The World Bank Caixa Solid Waste Management and Carbon Finance Project (P124663) REPORT NO.: RES47929 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF CAIXA SOLID WASTE MANAGEMENT AND CARBON FINANCE PROJECT APPROVED ON DECEMBER 5, 2011 TO CAIXA ECONOMICA FEDERAL URBAN, RESILIENCE AND LAND LATIN AMERICA AND CARIBBEAN Regional Vice President: Carlos Felipe Jaramillo Country Director: Paloma Anos Casero Regional Director: Anna Wellenstein Practice Manager/Manager: David N. Sislen Task Team Leader(s): Beatriz Eraso Puig, Keiko Ashida Tao The World Bank Caixa Solid Waste Management and Carbon Finance Project (P124663) I. BASIC DATA Product Information Project ID Financing Instrument P124663 Investment Project Financing Original EA Category Current EA Category Approval Date Current Closing Date 05-Dec-2011 30-Jun-2022 Organizations Borrower Responsible Agency Caixa Economica Federal Caixa Economica Federal Project Development Objective (PDO) Original PDO Project will support the creation of a Program within the Caixa Economica Federal do Brazil, through which Caixa will be able to identify, prepare and partially finance emission reduction activities under solid waste management projects and sell the resulting emissions reductions credits. Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-B0773 08-Dec-2019 01-Aug-2020 01-Aug-2020 30-Jun-2022 .20 0 .20 TF-B0774 08-Dec-2019 30-Jun-2022 2.07 0 2.07 TF-11236 05-Dec-2011 05-Dec-2011 05-Dec-2011 31-Dec-2019 21.05 21.33 0 TF-11237 05-Dec-2011 05-Dec-2011 05-Dec-2011 25-Jul-2017 3.81 3.86 0 The World Bank Caixa Solid Waste Management and Carbon Finance Project (P124663) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES 1. Summary of Project Status The Project Development Objective (PDO) "support the creation of a Program within the Caixa Econômica Federal do Brasil, through which CAIXA will be able to identify, prepare and partially finance emission reduction activities under solid waste management projects and sell the resulting emission reductions credits" remains achievable. Status of Achievement of PDO Indicator Targets. Three of the five PDO indicators have already been met. The status of all five PDO indicators is given below: (i) Program of Activities (PoA) registered with the UNFCCC - Achieved, the PoA was registered on October 5, 2012. (ii) Emissions Reductions (ERs) delivered for the PoA (Santa Rosa and São Gonçalo landfills) under TF-11236 - Achieved, CAIXA delivered the agreed 2,500,000 CERs. (iii) ERs delivered for the Itaoca and Candeias Landfills (TF-11237) - Achieved, CAIXA delivered the agreed 500,000 CERs. (iv) ERs generated by São Gonçalo Landfill (TF-0B0774) - Not yet achieved, as the verification and certification of ERs by the CDM Board is pending. About 605,447 ERs are expected for delivery (74 percent of the contract volume). (v) ERs generated by Caruaru and Petrolina Landfills (TF-0B0773) - Not yet achieved, as post-registration change, verification and certification is pending. About 14,966 ERs are expected from Petrolina (33 percent of the contract volume). Caruaru did not register with the UNFCCC due to the delay in signing the ERPA. Intermediate Results indicator: Number of Component Project Activities (CPAs) registered by the UNFCCC, target of four CPAs. After the last restructuring, two additional CPAs (Caruaru and Petrolina) were expected to register. However, due to the delay in signing the ERPA, Caruaru dropped out the program. Petrolina registered with the UNFCCC and signed the sub-ERPA with CAIXA. Thus, the total number of CPAs is three. The performance of Caixa as the signatory of the ERPAs and the coordinating entity for the CDM PoAs remains satisfactory. During the implementation support mission conducted on May 13 and 16, 2022, Caixa agreed to continue working with the operators of the São Gonçalo landfill and the Petrolina landfill to advance the verification processes. If no additional review is requested by the CDM Board, the issuance of certified emission reductions (CERs) is expected by December 31, 2022. Compliance with the ERPA. Petrolina has fulfilled the conditions of sale and purchase specified in Schedule 1 of the Emission Reductions Purchase Agreements (ERPAs). São Gonçalo had fulfilled all but one condition, i.e., generate electricity from landfill gas. This condition was fulfilled on June 2, 2022. There are no other pending covenants to fulfill before the delivery of ERs. Safeguards. The Project has a satisfactory track record on implementation of safeguards. Social risk and environmental risk remain moderate. Reports on safeguards have been received from both landfills and reviewed by the Bank. Both landfills continue to operate in accordance with the Environmental and Social Management Plans and the operators are in compliance with the ESMPs. Grievance Redress Mechanisms (GRMs) are in place at the São Gonçalo Landfill and The World Bank Caixa Solid Waste Management and Carbon Finance Project (P124663) grievances/comments are being addressed by the landfill operator. In the second semester of 2021, the landfill operator received 52 grievances, of which 49 were complaints and 3 were requests. All of them have been addressed by the landfill operator. In Petrolina the GRM channels are available but no grievance has been registered so far. The ISDS does not need to be updated. Status of CPAs. Both Petrolina and São Gonçalo CPAs have achieved higher landfill gas (LFG) generation than the ex- ante estimate registered with the UNFCCC. Because of these higher results, there has been a delay in completing the verification process, and it is not expected to be completed by the original closing date of June 30, 2022. In the case of Petrolina, an additional post-registration change (PRC) is required with the UNFCCC to validate the changes in methodology for higher LFG generation compared to the ex-ante estimate. 2. Rationale for the Proposed Extension This restructuring proposes an extension of the ERPAs for the São Gonçalo Landfill (TF0B0774) and the Petrolina Landfill (TF0B0773) from June 30, 2022, to May 31, 2023. As explained above, both CPAs are experiencing significant delays in verification due to their higher performance in LFG generation. On January 10, 2022, CAIXA submitted a request for extension of both ERPAs. However, the Carbon Partnership Fund (CPF) indicated that the São Gonçalo landfill has to fulfill all the condition of sale and purchase specified in Schedule 1 of the ERPA. On June 2, 2022, CAIXA submitted a letter with the evidence of electricity generation at the São Gonçalo landfill and requested to extend the ERPAs. Subsequently, the CPF approved the proposed extension of both ERPAs until May 31, 2023. It would give sufficient time for theverification, issuance, and delivery of ERs to be completed, allowing the Bank to make the corresponding ER payments to CAIXA. Further, the extension would allow continued support for CAIXA’s carbon finance portfolio, while Brazil develops a more robust climate policy that generates demand for these mitigation activities. CAIXA has currently no other buyer for these ERs, thus putting at risk the continuation of its carbon finance operations if the ERPAs are terminated prior to the delivery of the ERs. III. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-11236 Closed 31-Dec-2019 09-Mar-2020 25-Jul-2017, 14-May- TF-11237 Closed 31-Dec-2019 2018 TF-B0773 Effective 30-Jun-2022 31-May-2023 30-Sep-2023 TF-B0774 Not Effective 30-Jun-2022 31-May-2023 31-May-2023 The World Bank Caixa Solid Waste Management and Carbon Finance Project (P124663)