Report No. 36946-PK Pakistan Strategic Country Environmental Assessment (In Two Volumes) Volume I: Main Report August 21, 2006 South Asia Environment and Social Development Unit South Asia Region Document of the World Bank Table of Contents PAGE MAINREPORT EXECUTIVESUMMARY 1. Environmental Challengeso fAccelerated Growth........................................................ i-vii ..................................................................................................... 2. Scope and Process o fthe SCEA..................................................................................... ..i 4. Risingto the Challenge: A ProposedWay Forward.................................................... 3. A Framework for AssessingEnvironmental Outcomes............................................... 11 .. 5. DevelopingPriority Interventions for Capacity Building ........................................... 11 vi CHAPTER1 Contextand Objectives: . EnvironmentalChallenges to Growthandthe Response ........................................................ 1 2. The Responseo fthe Government o fPakistan and Development Partners...................1 1. Environmental Challengesto Growth........................................................................... 1 2 4. 3. Objectives o fthe SCEA ................................................................................................ A Framework for AssessingPolicyEffectiveness ........................................................ 2 5 3 6. Structure o fthe Report .................................................................................................. Preparation o fthe SCEA: Scope and Process............................................................... 4 CHAPTERI1 EnvironmentalIssuesandImpacts . ................................................................. 1. A Snap-Shot for Setting Policy Priorities ..................................................................... 5 6 2. The Costs o fEnvironmental Health Risks .................................................................... 8 4. Global Comparisons o fEnvironmental Sustainability ................................................ 3. The Costs o fNatural ResourceDegradation............................................................... 14 20 5 Conclusions: Environmental Degradation as a Constraint to Growth ........................ 21 CHAPTERI11 Institutionsfor EnvironmentalManagement: . Closingthe LinksinInstitutionalDesignand StrengtheningCapacity 2. InstitutionalDesign: the Vertical Division o f Responsibilities................................... 1. Legal and Policy Framework: the Basis o fInstitutionalDesignand Direction..........23 ............................... 23 4. Environment and the Judiciary: Strengtheninga Vital Link....................................... 3. The Horizontal Division o fResponsibilities: Mainstreaming and Upstreaming ........24 26 27 5. Are Resources for Environmental Management Adequate?....................................... 29 6. MovingForward: StrengtheningInstitutions through NEP Implementation..............31 CHAPTERIV Reinforcingthe EnvironmentalImpactAssessmentSystem . .................... 1. The EL4Framework: Establishing Oversight and EnsuringCoverage ...................... 34 34 2. Strengthening the EIA Process: Meaningful Public Consultation and Disclosure......35 36 4. EIA and Public Sector Investments:Mainstreaming and Upstreaming ...................... 3. PromotingQuality o fEIA Content and Implementation ............................................ 38 5. Strengtheningthe EM System.................................................................................... 39 CHAPTERV UrbanAir Quality:Addressing a GrowingThreatto Health 2. Pakistan Clean Air Program: the Challenge o f InstitutionalDesign........................... 1. UrbanAir Quality inPakistan: Unhealthy Concentrations o fParticulate Matter.......40 . .................... 40 42 3. Air Quality Monitoring: SupplementingCapacity through Outsourcing.................... 43 4. Strengtheningthe Regulatory Framework for UrbanAir Quality Management.........44 6. Support for Air Quality Management: the Role o fDevelopment Partners.................48 5. Moving Beyond Inspections and Enforcement: a Range o f Incentives for Clean Air 45 CHAPTERVI Water Supply and Sanitation: . ProtectingSourcesandSafeguarding Supplies 1. Water Supply and Sanitation inthe context o fWater ResourceManagement ...........49 ...................................................................... 49 2. DrinkingWater Sources: Declining Availability. Deteriorating Quality.................... 50 3. Extent and Sourceso fWater Contamination .............................................................. 50 4. InstitutionalDesign for Water Quality Protection ...................................................... 52 5. Settinga Regulatory Foundation: Use-Based Standardsfor Water Sources...............54 6. BuildingLocal Capacity to Provide Water and Sanitation Services........................... 55 7. Creating TieredCapacity to Regulate DrinkingWater Quality .................................. 56 8. Opportunities for Development Partner Support......................................................... 57 CHAPTERVI1 Recommendations and a ProposedWay Forward . ................................... 58 1. Strengthening Linkages inInstitutionalDesign.......................................................... 58 2. Updatingthe Regulatory Framework ........................................................................... 59 3. Building InstitutionalCapacity for Environmental Management ............................... 61 4. ReinforcingIncentives and Accountability................................................................. 63 5. Risingto the Challenge: a Proposed Way Forward .................................................... 64 TABLES Table 2.1 Annual Cost ofUrbanAir PollutionHealthImpacts............................................... 12 Table 2.2 Annual AttributedIncidence o fLead Exposure....................................................... 13 Table 2.3 Annual HealthCost due to Lead Exposure (Billion Rs.)......................................... 13 Table 2.4 Indoor Air Pollution................................................................................................. 14 Table 2.5 Wheat Yields (Kg/Hectare) ...................................................................................... 15 Table 2.6 Estimated Annual Cost o fAgricultural Losses from Soil Salinity, Erosion& Rangeland................................................................................................................. 19 Table 2.7 Costs ofAnnual Deforestation (Million Rs) ............................................................ 19 Table 2.8 Desert Countries (2 50% land classified as desert) .................................................. 21 Table 2.9 DenselyPopulated Countries (2 100persons per km2)............................................ 21 Table 3.1 EPA Staffing Levels................................................................................................. 29 Table 5.1 New Vehicle Emission Standards& Corresponding FuelQuality for Metro Cities45 FIGURES Figure 1 The Environmental "Production Function" ........................................................... .. 11 Figure 1.1 The Environmental "Production Function" ............................................................ 3 Figure2.1 Share o f Costs o fEnvironmentalandNatural Resource Damages......................... 6 Figure2.2 8 Estimated Costs from Water related Mortality and Morbidity ............................. Income and Infant Mortality ................................................................................... Figure2.3 11 Figure2.4 Annual DALYslost from UrbanAir Pollution..................................................... 12 Figure2.5 Agricultural Productivity Declines with Canal Releasesin Sindh........................ 16 Figure 2.6 Eroded Lands inPakistan in 1993-2003 ............................................................... 17 Figure4.1 EPA Performance Statistics .................................................................................. 35 Figure 5.1 Particulate Matter less than 10microns (PM10; 48-hour averages) ..................... 41 Figure 6.1 COD Levels inSurface Water .............................................................................. 51 BOXES Box 2.1 7 Measuring the Economic Impacts of Illness and Premature Death ...................... The Coastal Zone .................................................................................................... B o x 2.2 10 B o x 3.1 Environmental Federalism .Oversight Mechanisms inthe United States ..........126 Box 3.2 Empowering Citizens to Promote Environmental Compliance ............................ 28 Box 3.3 Environment Funds: Experience from Bulgaria ................................................... 30 Box 3.4 Incentive-Based Partnerships: the U S Experience................................................ 31 B o x 3.5 InstitutingPerformance BasedGrants inPakistan................................................ 32 B o x 4.1 37 FederaVState Partnerships for Clean Air inthe U S A............................................ EL4Capacity Building-a Successful Model inNWFP...................................... B o x 5.1 43 Box 5.2 Air Quality Index .................................................................................................. 47 Box 6.1 Beneficial Use Water Standards inthe State of Minnesota .................................. 55 APPENDICES Appendix 1 MeasuresProposed inthe PakistanCleanAir Program . ................................ 66 VOLUME11: TECHNICALANNEX ACKNQWLEDGEMENTS We would like to thank the staff o f the Ministry o f Environment for their guidance and support inthe preparation o f this report. This report is the product o fa team managedbyPaulMartin and including JaneNishida, Javaid Afzal, Sameer Akbar, RichardDamania and David Hanrahan. Significant analytical inputswere providedby ateam o fconsultants from AAB Pvt.Ltd., ledbyEle Jan Saaf, and a team from Resources for the Future, ledby Alan Krupnik. Helpful advice and contributions were receivedfrom a number o f colleagues across the WorldBank including Kseniya Lvovsky and Suphachol Suphachalasai. Valuable guidance was provided by the peer reviewers, Kirk Hamilton, Tariq Banuri and.KulsumAhmed. Assistance with document preparation was provided by Vinod Ghosh, and administrative support was provided by Afzal Mahmood. The report was prepared under the overall guidance o f Jeffrey Raclu, Acting Director, South Asia Environment and Social Development Department, andJohn Wall, Country Director for Pakistan. EXECUTIVESUMMARY 1. EnvironmentalChallengesof Accelerated Growth I. PalustanisthemosturbanizedcountryinSouthAsia,withaboomingeconomy. Economic reforms have paid their dividend and the country has achieved record growth rates, buoyant levels o f investment and sustainable fiscal balances. Longterm growth rates too have beenreasonable, averaging 2.6 percent since 1960, exceeding most other countries inSouth Asia. Despite this remarkable record, however, the natural resource base i s stressed and the burden of disease remains high, threatening to undermine growth prospects. 2. The urgency o f addressingPalustan's environmental problemshas probably never been greater. Conservative estimates presentedinthis report suggest that environmentaldegradation costs the country at least 6 percent o f GDP, or about Rs. 365 billion per year, and these costs fall disproportionately upon the poor. The most significant causes o f environmental damage identified and estimated inthis report are (i) illness andpremature mortality caused by air pollution (indoor and outdoor), (almost 50 percent o f the total damage cost); (ii)diarrhoeal diseases and typhoid due to inadequate water supply, sanitation and hygiene (about 30 percent o f the total), and (iii) reduced agricultural productivity due to soil degradation (about 20 percent of the total). 3 . The magnitude o fthese costs indicates that environmental decay has become a serious development concern. Furthermore, accelerated growth and urbanizationpresent additional environmental challenges, such as toxic air and water pollution, and hazardous solid waste. Capturing the development dividend o f growth calls for complementary policies that address environmental issues while facilitating development. Palustanhas a commendable record o f efforts to promote conservation and longer term sustainability, from the National Conservation Strategy o f 1992 through to the adoption o f a National Environment Policy (NEP) in2005. Implementation o f these initiatives remains a challenge, however. Whether judged interms o f regional performance or environmental stress factors, there i s significant scope to better ensure the sustainability of Pakistan's economic growth. 2. ScoDe andProcessof the SCEA 4. Inapproachingthe wide range ofPakistan's environmental challenges, itwas agreed with the Government that the SCEA should focus on a select set o f issues o f particular concern inthe context o f growth and urbanization. These were selected inconsultation with Federal and provincial environmental authorities based on a consideration o f the scope to achieve improvementsinthe near term, while influencing trends over a longer period. This process led to a focus on the Environmental Impact Assessment (EM) system, the principal instrument to manage the environmental risks o fnew investments, and the management of air andwater quality. While recognizing the importance o f action inmany other areas for the sustainability o f growth in Pakistan, the selective focus o f this report echoes government priorities to confront the environmental challenges of rapid industrial and urban growth. 5. Followingthe initial scoping consultation, development o f the SCEA continuedthrough a consultative process that sought guidance from provincial and local representatives o f government and civil society. An initial analysis was discussed at a National Stakeholder Conference, and the resultingrecommendations are incorporated into this report. I In 5 4" degradation and industrialpollution become more significant relative to other environmental damage factors. Followingthe analytical framework described above, the report analyzes the main bindingconstraints to improving environmentalperformance as falling into four categories, (i) ininstitutionaldesign, (ii) intheregulatoryframework, (iii) gaps gaps capacity limitations, and (iv) gaps inincentives and accountability. Of these weak incentives and low levels o fpublic accountability remain the critical constraints on performance. Public scrutiny o fperformance i s ultimately a source o f strength that leads to stronger institutions with greater public trust and support. The principal features o f these constraints are summarized below, together with recommendations for movingforward to more sustainable economic growth. StrengtheningLinkagesinInstitutionalDesign 8. Constitutionally, Federal and provincial governments share the concurrent legislative authority for environmental pollution and ecology. Within this environmental federalist structure, appropriate roles for national authorities include policy formulation, provision o fresources and oversight to provinces, and public reporting, while provincial authorities play the primary role in implementation and monitoring. Bringinggreater clarity to this structure would reduce the institutional design constraints to environmentalperformance, particularly through actions inthe areas highlightedbelow: Establishing Guidelinesfor Oversight of Delegated Authorities: guidelines are required for effective Federal oversight o f environmental authorities delegated to the provincial level, establishing (i) the adequacy o fprovincial regulations and resources, (ii) provincial commitment to share information for performance monitoring, (iii) arrangements for fundingassistance, and (iv) mechanisms for conflict resolution and the suspension o f delegated authorities when necessary. Oversightof Environmental Clearances: guidelines would facilitate Federal oversight of provincial EIA clearances. Pakistan EPAreserves the right to review any environment report and to suspend clearance authority ifit believes this power has been misused. This righthas neverbeen exercised, however, limitingthe effectiveness o fthe Federal mandate, and ultimately of the EIA system itself. Creating Partnershipsfor CleanAir: the Pakistan Clean Air Programme (PCAP) will require partnerships between multiple tiers and sectors o f government, with (i) Pakistan EPAresponsible for setting air quality and emissions standards, (ii) implementation o f these standards delegated to provincial environmentalauthorities, (iii) integrationo f air quality management with urban planningby municipal authorities, and (iv) policies for clean air inthe industry, energy, fuel and transportation sectors. Defining Rolesfor Water Quality Protection: it is useful to distinguishroles for water quality protection as being (i) protection of surface and groundwater sources, primarily involving environmental authorities and irrigation departments, (ii) the provision o f water and sanitation services by local governments, and (iii) regulation o f dnnlungwater quality through a tiered approach, with local governments conducting routine monitoring, provincial authorities carrying out regular oversight, and Federal agencies providing quality assurance. ... 111 Updatingthe Regulatory Framework 9. Pakistan currently lacks standards for the quality o f ambient air and water. Such standards are the foundation upon which emission control strategies are based, and usually specify schedules for attainment as well as monitoring methods. The regulatory fkamework needs to be updated to incorporate standards inthe following priority areas: 0 Developing Health-Based Air Quality Standards: Ambient air quality standards are required as a basis for emission control strategies, specifying limitsfor key pollutants and monitoring methods. While safeguarding public health shouldbe the main consideration, the costs and likelihood o f attainment should also inform the standard-settingprocess. 0 VehicleEmission and Fuel Quality Standards: updatedVehicle Emission Standards for new registrationand in-service vehicles are required, linked to standards for fuel quality. Inparticular, thecostofmovingtolowersulphurdieselandalternatefuelsneedstobe evaluated against the potential economic benefits interms o f lower emissions and better health. 0 Establishing Use-Based Water Quality Standards: The lack o f ambient water quality standards i s a significant gap inthe regulatory system. The NEPidentifies the need to establish a use-based system for classification o f water bodies, to provide a clear basis for regulation o fpollution discharges. 0 Drinking Water Quality Standards: There are currently no formal drinkingwater quality standards inPakistan. M o E should take a lead inestablishing these as part o f a broader framework for the protection o f drinhng water quality. Building Capacity for Environmental Management 10. With significantnewresources proposed for environmentalpurposesinthe Medium- Term Development Framework, fundingmay be less o f a constraint than the ability to effectively utilize available resources. This presents an important opportunity to develop capacity in environmental authorities at Federal, provincial and local levels, to mainstream the development o f environmentalmanagement capacity inkey sectoral agencies, and to upstream such capacity in planning departments, focusing inparticular on: 0 Strengthening Capacityfor Effective Environmental Impact Assessments: Capacity buildingfor more effective EIAsneeds to address four weaknesses, (i)lack o fexpert a input for technical reviews, (ii)widespread unawareness o frequirements and a procedures, both ingovernment and the private sector, (iii) the lack o f a system to identify projects, bothpublic and private, requiredto submit an EM, and (iv) weak enforcement o f EIA clearance conditions. Technical assistance would assist EPAsin many o f these areas, and adoption o fEIA training programs similar to that o fNWFP would help broaden awareness o f EIA requirements. 0 Improving Technical Capacityfor Air Quality Management: There is a needto engage trained technical staff for air quality monitoring, inspectionand analysis o f information. International experience indicates that it i s often more cost effective to use the skills and resources o fprivate or academic institutions than to buildin-house capacity. Where such opportunities exist inair quality management or other areas (for example, strengthening iv the EIA system), outsourcing should be considered as a way o f expanding technical capacity. Building Capacity to Protect Water Quality: Federal and provincial environmental authorities will require substantial technical assistance for water quality monitoring and stakeholder consultation to establish use-based standards for priority waterbodies, and their subsequent clean-up. The need for physical investments is greatest at the local level, to upgrade and expand water supply and sanitation services, combined with technical assistance to help T M A s develop partnerships with the private sector for service provision. To regulate drinkingwater quality, local capacity i s required for routine monitoring, supported by provincial resources for regular oversight, and by quality assurance at the national level, requiring a significant level o f expert input, equipment and training. Mainstreaming and Upstreaming: Environmental cells havebeen created ina few key agencies, butrequire additional resourcesto prepare adequate EIAs, and effectively implement associated Environmental Management Plans. The establishment o f environment sections inplanning departments is significant, and their limited permanent capacity should be supplemented with expert assistance to conduct environmental reviews and advise on environmentalmanagement plans. The effective promotion o f sustainable development innationalplanning will require more rigorous analysis o f environmental constraints to growth and poverty reduction, for which M o E will require additionalresources to contract the necessary analytical expertise. ReinforcingIncentivesand Accountability 11. Accountability to stakeholders is essential for sound environmental management, and will only be achieved by ensuring stakeholders are informed and empowered. Opportunities to strengthen environmental accountability inPalustan include the following: Public Consultationand Disclosure of EIAs: Measures to strengthen accountability in the EIAprocess include (i) requiring project proponents to develop a public consultation plan, (ii)creation o f EIA information centers at Federal and provincial levels, (iii)public disclosure o f all EIA filings on a website for easy accessby the public and private sector, and (iv) public provision of a non-technical summary o f EIA decisions. Public Information to Support CleanAir and Safe Water: The public provision o f air quality information, including the daily publication o f an Air Quality Index inmajor cities, will buildsupport for air quality improvement initiatives and enable the issuance o f health alarms when necessary. Similarly, public information regardingdrinlungwater quality not only protects public health, but builds support for water supply investments, and most importantly, for the recovery o f operation and maintenance costs. Empowering Civil Society: Public support for environmental compliance can be reinforcedbothby involvingconcerned civil society stakeholders inenvironmental decision-malung and oversight, and by supporting public interest advocacy through legal associations and the establishment o f environmentallaw clinics at universities. V 5. DevelopingPrioritvInterventionsfor Capacity Building 12. This report finds compelling evidence for the need to address urban environmental problems as a highdevelopment priority. Rising to the challenge will require not only a strategic programo f capacity building, but also the establishment o f incentives to encourage improved performance inenvironmental management at all levels o f government. IncentiveBasedPartnerships: One approach to buildingcapacity and encouraging improved environmental performance at different levels o f government i s to develop incentive-based partnerships between the Federal and provincial EPAs, as well as between provincial authorities and local governments. These would link the transfer of financial support with performance against indicators inagreed action plans, based on local priorities set withinNEP goals. Two important pre-requisites for such an approach to function effectively are (i)the translation o f the NEP's broad directions into specific targets, and (ii) the establishment of an efficient system o fperformance-based transfers, combining transparent decision-malung with the minimumnumber o f administrative hurdles. PakistanCleanAir Program: This Programis beingdevelopedby MoE as a vehicle to support a range o f initiatives for urban air quality management, involvinga variety o f sectors, levels o f government and development partners. The complexity o f the issues to be addressed suggests that the PCAPmightbest be supported as a stand-alone program for capacity buildingparticularly at the provincial and local level, complementing broader incentive-based partnerships for NEP implementation. ManagingNaturalResources: Over 60percent o fPalustan's populationisruraland depend on natural resources (agricultural soils, water, rangelands and forests) that are strained and degrading. Despite the economic significance o fthese assets there is a paucity o f accurate information that i s needed to guide effective policy interventions. A further priority i s to update andrefine assessments o f the status and use patterns o f key natural resources inorder to enhance their productivity and contribution to growth and development. PossibleAreas for WorldBankAssistance 13. Based on its current dialogue, the World Bank i s strategically placedto support these initiatives. Support for the NEP could focus on providing technical assistance to M o E for the development o fprovincial action plans. As action plans are defined, the Bank would consider investment support for their implementation. For implementationo f the PCAP, the Bank can provide technical assistance based on air quality management experience inother SouthAsian cities, with the possibility o f subsequent investment support as plans become more concrete. In addition to providing assistance for implementation ofthe NEP and PCAP, the Bank also plans to support further analysis o f selectedpriority concerns inmanagingnatural resources. Potential issues to be addressed include sustainable management of land and water resources, with the focus on long-term environmental sustainability dimensions, including newly emerging challenges o f global climate change, rangeland management, coastal zone development, as well as selective studies analyzing inmore detail environmental priorities, institutions and future strategies at the sub-regional or local level. vi I.CONTEXTANDOBJECTIVES-ENVIRONMENTAL CHALLENGESTO GROWTH AND THE RESPONSE 1. Environmental Challengesto Growth 1. Pakistan has achieved impressive macroeconomic results over the last five years, with ambitious reforms resulting inan acceleration of growth from 3.3 percent in 1997-2002 to over 6.5 percent during2002-2005. Despite these achievements, social andnaturalresource indicators continue to demonstrate the dauntingdevelopment challenges facing the country, and in particular the importance of strengtheningenvironmentalmanagement to reduce risks to health andnaturalresource productivity, and to sustain economic growth. 2. Pakistan's infant and childmortality rates are the highest inthe South Asia Region, with the prevalence of childhood diarrhea and acute respiratory infections, both associatedwith poor environmental quality, the secondhighest. With more than one-third of the population living in towns and cities, Pakistan is the most urbanized country inSouthAsia, and exposure to urban and industrialpollution is a rapidly growing concern. Overall, environmentalhealthrisks are estimated to contributemore than 20 percent o f the total burdenof disease. At about 25% of GDP, the contribution of amculture to Palustan's GDP i s close to the regional average, but the sustainability o f thisproduction i s subject to greater environmentalthreats than inother South Asian countries. The irrigated share o f crop land(80 percent) i s almost twice the regional average, butnearly 40% of this area i s water-logged, and 14percent i s saline. Forest and rangelandproduction i s also at risk, with rates of deforestation about ten times the regional average, and rangeland productivity estimated to be only one-third o fits potential, with upto 80 percent ofrangeland degraded. 3. Palustan's environmental challenges, and the difficulty of integrating sustainability criteria inthe policy and planningprocesses, threaten the country's povertyreduction efforts and long-term economic growth. The limitsofresource-intensive development are indicatedby World Bank estimates which suggest that when the costs o fnaturalresource depletion, pollution and consumption of fixed capital are factored in, grossnational savings are cut by half. The linkages between environment and poverty through the impact o f environmental degradation on livelihoods, health and vulnerability are explicitly recognized inPakistan's Poverty Reduction Strategy Paper (PRSP), which was presentedinDecember, 2003, and emphasizes sustainedrapid growth as the basis for poverty reduction. While the legislative framework for environmental management i s largely inplace, and many aspects o fthe Government's reformagendacanbe expected to have positive environmental outcomes, the PRSPrecognizes the urgentneedto strengthen the capacity of the institutions charged with its implementation. 2. The Responseofthe Government ofPakistanandDevelopmentPartners 4. Since adopting the National Conservation Strategy (NCS) in 1992, the Government of Pakistanhas made considerable progress inraising public awarenesso f environmental issues, and establishing a regulatory and institutional framework for environmentalmanagement. Implementation o f the NCS over the period 1992-1 999 was supported by the World Bank through the Environmental Protectionand Resource Conservation Project (EPRCP). Although the Project contributedto the development ofnew institutions, the enactment o f environmental legislation, and the promotion of environmental awarenessand environmentaleducation, the effectiveness o fthe institutionsand legal framework i s yet to be fully realized. 1 5. TheNCS sought to double conservation-related investments to an average o fUS$500 million a year. The midterm evaluation o f the NCS indicatedthat the average total investment in conservation for the period 1993-98 was about US$180 million a year, or less than20 percent o f the estimated need. Ina further initiative to strengthen implementation o f the NCS, the National Environmental Action Plan (NEAP)was approved in early 2001. The NEAP was designed to provide direction for the Ministry of Environment by focusing on four core program areas: clean air, clean water, solid waste management, and ecosystem management. While some additional capacity has been establishedat the federal level with the assistance o fUNDP, the NEAP project approval process was not integrated with the Government's budgeting system, and as a result has not succeeded inmobilizing additional financial resources for environmental programs, and has notprovideda strategic impetus for improved environmental management. Reflectingthese shortcomings, the PalustanNational Human Development Reportpublishedby UNDP in2003 reiterated the needto strengthen systems and capacities inenvironmental management at all levels, inparticular the professional capabilities o f the Federal and provincial Environmental ProtectionAgencies. 6. The Government's program for implementingthe PRSP agenda i s embodied inthe Medium Term DevelopmentFramework 2005-2010 (MTDF), which was adopted inmid-2005. Finalizationo f the MTDFcoincided with approval o f a new and far-reaching National Environmental Policy (NEP), with the goal to "...protect,conserve and restore Palustan's environment inorder to improve the quality of life o fthe citizens through sustainable development", and establishing directions for water supply and management, air quality, waste management, forestry, biodiversity, energy efficiency, and agnculture. Most importantly, the MTDFincorporates a significantincreaseinthe budget allocated for environmental management to support implementationo f the NEP. 7. Itis against thisbackgroundo f importantnew commitments to strengthenenvironmental management for sustainable growth that the Government o f Palustan and the World Bank have developed this Strategic Country Environmental Assessment (SCEA). As the Bankprepares a new Country Assistance Strategy, proposing a lending programo f up to US$1.5 billion per year inwhich fast-disbursing development policylendingmay formupto halfofthe total, the SCEA i s intended to help ensure that efforts to support poverty-reducinggrowth and environmental management are mutually reinforcing, 3. Objectives of the SCEA 8. The principal objectives o fthe SCEA are to: (i) review the status o f selected high-priority environmental concerns; (ii) assess the capacity o fthe environmental institutionscharged with addressing these concerns; and (iii) propose initiatives and possible Bank support to help to strengthen this capacity. The main audience for the SCEA is governmental, inparticular environmental and planning authorities at Federal andprovincial levels, as well as World Bank teams seelungto strengthen environmentalmanagement capacity through development policy, sectoral and dedicated environmentaloperations. 4. A Frameworkfor AssessingPolicy Effectiveness 9. What determines environmental outcomes? This report conceptualizes the problem as an environmental "production function" or process, where a multitude o f inputs interact to create an output environmental quality. The first andmost obvious factor that determines environmental - outcomes i s the level o f environmentalpressure, which i s shaped by the scale, composition and efficiency o f economic activity. These impacts are mediated and influencedby government 2 ure I.lprovides sc ;t I the environmental impact assessment system, (ii) air quality, and (iii) supply and urban water sanitation. Inaddition to their significant poverty and development implications, these issues were identified as areas with potential for highimpact interventions, based on a consideration o f the mandates o f the federal and provincial environmental authorities. 12. The EIA system is the most visible tool usedto address environmental concerns in sectoral investments, and air quality and water pollution are prominent issues, particularly affecting the quarter o f Palustan's populationliving incities. The selective focus o f this report does not necessarily reflect the economic significance o f these environmental problems, but instead responds to the priorities identified at the launchworkshop, and the prominence o furban issues and the EIAprocess inpublic discourse. 13. Followingthe launch workshop, a team o f consultants1 was selected to lead the consultation process, data collection and analysis, and to prepare a draft report which was discussed at a National Stakeholder Conference held inMay, 2005, inIslamabad. Prior to this Conference, provincial consultation were held inLahore, Karachi, Peshawar, and Quetta, each involving a variety o frepresentatives from the private sector, civil society and government. available on the website o fPakistan Environmental ProtectionAgency. Drawing on the Following the National Stakeholder Conference, the consultants' report2was made publicly comments subsequently received, this final version o fthe report has been preparedby the World Bank inclose consultation with the Ministryo f Environment. 6 Structureofthe Report 14. This report is arranged inseven chapters. The following two chapters provide overviews. The first presents estimates o f the costs o f environmentaldegradation, and the second examines the institutions establishedto address these. The followingthree chapters examine inmore detail the three focus areas selected duringthe consultative scoping process: the environmental impact assessment system, urban air quality, and water supply and sanitation. The final chapter o f the report draws together a set o fkey recommendations, and proposes a way forward to apply these recommendations and strengthen environmentalmanagement in support o f sustainable economic growth. IAAB (Pvt.) Ltd. 2(httu://www.environnient.aov.pk/ 4 11.ENVIRONMENTALISSUES AND IMPACTS 15. With its immense altitudinal variation Palustan spans a number o fecologicalregions- ranging from coastal ecosystems, through deserts and flood plains to the mountains of the Himalayas and HinduKushranges. Each o f these ecosystems has played a crucial role in providing the platform for economic development and growth. The rangelands which cover the bulko fthe landmass, sustaina growing livestock industry. The coastalzones o fSindh are highly productive ecosystems, with over 200 species o f fish and a thriving shrimp industry. The forests are a valuable source o f timber and private vital ecological services that protect watersheds and maintain soil productivity. The waters o fthe Indus have converted deserts and arid plains into productive farmland. As a result, agriculture remainsthe country's principal occupation, accounting for over 60 percent o f exports and 25 percent o f GDP. 16. Accompanying this richnatural heritage i s a booming economy. Economic reforms have paid their dividend and the country has achieved record growth rates, buoyant levels o f investment and sustainable fiscal balances. Longterm growth rates too have beenreasonable and have averaged 2.6 percent since 1960, exceeding most other countries inSouthAsia. But this remarkable record is blightedby other pressures. Poverty stubbornlypersists, diseases are widespread and the natural resource base on which the economy depends, i s stressed, threatening to undermine growth prospects. Many o f the environmental and developmental challenges facing Pakistan are common across the region and much o fthe developingworld. The decline inforest cover, degrading soils and rising levels o f air and water pollution are some o f the problems that Pakistan shares with its South Asian neighbors. uniquely disadvantagedby its dependence on a single river -the Indus- for its surface water. 17. Butat the same time there are important differences. Palustanis largely aridand The country i s therefore more vulnerable to the consequences o fbasin degradation and water pollution than any o f its neighbors. Agncultural growth i s further threatenedby depleting soil fertility, degrading rangelands and encroaching deserts, while the coastal wetlands o f Sindh, deprived o f water, are losing their productive potential. An estimated 70 percent o f the population i s rural andrelies heavily on naturalresources for their livelihoods. Consequently, a degrading resource base directly affects poverty outcomes. Inshort, many o f the economic challenges facing Pakistan have their genesis inenvironmental problems. 18. InPakistan, aselsewhere, environmental decayisbothacauseandconsequence of poverty. A fragile and damaged resource base i s a major cause o fpoverty: agricultural yields are lower on degraded land; as forests are depleted access to vital livelihood resources declines. To subsist the poor are compelled to mine and overuse the limited resources available to them. This has created a vicious downward spiral o f impoverishmentand environmental degradation. 19. The aim o f this chapter i s to chart the country's environmental record, focusing on the links between the environment and the economy. The fundamental message i s that neglect o f the country's natural assets has come at a significant economic cost and addressing these problems would pay economic dividends - strengthening the growth potential o f the economy, reducing poverty and the incidence o f disease. The chapter provides estimates o f the economic costs o f environmental degradation, developed at the request o f the Government o f Pakistan at a workshop held inIslamabad. A comprehensive description o f the data, methodology and analysis i s provided inthe Technical Annex to facilitate regular updating o fthe economic dimension o f environmental degradation and promote greater research. 5 1. A Snap-Shot for Setting Policy Priorities TheEconomic Consequencesof Environmental Degradation 20. Pakistan's environmental problems are a concern, notjust because o f the intrinsic virtues o fpromoting responsible environmental stewardship, but also because o fthe economic consequences o f environmental degradation. Usingconservative estimates this Chapter3finds that the mean annual cost o f environmental degradation i s approximately 6 percent of GDP. The costs are of a similar magnitude to the recent growthperformance recorded inthe National Accounts. The implication o f this continuing degradation is that despite record GDP growth rates many development indicators continue to show limited improvement. 21. The mean estimated annual cost o f environmental and natural resource damage i s about 365 billion Rs. per year or 6 percent o f GDP. This figure i s an approximation and i s based on those parameters for which reasonable estimates are available. The contribution o f each source of degradation to this total i s indicatedinFigure 2.1. The highest cost i s from inadequate water supply, sanitation and hygiene (Rs. 112billion) followed by agricultural soil degradation (Rs. 70 billion) and indoor air pollution (Rs. 67 billion). Urban air pollution (particulate matter) adds another Rs. 65 billion. The estimated cost o f lead exposure i s about Rs.45 billion. Rangeland degradation and deforestation cost are the lowest at about 7 billion Rs. intotal. These low estimates are somewhat misleading and reflect the lack of data that has led to partial estimation o f values and the already low productivity o f these resources. To guard against overstatement, the estimates are based on conservative assumptions and therefore represent the lower bounds o f zone degradation - for which there is no adequate data (Box 2.1). As a consequence calculations damage. They also omit several important categories of loss -most notably fisheries and coastal o fthe relative share o fdamage must be interpreted with the utmost caution since the magnitude o ftotal damages inunknown since the impacts o fnatural resource degradation have been underestimated. Figure2.1: Share of Costs of Environmentaland NaturalResourceDamages (Rs. Billion per Annum) EWater supply,sanitation 4.2, and hygiene I3Indoorair pollution EUrbanair pollution 04riculture (soilsalinity 70 and erosion) 0 Leadexposure ERangeland degradation 0 Deforestation 3These estimates are based on a study commissioned to support preparation of the SCEA, inresponse to a request from MoE. The detailed study is attached as a Technical Annex. 6 22. Since water supply, sanitation and hygiene issues dominate the costs it is tempting to argue that policy efforts should focus on this sector. Butthis would be premature and does not necessarily follow from these findings. To determine the optimum sequence o f interventions, expectedpolicy benefitsneedto be compared with the anticipated costs. The aggregate estimates providedinthis Report are the first step inaddressing this issue. The next task i s to identify and rank the returns from various policy investments. Inpracticepolicy priorities are guidedby the needto accommodate diverse and often conflicting objectives. The information provided inthis chapter i s a useful complement to the process and provides a rational and transparent basis for decision making. Box 2.1: The Coastal Zone The estimates inthis study are partial and ignore a number o f significant environmental issues because o f limiteddata. Perhaps the most significant omission i s that o fthe mangroves o f the Indus Delta. The interaction o f riverine and deltaic ecosystems created a richresource base that has sustained coastal communities. But reducedriver flows have ledto the intrusion o f sea water into the Indus Delta, rendering agricultural landbarren, contaminating ground water and causing degradation o f the coastal eco-system. Satellite imagery shows a steady decline inthe mangrove forests. In 1990 mangrove cover was estimated at 160,000 ha and by 2003 coverage had shrunk to 106,000 ha. Habitat degradation has resulted ina range o f economic losses, including the depletion o f fisheries, loss o f agricultural land and forests. Surveys conducted by IUCNintwo districts o f Sindh (Badin and Thata) suggest that the human toll has been substantial4 Sea water intrusion may have affected over 135,000 people and ledto losses inexcess o f $125 million. Despite the presumed scale o f the problem, there i s little accurate data on the environmental and economic costs which canbe usedto guide policy decisions. With growing water scarcity the country will face ever more difficult trade-offs between competing demands for water that need to be managedinways that maximize benefits to the entire nation. Sound economic management calls for policies that factor in the full range of externalities social, economic and environmental. - Economic Growth and theEnvironment 23. Economic growth i s the main vehicle for promoting development and reducingpoverty in a sustainable way, so it could be argued that environmental degradation i s the inevitable price to pay for economic success. This i s typically justified interms o f an empirical regularity termed the EnvironmentalK u n e t s Curve which shows that as countries develop, pollution intensity increases at first and then declines. It would be misleadingto assume that this empirical finding implies that environmentalneglect i s an economically prudent development strategy. Inmany casesprevention or mitigation o f damage may be more cost effective than neglect. Inthe short runenvironmental interventionsmay lowerprofits or utilize scarcepublic funds, butthese costs need to be compared to the associated benefits. 24. Environmental degradation disproportionately affects the poor and vulnerable, hence interventions that mitigate environmentaldamage also help to convert growth into broader development benefits. T o illustratethe importance ofthese issues, Figure 2.2 compares the relationshipbetween income and infant mortality inPalustanto that o f other countries inthe same income group.5 Initially infant mortality rates inPakistan were lower than the average for its income group, but thereafter Pakistan grew much faster than the other countries, but disappointingly it laggedbehind on infant mortality. A similar patternholds for other measures 4 IUCN,2003 Indus Delta,Pakistan: Economic Costsof Reduction in Freshwater Flows Paper# 5 5 All countries are rankedinorder of their level of incomein 1960, and the third lowestincomegroup which has the similar level of incometo Pakistanis taken as the "low income" countries. 7 o f environmental performance and development. For instance Pakistan's rate o f deforestation between 1990 and 2000 has been greater than that o f other countries inits income group. What these examples illustrate is that development outcomes are a consequences ofpolicy choices and there i s no assurance that a country can simply "grow-out" o f environmentalproblems. Put simply, any given amount o f growth can deliver higher development benefitsifthere are policies inplaceto address thenegative externalities that impede progress, suchas impacts onhealthand degradation ofthe productive resourcebase. Figure2.2: IncomeandInfantMortality Trend of Income and Infant Mortality, Benchmark Countries and Pakistan, 1960- 2 0 0 3 I60 40 0 100 200 300 400 500 60 Per capita GDP ($US) +Pakistan +BenchmarkCountries \ 1 2. The CostsofEnvironmentalHealthRisks 25. Goodhealth i s not only a crucial part o f well-being, but contributes directly to economic growth. The most direct economic effect o f improvedhealth i s interms o f greater productivity and educational outcomes. A healthy populationalso frees upresources consumed by health care for other productive purposes. Economic growth i s the essential first step inpoverty reduction, butitbringswith it environmental challenges that can impede and constrain the growthprocess. Air andwater pollution, unsafe waste disposal, landdegradation andthe exposure to agro- industrial chemicals are among the leading causes o f illness and child mortality indeveloping countries. All of these hazards are preventable, often through simple and cost effective interventions. 26. The World Health Organization estimates that environmentalhealthhazards account for over 20 percent o f the overall burden o f disease worldwide. This is comparable to malnutrition and i s larger than all other preventable risk factors. The vast majority o f environmental heath impacts are indevelopingcountries where there i s a strong correlationbetween the level o f poverty and the environmental burden of disease. The poor are exposed to greater environmental 8 healthrisksbecause o f the surroundings inwhich they live, the lack o fbasic services and their greater vulnerability due to malnutrition and inadequate health care. So poverty and illness reinforce each other, contributing to exclusion and economic deprivation. 27. This chapter examines the healthimpacts from three major sources o fpollution, contaminated water, urban air pollution and indoor air quality. Due to lack o f data the costs associated with hazardous waste and exposure to industrial and agncultural chemicals are not included. The healtheffects are presented inthree forms: interms o f the affected population, Disability Adjusted Life Years (DALYsf and economic costs. T o translate health effects into a monetary metric the Cost of Illness Approach is usedto measure the effects o f illness. The cost o f illness includes: medical costs, income lost and the "avoidance costs" associated with actions taken to prevent or mitigate the risks o f illness (e.g. boiling contaminated drinkingwater). Mortality impacts are monetized intwo ways. Child mortality is valued using the Human Capital Approach, which measures the discounted value ofincome lost due to premature death. Adult mortality i s measuredinterms o f the Valueof StatisticalLife usingestimates from global studies, adjusted for income and exchange rates. Box 2.2 provides a brief overview o f the methodological issues. To guard against overstating damages, modest assumptions are used to parameterize impact and cost coefficients. The Technical Annex provides comprehensive details o f the damage estimates, assumptions and sources of data. TheHealth Effects of Water Quality, Sanitation and Hygiene 28. Palustan i s an arid country with low, unreliablerainfall averaging 250 mma year. Classified as water stressed, the country uses almost all o f its available water supplies inmost years. Populationgrowth coupled with the demands o f industrializationand urbanizationare expected to create conditions o f absolute water scarcity ina few decades. Water shortages are compounded by water quality problems. Untreatedpollutants from industrial, agncultural and urban sources are releaseddirectly into water bodies intended for human consumption, with little regardfor assimilative capacity o f eco-systems. The result i s heavily polluted water around towns and cities and a highincidence o f disease, especially among the urbanpoor. 29. The links between water quality and health risks are well established. Inadequate quantity and quality o fpotable water and poor sanitation facilities and practices are associated with a host o fillnesses such as diarrhoea, typhoid, intestinalworms and hepatitis. Limitedby data problems this study focuses on the two most common water related illnesses, diarrhoea and typhoid, and estimates that more than 1.6 million D A L Y s are lost annually as a result o f death and disease due to diarrhoea, and almost 900,000 as a result o f typhoid. Diarrhoeal and typhoid ,mortality inchildren accounts for the bulk o f the losses, reflectingthe vulnerability o f children to these diseases. Froma policy perspective the more informative estimate i s presentedinFigure 2.3 which summarizes the costs o f water relatedmortalityand morbidity. The total health costs are estimated at Rs 114billion, or approximately 1.81percent o f GDP. Strihng are the high proportion o f costs due to premature child deaths, followed by the mortality impacts o f typhoid in the older population. 6DALYsare a standard measurethat combine disparate health effects using a consistent common denominator. DALYsadjust the years o fhealthy life lost to illness andpremature mortality, with aweighting function that corrects for the impacts o fdeath and illness at different ages. Though DALYsprovide a useful summary measure o f the physical effects o f illness and death, they provide little informationabout the economic consequences o f ill-health. 9 Box 2.2: Measuringthe Economic Impactsof Illnessand PrematureDeath The consequences o f morbidity and premature mortality are complex and varied. To make meaningful comparisons across diseases and risk factors it is necessary to aggregate these impacts using a common unito fmeasure. DALYs(Disability Adjusted Life Years) are the standard measure usedto bring disparate health effects to a common denominator. DALYs measure the years o f healthy life lost to illness and premature mortality, with a weighting function that adjusts for the impacts o f death and illness at different ages. While D A L Y s provide a useful indicator o f the effects o f illness and premature death on physical well- being, they provide little information on the economic impact o f diseases. Mortality and morbidity impose costs o n individuals, households and society at large. These include the direct costs o f illness such as expenses related to clinical visits, hospitalization, treatment and care giving. Inadditionthere are indirect costs from loss o f earnings and impairedproductivity. These are termed the costs o f illness and are relatively simple to compute. Medical costs are calculated by determining the type o f treatment provided and the associated costs. Earning losses can be determined using the Human Capital Approach which calculates the discounted value o f income lost through either sickness or premature death. Further adjustments can be made for the unemployment rate to reflect the probability o f obtaining paid work. However, illness andpremature death also impose more subtle and less visible forms o f economic loss. For instance workers generally demand higher wages for riskierjobs, or they may purchase safety equipment to reduce the risko f death and injury.Alternatively individuals often take costly averting actions (e.g. installing water filters inhomes) to minimize health risks. These examples demonstrate that individuals routinely trade income for outcomes that lower the risks o f mortality and avoid the pain suffering associated with illness. A number of approaches have been developed to measure these losses. One method termed the hedonic wage approach infers risk premiums from observed differentials inwage rates. Another approach, that i s more relevant to environmental health studies, i s termed the contingent valuation method and uses surveys to elicit preferences for avoiding illness, death and pain. The cost o f illness approach ignores these values and therefore underestimates the economic consequences o fpremature mortality and morbidity. It should therefore be treated as the lower bound o f the true costs o fpremature mortality and morbidity. Unfortunately, most hedonic and contingent valuation studies have been conducted indeveloped countries where data i s more widely accessible. There are no estimates available for Pakistan. Under these circumstances it is common to transfer the estimate from one country to another, after making appropriate adjustments for differences inincome, exchange rates and other relevant factors. The key concern intransferring values across countries relates to income differences. Economists treat health as a normal good which implies that the willingness to pay for good health rises with income and wealth. Hence estimates transferred from highto low income countries need to be adjusted for differences in income. Income elasticity is the measure used to capture variations inthe demand for health across income levels. A number o f studies fmd that an income elasticity o f 0.4 shouldbe used to transfer estimates from one country to another. This implies that a 1percent reductioninincome induces a 0.4 percent decline inthe demand for healthoutcomes. To guard against exaggeration, this report uses a more conservative income elasticity o f 1, which implies that the decline inthe demand for health is proportionalto income changes. Further complications arise intransferring the societal losses from the death o f children from one country to another. There is little consensus on the appropriate adjustment factor. Taking a conservative approach this report values the economic losses from premature child mortality simply in terms o f the loss o f future income. This clearly underestimates the true economic losses, but has the advantage o fprecluding overstatement o f damages. 10 Figure 2.3: Estimated Costs from Water-Related Mortality and Morbidity (Rs. Billionper Annum) L1Time loss (morbidity) from diarrhea and typhoid IMortalityforchildrenunder5 from diarrhea and typhoid Mortalityfor populationover 5 years of age from typhoid Cost of bottledwater to awid diarrhea 0 Costof boilingwaterto avoid diarrhea Cost of Hospitalization and medication due to diarrhea and typhoid Urban Air Pollution 30. With an estimated 35 percent ofitspopulationliving incities, Pakistanis the most urbanized country inSouth Asia. Its cities continue to grow, offering employment opportunities, amenities and facilities not found elsewhere inthe country. Butrapid urbanization has been accompanied by environmental problems such as pollution, waste management, congestion and the destruction o f fragile ecosystems. Urban air pollution remains one of the most significant environmental problems facing the cities. A substantial body ofresearch demonstrates that high concentrations o f suspended particulates adversely affect human health, provolung a wide range o frespiratory diseases and heart ailments. The most hazardous are fine particulates o f 10 microns indiameter (PM10) or smaller. Worldwide, fine particulates are implicatedin500,000 premature deaths and 415 million new cases o f chronic bronchitis.7 31. InurbanPalustan, as elsewhere, the major sources offine particulate pollutionare vehicles, combustion o f fossil fuels in factories, andpower plants. The problem i s aggravated by an aging fleet o f vehicles inpoor mechanicalcondition and low levels o f fuel efficiency. Over the past decade the number o f diesel trucks inmajor cities has increased dramatically, creating an additional source o f pollution. Though many cities are adversely affected, air quality monitoring i s restricted to the six major cities: Karachi, Lahore, Islamabad, Peshawar, Quetta and Rawalpindi. Ambient concentrations o fparticulates inthese cities lie consistently above World Health Organization guidelines, and are on average two to four times the recommended levels (the detailed data are presented inFigure 5.1). 32. Most o f Palustan's urbanpopulation lives incities where air quality i s unmonitored. Excludingthese cities fiom the analysis o f health impacts would clearly represent a serious omission. To address this problem PMlO concentrations are estimated usinga World Bank model o f particulate emissions. Two sets o f estimates are presented, to capture the potential imprecisiono f the forecast values. 7 WHO 33. An exposure-response relationship exists between concentrations o fparticulates and health outcomes. The health impacts identifiedinthis report are basedon epidemiological assessmentsrecommended by the WorldHealth Organizationand include chronic bronchitis, mortality caused by a higher incidence o f lungcancer, cardiopulmonary and respiratory problems. The annual health effects o f ambient particulate air pollution are presentedinTable 2.1. Urban air particulate pollution i s estimated to cause around 22,000 premature deaths among adults and 700 deaths amongyoung children. The total healthcosts are between Rs62-65 billion, or approximately 1percent o f GDP. Table 2.1: Annual Cost of UrbanAir PollutionHealthImpacts(BillionRs.) I I I 34. Interms ofannualDALYslost, asindicatedinFigure2.4, mortality accounts for an estimated 60 percent, followed by respiratory symptoms. The bulko f losses are due to adult premature mortality, which i s consistent with evidence from other assessmentsthat find adults to be more vulnerable to respiratory symptoms and in greater danger o f lungcancer. Figure2.4: AnnualDALYsLost dueto UrbanAir Pollution I rn Prematuremortalityadults 7,178 Mortalitychildren under 5 rn Chronic bronchitis 163,432 0 Hospitaladmissions Restrictedactiwtydays Lower respiratoryillness in children 22,385 Respiratorysynptoms ~ 12 Airborne Lead Pollution 35. Airborne lead is one o f the most harmful particulate pollutants. Young children are especially vulnerable since leadpoisoning causes learning disabilities, hearingloss and behaviouralabnormalities. Inadults lead absorption i s responsible for hypertension, blood pressure problems and heart disease. Lead exposure can come through breathing and ingesting leadparticles. The original sources o f lead can include leaded gasoline, industrial lead emissions to air, water, and land(e.g., from smelters), leached lead from lead pipes carrying drinkingwater, contaminated food, leadpaint, and pottery. Once inthe environment, lead accumulates insoil and water. Significant amounts o flead were added to gasoline (0.42 g/1 inregular gasoline and 0.84 g/1 inhighoctane gasoline), until,recognizing the gravity o f the problem, the government intervened to ban lead from gasoline. In2001-2002 all major refineriesannounced that they would move to productiono f leadfree gasoline (Paul et al, 2003). However the healthimpacts will persist for several decades as leaddeposits accumulated insoils andwater tend to dissipate slowly over time.8 As a resultnumerous studies inPakistan report elevated levels o f lead in blood samples.9 36. Table 2.2 presents the mortality and morbidity impacts attributable to lead exposure. The incidence o f gastrointestinal disease is highest, followed by anaemia, but it i s the impact on IQ that i s most troubling. Since IQ i s irreversible, it deprives thousands o f children each year o f loss opportunities, lowers productivity and earning capacity and imposes highhuman and economic costs on the country. Table2.2: AnnualAttributedIncidenceofLeadExposure 1 Cases I DALYs 11 Loss Mortality: Cardiac, ischaemic, hypertensive, 1114 21095 cerebrovascular Morbidity: I Gastrointestinal effects 660000 121,896 Anaemia - children 500000 Anaemia - adults 655000 4,225 Cardiovascular disease - adults 21095 MildMental Retardation- children 170000 177940 Table2.3: AnnualHealthCost dueto LeadExposure(BillionRs) Total cost Mildmentalretardation IQchildren loss 28-42 GIeffects children 260.12 8 International experiencesuggests a 39 percent decrease oflead inblood over 5-year period, or 7.8 percent annually. Hence 0.078 i s the correction factor that is applied inthis study to reflect annual reduction of lead concentration in blood starting in2002. 9 (White et al, 2001, Rahmanet a12002) 13 37. Table 2.3 translatesthese impacts into monetary costs. The total economic burden i s between Rs 38-52 billion a year, or about 0.7 percent of GDP. It should be emphasizedthat these are highly conservative estimate basedon modest assumptions and restrictedto the populations of the major cities (36.2 millioninhabitants). Ifthe exercisewere extended to the entire affected populationof the country, the health losses would likely double. Indoor Air Pollution 38. Indoor air pollution i s a seriousproblem inPalustan. The use of traditional biomass fuels suchas wood, dungand cropresidues is widespread across the country. According to the 1998 Palustan Census 86 percent o frural households and 32 percent of urbanhouseholds rely on these as their primary coolung fuel. Biomass burntinpoorly ventilatedhomes has severe health consequences, particularly for women, young children and the elderly who are most likely to be exposedto indoor pollutants. Several studies have shown strong associations betweenbiomass combustion and an increased incidence of chronic bronchitis and acute respiratoryinfections. Evidenceis also emerging o f linkages withtuberculosis, asthma, cataractsand low birthweights, though further researchi s needed to quantify the magnitude of these impacts. 39. Research suggests that the health effects of indoor air pollution vary and dependon the concentration of eachpollutant, the mix o fpollutants andthe levels of exposure.10 To capture this uncertainty arange ofdamage estimatesare presented. Table 2.4 presentsthe estimated annual healthimpacts. Indoor air pollution accounts for over 28,000 deaths a year and 40 million cases of acute respiratory illness. Total annual cost of indoor air pollution is estimated at Rs55- 70 billion, with a mean estimate of Rs 62 billion or approximately 1percent o f GDP. Indoor air pollution clearly represents a significant economic burdenand remains an issue that warrants considerably greater policy and analytical attention than i s currently givento it. EstimatedNumber of EstimatedAnnual Cost Cases (Million Rs) Low High Low High Acute RespiratoryIllness: Children (under the age o f 5 years) - 21,933 31,060 27.83 39.40 increased mortality Children (under the age o f 5 years) - 29,508,800 41,788,200 4.26 6.03 increased morbidity Females (30 years and older) - increased 10,754,600 15,229,800 2.04 2.89 morbidity Chronic obstructivepulmonary disease: Adult females -increased mortality 7,408 11,433 25.84 25.84 Adult females -increased morbidity 21,850 33,721 0.12 0.18 Total 60.08 14.34 3. The Costs of NaturalResource Degradation 40. Pakistan's location at the cross roads o fthe tropics, deserts and mountains shape many o f the natural resource issues confronting the nation. The country has a total area of 79.61 million 10(Desai et a1 2004) 14 hectares, 70 percent o f which i s classified as arid and therefore vulnerable to desertification.11 Despite low and unreliablerainfall, 27 percent o f the land i s under cultivation and 60 percent i s classified as rangelands. 41. Agricultural expansion has been fueled by the country's vast irrigation network. There have been two major epochs o fproductivity growth. The first phase was markedby the Green Revolutionwhere growth was propelledby the introductionof highyielding varieties and new technology. This was followed by an era o f intensification, where productivity increases were driven by higher fertilizer, pesticide and water use. Despitethe dramatic increases in productivity, by global standards Palustan's performance has notbeen exceptional. While acknowledgingthat yields are the product o f a host o f factors -including geography and policy - the international comparisons inTable 2.5 are instructive inrevealingPakistan's relativeranlung. For instance, Egypt,with broadly similar ago-climatic conditions has yields that are three times higher. Table 2.5: Wheat Yields (Kwectare) Egypt 6006 Mexico 4766 5100 China 3806 3777 India 2708 2770 Pakistan 2325 2262 Turkey 2033 2075 Iran 1703 1984 42. The nation confronts a receding land frontier. Landdegradation (salinity, water logging and fertility loss) coupledwith the pressures o f industrializationhaveplacedphysical limitson the ability to expand cropped area and there i s little prospect of increasing cultivable land. Estimates suggest that about 40 percent o f irrigated landhas been affected by either salinity or water logging. Paradoxically ina country where water scarcity is a problem, there is strong evidence that agncultural yields decline with water availability. This i s illustratedinFigure 2.5 which shows that, excluding the drought years o f 2000 -2002, agriculturalproductivity in Sindh i s inverselyrelated to the amount o f the canal water released. This i s a direct consequence o f over-watering. The supply driven irrigation system encourages farmers to irrigate when water is made available, rather than when it is needed. Since irrigation fees are low and unrelated to consumption, there is a tendency to use all available supplies. The consequence i s an increase in waterlogging, damage to soil structure and a reduction inproductivity. 43. Evidence from other sources corroborates this general pattern. Satellite images acquired from 1984-85 (a normal year) and 2000-01 (a drought year) shows that the yield o f some crops (notably wheat) inPunjab increased duringthe drought year. Production function analysis o f wheat output across Sindh in 1997-98 reveals a similar trend." The analysis finds that the productivity o f irrigation varies substantially across farms inSindh with "partial elasticities" o f water ranging from a low o f -0.2 to a higho f 0.59. This implies that on some farms additional watering would lower output by about 20 percent, while on other water-constrained farms 11 IUCN(2002). 12 Husain, I,FMarikarand W Jehangir, 2001, Productivty and Per$ormance ofIrrigated WheatFarms across Canal Commands in theLower Indus Basin. 15 increasedirrigation would raise output by about 59 percent. The conclusion to be drawn from the evidence i s clear. Reallocating water from the profligate to the productive users would confer multiple benefits -reducingthe incidence o f waterlogging and increasing agncultural productivity. Limited by data availability this study does not provide estimates o f the losses due to sub-optimal water allocations, or the consequent impacts on the coastal zone. Instead the focus i s on agricultural losses from salinization, soil erosionand rangeland degradation. Figure 2.5: AgriculturalProductivityDeclineswith CanalReleasesinSindh i 601 Canal Releases and Productivity 50 - k 40- U -m530- @` 2000-0 ought years 20- 0 0 0.5 1 1.5 ProductivityEffect Source: World Bank calculationsfrom Pakistan Agricultural Statistics Salinity Impacts 44. Salinity i s one o f Pakistan's most serious problems. Common to other arid regions, Palustanhas naturally saline soils, butthe problem has been compoundedby consistent mismanagement o f irrigation and human induced soil erosion. Official statistics indicate that over 25 percent o firrigated land suffers from various levels o f salinity, with over 1.4 million hectares beingrendered uncultivable due to excessive salinity levels. Salinity imposes direct economic losses, throughreduced yields and less visible indirect losses through changes in farming practices or the cropping mix. These impacts are approximated by the value o f "lost" output related to salinity. Two sets o f estimates are presentedto account for plausible (though not optimal) adjustments to cropping patterns inresponse to salinity. The total annual cost o f yield reductions from salinity i s estimated at Rs 15-55 billion. Including lost opportunities from cropping on the 1.4 million hectares o fland with highsalinity level adds a further Rs 10-18 thousand per hectare.13 This bringsthe total estimated cost o f salinity to Rs 30-80 billion, with a mean cost o f Rs 55 billion, or 0.9 percent o f GDP in2004. Groundwater Changes 45. Issues related to groundwater are becoming increasingly urgent and complex. Inthe major surface irrigation areas, groundwater levels initially rose, contributingto salinity and water- loggingproblems. Increasedefforts inabstraction o f groundwater to manage this concern also led to the widespread use o fthe better quality groundwater to complement surface irrigation. This informal conjunctive use has been a major contributor to agricultural output butisnow also 13 Dost (2002). 16 2 47. 'S'hecstin1 17 Rangeland Degradation 48. Rangelands cover the bulko f the arid and semi-arid zones which are characterizedby low precipitation and extremes o f temperature. The naturalproductivity of these pastures i s generally low and they remain vulnerable to desertification. Livestock are an integralpart o f the rangeland economy. Inthe Northern provincespastoralism i s the only livelihood option, and i s the principal source of income accounting for over 90 percent of household income. Inregions where agro- pastoralism i s the main farming activity, the contribution o f livestock varies from 30-70 percent. 49. The livestock population has doubled since 1975 and this trend shows little sign o f abating. However there is clear evidence that the carrying capacity has been exceeded inmost ranges. Overstoclung and overgrazing leads to soil compaction, andthe removal o fvegetation, renderingthe soil vulnerable to subsequent wind and water erosion. An FA0 survey based on satellite imagery classified 85 percent o fthe total rangelands as degraded. Inaddition there has been a substantial reduction inrangeland as areas have beentransformedfrom grazing commons to unproductive deserts. The most substantial reduction o frangelands occurred inthe Northern Areas and Balochistanin 1992-1997. Inabsolute terms rangelands inBalochistansuffered the greatest decline o f 3.6 million hectares as result of desertification and denudation o f vegetation from drought and continuous overgrazing. 50. Losses on the rangeland are valued interms o f the reductionof fodder yield and approximate Rs 3.6 to 5.4 billion per year. This amount may seem modest when compared to other environmental damages, but there are three important issues which suggest that this estimate grossly understates the development and strategic significance o f the rangelands. First the rangelands are home to amongthe poorest o fthe country's population, so that the impact o f pasture loss i s highly regressive, falling disproportionately upon the rural poor. The rangeland population i s also highly exposed to natural disasters such as droughts and floods that can lead to absolute destitution. As a corollary, policy interventions that improve rangeland productivity, and so provide a buffer against natural disasters, yield a highpoverty dividend. Second, much o f the degradation o fthe rangeland is irreversible. This implies that productionlosses are suffered inperpetuity andtherefore considerablyhigher than the figures recordedhere. 51. Third, even this adjustment does not fully account for the economic significance ofthe rangelands. Inthe past, traditional rules and practices assured sustainable use o fpastures, but these practices have now largely disappeared as a result o fpopulation pressures and other changes. Public interventions on the rangelands have been sporadic and solutions to the problem have remainedelusive. This i s not surprising since the most degraded lands are inhostile and inaccessible territory. Research finds that poverty and environmental degradation are seldom the direct causes o f conflict, however, poverty makes conflict relatively more attractive than seelung negotiated peaceful solutions. Consequently, economic factors aggravate existing (social and political) tensions, tippingthe balance towards conflict. The dilemma for policy makers i s that rangeland degradation creates poverty and thus fuels hostility. This inturn renders interventions ineffectual, suggesting the need for placing a higher priority on the causes and consequences o f rangeland degradation, particularly inregions prone to conflict. 52. Table 2.6 summarizes the estimated losses as a result o f salinity, soil erosion and rangeland degradation considered above. The mean estimate of the combined losses exceeds Rs. 74 billion annually, equivalent to more than 1percent o f GDP. 18 Table 2.6: EstimatedAnnual Cost of AgriculturalLosses from Soil Salinity, Erosionand RangelandDegradation TotalLoss (billionRs) Low Mean High Salinity Costs 30 55 80 Soil Erosion 15 15 15 Rangeland Degradation 3.6 4.2 5.4 Total Loss 48.6 74.2 100.4 Forests 53. Forests occupy a relatively small proportion o f the land area inPakistan (some 3 - 5 percent), but nevertheless play a vital role inthe country's economy. Forests remain an important source o f fuelwood, grazing land, livelihood and government revenue. Forests also provide multiple ecological-services such as watershed protection, soil conservation, biodiversity habitat and play a vital role inassuring eco-system resilience (i.e. stability). However, there i s insufficient information to estimate the full economic value o f the country's forests, and the estimates provided here are based on assessments drawn from studies inother countries. 54. Data on forest status inPakistan vary significantly and are highly controversial. Some statistics indicate that forest cover has acceleratedrapidly since 1999, withregenerationrates in excess o f 5 percent. However, commentators observe that these figures seem highand exceed the regenerationrate of most indigenous forest species. This Report does not contribute to this debate and instead uses the data provided by the Natural Forest Resource Assessment (NFRA). While this seems closest to globally accepted definitions and classifications, the data on forest cover used inthis Report are not the same as those publishedby the Government. 55. The NFRA classificationshows that forest cover i s declining inPakistan.15 The estimated deforestationrate over the 1990-2005 period i s 2.1 percent or 47 thousand hectares annually. Forest types included inthis definition o f forests are coniferous forest, riverain and mangrove forest. It i s estimated that the most valuable coniferous forest i s declining at the rate o f 40,000 hectares annually. Northern Areas and NWFPhave the highest annual rates o f deforestation (about 34,000 hectares inNorthern Areas and 8000hectares inNWFP). Riverain and mangrove forests are also decreasing at the rate o f 2,300 and 4,900 hectares annually. This i s an alarming rate given the quite highecological value o f these types o f forest. 56. Usingthis classification, the estimated costs o fdeforestation inPalustan are between206 to 334 million per annum, as summarized inTable 2.7. The direct use values, reflecting local private forest losses, include the losses from sustainable logging, non-timber products, tourism and recreation. The relatively low figure for deforestation losses i s due to the omission o f a wide range o f forest services related to non-use values for which plausible data are unavailable. Small aggregate losses also reflect the low level o f forest cover. This o f course does not imply that interventions are unwarrantedand uneconomic. The effectiveness o fpolicies needs to be determined by comparingthe cost o f investment to the marginal benefits. 15NFRAS (2004). 19 Table 2.7: Costs of Annual Deforestation (Million Rs) FOREST SERVICES 4. GlobalComparisonsofEnvironmentalSustainability 57. Having assessedthe costs o f degradation inPakistan it i s instructive to compare the overall environmental performance with other countries. A number o f environmental sustainability indices havebeen developed to facilitate this process. The most comprehensive and widely quoted measure i s the Environmental Sustainability Index (ESI), a collaborativeventure o f the Yale Center o fEnvironmental L a w and Policy and CIESIN at Columbia University. ESIi s a composite index o f 21 indicators that cover five broad categories o f environmentalpressure.16 As with any other aggregate index, the ESIis not without its shortcomings. Giventhe lack o f information inmany countries, the ranlungs are an approximation o f sustainability, basedon an aggregation o f a wide array o f indicators. 58. Among the countries o f South Asia, Bhutan scores the highest ESI, which i s unsurprising for a country with a low level o f industrializationand sparse population, consequently facing limitedecological stress. Incontrast, as a result o f highpopulation density, a pollution intensive industrial structure, a vulnerable natural resource base, and limited capacity to mitigate environmental stress, Palustan scores the lowest ESI in South Asia. It should be emphasized, however, that the ESIlacks precision inranlung closely clustered countries. Nevertheless, the large disparity between Bhutan and Sri Lanka's score on the one hand, and that o f Palustan, India and Bangladesh on the other, i s sufficient to indicate that Bhutan and Sri-Lanka are on a more sustainable growth trajectory than most o f their South Asian peers. 59. A further weakness o fthe ESIis that it gives an equal weight to all its sub-components and so assumes that environmental stresses are uniform intheir impact across countries. The problem with this approach i s that countries vary intheir vulnerability to different environmental pressures. Insome countries water scarcity may be a more pressing constraint, while inothers ecosystem loss may be a more significant problem. Consequently, the ESI scores are more revealing ifused to benchmark the performance o f countries facing similar environmental problems and constraints. Tables 2.8 and 2.9 divide countries into two possible categories that include Palustan-vulnerability to desertification and highpopulation density. 60. Table 2.8 shows that Pakistan remainsrelatively more susceptible to land degradation than most nations inthe arid-zone category. This vulnerability reflects not only the country's water scarcity, but its ability to cope with the problem. For instance, Israel and Oman like 16The subcomponentsmeasureperformance in the following areas: (1) EnvironmentalSystems, (2) Reducing EnvironmentalStresses, (3) ReducingHumanVulnerability to EnvironmentalStresses, (4) Societal andInstitutional Capacityto Respondto Environmental(5) Challenges, Global Stewardship. 20 Pakistan are water stressed, buttheir higher ESI scores indicate: (i) they face fewer additional that environmental pressures, such as salinity, water logging, or uncontrolled pollution; and (ii)a greater capacity to address environmental stresses. 61. Table 2.9 compares the ESI scores o f countries with a highpopulation density. Pakistan lies inthe lower halfo f the distribution. Somewhat surprisinglythe ESI scores o fIndia, Sri Lanka and Nepal appear inthe upper quartile. Whether judged interms o fregional performance or environmental stress factors, the aggregate sustainability indicators suggest that Pakistan faces a number of environmental challenges that could undermine the sustainability o f its remarkable economic performance. Table 2.8: DesertCountries(250% land classified as desert) Table 2.9: DenselyPopulatedCountries(2 100 personsper km2) 5. Conclusions: EnvironmentalDegradationas a Constraint to Growth 62. A clear conclusionthat emerges from this review i s that environmental degradation eventually translates into socio-economic problems which retard development and growth. There i s a needto address environmental issues through policies and institutional reforms that create the rightincentives for administrators to effectively enforce policies, and for pollutersto comply with regulations. Inthe short term this may increase costs andutilize public funds that couldbe spent on other development concerns. For instance, controlling emissions will raise productioncosts, and protectingrangelands will utilize scarce public funds. These costs need to be balanced against the benefits o freducing environmentalrisks -lower pollution bringshealthbenefits and protectingthe rangelands increases the resilience and earning capacity o f pastures. This calls for regulations and incentive structures that balance benefits and costs, and maximize the sustainability and growth potential o f the economy. 63. For this to be achieved, environmentalgovernance must be fully integrated into economic decision making at the macroeconomic, provincial and sectoral levels. Inaddition, informed and strategic policy malung i s not possible without information on critical issues, so improving the 21 information database inkey environmental sectors, and enhancing the dissemination o f this information, should be a highpolicy priority. 64. Based on the conceptual framework presented inthe first chapter, the following chapters o f this report attempt to identify the bindingconstraints on environmental performance in Pakistan interms o finstitutional design, the regulatory structure, administrative capacity, and accountability. At the outset, two important qualifications are inorder. First, data on environmental institutionsremain sparse, so the analysis and conclusions are necessarily qualitative. Second, many of Pakistan's environmental problemshave a longhistory, so instant solutions are unlikely to be possible, even ifthere were complete reformo f the environmental sector. As this chapter has demonstrated, however, delays ininterventionhave costly consequences for economic growth and the well-being of the poorest. 22 111. INSTITUTIONSFORENVIRONMENTAL MANAGEMENT: CLOSINGTHE LINKSININSTITUTIONALDESIGNAND STRENGTHENING CAPACITY 65. Environmental degradation i s highly visible inPakistan- air and water pollution, land degradation and deforestation are widespread. Consequently there is broad consensus at both the national andprovincial levels that there i s an urgent need to address environmental problems. why thenhas itbeen so difficult to bringaboutthe reformsneededto improve environmental performance? To answer this question, this chapter adopts the environmentalproduction framework outlined inChapter I.Itbegins with a briefreview o f the environmental legal and policy framework. Itthen assesses the design, mandates and resources of the key institutions with environmental responsibilities, principally inrelationto the management o f the impacts o f urban and industrial growth. 66. This chapter suggests that the key performance constraints are not primarily a consequence o finadequate legislation or insufficient funding, but rather are the result o f a few key weaknesses ininstitutional design combined with low capacity to apply available resources. Inparticular, thisassessmentconcludes that the lackofguidelines for oversight ofenvironmental authorities delegated from Federal to provincial agencies i s an important missinglink inthe institutional design. The potential availability o f significant development resources for environmental programs presents a golden opportunity to forge such links between levels o f government by providingresources for unfunded mandates, and developing incentive-based partnerships that would tie funding to the monitoring o fperformance and outcomes inthe implementationo fnational laws and environmentalpolicies. Inturn, such fundingwould allow environmental agencies to overcome a shortage of qualified staffby outsourcinga range o f technical tasks. At the same time as these key constraints are being addressed, this chapter also notes that opportunities exist to strengthen current mechanisms for the mainstreaming and upstreaming o f environmental concerns, and to support the judiciary and civil society organizations inenforcing environmental commitments. 1. Legal and Policy Framework: the Basis of InstitutionalDesign and Direction After more than two decades o f experience with environmentallegislation and policy development, Pakistan's environmentalmanagement framework i s relatively mature. Despite this experience, however, significant aspects o f institutional design and policy direction remain to be resolved, inparticularrelated to the delineation o f authorities, and the promotion o f local and mainstream initiatives. This section identifies the principal elements o f the framework, and concludes that while a relatively comprehensive legal and policy framework has evolved, there remain institutional obstacles to its effective application, which are discussed inmore detail inthe following sections. TheLegal Framework: ConcurrentResponsibilitiesand Delegated Authorities 67. The Fourth Schedule o f the Constitution o fPakistan establishes the concurrent legislative list o f subjects for the Federal and provincial legislatures. "Environmental pollution and i s included inthe concurrent legislative list, which means that boththe federal and provincial governments have constitutionallymandated responsibilities for the management o fpollution and naturalresources. This i s a significant recognition o fthe shared governmental responsibility for environmental protection, but it also raises important questions regardingthe proper alignment and coordination o fthese roles andresponsibilities. 23 68. The cornerstone o f environmental legislationi s the Pakistan Environmental Protection Act o f 1997 (PEPA) which superseded the Palustan Environmental Protection Ordinance o f 1983. The Act establishes the general conditions, prohibitions, and enforcement for the prevention and control o f pollution, and the promotion o f sustainable development. The Act also establishes and delineates the powers and functions o f the Pakistan Environmental ProtectionCouncil (PEPC), Palustan Environmental ProtectionAgency (Pakistan EPA), provincial Environmental Protection Agencies (EPAs), and Environmental Tribunals. Inparticular, the Act creates the authority for delegation o f environmental management functions to the provincial EPAs. Nothinginthe Act prohibits provincial governments from adoptingmore stringent standards or regulations. The juxtaposition o f the concurrent environmental responsibilities established inthe Constitution with the Federal authority to delegate environmental management functions established inthe PEPA creates a tension ininstitutional design which i s yet to be fully resolved. Environmental Policy: Moving towardsDemand-Driven Approaches andMainstreaming 69. The National ConservationStrategy (NCS) was adopted in 1992 as the guiding environmental policy for Palustan and a Mid-Term Review o f its achievements, impacts, and prospects was undertaken in2000. The Mid-Term Review concluded that the achievements under the NCS have been primarily awareness raising and institutionbuilding, and that future initiatives should emphasize improvements inimplementationcapacity. One of the specific recommendations was to "switch the NCS from a top-down and supply-driven approach to a bottom-up demand driven approach" andthereby foster the development and strengthening o f local institutions and the empowerment o f user groups to build sustainability. This NSC policy shift signalsa growing emphasis onthe needto develop the capacity o fprovincial and local governments for environmentalmanagement and the need to empower sectoral interest groups and civil society inthe decision-makingprocess. 70. The National EnvironmentalAction Plan (NEAP)was adopted in2001 withthe stated program objective o f alleviating poverty through environmental projects. Starting at the federal level, a gradual integration o f the programs at the provincial and local levels was envisioned. While some capacity has beenbuilt at the federal and provincial level, the NEAP has yet to fully realize its objectives. 71. The National EnvironmentalPolicy (NEP) was adopted in2005 and providesbroad guidelines to the federal, provincial, and local governments in addressing environmentalconcerns and cross-sectoral issues such as poverty, health, trade, and local governance. T o achieve its policy objectives, the NEP directs MoE, provincial and local governments to develop plans for its implementation. The NEPprovides an opportunity to strengthen relationships between Federal, provincial and local governments for environmental management, adopt innovative governance approaches, and incorporate performance measures inthe implementation o f agreed programs. 2. InstitutionalDesign:the VerticalDivisionofResponsibilities 72. Under the PEPA, the Federal government has the authority to delegate any o f its environmental management functions and powers to provincial governments, government agencies, or local authorities. Provincial governments inturn may delegate powers to any lower- tiered government agency. This provision establishes a framework for environmentalfederalism within which environmentalmanagementresponsibilities are shared among Federal, provincial and local governments. Environmental federalism i s built on the beliefthat governance is strongest when implemented at the level closest to the beneficiary, and i s further promoted in Pakistanby the Local Government Ordinance o f2001, which introduced a new system o f local 24 government aimed at promoting responsibility at the local level. According to this Ordinance, rural and urban local councils are responsible for "the prevention o fpollution o f water or land from such sources and in such manner as the by-laws may provide." 73. Under environmental federalism, appropriate functions for a national environmental agency include policy development, standard setting, environmentalresearch, and the oversight o f federally delegated programs to ensure the enforcement o fnational laws and policies. Conversely, environmentalissues requiringknowledge o f local environmental, economic, and social conditions can best be made by those closest to the problem. These issues will involve environmental assessments, permitting, and enforcement, which consequently should be delegatedto the provincial and local agencies for decision-making inmost cases.17 Supporting functions such as information management, public outreach, and compliance assistance should be includedinthe organizational structure for all agencies, butthe national agency may be required to play a greater role particularly where provincial and local authorities have limited technical capacity or resources. 74. Implementation o f environmental federalism poses the double challenge o f defining rules for oversight, and o fbuildingthe capacity necessary to fulfill delegated responsibilities. To date, these challenges remain largely unmet inPakistan. Oversight guidelines for the delegation o f federal powers to the provinceshave not been established, environmental management capacity at the provincial level i s uneven, and little capacity has been developed at the local level. Establishing Guidelinesfor Oversight of Delegated Environmental Authorities 75. What principles should guide the delegation o fpowers across tiers o f government? Oversight guidelines should allow for delegation o f environmental authorities from the Federal to the provincial level under three conditions: 0 the provincial government can demonstrate that there are adequate provincial laws and regulations inplace to enforce the national objectives; 0 the provincial authority has adequate technical expertise, staff, and resourcesto perform delegatedresponsibilities; and 0 the provincial authority can demonstrate a commitment to share the information that will be neededto monitor compliance and measure performance. Oversight guidelines should also establish policies for reporting, conflict resolution, training, and fundingassistance. Inestablishing roles and responsibilities under decentralization, Pakistan EPA must tread a careful line between over-management and lack o f oversight o f delegatedprograms. The proposed Regional Directorates o f Pakistan EPA will play an important role under decentralization to communicate, coordinate, and oversee the environmental responsibilities o f the provincial and local authorities. It i s critical that the delegation o f enforcement functions to provincial and local authorities does not compromise Pakistan EPA's legally mandated responsibility to ensure compliance with national environmental laws. This i s important since provincial EPAs are accountable directly to provincial governments, and 17 Provision should be made for exceptional cases. For example, Pakistan EPA maytake into consideration national implications regarding the compliance record of a large national enterprise at the provincial level. The national agency may needto be involved inajoint inspection, along with the Provincial EPA, o f the facility when consistency with national standards has become a major issue or where undue pressure from local interest groups threatens the integrity o f the regulatory process. 25 consequently Pakistan EPA has an important role to play as an autonomous adjudicator.18 Box 3.1 provides an example how such oversight is applied inthe USA. Box 3.1: EnvironmentalFederalism OversightMechanismsin the United States - The concept o f environmental federalism has beenpracticed incountries including the United States, Canada, Australia, Germany, and India for many years. Perhaps the most acknowledged form o f environmental federalism canbe found inthe United States. National legislation has given the responsibility for establishing environmental policies and standards to the Federal government, but the responsibility for implementing and enforcingthose standards has been delegated to the states. For example, under the CleanAir Act, the U S Environmental Protection Agency determines geographically uniformstandards for common air pollutants and for establishing uniformperformance standards for large stationary sources. The states are requiredto submit state implementation plans for approval to USEPA demonstrating that they can meet those standards, but are left with the discretion inhow air pollution control programs will be executed. Before delegating environmental enforcement responsibilities, the USEPA mustfirst determine whether the state concerned has the capabilities to carry out effective enforcement o f the law and has demonstrated its ability to protect human health and the environment. T o demonstrate its enforcement capabilities, the state must: '0 identify its existing or potential staff capabilities, technical as well as legal; identify its ownership or access to necessary equipment or facilities such as laboratories; have clearly defined enforcement policies andprocedures for addressing environmental violations andpollution releases; submitan enforcement work programto EPA, including a budget anddescription o fproposed activities and outputs to be accomplished. agree to the enforcement o f national laws and regulations and federal oversight by USEPA, including federal interventionwhen enforcement is not being adequately exercisedby the states. The oversight role o f the USEPA is to (i) ensure that the national environmental laws are being effectively enforced by the states, (ii)enhance state capabilities through technical assistance, support, and evaluation, and (iii) analyze and report on the progress o f state programs and performance. USEPA RegionalOffices formally review state programs at least once a year, relying on requiredreports, state records, and visits to the states. The reviews are based o n objective measures, standards, and expectations that are agreed to inadvance ina cooperative agreement. 3. The HorizontalDivisionofResponsibilities:MainstreamingandUpstreaming 76. Many environmental issues are cross-sectoral, so there i s a need to ensure coordination between the sectors involved. Pakistan has evolved a dual mechanism to achieve this coordination. A high-powered supreme authority, the Pakistan EnvironmentalProtectionCouncil (PEPC), i s responsible for approving environmentalpolicy across sectors. The Council is chaired bythe Prime Minister, andconsists o fthe provincial ChiefMinisters, Federal andprovincial ministers o f environment, as well as civil society andprivate sector representatives. The stature o f PEPC has given significant weight to its decisions, particularly among government agencies. While PEPC has been successful inadopting explicitly environmental policies, such as the NCS, 18 At stakeholder meetingsduring preparation ofthis report, theprovincial character and autonomy of provincial EPAs were stronglyendorsed, underlining the value of the National Environment CoordinationCommittee (NECC) as a forum to provide greater coordinationof Federal and provincial EPA's activities, andto addresspotentialconflicts in the exercise oftheir sharedmandatesandresponsibilities. 26 NEAPandNEP, ithas not yet addressed the needto mainstream environmentalconcerns into the activities o f other sectors. Given the importance o f environmentalmainstreamingfor sustainable growth, it would be extremely valuable to establish PEPC's authority inthis regard. 77. Inadditionto PEPC's potentialroleinenvironmental mainstreaming, the other key mechanism designed to ensure inter-sectoral coordination for environmentalmanagement rests withthe PlanningCommission. The PlanningCommissionhas established an Environment Section inthe Planning and Development (P&D) Division to address environmentalconcerns at the policy, planning, project conceptualization, and approval stage ofpublic sector projects, and so may be considered a force for environmental "upstreaming". Provincial planning departments have established corresponding environment sections for environmental screening o fproject proposals withintheirjurisdictions. While the establishment o fthese sections is significant, they lack the capacity andresourcesto conduct detailed environmentalreviews and to engage other ministries inthe screening process. 4. Environmentandthe Judiciary:Strengthening a VitalLink 78. When regulatory avenues for environmental enforcement fail, thejudicial system i s often the only other recourse for resolving environmental problems or disputes. Thejudiciary can succeed inenforcing policies andreconciling conflicts with powers that the executive branch agencies simply lack. In2002, the Global Judges Symposium adopted the Johannesburg Principles o f Law and Sustainable Development which affirmed that "an independentjudiciary andjudicial process i s vital for the implementation, development, and enforcement o f environmental law." InPakistan, thejudiciary has played an increasinglyimportant role inthe enforcement o f environmentallaws, and should continue to be strengthened through continued support for bothjudges and advocates. However, it should also be notedthat intervention by the judiciary can be costly and should be pursued only as a last resort when other administrative remedies are exhausted. Supreme and High Courts:EstablishingtheRight to a CleanEnvironment 79. The Supreme Court o f Pakistan has considered several cases regarding the degradation of the environment and the protection o f a clean environment. Inthe landmark case o f Shehla Zia versus WAPDA, the Supreme Court ruled that "while life i s not defined inthe Constitution, it does not meannor can be restricted to only vegetative or animal life or mere existence from conception to death; life includes all such amenities and facilities for which a person born ina free country i s entitled to enjoy legally and constitutionally." The Court concludedthat the right to a clean environment is a fundamental right o f all citizens ofPakistancovered bythe right to life and rightto dignity under Articles 9 and 14o f the Constitution. 80. The Supreme Court has also taken an activist role inenvironmentalpolicy making. In response to a letter from the Karachi Administration Women's Welfare Society, the Court appointed a Commission to look into complaints regardinghealth hazards inthe use o f open storm water drains for the disposal o f sewerage and the contaminationo f water resulting from damaged water and sewerage pipes. The Court subsequently directedthe implementation o f remedial measures including the repair o f water and sewerage pipes. The HighCourts inthe provinceshave also intervened and rendered significant policy decisions affecting future environmental management. One o f the most recent examples o f court policy interventioni s Syed Mansoor Ali Shah versus Government o f Puniab which ledto the establishment o f the Lahore Clean Air Commission. The Lahore HighCourt appointed the Commissionto develop 27 and submit a report on feasible and specific solutions and measures for monitoring, controlling, and improving vehicular air pollution inthe City o f Lahore. Environmental Tribunals: Supporting Channelsfor Advocacy and Enforcement 81. Section 20 o f the PEPA authorizes the federal government to establish as many EnvironmentalTribunals as it considers necessary and specify the territorial limits or class o f casesunder which each o f them shall exercisejurisdiction. Two Environmental Tribunals have been established - one inKarachi withjurisdiction over the provinces o f Sindh and Balochistan, and one inLahore withjurisdiction over the provinces o f Punjab and the NWFP. Like the Supreme Court and Provincial HighCourt, the Environmental Tribunals are playing an important role insetting and enforcing environmental policy,19 a role that i s set to increase with plans under the MTDFto establish a further three Tribunals by 2010. 82. Given the increasing role that Environmental Tribunals and Courts will play inthe future, it is importantthat they have an understandingo fscientificprinciples andtheir application to environmental laws, includingthe concept o f environmental risk and indirect impacts, and linkages between causation and harm. Therefore, investment instrengthening the institutional capacity o fthe Judiciary and Environmental Tribunals shouldnot be overlooked. These institutionsshould be supported throughjudicial training programs on environmental laws, issues, and institutionsand exchanges with other countries inthe region with ajudicial "Green Bench." Inaddition, the Courts should establishmechanisms to monitor the implementationofcourt orders either through the establishment o fjudicially appointed oversight committees or judicially mandated reporting requirements. Box 3.2: EmpoweringCitizensto PromoteEnvironmentalCompliance Inthe Philippines, the constitutionexplicitlyprovides for !`the rightofthe people to abalanced and healthy ecology inaccord with the rhythm and harmony ofnature." This right empowered citizens inthe Philippines to file public interest litigationinthe Supreme Court which resultedin a landmarkdecision for the clean up o f the Manila Bay. While there is tension between government regulators and civil society organizations over environmentalenforcement, the interests o f regulators and citizens are infact similar ensuring a healthy environment. Inmany - countries citizens are one o fthe most untapped andoverlooked resources for ensuring environmental compliance and enforcement. Active citizen involvement inenvironmental enforcement can help supplement an agencyk efforts byraising public awareness andbuilding popular support for an otherwise controversialenforcement action. Inthe UnitedStates, for example, controversial provisions inthe CleanAir Act, such as the vehicle inspectionand maintenance program, would not have beenimplementedwithout the intervention ofpublic interest advocates. 83. By establishinga constitutionalrightto a clean environment anddemonstrating a willingness to address matters o f environmentalpolicy, the Courts have empowered citizens with legal standing inwhich to enforce environmentallaws through administrative andjudicial proceedings. While this right has been established by the Courts, there are no citizen suit provisions inthe enabling environmental statutes. Existingand future laws should explicitly 19 Inaveryrecent case, thePunjabEnvironmentalTribunaldirectedthe ProvincialTransport Secretaryfor the Provinceof Punjabto explainthe reasonsfor the availability ofrickshawswith two- stroke engines inthe city of Lahore despiteaban on two- strokerickshawsthat was imposedayear ago. 28 provide for citizen enforcement. Public interest advocacy is a powerful force for improvements inenvironmental management (see Box 3.2), and shouldbe supported through environmental law associations and the establishment o f environmental law clinics at universities. 5. Are Resources for Environmental Management Adequate? 84. As far as federal financial resourcesinthe development budgetare concerned, the plannedallocation for the environment i s encouraging, with a proposed doubling o f the environment budget for the year 2005-2006. Under the Mid-Term Development Framework, the Federal government has indicateda proposed allocation o f Rs. 28.3 billion ($473 million) for the next five years for environmental management projects. Included inthe MTDFi s Rs.135 million ($2.2 million) for the Pakistan EPA's Activity Based Capacity Development Project (ABCD) and Rs.50 million ($836,000) for strengthening the capacity o f the provincial EPAs, though neither has yet been implemented. 85. The immediate challenge confrontingboth Federal and provincial environmental authorities i s to take swift advantage o f the proposed allocation o f development resources, and apply them towards programmatic goals insuch a way as to strengthen and supplement their still relatively limitedlevels o fpermanent staffing and operational budget. For example, the budget for operation and maintenance o f critical environmental management systems, such as air and water monitoringprograms, is extremely inadequate and a fundingprogram to sustain them i s needed. Inthe longer term, the challenge becomes one o f establishing more permanent and predictable sources o f funding, inwhich Provincial Sustainable Development Funds may play a valuable role. SupplementingPermanent Capacity with Outsourcingand Partnerships 86. The Environment Protectionand Resource Conservation Project (EPRCP) supportedby the World Bank from 1993 through 1999played a key role in creating the environmentalpolicy and institutional framework for the Federal and provincial agencies. It also provided critical staff support, but the adequacy and capacity o f staffremains a continuing challenge. Table 3.1 reflects the current staffing mix at the federal and provincial level. Inits RestructuringProposal, the Palustan EPA determined that to meet current and future mandates, it will need an increase o f 312 technical staffing positions (grades BPS-16 and above) and an additional 338 supportingstaff (BPS 1-15) to be phased over a period o f three years. A s these staffing increases are unlikely to be met infull, Pakistan EPA will needto consider ways into augment its resourcesthrough outsourcing some o f its functions. Table 3.1: EPA Staffing Levels Pakistan EPA 11 35 46 Punjab EPA 30 133 163 SindhEPA 12 79 91 NWFP EPA 12 (5 vacant) 36 48 Balochstan EPA 7 40 47 87. Since Provincial EPA's have the frontline responsibility for implementation and enforcement, expanding their laboratory facilities and monitoring capacity deserves attention. Not all functions needto be retainedin-house, however, and some may be performed more efficiently through contractual arrangements with private individuals or non-governmental 29 organizations such as research institutes or universities. Exploring formal partnerships with research or academic institutionswith technical expertise mightbe one avenue for strengthening capacity inthis area. Provincial SustainableDevelopment Funds: CreatingDependableSources of Funding 88. Under Section 9 o f the PEPA, a Provincial Sustainable Development Fund(PSDF) has been establishedineach province to provide financial assistance for eligible projects which may include (i) purchase o fpollution control equipment, (ii) installation o f effluent treatment facilities inindustrialestates, (iii) incentives to develop indigenous technology for pollution control, (iv) roundtables, conferences, workshops for pollution abatement, and (v) training and advisory services for industry. PSDFs will derive funds from a range o f sources, including grants or loans advanced by the Federal or provincial governments, assistance from donors, and contributions from private organizations. The PSDF Rules further provide that provincial Finance Departments may credit to the Fundevery year an amount equivalent to the pollution charges paid by industrial units, and fees received for environmental clearances and other environmental services. PSDFs have not yet been utilized, inpart because o fthe opaque and cumbersome procedures established for the approval o f expenditures. Experience from environmental funds elsewhere (see Box 3.3) suggests, however, that they may form important vehicles for the funding o fprovincial and local government capacity building, as well as project investments inenvironmentalinfrastructure. If environmental funds are used, they should incorporate good practices such as effective monitoring and evaluation procedures. Inaddition, periodic evaluation by independent and outside parties should be conducted to ensure the effective use o f the funds and the achievement o f environmental policy objectives. Financingthrough environmentalfunds will be effective only ifthe underlyingreasons for the environmentalproblems, suchas regulatory and market failures, are simultaneously tackled. Without strengthened environmental regulation and enforcement mechanisms, their effectiveness can be limited. Moreover, experience elsewhere has shown that crucial to the success o f these funds i s the need to avoid the mismanagement o fpublic funds, for which stakeholders' participationindecision making isneededto maintain transparency and accountability.20 Box 3.3: EnvironmentFunds:ExperiencefromBulgaria InBulgaria, the National Environmental Protection Fund(NEPF)was createdunder the Bulgaria Environmental Protection Act o f 1992. The mainobjective o f the NEPF is to provide financial support to implement the National Environmental Strategy o f Bulgaria. The main source o f revenue comes from fines and fees collected by the Ministryof Environment, as well as proceeds from fuel taxes andprivatization. The Fund's resources are controlledby a Management Board consisting o f the Minister o f Environment, Deputy Ministers from sectoral agencies such as the Ministry o f Energy, Ministryo f Health, Ministry o f Transport, and Ministry of RegionalDevelopment and Construction, and representatives from the scientific andNGO communities. The daily management o f the NEPF i s carried out by an Executive Bureau within the Ministryo f Environment. Annual reports on the activities and financial accounts o f the NEPF are provided to the Parliament and available to the general public. To date, the NEPFhas helped fiance projects for air pollution abatement facilities equipment, wastewater treatment facilities upgrades, conversion to gas at thermal power stations, and the upgrading o fbus engines inSofia. 20Lovei, M. 1999. "Environmental Funds." Pollution ManagementDiscussionNote (PMDN):InFocus - Number 1 (January 1999). Washington DC,World Bank. 30 6. Moving Forward: Strengthening Institutions through NEPImplementation 89. The NEPhas established an ambitious environmental policy agenda, the achievement o f which will require not only a comprehensive capacity buildingprogram, but also the establishment o f incentives at all levels o f government to encourage improved environmental performance and institutional sustainability. Incentive-Based Partnerships to meet National Goals and Local Targets 90. One institutional approach to linkingroles at different levels o f government is to develop incentive-based partnerships betweenthe Federal and provincial EPAsbased on performance. These would linkthe transfer o f financial support for institutional strengthening with demonstratedperformance inimproved environmental management. The benefits o f an incentive basedpartnership are that it allows Federal and provincial EPAs to mutually agree upon environmental goals and agency responsibilities, develop a shared strategy o fresponsibility to achieve goals, and provide incentive fundingbased on performance. Such an approach is usedin the National Environmental Performance Partnership System (NEPPS) that has been successfully adopted by the U.S. EnvironmentalProtectionAgency and several states (see B o x 3.4), and initial discussions with provincial authorities inPalustan indicate an interest inexploring this approach further. Box 3.4: Incentive-BasedPartnerships:the US Experience Underthe NEPPS approach, the USEPA and statesrecognizedthat environmental programswere expanding with limitedresources and effective implementation requireda structured planning process to establishjoint priorities, allocate responsibilities, and address mutual areas o f concern. The elements o f effective Performance Partnership Agreements include: 0 Description o f shared outcome objectives andpriorities; Description o f strategies, tools, and activities; Performance indicators for evaluating environmental progress; 0 Structure andprocess for mutual accountability, including clear definition o froles and responsibilities for eachparty and allocation o f resources; Processfor joint evaluation on how well the partnership is working and implementation o f any neededimprovements that are identified Description o f how priorities inthe agreement align with the national and state environmental plans. The scope o f Performance Partnership Agreements can cover many topical areas such as controlling priority pollutants, streamlining the environmental assessment process, improving compliance monitoring, and strengthening the enforcement o f targeted sectors, as well as many programareas such as air quality, water quality, drinkingwater, solid andhazardous waste, and natural resource protection. 91. This performance-based approach would fall naturally within the process o f developing action plans at the Federal and provincial levels envisioned inthe NEP. It is also consistent with current fiscal practices o f promoting federalism (see Box 3.5). These action plans would include agreed upon goals and responsibilitiesaroundidentifiedpriorities, such as strengthened capacity inenvironmental monitoring, auditing and enforcement, as well asprojectmanagement. Similarly, provincial governments would, as appropriate, establish performance-based partnerships with district and tehsil governments for environmental functions devolved to local governments. The action plans would also include the development o fperformance indicatorsto 31 measure boththe outputs (activities carried out by provincial or local authorities) and outcomes (environmental results) o f the partnership. Furtherbuildingon the vision established inthe NEP, funds would be transferredbetween levels o f government uponthe successful achievement o fthe agreed indicators. Two important pre-requisites for such an approach to function effectively are (i)translation o fthe NEP's broad directions into specific targets, and (ii) establishment o f an efficient system o fperformance-based transfers, combining transparent decision-malung with the minimumnumber o fadministrative hurdles. Box 3.5: InstitutingPerformance-BasedGrantsinPakistan InPakistan, sharing offederally collected revenue betweenthe federal government andthe four provincial governments is governed by the National Finance Commission (NFC) Award. The Award, determines the vertical (i.e. between the federal andprovinces) and horizontal (among the provinces) sharing o f revenue on criteria o f "need". While the horizontaldistributionis based o n determination o f expenditure needs o f the national and sub-national governments, the horizontal distributionhas beenbased mainly on population shares. Allowance, however, is made o f developmental needs o f the provinces by providing federal grants based on notions o fbackwardness. Moreover, as the Constitutiongives the ownership o f natural resources to the provinces, the provinces also get "unconditional transfers" from the federal governments, which are simply the pass on o f energy-related revenues collected by the federal government. Although the simple design o f the NFC Award has beeninstrumental ingetting it the required political support, it has been criticized for its lack o fperformance incentive system, which has createdsome unintended problems, particularly interms o fpoor use efficiency o f fiscal resources, weak collection o f ownrevenues and non-alignment o fpolicypriorities across governments. While these shortcomings o f NFC transfers prompted some o fthe provinces to establishperformance-based grants under their sectoral or sectoral reformprograms, the federal government has generally adopted more direct interventions to ensure implementation o f national policies. Performance-based grants, however, are considered as a better option as they can: Strike a balance between adherence to national policy goals and ensuring autonomylefficiency o f sub-national governments. 0 Provide incentives for sub-national governments to improve their performance by linking the access to and size o f the release o f grants with their performance inpre-determined areas. Supplement the overall needs assessment and monitoring and evaluation systems. Through focus and incentives, strengthen the capacity o f sub-national development efforts. Improve accountability (up/down), participation and citizens' access to information. Nonetheless, to achieve these objectives, performance-basedgrants need to be properly designed. In designing such grants, it is better to start with basic institutional requirements, such as improved financial management, good governance, transparency, participation etc. Other key elements are: Performance has to be within the control o f the sub-national governments. Signals should be mutually and inter-temporally consistent and non-conflicting. Sub-national governments need to know clearly the definedmeasures (i.e. both the benchmarks and targets) beforehand. Credibility o f assessment (of performance) is vital and remains a great challenge. Communication o f results i s crucial. Incase ofPakistan, itis important that these grants beeither builtintothe NFC framework or be additional to the NFC (and "straight") transfers. 32 Outsourcingto Build Capacity 92. NEPactionplans at the Federal andprovincial levels would also provide a strategic direction for initiatives to buildtechnical capacity. These would include support for consultants to assist managerial staff indeveloping and implementingprograms inpriority areas, such as the management o f air and water quality, expert review of environmental assessments, laboratory and monitoring equipment and analysis, the sharing o f innovative practices inregulatory management and compliance incentives, andpublic participation inenvironmental decision-making. In moving forward, it i s important that Pakistan EPA and Provincial EPAs focus efforts to strengthen institutional capacity inareas where there i s comparative advantage inexperience, resources, and local conditions. Ifefforts are made to address all the proposed environmental aspects o fthe MDTFsimultaneously, the agencies may reachbeyondtheir current capacities and resources, which could underminethe achievement of goals inthe long term. StrengtheningBottom-UpAccountability 93. Clarifying responsibilities and improvingaccountability through top-down partnerships i s an important part o fthe solution. Butthere are limits to the top-down model o f accountability. In hierarchicalsystems public sector goals are defined inthe short-term by measurable indicators - such as staff numbers, or the quantity o f infrastructure built, or the number o f reports submitted. Butthe final goal o fenvironmental policy is very different andinvolves environmental outcomes -thelevelofpollutionorresourcedegradation. Sinceenvironmentaloutputsareoftenharderto measure than physical inputs, it is natural for administrative goals to be defined interms o f inputs. Butthe result is that there is oftenlittle correlationbetween tangible and observable physical measures and the eventual environmental outcome. When affected citizens have no formal role to play inthe process, there is no mechanismfor identifying policy failures. Given the complexity o f environmental problems it i s impossible for institutionsto implement policies effectively without adequate consumer (citizen) feedback. So there i s a need to integrate bottom- up approaches with the top-down hierarchies that exist ingovernment. Public scrutiny o f performance i s ultimately a source o f strength that leads to stronger institutionswith greater public trust and support. 94. Creating effective stakeholder accountability i s a difficult process, but there are two obvious mechanisms for strengthening accountability. Improving the effectiveness o f environmental tribunals i s one way o f assuring greater accountability. Strengthening the independentjudiciary and the role o fpublic interest litigation gives an opportunity to press for policy enforcement when other avenues of accountability have been exhausted. However, stakeholders also need to be directly engaged inthe planning, consultation and evaluation of environmental performance. Establishingperformance-based indicators that are transparent and regularly reported to the public will help ensure greater stakeholder accountability. Pakistan is particularly well placedto further develop such systems, with the presence o f reputable scientific NGOs, legal associations, and academic organizations that have boththe shlls andknowledgeto participate inthe policy process ina meaningful andproductive manner. 33 Iv.REINFORCINGTHE ENVIRONMENTAL IMPACT ASSESSMENT SYSTEM 95. As Pakistanpursuesits development agenda, growth will continue to bringeconomic, social and environmental change. The Environmental Impact Assessment (EIA) system i s designed to be a key decision-making tool to ensure the integrationo f economic, social and environmental issues early inthe planning process. Its effectiveness as a decision-making tool i s determined by the capacity and resources-human, technical, and informational - with which the EIA systemis implementedandwill have consequences for the country's longterm growth. 96. While recognizing the increasing number o f EIAsbeing submitted for review, and the Government's commitment to environmental assessment o fpublic sector investments, this chapter identifies a number o f opportunities to reinforce the EIA system. Inparticular, this chapter highlightsthe needto establish Federal oversight and ensure better coverage o f investments, promote the quality o f EIA content and implementation, extend the NWFP model for capacity development, and promote meaningfulpublic consultation and full disclosure o f EIA documentation. 1. The EIA Framework: EstablishingOversightandEnsuringCoverage 97. The Pakistan Environmental ProtectionAct o f 1997 (PEPA) requires that before a project commences construction or operation, an Initial Environmental Examination(IEE) must be filed with the Federal government and where the project is likely to cause'adverse environmental impact, an Environmental Impact Assessment (EIA) must be filed. This requirement under Section 12 o fthe PEPA applies to bothpublic and private development projects. The Federal agency must communicate its approval or disapproval within four months from the date that the IEE/EIAis filedor otherwise it is deemedapproved. EstablishingOversightof DelegatedEIA Authorities 98. The policy and procedures for filing, review, and approval o f environmentalassessments are set forth inregulations promulgatedby the Palustan EPA. The regulations have established that the Federal EPAhasjurisdiction over all IEEs and EIAs,but may delegate its power to provincial authorities pursuant to Section 26 o f the PEPA. Federaljurisdiction will be retained for projects on federal land, military projects, and those involving either trans-border or trans- province impacts. Incases where there are trans-province impacts, the parties can agree to have provincial authorities review and manage the environmental assessment, inwhich case the federal authority will haveno direct role. 99. While the provincial authorities havejurisdiction for the vast majority o f cases, the regulations specifically reserve the right o f the Federal EPA "to review any Environment Report at any time and to suspend the powers it has delegatedto any Responsible Authority ifit believes those powers have been misused." This right to review and suspend has not been exercised, but represents a key provisionregarding oversight ofFederal/provincial conflicts and the determination o f an ultimate decision-maker. This right i s particularly important when provincial authorities may be subject to political pressureto expedient EIA clearances without proper and adequate environmental review. 34 Improving EIA Coverage The EIAregulations provide a sound legal andregulatory framework for the EIA system in Pahstan, and there has been progress inits implementation. As Figure 4.1 indicates, data providedby the Pahstan EPA show an increase inthe number o f IEEs and EIAsfiled inthe last five years from 37 in2000, to 87 in2004. While the trend is encouraging, the total number o f cases submitted is still relatively low. Bangladesh, for example, has a smaller economy with approximately the same level o f industrializationas Palustan, but the Bangladeshi Department of Environment issued more than 1,300 environmental clearances in2001. This discrepancy serves to underline the fact that there i s no system to help environmental authorities inPalustanidentify private sector projects, and as a result it is likely that some smaller projects with potentially damaging impacts are never reported. Federaland provincial EPAshave recently tried to strengthenlinkages inthe planning and licensing process by requesting Banks to verify environmental clearances before approving financing (as requiredunder the Equator principles), and byrequesting utilitycompanies to confirm environmental clearances before providing electricity, water and gas connections to industries. There has so far been little movement on these initiatives, however. Figure 4.1: EPA PerformanceStatistics \ 35 30 25 23 20 5Y) W U m 15 W Y) wr 10 2 0 5 0 2000 2001 2002 2003 2004 2. Strengthening the EIA Process: Meaningful Public Consultation and Disclosure 100. The PEPA and EIA regulations emphasize that every review of an EIA should be carried out with public participation. Adherence to these requirements has, however, proven to be challengng. While environmental reports generally state that stakeholders have been consulted, inanumber ofcasesnomeaningfulpublic consultation hasbeenpursued. Some project proponents view public hearings as a mere formality and make little attempt to identify and involve local communitiesthat mightbe impactedby the proposed project. For example, a 35 review o fthe public consultation process for a project inBalochistan revealed that only seven to eight persons attended the public hearing, and none came from the project area. 101. The EIA Guidelines for Public Consultation are very clear and specifically state "Proponents should explain their proposals clearly to affected communities, actively listento the communities' responses, and make prudent changes to the proposal to avoid or mitigate adverse impacts. Where proponents are able to go beyond this to participation, they will achieve even greater benefits for themselves and for the stakeholders." These guidelines emphasize that public consultation goes beyond simply listening to public concerns, but more importantly it requires active engagement with the public inthe development o f acceptable solutions to address those concerns. 102. Inbuildingthe capacity to conduct moremeaningful consultations, Pakistanis fortunate to be able to draw on the expertise o f leadingNGOs such as IUCN, WWF, and LEAD, which have organized public forums and training programs to raise awareness o f the EIA system and the role o fpublic participation. More formal partnerships with such organizations would enable environmental authorities to establishmeaningful public consultation as standardpractice. 103. Consultationis only meaningful ifthere i s adequate informationmade available about the project. Under Section 5 o fthe EMregulations the project proponent and responsible authority are requiredto make the EIA available to the public. Compliance with this rule i s uneven. While Sindh EPA does disseminate EIAs, and provides dispute resolution mechanisms to address stakeholder concerns, elsewhere only executive summaries rather than the full EIA reports are available to the public. Public access to EIAdocuments can enhance the ability o f the affected communities, NGO's and others to evaluatepotential environmentalimpacts, identify areas o f concern, and suggest possible mitigation measures. Transparency can help not only the affected community, but the regulator and regulated entity as well. Measures to improve public access and transparency o f information shouldbe further explored, including the application of information technology to allow the public to review and comment on proposed EIAs electronically. 3. PromotingQualityofEIA Content andImplementation 104. A direct consequence o flow levelso f stakeholder accountabilityis that the quality o f IEE/EIAreports remainshighlyvariable. Ingeneral the quality ofreports submitted for highly visible mega-projects i s satisfactory, butmore often the level ofresearch and information needed to evaluate project impacts i s missing. Indeed, consultants have been known to submit reports without visitingaffected sites to collect information. It i s unlikely that this would be tolerated were there greater transparency, genuine public consultation and inclusion. 105. Inthe clearanceprocess, there is also a needfor a formal system o fEIAreview or apanel o f experts to evaluate the documentation and identify issues inthe reports for projectswith likely significant impacts. Such a panel of experts would help ensure that the information provided in the EIA i s adequate and appropriately used inthe decision-making process, and incombination withbetter stakeholder consultation, would protect against criticism that the EIA may be drafted around a decision that has been pre-determined before it was conducted. Inaddition, the EIA review should not be confined to impacts and mitigation measures, but should extend to the monitoring and enforcement o f agreed measures. 36 Monitoring and Enforcement of EIA: Matching Capacity toAuthority 106. BothPEPA and EL4regulations provide for the inspection and enforcement of EIA provisions. Under Section 6 o f the regulations, the responsible authority is given the "full right of entry and inspection o f the site, factory or premises at any time prior to, duringor after the commencement o f the operations relating to the project." And under Section 17 of PEPA, anyone who fails to comply with the EIA requirements can be fined upto one million rupees, and additional fine o f 100,000 rupees for each day the violation occurs. These enforcement tools are seldom deployed, however, so compliance with EIAprovisions remains weak. 107. Assuringcompliance with EIArequirements mustrely on a broadrange o fmechanisms, including a sound EIA review and monitoringprocess, environmental awareness and management, and strong enforcement. Unlessthese enforcement tools are deployed, there will be no perceivedor real incentive to comply, or consequence for noncompliance. Under the law, Federal and provincial EPA's have the authority to issue Environmental ProtectionOrders (EPOs) andimpose penalties. Palustan EPA could also legally order civil authorities to withdraw utilities to a project that has failed to obtain a N o Objective Certificate (NOC), butthis power has never beenused. A review o fthe current staffing mix o f the Federalandprovincial EPAs suggests that strengthening enforcement will require greater capacity o fbothtechnical and legal staff inmonitoring, inspection, collection o f evidence, and prosecutiono f environmental cases. Box 4.1: EIA Capacity Building-a SuccessfulModel inNWFP The government o fNWFP has taken the lead ininstitutionalizing the awareness andunderstanding of the EIA systeminthe provinces and government. The NWFP EIA Centre was established at the PakistanAcademy o f RuralDevelopment, Peshawar incollaboration with EPA-NWFP for the purpose o fbuildingthe capacity o fpublic andprivate sector organizations inthe preparation o f EIAs, and to enhance the capacity o f EPA-NWFP inreviewing and monitoring environmental reports. Funding for the Centre was fust proposedinthe 2002 Annual Development PlanofNWFP Government for three years andbased on its performance, it was recently extended another three years until2008. Itreflects both an important commitment onbehalfo fthe provincial government and a significant recognition o fthe role that training plays inmaintaining an effective EIA system. In the first three years o fthe program, ten master trainers have beentrained and over 165 individuals have received training. Other provinces should be encouraged to institutionalize similar EIA training programs within their jurisdiction inpartnership with local universities or other training organizations. Currently the provinces have not involvedlocal governments inthe EIAprocess. As devolution progresses, building capacity at the tehsil and district levels for environmental management will become increasingly important. The challenge o flocating new developments inrapidly expanding urban centers will continue to grow, and with it the importance o fintegrating local land-use planning with investment decisions. As local governments become more involvedinthe preparation and review o f EIAs, so the need for EIA training centers will continue to grow. 4. EIA andPublicSector Investments:Mainstreaming andUpstreaming 108. Many o f the investments with the most significant environmentalimpacts are those undertaken by the public sector. Inall four provinces, the lack o fknowledge in sectoral ministries o fthe EIArequirements for public sector projects is a major challenge to sustainable development. Notwithstanding the list o fprojects requiring an IEEor EIA, the system has been bypassed ina large number o f cases. Recognizingthis weakness, the Executive Committee o f the National Economic Council (ECNEC) recently issued an order that "Incase o f development 37 projects having environmental implications, an Environmental Impact Assessment (EM) report should invariably be submitted along with the project document at the time o f getting approval." This order i s significant both for having been issued by ECNEC, and for clearly linlung the approval o fpublic sector projects with the need for environmental assessment. Mainstreaming SectoralAwareness: Over-coming Ignorance and Stigma 109. Many government officials are not aware o f the legal requirement that development projects must go through the IEEor EIAprocess. The result i s that government departments with significant infrastructure projects, such as agencies dealingwith roads, irrigation, power distribution, as well as city and municipal authorities, proceed with public sector projects without conductingany form o f environmental assessment. Even among those agencies aware o fEIA requirements, there i s often a reluctance to file an IEEEIAreport because o f the general perception that the EIA requirements are an unnecessary burden to achievingdesired economic development goals. Greater training and informationalresources are needed to improve public sector awareness o f the EIA process, so that sectoral agencies can answer the following questions: What are the EIA requirements? Why are the requirements needed? Who, when, and where must EIAsbe filed? What are the consequences for failure to comply? H o w can compliance be assured? Inaddition, specific good practice guidelines should be adoptedby sector agencies to better inform and guide the sector inthe EIA process. This approach has been successfully adopted inseveral other countries. For example, inPeru, the Ministry o f Transportation and Housing has established a registry o fthose parties authorized to produce an EIS and has produced specific EIA guidelines for roads. 110. The EPA can strengthen enforcement by harnessing the support o f other government agencies. Inmost countries civil authorities can withdraw utilities to projects that fail to comply with environmental regulations. A similar approach needs to be adopted inPalustan, where a No Objective Certificate (NOC) from the EPA shouldbe made a mandatoryrequirement for gaining access to gas, electricity or water connections. Other options to increase awareness may include include engaging organizations like the small and medium enterprise development authorities (SMEDA), Chambers o f Commerce, Associations of the Industries, Ministry o f Industries, and representatives o f the commercial banks and utility companies. While this may help buildtrust between the regulator and the industry,it is unlikely to improve compliance unless accompanied byreal and credible sanctions for non-compliance. UpstreamingEnvironmental Review in the Planning Process 111. The Federal Planning Commission has established a reasonably effective environment section responsible for the environmental screening o fpublic sector projects at the Federallevel, and provincial planning departments have also established corresponding environment sections. Due to their limited resources, however, these sections are not able to provide the depth of environmental review required, and EIAs of public sector projects are not conducted systematically. Inadditionto reinforcing the procedural guidelines necessary to consolidate environmental assessment as an integral element of the public planningprocess, environmental sections o fplanning departments would be greatly strengthened ifable to contract expert review to supplement their own capacity. 38 5. Strengtheningthe EIA System 112. The precedingreview of the EIA framework and process inPakistan identifies opportunities to reinforce this system through improvements ininstitutional design and technical capacity, and by strengthening incentives through broader public consultation and disclosure o f information. Ensuring Oversight and Coverage 113. Two important weaknesses inthe institutional design andregulatory framework of the EIA systemare the lackofclarity regardingoversight, andthe lack o f systematic incentives to ensure coverage. The previous chapter proposed an initiative to establish guidelines for the oversight o f authorities delegated fiom the Federal to the provincial level. These guidelines should explicitly cover Federal authority over environmental clearances. Given the relatively limitednumber o f IEEs and EIAsbeing submitted for review, there i s also a need to develop systems to help environmental agencies identify potentially damaging private andpublic sector investments at an early stage o f development. Inthis regard, the lack o f awareness o f EIA requirements, inbothprivate and public sectors, i s inpart responsible for weak adherence to the EIAprocess. Potentialmeasures to improve such awareness would include the development o f streamlined checklists for project preparation, broader dissemination o f the recent ECNEC directive requiring environmental assessment o fpublic sector projects, and the provision o f EIA guidelines to industryassociations and other civil society groups. Building Technical Capacityfor the Preparation and Review of EIAs 114. While wider public consultation and disclosure will increase incentives for higher quality EIAs,greater technical capacity is also essential for effective implementation o fthe EIAprocess. To strengthen the technical skills o f boththe private sector personnel preparingEIAsand the public sector staffreviewing them, national and provincial EIA training institutes modeled after the NWFP Center should be established. Inaddition, the limitedpublic sector capacity for EIA review should be supplemented through the use o f independent experts to assist environmental authorities inthe EIAreview process, inparticular to help ensure that assessments propose effective mitigation and monitoring measures. PromotingPublic Consultation and Disclosure 115. The EIA Guidelines state that the EIA must be prepared ina way that ensures the maximumparticipationo f affected groups. Inpractice, public consultation has often been limited and ineffective. Strongpublic participation has beenprovento be an importanttool inachieving compliance and also has long term benefits for both project proponents and stakeholders. More effective public consultation could be promoted through a range o fmeasures. A first step would be to require project proponents to develop a public consultation planwhich would identify affected stakeholders, and detail how public comments will be solicited andincorporatedinto project development. A broader initiative would be to create EIA information centers at federal and provincial levels, where project proponents and citizens could inquire about the status of clearances andpublic hearings, and request access to EIArelated documents. Inaddition, all EIA filings shouldbe electronically maintainedon a website for easy access by the public andprivate sector. Finally, environmental authorities could provide a non-technical summary o f EIA decisions, explainingreasons for granting a clearance, agreed measures to address objections fiom the affected community, and provisions for monitoring and reporting. 39 V. URBAN QUALITY: AIR ADDRESSING A GROWINGTHREATTO HEALTH 116. Rapid urbanization and the associated expansion of industry and transport have ledto a rapid decline inthe quality o f air in South Asian cities, to the point at which the associated health risks are similar to those experienced inEurope forty years ago. One o f the most serious environmental health concerns i s exposure to fine particulatematter (PM). Worldwide, it is estimated that upto one million citizens o f developingcountries die prematurely each year primarily as a result o f exposure to fine PM. Available data indicate that concentrations o f fine PMsignificantly exceedhealthy levels inmany Pakistanicities, with mobile sources likely to be the principal source of such pollution. 117. To address the growing threat o fpoor urban air quality, the M o E i s inthe process o f developing a clean air program incorporatinga range o f short- and long-term actions to be taken at all levels o f government and by a variety o f agencies. This chapter considers the principal challenges o f institutional design, capacity, regulation, and incentives that will need to be overcome ifthe clean air program i s to achieve its objectives. Inparticular, this analysis highlightsthe importance o fbuildingpartnerships between agencies and levels o fgovernment, the potential value o f outsourcing some data collection activities, the vital needto establish ambient air quality standards, and the benefits o f developing a range o f emission reduction incentives basedon a foundation o fpublic information and awareness-raising. 1. UrbanAir QualityinPakistan: Unhealthy ConcentrationsofParticulateMatter 118. Data on urban air quality inPakistan i s scarce. The limited information available, however, indicates that concentrations o fparticulate matter above acceptable levels for human health have already beenreached ina number o f cities.21 However, even this fragmentary data is based on limited monitoring that does not meet global monitoring protocols that require at least 104days o fmonitoring. Results fromrecent surveys conducted inKarachi, Lahore, Peshawar, Quetta, Rawalpindi and Islamabad by SUPARCO are presented inFigure 5.1. Inthis study, the highest levels o f fine PM were recorded inLahore and Quetta, but the levels recorded inall the cities exceed internationally accepted standards, with significant consequences for the health o f their citizens. These findings confirmthe results o f a study conducted by Pakistan EPA with assistance from JICA infive cities (Lahore, Faisalabad, Gujranwala, Rawalpindi, and Islamabad), which revealed that fine PMlevels have reached 6-7 times the WHO guideline values. As discussed inChapter I1o f this report, urban air particulate pollution i s estimated to cause around 22,700 premature deaths annually, with the total healthcosts associated withthe deaths and sickness caused by such pollution amountingto approximately 1percent o f GDP. ThePrincipal Sources of Particulate Matter 119. The three principal anthropogenic sources o f air pollution are vehicular emissions, industrialpollution, and the burningo f municipal waste. Of these, mobile sources are the most significant and growing concern. InPakistan, the number o f vehicles hasjumped from less than one million to about four million within 20 years. With more than a ten-fold increase, the fastest growth has been intwo-stroke delivery vehicles, but the number o f diesel trucks and buses has also increasedup to three times. Internationalexperience indicates that a major share o f the 21Data on other pollutants suggest they are not yet a cause for concern. 40 emission load from motor vehicles can be attnbutedto a relatively small number of smoky diesel and two-stroke vehicles. 120. The emission of air pollutantsi s directly related to fuel consumption. Pakistan's consumption o fpetroleum products is growing at an annual rate of about 6 percent, almost half o f which i s consumed by the transport sector. The highcontent o f sulphur indieseI (0.5 percent - 1 percent) and f m a c e oil (1 percent - 3.5 percent) i s a major contributor to air pollution in Pakistan. Higher sulphur content leads to the formation o f secondary PM. Incontrast, some other South Asian countries have reducedsulphur in diesel to 0.035 percent and infurnace oil to 0.5 percent. Figure 5.1: Particulate Matter less than 10 nlicrons (PM10; 48-hour averages) 350 300 250 200 2. 150 I00 50 0 Note:the dotted line across each graph shows the %hour standard prescribed for residential areas inIndia. The WHO does not prescribe a "safe" guideline value for TSP and PMIO, however a number o f countries have converted the WHO guidelines to standards, after considering what i s achievable based o n local technical and socio-economic conditions. The monitoring cycles for the data presentedwere as follows: I I Cities 1''Cycle 2"dCycle 3rdCycle 4th Cycle (2003) I , (2004) Karachi IPostMonsoon 1 Winter 1Spring I Summer Lahore Monsoon 41 121. Industrial activities, particularly those usingdirty fuels, are another important source o f air pollution inurban areas. Inaddition to emissions from large-scale facilities, such as cement, fertilizer, sugar, steel, and power plants -many o f which use furnace oil that is highis sulphur content, a wide range o f small to medium scale industries (including brick hlns, steel re-rolling, steel recycling, and plastic moulding) cause a disproportionate share o fpollution through their use o f dirty "waste" fuels, such as old tyres, paper, wood and textile waste. Industrialemissions are further compoundedby the widespread use o f small diesel electric generators incommercial andresidential areas inresponse to the poor reliability o f electricity supplies. 122. The burningo f municipal solid waste i s a significant, but difficult to quantify, source o f air pollution. Almost 48,000 tonnes o f solid waste i s generated each day, most o f which i s either dumped inlow-lying areas or burned. The bhing o f solid waste at low temperaturesnot only generates particulate matter, but also produces other carcinogenic pollutants. 123. A final important source o fPMis dust frombothnatural and anthropogenic sources. The arid conditions result in clouds o f fine dust that form a haze over many cities, compounded inby dust storms inthe summer months. 2. PakistanCleanAir Program: the Challenge ofInstitutionalDesign 124. The Pakistan Environment ProtectionCouncil (PEPC) approved a National EnvironmentalAction Plan (NEAP) inFebruary 2001, inwhich air pollution control was one o f the core programs. Although some key objectives were achieved, including the introduction o f unleaded gasoline and a reduction o f sulphur indiesel, a number o f initiatives are yet to be undertaken. To consolidate ongoing and proposed initiatives for the management of urban air quality, M o E i s developingthe Pakistan Clean Air Programme (PCAP), which highlightsthe four major sources o f urban air pollution that needto be addressed, (i) vehicular emissions, (ii) industrial emissions, (iii) o f solid waste, and (iv) natural dust. burning 125. The main objective o f the proposed PCAP i s to control the healthand economic impacts o f air pollution. The PCAPproposes a number o f short- and long-term measures that require action at all levels o f government. Appendix 1details the measures outlined inthe PCAP, and identifies the agencies responsible for talung action. The multiplicity o f agencies and the tiers o f government to be involved illustratethe main challenge inimplementingthe Program. Roles of Federal, Provincial, Municipal, and Sectoral Agencies: BuildingPartnerships 126. Pakistan EPA i s responsible at the national level for setting air quality and emissions standards, and for defining associated systems for monitoring and enforcement. Responsibility for the implementationo f these policies has been delegatedto the provincial environmental authorities. An important enforcement tool i s the Environmental ProtectionOrder, which can issuedby the Federal or provincial environmental authorities against persons or companies not complying with standards, and may require a range o f actions, from the immediate stoppage o f operations to measures for the restorationo f the environment. A more recent development i s the recognitioninthe NEP o f the important role o f local governments inenvironmental management, with active participationfrom stakeholders. Forthe management o furban air quality, city authorities are particularly important because o f the needto integrate emissions control measures withbroader aspects o furbanplanning, such as the provision o fpublic transport andzoning o f industrial developments. The needto meet national air quality goals through programs implemented at the provincial or city level underlines the importance o f forming partnerships and 42 providingincentives between levels o f government. The United Statesprovides an example of such an approach, as applied to implement the Clean Air Act (see Box 5.1) Box 5.1: FederalBtatePartnershipsfor CleanAir inthe USA Underthe UnitedStates CleanAir Act, the Federalgovernment provides funding support for the establishment o f state air monitoringprograms as well as other state air quality programs. The CleanAir Act authorizes the Federal government to provide grants for up to 60% o f the cost o f state air quality programs, while state governments must provide a 40% funding match. Every state i s requiredto establish a network o f air monitoring stations for criteria pollutants, using criteria set by USEPA for their location and operation including quality assurance criteria. The states must provide USEPA with an annual summary o fmonitoringresults at each o f the monitoring stations inthe state network and more detailed informationifrequested. To obtain additional information about air quality instrategic locations across the nation, the USEPA has established anetwork o fnational air monitoring stations which also becomes part of the state network. Inrecent years, the stateshave assumedmuchgreater fundingresponsibility straining their local resources and consequently, they have requested additional federal funding to meet the growing challenges inurban air pollution. 127. While the Palustan EPA and its agencies at various tiers o f government can createthe framework for effective air quality management, sectoral agencies such as those relatedto industries,transport, urban development, energy and fuels, have an equally important role in ensuringthat air pollution i s controlledat source. This necessitatesmulti-sectoral coordination at the stage of formulatingpolicies, plans, andprograms, since the impact on air quality i s often causedindirectly. 3. Air QualityMonitoring:Supplementing Capacity through Outsourcing 128. Continuous ambient air quality monitoring stations are to be set up inall provinces with JICA support by 2007. Experience indicates, however, that sustaining an operational monitoring network i s a challenge. An important lesson from similar initiatives inSouth Asia i s the need to ensure that sufficient resources are available to operate and maintainthe equipment, as well as to retaintrained technical staff. Doing so will require clarification of the roles andresponsibilities of the Federal and provincial EPAs, as described above, and also presents the opportunity to supplement public sector capacity through outsourcing to the private sector. 129. Inorder to address the issue ofretainingskilled staff, some countries areoutsourcing technical air quality management functions to private or academic institutions. InIndia, some states are movingtowards such a model of air quality monitoring, inwhich the government will essentially purchase air quality data generatedby a network operatedby a privateparty or academic institution.22 Inthe UK and Malaysia the routine monitoring o f ambient air quality has been outsourced to the private sector, with the state retainingcertain important functions, such as quality assurance audits. Inthe Philippines,the Environmental Management Bureaui s pursuing the outsourcing of stack emissions monitoringfor MetroManila to the private sector. 22 e.g. Maharashtra, see htta://m~cb.mah.nic.in/envtdata/airstrenethincr.ahp;AndhraPradeshsee http://www.appcb.org/pcb/online.htm 43 4. Strengthening the Regulatory Framework for Urban Air Quality Management 130. As recognizedinthe NEP, Palastan's legal andpolicy framework for urban air quality management i s weak, startingwith the lack o f a Clean Air Act to provide a framework. The NEQS o f 1993 provide only a limited set o f emissions standards, and do not specify standards for ambient air quality. The vehicles emission standards are too old to be o frelevance. Without standards, it is impossibleto set up a framework to monitor and regulate ambient air quality. A first priority, therefore, i s to establish bothhealth-based ambient air quality standards, and updated emissions standards for mobile and stationary sources, inline with regional and international practice. 131. Given the limitedinformation about the status o f urban air quality inPakistan, creating a framework for UAQMshould draw on experience in similar countries. Within South Asia, India, Bangladesh, Nepal, and Sri Lanka have been undertakingefforts to address urban air quality concerns, with varying degrees o f success. The experience o f these countries, amongst others, can informthe actions that can be taken inPalustan Establishing Ambient Air Quality Standards:A Prerequisitefor Air Quality Management 132. The NEP recognizes the need to establish and enforce standards for the management o f air quality. Ambient air quality standards are the foundation uponwhich emission control strategies are based, usually adopted as enforceable laws, typically with deadlines and schedules for attainment. It i s important to note though, that Air Quality Standards (AQS) are notjust limits for eachpollutant: they must also specify monitoring methods, locations and frequencies, averaging times and assessmentprocedures. 133. Pakistani s one the few countries inthe world without a comprehensive set o fhealth- basedAQS. This is partly linked to the fact that there has beenno systematic monitoring, and hence there i s a dearth o finformation on current conditions. With the JICA-funded effort to provide a network o f ambient air quality monitoring stations underway, however, it i s time for Pakistan to promulgate AQS. These should be formulated based on a review o f existing standards in similar countries, as well as WHO guidelines. While safeguarding public health should be the main consideration, the costs and likelihood o f achieving the standards should also be used to informthe standard-settingprocess. That i s the reason why the WHO issues "guidelines" and not standards, since the latter are to be formulated by individual countries keeping the local context inview. Updating VehicleEmission Standards:Links to Fuel Quality Improvements 134. Pakistanalso requires updated Vehicular Emission Standards (VES). Two sets o fvehicle emission standards are generally adopted, one for new registration vehicles, and the second for in- service vehicles. While the first i s meant to signal to vehicle manufacturers and importers that all new registrationvehicles should employ appropriate vehicle emissions control technologes, the second is designed to ensure that all vehicles are appropriately maintained so that the benefits o f the emission control technologies are realizedduringthe operation o fthe vehicles. The current NEQS specify only one set o fVES that are outdated when comparedto most other countries. 135. The establishment and achievement o f VES i s intrinsically linked to fuel quality. For example, the level o f sulphur indiesel inPakistan i s between 5000 ppmto 10,000 ppm, which i s too highto be able to meet Euro I1or Euro I11emission standards, which have already been 44 adopted in some South Asian countries.23 While meeting Euro I1emission standards requires 500 ppmsulphur, Euro I11requires 350 ppmsulphur indiesel. The cost ofmovingto lower sulphur diesel needs to be evaluated against the potential economic benefits interms o f lower emissions and better health. 136. Based on the current condition o f the vehicle fleet and fuel quality, it would be appropriate to adopt a phased approach to the development o f VES and fuel standards. The details o f this plan, particularly the use o f l o w sulphur fuels and alternatives such as CNG and LPG, needto be developed inconsultation with all stakeholders. A proposedtimetable for consideration i s provided inTable 5.1 below. M o E would needto consult and coordinate with the Ministryo f Petroleumto initiate these muchneeded changes. Table 5.1: New Vehicle EmissionStandardsand CorrespondingFuelQuality for MetroCities24 I I 5. Moving BeyondInspections and Enforcement: a Range of Incentives for Clean Air 137. Inspection and Maintenance (I&M)programs are neededto help enforcement o f in-use programs has been fi-aught with challenges o f governance. VES, targeted at gross polluters. However, inmost develoPinThecountries the operation o f I&M g development o f such a program inPakistanshould draw onnational experience withvoluntary inspection andtune-up programs such as the UNDP-GEFFERTSproject, and the GTZ-supportedprogram inPeshawar. It could also draw upon relevant regional experience, such as the testing o f in-use vehicles to derive socially acceptable and enforceable VES inBangladesh. Suchprograms shouldbe accompanied by support for vehiclerepair andmaintenance services, demand for which will be stimulated by I&Minitiatives. The limitationsofI&Mcampaigns elsewherepointto the needto supplement such efforts inPalustan with support for a range o f emissions abatement measures, such as those considered below. Other VehicleEmissionsAbatement Measures: Targeting GrossPolluters 138. The NEP 2005 and the proposed PCAPbothmention a number o f other actions to address emissions from motor vehicles, most o f which are presentedinAppendix 1. These include travel demand management, modal shift, vehicle technology, strengthenedenforcement, capacity building, and awareness-raising. But these are longer-tern measures, and prioritization 23The Eurostandards are a series of progressivelymore stringentVES developedfor applicationinthe European Unionandwidely used internationally. 24Proposedby CAI-Asia at the National Workshopfor the Improvementof UrbanAir Quality inPakistan, 13-15 December2004. 25Reports compilinginternationalexperiencescanbe downloadedfrom the CAI-Asia website as well as from www.worldbank.orrz/sarurbanair 45 o f these measures should be a consultative process, takmg into consideration the economic, financial, technical and social considerations o frange o f stakeholders. 139. As proposed inthe NEP, carefully-designed vehicle retirement, replacement, and disposal programs may also be considered, targeting the most grossly polluting categories o f vehicles. Some suggestions inthis regardbased on regional experience include: 0 Phase-out two-stroke three-wheelers and register only new four-stroke CNG 3- wheelers (as undertaken inDhaka, Delhi, Kathmandu); 0 Replace old diesel buses withnew dedicated-CNG buses, andreplace old engines with new ones (based on experience inDelhi, Mumbai, and Dhaka). The simple retrofit o f old diesel engines is not recommended; 0 A maximumage limit for public transport vehicles (adopted inDelhi andMumbai). However, the measures mentioned above need to be evaluated based on criteria of cost effectiveness and economic efficiency, besides takmg note o f stakeholder concerns. The mixed international experience emerging from the use o f CNG vehicles for public transport underlines the need for such careful evaluation. Measures to Reduce Emissionsfrom Stationary CombustionSources: ComplianceIncentives 140. The NEP 2005 and draft PCAPpropose a number o fmeasures targeting stationary sources, which in addition to PMand other criteria pollutants, may emit a range o fpotentially carcinogenic pollutants, including dioxins and furans. Given that ina number o f cities industrial clusters are located inclose proximity to residential areas, they are likely to significantly affect human health. 141. The proposed measures include the introduction o f low sulphur diesel and furnace oil, promotion o f alternate fuels, waste minimization and energy efficiency, and pollution control technology. A more draconian measure to reduce human exposure i s the relocation o fpolluting unitsfromareaswhere they violate land-useregulations. Most o fthese measures havebeentried successfully elsewhere in South Asia. As part o f a Canadian-fundedprogram inKolkata, industrial boilers were enabledto switch to cleaner fuels and technologies through the provision o f financial and technology transfer assistance26,and the industrywas given a time-frame for . phasing-in o ftighter emission standards. The challenge for environmental authorities, especially inthe caseofsmall-scale industrialsources, istoplaythe role offacilitator to the extent possible, not to act solely as a regulator. Inorder to do so, the Federal and provincial EPAsneedto work closely with various stakeholders, including industryassociations, to design and implement measures that leadto lower industrial emissions, while minimizingcosts to industry, and where possible achieving savings through cleaner production. 142. An important co-benefit o fcontrolling local industrialemissions can be the reductionin emission o f Green-House Gases (GHGs). This can be achieved by improving combustion and process technologies, energy conservation measures, improving fuel quality (such as reducin sulphur content), switchingto lesspolluting fuels (such as gas fired boilers and generators), 2 8 and 26http://www.wbpcb.gov.idicefXndex.html 27The World Bank Oil and Gas Sector Review in 2003 highlighted the large potential economic benefits of converting from the use of fuel oil to natural gas. 46 puttinginplace end-of-pipe controls suchas scrubbers. Followingthe ratification ofthe Kyoto Protocol inearly 2005, Pahstan i s ina position to claim emissionreductioncredits by reducing the emissions of GHGs. This presents a significant new opportunity for Pahstanto access grant resourcesto address local and global emissions reduction at the same time. Reducing Emissionsfrom DispersedArea Sources: Controlling Dust and WasteBurning 143. The draft PCAP liststhe burningofmunicipal solidwaste as a significant source of urban air pollution, including dioxins. The other major dispersed area source i s natural dust. A recent study inPune andKolkata found that the resuspendeddust component (natural plus anthropogenic dust) of fine P M was close to 60 percent. The recommended measuresinthe PCAP to address dispersed area sources are statedas block tree plantation, afforestation in deserts, sand dune stabilization, paving o f shoulders alongroads, and the proper disposal of solid waste. Implementingthese measureswill require a coordinated approach betweenMoE, provincialEPAs and other departments, and local governments. Ifsuccessful, these measurescan behighlycost-effective inreducingambient PMlevels. A successful example ofreducingre- suspendedroaddust i s already beingpracticedinAhmedabad, where anextensive programof roadimprov$Fent, includingwidening andresurfacing, hasbeentaken upbythe Municipal Corporation. Public Information: theEssentialIngredient 144. As most ofthe emissions abatementmeasuresconsideredabove will involve trade-offs, either inthe application ofpublic resourcesor byrequiringprivate investment, the PCAP should place considerable emphasison the provision o fpublic informationregardingair pollution, and the associatedhealth and other costs. The analysis and dissemination of air quality data should be done inconsultation with local governments, who will be primary users of the data indesigning and implementinglocal air quality managementprograms. Dissemination strategies should include the daily publication of an Air Qualiq91ndex, such as those usedinChina, Taiwan, Thailand, USA, andproposed inBangladesh, to raise public awarenessof the issue, and to provide health alarms incase of serious exceedanceof standards (see Box 5.2). The public information strategy shouldalso includethe collation and assessment ofpast monitoring initiatives, to make this data accessible to all relevant stakeholders. Box 5.2: The Air Quality Index The AQI is an index for reporting daily air quality, focusing on the health effects one may experience within a few hours or days after breathing pollutedair. The U S EPA calculates the AQI for five major air pollutants: ground-level ozone, particle pollution (also known as particulate matter), carbon monoxide, sulfur dioxide, andnitrogen dioxide. For each ofthese pollutants, the U S EPA has established national air quality standards to protect public health. The AQI canbe considered as a yardstick that runs from 0 to 500. The higher the AQI value, the greater the level o f air pollution and the greater the health concern. For example, an AQI value o f 50 represents good air quality with little potential to affect public health, while an AQI value over 300 and beyond represents hazardous air quality. 28http://www.ahmedabadcity.orglstreetpartnership.html 29http://www.doe-bdlaqmp1aqi.html 47 6. Support for Air QualityManagement: the RoleofDevelopmentPartners 145. A numberof development partners haveprovided assistance inaddressingurban air pollution. Underthe UNDP-supportedNational EnvironmentalAction Plan (NEAP)assistance was provided for a range of activities focusing on the control of vehicular emissions, industrial emissions, and indoor air pollution. Inaddition, the ongoing UNDP-GEF project on Fuel EfficiencyImprovements inthe RoadTransport Sector (FERTS) has generateduseful information on ambient air quality as well as vehicular emissions, and remains ausefulplatform on which to launchfurther initiatives to address vehicular emissions. Pakistan EPA also has on- going close cooperation with JICA, which i s supporting the establishment of fixed and mobile monitoring facilities for ambient air quality inall four provinces, with associatedcapacity building. The WorldBanki s supplementing this assistance withtechnical advice and linkages withthe regional Clean Air Initiative for Asia (CAI-Asia), and is preparedto provide additional support for implementationof the PCAP. 48 VI. WATER SUPPLYAND SANITATION: PROTECTINGSOURCESAND SAFEGUARDINGSUPPLIES 1. Water Supply and Sanitationinthe Context ofWater ResourceManagement 146. Water i s central to many critical environmental issues on Pakistan. Onthe one hand, the vast IndusBasin systemsustains the life and livelihoods of the majority o f the population; on the other hand, shortage of water and the uncertainties o frainfall dictate the patterns of activity in most non-irrigated areas. The Indus Basin systemreceives on average about 100million acre feet (MAF)offreshwater annuallyfrom glacier melt, snowmelt andrainfall. This surfacewater supply from the IndusRiver systemis augmentedby about 50 MAFof groundwater. Domestic water supply, bothurbanand rural, consumes only about 4 MAF annually or only some 5 percent of total freshwater use inPalustan.30 Concerns over public health, however, combinedwith rapid urban growth and demands for better household services, have movedwater supply and sanitation issues highon the national agenda. 147. The top priority o f the National Water Policy (Nwp),approved recently by the Federal Government, i s the provision o f safe drinkingwater for all, along with hygienic sanitation for urban andruralpopulations. The NWP establishesimportantbasic principles including protection of sources, monitoring and maintenance o f drinkingwater quality, and progressive upgradingof facilities for the provision o f water and sanitation, on a sustainable basis. It provides a framework within which to establish a single set ofrules and regulations for Pakistan's future water management. 148. Inaccordancewiththe NWP,the government hasdecidedto formaNationalWater Council (NWC) to take decisions on water-related issues andinter-provincial conflicts. At the provincial level, Provincial Water Regulatory Commissions (PWRC) will be set upto handle all water-related provincial matters, including domestic water and sanitation. One o fthe keyroles of the NWP and PWRCswillbeto provide advice and support to lower levels of government to help them inthe improveddeliveryof water and sanitation services. The constitution o f PWRCs i s not yet finalized but it i s envisagedthat these commissions will be functioning inthe near future. It willbe important for the environmental authorities to be able to provide informedinputsto these commissions. Water supply and sanitation are not mentionedineither the Federal List or the Concurrent List, and therefore the provincial governments have exclusive jurisdiction to enact laws concerning them, which adds an additional layer of complexity. 149. After examiningthe extent and sourcesofthe threat posedbythe declining availability and deteriorating quality of water, this chapter considers the developments ininstitutional design, regulation, and capacity necessaryto meet the NWP's goal ofproviding safe drinkingwater for all. Inparticular, this chapter emphasizes the needto (i) better clarify roles inprotecting source water quality, providing water supply and sanitation services, and regulating drinkingwater quality, (ii)establish use-basedstandards for the quality o f water sources, (iii) local capacity build for water supply and sanitation service provision, and (iv) develop a tiered approach to regulating drinkingwater quality. 30 `Pakistan Water Sector Strategv', Ministryof Water andPower, Office of the ChiefEngineering Advisor/ Chairmanfederal FloodCommission, Vol5 October 2002. [Taken fromWCAS Paperno.9.1 49 2. Drinking Water Sources: DecliningAvailability, Deteriorating Quality 150. Despite the enormous size o f the IndusBasin system, water availability on a per capita basis has been declining at an alarmingrate, from about 5,000 cubic meters per capita in 1951to about 1,100 currently, which i sjust above the internationally recognized scarcity rate, and i s projected to be less than 700 by 2025. Although householduse i s only a few percent o f the total use, increasing competition for resources and continuing degradation o f water quality are severely impacting efforts to improve levels o fhouseholdservice provision. 151. The majority o f the populationrely on groundwater as their principal source o f hnking water. This i s true both for rural areas and for major cities, apart from Karachi (which gets its water from the Indus), and Islamabad (which has a number o f different sources). Palustan can be divided into five groundwater zones, for purposes o f drinkingwater supply: (i) sweet groundwater areas; (ii) areas where canal or river water i s a real alternative; (iii) mountainous and hilly areas where springwater is available; (iv) the eastern desert belt where groundwater is available at increasing depth; and, (v) coastal areas where the groundwater i s saline. About 80% o fPunjab has fresh groundwater, with saline water inthe south and desert areas. Inaddition, there i s some evidence o f highfluoride or arsenic content locally inPunjab, and a number o f locations have been contaminated by industrial wastewater discharges. Less than 30% o f groundwater in Sindh i s fresh, with much o f the province underlainby highlybraclushwater, and some instances o f elevated fluoride levels. InNWFP, increasing abstraction has resulted inwells now reaching into saline layers, and much o f Balochistan also has saline groundwater. 152. Over 60% o f the population get their drinkingwater from hand or motor pumps, with the figure inrural areas being over 70 percent. This figure i s lower in Sindh, where the groundwater quality i s generally saline and an estimated 24 percent o f the rural population get water from surface water or dugwells. Inalmost all urban centres, groundwater quantity and quality has deteriorated to the extent that the availability o f good quality raw water has become a serious issue. Over-abstraction has resultedindeclining groundwater levels, and groundwater quality has deteriorated as a result o fthe discharge o f untreated sewage and industrial effluents. Groundwater over-abstraction and pollution have typically been seen as problems for rural and agricultural activities but its broader impact on water supply will make the challenges o f surface water transfers to growing urban areas even more difficult. 3. Extent and Sources of Water Contamination 153. There i s no regular monitoring o f dnnlungwater quality, interms o f either the source o f supply or the water as receivedbythe user. A nationalwater quality study was carriedout bythe Pakistan Council for Research inWater Resources (PCRWR) in2001. Inthe first phase o f the program, covering 21 cities, all samples from 4 cities, and halfthe samples from 17 cities indicated bacteriologicalcontamination. Inaddition, arsenic above the WHO limit of 10ppb was found insome samples collected from 8 cities. The same study also indicatedhow the uncontrolleddischarge o f industrialeffluent has affected surface and groundwater, identifying the presence o f lead, chromium and cyanide ingroundwater samples from industrialareas o f Karachi, and findingthe same metals inthe Malir and Lyari rivers flowing through Karachi and discharging into sea. A second PCRWRstudy was launched in2004, and preliminary results indicate no appreciable improvement, while a separate study reported that in Sindh almost 95 percent o f shallow groundwater supplies are bacteriologically contaminated. Figure 6.1 summarizes the organic load data from a number o f these studies. A comparisono fthe quality o f surface water with the NEQS effluent discharge standard clearly demonstrates the extent o f pollution due to the discharge o f industrialand municipal effluents. 50 Figure 6.1: COD Levels in SurfaceWater 1800 1580.5 1600 1400 150 mall) 1,250 1200 1000 800 600 400 200 n Streams NaturalWater Tributaries Tributaries Ravi River lndus River and Lyari River Malir River draining into Streams Originating Originating (2000) Adjacent (Karachi) (Karachi) LehNala Joining the fromthe frornthe Water Bodies (Islamabad) SoanRiver EasternSdeof WesternSde (2002) (Islamabad) the Ravi River of the Ravi (Lahore) River (Lahore) Sources: Investigation of Air and Water Quality (Lahore, Rawalpindi, Islamabad): Japanese International CorporationAgency (JICA), 2000; Investigation on Industrial Water Quality. Islamabad:Japan International CooperationAgency(J1CA)FakistanEnvironmentProtectionAgency, Governmento fPakistan, 2001;Pilot Water Quality Monitoring Program in Sindh. Draft Final Report. Karachi: Sindh EnvironmentProtectionAgency, Government of Sindh, 2002. 154. Althoughgroundwater is still the primary source o fdrinlungwater supplies, itis estimated that 40 million residents depend on irrigation water for their domestic use, especially in areas where the groundwater i s braclush. The associated health risks are grave, as bacteriological contamination o f irrigation water often even exceeds WHO limits even for irrigation. The poor quality o f drinkingwater has major socio-economic consequences for Pakistan. A study conducted by UNICEF found that 20-40 percent o fthe hospital beds are occupiedby patients suffering from water-related diseases, such as typhoid, cholera, dysentery and hepatitis, which are responsible for one thirdo f all deaths. As the analysis inChapter I1presented, the total health costs associated with the deaths and sickness caused by waterborne disease are estimated to amount to more than 1.8 percent o f GDP. Municipal Effluent: thePrincipal Source of WaterPollution 155. Most surface water pollution i s associated with urban centres. Typically, nullahs and storm water drains collect and carry untreated sewage which then flows into streams, rivers and irrigation canals, resulting inwidespread bacteriologicaland other contamination. Ithas been estimated that around 2,000 million gallons o f sewage is being discharged to surface water bodies every day. 156. Although there are some sewerage collection systems, typically discharging to the nearest water body, collection levels are estimated to be no greater than 50 percent nationally (less than 20 percent inmany rural areas), with only about 10percent of collectedsewage effectively treated. Although treatment facilities exist inabout a dozen major cities, in some cases these 51 have been built without the completion o f associated sewerage networks, and the plants are often either under-loaded or abandoned. Ineffect, only a few percent of the total wastewater generated receives adequate treatment before discharge to the waterways. Industrial Effluent: Uncontrolled Hazardous Discharges 157. Although the NEQS are intended to regulate the discharge o f industrial effluents to surface waters, inthe absence of strong monitoring and enforcement, compliance is very low. It has been reported that inLahore, only 3 out o f some 100 industries usinghazardous chemicals treat their wastewater adequately. InKarachi, two o f the biggest industrial estates inPakistan have no effluent treatment plant, and effluent containinghazardous materials, including heavy metals, i s discharged directly into the river and harbour. There are, however, plans to install Combined Effluent Treatment Plants (CETPs) inbothindustrial areas, with ADB support. International experience teaches that the principal challenge will be financing the operation o f these plants. InFaisalabad, one of the biggest industrial cities, there i s little segregation o f domestic and industrial wastes, and althoughthere i s a simple effluent treatment plant, its operational efficiency i s not known as there is no regular monitoring. 158. The Pakistan EPA has implemented a self-monitoring and reporting program, with the support o f some private sector institutions and NGOs, and this i s a practical step inmoving forward within the practicalconstraints o f the environment agencies. The provincial EPAs/EPDs are also beginning to develop baseline data on industrialdischarges which provides a platform for targeted enforcement approaches. Agricultural Runof$ Evidence of Pesticide Contamination 159. The quantity or quality of agricultural runoff has not been measured or tested at the national level but with an estimated 5.6 milliontonnes o f fertilizer and some 70,000 tonnes o f pesticides used annually, pollution from agricultural sources can be expected inreceiving waters. In107 samples ofgroundwater collected fromvarious locations inthe countrybetween 1988 and 2000,3 1samples were reportedto have concentrations o fpesticides beyond FAO/WHO safety limits.31 A pilot projectwas undertaken in 1990-91 inSamundari, FaisalabadDistrict over an area o f 1,000 km2,to look at the extent o f groundwater contaminationby agrochemicals. Of ten groundwater samples inFaisalabadDistrict drawn from a depth o f 10-15m, seven were contaminated with unsafe levels o f one or more pesticides (PCRWR, 1991). Although the study concluded that the contamination hadreached only the shallow aquifers, evidence suggested that it was gradually reaching the deeper aquifers as well. The contribution o fagriculturaldrainage to the overall contamination of the water resources has not been determined. It i s believed to be a small part o f the total loadbut can be important inlocal hot-spots. 4. InstitutionalDesignfor Water QualityProtection 160. In2004, aNational CoordinationCommittee onWater and Sanitation (NCCWS) was notified, under the chairmanship o fthe Federal Secretary o f Environment with representatives from bothpublic and private sectors, as well as civil society and development partners. The objectives o f the NCCWS are to review polices and standards for water supply and sanitation, and to develop plans and projects for the sector. An important institutional step will be to ensure that 31 Policy and Strategy for RationalUse of Pesticides inPakistan. BuildingConsensus for Action. Islamabad: UnitedNations System inPakistanPublication, 2001. 52 the NCCWS includesthe key agencieswith relevant power over water resources,particularly the MinistryofWater andPower, andWAPDA. The agendaofthe NCCWS shouldbefocused on coordinationrather than implementation. The challenge o f improving access to safe water and sanitation will not bemet bythe environmental sector working on its own, and one o fthe first steps mustbe to increase the degree of cooperation with other government agencies, as well as communities, to agree on priority issues and to work with them on implementation. 161. The responsibilitieso f the MoE for water supply and sanitation have been significantly increasedthrough the Ministry's chairmanship o fthe NCCWS and role as the lead agency of the Clean DrinkingWater program. A major task for the NCCWS will be to develop practical proposals for Pakistan to achieve progress towards the MillenniumDevelopment Goals for improvement o f access to safe dnnhngwater and sanitation. Meeting these new challenges will increasepressure for staff inMoE with the relevant background and qualifications. The challenges of protecting the quality of water sources, and expanding water supply and sanitation coverage are made more difficult by the complex institutional setting. There are three major topic areas where the MoE, provincial environmental authorities, and local governments have a role to play, (i)protection of water sources, (ii) supply and sanitation service provision, and water (iii) regulation of drinlungwater quality. The appropriate division o f institutionalresponsibilities between eacho fthese areas i s considered inmore detail below. Water Source Protection: an Important Rolefor EnvironmentalAuthorities 162. One set o f issues relates to the monitoring and protection of water sources, including surface water (all rivers, canals and drains whichare usedby communities) and groundwater. TheNWP recognizes the deteriorationinquality o fbothsurface and groundwater, and the urgent needto address this problem. Inresponse, the Policy highlights the need to implementa National Water Quality MonitoringProgram. While ad hoc surveys have beenconducted, there i s no regular or consistent monitoring o f source water quality. This clearly should involve the environmental authorities as having aprincipal responsibility for providing an overview o fwater quality, butmonitoring o f canal and drainage water quality i s also a mandate o f the irrigation departments. The irrigation authorities conduct regular monitoring of salinity and other parametersrelevant to their operations, but do notnormally test for heath-relatedparameters. Some broader studies have been carried out (e.g. those by PCRWR) butthere i s no overall water quality monitoringprogram, and MoE shouldtake the leadinclarifying the needs and practical scope of such a program. Providing Water Supply and Sanitation Services: a Local GovernmentMandate 163. Prior to devolution, responsibility for the provision of water supply and sanitation services rested with provincial governments, and was exercised though Development Authorities (DAs)or Water and Sanitation Authorities (WASAs) inurbanareas, andprovincial Public Health EngineeringDepartments (PHEDs)inrural areas. As part ofthe devolutionprocess, water and sanitation are now assignedto tehsils, except inthe case of city districts where they are district responsibilities. While MoE has an important role to play inreporting on progress towards the relevant MDGs, and i s presentlyimplementinganational mandateto provide water treatment plants under the Clean DrinlungWater initiative, inoverall terms water and sanitation i s an operational function that musthave a strong local dimension. 53 Regulating Drinking Water Quality: a TieredApproach 164. One o f the top priorities o f the NEPis to establish the legal and policy framework for providing safe drinkingwater. M o E should take a lead indeveloping this framework, with a focus on defining clear roles and responsibilities. The set o f activities around standard setting, testing, monitoring and reporting should be one o f the focal areas for the Ministry as well as provincial environmental agencies. This does not implythat all the necessary sampling and testing should be done inhouse, but it should be the objective o fthe Ministryto be able to provide reliable information and clear advice to both consumers and decision-makers. 165. Fromthe point o f view o fpublic health, there i s an importantneedto monitor water supply services, inparticular the bacteriologicaland chemical quality o f the water as it is received byusers. This is also clearly tied to effortsto upgradethe coverage andoverall quality o fwater services. There have been some studies o f the quality o f water delivered(for example the PCRWRwork) butthere i sno structured system inplace. In2002, the Palustan Standards and Quality Control Authority (PSQCA) issued a drinkingwater quality document, inline with WHO guidelines, but this i s a guidance document and i s not enforceable on water service providers. Consequently, there are currently no drinkingwater quality standards inPalustan to protect users. Once such standards are established, the ideal system for monitoring water supplies would be through a tiered approach, including routine samplingby the operator, monitoring by the local or provincial health or environmental authorities, with oversight, review and consolidatedreporting byMoE. Designingandputtingsuch as system inplace (which willrequireresources and shlls at all levels) couldbe an important task for MoE. 5. Setting a Regulatory Foundation: Use-Based Standards for Water Sources 166. Protection o f ambient water quality (both surface and groundwater) is an essential part o f the mandate o fthe environment authorities. Inthis context, the NEP identifies the needto establish a use-based system for classification o f water bodies, as a first step in setting objectives for protection andrehabilitation. This must be followed by clean-up o fpriority waterbodies, to avoid the recurrence o f health crises caused by the use o f polluted water. Such a program would require the refinement o f standards, clarification ofresponsibilities, better information systems and additional support for the enforcement o f discharge standards. 167. Under the Pakistan EnvironmentalProtectionAct (PEPA), the discharge o f any pollutant inexcess ofthe NationalEnvironmentalQuality Standards (NEQS) isprohibited, andpenalties are prescribed. NEQS have been established for municipal and industrialeffluents discharged to inland waters, sewage treatment facilities, and the sea. PakistanEPA i s charged with implementation o f PEPA, but has delegated powers to provincial EPAs for implementationo f the Act within their respective provinces. At the district level inPunjab, an Environmental Officer i s appointed to maintain environmental standards and further delegate tasks within the district and its municipalities. Other laws that relate to the prevention o fpollution o f water bodies include the Canal and Drainage Act (1873) and the PunjabMinor Canals Act (1905), which prohibit the corrupting or fouling o f canal water, and give irrigation authorities powers to control discharges to the irrigation system. Inaddition, the Sindh Fisheries Ordinance (1980) prohibits the discharge o f untreated sewage and industrial waste into water. 168. A significant gap inthe regulatorysystemis the lack o f ambient water quality standards, which would guide the use and protection o f major water bodies and would provide a basis for priority efforts inenforcingNEQS requirements. Approaches usedinternationally are usually based on the concept o f Beneficial Uses o f any water body, such as irrigation, fishbreeding and 54 capture, drinkmgwater supply, and recreation(see Box 6.1). Reasonable goals can be set for each stretch o f water interms o f such uses, based on current or proposed hture activity. One critical use i s drinkingwater supply (either directly or after water treatment) for which ambient standards should be set to protect o f the water source. Once an understanding o f critical uses i s established, there i s a clear and persuasive basis for regulation o fpollution discharges and water abstraction inthe light o f such goals. Box 6.1: Beneficial Use Water Standards in the State of Minnesota "Beneficial uses" are the uses that the government decides to make o ftheir water resources. Inthe USA, the process of determining beneficial uses is spelled out inthe federal rules implementing the U S Federal Clean Water Act. Inthe State o f Minnesota, seven beneficialuses are defined and these uses and the use-class designations are as follows. Drinkingwater source -Class 1 Aquatic life and recreation- Class 2 Industrial use and cooling - Class 3 Agricultural use, irrigation- Class 4A Agricultural use, livestock and wildlife watering -Class 4 B Aesthetics and navigation- Class 5 Other uses - Class 6 Limited Resource Value Waters - Class 7. Inthis scheme, the class numbers 1-7 are not intended to implyapriorityranking to the uses. Source: www.pca.state.mn.uslwateristandards1 169. One key action area for M o E should be to review available ambient water quality data, identify priority uses which needto be protected, and develop cooperative programs to implement essentialprotection measures. A formal process of agreeing Beneficial Uses for the whole water system would be a long and complex process but it should be possible to reachagreement on certain critical water bodies or reaches for short term action. Many o fthe actions necessary to implement a source protectionprogram are the responsibility o fprovincial or local authorities and the action are often under the control o fprivate sector industries so a process o f discussion and delegation will be required to agree on federal, provincial, and sectoral roles in setting and enforcing ambient and effluent standards. 6. BuildingLocal Capacity to ProvideWater and Sanitation Services 170. While the devolution process may have assignedresponsibility for water supply and sanitation to local government, unfortunately Tehsil MunicipalAdministrations (TMAs) have little capacity to undertake these responsibilities. Further, although the NWP stresses the needto engage the private sector inthe delivery o f urban water supply and sanitation services, there i s no ` Federalor provincial legal framework to guide private-public partnerships. 171. Bothrural and urban areas suffer from under-investment inwater supply and sanitation, compounded inmany casesby the inadequacy o frevenues to satisfy maintenance requirements. Inruralareas, over40 millionpeoplelack accessto safe dnnkingwater, while 60millionlack adequate sanitation. Figures available for implemented schemes may be a poor indicator o f actual coverage as many do not serve the entire population for which they were installed, some are in a state o f disrepair, and coverage figures mask the poor quality o f water beingprovided. 55 The situation regarding sanitation i s even more serious. Sewerage systems, where they exist, are usually poorly maintainedand often contribute to the cross-contamination o fwater systems and groundwater pollution. The few treatment facilities are often non-functional or ineffective. 172. Inthe absenceo fdetailed data, it isnot possibleto makereliableestimates ofthe costs of upgradingwater supply and sanitation. Palustan currently spends less than one quarter o fa percentage point o f its GDP on water supply and sanitation. According to rough estimates, to provide adequate drinkingwater and sanitation to all, Palustan will need investments inthe order o f $5 billion. This excludes operation and maintenance costs, which shouldbe recovered as far as possible through service charges. M o E can take a coordinatingrole inworking with provincial and local authorities to develop better information on the gaps and to prepare realistic programs for upgrading. Inpractice, however, it i s not for M o E to take the lead inimplementing such a program. 173. Significantresources have been committed through the Clean DrinkingWater program, the goal o f which i s to provide treated water to urban centers across the country. The Program focuses on the construction o f small scale water filtration plants at easily accessible points in areas which suffer from poor water quality. Experience worldwide shows, however, that physical infrastructure provision by itself i s not enough to improve basic health indicators. The commitment and ownership o f local authorities are essential for sustainable improvements in water supply and public health. 7. Creating Tiered Capacity to Regulate Drinking Water Quality 174. Inprinciple, the quality ofdrinkingwater "at the tap" shouldberegulatedandmonitored at the local level but only the major city WASA's have the technical resources for regular monitoring and there i s no routine high-level oversight or reporting o f the quality of water supplied across the country. Ingeneral, local authorities have very little capacity for the operation and control o f their water systems and poor water quality i s often not flagged untilthere i s a noticeable increase inwater-related illnesses. Some TMAs have simple monitoring kits provided by UNICEF which allow them to track basic parameters but this i s not the general case. There have been two broad studies inthe past five years (by PCRWR) butthis does not yet provide an adequate baseline. 175. The ideal system would be a tiered one. At the level closest to the consumer, TMAs should have adequate resources and knowledge for routine monitoring o f one or two simple parameters. The objective at this level is essentially to confirmthat the basic water system i s operating ina stable mode. At the next level, healthor environmental authorities at the local or provincial level should carry out regular oversight o fthe local systems, with some independent sampling and monitoring. The purpose o f this work i s to check the TMA findings, to carry out more detailedtesting on additionalparameters, andto provide a comparative picture o f different systems and areas to allow decisions to be made on upgrading and expanding systems. The role o fM o E at the national level would be quality assurance (including, for example, inter-laboratory comparisons), and consolidated reporting at the national level on trends and achievements. 176. There i s limitedtechnical capacity (skills and equipment) to carry out the sampling and testing and it is important to carry out the work as effectively as possible. At the local level, where the objective i s essentially to flag exceptions or breakdowns, then very simple methods can be used. For general monitoring, the range o fparameters routinely tested should be chosen to be simple, robust and manageable with the testing resources currently available inpublic and private sector laboratories. There will be a need for some more sophisticated testing, for verification o f 56 the routine work and for occasional monitoring of a wider range of parameters but this again should be camed out mainly usingexisting facilities, which include PCRWRand MoE's own laboratories. 177. Designingand puttingsuch as system inplace (which will require resources and skills at all levels) would be an important task for MoE. The role o f MoEwould be to ensure that the system provides a level o f confidence inthe monitoring o f dnnlungwater supplies, together with the use o f the information to target programs to upgrade and expand the service provided to the population. 8. Opportunitiesfor DevelopmentPartner Support 178. Water supply, sanitation and the safeguarding o f water quality constitute a very large agenda, and Palustanneeds the support o f its development partners inits implementation. JICA has recently initiatedassistance with source water quality monitoring equipment and training which can provide the basis for work on water uses andpriorities for tackling pollution problems. Areas that have been indicatedfor possible World Bank support include the development o f used- based standards, technical assistance to all levels of government for targeted monitoring and enforcement o f discharges, and the establishment of a system to understand and track the quality of water at the point o f delivery. 57 VII. RECOMMENDATIONSANDA PROPOSEDWAY FORWARD 179. The urgency for addressingPalustan's environmentalproblems has probably never been greater. Conservative estimates presented inthis report suggest that environmentaldegradation costs the country at least 6 percent o f GDP, and these costs fall disproportionately upon the poor. The most significant causes o f environmental damage identified and estimated inthis report are: (i)inadequatewater supply, sanitation and hygiene; (ii) degradation; (iii) air pollution; soil indoor (iv) urban air pollution; and (v) exposure to lead. Whetherjudged interms o fregional performance or environmental stress factors, there i s significant scope to better ensure the sustainability o f Pakistan's economic growth. 180. The preceding chapters o f this report have examinedthe current status o f environmental management inPakistan, focusing on three issues: (i) the environmental impact assessment system; (ii) urban air quality management; and (iii) supply and sanitation. Suggestions for water strengthening environmental management inthese specific areas are presented ineach chapter. Viewing environmental quality as the outcome o f an environmental "production function" involving pressures resulting from economic activities mitigated by a series o f institutional, regulatory and other incentives, this report identifies the main bindingconstraints on environmental performance as falling into four categories: (i) gaps inincentives and accountability; (ii)institutional design; (iii) inthe regulatory framework; (iv) capacity gaps limitations. Based on the analysis presentedinthe precedingchapters, the principal features o f these constraints are summarized below, followed by a set o frecommendations for reducingthese barriers to improved environmental quality and more sustainable economic growth. The chapter concludes with a set o f recommendations for immediate action. 1. StrengtheningLinkagesinInstitutionalDesign 181. Constitutionally, Federal andprovincial governments share the concurrent legislative authority for environmentalpollution andecology. Inaddition, Palustan EPA has delegated powers under PEPA to provincial EPAsto implement and enforce environmentalregulations. Further, the mid-term review o f the NCS and the NEP both emphasize the needto develop the environmentalmanagement capacity o fprovincial and local governments. Appropriate roles for national authorities within this environmental federalist structure include: (i) setting national policy and defining environmental quality goals: (ii) providing resources and oversight to provincial environmentalauthorities; and (iii) publicly reporting on progress inmeeting national environmental objectives. Provincial environmental authorities should play the primary role in the environmental clearance process, the implementation o f compliance and enforcement, as well as the monitoring o f ambient environmental conditions. At the same time, the Federal environmental authority has a legalmandate to ensure the enforcement o f national laws and regulations, which includes Federal oversight and suspension o f delegatedpowers. Bringing greater clarity to this structure would reduce the institutional design constraints to improved environmental outcomes, particularly inthe areas highlighted below. Establishing Guidelinesfor Oversight of DelegatedAuthorities 182. No oversight guidelines have been established for Federal environmental powers delegated to provincial EPAs. Inprinciple, such guidelines should allow for delegation based on (i) adequacyofprovincialregulationstoachievenationalobjectives;(ii) adequacyof the the provincial technical expertise, staff, and resources to perform the delegatedresponsibilities; and 58 (iii)provincial commitment to share the informationneededto monitor compliance and measure performance. 183. Oversight guidelines should also establish policies for funding assistance, dispute resolution, and provide a basis for Federal suspension of delegated authorities when necessary. Such guidelines would facilitate Federal oversight o fprovincial EIAclearances, for example. Although PalustanEPA reserves the right to suspendprovincial EL4 clearance authority, this has neverbeen exercised, inpart for lack o fclarity o f oversight arrangements, limitingthe effectiveness of the Federal mandate, and ultimately of the EIA system itself. CreatingPartnershipsfor Clean Air 184. MoE i s developing the Palustan Clean Air Programme (PCAP) to consolidate efforts to addressthe four principal sources o f urban air pollution, vehicular and industrial emissions, burningof solidwaste, andnaturaldust. Effective implementation ofthe programwill require the development ofpartnerships between multipletiers and sectors o f government. While Pakistan EPA i s responsible at the national level for setting air quality and emissions standards, and for definingassociatedsystems for monitoring and enforcement, responsibility for the implementationo fthese policies hasbeen delegated to the provincial environmental authorities. City authorities areparticularly important inthe management of urban air quality becauseo f the needto integrate emissions control measureswithbroader aspectsof urbanplanning, such as the provision ofpublic transport and zoning of industrial developments. Inestablishing policies for clean air, the energy, fuel and transportation sectors will have important roles to play. An essential aspect of PCAP's institutional design, therefore, will be the formation ofpartnerships andprovision of incentives betweenlevels and agencies o f government. Distinguishing Water Supply Roles: SourceProtection, ServiceProvision, and Quality Control 185. Inconsidering the protectionofwater quality, itisusefulto distinguishbetweenthe protection o f water sources, the provision of water supply and sanitation services, and the regulationof drinkingwater quality. Protectiono f surface and groundwater sources should clearly involve environmental authorities, although irrigation departments also have an important role to play. As part o fthe devolution process, the provision of water and sanitation services i s are now assigned to local governments, and should continue to have a strong local dimension. The ideal systemfor regulation o f drinkingwater qualitywould be tiered, with local governments or operators conductingroutine monitoring, provincial authorities carrying out regular oversight o f the local systems, and Federal agenciesprovidingquality assurance, and reporting at the national level on trends and achievements. 2. Updating the RegulatoryFramework 186. The current NEQS provide standards for emissions and effluent from selectedsources, butdo not establish standardsfor the ambient quality ofair or water. Inaddition, aspectsofthese standardsare out-of-date, no longer reflecting currentunderstanding or technologies. The regulatory framework would be significantly strengthenedby linking standards for ambient quality with updated standards for emissions, monitoring, and the provision o fpublic information, particularly inthe areas described below. 59 Developing Health-Based Air Quality Standards 187. Ambient air quality standards are the foundation upon which emission control strategies are based, usually adopted as enforceable regulations, typically with deadlines and schedules for attainment. Such standards are not simply limits for each pollutant: they also specify monitoring methods, locations and frequencies, averaging times and assessment procedures. Pakistan lacks a comprehensive set o f health-based air quality standards. This is partly linked to the lack o f information on current conditions, but with the establishment o f an air quality monitoring network underway, it would now be appropriate to develop national air quality standards based on a review o f the data generated, standards in other countries, and WHO guidelines. While safeguarding public health should be the main consideration, the costs and likelihood o f achieving the standards should also be usedto inform the standard-setting process. VehicleEmission and Fuel Quality Standards 188. The Vehicle Emission Standards (VES) currently specified inthe NEQS are outdated when compared to most other countries. Inupdating them, the goal should be to set two standards, one for new registrationvehicles, and the second for in-service vehicles. Establishment and achievement o f VES are intrinsically linked to fuel quality. For example, the current level o f sulphur indiesel inPalustan i s too highto be able to meet Euro I1or Euro III emission standards, which have already been adopted insome South Asian countries. The cost o f moving to lower sulphur diesel needs to be evaluated against the potential economic benefits in terms o f lower emissions and better health. Based on the current condition o f the vehicle fleet and fuel quality, it would be appropriate to adopt a phasedapproach to the tightening o f VES and fuel standards, developed inconsultation with all stakeholders. Establishing Use-Based Water Quality Standards 189. The lack o f ambient water quality standards is a significant gap inthe regulatory system. Inthis context, the NEPidentifiesthe needto establish a use-based system for classification of water bodies, as a first step insetting objectives for protectionand rehabilitation. Approaches used internationally are usually based onthe concept o f Beneficial Uses o f any water body, such as irrigation, fishbreedingand capture, drinking water supply, and recreation. Reasonable goals can be set for each stretch o f water interms of such uses, based on current or proposedfuture activity. Once an understanding o f critical uses i s established, there is a clear and persuasive basis for regulationo f pollution discharges and water abstraction inthe light o f such goals. While a formal process o f agreeing BeneficialUses for the whole water system would be a long and complex process, it shouldbe possible to reachagreement on certain critical water bodies for short term action. A process o f discussion and delegation will be required to agree on federal, provincial, and sectoral roles insetting and enforcing ambient and associated effluent standards. Drinking Water Quality Standards 190. One o fthe top priorities o f the NEPi s to establish the legal and policy framework for the provision o f safe drinkingwater. MoEshouldtake a lead in developingthis framework, with a focus on defining clear roles, including assigning responsibility for the development o f drinhng water standards. There is an important needto monitor water supply services, inparticular the bacteriological and chemical quality o f the water as it i s received by users. In2002, the Palustan Standards and Quality Control Authority (PSQCA) issued a drinkingwater quality document, in line with WHO guidelines, but this i s a guidance document and i s not enforceable on water 60 service providers. Consequently, there are currently no formal drinkmgwater quality standards inPakistanto protect users, a gap which shouldbe filled as amatter ofpriority. 3. BuildingInstitutionalCapacity for EnvironmentalManagement 191. With significantnewresources proposed for environmentalpurposes inthe MTDF, fundingis less o fa constraint than the capacity to apply available resources. The availability o f these resources presents an important opportunity to develop capacity in environmental authorities at Federal, provincial and local levels to implement the strengthenedregulatory framework described above, as well as to mainstream the development o fenvironmental management capacity inkey sectoral agencies, and to upstream such capacity inplanning departments. Effective use o f these resources will allow these agencies to address a shortage of qualified staffby contractingtechnical assistance, focusing on: 0 the outsourcing o f services to monitor environmental quality, as well as to analyze and disseminate the results; 0 the development o f environmental standards, particularly inpriority areas such as the establishment o f ambient air and water quality standards; expert input for the review o f environmentalassessments. 192. Inthe longerterm, ProvincialSustainableDevelopmentFunds(PSDFs) are potentially valuable vehicles to buildprovincial and local government environmental management capacity. PSDF rules allow environmental fees and charges to be creditedto these funds, not only strengthening incentives for better performance by environmental agencies, but also raising the possibility o f a more sustainable and predictable source o f funds for on-going capacity building. Strengthening Capacityfor Effective EnvironmentalImpact Assessments 193. Efforts to strengthen capacity for more effective EIAsneed to address four weaknesses in the current system, (i)lack o f expert input for technical reviews, (ii)widespread ignorance o f a a requirements and procedures, both ingovernment and the private sector, (iii) the lack o f a system to identify projects, bothpublic and private, that should be requiredto submit an EM, and (iv) the current weak enforcement o f EL4clearance conditions. 194. Providing resourcesto access expert advice would help the Pakistan and provincial EPAs ensure that information provided inEIAs i s adequate, and effectively usedinthe decision-malung process. Expert guidance would be particularly useful to ensure that alternatives, mitigation measures and monitoring are appropriately addressed. To buildbroader awareness o f EIA requirements, assistance should be provided to enable all provinces to establish EIA training programs similar to that o fNWFP, inpartnership with local universities or other training organizations. External technical assistance could also be used to develop systems to ensure better coverage o f EIAs, and to provide the additional technical and legal capacity requiredto help enforce implementation o f environmentalmanagement measures identified inEIAs. Outsourcing Technical Functionsfor UrbanAir Quality Management 195. Inordertomanageurbanairquality, itiscriticaltomonitor criteriapollutantsand conduct emissions inspections o fpriority sources. The primary responsibility for this should rest withprovincial EPAs. Internationalexperience underlines the needto ensure sustained resources for the operation and maintenance o f monitoring equipment, and to retain trained technical staff. 61 To address these issues, outsourcing technical functions to private or academic institutions should be considered, drawing on international experience with private sector contracts for air quality monitoring, the operation o f emissions inspectionand vehicle maintenance programs, as well as initiatives to reduce emissions from corporate vehicle fleets. Building CapacitytoProtect Water Quality 196. The emphasis o f the NEP on ensuring the safety of water supplies highlightsthe needto increase resources for this purpose at all three levels o f government, with an emphasis on coordination at the Federal level, enforcement at the provincial level, and investment locally. The three priority areas for strengthening the capacity o f MoE, provincial environmental authorities, and local governments are: (i) protection o f water sources; (ii) supply and sanitation service water provision; and (iii) regulation o f hnlungwater quality. 197. Protectiono f ambient water quality (both surface and groundwater) i s an essentialpart o f the mandate o f the environment authorities. The establishment o f a use-based system for classification o fwater bodies and the subsequent clean-up o fpriority waterbodies will require significant resources over a lengthy period. Even duringthe initial process o f agreeing Beneficial Uses for selected critical water bodies, Federal and provincial environmental authorities will require substantial technical assistance for water quality monitoring and stakeholder consultation. 198. The need for physical investments i s greatest at the local level, where the devolution process has assigned responsibility for water supply and sanitation to local governments. The NWP stresses the needto engage the private sector inthe delivery o fthese services, to supplement scarce public resources. T o help TMAs meet this challenge, there i s an urgent need to develop legal frameworks to guide private-public partnerships. 199. The ideal system for regulation o f drinkingwater quality would be a tiered one, with local capacity for routine monitoring o f a few simple parameters, provincial resources sufficient for regular oversight o f the local systems, and M o E providing quality assurance and consolidated reporting at the national level. Designingand puttingsuch as system inplace will be an important task for MoE, requiring a significant level o f expert input, equipment and training. Mainstreaming and Upstreaming 200. Many o f the investments with the most significant environmental consequences are those undertaken by the Federal or provincial governments, for example inroads, irrigation and power. InNovember, 2004, ECNECissuedanoticereinforcingtherequirementthat EIAsshouldbe prepared for all major public sector investments. While environmental cells have been created in a few key agencies, additionalresources and incentives are requiredto increase the capacity o f key line agencies to prepare adequate EMS,and effectively implement associated Environmental Management Plans. 201. The Environment Section o fthe Planning and Development (P&D) Division is an important force for environmental upstreaming through its mandate to address environmental concerns at the policy, project conceptualization, and approval stages o f public sector projects. Provincial planning departments have established corresponding environment sections for environmental screening o fproject proposals within their jurisdictions. The establishment o f these sections i s significant, and their limitedpermanent capacity should be supplemented with expert assistance as necessary to conduct detailed environmentalreviews and advise on the preparation o f environmental management plans. 62 202. Inorder for environmental considerations tobe more fblly upstreamedintonational policy-making, planning and budgeting, M o E must lead the sustainable development dialogue. Withinthis dialogue, and inparticular through the PRSP update process, the effective promotion o f sustainable development will require more rigorous analysis demonstrating that environmental degradation is a constraint to economic growth and poverty reduction. The M o E can help guide this PRSPupdateprocessbypreparingan environment chapter for the PRSP I1which would outline the environmental management challenges and opportunities associated with accelerated growth. To produce and help present such analysis, MoE will require additional resources to contract the necessary analytical expertise. 4. Reinforcing Incentives and Accountability 203. Accountability to stakeholders is essential for sound environmentalmanagement, and will only be achieved by ensuring stakeholders are informed and empowered. Opportunitiesto strengthen environmental accountability inPakistan includemeasures to improve public consultation and disclosure inthe EIA process, the public provision o f information on environmental quality, and support for the involvement o f civil society inenvironmental management and enforcement. Public Consultationand Disclosure of EIAs 204. As recognizedinthe EIAGuidelines, strongpublic participationinthe EIAprocess benefits bothproject proponents and other stakeholders; however consultation inPakistanhas often proven to be limited and ineffective. Possible measures to strengthen this process include: (i) requiring project proponents to develop a public consultation plan, (ii) creation o f EIA information centers at federal andprovincial levels, (iii) disclosure o f all EIA filings on a public website for easy accessby the public andprivate sector, and (iv) public provision o f a non- technical summary o f EIA decisions. Public Information to Support CleanAir and Safe Water Initiatives 205. Local and national air quality information dissemination strategies are required, both to buildpublic support for urbanair quality improvement initiatives, andto enable the issuanceof health alarms incase o f serious exceedance o f standards. As most emissions abatement measures involve trade-offs requiring public support, the PCAP should place considerable emphasis on the public provision o f air quality data andassociated health impacts. Dissemination strategies may include the daily publication o f an Air Quality Index, as discussed inChapter V. 206. As with air quality data, the public provision o finformationregardinghnktngwater quality not only enables health alerts to be issued, but also builds support for water supply investments, and most importantly, for recovery o f the costs necessary to operate and maintain safe water supply systems. Empowering Civil Society 207. Citizen involvement i s an important resource for environmental compliance and enforcement. While there i s often a tension between government regulators and civil society organizations, they share an interest inensuring a healthy environment. Active citizen involvement inenvironmental enforcement can help supplement an agency's efforts by raising public awareness and buildingpopular support for otherwise controversial enforcement actions. 63 This role canbereinforcedbothby involvingconcerned civil society stakeholders in environmental management, as achieved, for example through the Lahore Clean Air Commission, and by supporting public interest advocacy through legal associations and the establishment o f environmental law clinics at universities. 5. Risingto the Challenge: A ProposedWay Forward 208. The approval o f the NEPandthe significant increase inthe Federal budgetproposed for environmental management inthe MTDFpresent both a challenge and an important opportunity for Pakistan's environmental authorities. Meeting the challenge and risingto the opportunity will require not only a strategic program o f capacity building, but also the establishment o f incentives to encourage improvedperformance inenvironmental management at all levels o f government. Incentive-Based Partnerships: National Goals,Local Priorities 209. One institutional approach to buildingcapacity and encouraging improved performance at different levels o f government i s to develop incentive-based partnershipsbetween the Federal and provincial EPAs, as well as between provincial authorities and local governments. These would link the transfer o f financial support for institutional strengthening with demonstrated performance inimproved environmental management. 210. For its implementation, the NEP calls for a framework o f action plans at all three levels o f government. To establish incentive-basedpartnerships, Federal and provincial environmental authorities would mutually agree goals and priorities, performance indicators and needs, and define respective roles and responsibilities. This would fall naturally within the process o f developing actionplans at the Federal and provincial levels envisioned inthe NEP. These action plans would include agreed performance indicators around identifiedprovincial priorities, which would inturn contribute to national goals for the environment as set out inthe NEP. Similarly, provincial governments would, as appropriate, establish performance-based partnerships with district and tehsil governments for environmental finctions devolved to the local level. Further buildingonthe vision establishedinthe NEP, funds wouldbetransferredbetween levels o f government following satisfactory achievement o fthe agreed indicators. Two important pre- requisites for such an approach to function effectively are (i) the translation o f the NEP's broad directions into specific targets, and (ii)the establishment o f an efficient system o fperformance- basedtransfers, combining transparent decision-malung with the minimumnumber o f administrative hurdles. Pakistan Clean Air Program 211. MoEis developingthe PCAPas a vehicle to support arange o f ongoing and proposed initiatives for the management o f urban air quality, involvinga variety of sectors, levels o f government and development partners. The complexity o f the issues to be addressed, involving both city-specific and inter-sectoral considerations, suggests that the PCAP mightbest be supported as a stand-alone program, complementingbroader incentive-based partnerships for NEP implementation. A Strategyfor WorldBank Assistance 212. The World Bank i s strategically placedto support boththe development o fincentive- basedpartnerships to meet the goals o f the NEP, and the implementation o f the PCAP. The Bank's support for the NEPi s initially focused on providing technical assistance to M o E for the 64 development o fprovincial action plans. Drawing on the lessons o f international experience with similar exercises, the aim is to facilitate a process through which provincial authorities will establish their own priorities within the broad matrix ofnational environmental goals laid out in the NEP. The Bank is preparedto provide analytical support to help provincial authorities establish environmental management priorities based on consideration o f economic, technical and social realities, as well as assistance with the definition o f monitorable indicators to provide the basis for measuring performance. As action plans are defined, the Bank i s also prepared to consider investment support for their implementation. 213. For implementationo fthe PCAP, while JICA i s funding monitoring equipment which will provide necessary data, there i s limited capacity to plan and implement specific interventions. The Bank has been asked to bringimplementation experience from other cities inthe region, which will be provided initially through technical assistance, withthe possibility of subsequent investment support as plans become more concrete. 214. Inaddition to providing assistance for implementation o f the NEP and PCAP, the Bank also plans to support further analysis o f selectedpriority environmental concerns. Potential issues to be addressed include industrial and urbanpollution, environmentalmanagement inthe water sector, and sustainable environmental management at the local level. Immediate Actions 215. The list o frecommended actions presented inthis report i s extensive, and will take a number o f years to implement. However, the range o f environmentalchallenges facing Pakistan i s also extensive, and ignoring these problems will only result inaccelerating economic damage that will impede growth and poverty-reducing development. To catalyze the reformprocess, there are some priority actions among the proposedinterventionsthat should be immediately initiatedby MoE, including: establishment o f standards for environmental quality, especially ambient air quality standards, use-based ambient water quality standards, and drinkingwater quality standards; establishment o f oversight guidelines for the EIA clearance functions delegatedto the provinces; contribution o f an environment chapter to the PRSP update; and, development ofprotocols for the collection, analysis and dissemination o f data on naturalresource management. While this report has focused on urban and industrial environmental challenges, there are growing problems insustaining the country's natural resources, and effective interventionsare constrainedby the paucity of data. 65 Appendix 1: MeasuresProposedinthe PakistanCleanAir Short Term Measures Responsible Long-term Measures ResponsibleAgency Agency Stopimport andlocal WO Commerce Creationof public awareness and M/O Environment manufacturingoftwo stroke md M/O education andProvincial vehicles [ndustry Environment Department Restrictionon conversion of Provincial Settingup continuousmonitoring M/O of Environment vehicles from gasolineengineto Government stations incitiesto recordpollution andProvincial second-hand diesel engines levelsinambient air Government Launcheffective awareness campaignagainst smoke emittingvehicles High pollution spots incities Provincial Introductionof low sulphurdiesel M/OPetroleumand maybe identified andcontrol Government and furnace oil andpromotionof NaturalResources throughbetter traffic alternativefuels such as CNG, LPG management such as andmixedfuels inthe country establishment ofrapidmass transitandtraffic free zones Capacity building of Motor Provincial Identify pollution control M/O Environment, VehicleExaminers Government devicedadditivesfor vehicles and M/O Petroleum encouraeetheir use Regular checkingof quality of MI0Petroleum Promotionofwaste minimization, Federaland fuel andlubricatingoils sold in andNatural proper disposal of solidwaste in ProvincialEPAs, the market Resources cities, waste exchange andpollution FPCCI, and M/O controltechnologyinindustries I&P) Coveringofbuildingdsite during Provincial Improvementof energyefficiency in M/O Environment renovationand constructionto Government vehicles andindustry avoidair wllution Phasingout of2-stroke and Federaland ReviewMotor Vehicle Ordinanceto Federaland dieselrunpublic servicevehicles Provincial providefor inspectionofprivate Provincial Governments vehicles Governments Baselinedatacollectionon Federaland Establishvehicle inspectioncentres M/O Communication ambient air qualityusingfixed ProvincialEPAs andProvincial andmobile laboratories Government CNG drivenbuseswill be given M/O Industries Block tree plantationincities, M/O Environment tariff preference andM/O forestationindeserts and sanddune andProvincial Forest Finance stabilization Department Fiscalincentives andafinancing M/O Shouldersalongroadsshouldbe M/O Communication mechanismare adoptedto Communication paved andProvincial provideresourcesto the and Provincial Government transporters Government Launchof effectiveawareness Provincial campaignagainstsmoke Governments emittingvehicles Establishmentof environmental Provincial squadoftraffic police inall Governments major citiesto controlvisible smoke 32 FromAnnex 2 ofPCAP, 2005. 66