen in the context of specific project designs a Maximize cost-effectiveness by examining pollution prevention and reduction options across the fuel supply and consumption chain A Expand local participation and capacity building among analysts and decisionmakers. To date, most EERs have been motivated by local environmental concerns, but many activities simul- taneously address local, regional, and global effects. In Turkey, for example, an ESMAP-supported initiative on key aspects of energy and environment! GHG strategy was largely motivated by decisionmakers' desire to compare different options for miti- gating GHG emissions; but the modeling effort also provided specific guidance on least-cost control strategies for sulfur and particulate emissions in the power sector. ESMAP and the Canadian International Development Agency (CIDA) supported a regional study, Cleaner Transportation Fuels forAir Quality Improvement, which examined the linkages between fuel quality, vehicle emissions, and air quality in the eight countries of Central Asia and the Caucasus. The study made recommendations for improving air quality and vehicular emissions monitoring systems and for adopting improved fuel quality regulations and controls in the coming decade. It emphasized, in particular, the rapid phaseout of lead in gasoline and the possibility of harmonizing fuel quality requirements in the region. In addition to improvement of urban air quality, the proposed measures have implications for fuel and engine efficiency and for carbon dioxide emissions. In Mexico, an environmental strategy for the energy sector supported by ESMAP has assisted the Ministry of Energy in identifying pricing policy options for eliminating environmentally damaging sub- sidies in the power sector. In parallel, the Ministry of Environment has concentrated on vehicle emis- sions standards and the improvement of vehicle emissions performance. The EER has helped im- prove communications between Mexico's energy and environment ministerial authorities and has opened up the Bank's previously limited dialogue on key policy and structural issues in the energy sector. sequestration potential in addition to local ben- ment projects that can utilize these mechanisms efits. to lower carbon emissions from developing a The PCF is designed to show how a market for countries. carbon emission credits for developing countries can work under the Kyoto Protocol's proposed VULNERABILITY AND ADAPTATION flexible mechanisms. The PCF, a public-private partnership, will develop best practices in the Experience over the past two decades suggests that identification and implementation of develop- vulnerability to extreme weather events (floods, 177 Making Sustainable Commitments - An Environment Strategy for the World Bank droughts, storm surges, and so forth) has increased to promote more effective communication and markedly. Reflecting in part the rapid growth of use of climate information at the national and population-and in part, the pattern of develop- local levels ment itself-loss of life, displacement, and damage m Evaluate the longer-term consequences of di- and destruction ofnatural, social, and physical capi- sasters to increase awareness anmong tal have all increased, and the losses are relatively policymakers of the potentially serious threat greater for the poor in poorer countries. Now, with that variations and changes in climate Pose to the projected global warming and the associated sustainable development, as well as of the po- higher probabilities of intense precipitation and tentially high economic and social returns that more extended dry periods, the frequency and se- investments in reducing vulnerability can yield verity of droughts, floods, and storm surges are ex- a Conduct backcasting studies of at least two pected to increase, along with the vulnerability of countries and two projects to determine whether the developing countries. These developments will incorporating climate risks explicitly (a: would exacerbate the problems related to climate that face require a fundamental change in macroeconomic these countries today. and sector policies pursued to date, or a simple realignment and phasing of priorities, and (b) Many of the countries that are most vulnerable to would have yielded additional benefits, given climate change are already close to the margin of past and actual climate variability tolerance with respect to current climate variabil- X Develop a framework for incorporating climate ity. Hence, the most important measures that will risks in economic analyses, with a view to reori- enable these countries to deal with future climate enting the Bank's project work toward adapta- conditions are essentially the same as those needed tion to deal with the current climate. The Bank, there- & Support pilot initiatives in vulnerable countries fore, will focus on reducing present-day climate to promote community-level activities aimed at, vulnerability through the implementation of no- among other objectives, reforestation, conserva- regrets measures. Because there is no single best or tion and restoration of wetlands, protection of universal approach to adaptation, learning by do- mangroves and coral reefs, and strengthening of ing will be a critical aspect of the Bank's work over local institutions to reduce income-related risk the short to medium term. and thus improve the capacity of the poor to cope. Drawing on activities of partners, including the Bank's Disaster Management Facility, the follow- As noted above, because developing countries are ing initiatives are proposed: unwilling to borrow for adaptation, the Bank will a Support vulnerability assessments to better un- establish, with donor financing, a VAF to support derstand past weather events and their physical, short-to-medium-term strategic priorities.The aim economic and social conscquences and to de- of such a measure would be to better prepare the velop and test indicators of current and future World Bank Group and its clients to deal with cli- vulnerability mate change. To leverage VAF resources and en- a Strengthen regional institutions to improve cli- sure that the output from the activities supported mate forecasting and verification systems and by them are fully integrated into the Bank's main- 178 Annex F - Climate Change stream operational work, these three approaches are continue to focus on providing hands-on experi- proposed: ence through methodological, technical, and invest- * The focus on vulnerability in the 2000/2001 ment work to clarify how market mechanisms can WorldDevelopmentReport has alreadyplacedthe benefit our clients; development of national poli- issue squarely on the Bank's agenda, and data cies to identify potential investments for possible on vulnerability in the areas of health, environ- future international cooperation; evaluation of op- ment, infrastructure, and social protection are tions for reducing GHG emissions through sectoral already being collected for the Poverty Reduc- planning; and upstream work in investment plan- tion Strategy Papers (PRSPs). The proposed ning to identify options for mitigating the negative vulnerability assessments would complement this local, regional, and global environmental impacts work by generating good practices that could be of energy development. The scope of support will incorporated into the broader PRSP agenda. be expanded to include vulnerability and adapta- * For studies and pilot initiatives that are country tion, as well. The following are illustrative examples specific, a cost-sharing arrangement with the of capacity-building activities related to climate country team is envisaged to enhance the pros- change to be supported by the Bank: pects of buy-in. In this regard, the Environment B National Strategy Studies (NSS) Program. Since Department will work closely with the Disaster 1997, with the support initially of Switzerland Management Facility on continuing operations and subsequently of other donors, the Bank has (in Honduras and Mozambique). This would assisted 26 client countries to develop national allow for the integration of no regrets pilot ini- policies on Joint implementation under the tiatives into ongoing operations and reduce their Kyoto Protocol and the Clean Development monitoring and supervision costs. Mechanism (CDM). The Bank will also help a For methodological work and studies, includ- these countries identify potential investments for ing vulnerability assessments, that have impli- possible future international cooperation for cli- cations for Bankwide work, the VAF will cover mate change mitigation. the frll costs. As much of this work will require 8 Prototype Carbon Fund. The PCF, through fi- specialized skills, the Environment Department nancial support for project specific investments, will give priority to developing and strengthen- will help create the market infrastructure neces- ing partnership within both the Bank and the sary for CDM projects. It will also help develop broader scientific community. a knowledge base to maximize the value of its experience by collecting, analyzing, and dissemi- CAPACITY BUILDING nating information and knowledge to a broad range of stakeholders. The climate change agenda is relatively new and D CEM-Assist Program. To help Sub-Saharan evolving. As a result, the generation and dissemi- African countries take advantage of CDM, a nation of relevant knowledge-through analytical CDM-Assist Program, funded by ESMAP and work to plan, prepare, and implement GHG miti- a number of bilateral donors, is being prepared. gation measures and to manage climate change X Adaptation activities. As part of the identifica- concerns in general-are critical first steps in ca- tion and preparation of adaptation projects un- pacitybuilding. As in the recent past, the Bank will der the UNFCCC mandate, the Bank will help 179 Making Sustainable Commitments - An Environment Strategy for the World Bank mobilize resources to help clients prepare for ad- orities concentrates on learning by doing to gener- aptation to the impacts of climate change. ate good practices and to disseminate these widely Training. Plans are being developed for training to clients both within and outside the Bank. In this through the World Bank Institute (WBI) to regard, we will focus specifically on developing ana- support activities for assessing vulnerability. Such lytical and methodological tools that have impli- training would be offered on a regional basis cations for Bankwide work. In addition, we will through seminars, workshops, and short courses. collaborate with the Regions, and particularly with the Disaster Management Facility, on pilot initia- Within the Bank, compliance with Operational tives and on monitoring their implementation. Policies and Bank Procedures OP/BP 4.01 on En- vironmental Assessment and OP/BP 10.04 on Eco- Resources: The resource requirements for the imple- nomic Evaluation of Investment Operations re- mentation of the strategic priorities relateci to cli- quires, at the design and selection stage, assessment mate change are not expected to be demandi ng. The and consideration of lifetime GHG emissions from resources required for the work on GHG mitiga- Bank-supported projects. This would be facilitated tion are financed fully by the GEF, and no change through the development of methodologies and in this arrangement is envisaged. The only addi- through training for Bank task teams provided by tional resource requirements, therefore, are for the the WBI. implementation of work on vulnerability and ad- aptation. It is expected that a significant portion of Implementation and Resources these requirements will be covered by the VAF, but these resources would have to be supplemented, in Implementation: Our goal is to integrate the agen- das for GHG mitigation and for vulnerability and part through the prudential use of consultanat trust funds to mobilize specialized skills and in part adaptation into the Bank's mainstream operational thogteBakbdtfrsafti. work. Progress has been made in the area of GHG mitigation, but more at the project than at the policy level. We will therefore work closely with ESMAP on energy and environment reviews, which respond NOTE to the need for sectoral environmental assessments 1. "Annex II parties to the UNFCCC" refers to well upstream of lending operations. industrial countries and "non-Annex II parties" to all others, principally developing countries and In the area of vulnerability and adaptation to cli- the economies in transition. mate change, implementation of the strategic pri- 180 AnnexG G z~~~~ The IFC's Approach to Environmental arnd Social Issues - A Roadmap to Sustainable Investment he approach of the International Finance Corporation (IFC) on environmental and social issues in project finance follows closely that of its sister body, the World Bank. THE IFC'S STRATEGY The IFC's approach to environmental and social issues in project financing is evolving from ensuring compliance to the development of a sustainable development strategy, as outlined in the Strategic Direc- tions paper recently submitted to the Committee on Development Effectiveness (CODE). This annex outlines the IFC's vision of sustainable development and the substance of its approach. The IFC's management of environmental and social issues in investment projects has evolved over time to serve the particular needs of the IFC's private sector focus while recognizing its status and responsibilities as a public institution. Its strategy has been built around two primary objectives. a To achieve a high level of environmental and social performance in IFC investments through the devel- opment and implementation of a robust management system. This system ensures the consistent appli- cation of the IFC's environmental and social policy and procedural framework, which includes building adequate capacity within financial intermediaries distributing IFC funds. a, To pursue investments with specific environmental benefits that are financially viable, and to innovate in the area of "near-market" opportunities through appropriate use of commercial and concessional funding. The IFC believes that these foundations provide a firm basis on which to build a sustainable development strategy that seeks to maximize the overall financial, economic, environmental, and social return on its investments. 181 Making Sustainable Commitments -An Environment Strategy for the World Bank THE IFC'S MANAGEMENT SYSTEM and disclosure requirements, and the improved in- FOR ENVIRONMENTAL AND SOCIAL tegration of social analysis into the environmental ISSUES IN INVESTMENTS assessment process. The ESRP requirements are The IFC's management system has the following integrated into the FC's business processes. Early integral~ ~ ~ ~~~~ ~terae mtctemFCspusesepocsss.Eal integral components: environmental and social input into investment re- A Policy and procedural framework views is required, and clearance of the environmen- * Environmental and social analysis of projects tal and social terms of IFC investment and project * Capacity and resources .. documentation occurs with full participation of the * Quality Project Management QualityProject Management/correctie aenvironmental and social development specialists. MaInagesment/correctiven acndtionaplanis The IFC's ESRP is available online at http:// Investment agreement conditionalitieswwifor/vroESoES/ephm> w 'w.fc.org/env'ro/EnvSoc/ESRP/esrp.htm> . * Portfolio supervision * Disclosure, consultation, and transparency While environmental and social professionals are XAccountability mechanisms Sysccountem ifeedback. nisms very much part of the project teams, a direct re- * System feedback. porting line from the director of the Environment and Social Development Department (CES) to the Tlhe IFC has a well-developed policy and proce- executive vice president maintains independence dural framework. Its environmental and social safe- from operational line management. The overall guard policies are closely harmonized with the cohesion of environmental and social inpu-.s is en- Bank's safeguard policies, with minor adjustments cohes of einmentaland silninp ispe- to adapt them to the private sector context of its operations. The IFC applies the World Bank cialists of all disciplines integrated into teams that Group's Pollution Prevention andAbatementHand- service investment sectors and regions. The IFC book 1998 (World Bank 1999b) to its investments, believes that environmental and social issues are equally important, that they are mutually support- with high-level management clearance required for . ~~ive, and that they benefit from joint management any variation (see box 3.7 in chapter 3). To provide i idance for sectors for which no guideline is avail- oversight. IFC management has also supported able in the Handbook, the IFC has developed its CES through the provision of resources tc build a own guidelines. A full list of the IFC's environ- significant environmental and social management mental guidelines is available online at . As the need for environmental and social review of IFC projects has increased, so has the number of The Environmental and Social Review Procedure specialists within the department. The num.ber now (ESRP), set forth in 1998, guides staff in the ap- working on project review for the Environment plication of the policy and guideline framework to Division has grown to 39 full-time-equivalent po- the environmental and social analysis and process- sitions. This has prompted the need to develop and ing of all investments. The ESRP contains impor- implement a Quality Project Management (QPM) tant developments in the IFC's approach to finan- system to ensure that specialists (including those cial intermediary investments, local consultation on mission or based in the field) have access to the 182 Annex G - The IFC's Approach to Environmental and Social Issues appropriate management tools in order to make agreed environmental or corrective action plans and informed decisions and, in doing so, promote con- to other specific loan covenants and reporting re- sistency in project processing. In 1998, the Envi- quirements and (b) the development of environ- ronment and Social Review Unit commenced de- mental and social management capacity. A risk rat- velopment of QPM, a program that provides all ing for direct investments based on a range of cri- specialists with a reference manual and a work flow teria is used to apportion supervision resources to that prompts key actions during the project cycle. the highest-priority areas; a similar risk rating is An internal audit program regularly reviews the under development for financial intermediaries. performance of both the system and the individual Environmental and social risk analysis is routinely project managers. QPM has been operational for integrated into investment department portfolio direct investment projects since March 2000. Fi- reviews. nancial intermediary projects are being incorporated in 2001. The IFC relies on its disclosure policy and public consultation standards to ensure that interested It is often the case that projects, parficularly for parties have an opportunity to be heard and to ex- refurbishment or expansion, require time and in- vestment to bring them to an acceptable standard. inflrece theiport of m romumtrans- Projects may have impacts (such as resettlement) parency. Furthermore, the IFC's status as a public that require monitoring and action over an extended institution requires that It establish a significantl period. Financial intermediary projects commonly Oi m~~~~sechanism for accountability to its member coun- require the development of management systems tries and civil society, particularly with respect to and the building of capacity within the client orga- its environmental and social performance. nization. These situations are dealt with through appropriate action plans-for example, for environ- mentl maagemnt,resetlemnt,or crrecive Perhaps the most innovative aspect of the IFC's action. management, resettlement, or corrective environmental and social accountability is the es- action. tablishment of a compliance advisor/ombudsman Environmental and social investment agreement (CAO), an office designed to provide a nonjudi- conditionalities commit the project sponsor to com- cial, practical, problem-solving approach to con- ply with IFC policies and guidelines and, where tentious aspects of projects. This office is indepen- dent of the managements of the IFC and the Mul- appropriate, to follow a specific action program. The IFC's own capacity-building initiatives for finan- tilateral Investment Guarantee Agency (MIGA) cial intermediaries are leveraged through strategic and reports directly to the president of the World partnerships with international finance institutions Bank Group. The CAO has three roles: (a) respond- (IFIs), business schools, and others to deliver train- ing to complaints by persons affected by projects ing and assistance to clients. and attempting to resolve the issues, using a flex- ible, problem-solving approach; (b) providing in- The IFC monitors the environmental and social dependent advice to the president and senior man- performance of projects as part of its portfolio su- agement of the IFC and MIGA; and (c) oversee- pervision. This includes (a) review of adherence to ing audits of the IFC's and MIGA's environmental 183 Making Sustainable Commitments - An Environment Strategy for the World Bank and social performance, both on systemic issues and with environmental benefits, the EPU draws on the in relation to sensitive projects. IFC's own investment resources and, where appro- priate, concessional funding from sources such as Feedback on the overall efficacy of the manage- the Global Environment Facility (GEF) < see, for ment system is synthesized from a number of cxample, box 2.7 in chaptcr 2). The EPU also un- sources, including Operations Evaluation Group dertakes special initiatives such as iden-tifying analysis; CAO investigations and feedback; Les- projects to reduce greenhouse gas emissions under sons of Experience analysis; client surveys and in- the Kyoto Protocol. (For more informationl on the teraction; and representations by civil society, in- activities of the EPU, visit its Website at .) review by the CAD office is anticipated in late fis- cal 2002. Looking ahead: The transition to sustainability The IFC and environmental projects The IFC's mission is to help reduce poverty and In addition to seeking to mitigate and manage the improve the quality of life by supporting the cre- impacts of its traditional projects, the IFC has es- ation and expansion of a vibrant private sector. Pri- tablished units within several investment depart- vate sector development has several dimensions- ments to focus on environmental projects. These financial, economic, social, and environmental. include the Utilities Group within the Infrastruc- Development is sustainable if progress in one di- ture Department, which finances water, wastewa- mension does not come at the expense of the ter, and solid waste management projects, and the others. Renewable Energy and Energy Efficiency Team within the Power Department. In addition, the The IFC is launching a sustainability initiative that Privatization Policy and Transactions Groups in the has the potential to significantly increase the de- Private Sector Advisory Services Department have velopment impact of its activities. Sustainability for developed extensive experience in the area of water IFC means incorporating a more opportunistic, and wastewater. added-value approach that goes beyond compliance, particularly in the environmental, social, and cor- In 1996, the IFC created the Environmental porate governance aspects of its work. It means Projects Unit (EPU) to act as a catalyst and incu- complementing the existing regulatory-based ap- bator for projects with specific environmental ben- proach to environmental and social issues with one efits. In developing projects for the IFC's own ac- that is market based and incentives oriented. This count, the EPU operates as a cost center that pro- evolution is directly enabled by what is now a solid vides technical analysis and financial structuring foundation of environmental and social manage- services in order to prepare projects for funding by ment systems. the relevant investment departments. More recently, the EPU has begun to encourage the identification As we move beyond compliance, the IFC will not and implementation of ecoefficiency improvements compromise its minimum standards; rather, it rec- in mainstream IFC projects. In supporting projects ognizes that achieving an appropriate balance 184 Annex G - The IFC's Approach to Environmental and Social Issues among the financial, economic, social, and envi- tangible cost reductions, through ecoefficiency or ronmental dimensions ofsustainabilitywill depend cleaner technology; improved revenues, through on the circumstances and locality of the particular better access to global supply chains, development investment. This is not a one-size-fits-all philoso- of local supply chains, or the "branding" of prod- phy but an intention to operationalize sustainable ucts; reduced risks, through, for example, strength- development in a way that maximizes our overall ened and positive interactions with the local com- development impact and role. munity; or better access to financing. Many private firms in industrial countries recognize this conver- The sustainability initiative will manifest itself gence of environmental and social value and finan- through the IFC's investments, its role as a leader cial value, and a few in developing countries are in the financial sector, and its footprint in terms of beginning to do so, as well. As regulations and con- the environmental and social impacts of its physi- sumer behavior continue to change, these oppor- cal presence and activities. The IFC is currently tunities will proliferate. assessing its approach and what would constitute an indication of success in each of these three areas The challenges of the transition to sustainable pri- of activity. vate sector development are large, but many com- panies are recognizing that meeting the challenges Sustainability, in its financial and economic dimen- adds value in many areas of their business through sions, has always been at the core of the IFC's ap- customer and staff loyalty, product differentiation, proach. The IFC is a long-term, not a short-term, resource efficiency, risk reduction, and innovation. financial investor, and it avoids investments in which financial returns are predicated on unsus- The IFC has a role in helping to transfer emerging tainable economic distortions. It also continually private sector sustainable practices to the develop- looks for opportunities to help clients and member ing country context in which it operates. It is not countries create additional financial and economic an easy task, but it is a role that the IFC has per- value. The same approach is being extended to en- formed in many other areas in the past. We bclieve vironmental, social, and corporate governance is- that sustainable business practices converge with sues. The IFC has developed world-class expertise good management and that, as a result, sustainable in these areas and is now ready to move beyond its businesses will be the long-term winners. As in- "do no harm" approach to environmental and so- vestors, maximizing long-term shareholder value is cial issues toward one that more explicitly looks for one of our goals. It simply makes commercial sense: opportunities to add value and materially enhance any business that puts its supply chain at risk or the positive development impact of a project or ignores reputational issues is not acting in the in- undertaking. terests of its shareholders, let alone other stakehold- ers. A primary focus will be on how actions that create environmental or social value or improve corporate This is an area in which the IFC is already emerg- governance can also create financial value for our ing as a leader among the private sector investment clients. This financial value can take the form of institutions operating in the developing world, and 185 Making Sustainable Commitments - An Environment Strategy for the World Bank our advice is increasingly sought by other IFIs, com- anticipated in the months ahead. We believe that mercial banks, and businesses. IFC guidance docu- the journey toward sustainability will bring many ments on the value of public consultation and com- benefits to our clients. Furthermore, we believe that munity development are landmark publications that it will also benefit the IFC. It will differentiate the are widely referred to by practitioners and busi- IFC from other financial institutions in our ability nesses. They are available online at . us to operate in high-risk areas with renewed con- fidence in our role and ability to achieve sustain- The building blocks of this transition are currently able outcomes; and, most important, it will con- being put in place through internal discussions, and tribute to our mission of reducing poverty and im- substantive consultations with all stakeholders are proving people's lives. 186 Annex H Multilateral Investment Guarantee Agency E stablished as a member of the World Bank Group in 1988, the Multilateral Investment Guaran- tee Agency (MIGA) provides (a) an investment insurance (guarantee) program that offers politi- cal risk coverage to foreign investors from any of its member countries, and (b) a technical assistance program that helps developing member countries attract foreign direct investment. MIGA does not make investments, extend grants, or lend money to investors, nor does it propose or design projects. As with any other form of insurance, investors and lenders who want this coverage pay premiums. MIGA's founders required the institution to make sure that the foreign investments insured by it contrib- ute to the development of the host country. If investments are to provide development opportunities for local communities, the projects must be environmentally and socially sound. Therefore, in carrying out its mission, it is MIGA's policy that all the foreign investments it insures must be carried out in an environ- mentally and socially responsible manner. ENVIRONMENTAL POLICY Since MIGA issued its first insurance contract in 1990, it has been applying World Bank environmental policies and guidelines to MIGA projects, often with the environmental counsel and advice of the Interna- tional Finance Corporation (IFC). In fiscal 1998, MIGA began drafting its own specific environmental assessment and disclosure policies, which reflect its business as an insurer of foreign investments. These draft policies, and the procedures for implementing them, were the subject of extensive discussions by MIGA's Board and management. The Board approved MIGA's environmental assessment and disclosure policies and procedures in May 1999, and they took effect with all new applications received in fiscal 2000. The policies and procedures are available on MIGA's Website, . MIGA's Environmental Assessment Policy is the basic framework for MIGA's evaluation of the environ- mental and social soundness of a proposed project. The policy requires the project sponsors to carry out an 187 Making Sustainable Commitments - An Environment Strategy for the World Bank environmental assessment (EA) of the project. As must recognize that (a) compensation, benefits, and explained in the policy, the level of detail of this mitigation measures must be project oriented; (b) assessment varies with every project and depends acceptable measures of compliance must :n some largely on the nature, magnitude, and significance form be clearly linked and identifiable through con- of the project's impacts on the environmnient and on tract provisions, such as implementation of the local communities. project's proposed Environmental Action Plan, as appropriate to policy-related issues; (c) a.pproxi- MIGA then uses this assessment as the basis for mately 70 percent of MIGA's guarantee holders do its review and evaluation. In carrying out the re- not have a majority or controlling interest in a view and evaluation, MIGA considers the follow- project and are thus often constrained in their abil- ing features of the project: ity to change project design or implementation; and m Ability to comply with the appropriate guide- (d) the private sector has a partnership rcle with lines found in the World Bank Group's Pollu- government and local communities in local devel- tion Prevention and Abatement Handbook 1998 opment. Moreover, application of safeguards must (World Bank 1999) clearly consider MIGA's narrowly defined role as Compliance with host-country environmental an insurer with no ability to finance project im- requirements provements and must recognize that MIGAs in- Consistency with MIGA's safeguard policies volvement in the project's development process regarding natural habitats, forestry, pest man- typically takes place after approval of the EIA by agement, dam safety, projects on international the host country. waterways, resettlement, indigenous and vulner- able peoples, and cultural resources and prop- MIGA achieves harmonization in its application erty. of the safeguard policies through several mecha- nisms: Application of the safeguard policies focuses on a Environmental review, clearance, and monitor- impact avoidance, minimization, and mitigation ing functions are centralized in MIGA's Evalu- and links impacts and benefits/compensation to the ation Department, which is independent of the findings of the EA. Thus, MIGA has been apply- Guarantees Department. ing an integrated approach to the safeguard poli- @ MIGA's Environment Unit maintains frequent cies, positioning the EA process (and the EA contact with IFC's Environment Department policy) as a key integrator. In this approach, the at the staff level in order to share learning expe- safeguard policies become the norms for evaluat- riences and discuss emerging policy-related is- ing whether the proposed mitigation/compensation sues. measures identified in the project's Environmental S The application of the policies is integrated Impact Assessment (ETA) are reasonable and ac- through the EA process, which provides an ap- ceptable. propriate framework for assessing the " lo-no- harm" spirit and intent of the policies and for In its application of the safeguard policies, MIGA evaluating the development benefit achieved must ensure their applicability to private sector through the proposed project-specific impact projects. In particular, application of the policies mitigation programs. 188 Annex H - Multilateral Investment Guarantee Agency X In underwriting projects, MIGA fully consid- From an environmental and social perspective, the ers overall World Bank Group strategy, as pro- value of MIGA involvement in a project includes posed not only in the Country Assistance Strat- the following: egy but also in appropriate sector strategies (en- * MIGA's involvement provides a high degree of confidence that the project's design and imple- ergy, forestry, environment, and so on). Consis- prg tency of the proposed investment guarantee with mentation will be in accordance with relevant World Bank Group environmental guidelines these strategies is then discussed at the Board and application of the safeguard policies to level. project-specific private sector investments. * The Board itself has a critical role in concurring prThisi emetis p.aticulr citical wher ak This involvement iS particularly critical where with a decision to offer a guarantee, thereby serv- governmental agencies, rules, or regulatory ing as a final authoritative check on the consis- frameworks are lacking or ineffective. tency of MIGA's proposed action with World X MIGA's requirement for warranties and repre- Bank Group strategies. sentations of compliance, its ability to monitor performance, and its ability to cancel a contract If the project is expected to have significant ad- unilaterally or to deny a claim in the event of verse environmental or social impacts that are par- noncompliance add value to project implemen- ticularly sensitive, MIGA requires the sponsors to tation. carry out meaningful and timely consultations with directly affected local communities to discuss EVALUATION project-related environmental and social issues. MICAs evaluation program regularly selects Such consultations are particularly critical if the projects from the agency's portfolio and compares project requires resettlement or land acquisition the development effects that were initially expected involving vulnerable people.These consultations are with what actually happened. In the process of not only key components of "process," as required evaluating development effects, environmental and by the safeguard policies, but also provide outcomes social concerns play a major role. Ex post facto that may be used as measures of success in the evaluation of environmental performance is rated, implementation of the project and of compliance along with the other dimensions of development, with the safeguard policies, using MIGA's environmental guidelines and safe- guard policies as a benchmark for performance. This program, along with monitoring reports, site visits, Once aor projcths bev ent reviewed andcevluated bi and independent audits, is a valuable tool for track- MICA for its development effects, including envi- ing MIGA's contribution to development. ronmental and social soundness, MIGA prepares a report for Board discussion prior to providing po- litical risk insurance. Much of this report focuses STRATEGIC DIRECTIONS on the expected development effects of the pro- MIGAs role in facilitating appropriate foreign di- posed investment in the host country and the man- rect investment through its guarantee program and ner in which environmental and social issues have technical advisory services complements the devel- been addressed. opment roles of the IFC and the IBRD. In addi- 189 Making Sustainable Commitments - An Environment Strategy for the World Bank tion to ensuring that the investments it insures pro- gion in which MIGA has facilitated investment, vide development benefits to the host country and the overwhelming message that emerges from lo- local communities, MIGA seeks to support invest- cal communities during public consultations is the ments that provide significant environmental and keen desire for employment. Even in societies that social benefits. value traditional lifestyles, it is generally recognized that some forms of employment and income are Environmentally and socially sustainable develop- needed to maintain families and traditions intact. ment is not possible without individual opportuni- MIGAXs contribution is to facilitate environmen- ties for income and a sustainable livelihood. Ulti- tally and socially sound foreign investment that mately, the key weapon in the battle against pov- provides employment or the critical infrastructure crty is employment. In every country in every re- needed to encourage employment opportunities. 190 :r : Annex I The Environment Strategy - and the World Bank-GEF Program n the years since thc UN Conference on Environment and Development in 1992, the Global Environ- ment Facility (GEF) has emerged as a facilitator and a funding mechanism for integrating global con- cerns into the development process. After a three-year pilot phase, the GEF was restructured in 1994 to provide for universal membership with greater transparency and participation in its affairs and to serve as the financing mechanism for the global conventions on biodiversity and climate change. It also supports the objectives of the Convention to Combat Desertification, to the extent that they are impacted by actions under the other two conventions. In addition, the GEF has been designated to become the financing mechanism for the newly established Convention on Persistent Organic Pollutants. Together, the United Nations Development Programme (UNDP), the United Nations Environment Programme (UNEP), and the World Bank are serving as implementing agency for the GEF. (See World Bank 2000g for a detailed review of the World Bank's global environmental work program, including that for the GEF.) GEF assistance currently covers four focal areas: biodiversity, climate change, international waters, and the ozone layer. The Bank's GEF program is dominated by projects focused on biodiversity and climate change, which together account for more than 75 percent of World Bank-GEF grants. Over the past decade, the World Bank, as an implementing agency for the GEF, has committed close to $1.3 billion in grant funding to over 80 of its client countries for targeted global environmental objectives in 192 projects. These funds have catalyzed another $6.0 billion in cofunding, including $1.5 billion in funds from the World Bank Group (WBG). The demand for grant funding through the GEF is rising. The WBG's current pipeline of project concepts eligible for GEF consideration stands at an all-time high of close to 130 projects, excluding medium-size projects, for total estimated GEF funding of about $1.6 million. (Average annual GEF commitments for World Bank-GEF projects over the past five years amounted to $230 million.) Under these circumstances, it would be prudent for the World Bank to assume that demand from its client countries for GEF project 191 Making Sustainable Commitments - An Environment Strategy for the World Bank funding will continue to exceed the GEF resources The World Bank-GEF Program can play an im- available. The implication is that the further devel- portant role in implementing the objectivts of the opment of the World Bank's GEF program should Environment Strategy in four main ways: use available GEF funding more strategically, a It can provide a powerful extension o:f other matching the GEF's corporate priorities with op- World Bank instruments to help address the portunities for mainstreaming the global environ- quality of the regional and global commons. mental agenda and the GEF in the country assis- 0 It can generate local environmental benlefits in tance dialogue. the pursuit of global environmental benefits and through mobilization of associated funding. a It can offer modalities not readily available un- THE ROLE OF THE WORLD BANK- der conventional World Bank lending for en- GEF PROGRAM IN THE gaging nongovernmental organization (NGOs) ENVIRONMENT STRATEGY and other parts of civil society in the country Against this background, how can the World Bank- dialogue on environmental management. GEF program effectively support the objectives of a It can support the piloting of innovative meth- the Environment Strategy? What opportunities are ods of sustainable natural resource manag,ement there to further strengthen the program's contri- with local-global environmental links. bution to these objectives? And how can these op- portunities be pursued through the design and Extending the Bank's ability to support implementation of the Environment Strategy it- global and regional issues self? The Bank's lending and nonlending assistance for national sustainable development can gener ate im- The Bank's Environment Strategy emphasizes the portant and complementary regional and global linkages between environmental conditions and environmental benefits. For example, support for human welfare, in particular, the health, livelihoods, energy pricing reforms will reduce greenhouse gas and vulnerability of the poor. It acknowledges that emissions through more efficient energy use and while environmental conditions that affect human incentives for renewable energy development. For- welfare ultimately manifest themselves locally, their estry sector development based on policy and in- origins extend to the regional and global levels. stitutional reform will contribute to the conserva- Degradation of transboundary ecosystems, whether tion and sustainable use of biodiversity in rmpor- terrestrial or aquatic, has important local economic tant ways. and social impacts. Available projections show that local costs to the Bank's client countries of contin- Going beyond such complementary opportunities, ued deterioration of the global commons are likely however, will require compensation from the glo- to be substantial.' Hence, the preservation of the bal community, which will in effect raise the rate of regional and global commons has to be an explicit return on country investments. International re- objective of a strategy for promoting sustainable source transfers have to perform that function as development and poverty reduction over the me- long as the markets for trading global environmen- dium to long term. tal services are "missing." The GEF was established 192 Annex I- The Environment Strategy and the World Bank-GEF Program to do just that-to underwrite and catalyze resource In such cases, GEF project funding can be an im- transfers to meet the costs of actions having global portant way of helping to directly support health environmental objectives that would not be pur- and local livelihood benefits and reduce losses of sued in the absence of that "global premium." As a ecosystem services. Such local benefits are fre- GEF implementing agency, the World Bank re- quently magnified by the GEF's ability to leverage mains committed to effectuating such transfers client country and donor investment decisions. whenever they are consistent with the country as- sistance dialogue. The energy sector provides another example of glo- bal- local linkages. Access to $100 million of GEF At the regional level, riparian countries linked to resources to help accelerate energy conservation and transboundary terrestrial or aquatic ecosystems are renewable energy development was an important unable to capture the full value of the environmen- consideration in China's decision to borrow regu- tal services that they can potentially create. This lar Bank resources for these purposes. The World constrains action to address environmental degra- Bank-GEF Fuel Efficient Boilers Project is trans- dation of such threatened ecosystems, on which ferring clean-coal boiler technologies to China, important segments of the world's poor depend for which will improve air quality and people's health their health and livelihoods. With access to GEF in all the major industrial areas while reducing car- resources, the NVorld Bank is able to help riparian bon emissions (see box 3.4 in chapter 3).The World countries and stakeholders agree on and act on re- Bank-GEE Second Beijing Environment Project, gional environmental priorities. For example, the which is designed to convert at least 2,500 of the Bank works with the GEF and other partners to city's coal-fired boilers to clean natural gas, is ex- support the development and implementation of pected to reduce carbon emissions by 2.5 million regional conventions or agreements for the man- tons per year, sulfur emissions by 800,000 tons per agement of international river basins, shared lakes, year, and particulate emissions by 550,000 tons per regional seas, and shared groundwater aquifers. year over 20 years. Leveraging actions for improved local Facilitating the engagement of NGOs and environmental conditions civil society GEF-funded activities, while justified with respect One of the most important developments of the to expected global environmental benefits, also gen- past two decades has been the emergence of a strong erate important benefits for the local environment NGO movement. NGOs today represent a power- and economy. For example, domestic and global ful force providing technical assistance and policy environmental benefits frequently converge in the advice to governments and societies all over the conservation and sustainable use of biodiversity and world. The Bank has strengthened its capacity to their ecosystems. Thus, in India, a blend of GEF engage NGOs effectively, but until recently it has and International Development Association (IDA) lacked meaningful tools to support them directly. resources is facilitating a change in the manage- ment of protected areas, encouraging foresters to The GEF's program for medium-size projects has work with local communities and seek solutions that provided a way forward.2 There are now 45 such address both conservation and community needs. projects in 29 countries under implementation, in- 193 Making Sustainable Commitments - An Environment Strategy for the World Bank volving $34 million in GEF funding, and another BOX 1.1 50 project proposals at various stages of prepara- World Bank-GEF projects demonstrate tion. Most of these projects effectively involve innovative approaches to financing sustainable natural resource management NGOs in project preparation or implementation with global and local benefits and often support highly innovative approaches to tRecovering the value of ecosystem servib,es. The Costa Rica Ecomarkets project exemplifies how establishment of a new communal reserve to be national and global environmental benefits can managed by indigenous people in Vilcabamba, Peru; be effectively channeled to local comriunities. sustainable biodiversity management in the agri- Small landowners receive payment for tle envi- cultural landscape and mountain meadows of the ronmental services provided in their land.s when forest cover is maintained. The services include Slovak Republic; and incentives to farmers in El water quality (to be recovered from water utili- Salvador to maintain traditional systems of ties), scenic beauty (to be recovered from the biodiversity-friendly coffee production under for- tourism sector), carbon sequestration (Io be re- est cover. covered from carbon certificates), and biodiversity conservation (paid by the 3EF on an incremental cost basis). Promoting innovative solutions to Trust funds for financing sustainability One of financial sustainability of ecosystem the greatest challenges for conservation is how to cover the recurrent costs of parks and pro- The GEF operational strategy puts a premium on tected areas. Access to GEF resources has en- finding new and innovative ways of supporting abled the World Bank to help several country management practices for natural resources that are partners establish national trust funds. Trust funds in Bolivia, Mexico, and Peru and n East- environmentally friendly and globally replicable. In em Europe (for the Transcarpathian Mcintains) this context, the Bank has started to demonstrate are helping to support protected area networks. the effective use of GEF resources to promote the In Uganda, the Bwindi Trust Fund prov des re- financial sustainabilityofglobally (and locally) sus- sources for national park managerient to strengthen protection of gorilla populations. tainable natural resource management practices (see About 60 percent of the income is usec to pro- box 1.1). vide sustainable livelihoods for local people as an alternative to agricultural encroachrrent into the park. TOWARD MORE STRATEGIC USE OF WORLD BANK-GEF RESOURCES emissions in ways that improve local air quality The quality of life is closely linked to the quality of while meeting energy demands. Clearly, some GEF growth and the quality of the regional and global funding opportunities, because of their design and commons. Poverty alleviation Wil not be sustain- ablemins th verlon aru viatin ifglo eostbemsscntainue choice of technologies, have greater potential for able in the long run if global ecosystems continue to deteriorate. From this perspective, all GEE such synergy. Focusing on these opportunities will projects can be said to contribute to environmen- help to maximize the impact of the World Bank- tally sustainable development and poverty reduc- GEF program. Such targeting is particularly im- tion. GEF-eligible interventions can also help more portant when demand from client countries for directly-for example, by reducing greenhouse gas access to GEF resources exceeds available funds. 194 Annex / - The Environment Strategy and the World Bank-GEF Program Strategic priorities for the World Bank- schools yields direct economic and social ben- GEF program efits to rural residents. It also results in improved Biodiversity. GEF grants aimed at the conservation indoor air quality when it replaces traditional and sustainable use of biodiversity have already biomass fuels. started to evolve from their earlier emphasis on free- R Management reforms, energy efficiency im- standing protected area management projects. The provements, and fuel switching for municipal direction is toward landscape-focused interventions heating systems (in northern climates) can ben- with strong links to rural livelihood (see, for ex- efit the urban poor economically and reduce ur- ample, box A.5 in annex A). Moving further in this ban and indoor air pollution while improving direction would involve setting priorities that thermal efficiency and reducing greenhouse gas would: emissions. X Generate multiple benefits (social, ecological, C In developing countries, the transport sector is and economic) and have strong and explicit responsible for a significant and generally grow- health, livelihood, or vulnerability linkages ing share of energy consumption and urban air X Build in protection and sustainable use of eco- pollution. Measures to reduce energy intensity system services in mainstreaming develop- in this sector-such as land-use planning, traf- ment-for example by conserving wetlands for fic management, promotion of nonmotorized flood control or incorporating an ecosystem view transport, and more efficient technologies-can into rural infrastructure development have human health and livelihood benefits, es- 2 Involve protected area management within a pecially to the poor, in addition to reducing broader landscape context supporting main- greenhouse gas emissions. stream rural goals related to poverty reduction, X Forest regeneration through community partici- watershed management, and dryland and forest pation can offer substantial economic benefits management. to millions of poor households, while increas- ing forest cover, sequestering carbon, and reduc- Climate change. The close links between reductions ing pressures on natural forests. in greenhouse gas emissions and improvements in local air quality are at the center of the Bank's Cli- Transboundary water resource management. Past mate Change Strategy (see annex F), which em- World Bank-GEF projects have generally been rela- phasizes the need for synergy with national eco- tively weakly linked to World Bank assistance for nomic and environmental concerns in all World rural development and watershed management in Bank-GEF climate change interventions. The river or inland-sea basins. The importance of such implementation of the Environment Strategy links needs to be recognized in project preparation should therefore prioritize GEF assistance in the and design. In some cases, GEF assistance for re- following areas. gional management ofwater utilization may be di- f Renewable energy is often the least-cost option rectly linked to national sustainable development for providing electricity and other energy forms goals, as in the case of the Mekong River and Aral in rural areas. Improving energy access for house- Sea projects. In other cases, GEF assistance for hold lighting, water pumping, grain processing, management of forests and agricultural lands or for small cottage industry, rural health centers, and the control of point-source pollution is a means of 195 Making Sustainable Commitments - An Environment Strategy for the World Bank managing the quality of shared water resources, to pursue a client dialogue that integrates global which has direct links to rural livelihood and health environmental concerns within national sustainable in riparian communities. development programs. Most important, little progress will be made unless there is a readiness Desert fication and land degradation. By supporting and capacity on the client side to address global enhanced carbon management or conservation and environmental concerns and their links to national sustainable use of biodiversity, World Bank-GEF development objectives and priorities. funding can contribute positively to more sustain- able land management, including control of land Capacity building degradation and desertification. Local environmen- tal and developmental benefits from such interven- Capacitynamong Bankwstaffnandemanageen to understand the two-way linkage between global tions are expected to include improved health, nu- environmental concerns and national su:;tainable trition, and food security, development and poverty reduction needs to be strengthened. This entails increasing the under- The mainstreaming challenge standing of the technical issues involved (climate Global environmental issues and the role of the change, loss of biodiversity and ecosystems, and GEF can never be of equal importance to all coun- transboundary water resource issues), their effect tries. Clearly, however, there are circumstances in on the options for national sustainable develop- which global environmcntal issues and GEF assis- mcnt, and the role of the GEF in helping to ad- tance would be expected to play an important role. dress them. In these countries, the successful pursuit of the above strategic priorities depends on further To achieve this, action is required on three fronts. progress in mainstreaming the global environment n An enhanced environment knowledge manage- and the GEF in the country assistance dialogue. ment system will help to broaden and deepen At the level of country operations, such awarenessamongstaffandmanagementofglo- mainstreaming would be demonstrated by an ac- bal environmental concerns and their links to knowledgment of the Bank's role in assisting the local economic and environmental issues. country in implementing its obligations under the as Efforts must be stepped up to develop and dis- global environmental conventions and in using seminate the necessary analytical tools to mea- GEF grant resources for such purposes in the coun- sure the value of environmental services and to try dialogue. Where this occurs, we would also ex- analyze the effectiveness of options to rnitigate pect to find GEF funding opportunities more environmental degradation, including those re- closely linked to and blended with upstream IDA/ lated to carbon mitigation and sequestration. TBRD project identification. a The application of these tools in relevant sector work and environmental assessments rnust be Recently completed Country Assistance Strategies promoted. This means addressing conservation (CASs) do not suggest that such expectations are and sustainable use ofbiodiversity in forestry and being met. Further progress will depend on the water sector work and examining options for re- development of in-house capacity and incentives duction of carbon dioxide emissions in local 196 Annex I - The Environment Strategy and the World Bank-GEF Program pollution studies or energy-environment reviews. * Senior management should urge regional man- These actions need to form part of the Bank's agement to adopt strategic objectives for their overall environmental training program. GEF programs, including use of internal eligi- bility criteria for the allocation of GEF funds. Such strengthened in-house capacity needs to be Regional GEF strategies should form part of the employed to build local capacity 'among our client regional environment strategies and their annual country institutions. This calls for technical train- business plans. The latter would set out annual ing, strengthening of administrative and manage- GEF program targets; accountability would rest rial functions in key agencies, and support for net- with country directors. Such targets would in working of professionals within and between coun- turn be reflected in the region's internal work tries. The objective should be to help senior offi- program agreements (WPAs) and results agree- cials, planners, and technicians, such as those in ments. * Results agreements and performance evaluations agricultural or forestry ministries or agencies, rec- need to be used systematically as important tools ognize the importance of conservation and of sus- for managers to manage and reward staff for tamnable use of biodiversity and carbon sequestra- implementing global environmental and GEF tion to sustainable production, and to enable en- targets in regfional environment strategies and ergy sector planners and engineers to see the op- their associated annual business plans. portunities to use climate-friendly technology to °' * Managing directors, in their regular meetings reach their goal of local pollution management. with regional management, should systemati- cally follow up on progress in the implementa- A supportive incentive framework tion of annual business plans for regional envi- Building effective capacity to address the global ronmental strategies, including the GEF pro- environment and GEF in the country assistance gram. The Environment Sector Board should annually assess outcomes of the annual business dialogue requires a supportive framework of ac- plans, including their global environmental and countability and incentives, as outlined in the main l e ° GEF components, and provide comments to text of this report. Within this framework, the fol- lowing actions would help to specifically address Regions on proposed plans. the challenge of mainstreaming the global environ- The Bank should move toward a competitive internal process for allocation of available GEF ment and GEF: resources for project funding-between regions *I World Bank units and staff responsible for the as well as within regions-that promotes a GEF development of sectoral strategies for forestry, portfolio which meets strategic priorities. water, energy, and rural development should be a Highly publicized awards for environmental ex- held accountable for addressing links between cellence should include special awards for best relevant global environmental concerns, the ob- performance in mainstreaming global environ- jectives of the strategies, and the role of inter- mental issues in country dialogue (at the coun- national financing mechanisms. Relevant bod- try director level) and in mainstreaming GEF ies are the GEF, the Montreal Protocol (MP), in IDA/IBRD projects (at the task manager and the Prototype Carbon Fund (PCF). level). 197 Making Sustainable Commitments - An Environment Strategy for the World Bank The Bank should continue the process of stream- (IPCC 2001), adverse climate-change impacts lining and mainstreaming GEF into Bank pro- would amount to losses of at least a few percent cessing and portfolio management; reduce trans- of global gross domestic product (GDP); the ef- action costs by building on current initiatives to fects of climate change, in terms of loss of life promote a more programmatic allocation of and relative effects on investment and the GEF resources over longer time periods; ensure economy, are expected to be greatest il devel- that the World Bank's new accounting, budget- oping countries. ing, and operations monitoring systems fully cover all World Bank-GEF products and needs; 2. The GEF medium-size grant program (for and work with the GEF Council to determine amounts up to $1 million) offers a streamlined how the external review and approval cycle can and fast-tracked way of engaging all elements be further simplified and streamlined. of civil society in the management of lo. al envi- ronment resources linked to generation of glo- NOTES bal benefits. 1. According to the ThirdAssessment Report of the Intergovernmental Panel on Climate Change 198 ,~~~~~~~~~ - - - - -- - e- -- - - -........................ - -4 Annex] / / Consultation Process and Feedback I n early May 2000, the World Bank initiated a broad-based consultation on the emerging Environment Strategy, based on the progress report and discussion draft, Toward an Environment Strategy for the World Bank Group, and on the six draft regional environment strategies. (Summaries of the regional strategies can be found in annex A; the full documents are available on the Internet at .) BACKGROUND The discussion draft Toward an Environment Strategyfor the World Bank Group outlined key development and environment challenges facing the Bank's client countries. It summarized some of the lessons learned by the Bank and its clients in the past and laid out a framework and key principles for Bank assistance in addressing environmental issues. The report underlined the need to link the environmental agenda more closely with development goals, particularly poverty reduction. It identified three key development objec- tives: improving environmental factors that adversely affect people's health; enhancing people's livelihoods through sustainable natural resource management; and reducing people's vulnerability to environmental risks and natural disasters. The report also identified three areas of focus for Bank assistance: integrating environmental considerations into strategies and actions for poverty reduction; helping to establish condi- tions for sustainable private sector-led growth; and addressing regional and global environmental chal- lenges. The World Bank initiated the consultation process to hone the conceptual framework and regional strate- gies and to improve our mutual understanding of the developmental and environmental challenges under- lying the proposed framework. We also sought to identify new ways of working with our development and environment partners to reverse poverty and environmental degradation. 199 Making Sustainable Commitments - An Environment Strategy for the World Bank THE CONSULTATION PROCESS ings in East Asia and in Central, Eastern, and The consultation consisted of workshops with cli- Western Europe; and to the governments of ent and donor countries, including representatives Canada, Germany, and the United Kingdom for of government, civil society, the private sector, and their support of multistakeholder and donor meet- academia; a dialogue with several of our multilat- ings within their countries. Detailed reports of the eral and bilateral partners; meetings with interna- consultation meetings and outcomes, mostly pre- tional nongovernmental organizations (NGOs); pared by independent facilitators or record-keep- and a broad-based information dissemination and ers, are available on the Environment Strategy feedback process through e-mail and the Internet. Consultation Website, . Between May 2000 andJune 2001, over 30 formal and informal meetings or working sessions took A dedicated Environment Strategy Consultation place in Sub-Saharan Africa, Latin America and link on the World BankWebsite contained the dis- the Caribbean (LAC), the Middle East and North cussion draft, background papers, schedules, up- Africa (MNA), South Asia, East Asia and the Pa- dates, links to open discussion spaces, e-mail con- cific (EAP), Europe,Japan, and North America (see tacts, and a questionnaire. Visitors to the site could map in figure J.1). Table J.1 at the end of this an- download strategy documents, access various rel- nex summarizes the schedule for the formal con- evant links, subscribe to an electronic newsletter, sultation meetings. The Bank is grateful to the gov- send comments directly to the Environment Strat- ernment of Norway for its financial support to the egy team, and respond to the Environment Strat- African, Latin American, and South Asian con- egy Questionnaire. Box J.1 summarizes thc volume sultations; to the governments of Japan, Sweden, and nature of the site traffic and the countries from and Switzerland for their support of regional meet- which queries and comments were received. Box Figure J.1 Strategy consultations map Eastern Western ;EropeI North AmercEuoeCnaIsa East Asia/ Paific frca 200 Annex J - Consultation Process and Feedback J.2 describes the feedback received through the were some differences among participants. Con- questionnaire. versations in industrial countries tended to focus on wide-ranging concepts and global issues, whereas The value of the consultations was inestimable. discussions in client countries tended to empha- They provided a forum for face-to-face discussions, size local environmental concerns and concrete promoted greater dissemination of information implementation issues. In some meetings, particu- about the issues, and have led to a better under- larly in donor countries, a number of participants standing among the participants of our mutual con- regarded growth itself as antithetical to environ- cerns. Feedback was animated, thoughtful, and al- mental sustainability. In others, particularly in cli- ways challenging. Overall, there was a consensus ent countries, the general view was that environ- that the environmental issues we are confronting mental activities must be integrated with growth worldwide are urgent and that this urgency should planning. Overall, the discussions could be grouped more visibly inform the work of the Bank and the into three general areas of focus: the development Strategy. context; the role and past performance of the Bank; and specific implementation issues concerning the FEEDBACK Bank's operations and environmental assistance. In general, there was broad support among those who gave us feedback for the conceptual frame- work outlined in the discussion draft, although there Most participants agreed that environmental ob- jectives need to be systematically linked with de- BOX J.1 velopment goals, particularly poverty reduction. The Environment Strategy consultation discussion draft referred to a broad definition of through the Internet poverty that encompassed dimensions of opportu- Between August 2000 and the end of January nity, security, and empowerment, as defined in World 2001, the Environment Strategy Consultation DevelopmentReport2000/01. The draft recognized Website received nearly 35,000 download re- that the sustainable use of natural resources is fun- quests for various papers. Almost 15,000 people downloaded the Strategy progress reporUconsul- damental to long-term reduction of poverty. There tation draft, and more than 2,000 people from 98 was a common view among participants, however, countries registered by e-mail to receive future that poverty reduction strategies, a key instrument updates on the Strategy. In addition to the Bank's for addressing poverty, have had a focus that is too Environment Strategy Consultation Website, the LAO ad theEurop and entra Asia(ECA) narrow and short-term and have failed to adequately LAC and the Europe and Central Asia (ECA) Regions organized separate but linked online identify the environmental linkages. Many partici- discussions that were regionally focused. By pants in both client and donor meetings empha- November 2000, the LAO Website had logged sized that the concept of sustainable development more than 2,000 visitors, had tapped a network of over 100 NGOs, and had received online com- ments from 18 countries. The Environment participants in industrial countries were concerned website will continue to be a venue for future dis- that the discussion draft subsumed environmental cussions on strategic directions for the Bank's issues into poverty alleviation, and participants in environmental efforts. workshops in Africa and in Central and Eastern 201 Making Sustainable Commitments - An Environment Strategy for the World Bank BOX J.2 Results of an Environment Strategy questionnaire As part of the consultation process, more than 230 representatives of governments, NGOs, academia, and other members of civil society, with a wide range of geographic, institutional, and professional backgrounds, were surveyed through a multiple-choice questionnaire to collect standardized feed- back on the key aspects of the proposed strategic framework and regional strategies. The qJestion- naire was available online on the Environment Strategy Consultation Website and was distributed at consultation meetings and workshops. Because the respondent group was not a representative 3ample, the results are for illustrative purposes only. The responses indicated broad support for the proposed strategy. Across all regions, about 85 per- cent of the respondents agreed with or strongly agreed with the concept of linking enviro imental issues with poverty reduction, and the two largest groups of respondents-NGOs and the govern- ment-did not differ significantly on this issue. Support was similarly strong-about 85 percent-for the proposed development objectives: improving health, securing livelihoods, and protecting people from vulnerability to natural disasters. The strongest dissent, up to 15 percent, came from espon- dents in ECA, while the strongest support-100 percent-came from East Africa. Regional affiliation of respondents Organizational affiliation of respondents East Asia Academic & Pacific Eastern Europe institution % mt&CentralAsia A2so,oa ~ ~ ~ ~ 18 21%29 :e6- Suo-Savarand Government Africa 37c Private fiddle East Sout ~~~~~~~~~&North Africa Asia 29s a 2% - NGO Uul~~~~~~~~tilateral Latin p menct prcenization & Caribbean the 6% 21% 6 More varied were views on the role of the World Bank in developing markets for global enviror mental goods, such as carbon credits or payments for ecosystem services. Overall, about 72 percent of the respondents thought that the Bank should have a role in this area, while about 1s0 percent disagreed. There were strong regional differences, however. In EAP and MNA, close to 40 percent of respon- dents were indifferent to or opposed to this role, and in southern Africa, 25 percent were against the Bank's assuming a role in developing markets for global environmental goods. The proposed regional priorities identified in the strategy were supported by about 74 percert of the respondents. The highest agreement was in EAP (83 percent); the lowest was in southern Africa (64 percent). Regarding the Bank's effectiveness in the regions, the highest marks were given t2 assis- tance in water resource management, while the Bank's role in forestry and land-use management received low marks. Views on the effectiveness of different instruments varied across regiois. For example, in MNA lending was considered more effective than nonlending services, while in southern Africa and LAC analytical work, information sharing, and technical assistance scored the highest. Overall, only 38 percent of the respondents said that the environmental performance of Bank projects was satisfactory; 23 percent said that it was unsatisfactory. 202 Annex J - Consultation Process and Feedback Europe felt strongly that the environmental objec- ronmental responsibility and make larger financial tives should be discussed in the context of quality commitments to aid developing nations in their of growth, rather than poverty alleviation alone. efforts to both develop and foster sound environ- Although poverty was acknowledged as a perva- mental management. sive problem, environmentally sustainable develop- ment was viewed as the key to resolving both envi- There were clear regional differences on the role ronmental and poverty concerns. participants felt the Bank was best positioned to play. For example, Central European countries Some participants, particularly from donor coun- wanted the Bank to play more of a knowledge bank tries, questioned the basic framework of the Strat- role; participants in Russia and the Western newly egy. They challenged the World Bank's emphasis independent states (NIS) emphasized the advisory on long-standing growth-based models of devel- role of the Bank on policy; and participants in Cen- opment, arguing that new models founded on eco- tral Asia stressed the Bank's financial role. logical principles were needed. The World Bank's stress on markets and its perceived reliance on the A number of those who provided feedback wanted ability of the private sector to address environmen- the World Banks Environment Strategy to address tal challenges were criticized. In addition, many felt in depth a very broad range of development issues the Strategy should more clearly address the links in which, they argued, the Bank played a critical between environmental quality, security, and con- role, such as trade, globalization, population, bio- flict, as well as the relationship between better en- safety, governance, climate change, food security, vironmental management and the role of civil so- and private sector accountability. Many of these ciety, equity, empowerment, and good governance. issues have important linkages to environmental In many of the meetings, there was consensus that trends and management. Some of these issues, such how people view and utilize their environment is driven by much more than purely economic factors a and that environmental issues cannot be separated been incorporated into the Strategy. Others, such from social considerations. Finally, participants as food security and private sector accountability, advocated that the gravity of current environmen- are being addressed, or will be addressed, through tal conditions be more clearly stated in the Strat- other documents, sectoral strategies, or programs egy and that the links between local and global en- within the Bank. In particular, in 2002, the World vironmental issues be emphasized. Development Report will comprehensively explore the broad interlinkages of sustainable development. Role of the Bank Consultation participants requested that the Bank Implementation issues acknowledge and strengthen its leading position as There was a general call in the consultations for a global role model, facilitator, and catalyst. Many the World Bank to make changes within its own emphasized that the World Bank had a responsi- operations in several critical areas: bility to set high international benchmarks for good A Mandate a longer time-frame for policy analy- environmental practice. Some urged the Bank to sis, planning, and assistance programs in order lobby industrial countries to improve their envi- to better internalize the long-term impacts of 203 Making Sustainable Commitments - An Environment Strategy for the World Bank development decisions on the social and physi- egy will be systematically monitored, and feedback cal environment will be provided to revisit and update its emphasis &i Support Strategic Environmental Assessments on priorities. and other in-depth, cross-sectoral environmen- tal analyses early in country-policy dialogues In response to requests that the Strategy be framed 5 Support increased transparency and accountabil- more in the context of sustainable development, we ity on the part of both borrowers and the World have put greater emphasis on discussing environ- Bank by instituting regular reporting to exter- mental challenges within a sustainable development nal stakeholders, using clear benchmarks or per- framework. Development goals and key areas of formance indicators. assistance are integrated under three major objec- tives: quality of life, quality of growth, and quality Much of the feedback on implementation focused of the regional and global commons. on the need for the Bank to engage in more par- ticipatory and community-based approaches to In the action plan, the Strategy reflects several of development and to pay more attention to in-coun- the main recommendations of the meetings: try capacity building at all administrative levels. a The Strategy emphasizes the need to un dertake Many asked that the Bank find mechanisms to environmental analysis earlier in the policy dia- implement agreements with local governments and l a logue and to facilitate cross-sectoral analysis. A nongovernmental agencies and to support more * ~~~~~~~~~~~~commitment has been made to apply Strategic bottom-up initiatives. Environmental Assessments (SEAs) and coun- try environment profiles to aid this process. RESPONSE TO THE CONSULTATIONS These analytical tools will be applied more sys- The consultations have helped shape the Strategy's tematically to Bank core activities and will help presentation of the key issues and its action plan. integrate longer-term spatial, ecological, and Some of the issues that were raised within the con- social concerns. sultations, although gratefully acknowledged, were E The Strategy emphasizes that strengthening not integrated into the Strategy. In some cases, they environmental management and safeguard ca- were too broad or went beyond the reach of the pacities is a chief priority of the World Bank. It Strategy at this time, although they are recognized makes a commitment to in-country training dur- as indeed critical. Other issues are or will be incor- ing the process of carrying-out Environmental porated into the World Bank's work program, but Assessments and SEAs, in the couirse of the foundations within the Bank are not yet firm multistakeholder dialogues associated with enough for the Strategy to present an explicit ac- project-related work, and in the preparation of tion plan for them. The Environment team in the Country Assistance Strategies (CASs), Poverty Bank felt it was essential that the Strategy's dis- Reduction Strategy Papers (PRSPs), and other cussion and action plan be focused on a few spe- policy related work. cific priorities and recommendations, to heighten E The Strategy supports the linkage of local and the likelihood of short- and medium-term success regional/global concerns by committing Bank in implementation. Implementation of the Strat- staff to identifying in their analytical work the 204 Annex J - Consultation Process and Feedback overlaps between environmental goals at the lo- being identified by which progress can be cal, regional, and global levcls. It also commits measured. the Bank to helping client countries build their capacity to benefit from trade in local and glo- The World Bank's Environment Strategy-both as bal environmental goods and services and to a document and as an action plan-must be viewed participate in regional trade with global benefits. as part of an iterative process. The intent of the IN The Strategy makes a commitment to greater Strategy is not to bring to closure any of the issues transparency and accountability regarding the it addresses, and especially not to cut short the gen- World Bank's environmental performance. It eral debate under way among stakeholders on de- commits the World Bank to supporting the de- velopment directions. To promote continued dia- velopment and dissemination of environmental logue, the Strategy proposes a framework for re- and sustainability indicators in client countries, visiting, evaluating, and adjusting progress and for and it provides for an Environmental Perfor- maintaining ongoing communication with clients mance Reporting unit within the Banks Envi- and development partners, including governments ronment Department for the purpose of report- and civil society, on the World Bank's role, perfor- ing to both internal and external clients on mance, and priorities. the Bank's performance. Clear benchmarks are Table J.1 World Bank Environment Strategy consultation schedule Date I Venue Participants Latin America and Caribbean September 21-22 Cartagena, Colombia Govt., NGOs, private sector (PS), academia (Acad.) October 16-17 Rio de Janeiro. Brazil Govt., NGOs, PS, Acad. November 7-8 San Jose, Costa Rica Govt., NGOs, PS, Acad. Sub-Saharan Africa September 13-14 Nairobi, Kenya Govt., NGOs, PS, Acad. October 10-11 Pretoria, South Africa Govt., NGOs, PS, Acad. October 23-24 Ouagadougou, Burkina Faso Govt., NGOs, PS, Acad. December 13-14 Paris, France African Govt., NGOs, Acad. Europe and Central Asia September 5-7 Berlin and Bonn, Germany Govt., NGOs, PS, Acad. September 1112 London, United Kingdom Govt., NGOs, PS, Acad. September 14 Amsterdam, the Netherlands Govemment September 18-19 Moscow, Russia Govt., NGOs, PS, Acad. September 21-22 Tbilisi, Georgia Govt., NGOs, Acad. October 14-16 Szentendre, Hungary Govt., NGOs, PS May 14, 2001 Bern, Switzerland Govt., NGOs, Private Sector South Asia October 4 Pakistan Govemment October 9-10 Pakistan Govt., PS, NGOs, Acad., multi- lateral agencies October 14-16 Dhaka, Bangladesh NGOs October 17-18 Delhi, India Government November 18-20 Colombo, Sri Lanka Govt., NGOs, international donor agencies (continued) 205 Making Sustainable Commitments - An Environment Strategy for the World Bank Table J.1 World Bank Environment Strategy consultation schedule (continued) Date Venue Participants EastAsia May 22-27, 2000 | Tokyo, Japan Govt., NGOs, PS October 4-5 Bangkok, Thailand Governments, NGOs February 23, 2001 Beijing, China Govt., NGOs Middle East and North Africa October 9-10 Amman, Jordan Govemments, NGOs November 19-21 Amman, Jordan Govt., NGOs, PS, international donor agencies North America November 20 San Francisco, CA NGOs, PS January 18 Washington, DC Govemment March 22-23 Ottawa, Canada Govt., NGOs, PS Global May 8, 2001 | Washington, DC (GEF/NGO) NGOs May 9, 2001 Washington, DC (GEF Council) Governments June 4-5, 2001 J Washington, DC (OEDIWB) Govts., NGOs, PS 206 Annex K / / Selected Partnerships S upporting sustainable development is a complex task. Joiningforces with develop- ment partners, civil society, and the business community through effective partner- ships can improve project performance, policy dialogue, and development outcome. The Bank has been engaged in a wide range ofpartnerships in the environment area during the pastyears. This annex illustrates some of these partnerships. 207 Table K.1 Selected partnerships' co Scopel Partnership VPU Start End Overall objective Partners and donors Africa Water Resources Regional/ 1997 On- Assist countries to build capacity in the process of formulating and Canada (CIDA), France, Germany (GTZ), Japan, Netherlands Management Initiative AFR going implementing national water resource management (NRM) (BNPP), Norway, Sweden (SIDA), Switzerland, UK (DFID), US strategies (USAID), UNDP, UNEP, FAO, IUCN, AfDB, Development Bank of Facilitate collaboration among riparian states Southern Africa (DBSA) Enhance ongoing multicountry efforts for joint development of scarce water resources Alliance for Forest Global/ 1999 2005 Promote forest conservation and the adoption of international best BMZ, BNPP, NORAD, WWF, other NGOs Conservation and ESSD practices in forest management Sustainable Use Critical Ecosystems Global/ 2000 2005 Safeguard the world's threatened biological hotspots in developing Conservation International (CI), GEF, international and local NGOs, Partnership Fund ESSD countries by enhancing local livelihoods through improved NRM local community groups, other donors Forest Market Global/ 1998 On- Promote dialogue and pilot activities to help turn market forces DGIF, Forest Trends, Netherlands, SDC, UK (DFID), US (State Transformation Initiative ESSD going toward more forest-friendly practices Department, in discussion) Global Environment Facility Global/ 1991 Long Forge international cooperation and finance actions to address foai FAO, IFAD, IFC, regional development banks, UNDP, ENEP, UNEP, (GEF) ESSD term critical threats to the global environment: biodiversity loss, climate UNIDO, NGOs, global environmental convention secretariats change, degradation of international waters, and ozone depletion Global Mechanism to Global/ 2001 On- Focus attention, resources, and knowledge on combating Secretariat of the CCD, FAO, GEF, IFAD, Islamic Development Bank, Combat Desertification ESSD going desertification by mobilizing and channeling financial resources to other regional development banks, UNDP, UNEP increase financial effectiveness and ensure a holistic and equitable approach to resource distribution Integrated Land-Water Regional/ 2001 On- Develop, implement, and mainstream a coordinated and integrated AfDB, GEF, GM, UNDP, UNEP Management Action Program AFR going action program to mobilize resources from the GEF, the for Africa Implementing Agencies and other partners to address issues of land and water degradation Identify and promote the development of GEF-eligible projects Interagency Task Force on Global/ 1998 On- Support international policy dialogue on forests, coordinate DGIF, Finland, Germany (GTZ), Japan (JICA), UK (DFID), SDC, and Forests ESSD going interagency work, and promote outreach beyond the UN system. others Encourage a global dialogue on forests and country-level coordination through the support of national forest programs 1. For definitions of the abbreviations used in this Annex, see the Abbreviations and Acronyms section at the front of the book. Scope/ Partnership VPU Start End Overall objective Partners and donors International Coral Reefs Global/ 1995 On- Promote the sustainable use and conservation of coral reefs for Australia, France, Sweden, UK, US Initiative ESSD going future generations GEF, IUCN, UNEP, UNESCO/IOC, UNDP Assess the impact of climate change on coral reefs Managing the Environment Regional/ 1996 On- Empower local authorities and communities for better European Commission (EC), Norway, Sweden Locally in Sub Saharan Africa AFR going environmental planning and management, with an emphasis on benefiting the poor and using knowledge management as the primary tool Mediterranean Environment Regional/ 1990 On- Assist 15 countries with a common Mediterranean coastline to Canada, EC, European Investment Bank (EIB), Finland, Italy, Japan, Technical Assistance MNA going strengthen environmental policy, regulatory and institutional Luxembourg, Switzerland, UNDP, and others Program frameworks, and environmental management capacity Develop projects and mobilize resources for environmental improvement Mesoamerican Biological Regional/ 1997 On- Align conservation and development interests, bolster protected Denmark (DANIDA), Germany (GTZ), US (USAID), UNDP, Corridor LCR going area and buffer zone management, and, through improved foundations, and NGO's stewardship of private and tribal lands that link parks and reserves, establish greenways and corridors Millennium Ecosystem Global/ 2000 2004 Assess scientifically how world ecosystem changes will affect the GEF; the Packard, Rockefeller, and Turner Foundations; secretariats Assessment ESSD ability to meet human demands for food, potable water, health, of global environmental conventions (BCD, CCD, and Ramsar); FAO; biodiversity, and other ecosystem goods and services Norway; UNDP; UNEP; UNESCO; WRI; other environmental NGOs; and the international scientific community Multilateral Fund for Global/ 1991 Medium Assist developing country parties to the Montreal Protocol whose UNDP, UNEP, UNIDO, and the scientific and technical community via Implementation of Montreal ESSD term annual per capita consumption and production of ozone depleting the OORG Protocol substances (ODS) is less than 0.3 killogram to comply with the control measures of the protocol National Strategy Study Global/ 1998 On- Assist interested host country govemments to assess their role in Australia (AusAID), Finland, Germany (GTZ), Switzerland (SECO) Program ESSD going the Clean Development Mechanism (CDM), identify potential investment projects, and develop national policies regarding the CDM Nile Basin Initiative Regional/ 1997 On- Achieve sustainable socioeconomic development through the Canada, Denmark, Finland, GEF, Germany, Netherlands, Norway, AFR going equitable utilization of and benefits from common Nile basin water Sweden, UK, UNDP, US resources Pilot Program to Preserve the Regional/ 1992 2005 Identify ways to conserve the tropical rain forests of the Amazon Amazon and Atlantic Rain Forest Networks of NGOs in Brazil; EC; Brazilian Rainforest LCR and of Brazil's Atlantic coast and promote sustainable development France; GEF, Germany (GTZ, KfW); Italy; Japan; Netherlands; UK in these regions (DFID); UNDP; US Prototype Carbon Fund Global/ 2000 2012 Address climate change and promote the finance and transfer of 23 participants contributing a total of $145 million in funding, including ESSD climate-friendly technology to developing countries through 6 governments (Canada, Finland, Japan (FBIC), Netherlands, o purchases of greenhouse gas emissions reductions from clean- Norway, Sweden, $10 million each) and 17 private companies ($5 WD technology projects in these countries and through dissemination of million each) knowledge gained from these transactions UNDP-World Bank Regional! 1999 2001 Establish increased cooperation in supporting riparian states in UNDP International Waters MNA/ addressing complex issues of sustainable and equitable Partnership ESSD development in the Nile basin, Red Sea and other basins Annex L -/ World Bank Management's Response to O7ED's, Environment Review and Recommendations everal "building blocks" contributed to the preparation of the Environment Strategy, including Regional Environment Strategies (summarized in annex A), Environment Strategy Background Papers (several of them are summarized in annexes B-F), and an extensive strategy consultation process (summarized in annex J). One of the key building blocks was OED's environment review (OED 2001), which assessed the Bank's performance in supporting environmental sustainability. The OED review found that the Bank had made substantial improvements in its environmental perfor- mance, but large challenges remained. It rated the Bank's performance as satisfactory in addressing global environmental challenges; and partially satisfactory in (a) incorporating the environment into sector strat- egies, country strategies, and policy dialogues, (b) mainstreaming into the Bank's overall operations, and (c) implementing safeguard policies. In defining a course of action for the longer term and setting specific measures to adjust Bank actions, tools, and institutional incentives for the next five years, the Strategy has taken into account the findings and recommendations of the OED review. The actions proposed by the Strategy are summarized in tables 1 and 2 of the Executive Summary. The management action response matrix below summarizes OED's main recommendations, and outlines the elements of the Strategy and implementation plan which directly re- spond to these recommendations (table L.1). 211 Making Sustainable Commitments - An Environment Strategy for the World Bank Table L.1 OED's recommendations and management's action response Major OED recommendations Response Recommendation 1 - Bank management concurs. To support the linking of environmental issues with the In pursuit of holistic, long- Bank's core operations, improvements and actions will be taken in the following term development and the areas: International Development * Country-level environmental analyses will be part of the standard package of Goals, the Bank should diagnostic tools that informs policy dialogue, particularly in connection with the build on its comparative preparation of CASs and PRSPs. Key sustainability and environmental indicators advantage and analytical will become part of the country indicator set included in CASs. We will refine the capacity to demonstrate the methodology of country environmental analysis during FY02, and over the next 5 critical role of the years, carry out 5 to 15 country diagnostic studies annually, linked with CAS environment in sustainable preparations in priority countries (table 2, page xxv). development and poverty * Targeted environmental input to PRSPs-analytical work, training, and reduction. It should facilitation of cross-sectoral dialogue-will help integrate environmental incorporate environmental sustainability issues into the policy dialogue in 5-15 priority PRSP countries objectives into its core annually (table 2, page xxv). strategy and its operations. * Structured learning on strategic environmental assessments (SEAs) will help introduce environmental considerations earlier in sectoral decisionmaking and planning processes. We will refine methodologies and procedures during FY02, then pilot and disseminate good practice in SEAs based on about 10-20 SEAs annually (table 2, page xxii). The following measures will be taken to measure progress: * Monitoring and evaluating the environmental aspects of CASs. Our objective is to achieve satisfactory coverage based on methodology developed by ENV (table 2, pages xxv-xxvi) * Regular reviews of the environmental aspects of PRSPs (table 2, page xxv) * Refinement of the methodology for measuring the extent of environmental mainstreaming in key sectors (rural, urban, water and sanitation, energy) during FY02, and annual reporting on progress (table 2, page xxvi). Recommendation 2 - Bank management concurs and is committed to continue improvements in the The Bank should review its safeguard system, following a two-pronged approach described in the Strategy environmental safeguard (chapter 3, pages 49-51). oversight system and Addressing short-term priorities: processes to strengthen * Implementing an integrated safeguard system, and improving consistency in accountability for safeguard application validated by an independent internal audit in FY02 (table 2, compliance. In parallel, the page xxvi). policy framework should be * Establishing a corporate safeguard tracking and monitoring system by the end modernized and adapted to of FY02 (table 2, page xxvi). the changing practices and instruments being used by * Strengthening corporate consistency and oversight and meeting safeguard the Bank and take account implementation targets that will be established in FY02 (table 2, page xxvi). of recent experience. * Developing and piloting a client capacity assessment and development program FY02 (table 2, page xxvi). Reforming the safeguard system: * Developing a medium-term workplan for reforming the safeguards system to be reviewed by CODE in FY02 (table 2, xxvi). a Implementing a client capacity development program over the next five years (table 2, page xxvi). * Implementing systematic staff training. During the-next 5 years, 90 percent of all operational staff and managers will be tiained in safeguards. * Work with clients and other development institutions to review and harmonize safeguards (table 2, page xxvii). * Improved monitoring and regular reporting at the Regional and corporate levels will provide up-to-date information on safeguard implementation issues (chapter 4, pages 66-67). 212 Annex L - World Bank Management's Response to OED's Environment Review Table L1 OED's recommendations and management's action response (continued) Recommendation 3- Bank management concurs. The Strategy emphasizes the need to build on The Bank should help synergies by addressing local, regional, and global environmental issues, and spells implement the global out the principles to guide the Bank in actions to address global concerns (chapter 3, environmental agenda by pages 41-43). The following are key aspects: concentrating on global * Supporting the integration of global concerns into PRSPs. Several global issues which involve local environmental concerns-such as land degradation, water resource management and national benefits. and biodiversity loss, and the impacts of climate change-have strong linkages with poverty reduction. Such aspects will be included in PRSP reviews and joint staff assessments (JSA). A methodology will be developed during FY02 to guide annual reviews of PRSPs and inputs to JSAs. * Integrating GEF resources with Bank operations. The Strategy aims to improve the integration of GEF assistance into Bank operations measured annually by the proportion of the GEF portfolio blended with Bank resources, compared with the current level (reported in World Bank 2000e). * Addressing climate change comprehensively The Bank will also seek to enhance the proportion of Bank projects that carry out an assessment of their climate change impact. Assessment methodologies for sectoral operations will be updated and disseminated to operational staff (table 2, page xxv). Annex F on climate change spells out in detail the proposed actions for reducing the vulnerability of people to climate change including the development of methodologies for assessing vulnerability (table 1, page xxiv). 213 Annex M '/ Mapping Environmental Conditions A ccurate information is criticalfor environmental decisionmaking, but supporting data remain scarce in many countries. Sign ficant efforts have been made in recent years by governments, international organizations, and civil society to compile and/or estimate reliable and internationally comparable national and sub-national data. The Global Environmental Monitoring System, managed by UNEP, conducts activities related to measuring air and water quality in 142 countries. The World Bank, together with other devel- opment institutions, has worked with many client countries to improve their environmental monitoring systems. It has also taken significant steps toward integrating environmentalfactors with standard national accounts, developing measures ofgenuine savings, and developing mod- els to estimate environmental conditions where monitoring data are unavailable. The indicators displayed on these maps reflect the best available information about environment- related threats to health, livelihoods, and the global commons. They integrate data generously provided by colleagues in other institutions with information from the Banks own sources. They also reflect the Bank'sfocus on links between poverty and the environment. Given the limited state of ourpresent knowledge, they are intended to promote discussion, highlight areas of concern, identify information gaps, and encourage the development of better information. 215 Making Sustainable Commitments - An Environment Strategy for the World Bank Map 1 Gross domestic savings (percentage of GDP) f ~~~~~~~~~~~~~~~~~-I -0.25 -0.00 0.01 -0.10 0.11 - 020 0.21 -0.30 0.31 -0.60 Note: Gross domestic savings are calculated as the difterence between GDP and public and private consumption. Sources: WVorld Bank 2001: World Development Indicators 2001. Map 2 Genuine savings (percentage of GDP) -025 - 0 0 -0.1 01.. . . . . Notes: Genuine domestic savings are indicators ot economic and environmental sustainability. They measure the true rate ot savings in an economy after taking into account the cost ot depleting natural reseurces and the damage caused by pollution. They are calculated as the sum et gross domestic savings and investmnents in human capital less depreciation of produced assets and the depletion and degradation ot the environment. By this measure, some countries (shown in yellow) appear te be unsustainable as their savings rates are less than the combined sum ot conventional capital depreciation and natural resource depletion. Sources: World Bank 2001; World Development Indicators 2001. 216 Annex M - Mapping Environmental Conditions Map 3 Health burden associated with waterborne diseases (DALYs per 1,000 people) -W7 0 1- 5 6- 10 0 100 - 500 500 -1600 Notes: The main caLses of waterbome diseases are lack of access to safe water and sanitaf~on and inadequate hygiene. DALYs (disability-adjusted life years) are a standard measure of the burden of disease. The concept combines life years lost due to premature death and fractions of years healthy life lost as a result ot illness or disability. Years ot life lost at each age are valued differently reflecting dilterent social weights usually placed on illness and premature mortality at different ages. Sources: Murray and Lopez 1926; World Bank estimates. Map 4 Estimated ambient concentration of particulates (PM10) in urban areas (pglm3) tO 0 40 4l-80 .81400 Note: Most of the adverse health eitects of exposure to air pollution are attributable to particulate matter smaller than 10 microns in diameter (PMyj). Sources: WDI 2001; World Bank estimates. 217 Making Sustainable Commitments - An Environment Strategy for the World Bank Map 5 Population in areas of relative water scarcity < . .2U X r47' - ľA W , ,..( .. (t - 3, ', S I,~~~~~~~~~O > 1,000 > 10, 000 > 100,000 Notes: An area faces relative water scarcity if the mean annual demand for domestic, industrial and irrigated agricultural uses is greater than 40 percent of the mean annual surface and subsurface runoff for the area. The colors indicate the population in each area of relative water scarcity. Source: Vorosmarty and otners 2000. Map 6 Areas of high biodiversity importance Notes: Areas in green have been identified either as "hotspots" by Conservation International, as "biolog cally-important ecoregions" by Wor d Wildlite Fund, or "endemic bird areas" by Birdlite International. Areas in yellow contain "reefs at risk" as identified by World Resources Institute. Sources: Bryant and others 1egs; Mittmeier and others 2000 Olson and others 2000 Statterstield and others 1 998. 218 Annex M - Mapping Environmental Conditions Map 7 Per capita CO2emissions (metric tons) 0 - 1 2 - 5 6 0 1 15 110 I I 0 X ' - X Notes: CO, accounts for the largest share of greenhouse gases, which are associated with global warming. Variations in per capita emissions across countries reflect differences in the level of economic activity, energy efficiency, and pollution intensity. 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It is not a complete bibliography, but it does March 30. list important works, produced both inside and ton, e.C.: Thrld QualitynofkGrowth.Wash outside the Bank, relating to the areas covered and ton, D.C.: World Bank. points the reader toward recent thinking that in- Wester 2oveft "Tedug Project," (CheIna fluenced this paper. A more detailed list of sources, Western Poverty Reduction Project). The In-. spection Panel Investigation Report. World including country-specific references, can be found on the Environment Strategy Website, . Publications ton, D.C. in both lists are grouped according to their theme .2000g. "The World Bank and the Global Or geographic focus. Environment: A Progress Report." Washington, D.C. 2000h. World Development Report 2000/ State of the environment 2001:Attacking Poverty. New York: Oxford Uni- Brown, L. R., C. Flavin, H. French,J. Abrariovitz, versity Press. S. Dunn, G. Gardner, L. Mastny, A. Mattoon, 2001a. Adjustment Lending Retrospective. D. Roodman, P. 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