World Bank Document

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The Czech Republic: ProtoipeCarhontFund Umbrella Project OperationsManual

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Public Disclosure Authorized

Environmetital Assessment

Background and Scope of this Chapter

PCF projects, by definition, have a distinct environmentally beneficial aspect to them since PCF can only be involved when there are credible and verifiable greenhouse gas (GHG) emission reductions associated with the project. It is expected that, under the Umbrella Project, the Czech Republic will deliver to the PCF some 650,000 - 700,000 tons of C02 equivalent in GHG emission reductions from energy-efficiency and renewable energy projects over a 10-year period.

Nevertheless, the preparation of a PCF project involves the same level of environmental and social due diligence as any other investment operation supported by the World Bank. By decision of the Environmental Review Meeting held in Washington on March 26, 2002, the Czech PCF Umbrella Project has been assigned environmental category Fl ("financial intermediary"). One of the reqluirements under this approach is that the Environmental Assessment (EA) aspects are detailed in the Operations Manual of the project.

This chapter of the Operations Manual covers the required aspects and consists of the following parts:

1. A comparative assessment of the environmental regulatory fi-ameworks of the Czech Republic with World Bank safeguard policy requirements. In particular, requirements for environmental assessment, including: screening, documentation requirements and content, consultation and disclosure are addressed.

2. A detailed descriptionof institutionalarrangementsbetween the intermediaries ("FI"s) and environmental regulatory authorities for EA documentation preparation, review, public consultation and disclosure, and documentation approval.

3. An assessment of institutionalcapacity to implement the regulatory framework.

4. A detailed program ofinstitutionalstrengthening, as appropriate or necessary, to improve EA procedures or staff capabilities to insure compatibility with World Bank procedural requirements.

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The Qechl Republic: Prototype Carbon Flod Umbrella Project Operations Mvaniual

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1. A Comparative Assessment of the Environmental Regulatory Frameworks

The Environmental Sector Unit of the Europe and Central Asia (ECSSD) regional department of the World Bank has implemented a comparison of the Czech Environmental Impact Assessment (EIA) framework with the World Bank's OP/BP/GP 4.01 (February 2002). Annex I contains the results of this comparison as well as proposed amendments for ensuring better compatibility of the Czech EIA requirements with those of the Bank. The following paragraphs are dealing only with those aspects of this comparison that are directly relevant to the PCF Umbrella Project.

Environ,meital Categories The Bank's OP 4.01 provides for the following environmental categories of projects:

* CategoryA: A proposed project is classified as Category A if it is likely to have significant adverse environrental impacts that are sensitive', diverse, or unprecedented.

* Categoty B: A proposed project is classified as Category B if its potential adverse environmental impacts on human populations or environmentally important areas including wetlands, forests, grasslands, and other natural habitats - are less adverse than those of Category A projects. These impacts are site-specific; few if any of them are irreversible; and in most cases mitigatory measures can be designed more readily than for Category A projects.

* Category C: A proposed project is classified as Category C if it is likely to have minimal or no adverse environmental impacts.

* Finally, there is the special case of Category FI, when investment of Bank funds is made through a financial intermnediary, in subprojects that may result in adverse environmental impacts. By decision of the Environmental Review Meeting held in Washington on March 26, 2002, the Czech PCF Umbrella Project has been assigned Category FI.

For a financial intermediary (FI) operation, the Bank requires that each Fl screen proposed subprojects and ensure that subborrowers carry out appropriate EA for each subproject. Before approving a subproject, the Fl verifies (through its own staff, outside experts, or existing environmental institutions) that the subproject meets the environmental requirements of appropriate national and local authorities and is consistent with the Bank's OP 4.01 and other applicable environmental policies of the Bank.

A potential impact isconsidered "sensitive" if itmay be irreversible (e.g., lead to loss of amajor natural habitat) or raise issues covered by OD 4.20, Indigentouis Peoples: OP 4.04, Nalural 1-fabltats; OP 4.11. Safeguarding Cultural Property inBank-Flianiced Projects (forthcoming); or OP 4.12. InvoluntaryResetileinet (forthcoming).

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Thus, the Fls, rather than the Bank, will be expected to screen the subprojects of the Umbrella Project. To ensure the maximum level of integration of the Bank's EA principles into the Czech Environmental Impact Assessment (EIA) process while limiting the burden of new procedures on the government staff of the Czech Republic, the environmental categories normally applied by the Czech environmental authorities would be applied to the PCF subprojects. However, for the PCF project implementing agencies, this would imply that a matching category according to OP 4.01 is also assigned as explained below.

In the Czech law on Environmental Impact Assessment (Act 100/2001 Coll.), different project types are also subject to a different level of scrutiny. Category I is reserved to large-scale projects with substantial environmental impacts. Such projects are always subject to EIA. In other cases, Category II is applied, which triggers the requirement of fact-finding procedures. Mitigation measures are expected in both cases. In cases where neither category is applied, the project is exempt from EIA.

Although the criteria for applying environmental categories in the Czech Republic do not exactly coincide with those of the World Bank, there are substantial similarities between the Czech EIA and the Bank's OP 4.01 with respect to the environmental categories applied to projects. The table below makes these similarities explicit.

Table 1. Environmental Categories applied by the Czech Republic and by the World Banak

Czech EIA (Act 100/2001 World Bank EA (OP 4.01) Coll.)

Category I

Category A

Category II

Category B

Exempt

Category C

Apart from the above, the following aspects of ECSSD's comparative assessment are important to the Czech PCF Umbrella project:

Environmental Management Plans. While the Bank's procedures require the preparation (and subsequent implementation) of an Environmental Management Plan (EMP) for both Category A and Category B projects, the Czech law does not have an explicit provision for the same. For the purposes of the PCF Umbrella project, the requirement of EMP will extend to all subprojects except Category C, for which a letter from the MOE will be required to confirm that the subproject is indeed exempt from the Czech EIA requirements.

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Public Consultation antd Disclosure. The Czech law includes the requirements for informing the concerned government bodies as well as notice to the public about planned project activities, and Act 100/2001 Coll. makes important provisions for public hearings. However, these requirements still do not quite meet the more demanding World Bank standard for public consultation and disclosure. Under the PCF Umbrella Project, it will be required that the Bank's standard procedure for public consultation and disclosure be applied. Thus, for Category A subprojects, affected local communities, population and civil society organizations should be consulted at least twice: at the time of the preparation of the terms of reference for an EA study and after a draft EA Report is prepared. For Category B subprojects, at least one public consultation meeting should be held. In all cases, the public consultation meeting results should be documented.

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