Environmental Aspects of Development Policy Lending (OP 8.60) Kirk Hamilton Environment Department The World Bank

Treatment of the Environment Under the New OP/BP 8.60 The Bank determines whether specific country policies supported by the operation are likely to cause significant effects on the countrys environment and natural resources. For country policies with likely significant effects, the Bank assesses in the program documentation the borrowers systems for reducing adverse effects and enhancing positive effects, drawing upon relevant country-level or sectoral environmental analysis (undertaken by the country, the Bank, and third parties). If there are significant gaps in the analysis or shortcomings in the borrowers systems, the Bank describes in the program documentation how such gaps or shortcomings would be addressed before or during program implementation, as appropriate.

Good practice note Framework Framework Role of knowledge and analytic work Role of knowledge and analytic work Typology of DPLs and potential environmental linkage Typology of DPLs and potential environmental linkage Risks and opportunities (the positive agenda) Risks and opportunities (the positive agenda) Lessons from experience Lessons from experience Selected good practice – Madagascar, Bulgaria, Indonesia WATSAL, Uganda PRSC2 Selected good practice – Madagascar, Bulgaria, Indonesia WATSAL, Uganda PRSC2

Lessons from experience Feasibility of analysis; predictability Feasibility of analysis; predictability Country program vs individual operation Country program vs individual operation Measures to deal with risk Measures to deal with risk Conditionality Conditionality Advanced tools Advanced tools Costs of ESW Costs of ESW Disclosure Disclosure

Tools to Analyze Operations Partial equilibrium analysis of price changes Checklists Action-impact matrices Red flags (country and sectoral level) BUT – time, budget, data limitations

Strategic/Analytic Tools Country Environment Analysis (CEA) Country-wide Strategic Environment Assessment (SEA) Sectoral or regional Other Economic and Sector Work (ESW) on the environment

Environment DPLs Model is the Mexico ENVSAL, currently going into the second operation. Key actions by government include: Model is the Mexico ENVSAL, currently going into the second operation. Key actions by government include: Implementation of indicators on environmental performance of tourist facilities Implementation of indicators on environmental performance of tourist facilities Creation of national fund for renewable energy Creation of national fund for renewable energy Establishment of CDM office Establishment of CDM office Improved water rights registry Improved water rights registry Decentralization of environmental functions to 6 states, covering permit issuance Decentralization of environmental functions to 6 states, covering permit issuance

Mexico environment DPL (contd) Development of sustainable tourism action plans for 14 destinations Development of sustainable tourism action plans for 14 destinations Evaluation of transport fuel quality Evaluation of transport fuel quality Enactment of new General Law for Sustainable Forestry Development Enactment of new General Law for Sustainable Forestry Development Amendments made to the National Water Law Amendments made to the National Water Law Further decentralization of environmental management functions Further decentralization of environmental management functions

Review of DPLs, FY DPL commitments by region, $ millions (21 operations total)

Sectoral coverage, FY 05-06

Preliminary conclusions DPLs can be an important tool for environmental reforms – e.g. ENVSALs in Mexico, Brazil, Colombia DPLs can be an important tool for environmental reforms – e.g. ENVSALs in Mexico, Brazil, Colombia Forestry aspects Forestry aspects Vietnam, Lao PDR and Colombia DPLs deal explicitly with institutional capacity and management of forest resources; positive impacts of reforms are noted in Burkina Faso and Ukraine Vietnam, Lao PDR and Colombia DPLs deal explicitly with institutional capacity and management of forest resources; positive impacts of reforms are noted in Burkina Faso and Ukraine

Preliminary conclusions (2) The new policy has raised awareness of potential environmental impacts, especially for broader programs The new policy has raised awareness of potential environmental impacts, especially for broader programs Only one operation out of 21 (Kenya agricultural restructuring) was deemed to have significant environmental effects Only one operation out of 21 (Kenya agricultural restructuring) was deemed to have significant environmental effects There is substantial growth in analytical work (CEA/SEA), partly to support DPL programs There is substantial growth in analytical work (CEA/SEA), partly to support DPL programs