Report No. 16635-BR Brazil Managing Pollution Problems The Brown Environmental Agenda (In Two Volumes) Volume II: Annexes February 27, 1998 Brazil Country Management Unit ESSD Sector Management Unit Latin America and the Caribbean Region Document of the W9rfd Bank .~~~I on CURRENCY EQUIVALENTS Currency Unit - Real (R$) US$1 = R$ 1.1O (October 1997) WEIGHTS AND MEASURES The Metric System is used throughout the report. FISCAL YEAR January 1 to December 31 Vice President LAC: Shahid Javed Burki Director LCC5C: Gobind T. Nankani Director ESSD: Maritta Koch-Weser Lead Economist: Suman Bery Task Manager: Joachim von Amsberg Brazil: Managing Pollution Problems - Annexes iii CONTENTS 1. NATIONAL POLLUTION MANAGEMENT PRIORITIES ............................................................ 1 SUMMARY OF ISSUES AND RECOMMENDATIONS ...................................................................................1 iNTRODUCTION ...................................................................................1 ASSESSMENT OF POLICY ALTERNATIVES .................................................................................. 4 CRITICAL POLLUTANTS ..................................................................................... 8 THREATS TO HUMAN HEALTH ................................................................................... 9 CRITICAL POLLUTANTS FOR ECOSYSTEMS .................................................................................. 20 CONCLUSIONS ................................................................................... 22 2. BENEFITS OF WATER AND SANITATION SERVICES ................................................................ 27 SUMMARY OF ISSUES AND RECOMMENDATIONS .................................................................................... 27 EPIDEMIOLOGICAL ANALYSIS .................................................................................. 29 COST-EFFECTIVENESS OF INVESTMENTS IN WATER AND SANITATION ............................................................. 32 WILLINGNESS TO PAY FOR URBAN WATER AND SEWERS ................................................................................ 34 SUMMARY .................................................................................... 35 3. MOBILIZING PRIVATE FINANCE FOR WATER AND SANITATION SERVICES .................. 39 SUMMARY OF ISSUES AND RECOMMENDATIONS .................................................................................... 39 THE PROBLEM .................................................................................... 39 OPTiONS FOR PRIVATE SECTOR FINANCE .................................................................................. 41 MEETING THE NEEDS OF THE POOR .................................................................................. 50 CONCLUSIONS .................................................................................. 51 4. INSTITUTIONS FOR WATER RESOURCE MANAGEMENT ....................................................... 53 SUMMARY OF ISSUES AND RECOMMENDATIONS .................................................................................. 53 INTRODUCTION .................................................................................. 53 WATER RESOURCES MANAGEMENT AND POLLUTION CONTROL ....................................................................... 54 BRAZIL'S CURRENT INSTITUTIONAL FRAMEWORK .................................................................................. 55 BRAZIL'S NEW APPROACH TO POLLUTION CONTROL AND WATER RESOURCES MANAGEMENT ........................ 56 iNCENTIVES TO PROMOTE INSTITUTIONAL CHANGE .................................................................................. 57 DESIGN OF WATER RESOURCES MANAGEMENT AGENCIES ............................................................................... 62 INCENTIVES FOR STAKEHOLDERS TO PARTICIPATE IN WATER RESOURCES MANAGEMENT ............................... 64 CONCLUSIONS AND RECOMMENDATIONS .................................................................................. 65 5. POLLUTION CHARGES AT THE RIVER BASIN LEVEL ............................................................. 71 SUMMARY OF ISSUES AND RECOMMENDATIONS .................................................................................... 71 INTRODUCTION .................................................................................. 71 THE ROLE OF CHARGES .................................................................................. 72 RELATION TO OTHER INSTRUMENTS AND INSTITUTIONS .................................................................................. 81 6. URBAN ENVIRONMENTAL MANAGEMENT ....................................................................... 85 SUMMARY OF ISSUES AND RECOMMENDATIONS .................................................................................... 85 INTRODUCTION ..............86 METROPOLITAN ENVIRONMENTAL PROBLEMS IN BRAZIL: AN OVERVIEW ........................................................ 88 ENVIRONMENTAL PROBLEMS/PRIORITIES IN METROPOLITAN BELO HORIZONTE AND RECIFE . .......................... 90 INSTITUTIONAL ARRANGEMENTS FOR METROPOLITAN ENVIRONMENTAL MANAGEMENT ................................ 93 CURRENT METROPOLITAN ENVIRONMENTAL PLANNING AND MANAGEMENT INITIATIVES .............................. 96 KEY LESSONS OF EXPERIENCE WITH URBAN AND METROPOLITAN ENVIRONMENTAL MANAGEMENT ............ 102 STRATEGIC DIRECTION FOR INSTITUTIONAL DEVELOPMENT FOR METROPOLITAN AND URBAN ENVIRONMENTAL MANAGEMENT .................................................................................. 104 RECOMMENDED ACTIONS AT THE FEDERAL, STATE, METROPOLITAN AND MUNICIPAL LEVELS ..................... 109 iv Brazil: Managing Pollution Problems - Annexes 7. MUNICIPAL SOLID WASTE MANAGEMENT ..................................................................... 113 SUMMARY OF ISSU ES A ND RECOMMENDATIONS .................................................................................. 113 LESSONS OF DIFFERENT MANAGEMENT APPROACHES ................................................................................... 115 ECONOMICS OF MSWM .................................................................................. 127 FINANCING MSWM .................................................................................. 133 8. INFORMATION IN POLLUTION MANAGEMENT: THE NEW MODEL ................................ 139 SUMMARY OF ISSUES AND RECOMMENDATIONS .................................................................................. 139 INTRODUCTION .................................................................................. 139 INFORMATION IN FORMAL REGULATION .................................................................................. 140 STAKEHOLDER INPUT .................................................................................. 143 THE POWER OF INFORMAL REGULATION .................................................................................. 144 INFORMATION IN ACTION: TWO CASES ................................................................................... 146 RATING ENVIRONMENTAL PERFORMANCE: INDONESIA'S PROPER PROGRAM ................................................ 148 INFORMATION IN POLLUTION REGULATION: FIVE PRINCIPLES ...................................................................... 153 9. POLLUTION MANAGEMENT IN A FEDERAL SYSTEM ........................................................... 155 SUMMARY OF ISSUES AND RECOMMENDATIONS .................................................................................. 155 RATIONALE FOR A NATIONAL POLLUTION MANAGEMENT SYSTEM ................................................................ 155 CURRENT ISSUES AND PROBLEMS ................................................................................... 159 ROLES OF THE NATIONAL GOVERNMENT IN POLLUTION MANAGEMENT ........................................................ 163 10. POLLUTION MANAGEMENT PRIORITIES IN MINAS GERAIS ........................................... 171 SUIMMARY OF ISSUES AND RECOMMENDATIONS .................................................................................. 171 INTRODUCTION .................................................................................. 172 SUMMARY OF THE CURRENT ENVIRONMENTAL MANAGEMENT SYSTEM ........................................................ 172 IDENTIFYING PRIORITY PROBLEMS .................................................................................. 175 CONTROLLING PRIORITY PROBLEMS: SETTING GOALS AND IDENTIFYING INSTRUMENTS ............................... 177 MAJOR FINDINGS AND SUMMARY RECOMMENDATIONS ................................................................................. 197 11. POLLUTION MANAGEMENT PRIORITIES IN PERNAMBUCO ........................................... 201 SUMMARY OF ISSUES AND RECOMMENDATIONS .................................................................................. 201 AIR QUALITY .................................................................................. 202 WATER QUALITY .................................................................................. 202 SOURCES OF WATER POLLUTION .................................................................................. 207 MUNICIPAL WASTEWATER TREATMENT IN THE CAPIBARIBE BASIN ............................................................... 210 SETTING ENVIRONMENTAL GOALS ................................................................................... 213 OPTIONS ................................................................................... 214 12. LESSONS FOR POLLUTION MANAGEMENT FROM WORLD BANK FINANCED PROJECTS .................................................................... 217 SUMMARY OF ISSUES AND RECOMMENDATIONS ................................................................................... 217 INTRODUCTION .................................................................................. 217 LESSONS FROM WATER QUALITY PROJECTS .................................................................................. 218 LESSONS FROM INDUSTRIAL POLLUTION CONTROL PROJECTS ....................................................................... 220 Brazil: Managing Pollution Problems - Annexes v ABBREVIATIONS ABEMA Association of State Environmental Agencies [Associacao Brasileira de Entidades do Meio Ambiente] ABNT Brazilian Association for Technical Norms [Associacao Brasileira de Normas Tecnicas] ABRELP Association of Public Waste Management Companies [Associacao Brasileira de Empresas de Limpeza Publica] BANESPA State Bank of the State of Sao Paulo [Banco de Estado de Sao Paulo] BAPEDAL Environmental Protection Agency of Indonesia BHMA Belo Horizonte Metropolitan Area BNDES Social and Economic Development Bank [Banco Nacional de Desenvolvimento Economico e Social] BOD Biological Oxygen Demand BOT Build-operate-transfer CAGECE CearA State Water and Sanitation Company [Companhia de Agua e Esgoto do Cearc] CBA Cost-Benefit Analysis CECA Rio State Commission for Environmental Control [Comissdo Estadual de Controle Ambientall CEDAE Rio State Water Company [Companhia Estadual de Agua e Esgotos] CEMPRE Industrial Recycling Association [Compromiso Empresarialpara Reciclagem] CETESB Sao Paulo State Environmental Agency [Companhia de Tecnologia de Saneamento Ambiental] CGRSS Comissao de Gerenciamento do Residios Solidos de Saude CIBAPAR Intermunicipal Consortium for the Praopeba Bain, Minas Gerais [Cons6rcio Intermunicipal da Bacia Hidrografica do Rio Paraopeba] COD Chemical Oxygen Demand CODEVASF Sao Francisco Valley Development Commission [Companhia de Desenvolvimento do Vale do Sdo Francisco] COGERH Ceara State Water Resources Management Agency COMEC Coordenacao da Regiao Metropolitana de Curitiba COMPESA State Water and Sanitation Company of Pernambuco [Companhia Pernambucana de Saneamento] CONAMA National Environment Council [Conselho Nacional de Meio Ambiente] COPAM Council of Environmental Policy (Minas Gerais) [Conselho de Politica Ambiental] CPLS Cost Per Life Saved CPRH Pernambuco State Environmental Agency [Controle da Poluciao Ambiental e da Administracau dos Recursos Hidricos] vi Brazil: Managing Pollution Problems - Annexes CVRD Companhia Vale de Rio Doce DALY Disability-adjusted Life Years DNAEE National Department of Waters and Electric Energy [Departamento Nacional de Agua e Enegria Eletrica] DRH Water Resources Agency of Minas Gerais [Departamento de Recursos Hidricos] EIA Environmental Impact Assessment EMPLASA Empresa Metropolitana de Plan ejamento de Grande Sao Paulo S.P. FEAM State Environmental Control Agency of Minas Gerais [Fundagao Estadual do Meio Ambinte] FEEMA State Environmental Control Agency of Rio de Janeiro [Fundacao Estadual de Engenharia do Meio Ambiente] FEHIDRO State Water Resources Fund FESB Basic Sanitation State Fund GHG Greenhouse Gases GIS Geographic Information System GSPMA Greater Sao Paulo Metropolitan Area IBAMA Brazilian Institute of the Environment and Renewable Natural Resources [Instituto Brasileiro de Meio Ambiente e dos Recursos Renovaveis] IBGE Brazilian National Statistical Agency [Instituto Brasileiro de Geo grafia e Estatistica] ICMS Value Added Tax [Imposto Sobre Opera,coes Relativos a Circula,do de Mercadorias] IPEA Institute for Applied Economic Research [Instituto de Pesquisa Economica Aplicada] IPPS Industrial Pollution Project System LFG Landfill Gas M&E Monitoring and Enforcement MERCOSUL South American Common Market [Mercado Comun do Sul] MMA Ministry of Environment, Water Resources and Legal Amazon [Ministerio de Meio Ambiente, dos Recursos Hidricos e da Amaz6nia Legal] MSMW Municipal Solid Waste Management NIMBY Not-In-My Backyard NIPCP National Industrial Pollution Control Project ODS Ozone Depleting Substances OEMA State Environmental Control Agencies [Orgaos Estuduais de Meio Ambiente] PM-10 Particulate Matter less than ten microns in diameter PNMA National Environmental Plan [Plano Nacional de Meio Ambiente] PPA Public Performance Audit PROALCOOL National Ethanol Program [Programa Nacional de Alcool] Brazil: Managing Pollution Problems - Annexes vii PROCONVE National Program for Vehicle Emission Control [Programa Nacional de Controle da Poluicao do Ar por Veiculos Automores] PROCOP Sao Paulo Industrial Pollution Control Program [Programa de Controle a Poluicao] PROKASIH Clean River Program (Indonesia) PROPER Program for Pollution Control, Evaluation and Rating (Indonesia) PROSAM Minas Gerais Water Quality Project SABESP State Water and Sanitation Company of Sao Paulo [Companhia de Sanemento Basico de Estado de Sao Paulo] SANEGRAN Sao Paulo Sewage Collection and Treatment Master Plan SEMA Rio de Janeiro State Secretary of the Environment [SecretariEstadual de Meio Ambiente] SEMAD Minas Gerais State Environemnt Secretary [Secretaria de Estadol de Meio Ambiente e Desenvolvimento Sustent6vel] SEPA State Environmental Protection Agencies SEPURB Secretariat of Urban Policy in the Planning Ministry [Secretaria de Politica Urbana, Ministerio do Planejamento e Orqamentol SISNAMA National Environmental System [Sistema Nacional de Meio Ambient] SLAP National Licensing System [Sistema de Licenciamento de Atividades Poluidoras] SLU Urban Cleaning Service [Servicio de Limpeza Urbana] SO2 Sulfurdioxide SOMMA Minas Gerais Municipal Develoment Project SWC State Water Companies TA Technical Assistance TLV Threshhold Limit Values TPD Tons Per Day TPLS Tons Per Life Saved TSP Total Suspended Particles UNCED United Nations Conference on Environment and Development WHO World Health Organization viii Brazil: Managing Pollution Problems - Annexes Brazil: Managing Pollution Problems - Annexes ix FOREWORD For many years, the World Bank has supported the efforts of the Brazilian Government to address a large range of environmental problems. Over the years, the World Bank has financed a large number of projects that support natural resource management and conservation, environmental institutions strengthening, industrial pollution control, basic sanitation and water pollution management, and urban environmental improvements. As administrator of the Rain Forest Trust Fund, the World Bank helps Brazil address problems related to the threats to the Amazon ecosystem. Finally, the World Bank supports Brazil's effort to address global environmental challenges through projects financed by the Multilateral Fund of the Montreal Protocol and the Global Environment Facility. Recently, the Brazilian Government and several Brazilian States requested the World Bank's assistance in pulling together the lessons of experience of past efforts to address environmental pollution problems in Brazil and developing a more proactive strategy for addressing the increasingly important "brown environmental agenda." The present policy report is part of the response to this request. It follows a policy study on pollution problems in the State of Rio de Janeiro (Brazil: Managing Environmental Pollution in the State of Rio de Janeiro, World Bank Report No. 15488-BR, August 1996) and focuses on environmental pollution problems whose costs are predominantly domestic. The report does not address questions related to natural resource management and conservation (see Brazil: The Management of Agriculture, Rural Development and Natural Resources, World Bank Report No. 11783-BR, July 1994) and contributions to international environmental problems (such as emissions of ozone depleting substances and greenhouse gases). International environmental issues involve a number of important concerns and choices for Brazil. The World Bank is assisting the Government in these concerns through its operations under the Montreal Protocol and the Global Environment Facility. Issues, of industrial and occupational safety as well as problems strictly confined to the household level (such as indoor air pollution) are also outside the scope of this report. This report is based on the findings of visits to Brazil in September 1996 and March 1997. The report was prepared by a World Bank team comprised of Messrs./Mmes. Joachim von Amsberg (Task Manager), Carl Bartone, Gordon Hughes, Karin Kemper, Sergio Margulis, John Redwood III, Laura Tlaiye, and David Wheeler. Susmita Dasgupta, David Gray, Kseniya Lvovsky, and Muthukumara Mani contributed background analysis for different parts of the report. Andrew Hurd assisted in editing of the report. Furthermore, the report draws freely from a large number of previous studies and documents prepared by other Bank staff. The report was produced under the supervision of Mr. Gobind T. Nankani, Director, Ms. Constance Bernard, Division Chief, Natural Resources, Environment, and Rural Poverty Division, and Mr. Homi Kharas, Lead Economist and Country Unit Chief, Country Department I, Latin America and the Caribbean Region. The peer reviewers for this task were Sudhir Shetty and John Redwood III (who later also contributed an Annex for this report). This report was produced in close collaboration with various institutions and individuals in Brazil whose cooperation is gratefully acknowledged. The following institutions contributed, in particular: Ministerio de Meio Ambiente, dos Recursos Hidricos e da Amaz6nia Legal (MMA); Secretaria de Politica Urbana, Ministerio do Planejamento e Orcamento (SEPURB); Fundacdo Instituto Brasileiro de Geografia e Estatistica (IBGE); Instituto de Pesquisa Economica Aplicada (IPEA); Fundacdo Estadual de Meio Ambiente, Minas Gerais (FEAM), and Companhia x Brazil: Managing Pollution Problems - Annexes Pernambucana de Controle da Poluicdo Ambiental e da Administrac4o dos Recursos Hidricos (CPRH). This report consists of two volumes. Volume I is the Policy Report which is directed at policy makers and a general audience interested in environmental management. The Policy Report contains a summary of the most important policy recommendations without providing full analytical support. Volume II is the Technical Report which provides the analytical backup to the Policy Report. The Technical Report is directed at policy makers working specifically on environmental issues and anyone interested in the more detailed background analysis. Brazil: Managing Pollution Problems - Annexes I 1. NATIONAL POLLUTION MANAGEMENT PRIORITIES' SUMMARY OF ISSUES AND RECOMMENDATIONS -SUE U - AND PROBLEMS Data on emissions, environmental quality and impact of pollution are limited but decisions about priorties have to be made. A comprehensive municipal-level database is used to illustrate the use of cost-benefit analysis for the prioritization of pollution problems across locations, sources, and media. Even though the analysis is tentative given limited data, some clear priorities emerge for reducing health and ecosystem damage. ,30:~~~TRTEG o MAND ROMMENDTIoNS..---.7. The costs per life saved through the reduction of PM10 emissions and investments in water and sanitation services varies widely between interventions and locations. The overall priorities should include the following: - Extension of water supply networks with highest benefits in the North-East followed roughly by the North, the Center-West, the South-West and the South - Extension of sewerage networks with highest benefits in the North-East followed roughly by the North, the Center-West, the South-West and the South * Control of industrial PM1 0 sources with highest benefits in the larger cities of the South-East and Northeast * Control of PM10 from diesel vehicles with highest benefits in the larger cities of the South- East and Northeast. Regulation of industrial heavy metal emissions to water should be focused on a relatively small number of municipios which have heavy emissions and relatively low ratios of abatement costs to abatement benefits. The priorities for protecting aquatic ecosystems would include control of medium and large in- dustrial BOD sources in areas with heavy BOD loads and phosphorous control through removal from sewage and improved agricultural practices. INTRODUCTION tanal and the Mata Atlantica, along with the extremely urbanized and industrialized Rio- Brazil's Brown And Green Agendas Sao Paulo corridor, where severe pollution problems are encountered. Both brown and 1.1 Environmental priorities differ green environmental problems are aggra- widely across Brazil due to its vast size and vated by the country's extreme income ine- varied geography. It houses such diversified quality, both in individual and regional ecosystems as the Amazon region, the Pan- terms. Figures 1.1 and 1.2 (at end of report) illustrate the country's regional disparity, using census data from 1991. A large re- This paper was prepared by Sergio Margu- gion of extreme poverty dominates the lis and DaVid Wheeler with support from Northeast and extends well into Minas Susmita Dasgupta and Muthukumara Mani. Gerais. There is also a striking division 2 Brazil: Managing Pollution Problems- Annexes between middle and high-income areas, 1.5 In principle, only the identification particularly in Sao Paulo State. As this re- of priority actions is relevant for govern- port will show, regional income disparity ments, which then have to allocate resources has important implications for brown-sector so that the net social returns to investments priorities in Brazil. are maximized. However, identification of priority problems is the essential first step in 1.2 Brazil has responded in different determining what actions (investments) are ways to its environmental problems over likely to produce the greatest returns. In a time, depending on their severity, the politi- country as large and diverse as Brazil, dif- cal and institutional systems in place, and ferent levels of government will typically public pressure. Major steps have included have different perspectives on the costs and the creation of IBAMA in 1989, the decen- benefits of the same investment. Decisions tralization following the 1988 Constitution, deemed optimal by the federal government and the incorporation of the Ministry of may not necessarily be deemed optimal by Amazonian Affairs into the Ministry of En- local communities, municipalities or even vironment in 1994. The federal government States. has focused almost exclusively on the green agenda, with a major emphasis on the Ama- 1.6 An additional complication con- zon region. While this has been well- cerns the classification of environmental received by the international community, the problems. For instance, environmental is- fact remains that over 80% of the Brazilian sues can be defined geographically (indus- population lives in urban areas. For the vast trial districts, urban areas), sectorally (in- majority of Brazilians, the critical environ- dustries, households, governments), and by mental problems are brown. medium (air, water, soils). Each approach will require different institutional arrange- 1.3 Although measures of pollution ments. Thus, deciding on priority problems damage in Brazil are scarce, it is possible to and actions is ultimately a political process, estimate aggregate costs by combining data in which a consensus should be reached by on environmental quality with estimates of affected communities, major polluters, envi- health impacts, the cost of treatment, and ronmental experts, NGO's and government willingness to pay to avoid premature mor- agencies. Governments play a critical role tality. Available estimates of pollution costs in assuring broad participation in the deci- show that Brazil's brown problems are seri- sion process. ous, and warrant the attention of national policymakers. Priorities In Brazil: A Sensible Idea? Priority Problems And Priority Interven- 1.7 Establishing national priorities is tions difficult in a nation of continental dimen- sions like Brazil. Inhabitants of the Amazon 1.4 Because resources are scarce, all region may have little interest in the pollu- levels of government have to restrict the tion problems of Sao Paulo or Rio de Ja- range of problems to be addressed. The neiro; Gauchos in Rio Grande do Sul may Bank's experience suggests that environ- know little about the environmental prob- mental policies frequently fail in developing lems of the Northeast or Center-West. countries because governments do not iden- However, the federal government is charged tify the most serious problems and set clear with assuring that environmental quality is priorities for intervention. This problem is at reasonable levels for all Brazilians. If less serious in industrialized countries be- regional problems differ greatly in severity, cause resources are more plentiful. federal environmental policy may help re- Brazil: Managing Pollution Problems - Annexes 3 store the balance with appropriate regional environmental problems can, in theory, be cross-subsidies. evaluated by assessing the incremental benefits and costs associated with different 1.8 Brazil's regional income disparity levels of remediation. In practice, however, requires the federal government to balance the economic approach can be difficult be- income distribution and environmental ob- cause links between environmental prob- jectives. In the richer Southeast, greater lems and damages are not easy to establish. willingness to pay for environmental quality For instance, what health improvement will suggests greater economic benefits from follow the reduction of air pollution by 10% improvements than in poorer regions. On in a particular city, and how much will 10% strict 'valuation' grounds, this could justify abatement cost? Even when impacts can be assigning high federal priority to the solu- predicted with a reasonable degree of confi- tion of environmental problems in the dence, it may be difficult to value them in Southeast. However, it would clearly be monetary terms. Recent advances in eco- undesirable from an income distribution nomic analysis are reducing some of these perspective. Without some compensatory difficulties, but significant controversy re- weighting scheme, the monetized returns to mains. air pollution control in Sao Paulo could be much higher than providing sanitation serv- ices in the Northeast. Although environ- mental policy is a poor channel for income 1.11 This report provides an economic redistribution, such decisions are beyond the analysis of brown environmental problems sole domain of the Ministry of Environment. in Brazil, with the objective of assisting the They must also involve agencies such as the identification of environmental priorities by Ministries of Finance and Planning, which federal and State government officials and have to consider the distributional impacts other stakeholders. It also provides a of policies. benchmark document for the Bank's dia- logue with the Brazilian government on en- Criteria For Establishing Priorities vironmental policy issues. Critical ques- tions to be addressed include: 1.9 The political consensus-building process must be supported by sound techni- * Which brown environmental problems cal and economic analyses. Access to ade- impose the heaviest costs? quate and reliable information is essential for setting priorities. Commonly used crite- * What actions would be most effective in ria for ranking are: (1) ecological (physical addressing the critical problems? What impacts and irreversibility or recurrence of are the remediation costs? problems); (2) social (the number of people affected, health effects, and incidence * How do the benefits of investment in among the poor); and (3) economic (effects pollution control compare to the benefits on economic productivity and growth, and from other social investments (e.g., in factors such as risk and uncertainty). In education, health or infrastructure)? Brazil, relevant data are often missing or inaccurate, but this should not prevent all levels of governments from setting priorities with the best available information. 1.10 Economic analyses have been gaining increasing attention since critical 4 Brazil: Managing Pollution Problems - Annexes ASSESSMENT OF POLICY ALTERNATIVES However, most have not been re-calibrated for developing countries, where both envi- An Ideal Framework: Benefit-Cost And ronmental and socio-economic conditions Cost-Effectiveness Analyses are typically quite different. 1.12 Many stakeholders should partici- 1.14 When benefit estimation proves too pate in setting environmental priorities; the difficult, a modification of the same ap- economic perspective provided by this re- invlves esabin a persam e port can be only one input to the decision- proach involves establishing a performance making process. However, setting priorities target (typically an environmental quality malwaysinvolves critical trade-offs - in allo- standard), and determining the cheapest way alwaysinovsciiatrd-fs-ial- of reaching it. Thiis is termed cost- cating budgets, subsidizing specific groups effectiveness (CE) analysis. While it im- or regions, and setting pollution reduction effeweness for annd estim- targets. Under ideal conditions, decisions poses fewer demands for data and estima- targetshould Under i conditions, decisins ttion, CE cannot judge the relative value of should focus on control measures that alternative targets. In practice, this can be a maximize net social benefits. For an eco- serious weakness. For inistance, a 50 percent nomic analysis, this requires estimating the violation of ozone standards may impose marginal benefits from emissions reduction much lower health costs on an urban popu- and the marginal costs of control (i.e., in- l ot son an ur popu- stallation of filters, substitution of fuels, lation than a simiar violation for particulate proper operation and maintenance of or lead standards. equipment, dissemination of information). Benefits calculation is the more complex Application To Brazil exercise, involving estimation of physical 1.15 For a benefit-cost assessment of damage reduction from control (effects on possible interventions at the national level, health, economic productivity, or ecosystem some aggregation of problems and simpli- functioning) and assignment of monetary fying assumptions are necessary. The first values to the results. step is to classify the problems into four 1.13 Assignment of monetary value to broad sectoral categories: industry, agri- damage reduction is often assumed to be the culture, household and transport. most difficult part of benefit-cost analysis. Data Indeed, the available methods have technical limitations and require data which are fre- 1.16 For the analysis of problems in each quently unavailable. However, this ap- sector, a large database has been constructed proach can provide valuable insights without with information from IBGE and other Bra- assigning monetary values. For instance, zilian agencies. This section provides a brief two alternative pollution control strategies summary of the information resources avail- can be evaluated by comparing their 'cost able. per life saved,' or more generally, their costs relative to their estimated impacts on mor- bidity or mortality. In fact, the more serious 2 In Mexico, the estimated health costs from problem for benefit-cost analysis is fre- particulate air pollution are at least 8 times quently the absence of technical information higher than from ozone, even though ozone on links between pollution, changes in envi- levels violate existing standards to a greater ronmental quality, and physical impacts on degree than particulates. It took some time health, productivity and ecosystems. Some for the government to realize that, despite (certainly not all) of the important links have the greater 'severity' of ozone pollution in , ., . . ,. . ~~~~~~~~terrns of standard violation, particulates been quantified for industrialized countries. t o pose a far more critical problem for society. Brazil: Managing Pollution Problems - Annexes 5 1.17 Industry: Emissions of all major of phosphorus in detergents. Data on urban pollutants are estimated using an IBGE da- and rural population by municipio have been tabase of approximately 156,000 Brazilian combined with standard parameters to esti- factories, categorized by 266 4-digit CNAE mate total loads of BOD and phosphorus. codes, employment size, and location (for Estimations of the impact of sewerage and over 5,000 municipios). Emissions have clean water connections on health utilize the been estimated using international parame- results of a statistical model fitted to Brazil- ters established in previous work with ian data. In addition, data on the cost of FEEMA (Rio) and FEMA (Minas Gerais). sewerage and clean water connections were This large database has enabled the assess- used to provide a benefit-cost perspective on ment of the distribution and severity of Bra- water and sanitation investments. zil's industrial pollution problems at an un- precedented level of detail. For the benefit- 1.20 Transport: Combustion of motor cost assessment, the emissions estimates fuels is an important source of air pollution have been combined with data on abatement in large urban areas. This report has used costs by pollutant and sector. several types of data to estimate the contri- bution of transport to air pollution in each 1.18 Agriculture: The critical brown Brazilian municipio: measures of pollution- issue for agriculture is runoff of fertilizer intensity (pollution per unit consumed) for and pesticides. Data on pesticides were not each major fuel and pollutant; state-level available for this analysis, but detailed esti- fuel consumption data; and a statistical mates for fertilizer have been developed. equation which distributes state-level fuel Phosphorus runoff is of particular interest, consumption to municipios in proportion to since excessive phosphorus loads contribute their urban and rural populations. The latter significantly to eutrophication of receiving distinction is important, because urban fuel waters. Using data provided by Brazilian consumption per capita is much higher than research institutes, measures of phosphorus rural consumption. intensity (average phosphorus fertilizer ap- plication per hectare) for over twenty major Benefit-cost analysis crops have been developed. These have been combined with IBGE agricultural cen- 1.21 To perform a benefit-cost analysis sus data on acreage by crop for all mu- of intervention alternatives, the following nicipios in Brazil to produce crop-specific estimates are necessary: estimates of phosphorus loading. The sum- mation of these estimates produces total * Emissions of air, water and toxic pollut- loadings by municipio, and recorded infor- ants by the various sectors (households, mation on state-level loadings was used for industries, agriculture and transport). proportional adjustment of municipio-level The estimation methods have been de- estimates within each state. scribed above. 1.19 Households: Domestic waste water * Impact of emissions on environmental is a source of Brazil's three most serious quality. Actual data are only available water pollution problems: Coliform bacte- for a few urban areas and priority eco- ria, organic pollution (BOD), and phospho- systems. This report has relied mostly rus. Although production of coliforms and on proxy estimates of the impacts. It is BOD is roughly constant per person, house- clear that environmental quality data are hold production of phosphorus differs sig- the most important 'missing link' for nificantly between rural and urban areas analyzing Brazil's brown problems, and because urban households make greater use high priority should be given to in- 6 Brazil: Managing Pollution Problems - Annexes creasing the stock of information in this as pollutant characteristics. In general, area. regulatory cost per unit of induced abatement varies inversely with size of * Impacts of environmental degradation. the source and directly with its mobility Where supporting data are available, and dispersion. In the case of household health effects are estimated using 'dose- sewage, wide dispersal of emissions response' functions, relating different may necessitate collection into sewage levels of environmental quality to the transport networks before treatment is incidence and severity of diseases. economically feasible.4 Deployment of They have' been developed for industri- M&E resources is less costly in urban alized countries and, with some caution, areas, where activities are more con- they can be applied to developing coun- centrated. tries as well.3 In principle, it would be possible to extend dose-response func- 1.22 After all these steps are completed, tions to estimation of losses in economic it is possible to assess the relative benefits productivity, ecosystem functions and and costs of alternative approaches to con- environmental amenity. However, no trolling pollution. Theoretically, it is opti- reliable techniques are available at pres- mal to target different levels of abatement ent. for different problems (or the same problem in two different areas) because so many * Marginal benefits of damage reduction factors determine benefits and costs.5 from abating different pollutants. However, regulation is 'lumpy' (regulatory Whether or not monetary values are as- agents must operate from offices in central signed to such benefits, a benefit-cost locations; travel times are critical for in- assessment requires that they be com- spectors; laboratories are needed to test pared with the costs of control. samples; etc.). Thus, in practice, it is not possible to distribute M&E resources con- * Marginal costs of abating pollution (per tinuously at the margin. Cost-effective source and type of pollutant). This is regulation generally requires focusing re- one of the areas where international ex- sources on large problems which have high perience is most useful, and where ap- benefit-cost ratios at intermediate/high lev- plication to Brazil is probably subject to els of abatement. the least error. * The relative cost of monitoring and en- Septic tanks can be used, of course. Their forcement (M&E) for different pollution eptivenks can deped on the Their sources. International experience shows effectiveness will depend on the quality of that the impact of regulation on envi- construction andmaintenance. ronmental performance is principally 5 It is important to clarify the distinction due to M&E, not legal statutes. The between net benefits (benefits - costs) and cost of M&E per unit of induced abate- benefit/cost ratios in this context. The ob- ment depends on the scale, mobility and jective of social policy should be to choose dispersion of pollution sources, as well activities so that aggregate net benefits (benefits - costs) are maximized while few3dose-response curves have been es- staying within the budget constraint. A 3 A few dose-response curves have been es- standard result in economic theory shows timated in developing countries, including that this is achieved by allocating resources Brazil, and the results are not significantly to each activity so that marginal bene- different from those observed in industri- fit/cost ratios are equalized and the budget alized countries. is completely absorbed. Brazil: Managing Pollution Problems - Annexes 7 Limitations andfeasible analyses serve more detailed analysis. The analysis 1.23 As noted above, estimation of pol- also permits comparison of air pollution lution impacts requires four analytical steps: control with other important life-saving (1) Measuring emissions; (2) Measuring the measures - provision of clean water and effect of emissions on ambient quality in a sewerage - to determine the most cost- specific control region; (3) Measuring the effective approaches to safeguarding health. effect of ambient quality on health, produc- 1.25 Because the relationship between air tivity, amenity and ecosystem functions; and 1.25 Becentrationship retory dir (4) Valuing these effects. For a Brazilian pollution concentrations and respiratory dis- anValysing thexisting modeff and Braiimatn eases is strongly establislhed in the literature, analysis, existing modeling and estimation the use of air pollution dose-response curves techniques can provide reasonable approxi- is clearly justified. However, dose- mations for steps (1), (3) and (4). The key 'missing link' is step (2). For instance, air response curves for water pollution are far quality models which relate emissions to more problematic. While most air emissions qualiy moels hichrelae emssios to are eventually breathed by the population, atmospheric concentrations require data on muntually usuatred wate prion, local temperature, winds, precipitation, to- municipalities usually treat water prior to pography, etc., while water pollution models public consumption. Households also have require data on water temperature, volume options such as independent filtration, boil- and flow rates. Development of an inventory ing, and purchasing bottled water from safe of this information for each critical envi- sources. Thus, the relationship between wa- ronmental region in Brazil should be a high ter pollution concentrations and health ef- priority. At present, however, the basis for fects is not straightforward. The same rea- estimating such models in complete form do soning applies to sanitation services, such as not exist. It is therefore unrealistic to at- sewerage and solid waste collection. Nev- tempt a full four-step analysis of the type ertheless, sewage contamination in poorly- described above. served areas is inevitable, and a vast litera- ture documents the increase in waterborne 1.24 However, it is possible to make con- diseases associated with lack of sanitation. siderable progress with the information We will use dose-response curves for water available. In the case of air pollution, for pollution which are estimated in Annex 2. example, a simple dispersion model uses total emissions, physical area, and typical Comparing tlle severity of environmental wind patterns to predict atmospheric con- problems centrations by municipio. Estimated con- 1.26 Large metropolitan areas exposed to centrations can be combined with dose- high levels of pollution seem like the most response functions and area populations to plausible candidates for 1iigh brown envi- generate estimates of mortality. Reductions ronmental priority. Air pollution is clearly in emissions can then be linked directly to serious in some parts of the Sio Paulo and reductions in mortality; abatement costs in Rio de Janeiro metropolitan regions, and each area (which depend on sectoral compo- lack of access to sanitation services seems sition) can then be used to calculate the 'cost lik o ause sinifat probles inlag per life saved' for air pollution control. likely to cause significant problems in large Given data limitations, the results are mostly cities with poor infrastructure such as Give daa lmitaion, te rsult ar motly Belem, Recife and Fortaleza. However, dif- illustrative and should not be misinterpreted ferent Rea n these r on every as direct calls for specific regulatory action, ferent cn dithin thesre hae uobt However, this type of analysis establishes different conditions, and there are undoubt- Howrver,thistype of magnitude manls fosta s aedly other urban areas in Brazil which suffer order Of magnitude estimates of costs and fro hig exoue.eisosbcm priorities and highlights those areas that de- from high exposure. Decisions become more complex when comparing the pollu- 8 Brazil: Managing Pollution Problems - Annexes tion problems of large cities exposed to evaluate alternatives across regions, pollut- moderate pollution levels with smaller cities ants and media. This report will make ex- exposed to more extreme levels of pollution. tensive use of CPLS measures for compari- son of pollution control alternatives. 1.27 A convenient metric for comparison in this context is 'tons abated per life saved,' CRITICAL POLLUTANTS since this allows policy to focus directly on pollution problems with the ultimate objec- 1.28 The critical first step in priority- tive - health improvement - in mind. It also setting must be selection of the most dam- allows for the introduction of economic aging pollutants. In Brazil, three seem par- analysis, since abatement costs vary widely ticularly harmful to human health: (1) across sources and pollutants. With a life Emissions of small particles from industry saved as the common metric (this is suffi- and transport; the most harmful are 2.5 mi- cient, since existing morbidity estimates are crons or less in diameter, but available in- directly tied to mortality estimates),6 it is formation only permits an assessment for possible to develop an estimate of the 'cost particles of 10 microns or less (PM1O); (2) per life saved' (CPLS) which can be used to Coliform bacteria in sewage; and (3) Heavy metals in industrial water emissions. For D Definition of an equivalence between mor- aquatic ecosystems, the most serious threats tality and morbidity cases permits combi- are posed by two pollutants: (1) organic nation of mortality and morbidity into a water pollution (indexed by Biological Oxy- single indicator. Equivalence is defined by gen Demand (BOD)) from industrial emis- the rate at which society is willing to sions and household wastes; and (2) dis- "trade" one mortality case (i.e., a statistical solved phosphorus from household wastes life) for a certain number of morbidity and agricultural runoff. cases (involving days of work lost, inci- dence of sickness and disability, costs of 1.29 Table 1.1 summarizes the pollutant- medication and/or hospitalization). For the 1.29 T ation res the ant- sake of illustration, it is assumed that the specific information relevant for this analy- equivalence is 10,000 morbidity cases for sis. In general (as shown in a later section), each statistical life (reflecting an expected BOD and phosphorus from sewage are the productive lifespan of 20 years, if time dis- most expensive to control, followed by counting is not applied). Ostro (1994) es- heavy metals, PMI0 and BOD from indus- timates the following problems are avoided try. The cost of phosphorus reduction in through reduction of PMIO by 10 ptg/m3: agriculture is uncertain because reliable in- 6.72 deaths per 100,000 inhabitants, 37,000 formation on crop losses from fertilizer re- restricted activity days (RDA), 80 asthma restricted activt ds (duction and on the cost of runoff prevention attacks, 9 cases of bronchitis, 35 hospital do not exist. emergency room visits, etc. These results imply that about 5,750 morbidity cases are directly associated with the loss of one sta- 1.30 The characteristics of primary tistical life. Using the 10,000 assumption, source activities are also important for spe- each reduction of 10 ,pg/m3 of PMIO leads cific control strategies. In general, point to 6.72*15,750, or approximately 100,000 sources are easier to regulate than dispersed 'morbidity-equivalent' cases. Valuation of sources. Deployment of monitoring and one morbidity unit permits assessment enforcement resources is also less costly in against abatement costs; the same exercise urban areas, where activities are more con- could be made for other air and water pol- centrated. Finally, as previously noted, lutants, enabling comparisons of alternative certain industrial, transport and agricultural pollution reduction strategies. activities may have widely-differing costs of abatement. Brazil: Managing Pollution Problems - Annexes 9 Table 1.1: Critical Pollutants Main Source Source Characteris- Source . Pollutant -3Damage Medium Activity tic Location PM10 Health, Air Industry Point (Small, Large) Urban aesthetics and (by sector) materials Transport Mobile Urban (by fuel) Coliform Bacteria Health Water Households Dispersed Urban Heavy Metals Health Water Industry Point (Small, Large) Urban (by sector) BOD Ecosystems Water Industry Point (Small, Large) Urban (by sector) Households Dispersed Urban Phosphorus Ecosystems Water Households Dispersed Urban (by location) Agriculture Dispersed Rural (by crop) 1.31 This analysis focuses on the parts of * Lives saved by this reduction; tons Table 1.1 for which data are available. Par- abated/life saved. ticular attention is paid to the two most im- mediate threats to human health: PMIO and * Cost/life saved (from cost/ton x tons coliform bacteria in sewage. abated/life saved). 1.33 The results provide several insights Uinto the economics of pollution control in PM10 Brazil. To illustrate the computations and their implications, several versions are pre- 1.32 This analysis of harmful air pollu- sented in Tables 1.2 - 1.5. Table 1.2 pro- tion focuses on PMIO emissions from in- vides a 'conventional' priority ranking for dustry and motor vehicles. To develop pri- PM1O control: the top 15 municipios in orities for PM1O control, the following esti- Brazil by total PMIO emissions (industrial mates for every municipio in Brazil have and vehicular). been produced:7 1.34 Each column of Table 1.2 summa- * PM1O emissions from four sources: rizes a large body of information. The esti- small plants (50 employees or less); mates of transport emissions are developed large plants (more than 50 employees); from state fuel consumption data, fuel- gasoline-powered vehicles; and diesel- specific emissions parameters, and a statisti- powered vehicles. cal equation for allocating fuel consumption to municipios based on their populations and * Tons of abatement required to reduce urban/rural proportions. The estimates of atmospheric concentration by .1 ug/m3. PMIO emissions from industry are from in- formation on over 155,000 industrial facili- ties (municipio location, 4-digit CNAE sec- tor, employment) and average PM10 emis- 7 Missing data produced some limitations, sions intensity per employee by CNAE sec- but most of these estimates include at least tor. Since data are available at the plant 3,000 municipios. Most of the missing data level, it is also possible to categorize indus- are for lightly-populated areas in northwest trial PMI0 emissions by the scale of emit- Brazil. ting factories. This is tabulated in two col- 10 Brazil: Managing Pollution Problems - Annexes Table 1.2: Top 15 Municipios By Total PMIO Emissions Total md. =1t Transp fSmiall1tid. LargeC mnd. Municiplo ~State~ Pop PMIO PM1O % of %/ IOf %/ of To*talR (000) (tons) (tons) otal_ Total, Sao Paulo (SP) 9,646 41,204 17,123 58 1 41 Rio de Janeiro (RJ) 5,481 16,684 6,957 58 1 41 Belo Horizonte (MG) 2,020 10,140 5,206 49 1 50 Curitiba (PR) 1,315 9,759 3,706 62 2 36 Porto Alegre (RS) 1,263 6,107 1,413 77 2 21 Salvador (BA) 2,075 6,104 1,308 79 2 19 Brasilia (DF) 1,601 6,089 2,461 60 1 39 Volta Redonda (RJ) 220 5,833 5,443 6 1 93 Manaus (AM) 1,012 5,480 1,800 67 1 32 Campo Grande (MS) 526 4,603 639 86 1 13 Recife (PE) 1,298 4,542 2,494 45 3 52 Itapeva (SP) 82 4,515 4,403 2 1 97 Cubatao (SP) 91 4,406 4,168 6 4 90 Sete Lagoas (MG) 144 4,316 3,982 8 1 92 Guarulhos (SP) 788 4,228 2,208 48 2 50 umns, which portray the percentage of total 1.36 Thus, even among Brazil's top 15 PMIO emissions from small industry (50 or PM1O emitters, the regulatory environment fewer employees) and large plants (more is entirely different. Reduction beyond 50% than 50). Estimates of industrial emissions in the large cities would require a vehicle are adjusted from the US to the Brazilian control strategy, but large reductions in conditions by a factor which is proportional some smaller cities would require tight con- to the number of employees. The results can trol in only a few plants. be modified as local data is eventually pro- vided. CPLSfor Industrial Sources 1.35 The relative importance of PMIO 1.37 From the perspective of benefit-cost sources is of particular interest from a regu- analysis, total emissions of PMIO do not latory cost perspective. In the four most provide a reliable guide for setting priorities. populous cities which head the list, transport This requires estimating the cost per life emits a major share of PM10 - from 49% in saved (CPLS) as explained earlier. For this Belo Horizonte to 62% in Curitiba. For mu- study, the CPLS for four sources have been nicipios with a population of less than computed in each area: small factories (50 250,000, the situation is obviously very dif- employees or less), large factories (greater ferent: in no cases are transport emissions than 50), gasoline-powered motor vehicles, responsible for more than 8% of total PMIO. and diesel-powered vehicles. As shown in It must be noted, however, that the effects of Table 1.4, municipios differ greatly in CPLS emissions from transport and industry are because their emissions, populations, areas different. For a city like Belo Horizonte, for and distributions of PMIO sources are quite instance, I ton of PMIO emitted by large different. industries increases the average concentra- tion of the pollutant in the air by 0.25 1.38 CPLS for small and large plants is ug/m3; the effect of the same ton emitted by estimated separately because the average the transport sector is an increase of 4.2 difference in stack height makes a great dif- ug/m3. ference for atmospheric concentration of PMIO. An atmospheric dispersion model Brazil: Managing Pollution Problems-Annexes 11 Table 1.3: The Cost Of Controlling Vehicular PMI0 Emissions v -1 ^; -i ; --- -:7PMI/Vhicle -- -Control Cost/Ton ..i.e KY. K ar -- PMIOIEmissions PerYear Vehicles/ron of (@$300Iyear per ' ^Ty -:e - Per Vehicle ---- : - - (glkiil) - (:-g.rams)- PMI1 Per Year Vehicle; 80% Eff.) Gasoline 11,858 0.21 2,490 402 150,592 Diesel 80,000 0.81 64,800 15 5,787 which uses information on municipio area 1.39 Note that Ostro's result is expressed and atmospheric conditions (stability, wind in terms of elasticities, his model assuming speed) is employed to estimate the contribu- constant elasticity, i.e., that the relation be- tions of small- and large-facility emissions tween changes in pollution concentrations to atmospheric concentration of PM10.8 In and mortality rates are the same irrespective the dispersion model, percent changes in of the level of air pollution. This is an as- emissions and atmospheric concentration are sumption perhaps valid for certain ranges of equal (although different across transport, air pollution levels. It is reasonable to as- small and large industries). Therefore, a sume, however, that for pollution levels be- PM10 dose-response result from Ostro low the WHO recommended concentration (1994) is used to estimate required tons of standards such effects will eventually disap- abatement per life saved (TPLS). Ostro re- pear, i.e., further reductions in pollution will ports that a .1 ug/m3 reduction in concen- bring no additional reductions in mortality tration induces a fall of .067 per 100,000 in rates. Since only few metropolitan areas in the mortality rate. Dividing .1 by the esti- Brazil have PMIO concentration levels mated concentration components (in ug/m3) above the WHO standards, the results below for small and large sources in each area pro- should be considered only for the most pol- duces the percentage reduction in concen- luted metropolitan areas. tration (and emissions) associated with a fall of .067 per 100,000 in mortality. Multipli- 1.40 To estimate comparative costs per cation of the latter by area population yields life saved for motor vehicle emissions con- expected lives saved; division of tons trol, Sao Paulo data on average annual abated by expected lives saved yields esti- driving distance for gasoline and diesel ve- mated TPLS. Multiplication of this number hicles (alcohol-powered vehicles emit negli- by the estimated marginal cost of abatement gible PM10), and PMI0 emissions factors in at 70% abatement yields cost per life saved grams/kilometer are used (Table 1.3). Using for small and large industry sources (Si these factors, it is estimated that one ton of CPLS and LI CPLS in Table 1.4).9 PMIO is emitted annually by 402 gasoline vehicles and 15 diesel vehicles. Assuming that the annual cost of PM 10 control at 80% 8 This study applied one representative set of efficiency is $300, vehicular PM1O control atmospheric parameters to emissions from all municipios because local atmospheric marginal cost of abatement (that is, small data were not available. Better information plant MC is assumed to be 7.9 times large on atmospheric conditions would undoubt- plant MC in the same sector; intemational edly increase the accuracy of the estimates. parameters are for large plants). Note also 9 Intemational parameters have been used to from Table 1.4 that CPLS in smaller in- International parginameabaters eent uts.ed tdustries is smaller than for large ones. This estimate marginal abatement costs. Theisbcuevnthghhentcorl minimum MC for large sources is $100/ton. is because even though the unit control A model of PM1O abatement cost which costs are higher, the effects on air pollution adjusts for plant size has been used to esti- by smaller industries are greater than those mate a small-plant multiplier of 7.9 for the caused by large industries. 12 Brazil: Managing Pollution Problems - Annexes Table 1.4: Lifesaving Through Emissions Control In Least-cost Municipios (00)(Is '00PI0PIOP$i M1 PS PS PS PSCPLS "~CPLS, , x $000 $ $00 $000 Sao Paulo 9,646 1514 24.9 .2 3.4 36.9 35.3 9 132 7 13 52 1,378 (SP) RiodeJaneiro 5,481 1272 10.6 .5 7.4 35.6 36.4 14 212 11 21 84 2,198 (RJ) Belo Horizonte 2,020 331 5.4 .4 7.7 48.7 27.7 18 309 14 31 103 2,688 (MG) Fortaleza (CE) 1,769 311 2.9 .8 14.2 27.5 41.0 20 344 16 34 113 2,957 Recife (PE) 1,298 212 2.4 .8 14.3 27.4 36.8 20 398 17 40 121 3,170 Salvador (BA) 2,075 705 5.4 .7 10.8 22.8 53.4 27 422 22 42 158 4,122 Tocantins 919 169 1.2 1.3 26.4 38.4 21.8 26 512 20 52 149 3,882 (TO) Curitiba (RN) 1,315 443 6.6 .4 7.2 27.2 51.2 33 539 26 54 189 4,930 Sao Joao de 426 29 .9 .5 17.4 31.7 32.4 217 563 14 56 101 2,648 Meriti (RJ) Osasco (SP) 568 70 1.7 .5 12.8 33.2 31.8 23 583 19 58 135 3,531 Porto Alegre 1,263 519 5.2 .6 9.7 32.1 45.6 37 603 30 60 216 5,649 (RJ) Sao Goncalo 779 248 1.8 1.1 20.8 30.1 30.8 38 708 31 71 223 5,835 (RJ) Nova Iguacu 1,297 810 3.0 1.4 21.1 30.0 30.6 47 721 38 72 274 7,152 (RJ) Santo Andre 616 166 2.0 .8 16.0 31.8 30.5 38 758 31 76 219 5,723 (SP) Natal (RN) 606 163 1.0 1.6 32.7 20.9 26.2 38 765 30 76 220 5,751 Olinda (PE) 341 37 .7 .8 24.3 24.1 32.5 26 768 21 77 149 3,888 Diadema (SP) 305 28 1.0 .5 16.3 31.8 30.5 24 770 19 77 137 3,568 Guarulhos 788 313 2.5 1.0 16.7 31.5 30.2 44 773 35 77 255 6,659 (SP) Carapicuiba 284 30 .9 .5 17.7 31.3 30.0 27 854 21 85 155 4,060 (SP) Niteroi (RJ) 436 132 1.0 1.3 26.6 27.9 28.5 47 976 37 98 267 6,982 Goiania (GO) 922 798 3.7 1.1 16.7 21.3 48.5 66 1007 53 101 382 9,980 Joao Pessoa 497 210 .6 3.1 60.0 22.2 2.2 54 1036 43 104 315 8,242 (PB) Duque de 667 471 1.7 1.8 29.0 26.8 27.4 66 1092 53 109 386 10,081 Caxias (RJ) Nilopolis (RJ) 158 12 .4 .7 29.0 27.1 27.7 26 1100 21 110 150 3,920 Contagem 449 191 1.3 1.3 25.5 38.8 22.1 57 1101 45 110 328 8,574 (MG) Cuiaba (MT) 402 4029 3.8 2.5 37.4 12.2 41.2 373 5344 2,985 5,344 2,163 56,546 Campo 526 8139 6.4 2.3 34.2 9.1 48.1 414 6214 3,311 6,213 2,401 62,762 Grande (MS) Note: POP: Population S/LI: SmallLarge Industry CPLS: Cost per life saved TPLS: Ton per life saved costs per ton are as follows: $151,600 for 1.42 Table 1.4 summarizes the results for gasoline vehicles and $5,800 for diesel ve- Brazil's top 25 municipios by Large Indus- hicles. try CPLS. The last six columns of the table combine data on population, area, emissions 1.41 These figures are multiplied by by source and marginal control costs to pro- TPLS for small sources to estimate cost per duce composite estimates of TPLS and life saved (CPLS) for vehicles in each fuel CPLS for small plants, large plants and class. motor vehicles (gasoline, diesel). Two Brazil: Managing Pollution Problems - Annexes 13 Table 1.5: Cost Per Life Saved For Urban Sewerage Investments In Brazilian States Stfi-e-Total Households Connection 10% Incr.: Infant Cost/Life Households Connected to % Households Lives Saved ($) Sewerage Connected Saved Alagoas 528,150 325,581 61.6 32,558 157.6 20,661 Paraiba 695,355 442,031 63.6 44,203 206.9 21,361 Pernambuco 1,591,230 1,091,070 68.6 109,107 493.6 22,106 Amazonas 391,460 294,100 75.1 29,410 100.7 29,195 Roraima 44,567 29,926 67.1 2,993 9.2 32,553 Amap6 53,530 42,662 79.7 4,266 12.9 33,063 Rond6nia 256,053 178,818 69.8 17,882 53.7 33,313 Bahia 2,523,134 1,440,449 57.1 144,045 372.1 38,714 ParA 986,474 715,170 72.5 71,517 156.1 45,809 Acre 88,755 55,237 62.2 5,524 11.3 48,910 Ceara 1,349,815 759,714 56.3 75,971 151.6 50,105 Tocantins 192,934 94,165 48.8 9,417 18.3 51,497 Distrito Federal 379,865 332,676 87.6 33,268 63.8 52,144 Espirito Santo 620,705 530,301 85.4 53,030 95.2 55,694 MinasGerais 3,720,563 3,111,247 83.6 311,125 554.5 56,104 Sergipe 329,944 226,372 68.6 22,637 38.5 58,783 Mato Grosso do Sul 462,264 379,331 82.1 37,933 63.2 60,044 Parana 2,093,050 1,814,654 86.7 181,465 296.8 61,149 Mato Grosso 433,638 359,261 82.8 35,926 53.8 66,824 Rio Grande do Norte 521,672 376,844 72.2 37,684 50.6 74,548 Goias 994,490 774,266 77.9 77,427 94.3 82,084 Rio de Janeiro 3,463,292 3,169,148 91.5 316,915 333.7 94,975 Sdo Paulo 8,062,075 7,442,293 92.3 744,229 783.5 94,989 Santa Catarina 1,126,860 1,018,378 90.4 101,838 105.9 96,201 Rio Grande do Sul 2,497,757 2,212,961 88.6 221,296 204.0 108,465 patterns are particularly noteworthy in these least twenty times the level for diesel vehi- results. First, for any emissions source, cles. there are large differences in CPLS across municipios. For example, even among Bra- 1.44 These results imply some clear zil's top 25 municipios ranked by large- strategic priorities for allocating regulatory source CPLS, this cost varies from around resources to tighter PM I0 control in Brazil. $13,000 in Sao Paulo to $1 10,000 in Conta- Small industry emissions should be ad- gem. CPLS for large sources in lower- dressed first in areas where these emissions ranked municipios are much higher. are a significant source of pollution, if tighter regulation of these sources is feasi- 1.43 Secondly, there are very large dif- ble. This will depend on1 two factors: the ferences in typical CPLS across sources. In public cost of regulating small, dispersed Rio de Janeiro, for example, CPLS are plants, which will be much higher than the $11,000, $21,000, $84,000, and $2,198,000 cost of regulating large plants (per ton of for small plants, large plants, diesel vehicles abatement); and the potential loss of output and gasoline vehicles, respectively. The or- and employment associated with tighter dering of relative CPLS is consistent across control of small sources whose marginal all top-ranking municipalities: CPLS for abatement costs are high. If these factors do large plants is generally at least twice the not compensate for the CPLS advantage of CPLS for small plants; CPLS for diesel ve- small plants, then an initial strategy focused hicles is at least twice the CPLS for large on small industry looks promising for sev- plants; and CPLS for gasoline vehicles is at eral cities. 14 Brazil: Managing Pollution Problems - Annexes Table 1.6: Cost Per Life Saved For Urban Water Investments In Brazilian States Alagoas 528,150 252,631 47.8 25,263 216.3 17,516 Paraiba 695,355 362,123 52.1 36,212 284.1 19,120 Pernambuco 1,591,230 909,904 57.2 90,990 677.6 20,143 Rond6nia 256,053 108,541 42.4 10,854 73.7 22,093 Amazonas 391,460 208,760 53.3 20,876 138.3 22,642 Amap6 53,530 29,627 55.3 2,963 17.7 25,087 Roraima 44,567 21,455 48.1 2,146 12.6 25,500 Parc 986,474 366,948 37.2 36,695 214.3 25,681 Acre 88,755 27,542 31.0 2,754 15.5 26,645 Bahia 2,523,134 1,170,254 46.4 117,025 510.8 34,364 Tocantins 192,934 58,054 30.1 5,805 25.1 34,688 Ceara 1,349,815 544,285 40.3 54,429 208.2 39,221 Mato Grosso 433,638 270,489 62.4 27,049 73.8 54,971 Rio Grande Do Norte 521,672 257,209 49.3 25,721 69.4 55,593 Sergipe 329,944 196,915 59.7 19,692 52.9 55,868 Distrito Federal 379,865 328,168 86.4 32,817 87.6 56,200 Mato Grosso Do Sul 462,264 327,536 70.9 32,754 86.7 56,646 Minas Gerais 3,720,563 2,921,732 78.5 292,173 761.3 57,565 Espinto Santo 620,705 502,078 80.9 50,208 130.7 57,612 Parana 2,093,050 1,738,862 83.1 173,886 407.4 64,020 Goi6s 994,490 703,891 70.8 70,389 129.5 81,533 Sdo Paulo 8,062,075 7,703,706 95.6 342,439 622.0 82,588 Rio De Janeiro 3,463,292 3,162,821 91.3 274,403 468.0 87,957 Santa Catarina 1,126,860 1,017,203 90.3 98,986 146.9 101,071 Rio Grande Do Sul 2,497,757 2,165,731 86.7 216,573 280.1 115,979 1.45 Large plants are generally a signifi- Contaminated Water cant source of PM10 emissions, and the CPLS criterion suggests that they also be 1.47 The second pollutant which threat- given high priority in most areas. The results ens human health comes from households suggest that a very high level of large-plant themselves. Coliform bacteria and other emissions control is warranted before ad- pathogens in sewage are a major source of dressing emissions from diesel vehicles. mortality and morbidity, particularly in And the control of PMI0 emissions from young children. Exposure comes from nu- gasoline vehicles is enormously costly and merous sources, including direct contact and should have far lower priority for PM10 re- contaminated drinking water. For reduction duction.I0 of this primary threat to health, the most important action is to collect and transport 1.46 Finally, as noted previously, our sewage away from residential areas, either results are based on Ostro's constant elas- through sewerage systems or periodic re- ticity assumption: the results are likely to be moval from well-maintained septic tanks. overestimated for municipios with lower There is little evidence of additional health pollution levels. benefits from treatment of sewage before it is deposited in waterways and removed from 10 Gasoline urban residential areas. The primary reason vehicle may wll be cost- for this IS the self-cleaning capability of riv- effective target for the reduction of other air pollutants. ers; coliform bacteria do not live for long Brazil: Managing Pollution Problems - Annexes 15 periods once they are expelled from the tality across Brazilian States. For sewerage body.11 and water connections, the CPLS varies fivefold and tenfold, respectively, from the 1.48 By reducing exposure to pathogens, North-East and North to the more prosper- clean water and sewage collection systems ous states of Brazil's South-East and South. can significantly reduce the incidence of mortality and morbidity. The study pre- sented in Annex 2 quantifies the reduction in infant mortality associated with increases in Heavy Metals urban household water and sewerage con- 1.50 As in the case of PM1O emissions, nections. In Tables 1.5 and 1.6, these re- heavy metals from industry are highly con- sults are used to estimate the benefits of centrated in a few municipios. Table 1.7 clean water and sewerage for Brazilian lists the top 25 Brazilian municipios in esti- states. For each state, the reduction in the mated emissions of toxic metals to water. infant mortality rate associated with pro- Heavy metals differ greatly from PM1O in viding water and sewerage to an additional their pattern of sectoral intensity. As a re- 10% of urban households (or the remaining sult, the metals ranking for municipios is urban households, in cases where connec- quite different from the PM1O ranking. tion rates are already above 90%) is esti- Only Rio de Janeiro, Belo Horizonte and mated. The change in the infant mortality Sao Paulo are near the top in both sets due rate is multiplied by the state's infant popu- to their sheer scale. The metal products in- lation to produce estimates of infant lives dustries are the source of most heavy metals saved. In Brazil, the annualized cost of emissions, and the regional clustering of the connection per household is approximately top 25 reflects the concentration of the in- $106 for sewerage and $127 for water. dustry in Sao Paulo and Minas Gerais Multiplication of these numbers by the States: 10 are in Sao Paulo State; 7 in Mi- household connections required for a 10% nas Gerais; 3 in Rio State; 2 in Rio Grande increase (or an increase to 100% in states do Sul; and the remaining 3 in Bahia, Santa with connection rates over 90%) yields an Catarina and Espirito Santo. For sheer vol- estimate of the increase in annual costs for ume of metals output, Sao Paulo and Minas clean water and sewerage. Division of this Gerais are clearly the focus of concern for cost by infant lives saved yields an estimate Brazil. of the cost per urban life saved for each state in Brazil. These are presented in Tables 1.5 and 1.6. 1.51 From the perspective of monitoring 1.49 The water and sewerage results and enforcement, the data in Table 1.7 sug- clearly reflect the great disparities in in- gest a relatively easy situation for regula- come, access to sanitation, and infant mor- tion. For 24 of 25 municipios, large plants account for at least two-thirds of all heavy Of course, downstream settlements which metals emissions; in 11 cases they account for over 90%. are too close to outfalls for untreated sew- age can suffer severe impacts if they use 1.52 For benefit-cost analysis, informa- untreated water for drinking and recreation. tion on emissions volume must be combined Such cases seem to be relatively rare, be- cause coliform counts decline rapidly with data on the area of each region, its downstream and because relatively few population, and the cost of abatement. And, people use untreated water which is obvi- as in the case of PMIO, introduction of these ously contaminated. factors makes a big difference for rank- 16 Brazil: Managing Pollution Problems - Annexes Table 1.7: Brazil's Top 25 Municipios For Heavy Metal Emissions To Water Sao Paulo (SP) 61.1 9,646 1,514 7 37 57 1 8 Volta Redonda 29.6 220 168 0 2 98 2 18 (RJ) Rio de Janeiro 26.2 5,480 318 5 26 69 3 3 (RJ) Cubatao (SP) 24.1 91 140 0 2 98 4 30 Ipatinga (MG) 20.2 180 163 0 2 98 5 23 Camacari (BA) 19.7 113 742 1 11 88 6 147 Belo Horizonte 17.1 2,020 331 3 20 77 7 7 (MG) Guarulhos (MG) 15.7 787 313 2 31 67 8 17 Joinville (SC) 12.5 347 1,056 1 8 91 9 118 Timoteo (MG) 11.3 58 154 0 3 97 10 55 SantoAndre(SP) 9.3 616 167 2 11 87 11 16 Contagem (MG) 8.5 449 191 3 22 75 12 21 Serra (ES) 8.5 222 270 1 2 97 13 48 Diadema (SP) 8.4 305 29 4 38 58 14 2 Ouro Branco 8.0 4 275 0 2 98 15 364 (MG) SaoBernardodo 7.9 566 428 3 17 80 16 46 Campo (SP) Porto Alegre (RS) 7.6 1,263 520 6 28 66 17 28 Divinopolis (MG) 7.6 151 726 2 20 79 18 139 Sao Caetano do 7.6 149 13 2 16 82 19 1 Sul (SP) Barra Mansa (RJ) 7.2 172 860 2 1 97 20 146 Sete Lagoas 7.1 144 534 0 7 93 21 122 (MG) Maua (SP) 6.2 294 77 1 13 86 22 14 Piracicaba (SP) 6.1 283 1,497 3 23 74 23 159 Triunfo (RS) 5.8 17 825 0 5 95 24 469 Pindamonhan- 5.7 102 746 0 5 95 25 161 Gaba (SP) ordering. The last column of Table 1.7 pro- cost/benefit index for toxic metals control. vides rankings for the same municipios, but Once again, Sao Paulo State leads the list on the basis of a cost/benefit index ex- with 12 entries. However, the distribution plained below. When area, population and of other areas is broader than for total emis- cost are considered, only 9 of the municipios sions: Minas Gerais has only 3 entries; Rio remain in the top 25; nine rank lower than State has 4; Pernambuco and Rio Grande do 100 for Brazil as a whole. Sul have 2; Espirito Santo and Ceara have one each. Furthermore, the list of top mu- 1.53 Table 1.8 shows Brazil's 25 highest- nicipios in Sao Paulo State changes consid- ranked municipios according to a erably: only 6 are common to the two lists. Brazil: Managing Pollution Problems - Annexes 17 Table 1.8: Brazil's 25 Municipios With The Highest Cost/Benefit Index For Control Of Toxic Metals Costl $hr. Ben.~~~~~~~~'S Abate~ ~Srn ed -? >--- j˘OO)+n '_ ' 1 ' [lX---S Munlc$pio Ben Metals Pop. :Metal: W AMrea OF; Irdex Cot C/Ble td d RAnk Rk tCOQO) (tI) t fB31 1fCJ Shr .Shr Sector, Sao Caetano 1 19 150 7.6 12.7 45 9,051 611 0.07 2 16 82 do Sul (SP) Diadema 2 14 305 8.4 28.5 18 5,804 611 0.11 4 38 58 (SP) Rio de Ja- 3 3 5,481 26.2 318.0 18 4,948 611 0.12 5 26 69 neiro (RJ) Osasco (SP) 4 34 568 4.0 70.0 43 1,948 611 0.31 2 18 81 Sao Joao de 5 124 426 0.9 30.0 62 2,431 843 0.35 19 16 66 Meriti (RJ) Ferraz de 6 189 96 0.5 27.4 25 487 206 0.42 3 39 58 Vasconcelos (SP) Belo Hori- 7 7 2,020 17.1 331.4 68 1,385 611 0.44 3 20 77 zonte (MG) Sao Paulo 8 1 9,646 61.1 1,514 21 1,280 611 0.48 7 37 57 (SP) Jandira(SP) 9 63 63 2.2 17.4 39 1,267 611 0.48 1 60 38 Carapicuiba 10 248 284 0.3 30.9 28 936 611 0.65 12 48 41 (SP) Olinda (PE) 11 234 341 0.4 38.0 59 902 611 0.68 13 26 60 Poa (SP) 12 264 76 0.3 13.0 57 860 611 0.71 7 76 17 Vitoria (ES) 13 151 259 0.7 40.6 48 832 611 0.73 3 11 86 Maua (SP) 14 22 295 6.2 77.2 52 1,084 843 0.78 1 13 86 Recife (PE) 15 46 1,298 3.1 212.1 49 739 611 0.83 7 22 71 Santo Andre 16 11 617 9.3 166.6 45 876 843 0.96 2 11 87 (SP) Guarulhos 17 8 788 15.7 313.2 22 564 611 1.08 2 31 67 (SP) Volta Re- 18 2 220 29.6 167.5 92 553 611 1.10 0 2 98 donda (RJ) Nilopolis 19 626 158 0.1 12,8 35 763 843 1.10 76 14 10 (RJ) Fortaleza 20 50 1,769 2.9 311.6 24 549 611 1.11 9 29 62 (CE) Contagem 21 12 450 8.5 191.3 33 496 611 1.23 3 22 75 (MG) Sapucaia do 22 35 105 3.9 63.7 76 410 611 1.49 1 4 95 Sul (RS) Ipatinga 23 5 180 20.2 163.1 98 388 611 1.57 0 2 98 (MG) Barueri (SP) 24 36 131 3.9 68.9 21 452 843 1.87 2 27 71 Esteio (RS) 25 193 71 0.5 23.9 44 433 843 1.95 8 80 12 1.54 To derive the cost/benefit index in damage, an index is used in this case. The Table 1.8, it is assumed that damage per associated index of marginal benefit to person in an area is a function of emissions abatement (termed the 'Ben. Index' in Table density (or emissions per unit area); this is 1.8) is the product of population density and multiplied by population to obtain an index a function of emissions density. The square of total damage. Lacking the parameter root of emissions density represents the lat- which relates emissions density to physical ter; the heavy metal abatement cost for the 18 Brazil: Managing Pollution Problems - Annexes Table 1.9: Household And Industrial BOD: Top 25 Municipios Sao Paulo (SP) 1 1 217,810 19,875 237,685 92 Rio de Janeiro (RJ) 2 2 124,962 8,309 133,270 94 Salvador (BA) 3 76 47,300 735 48,035 98 Belo Horizonte (MG) 4 7 45,997 2,021 48,018 96 Fortaleza (CE) 5 18 40,325 1,540 41,865 96 Brasilia (DF) 6 155 35,730 360 36,089 99 Curitiba (PR) 7 49 29,983 957 30,940 97 Recife (PE) 8 35 29,600 1,129 30,728 96 Nova Iguacu (RJ) 9 132 29,557 403 29,961 99 Porto Alegre (RS) 10 25 28,661 1,328 29,989 96 Belem(PB) 11 3118 24,780 0 24,780 100 Manaus (AM) 12 118 23,017 490 23,508 98 Goiania (GO) 13 53 20,947 923 21,870 96 Campinas(SP) 14 31 19,119 1,187 20,305 94 Guarulhos (SP) 15 14 17,873 1,604 19,477 92 Sao Goncalo (RJ) 16 64 17,780 817 18,597 96 Tocantins (MG) 17 1269 17,431 11 17,442 100 Duque de Caxia (RJ) 18 56 15,193 891 16,083 94 Santo Andre (SP) 19 6 14,067 2,041 16,108 87 Maceio (AL) 20 8 13,926 1,898 15,825 88 Natal (RN) 21 396 13,837 99 13,936 99 Natal (RN) 22 397 13,837 99 13,936 99 Teresina (PI) 23 265 13,278 180 13,458 99 Osasco (SP) 24 148 12,956 375 13,331 97 Sao Bernardo do 25 19 12,821 1,538 14,359 89 Campo (SP) sector with the largest local share of emis- 1.56 One factor complicating this analy- sions represents the marginal cost of abate- sis is the distribution of industrial sources ment (Abate. Cost in Table 1.8). Division of for these municipios: in Table 1.8,12 only 14 estimated marginal abatement cost by mar- of 25 municipios have large-plant shares of ginal benefit yields the estimated C/B ratio. two-thirds or more, and only 3 have large- plant shares over 90%. One municipio 1.55 This introduction of population size, (Nilopolis) has most of it heavy metal emis- area and marginal abatement cost changes sions from small plants (those with 10 or the picture considerably from Table 1.7: fewer employees); 2 have over two-thirds of many large-emissions municipios drop far their emissions from medium plants, and 13 down in the rankings, and many municipios have over 30% of their emissions from with considerably lower total emissions rise small and medium plants. sharply. From an economic perspective, the 25 municipios in Table 1.8 seem to offer the most attractive returns to increased control of toxic metals. However, this illustrative cost/benefit index model needs to be refined before being useful as a practical guide for 12 For these estimates, industry size is classi- regulatory action. fied as follows: Small (less than 10 em- ployees); Medium (10-100 employees); Large (more than 100 employees). Brazil: Managing Pollution Problems - Annexes 19 Table 1.10: Industrial BOD Sources By Plant Size, Top 25 Municipiosl3 Kou.--old .; -.; li4Total fi: d Sm. Ind Med Ind Lg- ---ClQ 8D (,000 --- ; ;8OD6(0(0 HH!: Abat -Shr -- J; d (State) .o-) (--00 -tons) Shr Cost ($)- She Sao Paulo 217,810 19,875 237,685 92 112 6 26 67 (SP) Rio deJa- 124,962 8,309 133,270 94 112 4 26 70 neiro (RJ) Santo Andre 14,067 2,041 16,108 87 220 4 8 88 (SP) Belo Hori- 45,997 2,021 48,018 96 112 6 23 71 zonte (MG) Maceio (AL) 13,926 1,898 15,825 88 7 2 15 83 Guarulhos 17,873 1,604 19,477 92 220 6 52 42 (SP) Fortaleza 40,325 1,540 41,865 96 112 10 27 63 (CE) SaoBernardo 12,821 1,538 14,359 89 112 5 11 84 do Campo (SP) Porto Alegre 28,661 1,328 29,989 96 112 8 49 43 (RS) Sao Luis (MA) 11,781 1,285 13,066 90 112 1 7 92 Campinas 19,119 1,187 20,305 94 112 8 21 72 (SP) Recife (PE) 29,600 1,129 30,728 96 112 13 38 49 Curitiba (PR) 29,983 957 30,940 97 112 14 55 31 Golania (GO) 20,947 923 21,870 96 112 9 38 53 Duque de 15,193 891 16,083 94 112 6 20 74 Caxias (RJ) SaoGoncalo 17,780 817 18,597 96 112 3 9 88 (RJ) Salvador (BA) 47,300 735 48,035 98 112 22 38 40 Manaus (AM) 23,017 490 23,508 98 293 8 52 40 Nova Iguacu 29,557 403 29,961 99 230 1 57 41 (RJ) Osasco (SP) 12,956 375 13,331 97 220 15 19 66 Brasilia (DF) 35,730 360 36,089 99 112 12 15 73 Teresina (PI) 13,278 180 13,458 99 112 25 66 9 Natal (RN) 13,837 99 13,936 99 112 40 45 15 Tocantins 17,431 11 17,442 100 112 99 1 0 (MG) Belem (PB) 24,780 1 24,781 100 206 12 88 0 1.57 To summarize, Brazil's heavy metal tion on1 three factors which should be taken emissions are more highly concentrated than into account when determining priorities for PMIO emissions, particularly in Sao Paulo stricter regulation: total emissions, a State. Table 1.8 provides valuable informa- cost/benefit index for regulation, and the size distribution of sources. In practice, it would probably be best to focus on areas in For these estimates, industry size is classi- the top 25 by the cost/benefit criterion which fied as follows: Small (less than 10 em- have relatively high emissions and a con- ployees); Medium (10-100 employees); centration of emissions in large plants. If Large (more than 100 employees). 20 Brazil: Managing Pollution Problems - Annexes the choice is restricted to areas with 4 tons The top-ranked municipios are, in effect, a of emissions or greater, thirteen municipios list of the largest cities in Brazil which are remain on the list. All have large plant scattered all over the country. It is clear that shares of approximately 60% or greater. households are the dominant source of Seven are in Sao Paulo State (Sao Caetano BOD, since their share is above 85% in all do Sul, Diadema, Osasco, Sao Paulo, Maua, cases and above 95% in 17 of 25 cases. Santo Andre, Garulhos); 3 are in Minas Gerais (Belo Horizonte, Contagem, Ipat- 1.61 Clearly, organic water pollution in inga); 2 are in Rio State (Rio de Janeiro, Brazil will not be controlled until household Volta Redonda); and one is in Rio Grande sewage is treated. However, relative abate- do Sul (Sapucaia do Sul). ment costs are so skewed in favor of indus- trial BOD abatement that it makes sense to CRITICAL POLLUTANTS FOR ECOSYSTEMS begin a program of organic pollution control with targeted regulation of emissions from 1.58 Since we are primarily concerned large factories. For Brazilian households, with man-caused emissions, we do not focus the incremental cost of BOD removed on siltation of water bodies even though this through sewerage is approximately is largely due to agricultural erosion and $1775/ton. For industry as a whole, by erosion caused by deforestation. The infor- contrast, marginal cost at 50% abatement mation on such problems is essentially non- ranges from approximately $10 to $400/ton. existent for the level of analysis developed Even the highest figure is less than 25% of here. the cost of BOD control through sewerage. Biological Oxygen Demand (BOD) 1.62 Where should a targeted regulation program begin? A complete answer would 1.59 Organic water pollution (BOD) has depend on knowledge of receiving water- two major sources: industrial emissions and ways (volume, flow rate, etc.) which is not household sewage. Knowledge of relative available for this analysis. However, good emissions volumes and abatement costs for candidates are factories in municipios where these two sources is critical for regulatory total BOD loads are high (indexing the po- strategy. If BOD pollution from large plants tential threat to ecosystems); industrial loads is the main problem, careful targeting of are also significant (providing scale econo- monitoring and enforcement activity can mies for regulation); industrial BOD emis- significantly reduce emissions in a short pe- sions are concentrated in a few large plants riod of time. A large share for household (lowering the cost of monitoring and en- sewage, on the other hand, will imply the forcement); and industry's abatement costs need to construct sewerage and treatment are low. Municipios in Table 1.10 which systems for large areas. rank high in the first three categories are, in order of abatement cost, Maceio (Alagoas), 1.60 Household BOD is directly propor- Sao Bernardo do Campo (SP), Sao Luis tional to population, while industrial BOD (Maranhao), Santo Andre (SP), and Sao depends on the distribution and scale of ac- Goncalo (Rio). Within this set, marginal tivity in BOD-intensive industry sectors. abatement costs range from $7/ton to Significant threats to aquatic ecosystems are $220/ton. These criteria can be used for only likely in areas with heavy emissions further investigation of municipios where volumes. Table 1.9 provides evidence on BOD-related damage may be relatively se- the distribution of BOD emissions by vere. source; the 25 municipios listed have the highest estimated BOD emissions in Brazil. Brazil: Managing Pollution Problems - Annexes 21 Table 1.11: Brazil's Top 25 Municipios: Phosphorus Loadings Total ~Household A9ricultural Hausehflod = ;~~~~~~~~~~~~~~~~~~~~~~~~~~~~o rsp h - r u Sao Paulo (SP) 10,508 10,508 0 100 Dourados (MT) 7,295 144 7,151 2 Rio de Janeiro (RJ) 6,031 6,029 3 100 Rio Verde (GO) 2,488 101 2,387 4 Campo Novo do Parecis 2,474 5 2,468 0 (MS) Sorriso (MS) 2,452 16 2,437 1 Salvador (BA) 2,287 2,282 5 100 Brasilia (DF) 2,281 1,724 557 76 Ponta Pora (MT) 2,108 57 2,051 3 Sao Gabrel do Oeste 2,102 12 2,090 1 (MT) Piracicaba (SP) 2,001 306 1,695 15 Fortaleza (CE) 1,946 1,946 0 100 Maracaju (MT) 1,870 23 1,847 1 Londrina (PR) 1,732 419 1,313 24 Ituverava (SP) 1,638 35 1,603 2 Guarapuava (PR) 1,622 156 1,466 10 Unai (MG) 1,572 65 1,507 4 Sidrolandia (MT) 1,544 16 1,529 1 Costa Rica (MT) 1,535 13 1,522 1 Cascavel (PR) 1,466 206 1,261 14 Curitba (PR) 1,456 1,447 10 99 Nova Iguacu (RJ) 1,427 1,426 1 100 Toledo (PR) 1,422 94 1,328 7 Porto Alegre (RS) 1,389 1,383 6 100 Candido Mota (SP) 1,368 26 1,342 2 1.63 Phosphorus is another threat to Phosphorus aquatic ecosystems because excessive load- ings are a major cause of eutrophication. 1.65 Table 1.11 provides information on The two major sources of phosphorus are the geographic and sectoral distribution of household waste water and runoff from ag- estimated phosphorus loads. For agricul- riculture. As in the case of BOD, appropri- ture, the estimate is based on the assumption ate targeting of regulation depends on three that 20% of total phosphorus fertilizer appli- factors: the scale of phosphorus loading cations find their way into waterways relative to the absorptive capacity of local through runoff.14 Potential problems from waterways; the relative magnitude of phos- agriculture appear to be concentrated in the phorus loading in different municipios; and agricultural hinterlands of the Brazilian the shares attributable to households and South, and this is confirmed by Table 1.11. agriculture. Large potential loadings are identified in agricultural municipios of Mato Grosso (6), 1.64 Since evidence on the incidence of Mato Grosso do Sul (2), Sao Paulo (3), eutrophication problems by waterway is cur- Parana (4), Goias (1) and Minas Gerais (1). rently unavailable, this analysis will be lim- ited to identifying areas which may pose problems, and tracing potential phosphorus 14 Qualitative results are not changed by loading problems back to household and variation of the runoff percentage from agricultural sources. 10% to 30%. 22 Brazil: Managing Pollution Problems - Annexes The largest loadings from households are sions control in the South/Southeast. In found in the major urban centers: Sao most areas, PMI0 pollution can be reduced Paulo, Rio de Janeiro, Salvador, Brasilia, significantly by stricter regulation of a few Fortaleza, Curitiba, Nova Iguacu and Porto large industrial facilities. Alegre. 1.69 Additional reduction of PMIO in Brazil's large urban areas will require stricter control of motor vehicle emissions. 1.66 This report utilized a large new da- However, this option is generally about tabase for a comprehensive analysis of twice as expensive as industrial PMIO con- brown environmental problems in Brazil. trol, and should be deferred until large in- The analysis has included all four sectors dustrial sources have been brought under which are major sources of pollution: control. Such conclusions perhaps call for households, industry, transport and agricul- some careful consideration by Brazilian ture. Because regulatory resources are lim- policymakers at a time when inspection and ited, attention has focused on intervention maintenance programs are becoming man- priorities for the few pollution problems datory, and also when some large metro- identified as most serious. For public politan cities are considering the (very) health, these are PM10 air pollution, sew- costly strategies of banning the circulation age-contaminated water, and industrial of vehicles during certain periods of the heavy metal emissions to water. For aquatic year. ecosystems, the two major problems are 1.70 Focusing on cost-effectiveness for emissions of BOD by households and in- lifesaving leads to the following order of dustry, and emissions Of phosphorus by priorities for regulatory intervention. For households and agriculture, heavy metal emissions, regulatory attention should be focused on the small number of Hffuman Health municipios which have large metals loads 1.67 Although some missing links re- and low abatement costs relative to abate- main, it has been possible to use the wealth ment benefits: of available information to identify those areas where the three critical health-related * Countrywide: Extension of water net- pollution problems seem to be greatest. works, primarily in urban areas. Furthermore, available data on abatement Furtshaerboreen sfialent data prov an ine* North/Northeast: Extension of sewerage costs have been sufficient to provide anin- networks, primarily in urban areas. dication of relative benefits and costs in y most cases. For PM 10 control and sanita- most cases. Fo MIo* South/Southeast: Control of industrial tion investments, intervention priority rank- ings were based on estimated costs per life gIa abatemen cos in heav- saved. In the case of heavy metals, a com- glnal abatement costs) in heavily- parative cost/benefit index was developed. polluted, densely-inhabited cities with large populations. 1.68 These results provide a relatively * South/Southeast: Extension of sewerage clear sense of priorities. To combat threats netwouthearly in of areas. to human health, immediate actions should focus on the countrywide expansion of ur- * North/Northeast: Control of industrial ban water connections. Second priority PMI1 sources (in sectors with low mar- should be given to sewerage in the North/Northeast and industrial PMIO emis- gial abatement costs) i heavily- Brazil: Managing Pollution Problems - Annexes 23 polluted, densely-inhabited cities with for intervention to be made. In all cases, large populations. ambient quality should be checked prior to action. The ranking in terms of cost- * South/Southeast: Control of PMIO from effectiveness is as follows: diesel vehicles. * Control of medium and large industrial * North/Northeast: Control of PMIO from BOD sources (in sectors with low mar- diesel vehicles. ginal abatement costs) in areas with large total BOD loads. * (A very distant last) Nationwide control of PMIO from gasoline vehicles. * Evaluation of the potential for low-cost changes in agricultural practice which Aquatic Ecosystems will reduce phosphorus runoff in agri- cultural areas where receiving waters 1.71 Priority interventions to protect have serious eutrophication. aquatic ecosystems are subject to much greater uncertainty than measures to protect * Installation of sewage treatment in cities human health. The carrying capacity of re- with large total BOD and phosphorus ceiving waters is subject to high variation, loads. and data on ambient water quality near large Reference emissions sources are generally unavailable. Therefore, this analysis has focused on the Ostro, Bart. 1994. "Estimating the Health Ef- identification of areas where emissions are fects of Air Pollutants." World Bank large enough to pose a potential risk. Again, Policy Research Working Paper 1301, an assessment of relative costs has enabled Washington D.C. some conclusions about relative priorities 24 Brazil: Managing Pollution Problems - Annexes Figure 1.1: Municipio Incomes in Brazil (1991 Currency Units) W a9f,- D istr8000i7,0 r ~~~~~ 0-80,000 80,000 -780,000 Brazil: Managing Pollution Problems - Annexes 25 Figure 1.2: Cost Per Life Saved: Sewerage (2~~~~~~~~~~$000- 6,000 $60,000- 80,000 U 0 - $80,000- 120,000 26 Brazil: Managing Pollution Problems - Annexes Brazil: Managing Pollution Problems - Annexes 27 2. BENEFITS OF WATER AND SANITATION SERVICES' SUMMARY OF ISSUES AND RECOMMENDATIONS 1SSUES AND PROBLEMS: Urban access to piped water and sanitation has a significant effect in reducing infant and child mortality; however, water supply and sanitation are not equally important as influences on the incidence of different diseases. A ten percentage point rise in urban access to piped water reduces the average mortality rates for both infants and children under 5 by almost 3%. A ten percentage point rise in urban access to sewers reduces the average mortality rates for both infants and children under 5 by almost 2%. For Minas Gerais, Pernambuco, Rio de Janeiro, and Sao Paulo, it is possible to avoid nearly 3,000 deaths of babies and young children each year and to reduce the burden of disease by over 220,000 DALYs through investments in water and sanitation. Under-5 deaths account for 70-75% of the total burden of disease affected by water and sanitation. The case for expanding piped water and sewer services to urban residents rests on the general community benefits of reducing the burden of ill-health and infant mortality as well as on the willingness to pay of the households receiving increased coverage. Household willingness to pay for piped water and sewage removal exceeds the costs of sup- plying piped water if household income is greater than $4,000 per year; for sewers, the thresh- old is higher at $5,000 per year. STR;TG AD RECOMMENDATIONS The largest impact at the lowest cost can be achieved by concentrating on ensuring that the en- tire urban population has access to piped water at a cost of $1,560 per DALY. Providing every urban resident with access to piped water should be the first priority for reducing the burden of disease and ill-health via investments in water and sanitation. The average cost per DALY saved by expanding urban sewers is higher at $2,440, but is still well below reasonable estimates of willingness to pay to save a DALY. When the substantial non-health benefits from expanded sewer coverage are taken into account, the benefits are likely to outweigh the costs. 2.1 There is ample evidence from inter- eases. However, few studies have attempted vention and cross-community studies to es- to use these epidemiological results as the tablish that access to improved water supply basis for (a) estimating the net social bene- and sanitation can have a significant impact fits of expenditures on water and sanitation, in reducing the incidence of both morbidity and (b) identifying which urban areas or and mortality associated with diarrhea, in- rural communities should receive priority in testinal nematodes, and other tropical dis- expanding water and sanitation services.2 This paper was prepared by Gordon 2 The original report on the study under- Hughes. taken by Esrey et al included an analysis of the expected net benefits from water and 28 Brazil: Managing Pollution Problems - Annexes This section will draw upon a detailed cross- such episodes, or to pay for medical atten- sectional epidemiological study of the im- tion to mitigate their severity. Education, pact of water and sanitation on infant and especially of women, plays a critical role in under-5 mortality in Brazil to estimate and disseminating the importance of personal rank the net benefits of improvements in and domestic hygiene in reducing the fre- water and sanitation. quency and severity of waterborne disease. Thus, the influence of these factors must be 2.2 The primary indicators of the health taken into account when estimating the im- impacts of water supply and sanitation that pact of water and sanitation improvements. were used are (i) the infant mortality rate, defined as the number of deaths of babies 2.4 Diarrhea diseases are a major cause less than 12 months old per 1,000 live of mortality among young children in Af- births, and (ii) the under-5 mortality rate, rica, Asia (except China), and Latin Amer- defined as the number of deaths of babies ica, typically accounting for 20-25% of and young children under 5 years old pXer deaths of children from 0 to 4 years old as 1,000 children under 5. In Brazil, infant well as about 8% of the total loss of DALYs mortality accounts for over 80% of under-S in the developing world as a whole (just be- mortality. The under-5 mortality rate was hind lower respiratory infections).3 Other used in the analysis as the link between the water-borne diseases impose substantial cross-section analysis of mortality and data costs as a result of disability and loss of on the overall burden of disease in Latin productivity by those who suffer them. The America which was then used to calculate magnitude of such costs seems to be the total impact of improvements in water strongly correlated with levels of mortality and sanitation on health. for infants and young children. Thus, it is reasonable to use changes in these mortality 2.3 Casual observation supported by variables in response to access to water sup- detailed community studies show that in- ply and sanitation as a general indicator of come and education are both critical factors the impact of water and sanitation on the in understanding the impact of water supply overall burden of water-borne diseases. and sanitation on health. Income matters both as a determinant of, and possible proxy 2.5 Small scale studies have shown that for, nutritional status and as an indicator of water supply and sanitation are not equally the resources available for avoidance or important as influences on the incidence of mitigation expenditures. Infants who are different diseases. Water supply seems to well-nourished are less likely to die during be the critical variable for guinea worm episodes of diarrhea. A higher average in- (dracunculiasis), schistosomiasis, and tra- come means that parents are more likely to choma in the sense that access to ample be able to buy either bottled water or other water of reasonable quality for drinking and clean water, thus reducing the frequency of 3 DALY is the acronym for 'disability- sanitation interventions for six diseases for adjusted life years' and is a standard meas- Africa, Asia, and Latin America. This ure of the burden of disease. DALYs are analysis takes account of the costs of both calculated as the present value of the future mortality and morbidity, but the figures are years of disability-free life that are lost as inevitably very broad-brush since the the result of the premature deaths or cases of authors had to rely upon continent-scale disability occurring in a particular year. A dauthor had to rely upon continent-scale full discussion of the definition and calcula- tion of the burden of disease in terms of DALYs may be found in Murray & Lopez. Brazil: Managing Pollution Problems - Annexes 29 hygiene substantially reduces the transmis- EPIDEMIOLOGICAL ANALYSIS sion of these diseases. For hookworm in- fection (ancylostomiasis and necatoriasis) it 2.8 The analysis was carried out using a is sanitation that is critical in breaking the sample of 1533 municipalities from 4 states cycle of transmission, though its impact on -- Minas Gerais, Pernambuco, Rio de Ja- incidence as opposed to severity of the dis- neiro, and Sao Paulo -- which span the full ease is uncertain. The incidence and sever- range of incomes and living conditions ity of diarrhea diseases and ascariasis seem found in Brazil today. The data was ex- to be influenced by both water supply and tracted from individual state reports from sanitation, though it is not possible to con- the 1991 Census plus a dataset containing clude which of the two is more important. full death registration information compiled by the Fundacao Nacional de Saude, an in- 2.6 Since important questions of priori- stitute affiliated with the Federal Ministry of ties may arise in allocating resources to the Health. Deaths are recorded by municipality development of water and sanitation serv- where the deceased person resided, but it ices in poor communities, the study was de- was not possible to separate deaths of urban signed to identify the separate influences of and rural residents, so that infant and under- water and sanitation on mortality and, by 5 mortality rates could only be calculated at inference, on morbidity. No attempt has the municipal level. Analysis of mortality been made to examine the impact of quality rates for urban and rural populations was variables -- in particular, the quality of water only possible for those municipalities which supplies and the extent and nature of sewage are predominantly either urban or rural. treatment. 2.9 The main independent variables 2.7 The overall burden of ill-health as- used in the analysis were: sociated with transmission through contact with untreated sewage outside the local * average head of household income, neighborhood is relatively small. Children expressed originally as a multiple of and adults may develop diarrhea, cholera, the minimum wage but converted to typhoid, or hepatitis as a result of batlhing in US$ at the average exchange rate contaminated waters or eating contaminated for 1991; shellfish, but both mortality and the overall loss of DALYs from such causes is usually * percentage of population living in small. Moreover, conventional sewage urban areas; treatment on its own yields minimal or zero health benefits. Unless the treatment plant * percentage of females aged 5 or chlorinates its effluent -- an unusual meas- greater who are illiterate; ure -- or includes maturation ponds, land treatment or other measures for bacterial percentage of total population removal, sewage treatment has little impact served by piped drinking water; and on the bacteriological quality of wastewater. In most cases, the collection of sewage and percentage of total population the discharge of wastewater to more distant served by sewers and/or septic or less harmful locations is more effective in achieving a reduction in e-coli or fecal coli- Since mortality rates cannot be less than form counts Of, for example, bathing or shellfish waters. zero, a logit specification was estimated by a nmaximum likelihood procedure using the number of deaths of infants or of children 30 Brazil: Managing Pollution Problems - Annexes under 5 years old in 1991 together with the tify what these might be -- such as rural- total number of infants under 1 year or 5 urban income differentials, income inequal- years old in the population census. Dummy ity among the rural population -- were not variables for three states were included in successful. the equations in order to allow for state dif- ferences in variables that could not be in- 2.12 Better results were obtained by cluded in the analysis. dropping the rural component of the water and sanitation variables altogether. Meas- 2.10 A priori one would expect that in- ures of goodness of fit for this specification fant mortality (or under-5 mortality) will were much better that those for the model decline with increasing values of (a) income using access to piped water and sanitation per person, (b) the level of female educa- for the whole population and only slightly tion, and (c) access to piped water and sani- worse than those for the model in which tation. The coefficients for the relevant both rural and urban components were in- variables are all highly significant and cluded. Thus, the working hypothesis is that negative. The expected effect of urbaniza- urban access to piped water and sanitation tion on mortality is uncertain. Infants and has a significant effect in reducing infant children in urban areas may be more ex- and child mortality, whereas rural access posed to the diseases associated with squalid may have little or no such effect -- in Brazil living conditions, but equally their parents at least. may have better access to information and services which reduce the chances of con- 2.13 Another question concerns the rela- tracting these diseases or mitigate their ef- tive importance of sewers and other types of fect. In all of the models estimated it turns sanitation in contributing to lower mortality out that the coefficient on the level of ur- rates. Households with septic tanks com- banization is very significant and positive so prise about 10% of urban households and that infant and under-5 mortality rates are 15% of rural households, while the equiva- higher in urban than in rural areas if other lent shares for sewers are 61% and 13%. To factors are held constant. compare the effects of different types of sanitation separate equations were estimated 2.11 It is possible that water supply and for sewers and septic tanks combined, sew- sanitation have different effects for urban ers alone, and sewers and septic tanks sepa- and rural households, so various alternative rately. In all cases, the model with sewers specifications were estimated to examine and septic tanks separately was no better whether this is case. The initial approach than the one with sewers and septic tanks was to decompose the influence of the water combined, since the coefficients for sewers variable by including (a) access to piped and septic tanks were effectively identical. water in urban areas multiplied by the urban This confirms that, in terms of the impact on share of the population, and (b) access to human health, it does not matter whether piped water in rural areas multiplied by the urban sanitation takes the fonn of sewers or rural share of the population plus a similar septic tanks. decomposition of the sanitation variable. Unfortunately, this yielded significant posi- 2.14 The relative importance of water tive coefficients for both rural water and and sanitation as influences on infant and sanitation, which is entirely counter- under-5 mortality may be inferred from the intuitive. It is probable that the rural vari- equations by calculating the impact on ables are acting as a proxy for some unob- mortality rates of a 10 percentage point in- served characteristic(s) affecting mortality creases in the water and sanitation variables. among rural populations. Attempts to iden- These are shown in Table 2.1. Brazil: Managing Pollution Problems- Annexes 31 Table 2. 1: Impact Of Water And Sanitation tinal nematode infections were summed to On Mortality Rates provide an aggregate estimate of the burden of water- and sanitation-related diseases for Infant; .Under- Mor- the region.4 This was normalized by the -Mortality tality, total number of deaths of children under 5 Average Mor- 39.4 8.8 years old each year from the same group of tality Rate t7-e duetowa10perentagepointrise diseases.5 Thus, the scaling factor repre- in-- sents the average number of DALYs lost as Urban access 0.8 0.25 a result of water- and sanitation-related dis- to piped water eases per under-5 death associated with the Urban access 0.6 0.15 same group of diseases. Applying it to the to sewers estimated reduction in uilder-5 mortality as a 2.15 Clearly, expanding access to piped result of improvements in water and sanita- water has a larger impact on mortality rates tion yields an estimate of the total number of per person or household affected than does DALYs that may be saved by such meas- expansion of sewers. However, over 91% ures. of all urban households in the 4 states had access to piped water in 1991 and the pro- 2.18 There are alternative ways of com- portion is likely to be nearly 95% now, so puting DALYs which vary in their assump- that the scope for reducing mortality by tions about the discount factor and age further investments in water supplies is weights that are used. The results reported rather limited. Building sewers or septic here are based on the standard parameters tanks has a much less powerful impact on used in the Global Burden of Disease study. mortality rates but may, nonetheless, have a Alternative calculations using a zero dis- large impact in aggregate because of the couint rate and uniform age weights have much more limited coverage in most urban also been prepared. The broad conclusions areas. are little affected though the average cost per DALY saved is much lower because the 2.16 As a working hypothesis, it will be death of a child under 5 years old means the assumed that morbidity and mortality of loss of 34 DALYs for the standard parame- those aged 5 or above will decline as a result ters but about 78 DALYs under the alterna- of increased coverage of urban piped water tive assumptions. The aggregate scaling and sewers in proportion to the reduction in factor is 47.9 DALYs per under-5 death mortality rates. The scale of the reduction in from water- and sanitation-related diseases the overall burden of disease has been esti- for the standard assumptions and 102.2 mated from the data compiled for the Global Burden of Disease study sponsored by the World Health Organization and the World 4 Trachoma might also have been included Bank (see Murray and Lopez (1996), and but it is of negligible importance in Latin footnote 3 above). This gives estimates of America and the evidence for the impact of the total burden of various diseases linked to water and sanitation on its incidence is water and sanitation in terms of DALYs for rather mixed. The survey by Esrey et al suggests that it may be personal hygiene Latin America as a whole. practices rather than the availability of water that is the critical factor. 2.17 To scale changes in mortality, the total number of DALYs lost each year to (a) Diarrheal diseases accounted for 99% of the diarrhea diseases, (b) hepatitis B & C, (c) total deaths and 85% of total DALYs lost as tropical cluster diseases excluding trypano- a result of this group of diseases. somiasis and Chagas disease, and (d) intes- 32 Brazil: Managing Pollution Problems - Annexes DALYs for the alternative. Thus, under-5 2.21 The estimated reductions in under-5 deaths account for 70-75% of the total bur- mortality and DALYs lost to water- and den of disease affected by water and sanita- sanitation-related diseases following an ex- tion. tension of urban water supply and sewers are shown in Table 2.3 (at end of report). 2.19 It would have been possible to have The total number of avoided under-5 deaths used mortality from infectious and parasitic for the 4 states would be just under 22,000 diseases rather than total mortality as the per year, with the biggest proportional im- base for the analysis. However, this cate- pact in Pernambuco, which had an under-5 gory represents barely 10% of both infant mortality rate double that of Minas Gerais and under-5 mortality, whereas it accounts and 40% or more higher than those for Rio for 36% of under-5 deaths in Latin America de Janeiro and Sao Paulo. in the Global Burden of Disease estimates. This suggests that many under-5 death from 2.22 The estimates suggest that over many water- and sanitation-related diseases 700,000 DALYs per year could be saved by may have been classified under the general expanding the coverage of urban water sup- 'Unspecified' category. For this reason it plies to the 4.2 million people who were not was better to make use of the total mortality served in 1991. The average health benefit statistics rather than relying on an possibly amounts to 0.17 DALYs per year per addi- erratic classification by cause of death. tional urban resident supplied with water, with a range from 0.12 for Minas Gerais to COST-EFFECTIVENESS OF INVESTMENTS IN 0.26 for Pernambuco. If all of the urban WATER AND SANITATION population has access to piped water supply, the additional impact of expanding sewers 2.20 These results were used to estimate would be much smaller. The total saving the reduction in the burden of disease that would amount to about 340,000 DALYs per would follow an extension of water supply year for an additional 19.6 million people and sewers to all urban households in each served. Thus, for sewers, the average health of the municipalities in the four states. benefit is only 0.018 DALYs per year per Since this would be a non-marginal change, additional urban resident covered, or one- the full logit equation was used rather than tenth of the equivalent figure for water sup- the slope coefficients shown above. Note, ply. The range is from 0.014 for Minas also, that the shape of the logit model means Gerais to 0.023 for Pernambuco. that the sum of the reductions in mortality associated with the extension of water sup- 2.23 The cost of expanding urban water ply or sewers alone exceeds that due to the supply and sewers will, of course, depend full extension of both water supply and sew- upon the specific circumstances of munici- ers.6 palities. However, it is possible to compute a broad index of the cost effectiveness of expenditures across services and munici- palities by using average costs based on re- 6 In essence, this is a question of which comes first. The calculation of reductions in mor- tality for urban water supply or sewers alone assume that each change is made from the move to 100% urban sewers would start current level of coverage and, thus, are from a lower mortality rate and would be based on current mortality rates. If, instead, equal to the difference between the figure it were assumed that 100% urban water for 100% urban water and sewers combined supply is achieved first, then the reduction and that for 1 00% urban water alone. in mortality resulting from a subsequent Brazil: Managing Pollution Problems - Annexes 33 Table 2.2: Average Costs for Water Supply with Pernambuco having the lowest costs and Sewers and Minas Gerais the highest costs for both urban water supply and sewers. Even so, Water Sewers the average costs per DALY saved for urban supply water supply are low relative to other practi- Investment costs 150 220 cal interventions that might have a signifi- ($ per additional cn mato h oa udi fdsaei urban resident cant impact on the total burden of disease in served) these states. Annualized total 30 25 cost ($ per year per 2.27 There are large differences across additional urban municipalities within each state in the cost resident served) per DALY saved. The second half of Table cent projects in Brazil. Table 2.2 gives the 2.4 shows a simple distribution of costs per average costs that have been assumed. DALY saved across municipalities aggre- gated in terms of (a) the populations that 2.24 Note that the cost of sewers does not would be covered by expanding urban water include any allowance for sewage treatment, supplies and sewers, and (b) the numbers of since this is not strictly required in order to municipalities in each category. The lowest achieve the health benefits examined here. class limit of $2,000 was chosen as a level that few, if any, would challenge as an ac- 2.25 The total investment cost required to ceptable cost per DALY saved per year. provide piped water supply to all urban resi- The upper class limit of $6,000 is slightly dents who did not have it in 1991 would be greater than twice the minimum wage and about $630 million, while that for extending GDP per person in 1991, which fell in the sewers to all of the urban population without range $2,700-2,900 per year at the average sanitation would be about $3 billion. The exchange rate for the year. It is reasonable total annualized costs would be $126 million to assume that the minimum willingness to and $340 million per year respectively. The pay for a DALY saved will fall in this range. largest shares of both water and sewer in- vestments would arise in Sao Paulo because 2.28 About 64% of all urban residents of its size, but scaling by total urban popu- without piped water live in municipalities lation the investment per person would be for which the annualized cost per DALY much larger in Pernambuco than in the other saved is less than $2,000. Thus, it is easy to states -- see Table 2.3 (at end of report). conclude that providing most urban resi- dents with access to piped water should be 2.26 It is possible to rank states and mu- the first priority for reducing the burden of nicipalities by the cost per DALY saved as a disease and ill-health via investments in result of expanding access to water supply water and sanitation. The slightly lower and sewers -- see Table 2.4 (at end of re- share of municipalities for which the aver- port). The average investment per DALY age cost per DALY saved was less than per year saved is $7,810 for urban water $2,000 indicates that it is the municipalities supply and $21,460 for urban sewers. Con- with the largest number of people without verting investment costs to annualized costs urban water supplies which have the lowest and allowing for operating cost narrows the average costs per DALY saved. relative difference somewhat with average costs of $1,560 and $2,440 per DALY on an 2.29 The picture is more mixed for ex- annual basis, which will be used for the re- penditures on sewers. The average cost is mainder of the analysis. Average costs per higher than for water supply, but there are a DALY saved vary substantially across states significant number of municipalities for 34 Brazil: Managing Pollution Problems - Annexes which the annualized cost per DALY is less municipalities, the cost per DALY saved for than $2,000. This is particularly the case for sewers falls in the range from $2,200 to Pemambuco and Rio de Janeiro where 40% $3,200. and 55% respectively of urban residents without sanitation. Most urban residents WILLINGNESS TO PAY FOR URBAN WATER without sanitation live in municipalities for AND SEWERS which the annualized cost falls in the range $2,000 to $6,000 per DALY. Since the 2.32 There are two, partially overlapping, overall size of the population without sani- aspects of the benefits generated by expen- tation is much higher than that without piped ditures on water supply and sewers that water, the number of people who would be must be weighed against the costs involved. covered by giving priority to municipalities The first is the general community's willing- in the lowest category ( < $2,000 per ness to pay for infrastructure improvements DALY) would be large -- over 3.4 million in that generate healthi benefits in the forn of a total with over 1.5 million in Rio de Janeiro, lower burden of disease and infant mortal- over 1.3 million in Pernambuco, and over ity. The second is the willingness of indi- 0.4 million in Sao Paulo. vidual households or neighborhood groups of households to pay for the convenience 2.30 At the other end of the scale there and better quality of life that is associated are only 9% of urban residents without with access to piped water and sewers. sanitation living in municipalities for which There is an overlap between the two to the the average cost per DALY saved exceeds extent that households or groups of house- $ti6,000. This proportion varies from 0.1% in holds allow for a reduction in the risks of ill- Rio de Janeiro to 24% in Minas Gerais. The health or infant mortality that they face in median cost per DALY saved is just under evaluating their willingness to pay for water $3,000 and even the state median values for or sewer services. The extent of the overlap the highest cost state -- Minas Gerais -- is is uncertain, but it is clearly not complete. under $4,000. The risks of some kinds of epidemics or of 2.31 Table 2.5 shows the cost per DALY exposure to water-borne disease via the con- sumption of contaminated food or water saved by expenditures on urban water sup- extend far beyond the immediate neighbor- ply and sewers for a sample of 17 large ur- hood effects that may be taken into account ban municipalities in the 4 states. The sam- by individual households. ple was constructed by taking all munici- b palities with a population greater than 2.33 Classic studies of wilinigness to pay 200,000 which had either at least 25,000 for a reduction in the risk of premature urban residents without piped water in the mortality tend to generate estimates for the 1991 Census or at least 100,000 urban resi- US that are equivalent to $3-7 million per dents without sanitation. The 17 munici- so-called statistical life -- i.e. the product of palities account for about 30% of urban the change in the probability of death times residents without piped water and/or sanita- the number of people at risk. Converting tion. The annualized cost per DALY saved this into DALYs depends on the age of by expanding urban water supplies ranges those at risk. Most studies are based on from $910 for Campos in Rio de Janeiro to risks that are faced by people in an age $2840 for Campinas in Sao Paulo. The range from 30 to 60 years old. The average same two cities also have the lowest and number of DALYs lost per death will fall in highest costs per DALY saved by expanding the range from 28 (for the youngest) to 12 urban sewers at $1,350 for Campos and (fortheoldest) so that itis reasonable to use $4,010 for Campinas. For most of these ( Brazil: Managing Pollution Problems - Annexes 35 a mid-point value of 20 DALYs per statisti- ceeds the costs of supplying piped water if cal death. On this basis, the value of a sta- household income is greater than $4,000 per tistical life would be at least 6 times US year or 3.2 times the minimum wage in GDP per person per DALY saved. This is 1995, while the similar threshold for sewers much higher than one would expect from a is $5,000 per year or 4 times the 1995 model of willingness-to-pay based on a sim- minimum wage. ple model of individual behavior, but is not so far out of line with the results of a model 2.36 The 1995 National Survey of that takes account of life cycle and inter- Household Expenditures reports the number generational transfers.7 of households by income group expressed as multiples of the montlily minimum wage. 2.34 Even if the value of a statistical life Interpolating these income groups and ex- were set at only $1 million for the US cluding houselholds whichi did not reply to (equivalent to twice the level of GDP per the income question, about 38% of house- person per DALY saved), this would imply holds had incomes less than 3.2 minimum an average willingness to pay per DALY wages and 44% had incomes less than 4 saved for Brazil of about $5,500 in 1991. minimum wages. The shares will be higher This is well above the annualized costs per -- perhaps much higher -- for those which DALY saved by expanding urban water did not have piped water or sewers in 1991. supplies and sewers for all but a small num- Hence, the case for expanding piped water ber of municipalities. and sewer services to the large number of urban residents without them must rest as 2.35 Surveys of household willingness to much on the general community benefits of pay for piped water and sewage removal reducing the burden of ill-health and infant consistently suggest that people are willing mortality as on the willingness to pay of the to pay in the range of 2-3% of household households which would be covered by the income for each service. Typically, willing- expansion of services. This has important ness to pay for piped water is somewhat implications for the ways in which basic higher than that for sewage removal. With a sanitation services might or should be fi- median household size of about 4 for urban iianced. households, the annualized cost of piped water is $120 per year and of sewers is $100 SUMMARY per year. It is reasonable to assume that willingness to pay for piped water is 3% of 2.37 The health benefits that would be household income and for sewers is 2%. On generated by expanding urban water and this basis, household willingness to pay ex- sewer services are large. For 4 states, the analysis shows that it should be possible to 7 See pp. 56-57 of Murray and Lopez (1996). avoid over 3,000 deaths of babies and young Note that Murray focuses on the issue of children each year and to reduce the burden whether non-uniform age weights should be of disease by nearly 220,000 DALYs (dis- used in constructing the DALY calculations. These are already implicit in the results re- ability-adpusted le eas ech year. Te ported above. However, his calculations largest Impact at lowest cost would be also show that the social willingness to pay achieved by concentrating on ensuring that model generates estimates of willingness to the entire urban population has access to pay to avoid a death at specific ages that piped water at average cost of $1,560 per may 3-4 times the product of DALYs lost as DALY. a result of that death time consumption per person. 2.38 Whether this expenditure can be justified on health grounds alone is open to 36 Brazil: Managing Pollution Problems - Annexes debate. The cost per DALY saved is high ban population are likely to substantially by comparison with most health interven- outweigh the costs involved. Thus, the tions examined in the 1993 World Develop- question to be addressed next is how such an ment Report on health, because it is cheaper expansion in services can be financed. to give oral rehydration therapy to babies suffering from diarrhea than to reduce the incidence of such episodes by expensive investments in infrastructure. On the other References hand, it may reasonably be argued that the Esrey, S.A. et al - "The health and economic ranking of other health interventions should benefits following improvements in water be adjusted to take account of the (usually) and sanitation" (Arlington, Va : WASH low shares of episodes to which the relevant Report, US-AID; July 1989). intervention is actually applied. In that case, Esrey, S.A., J.B. Potash, L. Roberts, and C. Shiff investments in water infrastructure may be - "Effects of improved water supply and seen as a justifiable and practicable use of sanitation on ascariasis, diarrhea, dracun- resources to improve public health. culiasis, hookworm infection, schistoso- miasis, and trachoma," Bulletin of the 2.39 The average cost per DALY saved World Heath Organization, Vol 69 (5), by expanding urban sewers is higher at 1991, pp. 609-621. $2,440, but is still well below a reasonable Murray, C.J. and A.D. Lopez (eds) - The Global estimate of willingness to pay to save a Burden of Disease (Cambridge, Mass DALY in Brazil. In addition, investments Harvard University Press, 1996). in both urban water supplies and sewers VanDerslice, J. and J. Briscoe - "All coliforms generate substantial non-health benefits as are not created equal : a comparison of the reflected in the willingness of households to effects of water source and in-house water pay for these services. When these are contamination on infantile diarrheal dis- taken in account, the benefits of extending ease," Water Resources Research, Vol 29 urban sewers to cover almost all of the ur- (7), 1993, pp. 1983-1995. Table 2.3: Impact Of Urban Water Supply And Sewers On Health By State Total population 1991 ('000s) 66,732 15,631 7,097 12,720 31,284 Urban population 1991 ('O0Os) 57,895 11,704 5,028 12,117 29,046 No of children under-5 1991 ('000s) 6,823 1,710 850 1,151 3,113 No of under-5 deaths in 1991 63.9 10.9 10.8 14.9 27.3 ('OOOs) '^educt,,iniuti' unde,.e5 z m,o,(rtai .'000s per year)d, .Saf ;::i 0A; 0 SV CSX Rd ( XRt0 SC?X0t ; 's..f 100% urban water supply 1.68 0.17 0.37 0.77 0.37 100% urban sanitation 3.01 0.45 0.99 0.83 0.74 100% urban water supply & sanita- 4.57 0.61 1.32 1.54 1.10 tion uionS irotbtwl A OO0s r 0e due6to 100% urban water supply 80 8 18 37 18 100% urban sanitation 144 22 47 40 36 100% urban water supply & sanita- 219 29 63 74 53 bon 2EJhc~ea&en rban puiiopulatiseiyeid ('QQ0);byw:~ psply andlor sewers for0:-0 f 0 '.,ij.:. 100% urban water supply 4,186 723 695 1,679 1,088 100% urban sanitation 13,529 3,252 3,391 3,026 3,860 Brazil: Managing Pollution Problems - Annexes 37 Table 2.4: Cost Per DALY Saved By Expanding Urban Water Supply And Sewers Total Minas Pernambuco Rio de Sao Paulo Gerais Janeiro Average investment per DALY per year saved ($) Urban water supply 7,810 13,570 5,880 6,840 9,120 Urban sewers 21,460 33,620 16,320 17,990 24,470 Average annualized cost per DALY saved ($) Urban water supply 1,560 2,710 1,180 1,370 1,820 Urban sewers 2,440 3,820 1,850 2,040 2,780 % of urban population without water supply in municipalities with annualized cost per DALY for urban water supply in range: < $2,000 per DALY 64 19 80 84 55 $2,000- $6,000 per DALY 31 64 14 16 44 > $6,000 per DALY 5 17 6 0 1 8% of urban population without sanitation in municipalities with annualized cost per DALY for urban sewers in range- < $2,000 per DALY 25 3 40 51 12 $2,000 - $6,000 per DALY 66 73 52 49 84 >$6,000 perDALY 9 24 8 0 4 % of municipalities with annualized cost per DALY for urban water supply in range: < $2,000 per DALY 30 17 69 73 29 $2,000 - $6,000 per DALY 46 54 14 26 49 > $6,000 per DALY 24 29 17 1 22 % of municipalities with annualized cost per DALY for urban sewers in range: < $2,000 per DALY 15 6 55 39 11 $2,000 - $6,000 per DALY 57 56 25 60 68 > $6,000 per DALY 28 38 20 1 21 Table 2.5: Cost Per DALY Saved For Large Urban Areas Municipality State Urban population ('OOOs) Annualized cost per DALY without: saved ($) by: Piped water Sanitation Piped water Sanitation Belo Horizonte MG 41 262 2,310 3,270 Contagem MG 13 145 2,070 2,990 Jaboatao PE 44 310 1,810 2,720 Olinda PE 27 156 1,850 2,730 Recife PE 69 621 1,950 2,860 Campos RJ 74 158 910 1,350 Duque de Caxias RJ 132 264 1,170 1,750 Niteroi RJ 101 62 2,260 3,320 Petropolis RJ 134 221 1,370 2,260 Rio de Janeiro RJ 132 430 2,270 3,170 Sao Goncalo RJ 165 263 1,880 2,800 Campinas SP 25 92 2,840 4,010 Carapicuiba SP 11 114 1,970 2,870 Guaralhos SP 104 195 1,600 2,330 Moji des Cruzes SP 30 41 1,820 2,720 Sao Paulo SP 96 779 2,250 3,160 Sumare SP 16 136 2,170 3,250 38 Brazil: Managing Pollution Problems - Annexes Brazil: Managing Pollution Problems - Annexes 39 3. MOBILIZING PRIVATE FINANCE FOR WATER AND SANI- TATION SERVICES' SUMMARY OF ISSUES AND RECOMMENDATIONS SUMMARY OF ISUES AND RECOMMENDATIONS Providing safe water to the currently unserved urban population should be straighfforward. Also, ensuring adequate rural water supplies is more an institutional than a financial problem. The major challenge is to provide access to reasonable sanitation for up to 40 million urban residents -- over 35% of the urban population -- who have neither sewer connections nor septic tanks. Also, in the long term, it is desirable to replace septic tanks by sewer connections be- cause many septic tanks are overloaded and discharge a substantial pollution load to ground- water or, indirectly, local streams. Both states and companies rely primarily upon the availability of subsidized investment funds either from the federal govemment or from multilateral lenders to finance new investments. This creates perverse incentives, which encourage a 'boom and bust' pattern of investment spend- ing. There is little likelihood that state water companies or state finances will permit the scale of in- vestments in urban sanitation required over the next two decades to fill existing deficits in sewer coverage and to meet the expansion in demand due to the growth in urban populations. Attention has been turning increasingly to the role that might be played by the private sector in both improving the operational efficiency of water and sanitation companies and in providing the finance required to meet current and future demands. Concession arrangements are likely to be the best mechanism for mobilizing private finance to expand the coverage and improve the quality of water and sanitation services in Brazil. Access to financial resources is less important than operational skills and managerial compe- tence in determining the likelihood that a concession operator will meet its service obligations, so that pre-qualification and selection criteria should not rely too heavily on the financial re- sources of potential bidders. Contracts must be carefully designed to minimize the chances of later renegotiation and proper arrangements for monitoring contract performance and regulating operators must be estab- lished. In most cases, the preferred option should be the creation and award of concessions to private operators on the basis of clear service and environmental targets (after a competitive bidding process in terms of the lease payment for the use of existing assets). THEPROBLEM among the most cost-effective options for reducing the burden of ill-health and disease 3.1 The analysis in Annex 2 has demon- in Brazil. The primary focus was on urban strated that expenditures on expanding ac- water and sanitation, as this is the largest cess to water and sanitation services rank problem in terms of the number of people affected and the total investment required. Still, rural water supplies should not be ne- This paper was prepared by Gordon glected, since there is ample evidence that Hughes. ensuring the availability of piped water sup- 40 Brazil: Managing Pollution Problems - Annexes plies can contribute much to reducing infant will be required to maintain 100% coverage mortality and improving the quality of life as the urban population grows over the next for rural communities. Lack of rural water 15 years. Further, as noted above, most ur- supplies is closely linked to poverty prob- ban households are willing to pay sufficient lems and is primarily concentrated in the amounts to cover the marginal costs of ur- North-East. ban water supplies. Given an appropriate set of prices and incentives, a set of compe- 3.2 Providing water supplies for poor tently managed and efficient urban water rural populations is more an institutional utilities should have no difficulty in reach- than a financial problem. In aggregate ing a target of 98% or 99% access to piped terms, the costs involved are modest -- IPEA water supplies for all households in their estimated an investment cost of US $2.8 service area within a period of 5 years at billion over the 20 years 1992-2011 -- but it most. No special financial mechanisms is difficult to get the incentives right. State should be required, since the investment is water companies with cumbersome organi- substantially less than the cash flow avail- zations and high costs have mostly not been able under any reasonable financial struc- interested in devoting much effort to rural ture. water supplies, while municipal and com- munal authorities may find it difficult to 3.5 The scale of the urban sanitation maintain the organizational and technical problem is altogether different. IPEA's es- capacity to operate such services. There timates of investment needs for 1992-2011 may, therefore, be a case for establishing amount to US $23.5 billion, which covers specialized rural water agencies (or coop- both sewers and sewage treatment. How- eratives) -- along the lines of rural electrifi- ever, it is important to distinguish the vari- cation utilities in many countries -- at either ous categories within this overall total, since state or meso-region level. the urgency of the problem and options for financing the investments required are very 3.3 It is frequently assumed that heavy different. subsidies are required for the provision of rural water supplies in Brazil. This runs 3.6 Reducing mortality rates and im- counter to the results of detailed studies in proving the general health of the urban various parts of the world, though the size of population depends on ensuring that fecal the populations to be served can be a sig- material is sufficiently removed from the nificant factor. However, if subsidies are immediate environment to provide reason- necessary they can be provided through able protection from exposure to pathogens mechanisms which provide better incentives and parasites. For this, septic tanks can be a to lower costs, improve quality of service, satisfactory substitute for sewers if they are and expand coverage than under present properly installed in medium or low density arrangements. urban areas. Thus, the first priority should be to provide access to reasonable sanitation 3.4 Ensuring access to piped water sup- for up to 40 million urban residents -- over plies for almost all of the urban population 35% of the urban population -- who have should be more straightforward. For the neither sewer connections nor septic tanks. country as a whole, the number of urban residents without piped water was about 3.7 In the longer term, it is desirable to 15.2 million in 1991. The total investment replace septic tanks by sewer connections required to expand urban piped water sup- because many septic tanks are overloaded plies to cover these people would be about and discharge a substantial pollution load to $2.3 billion, though additional investment groundwater or, indirectly, local streams. At Brazil: Managing Pollution Problems - Annexes 41 present, about 20% of the urban population the scale of investments in urban sanitation is estimated to rely upon septic tanks. required over the next two decades to fill existing deficits in sewer coverage and to 3.8 There is a substantial deficit of sew- meet the expansion in demand due to the age treatment relative to sewage collection, growth in urban populations. Thus, atten- so that most sewage is discharged to re- tion has been turniig increasingly to the role ceiving waters with little or no treatment. that might be played by the private sector in The extent to which this is a serious problem both improving the operational efficiency of varies from place to place. The health costs water and sanitation companies and in pro- associated with the discharge of untreated viding the finance required to meet current sewage are small and easily avoided -- and future demands. though this implies some loss of amenity and economic output from, for example, OPTIONS FOR PRIVATE SECTOR FINANCE fisheries. The amenity costs may be larger but depend upon the population's willing- 3.12 There are a variety of arrangements ness to pay to protect bathing beaches and to under which responsibility for operating an avoid exposure to the offensive smells and existing system and managing investments other consequences of using drainage canals in expanding services is transferred to pri- and rivers as open sewers. vate operators. In some cases, the private 3.9 Finally, there is the need to invest in operator may be required or choose to fi- water and sanitatio systemsinornance certain categories of investment water and sanitation systems in order to wihhv hr abc eid.Cnrc keep up with the growth of the urban popu- which have short payback periods. Contract lation. The sanitation component of this terms may extend from 5 to 10 years with . . ~~the payment to the operator being linked to item accounts for nearly US $10 billion for th y g 1992-2011. improvements in indicators of operating per- formance such as unaccounted for water, 3.10 The financial position of many state costs per connection or per cubic meter of water, etc. The French system of 'affer- wae copne is dir. Tyialyte mage' is, in practice, equivalent to a per- have relied upon inflationary accounting ormance contract, since the concedent re- practices to preserve their balance sheets, so that the balance between current operational tains a decisive role in medium and longer revenues and expenditures allows limited term investment plans together with the re- resources for debt service, let alone for fi- sponsibility for raising the necessary fi- nancing new investments. Neither are the nance, perhaps via issuing municipal bonds. states which own them any more credit- 3.13 In general, performance contracts worthy. As a result, both states and compa- flies~~~~~~~~~~~ reypiaiyuo.h viaiiyo are most appropriate when the primary con- nies rely primarily upon the availability of cern is to ensure efficient management of a subsidized investment funds either from the water and sanitation system which does not federal government or from multilateral require significant investments in expanding lenders to finance new investments. This its facilities or the population served. The creates perverse incentives, which encour- experience of performance contracts in de- age investment in new areas rather than the veloping countries where large investments maintenance and improvement of existing are usually required has not always been assets, as well as a 'boom and bust' pattern satisfactory, often because of divergent ex- of investment spending. pectations and incentives between the 3.11 There is little likelihood that state authorities which grant the contract and the water company or state finances will permit contractor. For example, it can be very dif- 42 Brazil: Managing Pollution Problems - Annexes ficult to settle disputes over responsibility rangements. In fact, the reverse is closer to for cost over-runs in large investment proj- the truth. There are two great problems ects, since it will usually not be clear how which face those raising finance for BOT much is due to changes in specification and projects. how much to deficiencies in construction management. Such difficulties are particu- 3.16 The debt will usually be secured larly likely to arise when contracts are taken against the value of the contract to supply on by consortia whose members have diver- water or sewage treatment services, not gent interests. Experience shows that con- against the assets of the contractor. Thus, sortia that bring together companies whose the appraisal of the project's credit risk will primary interest is construction with others depend primarily oni whether the ultimate interested in supplying goods and services purchaser is creditworthy and contractual and with operators may be especially prone arrangements for guaranteeing payment. A to conflicts of this nature. variety of arrangements to mitigate this risk have been used -- for example, escrow ac- 3.14 Contracts for the construction and counts for a portion of revenues for water or operation of production facilities - Build- sanitationi services. None of these can get operate-transfer (BOT) contracts -- are a around the difficulties of dealing with a standard feature of the energy sector and are nearly insolvent utility whose tariffs are too becoming more widespread in transport and low or which is dramatically inefficient. In water. A common variant is one under such cases, it is the government which owns which projects are financed on the basis of that company that will be seen the ultimate long terms purchase agreements for 80-90% borrower -- via guarantee or other provi- of the capacity of the facility. The devel- sions -- in which case the BOT contract is opment of power plants and, even more, gas no more than a combination of a govern- transmission pipelines by independent op- ment-guaranteed loan with a performance erators, i.e. those which are not part of verti- contract. This will not solve the problems cally-integrated utilities, rely heavily upon faced by governments which are uncredit- such arrangements. For the water and sani- worthy and unable to finance investments in tation sector this implies that BOT contracts extending water and sanitation services. are most suitable for large water supply systems such as reservoirs, transmission 3.17 Currently, most financial institutions pipelines, and water treatment plants or for view the risks associated with water and sewage treatment. However, it is difficult sanitation projects as being high. Thus, the and unusual to rely upon BOT-type con- cost of capital for these projects will be high tracts for distribution services including both -- at least 18-20% p.a. in real terms -- household water distribution and sewage though this will fall if experience over the collection. Typically, these account for the next 5-10 years is positive. major share of the total costs of providing water and sanitation services, so BOT ar- 3.18 A full concession contract repre- rangements are, at best, only a partial solu- sents a combination of the characteristics of tion to the financial and operating problems performance and BOT contracts. In effect, facing the sector in Brazil. the concessionaire leases the existing assets of the system being concessioned and is 3.15 Since BOT-type contracts are rela- then expected to invest in expanding serv- tively familiar to both operators and finan- ices to meet specific targets. The length of cial institutions, it is often assumed that concessions may run from 20 years if the large investments can be financed more eas- investment commitment is relatively small ily via BOT contracts than by other ar- Brazil: Managing Pollution Problems - Annexes 43 to 50 or even 100 years if very large capital work, and what water quality standards expenditures are needed. should apply to the water which it supplies? 3.19 Care in designing the concession C. What should be the arrangements contract is critical to the success of a con- for reviewing and, if appropriate, modifying cession arrangement. Too often this has the provisions of the contract? How fre- been neglected. One approach is to spell out quently should such review occur and what general objectives and procedures, while rules should goverm the adjustment of tariffs leaving the details to be worked out between or other finiancial provisions of the contract the concessionaire and the concedent as if service targets and other obligations are specific issues arise. In practice, there will varied? be frequent renegotiations of the terms of the concession, so that the outcome will be D. What penalties should apply if the close to what might be expected under an concessionaire fails to comply with the 'affermage' type of performance contract. terms of the contract? Under what circum- This approach can be satisfactory if the stances can a concession be terminated early main concern is to improve the operation of and what compensation, if any, should be an existing system rather than financing the paid if the concession is abrogated? expansion of services. There are a number of examples of concession contracts of this E. What happens at the end of the con- kind in Brazil. Experience has been mixed, cession period? Can the concession be ex- but there have been some notable failures tended without a rebidding process and, if arising out of different expectations on the so, what criteria will apply in deciding part of the concedent and the concessionaire whether to extend the concession? If the or difficulties in raising finance for invest- concession terminates, what provisions ment where the obligations and rights of the should there be to compensate the conces- concessionaire are unclear and open to re- sionaire for a part of the costs of invest- interpretation. ments made in the later years of the conces- sion? Without such compensation the con- 3.20 At the other end of the spectrum is a cessionaire will seek to minimize invest- contract which specifies service targets, fi- ments and, possibly, maintenance expendi- nancial obligations, and other requirements tures in the final 10 or even 15 years of the in considerable detail together with proce- concession. dures for the intermittent review and revi- sion of certain provisions of the contract to 3.21 All of these issues impinge upon the take account of changing circumstances. In financial viability of the concession and on defining the terms of the contract, the fol- the prospects of attracting bidders for the lowing issues need detailed consideration: concession with the financial capacity to fund the necessary investment program. A. What should be investment obliga- Thus, there are close links between defining tions of the concessionaire or, equivalently, the regulatory and legal framework that will what should be the target for expanding the govern the operation of the concession and coverage and level of services? assessing the financial implications of serv- ice and environmental obligations. Whether B. What environmental targets should explicitly or not, trade-offs will have to be the concession meet? In particular, how made between what can be achieved in dif- should the utility deal with the sewage that ferent areas. Is it more important to expand is collected by its sewage collection net- the water supply or sewage collection net- works rather than to upgrade the quality of 44 Brazil: Managing Pollution Problems - Annexes water supplied' or the level of sewage treat- cause the circumstances under which con- ment? How far can tariffs be raised in order cessions are awarded mean that neither the to finance better services? Relying upon bidders nor, indeed, the concedent will have private sector finance may improve the effi- the information about the existing system ciency of water and sanitation utilities, but it required to develop detailed plans. Simi- does not avoid the necessity of making dif- larly, the evaluation of the financial bids ficult choices about priorities and the af- should, as far as possible, avoid any attempt fordability of different goals. Indeed, in- to judge the commercial basis for each bid. volvement of the private sector may appear In other concession or franchise competi- to exacerbate the conflicts that have to be tioils major disputes have been prompted by resolved -- at least temporarily -- because the disqualification of bids that did not cor- the scope for fudging the options is limited respond to the technical or financial expec- by the necessity of providing clear guide- tations or preconceptions of those responsi- lines as the basis for financial planning by ble for evaluating proposals. bidders and the ultimate concessionaire. 3.24 There is a genuine problem that 3.22 A variety of mechanisms for must be acknowledged. It is usually diffi- awarding concessions have been tried. In cult, expensive, and slow to terminate a con- general, the ease and transparency of the cession contract when the concessionaire is process is a direct function of the amount of failing to honor its requirements. The con- work that has gone into preparing the con- sequences of a concessionaire going bank- cession contract. Vague and poorly- rupt as a result of a misjudged concession prepared concessions result in a beauty bid may even worse. Thus, the cost of contest, since the obligations of the conces- making a mistake when awarding a conces- sionaire are ill-defined and there will be a sion contract can be high. Politically, the great deal of scope for differences in evalu- concedent will be less willing to take risks ating the proposals submitted by different that might be regarded as commercially ac- bidders. A better approach is to rely on a ceptable, so that the process is bound to err two step process involving an initial techni- on the side of caution and conservative cal pre-qualification stage followed by the technical or financial proposals. On the submission of financial proposals that are other hand, it is important to encourage evaluated on the basis of a single criterion competition, new approaches, and some de- variable. gree of risk-taking so long as the rewards to innovation are high enough. 3.23 However, even this can go wrong if those responsible for the design and award 3.25 Probably the best way of dealing of a concession try to impose inappropriate with this is to transfer much of the burden of technical or other requirements on the tech- assessing the technical and financial feasi- nical proposals or financial bids. A conces- bility of proposals to those better placed to sion contract is not a contract for carrying bear the cost of risks involved. This may be out public works, rather it is a contract for achieved by devising an appropriate struc- the delivery of certain services to the popu- ture of non-performance penalties. Too lit- lation according to specific service stan- tle thought has been given to the incentives dards and other obligations. Thus, the tech- implied by different types of performance nical pre-qualification stage should not re- bonds and penalties in water and sanitation quire that bidders provide full technical concessions, perhaps because of a reluc- plans for how they intend to fulfill the serv- tance to invoke them in practice. Minor or ice obligations of the contract. In any case, temporary infractions should not be heavily such plans cannot possibly be binding be- penalized, but a concessionaire which ex- Brazil: Managing Pollution Problems - Annexes 45 hibits a consistent pattern of failing to meet aged to. accelerate the expansion of the net- its contractual obligations should be subject work, as its lease payment is fixed so that to increasingly heavy penalties. Similarly, its incentive is to maximize revenue pro- contracts should require substantial per- vided that the tariff covers the marginal cost formance bonds and should contain clear of serving new connections. However, this provisions about the circumstances under arrangement can also mean that the conces- which the bonds will be called upon. This sion is regarded as a riskier financial propo- will ensure that the financial guarantors who sition, which may affect the concession- stand behind bids have a strong incentive to aire's required rate of return on capital and undertake an independent evaluation of pro- the viability of the project. In most cases, posals. the lease payment process is the better op- tion because its incenltive structure can be 3.26 The choice of the financial criterion more closely linked to the priority goals es- for awarding the contract will also have an tablished for the concession and the per- important impact on the bidders' incentives. formance bond can be tied to a pre-payment Two main alternatives have been used: of some portion of the lease payments into an escrow account. * an annual lease payment (or, perhaps, the capitalized value of the stream of 3.29 A final option for the involvement such payments) for a fixed level of tar- of the private sector isprivatization, similar iffs; or to the structure adopted in England and Wales. In the case of Brazil, this would in- • a base tariff level to which the whole volve the grant of a very long - e.g. 999 tariff structure is linked for a fixed (usu- years - but non-exclusive concession to op- ally zero) lease payment. erate water and sanitation services in a de- fined area to a private company created by 3.27 The core issue is how the implicit transferring some or all of the assets of the lease value of the assets that the concession- existing state or municipal water company. aire takes over is to be allocated. In both Shares in the new company could be offered cases a part of this value may be used to for sale, either via a stock exchange flotation finance the expansion of services while or/and by a tender open to trade purchasers. charging a uniform level of tariffs to all con- The original state or municipal owners sumers. Under the tariff bidding process, might choose to retain shares in the privat- the concedent foregoes most or all of this ized company for later sale. implicit value in order to hold down the level of tariffs required to expand services. 3.30 The practical differences between As a result, the level of tariffs paid by new awarding a full concession and privatization users may often be less than the marginal are limited, since the basic regulatory struc- costs of expanding the network and supply- ture and obligations imposed on the operator ing the water which they consume or dealing would be very similar. Privatization enables with the sewage that they discharge. Thus, the current owners to put an immediate mar- the concessionaire has an incentive to delay ket valuation on the assets of state or mu- the expansion of the network or to focus nicipal water companies. This may be im- their investments on serving areas which are portant if the initial ownership structure is expected to generate the highest levels of complex and there is pressure to transfer net revenue per connection. some of these assets from, for example, a state water company to municipalities. Tar- 3.28 Under the lease payment bidding iffs for the services supplied by the privat- process, the concessionaire will be encour- ized company should be based on the mar- 46 Brazil: Managing Pollution Problems - Annexes ginal and average costs of providing these vestments are required for the construction services, since the option of using the lease of new sewage or water treatment plants. value of existing assets to cross-subsidize Even then, a BOT contract may only be at- tariffs for new customers would be neither tractive if the operator is able to hold down efficient nor sustainable. construction and/or operating costs suffi- ciently to outweigh the additional expense 3.31 When evaluating alternative mecha- of relying upon project rather than cash flow nisms for mobilizing private finance for in- financing. In contrast to the power sector, vestment in expanding water and sewer there are almost no cases where an efficient networks or in building treatment plants, it is water and sanitation concession has chosen important to understand the reasons why to contract out the construction and opera- external finance is required at all. The basic tion of a large treatment plant under a BOT- fact is that an established and well-run water type contract in preference to financing and utility should not need large amounts of ex- operating it itself. temal finance, unless either (a) it is being expected to meet a new set of goals - per- 3.34 Two important conclusions may be haps as a result of stricter environmental drawn from this analysis: standards - or (b) there has been a radical shift in the extemal financial environment * concession arrangements are likely to be that affects its balance sheet. Without such the best mechanism for mobilizing pri- changes, water and sanitation companies are vate finance to expand the coverage and usually able to finance the expansion of improve the quality of water and sanita- their networks and treatment plants out of tion services in Brazil; and their operational cash flow after an initial period of relying upon external finance to * access to financial resources is (much) develop a core distribution network. less important than operational skills and managerial competence in deter- 3.32 As will be seen, most Brazilian wa- mining the likelihood that a concession ter companies are not well-managed, but operator will meet its service obliga- equally the public expects them to deliver a tions, so that pre-qualification and se- higher quality of service to many more peo- lection criteria should not rely too heav- ple at a time when macroeconomic stabili- ily on the financial resources of poten- zation has eliminated the inflationary tial bidders. mechanisms which underpinned their bal- ance sheets in the past. Thus, a period of Example 1: Rio de Janeiro reliance upon substantial external finance should accompany a temporary phase of 3.35 CEDAE, the state water company of correcting the mistakes of the past, equiva- Rio de Janeiro, is the second largest water lent to that when the companies were first company in the country (after SABESP), but established. Indeed, some companies may its performance in terms of physical and not require external finance at all if they can financial indicators is typical of the sector as rapidly bring their ratios of operating costs a whole. By international standards it is to revenues down to a level more typical of inefficient - with about 420 households the more efficient water utilities in the rest served per employee, about 50% unac- of the world. counted for water, and nearly 20% of water and sewerage bills not being collected - and 3.33 BOT investments rely upon project its financial position is very precarious. De- financing and are, thus, primarily suitable spite high tariffs the company is barely able for circumstances where large lumpy in- to service its debts and it is not generating Brazil: Managing Pollution Problems - Annexes 47 anything like the level of cash flow that 3.38 In legal terms, CEDAE operates on should be available to finance the expansion the basis of concessionis to provide water in services that is required. Further, like and sanitation services granted either by other water companies in Brazil, it relies in municipalities or by the state government part on a structure of tariffs that allows it to (or its predecessors). Many of these conces- charge for sewerage services which it often sions have expired or will shortly expire, so does not supply. Thus, any large expansion that the approach being suggested to the in its sewer network will worsen its financial state government is to create a small number situation by increasing its operating costs (4 or 5) of large concessions in the metro- and debt service obligations without any politan area and to 'municipalize' the sector commensurate increase in revenues. outside the metropolitan area. About 80% of the population of the metropolitan area 3.36 The main operations of CEDAE are receive water from one very large water concentrated in the metropolitan region of treatment plant - the Guandu plant - that Rio de Janeiro and lie within the water basin serves 10 municipalities, while the remain- of Guanabara Bay. Water quality in the bay ing 20% of the population rely UpoIn anothier has been deteriorating and, despite a large integrated water supply system that covers 4 program of investment in basic sanitation municipalities. Thus, decisions about the with sewage treatment, is not likely to im- structure of water and sanitation services in prove in the immediate future. Millions of the metropolitan region must take account of people live in the poorer suburban areas of essential common interests, which provides Rio de Janeiro located in a flood plain on the the legal basis for concessions to be north-west side of the bay - the Baixada awarded by the state rather than municipali- Fluminense - without access to piped water ties. Outside the metropolitan area, the for- or sewers. Investments in water supply and mal responsibility for awarding concessions sewer network plus limited sewage treat- lies with the municipalities. A number of ment in this area will produce large health large towns/cities already have municipal and environmental benefits for these com- water companies independent of CEDAE. munities as well as the whole metropolitan For reasons of operational efficiency and region. financial stability, it would be desirable that municipalities within water basins or sub- 3.37 In the recent past, the company has basins join together to award concessions relied primarily on federal and multilateral with a minimum size of 100,000-200,000 loans to finance its investment programs. people. To encourage competition between The fiscal positions of the federal and state concessionaires no operator or major inves- governments will not allow a continued ex- tor in a consortium would be allowed to pansion in this kind of debt, especially if the hold more than one concession in the met- company's performance means that they are ropolitan area or (probably) more than 2-3 obliged to take on some or all of the associ- concessions in the state. ated debt service. Thus, the state govern- ment has decided that the company must be 3.39 For each concession, service targets restructured in order to (a) establish the and other goals would be developed on the framework for expanding water and sanita- basis of detailed financial and environ- tion services to areas of the state that have mental models. In the metropolitan region, been neglected until now, (b) improve the the service targets would be designed to en- operational and environmental performance sure that: of the sector, and (c) provide a secure finan- cial base for water and sanitation utilities in * 98% of households have access to piped the state. water connections within 5 years; 48 Brazil: Managing Pollution Problems - Annexes * 90% of households have access to sewer 3.42 One problem concerns the future of connections within 10-15 years; and the Guandu treatment plant which will con- tinue to provide bulk water supplies to 3 or 4 * all sewage collected receives advanced of the metropolitan concessions. The cur- primary treatment with phosphorus re- rent proposal is that the plant should be moval within 5 years, but secondary vested in a new company owned by the state treatment will not be required prior to government as a minority shareholder - but 2015 except, perhaps, in one or two spe- with certain blocking rights - and the con- cial cases. cessionaires for the concessions served by the plant. Since little investment is required 3.40 Currently, the tariffs - an increasing at the plant, it would be operated under a block structure with very high prices for performance contract that would awarded by commercial and other large users -- operated the new company on the basis that none of by CEDAE provides industrial plants with a the concessionaires could have an interest in strong incentive to rely upon groundwater the company that operates the plant. The drawn from their own boreholes. This is plant would then supply bulk water to the inefficient and poses long term dangers to concessions at a regulated price ex- the quality of groundwater due to the risks treatment plant. In addition, transmission of salt water intrusion as a consequence of fees would be payable to the concession(s) over-abstraction. Thus, the new conces- responsible for maintaining and operating sions will be given the freedom to negotiate the main water transmission pipelines. water and sewage tariffs for large consum- ers, though these consumers can opt to take 3.43 The state government will have to supplies on the basis of the regulated tariff bear the costs of restructuring CEDAE and structure which will put a cap on the negoti- shedding excess workers, so that funds will ated rates. be required to finance severance and early retirement payments. For this reason, the 3.41 The basic tariff structure for the successful bidders for some of the conces- metropolitan region is being reviewed in sions may be required to make lump sum order to encourage the expansion of water payments at the beginning of their conces- metering -- many households do not have sions. Once these have been determined, meters and pay according to a schedule concessions will be awarded on the basis of based on housing area - and to provide in- the annual lease payment offered for the centives for improvements in operational concession. efficiency. The new concessions will not be permitted to charge for sewerage services 3.44 Water quality models for Guanabara unless they are supplied, but property own- Bay and Sepetiba Bay - the primary water ers may be required to connect to sewers basins affected by water pollution in the passing within 10 or 20 meters of their metropolitan region - are being used as the property. Preliminary financial analysis basis for establishing wastewater treatment suggests that each of the metropolitan con- goals for the concessions. This builds upon cessions should be able to meet its service earlier work on the cost-effectiveness of targets and pay a positive lease payment if measures to improve Guanabara Bay un- the overall level of tariffs is reduced by 10- dertaken by the Bank and others. The 20%. At least initially, a uniform tariff working assumption is that it should be pos- structure will apply to all of the concessions sible to achieve an 80% reduction in the in the metropolitan region, though this may damage-weighted load of pollution flowing change as a result of regulatory reviews in each bay within 10-15 years and a 90% during the life of the concessions. reduction by 2020 without imposing exces- Brazil: Managing Pollution Problems - Annexes 49 sive costs on the concessions and their cus- so, the water supply available from the cur- tomers. The specific targets for each con- rent system and one other project nearing cession will be designed to improve the completion will only cover 60-70% of pro- quality of receiving waters - including the jected demand at that time. Hence, the state rivers which flow into the bays - in a man- has invited proposals for a BOT-style con- ner that is consistent with the primary goal tract to supply water from the Piripama res- of expanding the coverage of water supply ervoir to COMPESA over a period of 20 and sewers at tariffs which ensure that effi- years. cient concessions can operate profitably and are affordable for households. 3.47 The investment required is about $200 million for the reservoir, treatment 3.45 Based on the earlier analyses, it is station with a capacity of 5.6 m3/s, and already clear that it would not be appropriate transmission pipes. Construction will re- to impose a uniform standard of secondary quire 2-3 years, but the projections assume wastewater treatment for all of the conces- that water supplied by the project will only sions. It is possible that some level of BOD reach 80% of full capacity after nearly 8 or nitrogen removal beyond that achieved by years of operation. The slow build-up of advanced primary treatment may be neces- revenue from water supply means that the sary in order to deal with specific environ- net cash flow from the project is unlikely to mental problems. Thus, the environmental cover the full costs of debt service for sev- goals for the concessions will be based on a eral years, even though the bulk water price flexible and gradual implementation of is 57.5 US cents per m3 which is very high treatment standards with provision for re- for such contracts. view and, if necessary, revision of the goals at 5 or 10 year intervals in the light of addi- 3.48 A very preliminary project analysis tional information and analyses. suggests that the project might just be viable on current projections with an average cost Example 2: Piripama, Recife of capital of 20%. However, the risks are Example high. Cost overruns or delays in completing 3.46 The metropolitan region of Recife, the reservoir would greatly reduce the return Pernambuco, faces a rapidly growing imbal- on capital. On the other hand, if COMPESA ance between water demand and water sup- fails to meet its targets for reducing water plies. The performance of the state water losses, then revenues in the early years will company, COMPESA, is little different be higher than projected and the return will from that of CEDAE, so that it is unable to be significantly higher. In effect, any firm finance the development of new water sup- that undertakes the project is betting that it ply projects. As a result, it has been ex- can control its development costs and that ploring the option of relying upon private COMPESA will not be successful in reduc- finance to complete the development of a ing its losses. new reservoir, water treatment plant, and 3.49 Many features of the project suggest associated transmission system drawing that neither COMPESA nor the state gov- upon the Pin pama river to the south of the.. region. the comipany' water loshes in 1995 ernment appreciate the conditions required region. The company's water losses in 1995 t eeo ucsflBTpoet h to develop a successful BOT project. The were 54%. Its demand projections assume marginal cost of water under this scheme that these can be reduced to less than 30% will be very high, yet the project will only within 7 years, though it is not clear how be viable if less costly measures to meet this is to be achieved under the present sys- some of the supply deficit have not been tem of incentives and management. Even implemfeted. Indeed, this deficit will in- 50 Brazil: Managing Pollution Problems - Annexes crease rapidly after the project reaches full (monthly connection fee) plus a volume capacity, so it will be no more than a tempo- charge which reflects the marginal cost of rary stopgap. Further, large changes are supplying water or treating sewage. This required in the financial and operation man- means, of course, that low volume consum- agement of water and sanitation services in ers -- who are assumed, not always cor- the metropolitan area in order to achieve rectly, to be poorer than medium or high something close to 100% coverage of piped volume consumers - pay a higher average water and sewers. price. The typical response is to create 'lifeline' tariffs for low volume under which 3.50 In these circumstances it would be the fixed cost is kept down by cross- much more appropriate to follow the exam- subsidies from larger consumers. pie of Rio de Janeiro by splitting the exist- ing system into two or three separate sub- 3.53 In fact, the marginal cost of serving systems and awarding concessions to private additional households is more complicated operators who will take complete responsi- than this description suggests. A distinction bility for improving or expanding services. can be drawn between the fixed costs of (a) The Piripama project might then be com- extending a local distribution network and pleted - after review and, perhaps, redesign servicing each additional customer, and (b) - by the concessionaires acting jointly or by building and maintaining the utility's trunk one concessionaire that would have exclu- network and other basic infrastructure. The sive access to the water that it supplies. Fi- former will be referred to as the 'customer nancing the project as one part of a much fixed cost' and the latter as the 'network larger investment program covering both fixed cost'. It is important that even the ba- treatment and distribution would be much sic lifeline tariff should cover the customer easier and more satisfactory than relying fixed cost as well as the marginal cost of upon a stand-alone BOT contract. water consumed or sewage discharged. If this is not the case, then the operator will MEETING THE NEEDS OF THE POOR have no incentive to expand service cover- age in areas where it expects that most cus- 3.51 In thinking about the problems of tomers will pay the lifeline tariff. Even if it ensuring that the poor have access to water does expand coverage in order to comply and sanitation services it is important to dis- with its service obligations, it is likely to tinguish between the problems of (a) poor delay compliance as long as possible or may households and neighborhoods in medium offer a minimal quality of service if this re- and large urban areas, and (b) small towns duces costs. and rural communities where most of the population are poor. In both cases, some 3.54 The issue, then, is how the network form of implicit or explicit transfer from fixed cost should be allocated across con- either higher income consumers or the gov- sumers. The tariff structure can be designed emnment will be required, but this is usually so that the smallest consumers make no easier to arrange within a single concession contribution to this element of total fixed and tariff structure than between conces- costs, while large consumers pay a substan- sions. tial contribution. The allocation should not be loaded too heavily towards the largest 3.52 The basic difficulty in devising tar- consumers, since perverse incentives may iff structures is that the bulk of the costs of be created if the average and marginal prices providing water and sanitation services are charged rise too steeply or are discontinuous fixed. Thus, an efficient pricing schedule -- particularly if water consumption is not would have a relatively large fixed element Brazil: Managing Pollution Problems - Annexes 51 metered so that some proxy such living CONCLUSIONS space is used instead. 3.57 Private sector investment is not a 3.55 For poor communities this approach panacea for the problems of expanding wa- may still result in tariffs that exceed willing- ter and sanitation services. Contracts must ness to pay. Then, external assistance will be carefully designed to minimize the be required. Under a concession this could chances of later renegotiation. Proper ar- take the form of a negative lease payment, rangements for monitoring contract per- so that the government provides a subsidy to formance and regulating operators must be hold down the level of tariffs. Care is established. All of this means that a large needed in structuring the lease payment, in amount of preparatory work is required to order to create the right incentives for the establish targets, financial viability, tariffs, operator, especially to serve the poorest or and regulatory structures. The aphorism more remote communities. Probably the 'more haste, less speed' applies very best approach is to start from an efficient strongly to attempts to mobilize private fi- tariff structure without subsidies. The actual nance for ill-designed projects or conces- tariff charged will be this base tariff less a sions. subsidy calculated from a formula defined in terms of standard subsidy units, i.e. referring 3.58 Still, the general performance of to the discount applied to the tariff for some state and municipal water companies in Bra- specific tariff category. In the simplest case zil over the past 20-30 years has been lam- this would be the same for all tariff catego- entable. If the future is to be any better, ries, so it would be equivalent to a uniform each state government or municipality ought reduction in the network fixed cost that is to be examining what role the private sector charged. For more complex cases, such as can play in operating and expanding water concessions that cover dispersed rural com- and sanitation services. In most cases the munities as well as urban areas, the subsidy preferred option should be the creation and formula might give greater weighlt to rural award of concessions to private operators on inhabitants or to towns/communities whose the basis of clear service and environmental average income falls below some threshold. targets after a competitive bidding process in terms of the lease payment for the use of 3.56 The advantage of basing the subsi- existing assets. dies on a standardized unit is that bids for the right to operate a concession can be specified in terms of the required subsidy per unit without imposing the assumption that the subsidy is uniformly distributed over all consumers. The structure of subsi- dies should not be too elaborate, so as to avoid the danger that neither those who de- sign the system nor the potential operators can really appreciate its consequences. On the other hand, a lump sum negative lease payment or a uniform subsidy for all con- sumers are unlikely to be consistent with appropriate incentives for the operator to serve the whole community. 52 Brazil: Managing Pollution Problems - Annexes Brazil: Managing Pollution Problems - Annexes 53 4. INSTITUTIONS FOR WATER RESOURCE MANAGEMENT1 SUMMARY OF ISSUES AND RECOMMENDATIONS In the past, stakeholders, such as industries and water and sanitation companies or civil society, have had no say in how to manage their water resources and render their use more sustainable. Relatively broad consensus has emerged in Brazil on the principles of integrated water resource management at the lowest appropriate (typically river basin) level and treating water as an eco- nomic good. Due to the erosion of state finances, state environmental agencies have suffered from a pro- longed lack of funding which has substantially reduced their capacity to monitor compliance with regulations. Also, command-and-control mechanisms are too rigid and difficult to enforce. While some states have passed laws to introduce the new water resource management strat- egy, practical implementation has been lagging behind. STRfATEGYANDRE M ATIONS The concept of a social catchment permits the interests of local stakeholders to be taken into account and relates their interests and incentives to the natural environment. State agencies will continue to play a role in water resources management and will have to be involved with the implementation process of the new system from the beginning. An agency provided with initial funding - preferably through stable multi-year budgets - can be- come financially independent once it has its own revenues through service provision and pric- ing. Laws and implementation procedures should be simplified to minimize time and financial costs. Since resources, both in terms of finances and in terms of qualified expertise, are scarce, man- agement efforts should concentrate on areas where the benefits of management will be highest and where clear targets can be achieved. This includes determining pollution 'hotspots' in ba- sins (and sub-basins) and making them a high priority. INTRODUCTION stitutional change. The incentive structure is analyzed from two points of view. First, an 4.1 This chapter discusses institutional attempt is made to identify the existing in- arrangements for water pollution control. centives for change. Second, once change The chapter begins by describing state of the has been decided upon, how can sustainable art water resources management as it relates institutional arrangements be designed, tak- to pollution issues and places the current ing into account, inter alia, stakeholder par- Brazilian framework into this context. Sub- ticipation and financing. The chapter makes sequently, a number of specific issues are the point that although on paper Brazil is discussed, such as basin vs. sub-basin man- very advanced in basin and pollution man- agement and the incentive structure for in- agement issues, in practice not much has happened to date largely due to the fact that the incentives to implement institutional This paper was prepared by Karin Kemper. change are very weak for some of the prin- 54 Brazil: Managing Pollution Problems - Annexes cipal actors. The chapter concludes with and other stakeholders within a riverbasin; recommendations for further development and third, the pricing of water as a resource of the institutional arrangements for water in order to provide incentives for more effi- resources management in Brazil. cient water use, allocation and pollution control. WATER RESOURCES MANAGEMENT AND POLLUTION CONTROL 4.4 In addition, prior to UJNCED, two Brazilian states, Sao Paulo and Ceara, had 4.2 Water pollution has two major im- passed State Water Resources laws that pacts. First, it deteriorates water quality were based on these principles. Other states2 with detrimental effects on health, produc- have since followed suit, and recently, a tivity and recreational value. Second, it de- federal water resources law was passed con- creases the availability of water since a pol- firming the standards set in the state laws luted water source may not be suitable for and providing guidance for water resources certain uses. This is the case in the southeast management of federal rivers. Box 4.1 pro- of Brazil where increasing demand for water vides a summary of the key principles found due to population growth and economic de- in five Brazilian Water Resources Laws. velopment has reduced the quantity of us- Thus, conceptually Brazil might be consid- able water. ered a leader in terms of water resources management. In practice, however, the 4.3 To control pollution, adequate in- country has not advanced as much as could stitutional arrangements must be in place. It be expected. is now widely recognized that a fragmented sectoral approach to water resources man- 4.5 To understand the causes of this gap agement is not successful. For example, in between the conceptual and practical Agenda 21, elaborated under the auspices of frameworks, one can begin by regarding the the United Nations in 1992, a number of above principles as instruments used to factors were stressed to improve water re- achieve better water resources management, sources management worldwide. Three of including pollution control. These princi- the principles that evolved are as follows: ples, however, are very broad in scope and therefore are difficult to disagree with. The * Water resources management should keisuishwtmaehmoprinl take place in an integrated manner. key issue is how to make them operational and to identify the obstacles that impede * Water resources management should effective water resources management. take place at the lowest appropriate lev- els. 4.6 One obstacle is the need for a com- * Water should be treated as an economic prehensive institutional framework consist- resource that has an opportunity cost. ing of, on the one hand, institutional ar- Brazil not only subscribes to the above prin- rangements such as laws, legal norms, and ciples, but was, in fact, a forerunner. In the regulations and, on the other hand, water 1980s, the Brazilian Association of Water Resources pushed for these principles which 2 As of March 1997, the following states led to three practical implications, namely have water resources laws: Rio Grande do integration through management at the riv- Sul, Sata rina, S io PandeMdo . ~~~Sul, Santa Catarina, Sao Paulo, Minas erbasin level, taking into account the differ- Gerais, Distrito Federal, Bahia, Sergipe, ent uses and users of water; decentralization Rio Grande do Norte and Ceari. The states of decision making structures to appropriate of Rio de Janeiro, Goias and Pernambuco levels, e.g. from the state to municipalities are preparing laws. Brazil: Managing Pollution Problems - Annexes 55 Box 4.1: Principles Contained in Most Bra- state jurisdiction. Federal rivers flow be- zilian Water Resources Laws tween at least two states, and international rivers flow between Brazil and at least one :SFee aerResources Council with more country. Federal and international riv- esfla.rZeXtien ogovemmeflttnmnicipalities:- ers are under federal jurisdiction. Thus, in -anndbher interesed-parties(water users. Brazil, the legal framework for river basin Sx s~iety)management has to exist at least at two lev- Meat '< sin as entity for integrated manage- els, the state and th e federal level. ~~~~~c Merah panecnoing-c: ater-as-a public good-with an economic 4.9 Pollution control has traditionally been practiced at the state level by state en- +- ter pricing vironmental agencies. These are usually tied .: bsin committees with representation of the to the Environment Secretariat (e.g. FEEMA -,state, municipalities and other interested in Rio de Janeiro). At the federal level e-pas (water users, civif society) IBAMA has been responsible for pollution 'basinagencies with executive functions issues, but the agency has primarily con- centrated on1 natural resources management. users as well as entities such as state agen- The instruments that have been used to cies and organizations, NGOs, research in- achieve pollution control are of the com- stitutes etc. The former can be regarded as mand-and-control nature, i.e. zoning regula- the arrangements that provide guidance and tions and licensing. incentives to the latter, who are the actors. In traditional systems, water users have had 4.10 Due to the erosion of state finances, no say in determining the framework. They the agencies have suffered from a prolonged have merely been dependents. In the new lack of funding which has substantially re- evolving frameworks, however, water users duced their capacity to monitor compliance are recognized as stakeholders and interact with regulations. Thus, on the one hand, officially with rule-making entities, and pollution policy has been quite rigid due to consequently, can have an influence on the inflexible command-and-control mecha- norms and regulations as well as facilitate nisms On the other hand, the lack of en- institutional change (see Fig 4.1). forcement has not provided incentives for 4.7 -oflnlpolluters to comply with the regulations so 4.7 Int instheifollwingustion,lfr k Borwaz' that, in reality, the institutional framework curt ionstoituionl fsbramewor for wate has been very lax - with obvious effects on pollution control IS briefly examined, fol- polto lods Irncly th an ot lowed by a brief description of the country's pollution loads. Ironically, the mam pollut- goals as exemplified by the laws that have ers, such as water and sanitation companies, often have not been subject to any formal or already bn sdn nnsobiiinformal rules to reduce their pollution out- stacles - and successes - concerning the op- put. In their case, an institutional framework erationalization of these laws. to reduce pollution simply has not existed. BRAZIL'S CURRENT INSTITUTIONAL This may explain in part why sewerage cov- FRAMEWORK erage levels in Brazil are so low and why new water supply systems are implemented 4.8 Brazil has three types of rivers; witlhout taking into account the necessity to state, federal and international. State rivers treat the increasing sewage volume. are confined to one state only and are under 56 Brazil: Managing Pollution Problems - Annexes Figure 4.1: Institutional Framework Of The Water Resources Sector / rrangements: federal and state agencies, laws, decrees, norms, research institutes, regulations, and rules professional organizations water & sanitation X companies, industries 4.11 In spite of the weak legal frame- well as water pricing. Its organizational work, water resources management has been structures include a riverbasin agency, a highly centralized at the state level and basi- technical entity that determines investment cally nonexistent at lower levels. Thus, plans for wastewater treatment, makes sug- stakeholders, such as industries and water gestions for water tariffs, financial forecasts, and sanitation companies or civil society, contracting of utility or reservoir construc- have had no say in how to manage their tion, etc. water resources and render their use more sustainable. 4.14 The agency operates as the execu- tive arm of the basin committee. The basin 4.12 Given the weakness of the current committee consists of the stakeholders in the institutional framework, the outcome, basin, e.g. municipalities, water and sanita- namely increasing pollution loads due to tion companies, farmers, industries, civil population increase and economic develop- society, environmental interest groups, and ment, is not surprising. The next section de- state and federal government representa- scribes the country's approach to a new in- tives. Based on proposals elaborated by the stitutional framework that addresses the is- agency, it is these stakeholders that will de- sues mentioned above. cide on the policy for the basin, including investment priorities and tariff levels. BRAZIL'S NEW APPROACH TO POLLUTION 4.15 Recent water resources laws passed CONTROL AND WATER RESOURCES in Brazil follow this basic model, with some CONTROLMAND WATERMREN OURCTS variation due to local differences. The Ceara law, for example, presupposes only one 4.13 The new approach that has been agency for the state's 11 basins due to their developing in Brazil resembles the frame- limited size even though each basin is sup- work existent in France since 1964. Based posed to have its own user committee. on management at the riverbasin level, this Eventually, the agency will have local new approach includes elements of branches, but for now it is located in the stakeholder participation with a prominent capital Fortaleza. Conversely, in Parana's role for municipalities and industries, as draft law, a reverse approach is planned. Brazil: Managing Pollution Problems - Annexes 57 Each basin will have its own User Associa- the State Water Resources Fund (FEHI- tion, which will create a Technical Entity as DRO) which is replenished by royalties its executive arm. Whatever is decided by from the energy sector. This money is cer- the User Association must be endorsed by tainly welcome as a start-up, but will hardly the Basin Committee, which consists of state be sufficient in the long run. The Alto Tiet8 agencies and members of civil society. The Committee, for instance, is supposed to re- User Association itself has only a consulta- ceive about 30 million US$ in 1997, but this tive seat on the Basin Committee. Thus, sum cannot meet the needs of a basin with while in Ceara the agency was created first roughly 40 municipalities and a population (as a mixed company by the State) and is of over 20 million. now responsible for creating committees in the different basins, in Parana the User As- 4.19 A first conclusion is that while Bra- sociations will create themselves first - as zil has taken the first important steps to im- private entities - which will be followed by proving water resources management, prac- concomitant creations of Basin Committees tical implementation is still lacking. The by the State. question arises why the process is taking such a long time, given that framework laws 4.16 Obviously, although the ingredients in some states were passed three to five of the system look the same on the surface, years ago. Are the reasons just general po- the incentives that emerge for the different litical inertia or is there active resistance? stakeholders to institute and maintain such a system are different and will be discussed in INCENTIVES TO PROMOTE INSTITUTIONAL the following section. For the new ap- CHANGE proaches to become legal, new laws are needed. Table 4.1 shows four states and the 4.20 To answer this question, one has to federal level and their achievements in the examine the underlying incentive structures legal realm to date. that promote institutional change, i.e. from the current situation of a number of dis- 4.17 As evidenced by the table, actual persed agencies at the state and federal lev- practice is quite different from the concep- els to a more integrated view that would tual framework that is so well accepted provide ample opportunities for stakeholders among water resources professionals and to decide their own fate. policy makers. Although the framework laws exist, the actual institutional set-up that 4.21 Institutional change may be driven would make water resources management by several different factors; for example, possible is not in place in any state. An ex- one strong committed individual. This is in ception is the state of CearA, which recently part the case in Ceara and in Rio Grande do introduced bulk water pricing in a riverbasin Norte where committed governors have put (the Metropolitana riverbasin around the water high on their agenda. Institutional state capital Fortaleza) and has a water re- change may also come about when sources management agency as well as stakeholders feel the necessity for change in committees in two out of eleven basins. such a way that the costs they incur in terms of finances, time, and effort are smaller than 4.18 In addition, Sao Paulo has a number the benefits they expect to receive. For ex- of basin committees, but since neither ample, in the case of extreme water pollu- agency nor pricing laws have passed, the tion which implies high costs, consumers committees' activities are restricted. They may press for change more actively than have started to receive some money through when they are not substantially affected. 58 Brazil: Managing Pollution Problems - Annexes Table 4.1: Institutional Requirements For New Approaches To Water Resources Management In Sao Paulo, Parana, Minas Gerais And Ceara As Of March 1997 equIrm. Guarpiga Prn9m =Fl Mt'ilnas Gras :f- Pirasicaa; '0eVar|ti; State Water Re- 1991 prepared but not 1994 n aa 1992 sources Law passed yet Other laws in yes yes yes yes no place? Laws still re- * state law for * pricing * river ba- * river Ceara has quired? headwaters (draft to be de- sin agency law basin created (draft)b veloped) (to be devel- agency law agencies * river basin oped) and pricing agency law (draft * water stipulations State Assembly) pricing law (to by decree * water pricing be developed) law (draft) Basin commit- consultative com- no no yes yes, two of tee? mittee 11 basins Basin agency? no no no no yes, 1 cen- tral agency Water pricing? no no no no yes for bulkwater; no for pol- lution loads Notes: a The federal water resources law (Lei No. 9.433) was passed by Congress on January 8, 1997. It per- mits water pricing and the creation of riverbasin agencies, which legitimates - retroactively - the ap- proaches taken by various states in the past years. b The current State Law for Headwaters which entered into effect in the 1970s, has up to now been de- cisive for water resources management in the state's headwater areas. It forbids, in a very simplistic manner, any industrial occupation in the designated areas in order to preserve water quality. The lack of enforcement, however, has led to two most undesirable effects. First, for example in the Guarapi- ranga basin, only industries were impeded from establishing themselves in the region because they would not be able to obtain a license. Housing, however, especially favela-like housing went uncon- trolled so that today the Guarapiranga basin is entirely urbanized, but without adequate water and sewerage services. At the same time work opportunities are extremely limited due to the lack of in- dustries. The entire area has thus turned into a 'sleep city' with people commuting to Sao Paulo. In recognition of the perverse effects that have emanated from the current legal stipulations, the purpose of the new Headwaters Law is to allow controlled soil and water management in the concerned mu- nicipalities since the pure policing approach has shown to be entirely unsustainable. The new law will be supplemented by the specific Guarapiranga law, permitting controlled industrialization, tourism fa- cilities, installation of sewerage systems and housing improvements. 4.22 In the current situation, water pollu- to 1996.3 Although fecal coli amounts were tion is either worsening or not improving. reduced, general BOD levels increased sub- Though few figures about water quality are available, Appendix 4.1 highlights the pre- vailing trends. The table shows that water 3 The data used in this table are quite weak quality continuously deteriorated from 1978 due to changes in laboratory methods over the time period observed. They neverthe- less show the prevailing trends. Brazil: Managing Pollution Problems - Annexes 59 stantially, as did total nitrogen levels which transaction cost of registering complaints is multiplied by four in the 19-year period. high). Also, large groups generally have Also, total phosphate levels have clearly difficulty organizing for collective action shown an increasing trend. since the input of the individual is hardly measurable, and many individuals assume 4.23 Those affected by deteriorating wa- that someone else in the group will take ac- ter quality are domestic consumers who tion, resulting in inaction. need water for drinking and cooking and certain producers who, depending on the 4.27 Thus, the responsible agencies have type of their production, require different hitherto not been subjected to much pressure levels of water quality. These two groups to enforce zoning laws, water effluent stan- are, at the same time, the worst polluters. In dards, etc. On the contrary, as such en- fact, most BOD pollution in Brazil stems forcement implies costs to the polluters, they from domestic wastewater. would resist any such change. In addition, the financial situation of state agencies has 4.24 Appendix 4.2 illustrates pollution deteriorated continuously since the early abatement levels in a number of Brazilian 1980s, so that monitoring and enforcement states in 1988.4 The data show that industry of existing regulations has been difficult. In has been most efficient in removing organic this situation, there now is the call for insti- pollution loads while only 15% of domestic tutional change that would strip the state wastewater loads were removed. A special agencies of much of their remaining power effort would thus be needed to treat urban by substantially decentralizing decision wastewater. making to entities that until now have not played an active role in water resources 4.25 Another interesting point illustrated management, namely municipalities, indus- in the table is that organic loads due to cattle tries and civil society at large. Obviously, ranching are of major importance. This fact the state agencies are not very keen on this is generally overlooked and certainly merits change, since it implies less control, possi- further investigation, especially given the bly fewer staff, and also lower budgets for fact that the latest data available are from them. 1988. 4.28 Other entities are more interested in 4.26 Other stakeholders such as the envi- promoting change. Examples have been set ronment, do not pollute but are adversely by the consorcio movement, notably in SP, affected by deteriorating water quality. Fish Parana and Minas Gerais, where munici- disappear from rivers with additional nega- palities have joined in an effort to clean up tive impacts on fish feeding birds, etc. Yet, their local rivers. Since institutional change as long as water of more or less adequate has to be pushed by the current agencies in quality is provided to domestic households power, however, the will at the municipal and industries, the public at large will not and societal level is not sufficient to move hold the responsible agencies accountable. things along. This power struggle can be The problem is one of long distances, observed in Sao Paulo with regard to the namely from the individual consumer to an Piracicaba basin (see Box 4.2). unknown bureaucrat in a state agency (the 4.29 As long as no dramatic events oc- cur, for instance algae poisoning of drinking 4 More recent data are not available. These water supplies, water is usually not high on data were published in their current form in the political agenda which might explain 1994. why different states are taking so long to 60 Brazil: Managing Pollution Problems - Annexes approve draft laws in the State assembly. A wise be dismantled by the next government. counterexample is the state of Ceara in the semi-arid Northeast where water is one of 4.30 The above discussion illustrates the major issues on people's minds and some key points. First, it is not only political where, once there was continuity in gov- inertia that stalls effective actions concern- emnment, major changes in water resources ing the new institutional framework for wa- legislation have taken place. In Ceara, the ter resources management. Concrete reasons water resources law is used as a framework exist as to why the current stakeholders do law and is complemented by decrees. De- not actively promote the decentralization crees can be passed by the government and necessary for the new models that have been need not pass through the legislative assem- approved in the framework laws. This has bly. By contrast, in the South and Southeast, implications for future programs concerning structures such as riverbasin agencies have water resources and pollution management. to be enacted by law since they can other- To be sure, a number of thinlgs have in fact Box 4.2: River Basin Institutions In Piracicaba 1~~~aiaa ie basstiun co mmitteewacatn.: acoraKe witoth Sotate! WaterRsouce La f e1.A the amerne, hwever, Jtheeis also a consorbatium i dSof mncpSablgtitesifomdbeforevasti ithe cr>ation of the foral riverbsin ,'g committee. theth canTmerely u,ea,tlo thedifferent stcturesofthiess i.dircty,femunicipalitis afunds' anu berofindustriesv .acommitteentatalsoincludesreireentativesfrostteistiiontina198d civil socie there have< een tesosbtwenthecosrhad,tium and gthe commiothtee.The consortium, whorsent lembership . .~~~~~~~~h gi.nsiss of,. th mayrs o te muncipshaliti se dnsotus along the Piraoiaba riverin SiPuo tte elieves tha i i bet qippA d' red toda wt teius aing te basi. ithir mnd,thre, conitteecan mcitvere ieaydion-3 suat' olea d ths o rfnnca basis TheXdl itconsortu se uiipalityebesi funds whgich re ot li>arge m'* b ut hae eritedsomenv6.estmetttils sic tsa vincep&dtio in 'it,oi 1989.aetob pad s, , tces representativets on teothenr hand ar#eofthe oinin tha ther ondsifortu rhe puresens o sltimited becaa: use t onablfy consist ofwtrpllutrs not state repreentative for'civi society. Util ves'ryt re- cetyr souion to he institutional whc and plitcalrr deadloc was nbout insiht Tis siotuS lati on r may haea "h'nged' with0 the -passae of the federaal Wa ter Re sournes oflhbawin in Jaurya 199 thtwhicha frernders the following two things possible.~~~~~~~~~~~~~~~~in~ i it Firg'io:lst,ruectues cto b cmroe fated qanit,d tsecod, cnstiuemsgh diarpeall rawedl to a thes bainagencties. The;i, Ps.ccta,eodr consortium theasofere nd to aproidetheagiency, butwhsynotreceted leal possiiitives recio fro the ..'. i00 stt as0 yet0. An coposblictingfacldbtor isltht thefedea a prisconsortiar lyamr tactiv asl agencintes fonlyas torn-te. sitory rrngments Fur+thermo;re it stnipualties thnatdithion to120 das,regulatons wndi6ll hav tor bei pasoced sty.o finplac pbymid-May 1997' will hold. Andnally, the Pirnciscwillhava to beapproved bf the Jundiati onall,haV Wa tenaiesouresCucithihhasr, not been cethed ntas wofud yet.I ther wrs,aorth mncpurposes o tattr soltio' qn^ ;' has not provided clear guidItance.ly, pen om A fur.0ther compica; tingR aspec' 00t is the lack of: cla stiultions;' concerning :wate pic ing,0 wh;;ich f99' exit ; nith>ere at th stt no at the .A.; fe :DSA :..dea levelb. In bot intncs copietr law ar plnnd bu f. ;::;tx hav nt . As illbe isussd lter a agncywit te ailiy o institute Watrpiigwol ansr finanial ustanability6. Howvr wae rcn ln ilnts~l~teneed frteeomu netet neesr n the~ Piraicaebsn hihaecrenlsiae at about 2 billo Sdlasoe 0ya peid0te fin'an cin'g soresnd 'mecaim il aete found.' In site of tePrccb bsnbigoethe he bains i Brazil that was a :forerune ncetn intitutinal ~structures to ipoe water quality, its advantage might disappe4ar rapidly if the ifrn stkhlers~ do notget tohe table-and caipitalize' on thenewly-created legal possibili'ties. One-possibility woul d~ be o letthe~ consortium play a more active role withi n the formal comimittee. Inthe commoiptte.,theclre a~6re 6unicipalities (in addition ~to 16 state slots and 16 slots for civil society.O these16 muicipaitis 61 re-also m-em0bers of the'Piracicaba consortium and.2 of thei Jundiai cnsrim Thus,the mnicialitis tha are acientheN cnsrtia woldbe the same mrunicip'alities,that are ctvei Brazil: Managing Pollution Problems - Annexes 61 changed. A federal law now exists and be used to tailor further state laws to the lo- framework laws do exist in some states. cal circumstances. The World Bank can play Thus, projects such as the introduction of a facilitating role by organizing workshops, water resources management in federal riv- financing studies, disseminating previous ers, such as the Paraiba do Sul and the Sao experience and helping identify national and Francisco, now have a sound legal basis to international experts. While international build on. Also state based projects, such as expertise also plays a role, the existence of the Guarapiranga in Sao Paulo and the Rio considerable Brazilian experience allows das Velhas in Minas Gerais, can proceed subsequent states to assess their possibilities due to their state laws. and challenges with local assistance - and to learn from the failures of others. 4.31 For future endeavors at the federal level and in those states with a legal frame- 4.34 The other aspect to be learned from work, projects should therefore be more the discussion is that the current set-up of predictable than previous ones, especially management units for such programs has to once the agency aspect is resolved. That will be reconsidered. Even though current allow implementation to focus on more stakeholders, i.e. state agencies, have their practical issues, i.e. how to set up an agency, own agendas and may not easily accept de- what kind of monitoring is required and how centralization, it may not be a good strategy to involve stakeholders more effectively. In to set up management uniits exclusively states with existing laws, projects can be staffed by consultants which bypass impor- designed within the current legal frame- tant agencies. Management units ought to work. Design can thus concentrate on how include staff from existing key agencies so to tackle the problems in a specific basin that change comes from within. As it is now and avoid the fight for an entirely new legal in several states, the management units may framework at the state level. be seen as 'foreign organisms' that are bi- ased towards certain Secretariats and State 4.32 The second related aspect is that agencies, undermining their diplomatic po- now there is a pool of both national and in- sition. Their distance from some of the prin- ternational experience. In states where laws cipal stakeholders might also be interpreted do not yet exist, national experience from as an unwillingness by the state government other states now is available. In addition, the to let them play an effective role in the crea- federal law provides general guidance on tion of the new management systems. In this how to design institutional arrangements for case, agencies like the World Bank could be water resources management. It also legiti- led to believe that local stakeholders are mates some of the former stumbling blocks. being incorporated into the new institutional In Minas Gerais, for example, all articles framework, when in reality, they continue to concerning pricing were vetoed in the State be outside the system. Water Resources Law of 1993 with the ex- planation that pricing was not a legally rec- 4.35 Inclusion of important agencies in ognized instrument at national level. Al- the process is necessary because of the need though this opinion was not universally for sustainability. Given the committee shared (pricing is already mentioned in Bra- structure that is being implemented through- zil Water Code of 1934), the new federal out the country, state agencies will continue law now officially sanctions the principle. to play a role in water resources manage- ment. Therefore, they will have to be in- 4.33 The experience in a number of dif- volved with the implementation process of ferent states with different hydro-geological, the new system from the beginning. Other- climatic and socio-economic conditions can wise, the consultant firms leave and no in- 62 Brazil: Managing Pollution Problems - Annexes stitutional memory or new technical skills Agency in Ceara, COGERH, for instance, have been created to perpetuate the process. which was designed with the explicit goal to provide independence both functionally and 4.36 Having analyzed and possibly miti- financially, experienced considerable diffi- gated the impediments to institutional culties in achieving its mission. COGERH, a change, the next step is to design a system mixed company integrated into the state's that will be sustainable, financially and in- public service system, is faced with unpre- stitutionally, in the long run. The subsequent dictable budgets and deteriorating salaries, sections concentrate on two key issues in along with the well-known manifestations of this context, i.e., the design of the water re- such problems. sources management agency and incentives for stakeholders to participate in the man- 4.39 This situation is expected to change agement design. shortly, however, because COGERH has recently taken over parts of the State Water DESIGN OF WATER RESOURCES and Sanitation Company's (CAGECE) bulk MANAGEMENT AGENCIES water supply network and is now supplying - and charging for - bulkwater in the metro- 4.37 As noted above, state and federal politan region of Fortaleza. These tariffs will agencies have been very weak in regard to provide sufficient revenues to render the pollution management in Brazil and hope is company independent from state financing vested in the new committee-agency struc- for operation, maintenance and certain fu- tures endorsed by the budding legal water ture reinvestments. They will also permit the resources framework. Careful consideration company to increase salaries to more com- should to be given to the design of the new petitive levels in order to retain and attract institutional arrangements in order to avoid qualified personnel. In addition, COGERH the pitfalls of previous frameworks. Cer- will pay a percentage of its revenue to a tainly, a number of solutions exist and will State water resources fund that will permit a depend on local circumstances in the differ- limited amount of future investments in ent state or federal riverbasins. structural works. 4.38 A large problem for state agencies 4.40 This experience shows that an has been the lack of funding and the ensuing agency provided with initial funding - pref- difficulties in attracting and retaining quali- erably through stable multi-year budgets - fied personnel as well as in building and can become financially independent once it maintaining monitoring and enforcement has its own revenues through service provi- systems. More often than not there has been sion and pricing. By giving it a sustainable a lack of priority in budget allocations. start, i.e. in a smoother manner than hap- Many times, governments prefer to build pened in Ceara, the basis is created for new visible works such as reservoirs, parks, sustainability of the entire water resources and highways rather than invest in monitor- management system. ing and maintenance of existing systems The consequence has been a deterioration of 4.41 Although Ceara is the first state in existing structures and institutions, increas- Brazil to charge for bulkwater, it has to be ing pollution and an enormous lack of basic pointed out that the industries that will now information about water quality, pollution pay COGERH formerly paid CAGECE, al- loads, etc. For these reasons, agencies ought though the water was considered to be to be as independent from public budgets as treated and thus the tariff was higher. The possible. The Water Resources Management political price to make the companies accept Brazil: Managing Pollution Problems - Annexes 63 paying for bulkwater was thus very low. 4.44 In other states, and in the federal Industries now pay less because the bulk- law for that matter, agencies are perceived water tariff charged by COGERH is about as the executive arm of the user committees, half of the tariff for treated water charged by i.e. the committees are created first and then CAGECE. in turn they create the agency. Here again, in order to avoid problems such as overstaff- 4.42 The political fight took place be- ing, deteriorating salary levels, etc., agen- tween the agencies because COGERH's as- cies could be designed as foundations or as sumption of bulkwater responsibilities im- private entities.5 Furthermore the agency plies a revenue loss for CAGECE with im- ought to be as lightly staffed as possible and plications for its cross subsidization of other rely on contracting out the better part of its parts of its supply system. The real test will functions. This terceirizaqdo could take be the charge for irrigation bulkwater pric- place by contracting out to both public state ing which has not yet taken place. It also has or federal agencies and to the private sector. to be taken into account that Ceara water Such an approach would provide some tariffs are not linked to water quality. The competition and hopefully lead to cost- state's experience is cited here because, in effective management. general, Ceara is the state that is the most advanced in setting up its institutional ar- 4.45 This latter approach is the one fore- rangements, which are relevant regardless of seen in the draft water resources law of whether the approach focuses on water pol- Parana. The User Association of each river- lution or water quantity. However, in states basin, which would be an entirely private where water pollution is the principal issue, entity created by the water & sanitation tariffs will imply additional costs to water company, industries and municipalities, user, not lower costs as in Ceara. would be responsible for, inter alia, elabora- tion and implementation of a basin man- 4.43 The fact remains, however, that with agement plan, tariff proposals, tariff imple- the recent arrangements COGERH will be mentation, mobilization of financial re- financially independent of the State and will sources, etc., but would work with only a have an incentive to act as a commercial small technical nucleo. Most of the technical company if it wants to survive, i.e. it will works, such as monitoring activities, would have to enforce its tariff system, inter alia, be contracted out. by providing quality in its services to the users. This institutional framework is de- 4.46 It remains to be seen, however, what signed to avoid the failures of the former incentives are needed in order to effectively system where no entity had an incentive to implement this system. In theory, the water adequately operate and maintain the state's users are regarded as willing financiers of extensive water supply infrastructure. CO- the riverbasin managemenit system who will GERH thus was designed as a public mixed happily leave most technical works to state company. As we have seen, however, the agencies. They would, in addition, agree to water resources management system in quite rigorous oversight by the riverbasin Ceara remains very centralized. It is CO- GERH that is responsible for creating river- At the federal level, an alternative is cur- basin committees and, as of yet, it has not rently being explored that would create an been decided if such committees will ever agency of quasi-private nature that would have a deliberating power in regard to their have the least public interference possible. budgets. Some public element has to be preserved because otherwise the state is prevented by law from participating in the agency. 64 Brazil: Managing Pollution Problems - Annexes committee in which they only have a con- participate in both committees and agencies. sultative role. As in all countries, laws are not sufficient to ensure interest in and sustainability of new 4.47 It is not entirely clear if the users institutional arrangements. Stakeholders have an incentive to actively promote this must have reason to spend time and money arrangement or if they are not better off by to participate. Apart from sanctions for non- leaving things unregulated, as they are now. participation, other mechanisms can provide The State, on the other hand, is going to lose positive incentives. power by this arrangement and that may be one of the reasons why the legal process has 4.50 For example, in Minas Gerais, re- progressed so slowly. cently the 'ecological VAT' (ICMS ecol6gico) was introduced. When a munici- 4.48 A further issue is related to staffing pality invests a certain amount in environ- uncertainties at the managerial level. In the mental improvements, it will receive a Brazilian public sector, it is common to re- higher than usual return on ICMS from the place managerial staff at all levels as soon as state for further improvements. By explain- political constellations change. Since elec- ing to municipalities that a river basin tions take place every two years, either at agency might help them qualify for the the municipal, state or federal levels, politi- ecological VAT, they might be able to see cal constellations change often and, conse- benefits in participating. In fact, the Para- quently, so do staff. The ensuing lack of opeba consortium has spread word about continuity regarding planning, implementa- this program in one of its recent training tion and institutional memory has been a courses, illustrating the importance of such major reason why many potentially good initiatives to other municipalities. innovations have not been successfully im- plemented. If the new agencies are to suc- 4.51 Also, the Bank-financed SOMMA ceed, serious consideration should be given program seems to be popular in Minas to offering managerial staff the highest level Gerais. If a river basin organization can of time-bound contracts of up to four or five provide municipalities with access to such a years which would prevent removal for po- program, it will be of more interest than if it litical reasons. Independent auditors could is perceived as just another bureaucratic instead judge the performance of the layer. Obviously, the possibility of active agency, and only in the case of obvious participation is an incentive to get involved. mismanagement would managers be dis- In this context, the size and scope of man- placed. Given that the strategic decisions are agement systems has to be considered. made by the basin committees and that the agencies have a primarily executive func- Water Catchment vs. Social Catchment tion, this approach would provide managers, i.e. technical professionals, with sufficient 4.52 The Alto Tiete in Sao Paulo has a resources and stability to meet their river basin committee (instituted according agency's objectives. to the State Water Resources Law), but it consists of diverse municipalities and is ex- INCENTIVES FOR STAKEHOLDERS TO periencing a vast array of problems. The PARTICIPATE IN WATER RESOURCES assessment by a number of committee MANAGEMENT members is that the Alto Tiete committee is not functioning because it is too large to 4.49 An important task is how to create adequately take into account the sub-basins. incentives for the various stakeholders to Therefore, participation in the Alto Tiete Brazil: Managing Pollution Problems - Annexes 65 committee has been weak and in decline. In 4.55 In this context, the Guarapiranga this case, tensions exist between hydrologi- basin can be defined as a social catchment cal and social realities. While the hydrologi- with common economic and social con- cal reality is that management of water cerns. This stands in contrast to the larger quality in the Guarapiranga sub-basin has an hydrologically defined basin, which many important impact on the overall basin, the stakeholders do not perceive as one unit. social reality is that human beings are usu- The concept of a social catchment permits ally most interested in their immediate envi- the interests of local stakeholders to be ronment. The Guarapiranga municipalities taken into account and relates their interests have no interest in spending their time in a and incenltives to the natural environment. committee of 38 municipalities if they are The approach facilitates the analysis of the not affected by the problems of 33 of these. relationships between socio-economic and natural systems and enilances the possibili- 4.53 The Alto Tiete committee has now ties of developing adequate institutional ar- started to create sub-committees for the sub- rangements for environmental management. region Cotia-Guarapiranga as stipulated in Such relationships ought to be taken into the State Water Resources Law. In the case account when decentralization of riverbasin of Guarapiranga, the fact that the Cotia and management 'to the appropriate levels' is the Guarapiranga regions are entirely differ- expected. The appropriate level might be ent has regrettably not been taken into ac- lower than the hydrological unit of a river- count. Although this shows that this type of basin. decision had better be left to the committee - according to the principle that management 4.56 One solution might be, for instance, decisions are best taken at the lowest appro- to create working groups that provide a priate level - a sub-committee which covers bridge between sub-basin committees and a smaller region will provide more incen- committees of the main river so that plan- tives for the municipalities in the Guarapi- ning is made compatible overall. This ap- ranga basin to make the management of proach is being discussed in Parana. their basin work. 4.54 At present, a sub-agency is not be- CONCLUSIONS AND RECOMMENDATIONS ing planned due to the lack of agency law in 4.57 From the above discussion, it be- Sao Paulo state. As soon as the creation of comes clear that Brazil, while in the process an agency is possible, it should be instituted of implementing considerably improved ap- in the sub-basin. Once there is an agency for proaches to water resources management the entire Alto Tiet8 basin, the agency in the and pollution control, has only taken the Guarapiranga basin might become a sub- initial steps, and it remains to be seen what agency with a certain degree of liberty. This impacts the laws will have in practice. It has institutional set-up is perfectly compatible also become clear that the different states, with the new laws to be passed in Sao Paulo while based on the same principles, are de- (the umbrella law for the headwaters and the veloping different approaches based on their specific Guarapiranga law). The complica- institutional, political and hydro-climatic tion in Sao Paulo consists of the fact that the realities. State Environment Secretariat favors the idea of management at the level of the entire 4.58 This latter development should be Alto Tiete Basin and is not likely to work actively encouraged by the World Bank. actively for an agency in the Guarapiranga Just as one recipe is not automatically appli- basin. cable in different countries, so is the case for a large federal country like Brazil. 66 Brazil: Managinig Pollution Problems - Annexes A Call For Simplicity vestments as incenltives for the introduction of riverbasin management pilot projects. 4.59 Certain common conclusions can be Viewed in this light, the projects have not drawn from the experiences above. One been successful. While the structural works concerns the approach to the drafting and are now progressing more or less satisfacto- implementation of laws. Both the Sao Paulo rily (after serious initial counterpart funding and the Minas Gerais approach are exces- problems), the riverbasin pilot projects have sively legalistic. In spite of the existence of been mired in legal battles and are advanc- framework laws, the process of implement- ing quite slowly, as described in detail ing water management has been stalled be- above. cause of the need for further regulations. Such a process, i.e. to pass legislation on the 4.63 The connectioni between a Bank- same topic twice, is extremely costly in loan for engineerinig works and the imple- terms of time, finance and lost opportunity mentation of a new legal system therefore to fight pollution and should be avoided. has to be seriously questioned. The reason might be that the three states mentioned 4.60 A first step has been made in Parana above are very large and that even multi- where no specific agency law will be re- million dollar projects are not large enough quired once the main law is passed. A draft a incentive to induce a process of institu- law in Rio de Janeiro would permit both tional clhange. Possibly, in a smaller state, creation of an agency and water pricing commitment by the state government might from the beginning. In Ceara, the issues be more enduring. It also has to be taken were resolved by decrees. This is a possible into account that each of the projects in the approach with a stable succession of gov- three states involved only one pilot basin but ernments, but is more insecure than passing required a new legal framework at the state a comprehensive law. level. That is a high price to pay for invest- ments in one basin only. 4.61 Thus, future state projects should avoid these unnecessary costs. The role of 4.64 In the future, a distinction should be the World Bank should be to point to the made between a state such as Ceara, which problems that have occurred in the past and already had a law in place when the water to point to the benefit of increased flexibil- resources loan was negotiated, and a state ity. For example, instead of stipulating the where no legal framework is in place yet. formation of certain institutions and regula- The rationale for investments in infrastruc- tions by law, important decisions should be ture should be separated from the rationale left to the stakeholders. for investments in a new management sys- tem. The distinction is important also be- Different Incentives For Different Con- cause of the different time frames that have texts to be considered for institutional change, which is slow and not always controllable, 4.62 Since 1992, the World Bank has and engineering works, which can be de- been financing pollution control manage- signed for a certain time period and are ment projects in the states of Sao Paulo, Mi- more predictable. nas Gerais and Parana. One of the objectives of the projects has been to finance structural 4.65 Another option is, of course, to works for pollution control, such as sewer- make loan disbursements conditional on age systems, anti-flood works, and solid certain regulations. Again, this is difficult in waste disposal systems and to use these in- a situation where no legal framework exists Brazil: Managing Pollution Problems - Annexes 67 at all. However, in the Piracicaba basin, for Parana is to create an intermediary commit- example, the legal options for an agency tee that takes care of overlapping responsi- now exist through the federal law and a loan bilities. This approach might also be applied for the future investment package could be in the relations between states and the fed- made conditional on the prior existence of a eral government when the state wants to basin agency in order to facilitate the proc- manage a river that belongs to the state be- ess. cause it is entirely on state territory but be- longs to a federal basin. This is the case, for Integration of Water Sector Moderniza- instance, for various tributaries of the fed- tion Regarding Sanitation Components eral Sao Francisco river. 4.66 As mentioned above, the largest 4.68 In addition, a distinction has to be polluters in BOD terms are the water and made between rivers that require manage- sanitation companies. For instance, in the mnent along the entire river and rivers that metropolitan areas of Belo Horizonte and have a problem area, such as the Alto Curitiba, industrial pollution plays a minor Iguacu in Parana, where management is role while sewage is the main problem. In suggested to concentrate on the region of Belo Horizonte, 93% of all pollution is due metropolitan Curitiba. Since resources, both to domestic sewage and only 7% due to in- in terms of finances and in terms of quali- dustrial effluents. It is therefore necessary fied expertise, are scarce, management ef- for the states and the Bank to integrate the forts should concentrate on areas where the on-going modernization efforts of the water benefits of management will be highest and and sanitation sector into the efforts of im- where clear targets can be achieved. Other- proved water resources management. If such wise the incentives for stakeholders to par- an integration is neglected, an important ticipate will be very small. opportunity will be missed to achieve better 4.69 This reasoning also implies that a pollution control in the country. For exam- 4.69 may nothav als inplies ba- ple, the disclosure of certain quality data state may not have committees in every ba- should be designated in contracts with pri- sitical oncerefore tat Wate vate concessionaires. Concessionaires critical problems. Therefore, State Water should concssionmaderes. Conceistiongore Resources Law should avoid stipulating that should also be made aware of existing or committees must be created in all basins, planned water resources management insti- especially if no assessment has been made tutions and the possibilities, and obligations, as to what kinids of problems the different for interaction and participation. basinls are faced with. The 'Lowest Appropriate Level' For Management May Be A Sub-basin 4.67 As mentioned above, when riverba- sins are very large and management effects are concentrated in only one part of the ba- sin, such as a sub-basin, the decision might be made to institute management at the lower level. In order not to obstruct man- agement of the basin at large, a representa- tive of the sub-basin can be aggregated to the committee of the other parts of the basin. An approach being discussed in the state of 00 Appendix 4.1: Guarapiranga Annual Average Of Water Quality Parameters And Indicators Sabesp Water Intake Channel w7Sz tDO fW ... S? D ......m/I mg/ l rn jn UFTE aver. peak aver. peak aver. peak aver. peak aver. peak 1978 22 6.9 7.5 8.6 2 5 274 1300 0.48 2.26 0.033 0.082 59 19 80 1979 21 6.6 7.6 8.4 2 3 46 230 0.82 1.10 0.065 0.338 71 32 81 1980 21 6.7 7.8 8.4 1 2 279 2200 0.76 0.97 0.053 0.136 57 21 83 1981 22 6.6 7.9 9.4 1 2 1091 2300 0.77 1.22 0.048 0.100 72 40 71 1982 21 6.7 7.4 8.7 1 1 3910 17000 0.90 1.14 0.060 0.125 71 32 69 1983 22 6.9 7.4 8.4 1 3 869 7900 0.83 1.24 0.064 0.135 53 14 82 1984 23 7.1 7.8 9.2 2 3 127 700 1.20 2.11 0.077 0.275 51 10 81 1985 21 6.9 7.6 8.2 4 16 190 330 0.83 1.50 0.053 0.090 60 18 76 1986 22 6.8 7.8 9.8 2 3 291 1300 0.83 1.22 0.046 0.080 69 23 78 1987 20 6.8 7.7 9.4 2 3 54 280 0.79 1.22 0.032 0.045 54 7 86 1988 21 6.6 7.7 9.6 2 4 91 230 0.96 2.84 0.031 0.060 60 2.3 84 1989 22 6.9 7.7 8.5 3 5 84 230 0.82 1.31 0.090 0.390 50 4 82 _ 1990 21 7.0 7.9 9.3 3 4 23 50 1.82 4.28 0.121 0.275 53 3 79 1991 21 6.9 7.6 8.4 3 6 545 2300 1.12 2.41 0.050 0.100 54 4 78 1992 21 7.2 8.1 9.0 2 4 1648 8000 1.17 1.51 0.041 0.055 54 3 82 1993 21 6.9 7.5 8.2 5 10 433 1300 1.27 2.77 0.052 0.060 58 2 82 1994 21 7.0 6.8 9.9 6 16 7 7 1.19 1.55 0.046 0.060 60 3 83 1995 21 7.1 7.3 8.7 4 9 266 280 1.04 1.43 0.154 0.345 71 2 82 0 1996 21 7.0 7.1 8.7 4 5 39 140 1.88 3.56 0.030 0.050 61 2 82 _ . Source: CETESB. 0 CD a CD w Appendix 4.2: Organic Pollution Loads Discharged In Water Bodies In 1988 Pot*nWV-oI Lad (00 t BODIYear R Lo' Region State lndustry Urban Rural Cattle Rural Urban Total Diffse Rural Diffuse U- ont t Ur Sewage Sewage Ru-off Ru IC b ( r S _ North PA 11.532 48.098 45.540 166.772 321.836 12.210 605.988 534.148 12.210 59.630 9.948 37.665 o MA 47.265 34.578 57.091 180.412 70.134 5.180 394.660 307.637 5.180 81.843 14.678 30.345 CE 29.640 71.957 44.859 230.831 241.700 34.830 653.817 517.390 34.830 101.597 22.470 50.663 North- PE east 209.107 97.927 42.367 151.607 97.810 22.010 620.828 291.784 22.010 307.034 51.781 92.753 > BA 3 44.885 122.527 95.255 427.577 584.374 21.830 1.296.448 1.107.206 21.830 167.412 10.907 103.600 C Center- GO West 49.048 65.622 18.087 626.167 494.412 9.290 1.262.626 1.138.666 9.290 114.670 30.236 63.994 MG 212.036 218.601 80.240 1.091.010 880.640 36.700 2.519.227 2.051.890 36.700 430.637 150.283 217.292 ES 37.526 30.288 13.601 95.842 83.202 810 261.269 192.645 810 67.814 18.611 26.991 South- RJ 81.599 247.496 13.407 127.394 57.088 64.640 591.624 197.889 64.640 329.095 39.695 181.766 East SP 999.999 569.103 47.633 643.863 412.550 79.510 2.752.658 1.104.046 79.510 1.569.102 65.800 514.149 PR 321.064 118.171 48.641 461.043 312.332 87.630 1.348.881 822.016 87.630 439.235 80.601 95.980 South SC 60.988 51.144 26.997 334.492 126.250 4.510 604.381 487.739 4.510 112.132 45.577 31.810 RS ______ 101.185 121.480 44.135 513.994 491.730 58.060 1.330.584 1.049.859 58.060 222.665 53.644 83.193 Total 2.205.874 1.796.992 577.853 5.051.004 4.174.058 437.210 14.242.991 9.802.915 437.210 4.002.866 594.231 1.530.201 Source: Leal, 1997. so0 70 Brazil: Managing Pollution Problems - Annexes Brazil: Managing Pollution Problems - Annexes 71 5. POLLUTION CHARGES AT THE RIVER BASIN LEVEL' SUMMARY OF ISSUES AND RECOMMENDATIONS ISSUES AND PROBLEMS Water and pollution charges levied and invested at the river basin level are a crucial element of the new water resource management framework. Pollution charges have both an incentive and a revenue function. However, the revenues from a pure incentive charge are likely to be higher than financing needs. At the same time, the charge would not be affordable for the sanitation sector. A two step-charge with tradable emission al- lowances would provide the right incentives for polluters while raising the desired level of reve- nues. A simulation for the Rio Paraiba do Sul illustrates the choices in the design of charges. A full incentive charge would reach US$ 1,100 per ton of BOD at 50% of abatement, raise revenues of about US$ 100 million per year and could finance the necessary investments. However this charge would not be affordable for the sanitation sector. In contrast, a pollution charge to fi- nance only system administration would start at US$ 12 per ton of BOD and later reach US$ 150. In this case, capital for investments would have to come from outside the system. In a more realistic intermediate scenario, first-step charges would be set at US$ 200 per ton of BOD. This charge would initially raise US$ 30 million per year which would finance 75% of invest- ments. This scenario could lead to 78% abatement after 15 years and would be affordable to polluters. S TRA TEG Y AND RECOMMENDA TIONS A (low) administrative charge appears preferable if outside capital is available and sanitation companies have the clout to raise household tariffs to the necessary levels. A system with higher charges would spread the burden of treatment investments by individual companies. In principle, the benefits of a low-charge system in which polluters are fully responsible for fi- nancing their control investments appear to outweigh the benefits of a high-charge system with investment financing from revenues. In practical terms, however, many sanitation companies do not have the necessary access to outside financing, and a high-charge system may be the only path toward available. If this is the case, financing from external sources, such as the World Bank Group, can assist in tilting the balance toward a lower charge system which ultimately has a higher chance of successful implementation. INTRODUCTION agement strategy for Brazil: (a) water re- sources are managed in an integrated man- 5.1 Over the last years, relatively broad ner across water users and sectors; (b) water consensus has been achieved on the princi- resources are managed at the lowest appro- ples of an integrated water resource man- priate level, usually thie river basin; and (c) water is treated as an economic good whose This paper was prepared by Joachim von use has an opportunity cost. Amsberg with contributions from Gordon Hughes. 72 Brazil: Managing Pollution Problems - Annexes 5.2 After several States have passed nues from these charges would remain un- water resource laws that follow these broad der the control of the basin committee. The principles of integrated water resource man- decision to retain revenues in the basin and agement, the federal level has followed with not channel them through public budgets is a similar national water resource law (Law important for overcoming resistance by wa- No. 9,433 of January 1997). Most of these ter users, generating confidence that charges laws foresee the formation of river basin will be used to generate benefits locally, committees composed of representatives of thus, increasing the likelihood that charges all river users as decision making entities at will actually be collected in the first place. the level of the river basin. River basin agencies would be the executive arm of the system, implementing the decisions of the Conceptual Issues basin committees. Water resource councils 5.6 Pollution charges, levied on emis- at the state and federal levels would oversee sions that enter water bodies -- untreated the management arrangements at the basin effluent or residual emissions after treatment level. -- have an incentive and a revenue function. In terms of the incentive function, polluters 5.3 While discussions of water re- will control emissions up to the level at sources management in Brazil have tended which marginal abatement costs are equal to to focus on issues of water allocation within the per-unit-of-pollution charge. In order to river basins, the structure that is proposed provide the right incentives to polluters, can be used to meet much broader concerns. pollution charges per unit of pollution would In particular, it allows for the integration of have to be set at the level of marginal envi- pollution management and coastal zone ronmental damage costs (Pigouvian management with river basin management. Charges) or, in the absence of such infor- As such, the creation of the new institutional mation, at the level of marginal abatement framework for water resource management cost at the level (of abatement) that corre- is both an opportunity and a challenge for sponds to emission reduction targets. more effective pollution management. 5.7 In the example shown in Figure 5.1, 5.4 Based on the broad agreement on a charge of $750 per ton would induce emis- integrated water resource management and sion abatement of around 43%. At this level the legal basis that has been created in se- of aggregate abatement, pollution abatement lected cases, the next set of questions to be will obviously differ drastically between addressed in this section includes the individual polluters. Some polluters would mechanisms for implementation and inte- be able to control all of their pollution at less gration of the new framework with pollution than $750 per ton and would do so in order management instruments. This paper fo- to avoid paying the charge. Other polluters cuses, in particular, on the relation between with abatement costs above $750 per ton incentive and revenue functions of pollution would choose to pay the charge in order to charges and the process of targets setting avoid the higher treatment costs. Marginal and instrument implementation. abatement costs across polluters would be equal, thus ensuring implementation of cost- THE ROLE OF CHARGES effective pollution controls. 5.5 The emerging legal framework for 5.8 If the pollution charge was levied on water resource management includes as a the entire remaining pollution load, the critical element the levying of charges for charge would generate revenues that are water use and effluent discharges. The reve- equivalent to the charge times the quantity Brazil: Managing Pollution Problems - Annexes 73 of remaining emissions (the areas A and B instrument, such as emission standards. The to the right of the abatement cost curve in disadvantage of this approach is the ineffi- Figure 5.1). The revenues generated by such ciency introduced by administratively set- a "full incentive charge" would differ with ting emission standards for polluters with the level of abatement and depend on the different abatement cost curves. Since abatement cost profile of the polluters in a regulators cannot possibly know the abate- specific basin. The revenues from a full in- ment cost curves for each polluter, they are centive charge are the maximum revenues bound to introduce inefficiency in their that can be generated from a pollution regulation. charge at different levels of abatement. However, there is no reason why these 5.10 There are two feasible options to revenues would coincide with the financing combine the efficiency advantage of a full needs at the river basin level. In fact, reve- incentive charge with a specific revenue nues from a full incentive charge will often target and a lower financial burden for pol- be rather high, thus generating unnecessary luters. One option is a system of refunds in resistance against their implementation by which revenues exceeding financing needs polluters who will have to pay this charge in (the area B in Figure 5.1) are returned to addition to the cost of partial pollution polluters according to some criterion other abatement. than emissions. For example, excess reve- nues could be returned to sanitation compa- 5.9 An alternative to a full incentive nies on the basis of population served. The charge is a "pure financing charge." This net charge that each sanitation company charge per unit of pollution would be set to pays would be the difference between its meet specified financing needs but must be full incentive charge and the refund deter- lower than the full incentive charge. This mined on the basis of population served. charge would have no incentive effect since The charges from industrial sources could it is less than marginal abatement costs at be refunded to industry on the basis of, for the desired level. Pollution control targets example, employment or included in the would be implemented through an additional refunds for the sanitation sector, which in Figure 5.1: Charges 1000 900 800 700 - 600 - *-_ 500 r, . Mria ot E 500 B-* Full Incentive Charges .) 300 - I i j !---. Two-Step Charges l 300 -----_- 200 100 - 0 ____ 0% 20% 40% 60% 80% 100% Abatement % 74 Brazil: Managing Pollution Problems - Annexes Figure 5.2: Marginal Cost of BOD Abatement 7000 6000 5000 4000 3000 2000 1000 0 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Abatement % general will face higher treatment costs and charges unless they hold an allowance (in more serious financing problems. tons per year) for first-step charges. Allow- ances for first-step charges would be issued 5.11 The second option is a system of by the system administrator up to the aggre- two-step charges. The charge up to the ag- gate emission targets. They can be allocated gregate emission target would be set ac- by historic pollution load but should be trad- cording to revenue needs while the charge able among polluters in order to ensure an above the aggregate emission target would efficient outcome.2 If regulators miscalcu- be set at the level of marginal abatement late the aggregate pollution abatement cost costs. Figure 5.1 shows the two-step charge curve (which they are likely to do in the be- (at the right, the first-step charge; and at the ginning), they can adjust either the quantity left, the higher second step charge) with the of allowances issued in subsequent years or same efficiency and incentive effect as the the level of the second-step charges. Trad- full incentive charge but revenues equiva- ability of the allowances ensures that pollu- lent to only the area A which can be ad- tion reduction is cost-effective even in the justed by changing the level of the first-step case of error or incomplete information. In charges. Theoretically, the second-step summary, this mechanism results in a com- charge would never be paid and its level bination of charges with a system of trad- would not matter as long as it was above able pollution permits. marginal abatement costs. Practically, how- ever, its level matters since regulators have 5.13 The question at which level first- incomplete information and will likely miss step charges are to be set depends on the the true abatement cost curve. The level of revenue needs and the affordability for pol- the second-step charge would thus serve as an upper limit on costs for polluters in case 2 Allowances could be allocated annually of regulator error. 2 Alwne ol ealctdana1 based on a declining share of historic emis- 5.12 How can two-step charges be im- sions. To avoid windfall profits for low- plemented in practice? In simple terms, all control-cost sectors (industry), allowances would decline faster for industry than for polluters would have to pay the second-step sanitation. Brazil: Managing Pollution Problems - Annexes 75 Figure 5.3: Investment Costs 1200 1000 800 600 /_Sewage . . . . . .Industry 400 200 0 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Abatement % luters. Revenues are needed to operate the sources. This pollution is of concern be- river basin management system including cause the river supplies drinking water not water quality monitoring, planning and a only to the basin population but also to a small administrative staff. In addition, reve- much larger population in the Rio de Janeiro nues are needed for communal investments Metropolitan Area. The following case for the improvement of water quality such study simplifies the problems faced in the as watershed protection measures to reduce basin by focusing entirely on basin-wide non-point run-off of nutrients. In addition, aggregate BOD emissions. revenues can be used to help polluters fi- nance the costs of pollution control invest- 5.15 Basin-wide BOD emissions are cur- ments. Whether the latter use of revenues is rently estimated at 168,522 tons per year, desirable depends on polluters' access to 50.5% of which are from industrial sources outside capital, on the one hand, and the im- and 49.5% from domestic sewage. The es- pact on the affordability of charges, on the timated marginal control cost curve is other hand. shown in Figure 5.2. The total annualized and investment costs for both sectors at dif- A Case Study: The Rio Paraiba do Sul ferent levels of aggregate abatement are shown in Figure 5.4 and Figure 5.3. In this 5.14 The trade-offs involved in setting up specific case, it is noteworthy that industrial a charge system based on the principles out- and sewage control options barely overlap. lined above can be best understood by con- Almost all controls up to 48% of aggregate sidering a numerical example of an impor- load reduction are in industry at a marginal tant river basin in Brazil. The Rio Paraiba do cost of up to US$ 1,000 per ton while most Sul Basin covers an area of 57,000 km2 in the states of Sao Paulo, Rio de Janeiro and Minas Gerais with dense populations (4.8 3 Note that the horizontal axis shows aggre- million people living in the basin) and large gate abatement in the order of cost- industrial concentrations. The river is heav- effectiveness. Sectoral abatement levels ily polluted from industrial and domestic (industry and sewage) may be very differ- ent at the same level of aggregate control. 76 Brazil: Managing Pollution Problems - Annexes Figure 5.4: Annualized Abatement Costs by Sector 200.00 180.00 160.00- . 140.00 - 1 120.00- o 100.00 . -SeOege 680.00 J . . .Irdustiy 60.00 40.00 20.00 _ -. - -4- 1- O0OD/o 10.0% MD2% 30/6 40./o 50.0/o 600%/o 70.00/o 8.0D/o o.o% 1./o AJateTmet % controls over 48% of aggregate load reduc- rate scenarios are not provided since the re- tion are in domestic sewage with marginal sults are identical at the sectoral level.4 costs ranging from US$ 1,000 up to US$ 40,000, for 92% aggregate load reduction. 5.17 Given the relatively small burden Investments of about US$ 90 million in in- that either charge would pose on industry, dustry and US$ 1.19 billion in sewage affordability for industry is not considered a would be required to reach this abatement major issue. Affordability for households, level. Annualized costs (assuming a real however, is a critical issue. In contrast to cost of capital of 10%) would reach up to water supply and sewage collection, sewage about US$ 20 million in industry and US$ treatment does not provide a direct benefit to 230 million in sewage. the households paying for the service since benefits accrue to the downstream popula- 5.16 Four charge scenarios are compared tion at large. Also, and in contrast to indus- below; a full incentive charge, a two step try, sewage treatment charges have no sig- charge with a constant first-step charge, a nificant incentive effect for households two-step charge designed to cover system since there are no options for emission re- administration costs only (administration duction at source. Therefore, the question of costs are assumed to be US$ 2 million per sewage treatment charges for households is year) and a mixed charge that would cover essentially a question of raising the neces- some but not all investment costs. All sce- narios can be implemented through charge 4 At the level of individual polluters, how- refunds instead of two-step charges. Sepa- ever, the outcome may well differ. In par- ticular, the net charge will be higher under a refund system than under a two-step charge for polluters which maintain a higher share in emissions than their share in the refund basis, and vice versa. Brazil: Managing Pollution Problems - Annexes 77 Figure 5.5: Abatement and Affordability under Full Incentive Charge 700.00 100.0% 600.00 90.0% 80.0% 500.00 -- 70.0% I 400.00 60.0% L: .50.0% CostyrIHH Z" 300.00 40.0% ---- Abatement 200.00 30.0% 20.0% 100.00 10.0% .0.0% 0 2 4 6 8 10 12 14 16 Year sary revenues, on the one hand, and af- charging into the basin (assuming an annual fordability, on the other hand. per capita load of 20 kg BOD or 100 kg BOD per year for a five-head household). 5.18 Based on Brazil's average annual household income of US$ 9,000 and a typi- Full Incentive Clharges cal willingness to pay of 5% for water and sanitation services (US$ 450 per year per 5.19 The first scenario assumes a full household at the average household in- incentive charge equal to the marginal come), it is assumed that US$ 100 per year abatement costs at the respective abatement per household is the upper limit of an af- level. Figure 5.6 shows the total annual fordable sewage treatment tariff5 embedded revenues from charges and treatment costs in an overall water and sanitation tariff of up by abatement level. In this scenario, pollut- to US$ 450 per year per household for the ers would pay the sum of both treatment average Brazilian household.6 The three costs and charges on the remaining load. charge scenarios show the costs per year per Note that such a system would generate household calculated as the total of treat- revenues in excess of US$ 80 million above ment costs incurred and the total pollution 43% abatement levels (when charges would charges levied on the sanitation sector di- reach US$ 830 per ton). The generated vided by the number of households dis- revenues would immediately exceed the system administration costs of US$ 2 mil- 5 Throughout this paper "tariff' denotes the lion, thus generating resources that could be payments from households to the sanitation made available to polluters to cover their company. Payments from sanitation com- investment costs. panies and industry to the river basin agency are denoted "charges". 5.20 If the excess revenues of the system 6 were used to finance all pollution control Given Brazil's income distribution, the investments leaving payment of the operat- median household income and affordability ing costs and 10% interest on the capital to threshold will be lower than the average. 78 Brazil: Managing Pollution Problems - Annexes Figure 5.6: Cost and Revenues under Full Incentive Charge 200.00 180.00 160.00 , 140.00 c 120.00 100.00 Charge Revenuesl E ,9 80.00 ~ z Z . . ..... Treatment Costs 60.00 _ 40.00 J,, 20.00 -- 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Abatement % the polluters, a schedule for raising charges main problem of this charge system is that it over time can be determined that would ex- does not generate investment funds. It is actly balance the revenues raised with the only viable if outside capital (at an assumed investments made by polluters. The results cost of 10% per year in real terms) can be are shown in Figure 5.5. High levels of pol- mobilized for the necessary pollution control lution reduction would be achieved very investments. quickly (90% in year 14), however, afforda- bility is a major problem. In year 6, the pol- Constant Charges over Time lution charge would reach US$ 1,000 per 5.22 The third scenario is based on a ton and costs per household would reach the first-step charge constant over time and the threshold of US$ 100 per year, later ex- assumption that all pollution control invest- ceeding US$ 300. At the time when house- ments need to be financed out of charge hold cost reaches US$ 100 per year, pollu- revenues. The level of the constant charge tion abatement of 47% would be achieved. depends on the speed at which control in- Thus, after this threshold is reached, the vestments are desired. For illustration, Fig- system becomes essentially unaffordable for ure 5.8 shows a constant US$ 200 per ton the sanitation sector. charge that would allow reaching a 92% abatement target by year 25. However, the Administrative Charge charge would be affordable for households only until year 15 when a 78% abatement 5.21 The second charge analyzed is a level would be achieved. Note that the cost two-step charge with a first-step charge that for households increases even with constant is designed to cover only the system's ad- charges since increasing abatement costs ministration costs. Since the base of the contribute to the total cost borne by house- charge shrinks with increasing abatement, holds. charges would rise over time from an initial US$ 12 per ton to US$ 150 per ton at 92% abatement (see Figure 5.6). The resulting cost to households would be affordable (less than US$ 100) up to 77% abatement. The Brazil: Managing Pollution Problems - Annexes 79 Figure 5.8: Affordability Under Administrative Charge 200.00 180.00 160.00 140.00 I 120.00 2 100.00 C, Charge/t 2 80.00 / - -- CostIyr/HH 60.00 40.00 20.00 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Abatement % 5.23 Obviously, combinations and modi- returns to the capital accumulated by the fications of the three prototype scenarios are system over the previous years. This would possible. In particular, a higher charge can slow down further emission reductions but be phased in over several years to reduce still provide for gradual further improve- resistance by polluters. Also, charges can be ments. In effect, the river basin would at this set at an intermediate level that is sufficient stage return to polluters the stock of capital to provide some but not all necessary in- accumulated during the initial years. Finally vestment funds. In addition, at the moment differences in treatment between industry when costs to households reaches the af- and sanitation are perceivable. fordability threshold, additional treatment costs would have to be subsidized from the Figure 5.7: Abatement And Affordability Under Constant Charge 300.00 100.0% 250.00 90.0% 200.00 r 'r 70.0% I .,- ' .. S 60.0% I 150.00 50.0% Costlyr/HH ;3 r' .. _ r 40.0% ..----.Abatement 100.00 30.0% 50.00- , 20.0% 10.0% - I I I 0.0% 0 5 10 15 20 25 Year 80 Brazil: Managing Pollution Problems - Annexes MixedAdministrative/Incentive Charges regardless of the charge system adopted. 5.24 A possible pragmatic combination 5.26 A (low) administrative charge ap- of scenarios is shown in Figure 5.9. Here it pears preferable if outside capital is avail- is assumed that 75% of all investment costs able and sanitation companies have the clout have to be financed from charge revenues. to raise household tariffs to the necessary The constant first-step charge is US$ 200 levels. It would clearly lead to less resis- per ton. However, charges for the sanitation tance by polluters against the introduction of sector are limited by the assumed afforda- charges. On the other hand, a system with bility threshold of US$ 100 per year per significant charges that would finance the household. After this threshold is reached in investments has advantages if one considers year 13, only few additional investments can the level of an individual sanitation com- be financed from the now reduced charges, pany rather than the sector as a whole. With essentially limiting abatement to 80% in the higher charges, the burden of treatment in- long-term. vestments by individual companies would be spread between all companies that con- Comparison of Charge Systems tribute through their charges. This spreading of costs is also reasonable given that treat- 5.25 The key considerations in choosing ment benefits water users at large rather between the different charge systems in- than the polluters. As a result, individual clude: (a) the ability to access outside capital companies would be less likely to resist the to finance necessary investments; and (b) need for investing in treatment once it is the acceptability and affordability of charges their turn. Also, higher charges would pro- to polluters and households. The latter point vide a rationale for the necessary early but includes the important question about which gradual increase in tariffs. The advantages system will make it easier for sanitation and disadvantages of the two fundamental companies to raise household tariffs to a approaches are summarized in Table 5.1. level that will allow recovery of the costs of The full incentive charge is not considered sewage treatment. This will be necessary since it is fundamentally unaffordable. Figure 5.9: Abatement And Affordability Under Mixed Charges 120.00 100.0% 90.0% 100.00 80.0% 80.00 .. 70.0% 60.0% 60.00 . 50.0% - Cost/YrlHH ° !.- H 40.0% . --- Abatement 40.00 - 1 X << 30.0% A 20.0% 20.00 ..20% 10.0% .-I . I 0.0% 0 5 10 15 20 25 Year Brazil: Managing Pollution Problems - Annexes 81 Table 5.1: Advantages And Disadvantages Of Low And High Charges Advantages Disadvantages Low charges for Less initial resistance against the introduc- Only feasible if investors have access to administration tion of charges outside capital only No danger of river basin agency becoming Drastic increase in tariffs necessary at the an inefficient and politicized banker time treatment is introduced in a specific system may lead to resistance by house- No danger of subsidies implicit in financing holds mechanism High charges to Tariffs can be raised gradually since treat- High charge may lead to resistance by pol- finance invest- ment costs for individual systems are luters ments smoothed over time River basin agency could become an ineffi- No, or less, need for outside capital cient and politicized financial agent Danger of implicit subsidies messing up incentives 5.27 From a purist point of view, the ants other than BOD and locational aspects benefits of a low-charge system in which will have to be incorporated into the charge polluters are fully responsible for financing system. In this respect, a trade-off between their control investments appear to outweigh simplicity and economic efficiency will the benefits of a high-charge system with have to be made under highly incomplete investment financing components. In practi- information. Initial charges would probably cal terms, however, many sanitation compa- be based on an index of a small number of nies simply do not have the necessary access key pollutants differentiated only by a small to outside financing, and a high-charge sys- number of geographic zones, or sub-basins. tem may be the only path toward cost- The index would be developed based on effective pollution control. If this is the case, broad water quality targets applied to a financing from external sources, such as the crude water quality model. All of the ana- World Bank Group, can assist in tilting the lytical elements would be refined throughout balance toward a lower charge system which the process. ultimately has a higher chance of successful implementation. RELATION TO OTHER INSTRUMENTS AND 5.28 Regardless of the aggregate level of INSTITUTIONS charges, a choice has to be made between 5.30 River basin committees would have the use of two-step charges or charge re- responsibility for a variety of matters, but funds to match charge revenues with expen- one of the most important would be the ditures. Given the practical complications management of water quality within the ba- that a system of tradable pollution allow- sin. The basin committee or its agency ances is likely to imply, a refund system would develop a water resource and water appears to be preferable if agreement can be quality management plan for the river basin. achieved on the appropriate basis for charge This plan would be presented for approval refunds, i.e. population served, to the responsible State agency. The ap- proved plan would constitute an agreement 5.29 The simulations i thi that would specify: (a) levels of ambient paper are obviously a simplification of the waequlttobacivdndfert real choices that will have to be made in the par oflth rv basie.g. n morent Paraiba do Sul Basin. In particular, pollut- parts of the river bas -- e.g. not more than 82 Brazil: Managing Pollution Problems - Annexes 10% of the length of the Pirai river should action open to the State. First, the river ba- have a level of BOD exceeding 10 mg/I; (b) sin committee may have achieved the agreed the date by which these targets are to be met targets for load reduction but this did not together with, if appropriate, intermediate have the anticipated impact on water quality. water quality goals; (c) general targets for In this case the two bodies would have to the reduction of pollution loads required to renegotiate the agreement, extending the meet the ambient water quality goals;7 and time allowed to meet the quality targets and (d) the measures that the river basin com- setting a new set of load reduction targets. mittee intends to implement in order to Alternatively, the river basin committee may achieve the water quality targets (to ensure have failed also to meet the load reduction that they are consistent with other State en- target in which case some collective penalty vironmental policies). The agreed dynamic would be imposed on the users in the river targets for water quality would replace the basin -- probably in the form of an increase rather rigid and static classification of water in the effluent discharge fee for as long as bodies that is currently applied. the load reduction targets are not met. 5.31 After reaching an agreement with 5.33 It should be recognized that the pro- the responsible State agency, the river basin cess of arriving at an agreement on aggre- committee would proceed to develop and gate targets is likely to be a time-consuming implement the outline measures specified in and difficult one. River basin committees, the agreement. These may include: (a) the on behalf of their users, may have an incen- introduction or adjustment of effluent tive to delay the finalization of such agree- charges, (b) varying discharge permits for ments, so the environmental agency must individual point sources, (c) financing in- have the ultimate power to impose interim vestments for wastewater treatment plants targets if negotiations continue beyond some by large polluters, (d) constructing commu- reasonable time period and to impose penal- nal wastewater treatment plants for groups ties for failure to abide by these targets. of municipalities, and (e) undertaking water- shed protection measures such as re- 5.34 Moving to a full system of river ba- forestation to reduce non-point run-off of sin management is likely to take many nutrients, etc. The finance for capital proj- years, but it is possible to introduce a num- ects may be obtained from the fund which ber of transitional measures that will both receives all revenues from effluent dis- accelerate the process of forming river basin charge fees. management committees and reaching the environmental management agreements. 5.32 If the intermediate or final water One important issue is the potential incen- quality targets specified in the agreement tive to resist the formation of a river basin with the State environmental management committee on the grounds that this will lead agency are not met, there are two courses of to the imposition of effluent discharge fees. Thus, the states must take the power to in- 7 troduce a uniform effluent discharge fee on While this might appear to over-determineoitsuc.Schafewldblvedn the actions to be taken by the river basin . . committee, the discussion of load reduction all plants, municipalities, water and sanita- targets provides a basis for avoiding con- tion companies, and other bodies which dis- flicts that may arise if the environmental charge water pollution above the threshold and river basin agencies have very different either to surface or ground waters unless models of the relationship between emis- their discharges were regulated by a river sions and ambient water quality in the river basin agency for the relevant river basin basin. Brazil: Managing Pollution Problems - Annexes 83 (which would also use effluent discharge can be pursued. One option is for the state fees as one of its instruments). environmental agency to retain responsibil- ity for the entire licensing process but re- 5.35 Pollution management instruments places the current emission standards, etc., applied at the level of the river basin have to applied in the licensing process with the pa- be closely coordinated with those applied by rameters on emissions and charges estab- State environmental agencies. In particular, lished by the river basin committee. The the relation to environmental licensing needs other option is for river basin agencies to to be carefully considered. The relationship take over the water pollution related aspects between the river basin agency and the pol- of the licensing process. In this case, the luter cannot replace environmental licensing river basin agency would prepare the appli- since the environmental impact of a polluter cable (sub-) license for polluters discharging may include aspects outside the responsibil- into the river basin. Both arrangements ap- ity of the river basin agency. On the other pear feasible as long as clear rules of the hand, the licensing process needs to be game and unambiguous responsibilities are compatible with the rules and instruments established and the actions of both entities implemented at the river basin level. In this are consistent and coordinated. Legal con- case, the river basin committee would de- siderations may ultimately decide which termine the basic parameters on which the option is preferable. In particular, it would relevant aspects of environmental licensing be desirable that the agency responsible for would be based. preparing a license also has the legal power to enforce its conditions. 5.36 In terms of institutional arrange- ments, there are basically two options that 84 Brazil: Managing Pollution Problems - Annexes Brazil: Managing Pollution Problems - Annexes 85 6. URBAN ENVIRONMENTAL MANAGEMENT' SUMMARY OF ISSUES AND RECOMMENDATIONS v UE;S AND ROBLEMS There are currently no consistent mechanisms for cross-jurisdictional strategic environmental planning or coordination of environmental service provision in metropolitan areas in Brazil (ei- ther inter-municipal or metropolitan-wide). There is no single federal government agency that deals specifically with urban and metropoli- tan environmental issues, or with metropolitan issues generally. There is significant disparity in income levels, tax base, service provision (in both quantity and quality), institutional capacity, and environmental awareness between the central and peripheral municipalities in Brazilian metropolitan areas. Information on urban brown pollution problems is inadequate. Inter-municipal environment-related interventions (e.g., in the area of solid waste) continue to be adversely affected by political factors, specifically periodic changes in municipal administrations due to the regular cycle of local elections and because of differences in the political party affilia- tions of state and local officials, on the one hand, and among municipal authorities in each met- ropolitan area, on the other. ''9i ~ ~ STATG V;'s s -.;-.. YAND RECMMENDATIONS - . . .:.. ; Urban environmental management should start with an analysis of the underlying problems on a citywide basis, careful identification of alternatives and definition of priorities for public and pri- vate sector action, and the selection of cost-effective interventions. Greater attention should be given to the institutional and financial dimensions of urban environ- mental service provision, particularly at the municipal level, including the development of ade- quate normative, operational, and financial frameworks, and the creation, strengthening, or con- solidation of the appropriate agencies. The substantial human and financial resources and comparatively long time horizons required for the attainment of many urban environmental goals and the political sensitivity of many envi- ronmental management decisions should be clearly recognized and taken into account in for- mulating and implementing urban environmental strategies and lending operations. Key preconditions for successfully dealing with urban environmental problems: (a) an active and informed public; (b) a solid information base on the nature, extent, and associated costs of local environmental problems; (c) systematic analytical and participatory mechanisms for defining and building consensus around local environmental priorities; and (d) adequate local technical, institutional, and financial capacity to design, coordinate (especially across municipal bounda- ries), and implement cost-effective solutions to priority problems, and to monitor and evaluate the results of these interventions. Environmental services in low income neighborhoods should be improved. Define roles of federal, state, metropolitan, and municipality governments in regard to urban pollution problems. I This paper was prepared by John Redwood 86 Brazil: Managing Pollution Problems - Annexes INTRODUCTION ropolitan areas in Brazil (either inter- municipal or metropolitan-wide). However, 6.1 In most metropolitan and urban ar- different institutional arrangements have eas in Brazil,. the principal environmental evolved or are evolving in each of the vari- problems (to varying degrees) are: ous metropolitan regions with Recife and Belo Horizonte illustrating two quite differ- (a) surface and groundwater pollu- ent approaches. tion due to poor basic sanitation, particularly (b) There is no single federal gov- inadequate domestic sewage collection and(bThrisnsngefdalov treatment, and inadequate solid waste col- ernment agency that deals specifically with lection and disposal; urban and metropolitan environmental is- sues, or with metropolitan issues generally; (b) flooding and landslides due to several federal agencies, however, deal with poor drainage and the location of low- key urban environmental issues, especially: income (and generally informal or illegal) (i) the Secretariat of Urban Policy settlements (favelas) in high risk areas (ar- (SEPURB) in the Ministry of Planning and eas de risco) from an environmental stand- Budget (MOP), which focuses on housing point; and basic sanitation infrastructure and is responsible for the national component of (c) air pollution from vehicular, in- the Brazil Water Quality and Pollution Con- dustrial and other sources (particularly in trol Project (Loan 3503-BR, approved in Sao Paulo and, to a lesser extent, Rio de Ja- June 1994) known as "PQA"; (ii) the Insti- neiro and Belo Horizonte); and tute of Economic and Applied Research (IPEA), also in MOP, which is coordinating (d) noise pollution in central city the preparation of metropolitan environ- areas and higher density neighborhoods. mental diagnostic studies under the Bank- assisted Water Sector Modernization Project 6.2 Some metropolitan areas also have (PMSS) (Loan 3442-BR, approved in De- specific environmental problems due to their cember 1992); and (iii) the Environmental locations or the proximity of particular eco- Secretariat of the Ministry of Environment, nomic activities -- e.g., beach erosion in the Water Resources, and Legal Amazon coastal city of Recife, and mining-related (MMA). In addition, a semi-private entity, pollution in Belo Horizonte. the Brazilian Institute of Municipal Admini- stration (IBAM), which provides training 6.3 The main institutional/political and technical assistance to municipal gov- problems affecting environmental manage- ernments on demand, organized local and ment at the metropolitan level in Brazil are national consultations on sanitation and ur- the following: ban environmental management during 1994 under PMSS and with financial support (a) Except for urban transport in from the IBRD/UNDP/UNCHS Urban some cities (such as Belo Horizonte and Re- Management Program (UMP). cife) and the provision of water supply and sewerage services (through municipal con- (c) There continues to be a signifi- cessions to state water utilities), there are cant disparity in income levels, tax base, currently no consistent mechanisms for service provision (in both quantity and cross-jurisdictional strategic environmental quality), institutional capacity, and environ- planning (or planning for metropolitan de- mental awareness between the central and velopment, more generally) or coordination peripheral municipalities in Brazilian metro- of environmental service provision in met- Brazil: Managing Pollution Problems - Annexes 87 politan areas. This strongly affects their projects. In some cases, local NGOs have capacity to plan, implement, and coordinate also played a relevant role. At the national interventions to improve environmental level, recent efforts to diagnose metropolitan conditions at the metropolitan level. environmental priorities include: (d) In most metropolitan areas (the (a) IBAM, "National Consul- one significant exception being Sao Paulo, tation on Managing Sanitation and the Ur- particularly with respect to air quality), in- ban Environment," (final report 1995). Each fornation on environmental quality, in- of the 14 metropolitan areas and large cities cluding the monitoring of water and air that participated in this process, including pollution sources, is poor. both Recife and Belo Horizonte, produced reports presenting the results of local con- (e) Inter-municipal environment- sultations. The local consultation for Recife related interventions (e.g., in the area of was organized by FIDEM (the Recife Met- solid waste) continue to be adversely af- ropolitan Region Development Foundation) fected by political factors, specifically peri- and that for Belo Horizonte was organized odic changes in municipal administrations by FEAM (the State Environment Founda- due to the regular cycle of local elections tion) and ABES/MG (Minas Gerais chapter (the most recent change in Mayors and mu- of the Brazilian Sanitary Engineering Asso- nicipal legislative bodies having occurred on ciation). January 1, 1997) and because of differences in the political party affiliations of state and (b) IPEA (Urban Policy Coor- local officials, on the one hand, and among dination Unit), as part of PMSS, is currently municipal authorities in each metropolitan coordinating a study entitled "Strengthening area, on the other. Environmental Management in the Metro- politan Regions." This study involves the (f) The above problems have been Recife, Belem, Curitiba, Porto Alegre, Sal- exacerbated by the recent creation of new vador and Sao Paulo (but not Belo Hori- (and, in most cases, even weaker) munici- zonte, Fortaleza or Rio de Janeiro)2 metro- palities within some metropolitan regions politan areas. The first stage of this exercise (e.g. Belo Horizonte, where the number has consists of diagnostic studies involving the reportedly grown from 14 to 24 in recent years). 2 These areas were excluded from the study either because their former metropolitan 6.4 Despite these complicating factors,plnigcornaongeishvebn , , ~~~~~plannmng/ coordination agencies have been several urban, inter-municipal and metro- abolished (Belo Horizonte and Rio de Ja- politan scale diagnostic, sector-specific, and neiro) or because they did not submit a more integrated planning/coordination and preliminary diagnostic study of metropoli- management initiatives are currently under- tan environmental problems (Fortaleza) to way in the various metropolitan regions, as IPEA. See Heitor Matallo Junior, (1996). can be illustrated by recent experience in Environmental problems in Rio de Janeiro Recife and Belo Horizonte. Among the have been the focus of two recent Bank most important elements of promoting im- studies, however: Kreimer, Alcira, et. al., proved inter-municipal if notmetropo"Towards a Sustainable Urban Environ- proved inter-munaiopal, if not metropolitan- ment: The Rio de Janeiro Study," World wide, coordination in terms of environment- Bank Discussion Paper No. 195, March related planning and service provision, how- 1993, and "Brazil - Managing Environ- ever, are Bank and other externally-funded mental Pollution in the State of Rio de Ja- pre-investment (e.g., PQA in Recife) and neiro," Report No. 15488-BR (two vol- investment (PROSAM in Belo Horizonte) umes), August 22, 1996. 88 Brazil: Managing Pollution Problems - Annexes Table 6.1: Summary Data For Eight Largest Metropolitan Regions ' () ) X (_%E)X a : (%t. )...... Sao Paulo 16,567,317 24.4 95.7 85.4 96.3 Rio de Janeiro 10,389,441 44.5 86.5 77.8 79.2 Belo Horizonte 4,623,620 52.0 88.5 69.2 67.8 Porto Alegre 3,757,500 44.1 84.8 79.9 86.0 Salvador 3,134,886 55.1 80.8 53.4 66.8 Recife 2,921,665 54.5 88.2 44.0 72.1 Fortaleza 2,357,100 63.5 68.5 39.2 76.0 Curitiba 2,319,526 38.1 85.8 72.3 84.3 systematic compilation of environmental 6.7 As in other metropolitan regions, quality and service data (step 1), mapping of center-periphery differences in service cov- this information (step 2), and analysis and erage were significant in both Belo Hori- recommendations (step 3).3 The Recife zonte and Recife. Table 6.2 likewise indi- study is being undertaken by FIDEM. cates the distribution of low income families between the central and peripheral munici- METROPOLITAN ENVIRONMENTAL palities. The corresponding figures for Sao PROBLEMS IN BRAZIL: AN OVERVIEW Paulo and Rio de Janeiro are reported for purposes of comparison. 6.5 Table 6.1 summarizes the following data from the 1991 census for the eight larg- 6.8 Planning/coordination agencies for est metropolitan regions (RMs): population, six metropolitan regions, including Recife percentage of family heads who earned less and Sao Paulo, but not Belo Horizonte or than 2 minimum salaries (SMs) -- an indi- Rio de Janeiro, have also provided IPEA cator of urban poverty -- and households with a preliminary ranking of environmental aith access to water supply, sewerage sys- problems based on1 their inlten1sity, spatial tems/septic tanks (sanitation), and solid distribution (localized vs. diffuse), and so- wastemcollection (trash). cial incidence (poor vs. non-poor popula- tions), both for their central municipalities 6.6 Among the eight RMs surveyed, and for those on the periphery. An overall Belo Horizonte ranked third in population, index of environmental quality was then second in water supply coverage, fifth in calculated on the basis of these rankings, relative poverty, fifth in sanitation service with Sao Paulo, Recife and Porto Alegre coverage, and seventh in terms of solid having the lowest ratings (i.e., poorest envi- waste collection. Recife ranked sixth in population, third in relative poverty, third in water supply coverage, seventh in sanitation service coverage, and sixth in solid waste Belo Horizonte ranked fifth and Recife collection 4 sixth among the eight metropolitan regions collection*4 examined. Overall, the eight metropolitan areas fell into two clusters in terms of basic sanitation service coverage, the better sup- 3 The methodology used in these studies is plied "southern" RMs of Sao Paulo, Porto 3 The methodology used in these studies is Alegre, Rio de Janeiro and Curitiba falling essentially that described in Leitmann into one category and the less well supplied (1994). "northern" ones of Belo Horizonte, Recife, 4 When water supply, sanitation services and Salvador and Fortaleza in the other. A solid waster colplecsanitation co ervces c- similar pattern exists with respect to urban solid waste collection coverage were com- poverty levels. bined using principal component analysis, Brazil: Managing Pollution Problems - Annexes 89 ronmental quality) and Curitiba,5 Belem pollution problems being of greater intensity and Salvador possessing the highest in this in the municipality of Sao Paulo than in sur- order. rounding areas, and the reverse occurring with the risk of landslides and natural re- 6.9 In the Recife metropolitan region, source losses due to erosion, deforestation, environmental problems were ranked by and reduction in water availability.6 FIDEM as follows, from most to least seri- ous on the basis of the three dimensions cited above: (1) surface water pollution, 6 Sao Paulo was also one of the cities in- noise pollution, and loss of natural resources cluded in the rapid urban environmental due to the reduction of water availability; (2) appraisal exercise carried out by the Urban groundwater pollution, pollution from in- Management Program, whose overall dustrial emissions, and loss of natural re- methodology and results are summarized in sources due to pressure on remaining native the papers by Leitmann (UMP Discussion forests; (3) natural resource loss due to ero- Papers No. 14 and 15, May 1994) cited sion; (4) pollution from motor vehicle emis- above. For this exercise, an "Environ- sions, (4)apolluatiof omu m soto vehie edis- mental Profile of Sao Paulo" was also pre- siosa, inadequate mndunrical solid wastedisl pared by Josef Leitmann in draft form in posal, inadequate industrial and medical August 1991. Preparation of this profile waste disposal, environmental risks of involved both a local public consultation flooding, fires, and toxic contamination; and process and a "data and criteria-based" (5) environmental risk of landslides. Rank- problem ranking through which priority ur- ings for all of these factors were similar for ban environmental issues were tentatively both central and peripheral municipalities identified. High priority environmental except for the risk of landslides and loss of problems identified through the consulta- natural resources due to erosion, which were tion process in Sao Paulo included: (a) sub- greater for the city of Recife than for the standard housing; (b) lack of urban infra- surrounding municipalities. structure for the poor; (c) settlement of risk-prone areas; and (d) lack of green space. Problems of "medium" priority 6.10 In metropolitan Sao Paulo, by con- were: (a) inadequate sewage treatment; (b) trast, the most serious environmental prob- unprotected water supply; and (c) flooding. lems, according to EMPLASA, are pollution Low priority problems were: (a) vehicular from industrial emissions and from inade- air pollution; and (b) poor transport man- quate disposal of industrial and medical agement. This more analytical approach, wastes, followed by pollution of surface and which sought to rank problems on the basis groundwaters, risk of toxic contamination, of their relative impacts on human health, and loss of natural resources due to the re- economic losses, impact on the urban poor, duction of water availability. Risk of land- irreversibility, and unsustainability of re- slides, erosion, flooding, and fires, in turn, source consumption, in turn, led to the fol- slides,werecosparation,flo andh lres, inpotur. lowing high priorities in the Sao Paulo were comparatively much less Important. case: (a) surface water pollution; (b) envi- Unlike metropolitan Recife, however, there ronmental hazards; (c) forest/agriculture- were important differences between the related problems; (d) hazardous waste; and central city and the periphery, with most (e) poor sanitation. "Medium" priorities identified on this basis included: (a) ambi- 5 The comparatively successful urban devel- ent pollution; (b) solid waste; (c) noise opment and environmental management pollution; and (d) indoor air pollution. Im- experience in Curitiba overthe past several pacts on rural ecosystems and cultural dencades hasin Curiti ver su etof two recent property were identified as comparatively decades has been the subject o t Lent low priorities (see Tables 2.1 and 2.2 in Bank studies: Rabinovich and Leitmann UMP Discussion Paper No. 14). Another (I1993), and Tlaiye and Biller (1 994). key finding of this study, which is clearly 90 Brazil: Managing Pollution Problems - Annexes Table 6.2: Center/Periphery Comparison 0 -t b~~~~~~~~ . . .....t 0 x Belo Hori- 25.0 75.0 97.9 93.4 86.8 63.0 86.7 60.0 zonte Recife 70.0 30.0 94.6 82.7 51.9 37.3 82.5 63.4 SAo Paulo 54.0 46.0 98.4 91.6 91.1 77.0 93.4 93.4 Rio de Ja- 42.0 58.0 97.6 73.0 92.2 60.2 95.7 59.0 neiro 6.11 When all six of the metropolitan ENVIRONMENTAL PROBLEMS/PRIORITIES areas for which data are available are con- sidered, surface water pollution was found REL R N D to be the most serious problem in the Recife, RECIFE Belem and Curitiba RMs, risk of flooding 6.12 The IBAM-sponsored local consul- was reported to be the most important prob- tations on sanitation and the urban environ- lem in metropolitan Porto Alegre, inade- ment (1994) provide further information on quate disposal of industrial and medical critical environmental problems in the Belo Horizonte and Recife metropolitan regions. The reports by FEAM-ABES/MG and FI- Table 6.3: Summary Of Environmental DEM also provide an overview of state and Problems local institutional arrangements and capacity t> MoSt Serios Environin Minas Gerais and Pernambuco for ad- Recife Surface water pollution dressing environmental problems at the met- Belem Surface water pollution ropolitan level. Highlights from these re- Curitiba Surface water pollution ports are summarized below. Porto Alegre Risk of flooding S.io Paulo Inadequate industrial and Belo Horizonte medical waste disposal Salvador Reduction in water avail- 6.13 The local consultation for the Belo ability Horizonte metropolitan region (BHMR) fo- waste was considered the most serious envi- cused on the following priority environ- ronmental issue in metropolitan Sao Paulo, mental problem/intervention areas: basic and reduction in water availability the most sanitation (i.e., water supply and sewerage); serious problem in the Salvador RM (Table drainage and water resource management; 6.3). urban and industrial solid waste; and control of disease vectors. According to the corre- sponding report, water supply and sewerage coverage for selected (generally larger) mu- nicipalities within the metropolitan region are presented in Table 6.4. generalizable to other Brazilian metropoli- tan and large urban areas, was that low- 6.14 As is generally the case in Brazilian income residents have the greatest exposure metropolitan areas, water supply coverage in to environment-related causes of mortality the Belo Horizonte MR is significantly and morbidity, have the least access to greater than that for sewage collection, and health care, environmental infrastructure peripheral municipalities are less well and services, and are most likely to be oc- served than the central city, particularly in cupants of hazard-prone lands. terms of sewerage infrastructure. In the Brazil: Managing Pollution Problems - Annexes 91 Table 6.4: BHMR Water And Sewer dominantly with COPASA's own resources. Coverage Percentages However, additional investments are re- -Munipalit : WaterSupA- XSewerage- quired in order to provide complete cover- ply -(%) - - age to the metropolitan population. The Belo Hon- 93 78 principal persisting obstacles to extending Contagem 93 51 water supply and sewerage infrastructure, Betim 97 35 other than the limited availability of finan- Santa Luzia 87 56 cial resources, include: (a) informal settle- Vespasiano 86 49 ments (invasoes) in risk areas, involving an SosJoseide 95 26 estimated 18,000 families in the metropoli- Lapa tan region in 1994; (b) areas of low demo- lbirite 71 - graphic density; (c) areas subject to erosion; Igarape 97 -- (d) non-urbanized areas; and (e) informal Lagoa Santa 88 -- settlements (favelas and vilas), more gener- Mateus Leme 84 -- ally. Integrated community action and Nova Lima 96 sanitation programs (PACs), which include TOTAL BHMR 93 69 drainage and solid waste, as well as sewer- BHMR, water supply and sewerage services age interventions, have recently been devel- are provided by the state water company, oe y ty COPASA, -under concessions from each of Belo Horizonte as one way of dealing with COPASA, under concessions these probems the municipalities. At the state level, unac- these problems. counted-for-water is a significant problem, 6.16 Given its irregular topography and reportedly representing 35 percent of the history of unplanned/uncontrolled settlement total distributed. There are three major in many areas, parts of the BHMR also face sources of water supply for the BHMR: (a) serious drai,age problems. These are being Rio das Velhas; (b) Paraopeba; and (c) iso- addressed in the municipalities of Belo lated systems. Some municipal govern- Horizonte and Contagem, which together ments, such as that for Belo Horizonte, have house roughly two-thirds of the metropolitan established formal agreements with population, under PROSAM. In addition, an COPASA to extend water supply to low- inter-institutional Sanitation Group (1994) income neighborhoods (favelas). COPASA was reportedly elaborating a macro-drainage has also developed master plans for water plan for the region, which would include supply and sewerage for the metropolitan actions to rehabilitate degraded areas and region. These were revised in 1994 for the provide environmental and sanitation edu- period extending through the year 2000. cation together with physical works (dredg- 6.15 At present, only a very small per- ing, removal of debris, etc.) to improve lo- centage of the sewage generated in the cal drainage channels. BHMR region undergoes any form of treat- 6.17 It is estimated that roughly 2000 ment. The principal on-going investment in tons of domestic solid waste are produced sewage collection and treatment, which daily in the BHMR. Implementation of a seeks to partially remedy this situation, is new sanitary landfill in Belo Horizonte the Bank-financed Environmental Sanitation Program (PROSAM), described in further (aznaCptoEur)in19,hw ever, has reportedly reduced the average detail below. Expansion of water supply distance required for solid waste vehicles to systems (i.e., construction of additional aq- travel from their collection points by more ueducts) in the eastern and western parts of than half (i.e. from 15.6 km to 6.7 km), as the metropolitan area is being financed pre- well as representing the first such facility in 92 Brazil: Managing Pollution Problems - Annexes Brazil with the capacity to treat leachate. In sewerage coverage for the entire metropoli- addition, the municipality of Belo Hori- tan region in 1994 were reported to be 87.4 zonte, has apparently proposed an integrated percent and 23 percent, respectively. system of urban cleansing (limpeza urbana) in order to "universalize" the service and 6.19 Solid waste production in the RMR reduce costs. This system is based on a was estimated to be on the order of 3,200 German model which includes resource re- tons/day in 1994. However, with the excep- covery and recycling of paper and other re- tion of the city of Recife, which has a spe- usable materials. As of 1994, the BHMR cific municipal enterprise (EMLURB) for contained 14 authorized trash dumps (12 in this purpose, solid waste services in other Belo Horizonte and two in Ibirite) and 134 metropolitan municipalities were reportedly clandestine dumps. Some 300 tons/day of in a state of "collapse" as evidenced by the construction and other debris (out of an es- advancing age and "precarious condition" of timated total production of 1,200 tons/day) trucks and other collection equipment. were being collected by the Belo Horizonte Other urban cleansing services (street municipal government, and a proposal has sweeping, cleaning of parks and beaches, been put forward to establish "voluntary etc.) are also carried out by local govern- delivery sites" (PEVs) to help induce proper ments to the extent permitted by available disposal of such materials. Medical wastes resources. In most cases, some or all of are reportedly buried in a special section of waste collection, transport, sweeping, and the sanitary landfill. Finally, hazardous disposal services are contracted out to pri- solid wastes from larger industries located in vate enterprises (terceirizados). Of the the BHMR are incinerated at seven loca- 2,560 tons/day of domestic solid waste that tions, but collection and disposal of such are collected, 40 percent are deposited, wastes generated by small and medium en- without any kind of treatment, in large open terprises continues to be a problem. air dumps, some of which are used by more than one municipality, together with medical Recife and other types of wastes. Reusable materi- als are generally separated either before 6.18 The local consultation in Recife, wastes are transported to the dumps or at the organized by FIDEM (1994), also focused dump sites by low-income informal sector primarily on basic sanitation services, espe- operators (catadores). As of 1994, just two cially sewerage and solid waste. At the metropolitan municipalities (Olinda and time of the 1991 census, the Recife metro- Itapissuma) had formal recycling programs. politan region (RMR) involved 13 (now 14) 6.20 The principal environmental prob- municipalities and a total population of leis ideiitified at the mip etropolitan level by 2,916,663. The largest municipalities in the local consultation, and which were at- demographic terms (with their respective tributed largely to several decades of rapid 1991 populations) were Recife (1,296,995), poputed growto wer e s o apid Jaboatao (486,774), Olinda (341,059) and population growth, were (in no apparent Jaboaao (86,74), lind (34,059 and order of priority): (a) uncontrolled occupa- Paulista (211,017), which together account tion of hillsides; (b) uncontrolled occupation for more than three-quarters of the metro- politan total. As elsewhere, water supply of mangroves or areas subject to periodic and sewerage services are provided, under flooding; (c) mining activities without ade- concessions from the municipalities, by the quate environmental precautions in urban state water company, COMPESA, and solid areas; (d) clearing of the few remaining ar- waste collection and disposal is carried out eas of forest in the interior of the water- by local governments. Water supply and sheds; (e) discharge of untreated sewage Brazil: Managing Pollution Problems - Annexes 93 directly into local watercourses due to insuf- This has led to a variety of local responses, ficient sewerage infrastructure; (f) discharge as can be illustrated with reference to the of raw sewage into existing drainage canals; Belo Horizonte and Recife MRs. 8 (g) discharge of treated effluents from the existing sewage treatment plant (Cabanga) Belo Horizonte of a quality not compatible with the dilution capacity of the receiving waters (Jiquia, 6.22 The former metropolitan planning Pina, Jordao, Tejipio and Capibaribe Riv- agency in Belo Horizonte, PLAMBEL ers); (h) non-regulated use of groundwater (Planning Superintendency for the Belo resources, resulting in their contamination, Horizonte Metropolitan Region), was abol- salinization and, even exhaustion; (i) dis- ished in 1996 and part of its former staff and posal of urban solid wastes in drainage ca- research activities transferred to the Center nals, mangroves, and vacant lots; and (j) the -for Municipal and Metropolitan Studies at existence of 14 open air solid waste dumps, the Joao Pinheiro Foundation, which is sub- without any treatment, contributing to ordinated to the state Secretariat of Plan- groundwater pollution and the proliferation ning. As its name suggests, however, this of disease vectors, and informal trash col- Center does not focus exclusively on metro- lectors (catadores de lixo) in conditions of politan issues but provides support to mu- extreme poverty (miseria absoluta). nicipal governments more generally, of which there are well over 800 in Minas INSTITUTIONAL ARRANGEMENTS FOR Gerais. The only remaining formal metro- METROPOLITAN ENVIRONMENTAL politan-wide institutions, which are largely MANAGEMENT political in nature, are GRANBEL, a forum of Mayors, and AMBEL (or Metropolitan 6.21 There are few systematic metro- Assembly), established in 1993, which is politan-wide environmental planning and composed of representatives of municipal coordination mechanisms in Brazil, and legislative assemblies and includes a number metropolitan level agencies, more generally, of councils (camaras) that are convened on are in a substantial state of flux. Eight MRs an ad hoc basis to discuss specific topics of (Sao Paulo, Belo Horizonte, Porto Alegre, common interest. Neither of these collegiate Recife, Salvador, Curitiba, Fortaleza, and bodies is reportedly very active at present, Belem) were legally established by the Fed- nor do they generally focus on environ- eral Government in June 1973 and a ninth mental issues. The area of urban transport, (Rio de Janeiro) was added in early 1974, however, provides a partial exception. each with its respective state government- Here, a Regional Transportation Coordina- level planning/coordination agency. How- tion Commission (RTCC) has been estab- ever, most of these agencies were either lished in conjunction with the Bank- formally abolished and not replaced (as in financed Metropolitan Transport Decentrali- the cases of Rio de Janeiro and Belo Hori- zation Project for Belo Horizonte (see sec- zonte, for example) or considerably weak- tion on metropolitan environmental planning ened during the 1980s and 1990s (as is the and management initiatives below). case with Recife), while the 1988 Federal Constitution delegated authority to the states to determine how best to organize public gions in Brazil, see Ferreira de Araujo interventions at the metropolitan level.7 Filho (1996). 8 For recent environmental and pollution- 7 For a discussion of the political- related initiatives in the municipality of institutional aspects of the metropolitan re- Sao Paulo, see Zulauf (1997). 94 Brazil: Managing Pollution Problems - Annexes 6.23 As a result, environmental manage- or Departments, in some cases possessing ment activities in the Belo Horizonte MR professional staff with considerable relevant involve a variety of state and local agencies. experience. One particularly noteworthy At the state government level, in addition to recent local initiative, which has occurred at COPASA, the principal entities involved the instigation of AMDA (Minas Environ- are: (a) the state Secretariat of Planning mental Defense Association), a local envi- (SEPLAN/MG), which is responsible for ronmental NGO, is the creation of a forum coordination of PROSAM (involving the of municipal Environment Secretaries in the municipalities of Belo Horizonte and Conta- Belo Horizonte MR. These officials, who gem); (b) the state environmental council met for the first time as a group in March (COPAM), which is composed in equal 1997 at AMDA's invitation, have now rec- parts of public and private sector, including ognized the need to coordinate local activi- NGO, representatives and has a number of ties in certain areas, such as solid waste very active technical councils (camaras tec- collection and disposal and urban transpor- nicas) to discuss specific environmental is- tation, and agreed to meet on a bi-monthly sues (e.g., water resource management); (c) basis to discuss topics of mutual interest and the state environmental agency, FEAM, recommend joint actions.10 A number of subordinated to the state Secretariat for En- localities, both within and outside the met- vironment and Sustainable Development ropolitan area also have municipal environ- (SEMADES)9 and the executive secretariat mental councils, or COMDEMAs, with of COPAM, is responsible (as in other public and private sector representatives and states) for environmental licensing of pro- deliberative functions similar to those of ductive and infrastructure activities, and COPAM at the state level. provides technical support on environmental management to the municipalities; and (d) Recife the Minas Gerais Development Bank (BDMG), which is the implementing agency 6.25 In institutional terms, the current for SOMMA (Municipal Management and situation in Recife differs from that in Belo Environmental Infrastructure Program), an- Horizonte in that, although technically other Bank-supported program (Loan 3669- weakened, a metropolitan planning agency, BR, approved in October 1993) which fea- FIDEM, continues to exist and is actively tures a credit line and technical assistance to working to coordinate environmental and local governments -- including those in the other interventions among municipalities in metropolitan region -- for investments in a participatory way. The main mechanism basic sanitation and other municipal services for this coordination is the Recife Metro- (see section on metropolitan environmental politan Development Council (CONDERM). planning and management initiatives be- Together with FIDEM and the Recife Met- low). ropolitan Development Fund (FUNDERM), CONDERM forms the "Metropolitan Man- 6.24 At the local level, in addition to the agement System" (Sistema Gestor Metro- enterprises or departments specifically re- sponsible for solid waste services, most mu- nicipalities have Environment Secretariats l The municipalities which have more active environmental Secretaries (Belo Horizonte, Betim, Brumadinho and Nova Lima) also 9 Formerly the state Secretariat of Science, see this forum as a way of raising the envi- Technology and Environment (SECTMA), ronmental awareness and increasing the ef- whose name was changed in December fectiveness of their colleagues in other parts 1995. of the BHMR. Brazil: Managing Pollution Problems - Annexes 95 politano), which was established by law in and approves an annual metropolitan action 1994.11 plan, which indicates specific investments for economic and tourism development, 6.26 CONDERM is a deliberative and transportation, sanitation and environmental consultative council, which is formally protection, social development, and metro- linked to the state Secretariat of Planning politan planning and management.13 (SEPLAN/PE). It is composed of all (14) Mayors in the RMR, together with an equal 6.27 In addition to SEPLAN/PE, CON- number of representatives of the state gov- DERM, FIDEM, and COMPESA (Compan- emnment, who are nominated by the Gover- hia Pernambucana de Saneamento), as in nor, all with the right to vote (deliberative Minas Gerais, the state Secretariat of Sci- members). In addition, its "consultative ence, Technology and Environment members" (who do not posses the right to (SECTMA/PE) and the state environmental vote) include one representative of each agency, CPRH (Companhia Pernambucana municipal legislature and three representa- de Controle da Poluicao Ambiental e de tives of the state Legislative Assembly. Administracao dos Recursos Hidricos), are CONDERM is chaired by the Secretary of directly involved in metropolitan environ- Planning with FIDEM as its technical sec- mental management through environmental retariat. Its functions are to: (a) determine licensing, industrial pollution control, and activities, enterprises and services that rep- other activities. SEPLAN/PE is also taking resent public functions of metropolitan-wide the lead on water resource management ac- interest; (b) establish policies and guidelines tivities in the state, including ongoing Bank- for metropolitan region development and financed basin studies for four rivers that standards for public service performance; traverse the metropolitan region (see section (c) encourage integrated action on the part on PQA below). FIDEM and CPRH like- of the agents involved and supervise the wise participate in this initiative. execution of public functions of common interest; (d) decide on initiatives to elaborate 6.28 The municipality of Recife is simi- plans, programs and projects; and (e) com- larly active in environmental improvement ment on proposals regarding metropolitan- efforts through its Secretariat of Urban and wide planning instruments. CONDERM is Environmental Planning and the municipal organized into a number of sectoral techni- enterprise responsible for solid waste col- cal councils (Camaras Tecnicas Setoriais) lection and disposal and other urban for: (a) plans and projects for urban devel- cleansing activities (EMLURB). A number opment and territorial organization; (b) so- of environmental projects are currently un- cial development; (c) transportation; and (d) der development by the municipal govern- environment and basic sanitation. These ment, most notably a proposal for IDB councils are each composed of six repre- funding for basic sanitation and other im- sentatives from the public sector and six provements in the Tejipio and Jordao River from civil society in order to ensure "equi- Basins (see paragraph on metropolitan envi- librium in terms of participation" and create ronmental initiatives below). As in the "an intergovernmental model of shared re- BHMR, however, other metropolitan mu- sponsibility."12 CONDERM also considers " For further information on this system see Planejando o Futuro Metropolitano" FIDEM (1997). ("CONDERM is Planning the Metropolitan Future"). 12 The above information is drawn from a 1 3 pamphlet entitled "o CONDERM Esta See, for example, CONDERM (1996). 96 Brazil: Managing Pollution Problems - Annexes nicipalities have considerably less environ- to protect the das Velhas River, into which mental management capacity. the Arrudas and Onca Rivers flow. The project, whose total cost was estimated at CURRENT METROPOLITAN ENVI- appraisal at US$ 307.6 million and was RONMENTAL PLANNING AND MAN- awarded a Bank loan of US$ 145.0 million AGEMENT INITIATIVES in January 1993, has five main components: (a) flood control and urban drainage; (b) municipal and industrial sewage collection Belo Horizonte and disposal, including the construction of two sewage treatment plants on the Arrudas 6.29 Except for the recently created fo- a .. . . ~~~~~~and Onca Rivers; (c) municipal and indus- rum of municipal environmental secretaries trial solid waste disposal and collection; (d) and, for urban transport, the Regional environmental protection and urban land Transport Coordination commission-- use; and (e) river basin management, in- (RTCC), there is no systematic mechanism c d a at the metropolitan level in Belo Horizonte a prpslopest a sinComittee a proposal to establish a Basin Committee for the development and implementation of and Agency for the Rio das Velhas. 14 Once environmental strategies and action plans. all project investments are completed, it is Several state government, inter-municipal expected to have a substantial positive envi- and local initiatives are, nevertheless, wor- ronmental Impact both by reducing domestic thy of note. At the state government level, and industrial water pollution and by im- the PROSAM and SOMMA programs, to- proving water resource management in the gether with FEAM's efforts to orient mu- Arrudas/Onca/das Velhas basins. It is also nicipalities with respect to environmental expected to improve solid waste collection management, both in the metropolitan area and disposal in Belo Horizollte and Conta- and elsewhere in the state, have already em 15 been mentioned, but should be described in somewhat further detail, as should innova- tive state and municipal (Belo Horizonte) SOMMA legislation and a Bank-supported project for improvements in the metropolitan transport 6.31 The Municipal Management and system (Loan 3916-BR, approved in June Environmental Infrastructure Program, 1996). whose principal executing agency is BDMG, has as its principal objectives to: (a) PROSAM 14 For additional information on the proposed 6.30 The Environmental Sanitation Pro- das Velhas River Basin Agency, see a gram is coordinated by SEPLAN/MG, with PROSAM newsletter recently issued by active involvement of other state agencies SEPLAN/MG (Volume 1, No. 1, March such as FEAM and COPASA and the mu- 1997). nicipalities of Belo Horizonte and Conta- 15 Additional information on the design and gem. Its general objective is to assist the implementation of this project can be found state of Minas Gerais in developing a cost- in the Staff Appraisal Report (No. 10805- effective approach to control water pollu- BR, dated December 1, 1992) and in peri- tion. Its specific objective is to rehabilitate odic Bank supervision reports, as well as in the environmentally deteriorated urban ba- a document issued by the Government of sins of the Arrudas and Onca Rivers in the Minas Gerais entitled "Programa de BHMR and, beyond the metropolitan area, Saneamento Ambiental," Belo Horizonte, BHMR an, beyon the meropolitn area,October 7, 1996 Brazil: Managing Pollution Problems - Annexes 97 strengthen municipal financial management viding orientation in environmental man- in support of recent state decentralization agement to municipal governments, includ- reforms; and (b) improve environmental ing those in the BHMR. This is part of management, through development of a co- broader environmental education activities, herent state strategy for local provision of which take several forms including training water and sewer services, investment in pri- courses for local officials and preparation of ority basic sanitation infrastructure, and guidance documents with assistance from provision of technical assistance and train- the Environmental Sanitation Department of ing for municipal administrations in envi- the Federal University of Minas Gerais ronmental management. The project, which (DESA/UFMG) and financial and technical has an estimated total cost of US$ 333.1 support from GTZ. Thus far, three volumes million and is supported by a Bank loan of of a "Sanitation and Environmental Protec- US$ 150 million, has four main compo- tion Manual for the Municipalities" have nents: (a) institutional development to up- been produced17 and others are under de- grade municipal financial administration and velopment on specific environmental man- improve municipal management and envi- agement instruments (licensing, monitoring, ronmental planning; (b) environmental in- enforcement (fiscalizacao), etc.). FEAM frastructure to upgrade basic sanitation and has also recently (1995) published a manual related services, primarily water, sewerage, targeted primarily at local governments on drainage, solid waste, and street paving and how to dispose of urban solid wastes, with lighting; (c) small pilot programs to test pri- financial support from a large private min- vate sector provision of municipal services; ing company (Belgo Mineira). 18 and (d) studies on the development of a statewide strategy for local provision of water and sewer services and on medium- 17 term options for municipal finance. The These volumes are on the following spe- project is open to all municipalities in Minas cific themes: (a) The Municipality and En- Gerais, including those in the metropolitan vironment (1995); (b) Basic Sanitation . . ~~~~~~(1995); and (c) Environmental Education: region, (as well as to municipal water and/or Basic.Concepts andironenstrument sewerge auhorites an COPAA) aslongBasic Concepts and Action Instruments sewerage authorities and COPASA) as long (1996). They appear to be of excellent as they meet certain eligibility criteria. Thus quality. The one on basic sanitation, for far, however, within the BHMR, only Be- example, has chapters on sanitation and the tim, an important industrial district and the municipality, sanitation and the environ- third largest metropolitan municipality in ment, sanitation and public health, water demographic terms, has made use of supply, sewerage, stormwater drainage, SOMMA resources for an environment- solid waste and public cleansing (limpeza related project, specifically for installation publica), and useful information for mu- of a sanitary landfill. 16 nicipal administrations. IBAM also has a basic guidance document for municipalities entitled "Municipio, Desenvolvimento e FEAM's Support to Municipalities Meio Ambiente," issued in 1992, but the FEAM publications provide more technical 6.32 The state environmental agency, information and appear to be examples of FEAM, gives considerable priority to pro- "good practice" in terms of guidance to lo- cal governments in Brazil. 16 . This publication, which is also an example For further information on this project, see of "good practice," has chapters on the the respective SAR (Report No. 11714-BR, characteristics of solid waste, alternative dated June 21, 1993) and subsequent su- treatment and disposal methods, recycling, pervision mission reports. recuperation of areas degraded by trash 98 Brazil: Managing Pollution Problems - Annexes Innovative State and Municipal Legislation only provides a compensation mechanism for municipalities that possess formal pro- 6.33 In addition to being one of the first tected areas, but also creates an incentive to states in Brazil to adopt water resource leg- reduce pollution (and associated public islation, Minas Gerais has also gone farthest healtil risks) by improving their basic sani- in using fiscal incentives to induce munici- tation services.21 The municipality of Belo palities to improve environmental manage- Horizonte has also hiad its own environ- ment. Like several other states, including mental legislation (Lei Ambiental) since De- Parana, Sao Paulo and Rio de Janeiro, Mi- ceinber 1985. Among other provisions, this nas Gerais uses an instrument known in law specified the functions of the Municipal Brazil as ICMS Ecologico to transfer (value Environment Secretariat (created in June added) tax revenues to municipalities which 1983) and established the Municipal Envi- have legally established conservation units ronmental Council for Belo Horizonte.22 in their territories.19 In Minas Gerais, ac- cording to legislation approved in December Metropolitan Transport Decentralization 1995 (Law No. 12.040, known locally as the Project "Robin Hood Law"), among the criteria utilized to determine how the 25 perceilt of 6.34 This project, approved in June 1995, resources returning to the municipalities involves a total cost of US$ 197.3 million would be channeled are the existence of and a Bank loan of US$ 99 million. It seeks conservation units that are formally regis- to: (a) develop an integrated urban transport tered with SEMADES and the existence of system for the BHMR under a Regional solid waste disposal and/or sewage treat- Transportation Coordination Commission ment disposal systems licensed by (RTCC);23 (b) complete the decentraliza- COPAM.20 This legislation, in short, not SOMMA, the municipality of Betim has al- dumps, organization and administration of ready been declared eligible to receive an solid waste treatment and disposal services, additional ICMS transfer of US$ 2 million environmental licensing, and relevant state in 1998 under the provisions of this law. (COPAM) regulations in this area. 21 Details on this legislation can be found in a 19 ICMS refers to the Tax on Operations in- recent (March 1997) publication by FEAM volving the Circulation of Goods and Pro- entitled "ICMS Ecologico." In addition to vision of Interstate and Inter-municipal the existing law, FEAM is presently devel- Transport and Communications Services. oping draft legislation (known as the Under the 1988 Federal Constitution, 75 "Robin Hood Law II") to establish tax pen- percent of the proceeds of this tax collected alties for municipalities that do not prop- in each state are allocated to state govern- erly protect environmentally sensitive areas ments to help finance their operations and (areas de risco) and to reward those that investments and 25 percent are distributed develop action plans to reduce pollution. to the municipalities. Of the latter 25 per- This is described by the President of FEAM cent, 75 percent are allocated to the mu- as the "protector or non-polluter receives" nicipalities in proportion to their contribu- principle, or the reverse of the "polluter tions to value added in the state and the re- pays" principle. maining 25 percent are allocated according 22 to the criteria set out in specific state legis- For further information, see "Lei Ambiental lation. do Municipio de Belo Horizonte," 1993. 20 Within the metropolitan region, and pre- 23 According to the draft agreement (con- sumably on the basis of the sanitary landfill venio) to establish RTCC, its overall objec- implemented with financial support from tives are to carry out transport planning of Brazil: Managing Pollution Problems - Annexes 99 tion of the Belo Horizonte Subdivision Recife (STU-BH) of the Brazilian Urban Train Company (CBTU) from the federal to the 6.35 Among the most important envi- state and municipal levels; (c) reduce envi- ronmental planning and management-related ronmental (mainly air quality and noise) activities involving the Recife MR are: (a) impacts on the BHMR due to motor vehicles the new regional master plan (plano dire- and promote non-motorized transport tor), which is currently being elaborated modes; and (d) develop special strategies under FIDEM's coordination; (b) solid and actions to improve accessibility of low- waste management studies, also coordinated income populations to employment centers by FIDEM, and water supply and sewerage and health and education facilities. The service management studies for the munici- project consists of three major components: pality of Recife, undertaken under the aus- infrastructure and equipment; environmental pices of the Bank-funded Water Sector and traffic safety; and institutional and pol- Modernization Project (PMSS); (c) diag- icy development. The latter includes: (a) nostic and preliminary basin management creation of the RTCC; (b) preparation of an studies for four rivers that cross the metro- integrated Transport Policy, Land Use, and politan regioni, coordinated by SEPLAN/PE, Air Quality Management strategy for the and funded under the national component metropolitan region to meet both transport (PQA) of the Bank-assisted Water Quality and air quality targets and to introduce and Pollution Control Project; (d) the Bank- sound cost recovery, tariff, regulatory and financed (Loan 3915-BR, approved June subsidy policies; (c) implementation of a 1995) Recife Metropolitan Transport De- cost-based financial management system in centralization Project; and (e) existing envi- the STU-BH; (d) development of an ena- ronmental legislation and environmental bling environment and financial instruments sanitation project proposals by the Recife for more substantial participation of the pri- municipal government. vate sector in the investment and operation of the operating agencies; and (e) strength- Metropolitan MasterPln ening of air quality planning and monitoring of vehicle-based emissions.24 6.36 Preparation of this plan, which will be normative and strategic in character, was initiated in 1996 by FIDEM in its capacity as executive secretary of CONDERM and is the BHMR to ensure that state and munici- expected to be completed by the end of pal transport plans and programs are com- 1997. It is being carried out as the metro- patible with metropolitan plans, to define politan scale counterpart to an earlier sus- transport policy and standards, to prioritize taimable development planning exercise un- investmnents, and to coordinate transport in- dertaken for the state as a whole, known as vestment expenditures. As proposed, "Pernambuco 2010,,"25 and has the same RTCC would be chaired by a state Secre- tary and include the municipal Secretary of Transport of Belo Horizonte and the May- 25 See SEPLAN/PE, "Perambuco 2010: Es- ors of all the municipalities that compose SeSPA/E Prabc 00 s the metropolitan region. trategia de Desenvolvimento Sustentavel," Recife, 1996, for details. This exercise was 24 For more detailed information on the de- carried out in the context of a broader stra- sign and implementation of this project, see tegic planning activity for the Brazilian the SAR (Report No. 14265-BR, dated Northeast Region as a whole, known as June 5, 1995) and subsequent supervision "Projeto Aridas." See Ministry of Planning reports. and Budget (MPO)/IPEA (1995). 100 Brazil: Managing Pollution Problems - Annexes time horizon. Its objective is to "provide the Metropolitan Solid Waste, Water Supply various 'metropolitan agents' [e.g., munici- and Sewerage Service Management. palities, state government, civil society] with a policy instrument for metropolitan devel- 6.37 FIDEM contracted the Technical opment that should orient future interven- Association of Pernambuco at the Federal tions both in the urban and rural segments of University (UFPE/ATEPE) to undertake the Recife MR and establish a basis for studies, in consultation with the municipali- shared management of public services of ties, on1 solid waste treatment and disposal common interest (gestao compartilhada de for the metropolitan area.28 On the basis of servicos publicos de interesse comum), con- these studies, FIDEM has recently proposed sidering regional problems and potentialities a management system for the treatment and and observing the principles of sustainable disposal of solid wastes in the RMR.29 This. development."26 The plan will be prepared proposal features six subsystems centered in a participatory manner, through a series around six sanitary landfills (one each in of workshops and seminars, using the secto- Olinda, Itapissuma, Paulista, Sao Lourenco ral technical subcommittees (camaras tecni- da Mata, Jaboatao, and Ipojuca) that would cas setoriais) of CONDERM described receive wastes from neighboring munici- above and focusing on four major themes: palities, to be operated through some sort of (a) urban development and territorial or- state-municipal government partnership ar- ganization (ordenamento territorial); (b) rangement. In parallel to these metropolitan socio-economic development; (c) transpor- scale studies, the city of Recife, using re- tation; and (d) sanitation and environmental sources from PMSS, has contracted studies protection. In addition, specialized consult- for the establishment of a regulatory frame- ants will work with the inter-institutional work and development of a management technical teams in all four areas to ensure and operational model for water supply and that the three guiding principles mentioned sewerage services at the municipal level. in the general objectives of the exercise -- Preliminary diagnostic reports for both of shared management, citizenship (cidada- thiese studies are now available.30 nia), and sustainable development -- are adequately reflected in their deliberations.27 2 F For the results of these studies, see UFPE/ATERPE, "SGRS - Sistema de 26 Gestao do Tratamento e Destinacao dos FIDEM, "Piano Diretor da Regiao Metro- Residuos Solidos na RMR: Concepcao Ba- politana do Recife: Termos de Referencia," sica Operacional, institucional e Fi- Recife, December 1996, pg. 5. This docu- nanceira," Recife, March 1996. ment provides details on the scope and pro- cedures for elaboration of the proposed 29 FIDEM, "Sistema de Gestao do Tratamento master plan. e da Destinacao Final de Residuos Solidos 27 na RMR," Recife, January 1997. Unlike in previous metropolitan planning See, Deoite, Touc at Esale exercises for the Recife MR (which were 30 See, Deloitte Touche Tohmatsu, "Estabele- largely technocratic and "top down" in na- cimento de Marco Regulatorio para a ture), FIDEM's role will be largely one of Gestao de Servicos de Agua e Esgoto no facilitating and providing technical support Municipio de Recife: Diagnostico Inicial," to sectoral diagnoses and priority setting by January 13, 1997, and Condominium, the various thematic teams, all of which "Modelo para Gestao e Operacoes de will include representatives from the mu- Servicos de Agua e Esgotos no Municipio nicipalities as well as state and federal (lo- de Recife: Diagnostico," Recife, January cal representatives) government agencies. 1997. Brazil: Managing Pollution Problems - Annexes 101 Basin Diagnostic and Management Studies Metropolitan Transport Decentralization Project 6.38 With financing under the national component (PQA) of the Bank-assisted 6.39 This project, which is estimated to Water Quality and Pollution Control Project, involve a total cost of US$ 203.8 million SEPLAN/PE, in conjunction with and is partially financed by a Bank loan of SECTMA/PE, the state Secretariat of Infra- US$ 102 million, has objectives and compo- structure, CPRH, COMPESA, FIDEM, and nents which are virtually the same as those FIAM (the Foundation for Municipal De- for the Belo Horizonte Transport Decen- velopment in the Interior of Pernambuco), is tralization Project described above (and thus in the process of contracting comprehensive not repeated here). The one significant dif- diagnostic studies on which to base prepara- ference between the two operations is insti- tion of an environmental sanitation invest- tutional in nature. Instead of establishing a ment program (similar in nature to PRO- new metropolitan level coordination mecha- SAM in the Belo Horizonte MR) for the Re- nism, the Recife project proposes trans- cife MR.31 The primary focus of these forming an existing structure, the Metro- studies and of the future investment program politan Urban Transport Enterprise will be reduction of water pollution and im- (EMTU), into a Regional Transport Coordi- proved water resource management in the nation Commission (RTCC).33 four main river basins (Capibaribe, Be- beribe, Jaboatao, and Ipojuca) that bisect the Environmental Legislation, Policy, and metropolitan area. The two studies that are Environmental Sanitation Projects in Re- presently being contracted are for consoli- cife dation of a diagnosis of water quality and an analysis of alternatives for development of 6.40 Like the city of Belo Horizonte, the metropolitan sewerage and drainage sys- municipality of Recife has its own environ- tems.32 mental policy (1994),34 legislation, and (in this case, Urban and) Environmental Plan- ning Secretariat. It also has a master devel- opment plan (Plano Diretor), formally adopted in 1991, that includes chapters on urban environment and urban services (wa- 31 A preliminary (outline) version of this pro- ter, sewer, drainage, and limpeza urbana).35 gram, under the tentative title of "Recife Recent environment-related legislation of Metropolitan Environmental Project," was relevance includes an environmental code discussed by local officials with a Bank su- and a land use and occupation law for the pervision mission that visited Recife in March 1997. In addition to SEPLAN/PE, COMPESA, and FIDEM, and the other 33 This proposal and other aspects of the proj- agencies that compose the proposed state ect are described in the corresponding SAR coordination unit, implementation of this (Report No. 14264-BR, dated June 5, project would involve the municipalities of 1995). Recife, Olinda, Camaragibe, and Jaboatao. 32 34 See Prefeitura da Cidade do Recife, "Poli- For greater detail, see SEPLAN/PE, "Con- tc eMi minepr iaed ~~~~~~~tica de Meio Ambiente para a Cidade do solidacao e Complementacao de Diagnos- Recife," Recife December 1994. tico sobre Qualidade das Aguas: Termos de Referencia" and "Esgotos e Drenagem da 3 Prefeitura da Cidade do Recife, Plano Di- Regiao Metropolitana do Recife - RMR," retor de Desenvolvimento da Cidade do Recife, April 1997. Recife, Law No. 15.547/91, Recife 1992. 102 Brazil: Managing Pollution Problems - Annexes city of Recife, both of which were formally KEY LESSONS OF EXPERIENCE WITH adopted in 1996.36 In addition to its par- URBAN AND METROPOLITAN ENVI- ticipation in the river basin studies and RONMENTAL MANAGEMENT IN BRAZIL preparation of the proposed environmental sanitation project mentioned above, the mu- 6.41 The Bank has financed a number of nicipality of Recife is developing several projects in urban and metropolitan areas in other environmental sanitation projects, in- Brazil. Many of these operations have had cluding one whose first stage is presently environmental sanitation components, in- under discussion with the Inter-American cluding sewerage (including the use of in- Development Bank (IDB) for possible fi- novative low-cost approaches, such as nancing. This project, known locally as "condominial" sewage systems, in low- PROEST I (Tejipio River Urban and Envi- income urban neighborhoods), drainage, and ronmental Recuperation Program), would solid waste collection and disposal. Urban involve four components: sewage collection transport, both in metropolitan areas and and treatment, solid waste collection,favela other large cities, lhas also been an important relocation and upgrading, and environ- part of the Bank's lending program in Brazil mental education. Its estimated total cost is over the past several decades. Many of US$ 96 million, for which an IDB loan of these operations have been subject to com- US$ 72 million is being sought.37 Beyond pletion reports, OED audits,39 and, in some this, the local government is developing a cases, impact studies.40 project and seeking funding for the recovery of a large heavily polluted reservoir (Apipu- 6.42 While these evaluation studies do cos) and is attempting to implement a num- not specifically address the issue of urban ber of protected areas in ecologically sensi- and metropolitan environmental manage- tive zones within the municipality.38 ment per se, they do contain lessons that are of relevance to it, and to project design and implementation more generally. Bank expe- 36 Prefeitura da Cidade do Recife, "Uso e rience worldwide with urban environmental Ocupacao do Solo da Cidade do Recife," management was likewise one of the sub- Law No. 16.176/96, April 9, 1996 (regu- lated by Law No. 16.289, January 29, 39 1997) and "Codigo de Meio Ambiente e See, for example, OED Project Perform- do Equilibrio Ecologico da Cidade do Re- ance Audit Reports (PPARs) No. 8302, cife," Law No. 16243c96, September 13d "Brazil - Medium-Sized Cities Project 1996. The gove6ment/of Pepambuco also (Loan 1720-BR), December 29, 1989, and recently (January 17, 1997) approved a law No. 10832, "Brazil - Third Urban Transport (No. 11.427) for groundwater protection in Project (Loan 1965-BR); Recife Metro- the state. politan Development Project (Loan 2170- the state. BR); Parana Market Towns Improvement 37 See Prefeitura da Cidade do Recife, "Pro- Project (Loan 2342-BR); and "Northeast grama de Recuperacao Urbana e Ambiental Urban Flood Reconstruction Project (Loan - Bacia do Rio Tejipio - PROEST 1: Sin- 2545-BR)," June 26, 1992. tese do Programa," 1996. 40 OED has recently carried out an impact 38 With respect to the former, an earlier proj- study on several completed urban projects ect document entitled "Revitalizacao do including the Medium-Sized Cities and Acude de Apipucos, 1987-89" is in the Parana Market Towns Improvement Proj- process of being revised and updated by the ects mentioned in the preceding note. A Prefeitura of Recife. As concerns the latter, workshop was recently (April 1997) held in see Prefeitura da Cidade do Recife, "Uni- Brasilia to discuss the results of this study dades Ambientais do Recife." and a report is under preparation. Brazil: Managing Pollution Problems - Annexes 103 jects examined in OED's annual review of measures, should be considered. Both in evaluation results for 1991.41 Among the borrowing countries and the Bank, this im- general conclusions and recommendations plies a need for closer coordination across emerging from these ex-post assessments of infrastructure sectors to achieve greater con- Bank experience with urban environmental sistency in policies relating to urban water management that continue.to be relevant to supply and sanitation, land development, the contemporary Brazilian metropolitan and transport. setting are: (c) The Bank should give greater (a) Given the increasing levels of attention to the institutional and financial urbanization in the developing world, dimensions of urban environmental service greater priority should be given to urban provision, particularly at the municipal environmental issues in general and to urban level, including the development of ade- sewerage, drainage and pollution control in quate norinative, operational, and financial particular, especially in the largest and most frameworks, and the creation, strengthening, rapidly growing cities. or consolidation of the appropriate agencies. Adequate inter-institutional (including pub- (b) Urban environmental manage- lic-private and cross-jurisdictional) coordi- ment should start withi an analysis of the nation, public awareness, and NGO and underlying problems on a citywide basis, community participation, together with en- careful identification of alternatives and hanced local resource mobilization, are definition of priorities for public and private likely to be essential for improved urban sector action, and the selection of cost- sanitation, solid waste management, and effective interventions.42 In general, pre- pollutioni control. vention (i.e., waste reduction, demand man- agement) should be favored over "clean-up" (d) The substantial human and fi- approaches. In dealing with urban environ- nancial resources and comparatively long mental problems, moreover, land use and tine horizons required for the attainment of traffic management, as well as technological many urban environmenital goals and the political sensitivity of many environmental 41 management decisions should be clearly See, OED, Evaluation Results for 1991, recognized and taken into account in for- World Bank, Washington, D.C., March mulating and implementing urban environ- 1993, Chapter IV "Aspects of Urban Envi- mental strategies and lending operations. ronmental Management." This chapter specifically addresses Bank experience in 6.43 Beyond these general lessons, Bank projects completed through the early 1990s e in three main areas: urban water supply and experience with metropolitan development sanitation; solid waste management; and in Brazil (and elsewhere), particularly in the urban-industrial pollution control. problematic Recife Metropolitan Develop- 42 See also, Bartone, Carl, Bemstein, Janis, ment Project, point to the need to avoid in- 42See also, Bartone, Carl, Bernstein, Janis, terventions which are either excessively Leitmann, Josef, and Eigen, Jochen., "To- compextin inioal terms)corsexces ward Environmental Strategies for Cities: . Policy Considerations for Urban Environ- sively "top-down" technocratic approaches mental Management," UMP Discussion to address environmental (and local devel- Paper, No. 18, 1994, and, for similar rec- opment) priorities, once these have been ommendations at the national level, World clearly defined. Current efforts to increase Bank Environment Department, National awareness among local officials (both May- Environmental Strategies: Learning from ors and legislative assemblies), as well as Experience, Washington, D.C., 1995. among the general population, of the human 104 Brazil: Managing Pollution Problems - Annexes health and other costs of pollution and of the agree on a location for a sanitary landfill in need to design and coordinate cost-effective the northern part of the metropolitan region. inter-municipal or metropolitan scale inter- In both cases, lack of coordination among ventions to address critical environmental metropolitan municipalities led to the non- problems, as are presently occurring in both implementation of key environmental sani- the Recife (CONDERM) and Belo Hori- tation facilities. zonte MRs (FEAM, forum of municipal Secretaries of Environment) are clearly STRATEGIC DIRECTION FOR INSTITU- steps in the right direction. TIONAL DEVELOPMENT FOR METRO- POLITAN AND URBAN ENVIRONMENTAL 6.44 Past experience also indicates that a MANAGEMENT lack of inter-municipal cooperation in met- ropolitan service provision can involve sig- 6.45 As the preceding paragraphs sug- nificant costs. Two examples from com- gest, there is likely to be no single "magic pleted Bank urban pollution control projects formula" in institutional terms for address- in Brazil illustrate this. Under the Greater ing urban and metropolitan environmental Sao Paulo Sewage Collection and Treatment problems. However, there appear to be sev- Project (Loan 1525-BR, approved in Febru- eral key preconditions for successfully ary 1978), which was intended to partially dealinig with such problems: (a) an active finance implementation of the metropolitan and informed public; (b) a solid information sewerage master plan (SANEGRAN) pre- base on the nature, extent, and associated pared under an earlier Bank project, three costs of local environmental problems; (c) new sewage treatment plants were to be systematic analytical and participatory built in the northern, southern, and eastern mechanisms for defining and building con- parts of the Sao Paulo MR, respectively. sensus around local environmental priori- Successful operation of the southern treat- ties; and (d) adequate local technical, insti- ment plant required construction of sewage tutional, and financial capacity to design, interceptors by three important municipali- coordinate (especially across municipal ties with their own resources. For a variety boundaries), and implement cost-effective of financial and political reasons, however, solutions to priority problems, and to moni- the municipalities decided to not to build the tor and evaluate the results of these inter- interceptors, resulting in the need to drop the ventions. southern treatment plant and deferring the potential health and environmental benefits 6.46 Of the two cases considered in more expected to be generated under the proj- detail, it would appear that Recife is pres- ect.43 The second example involves the ently farther along this path than Belo Hori- solid waste component of the Recife Metro- zonte, both in terms of institutional ar- politan Development Project which failed to rangements at the metropolitan level achieve its objectives because of the inabil- (CONDERM, FIDEM, etc.) and in terms of ity of the participating municipalities to attempting to develop a broader strategic vision for metropolitan development (new 43 indicative master plan) over the next decade See OED Report No. 7016, PCR for Loan or so, including environmental management 1525-BR, dated November 18, 1987; and priorities. Part of the reason for this is his- OED, World Bank Approaches to the Envi- torical as ofcife w ason or the is his- ronment in Brazil: A Review of Selected torical, as Recife was one of the first metro- Projects, Volume II ("Pollution Control in politan areas in Brazil to establish a metro- Sao Paulo"), Report No. 10039, April 30, politan planning agency (FIDEM) and to 1992, for details. elaborate and attempt to implement (with Brazil: Managing Pollution Problems - Annexes 105 World Bank support) a metropolitan devel- eral municipalities. Given that all of the opment plan.44 However, what was origi- municipal administrations are still relatively nally a technocratic, "top-down" -- and ul- new, this is an opportune time to undertake timately only partly successful -- approach such initiatives. to metropolitan planning has clearly evolved in recent years to a more democratic, par- 6.49 Among thie policy instruments that ticipatory, "bottom-up" approach, in which should be utilized in addressing urban and FIDEM's role has become one of providing metropolitan environmental issues, in addi- technical support to and facilitating dialogue tion to priority investments in pollution between the municipalities that compose the control (including basic sanitation and solid metropolitan region. Recife has also gone waste infrastructure and services)45 are farther than Belo Horizonte in terms of the planning and regulatory measures, including integration of environmental and sustainable land use zoning and building codes, which development concerns in development plan- can result in important environmental bene- ning at the metropolitan level. fits. As the experience in Curitiba over the past several decades clearly demonstrates, 6.47 The Belo Horizonte MR presents an coordinated urban land use and transporta- alternative "model." Here, except in the tion planning can both rationalize the loca- urban transport sector, a metropolitan-wide tion of new urban productive and residential planning agency no longer exists. However, activities (and associated physical infra- a local NGO has recently induced municipal structure investments) and maximize the environmental officials to meet periodically efficiency of collective transport services, to better coordinate their actions at the met- while at the same time reducing vehicle ropolitan level. In addition, the state envi- congestion and associated air pollution.46 ronmental agency, FEAM, actively provides Urban development planning, infrastructure technical assistance and training to munici- provision, and associated legislation, to- palities in key areas of urban environmental gether with appropriate housing policies, management. can also effectively "lead" settlement away from environmental "risk areas," such as 6.48 In both the Recife and Belo Hori- hillsides and low-lying areas subject to zonte MRs, the central cities are also very active in terms of environmental manage- 4 For a systematic discussion of such instru- ment initiatives. However, there is a consid- a see distein ofns, instru- erable imbalance in both environmental ments, see Bernstein, Janis, "Alternative awareness and planning and implementation Approaches to Pollution Control and Waste Management: Regulatory and Economic capacity (as well as in many other respects) Instruments," UMP Discussion Paper, No. between the central and peripheral munici- 3. April 1991. For a more recent discus- palities. Both the metropolitan council ap- sion of policy instruments for environ- proach in Recife and the recently created mental management, see Environment De- Forum of Municipal Environment Secretar- partment, Five Years After Rio: Innova- ies in Belo Horizonte are potential ways of tions in Environmental Policy, Rio + 5 redressing this imbalance, although in both Edition, Draft for Discussion, March 1997. cases targeted institutional capacity building 46 On the experience with urban transporta- efforts are clearly necessary in most periph- tion in Curitiba, in addition to the refer- ences cited in note 4 above, see Campbell, Tim, "Innovations and Risk Taking: The 44 See, for example, FIDEM, Regiao Metro- Engine of Reform in Local Government in politana do Recife: Plano de Desenvol- Latin America and the Caribbean," World vimento Integrado, Recife 1976. Bank, November 18, 1996. 106 Brazil: Managiing Pollution Problems - Annexes flooding, as well as play a key role in the cities. As a result, there are strong comple- preservation of environmental resources and mentarities in policy changes necessary to provision of open space through the estab- address the problems of the urban poor and lishment of urban parks and protected areas. the major environmental problems associ- When properly applied, moreover, urban ated with poor housinig sector perform- zoning and environmental licensing can ance.48 avoid incompatible land uses (e.g., housing and certain types of industry) and minimize 6.51 Among the significant implications the impact of potentially polluting economic of these linkages are that "environmental activities on urban populations.47 and housinig goals can be addressed simulta- neously by good housinig policies."49 6.50 Many urban and metropolitan envi- Granting secure property rights in low- ronmental problems in Brazil and elsewhere are directly associated with an inadequate residential environment, both in terms of 48 World Bank, Housing: Enabling Markets to housing location, quantity and quality and Work - A World Bank Policy Paper, the lack of basic sanitation infrastructure Washington, D.C., April 1993, pp. 31-32. and services. While the focus of most of the Not all of the linkages are positive how- above discussion has been on poor infra- ever. "Land use regulations and infrastruc- structure and services, urban land tenure and ture investment policies have important in- housing also require attention. As a recent centive effects as well as direct effects on the spatial layout of cities. In some cases, Bank policy document affirms, there are the resulting outcomes may diminish access important linkages between housing, pov- to open space, parks, and playgrounds; ag- erty and the urban environment: gravate air pollution associated with com- muting on congested roads; and lead to en- Slums, dilapidated urban neighborhoods, ergy wastage from unnecessarily long and squatter settlements which provide commutes." In addition, "despite good rea- housing to the majority of the urban poor are sons for protecting local environments, and very often th-e places of lowest environ- the best of intentions, implementation of mental quality .... Poor environmental health certain 'environmentally friendly' regula- is a consequence of both inadequate infra- tions has not always been friendly to the structure provision and insecure tenure. 11- operation of urban land and housing mar- structure prvsonadikets, and has, too often, been less effective legal neighborhoods are less likely to be than hoped for in meeting environmental adequately serviced by residential infra- objectives. Greenbelt regulations have of- structure, and households uncertain of their ten unnecessarily restricted the supply of physical security are not only less likely to residential land, leading to high land and invest in improving their housing but less house prices and often, because of high de- likely to invest in improving the quality of velopment pressure, to the elimination of their local environments. Housing policies accessible parks and open space within the that pay inadequate attention to the housing metropolitan area. Unenforceable zoning thatcpayoinditions qathe a io n a therforsscing of large green areas has often been an open conditions of the poor are therefore associ- invitation to squatting, and has thus led to ated with worse environmental conditions in the disappearance of open space. Simi- larly, when artificial shortages of land have 47 been created through inappropriate land use For further information on this topic, see regulations, environmentally fragile areas Bernstein, Janis, "Land Use Considerations have sometimes been assaulted by housing in Urban Environmental Management," developers. " (pp. 32-33). UMP Discussion Paper No. 12, January 1994. 49 Ibid., pg. 39 , Brazil: Managing Pollution Problems - Annexes 107 income urban areas, for example, can lead to * infrastructure provision in sites and increased investment in sanitation facilities services; at both the household and the neighborhood levels with associated environmental and * enhancing the efficiency of the building public health benefits. A second implication industry; is that there is a "clear need for greater un- derstanding of the consequences of envi- * regulatory reform; and ronmental regulations as they affect land and housing markets, but also a need to un- * institutional reform.52 derstand better the environmental conse- quences of housing policies."50 This analy- 6.52 Finally, it is important to remember sis has yet to be done for Brazilian metro- that many metropolitan and urban environ- politan areas and could well be undertaken mental problems require considerable time with federal government coordination. More to solve and that, therefore, in addition to generally, priorities for future lending, with participatory strategic planning and priority a continued focus on the urban poor, that setting, cost-effective interventions, and emerge from the Bank's 1993 review of its adequate coordination across municipal experience in the housing sector5 iniclude: boundaries, continuity of vision -- and ac- tion -- is essential. Such continuity is often * property rights development; difficult given the frequent political- administrative changes at the local level. * enhancement of housing finance; However, experiences such as that of Curi- tiba and CETESB, the state environmental * rationalization of subsidies; agency in Sao Paulo, confirm that it is pos- sible. In both cases, successful outcomes * infrastructure for residential land devel- over an extended period of time have been opment: due to a combination of sustained institu- tional capacity and political support, in- * large-scale trunk infrastructure projects; cluding that of the affected local communi- ties. In the case of CETESB, continued * infrastructure upgrading in slums and World Bank support and that of other exter- squatter settlements; nal agencies has also been a relevant factor. 6.53 A recent Bank study of the Curitiba 50 Ibid., experience identifies three key elements ipg. which appear to have been essential to its 51 Among the key lessons from past Bank positive environmental performance: (a) experience in the housing sector were: (a) policymakers recognized that environmental the macroeconomic and regulatory envi- problems are cross-sectoral in nature and, in ronment is important; (b) the informal translating this recognition into action, housing sector has a significant contribu- proved capable of influencing decisions in tion to make; (c) projects have limited im- different sectors of the local economy by pact; (d) attention should continue to shift taking a multi-disciplinary approach and to the housing sector as a whole; (e) em- successfully integrating environmental con- phasis should continue to shift from proj- cerns into overall urban planning activities; ects to institutional reform; (f) a variety of (b) environmental planning centered on pre- approaches is needed; and (g) past empha- sis of Bank housing lending on the poor is important and should continue. Ibid., pp. 52 58-60. Ibid., pp. 64-69. 108 Brazil: Managing Pollution Problems - Annexes vention rather than correction and clean up, and the participation of non- took complementarities and trade-offs into governmental organizations, both at the account at an early stage, built on a flexible national and the local level, will be rele- regulatory framework, and benefited from vant factors in, and possibly necessary cost-saving approaches, such as market- preconditions for, generating and main- based incentives, and stakeholder participa- taining political commitment to pollu- tion; and (c) the local planning agency was tion control and other environmental able to secure the financial resources neces- preservation goals. 54 sary to fulfill its mandate and to influence overall local government resource alloca- 6.55 CETESB presently possesses the tion, thus ensuring the critical linkage be- technical and administrative capacity, as tween planning and implementation.53 well as the legislative mandate, to success- fully oversee pollution control activities in 6.54 Among the relevant conclusions of Sao Paulo. Bank support over the past dec- an OED study of Bank experience with ur- ade has further strengthened its capabilities ban-industrial pollution control in Sao in this area. It is important to remember, Paulo, in turn, are the following: however, that while CETESB was formally created in 1975, its foundations were laid * [One] major lesson ... is the fundamental with establishmenit of the State Basic Sani- importance of an adequate legal frame- tation Fund in 1968 and a major work, sufficient institutional (including UNDP/PAHO technical cooperation project technical and administrative) capability, on pollution control in the early 1970s. and strong control and other environ- Nearly a decade, therefore, preceded the mental protection efforts. Institutional Bank's first interventions with CETESB, capacity, together with an adequate leg- which was already a fairly well developed islative and judicial framework, is es- institution by the time the initial industrial sential in order to properly design viable pollution control operation was approved and effective pollution control strategies (1980). and to administer the instruments neces- sary to implement these strategies. This, 6.56 All of these lessons are germane for in turn, requires adequately trained per- future Bank efforts to support improved sonnel and proper logistical support, to- pollution management -- and environmental gether with adequately equipped moni- management more generally -- in metro- toring and laboratory facilities and other politan and urban areas in Brazil. Success- installations. ful environmental outcomes will also require a range of complementary actions at the * Strong political commitment to the goals federal, state, metropolitan and municipal of environmental betterment must also levels. Some of these are briefly described be present .... Furthermore ... it is likely below. that the mobilization of public opinion 53 See Tlaiye and Biller, op. cit., pp. 25-26. These three elements were found to char- acterize other successful environmental management experiences in Latin America, such as those of the Corporacion Autonoma del Valle del Cauca (CVC) and the Corpo- 5 racion Autonoma Regional Rionegro-Norte 5 World Bank Report No. 10039, Volume II, (CONARE) in Colombia, as well. op. cit., Executive Summary, pp. x-xii. Brazil: Managing Pollution Problems - Annexes 109 RECOMMENDED ACTIONS AT THE pollution and environmental management FEDERAL, STATE, METROPOLITAN AND issues more broadly in a strategic and cost- MUNICIPAL LEVELS effective way at the metropolitan level. Furthermore, as is now the case in Minas 6.57 The brief survey above of contem- Gerais, they can provide needed technical porary metropolitan and urban environ- guidance and support to local governments mental management experience in Brazil, on urban environmental management issues. with an emphasis on metropolitan Belo Clearly, state water and sewerage companies Horizonte and Recife, provides the basis for (such as COPASA and COMPESA), the following preliminary recommendations whether they remain as government enter- at different levels of public administration prises or are privatized, will continue to be and intervention. important actors in urban and metropolitan environmenital management. However, they Federal will need to improve the administrative, op- erational and financial efficiency of their 6.58 Among the actions that should operations, while giving greater attention to (continue to) be taken at the federal level, the needs of the urban poor and helping to perhaps in collaboration with entities such enhlance urban environmental quality, pri- as IBAM, are: (a) promotion of environ- marily through improved sewerage collec- mental diagnosis/priority setting processes tion, treatment, and disposal. Wherever at the metropolitan and urban levels; (b) possible, the Bank and its borrowers should promotion of interchanges of experience take these factors into account in the prepa- among metropolitan and large urban areas ration of state reform programs, as has re- with respect to alternative instruments for cently occurred in the case of Rio de Ja- and approaches to addressing local envi- neiro. The actions of state water and sewer ronmental problems; (c) financing of pre- utilities also need to be better coordinated investment studies for metropolitan/urban with other urban infrastructure (e.g., drain- environmental management; and (d) devel- age and transport) and solid waste interven- opment and dissemination of guidance mate- tions, as well as across municipal bounda- rials on key aspects of urban environmental ries, at the metropolitan level. Water re- management. There is also a need to better source management at the river basin level coordinate federal government activities and coastal zone management for the ur- involving metropolitan/urban environmental ban/metropolitan region are also areas management among SEPURB and IPEA in where inter-municipal coordination is es- the Ministry of Planning and Budget sential and, therefore, where state govern- (MPO), together with the Caixa Economica ments (and metropolitan agencies) can play Federal (water supply and sewerage), and a useful catalytic and technical support role. with the Ministry of Environment (MMA), as well as to considerably strengthen the Metropolitan capacity of the latter ministry in this area. 6.60 Strategic environmental diagnostic State and priority-setting exercises for specific metropolitan areas should be carried out at 6.59 As presently appears to be the case this level. All major stakeholders, including in Pernambuco, state governments can play state and municipal governments, local an important catalytic and technical support NGOs and other representatives of organ- role in inducing municipal governments, ized civil society (neighborhood associa- individually and collectively, to address tions, etc.), should be actively involved in 110 Brazil: Managing Pollution Problems - Annexes this process so as to generate maximum can be proactive in this regard, both in terms consensus around priority problems and of local legislation, policies and plans and maximum local "ownership" of proposed specific pollution reduction and other envi- solutions. Furthermore, permanent delib- ronmental action programs, whether carried erative and consultative mechanisms, such out individually or in coordination with as CONDERM in the Recife MR (both the neighboring metropolitan municipalities. In overall Council and the camara tecnica se- addition, municipal governments are gener- torial on sanitation and the environment), ally in the best position to deal with local should be established to ensure adequate land use planning and environmental nui- fora for participatory priority setting, con- sance issues such as noise pollution. As sensus building, and coordination of envi- noted in the previous section, however, both ronmental (and other) interventions at the general awareness of the need for and insti- metropolitan level over time. State (envi- tutional capacity to undertake urban envi- ronmental) and metropolitan level technical ronmental management activities at the mu- agencies can also play a key role in the gen- nicipal level are extremely uneven both eration and public dissemination of infor- within and outside metropolitan regions in mation concerning the evolution of envi- Brazil. Environmental management capac- ronmental quality in urban and metropolitan ity building at the municipal level, thus, areas over time. More specifically, they should be strongly and more systematically should carefully monitor both ambient air supported by federal and state agencies, and water quality and specific sources of air both through specific environmental out- and water pollution in large cities and met- reach and education activities and by Bank- ropolitan regions. Both in the Belo Hori- supported municipal development projects zonte and Recife MRs, there is a clear need at the state level, such as SOMMA in Minas to strengthen environmental monitoring ac- Gerais, PROURB in Ceara, and the recently tivities. These same agencies, working approved project for Bahia. closely with local governments and NGOs, can likewise be an important source of References strategies and materials for environmental Bartone, Carl, Bernstein, Janis, Leitmann, Josef, education to be used in urban and metro- and Eigen, Jochen., "Toward Environ- politan areas (and elsewhere) in order to mental Strategies for Cities: Policy Consid- raise public awareness about environmental erations for Urban Environmental Man- problems and potential solutions more gen- agement," UMP Discussion Paper, No. 18, erally. Finally, solid waste management, 1994. particularly treatment and disposal, in urban Bernstein, Janis, "Alternative Approaches to agglomerations that involve numerous mu- Pollution Control and Waste Management: nicipalities requires planning and coordina- Regulatory and Economic Instruments," tion at the metropolitan level. This contin- UMP Discussion Paper, No. 3. April 1991. Bernstein, Janis, "Land Use Considerations in ues to be a major problem in the Recife MR, Urban Environmental Management," UMP for exarnple. Discussion Paper No. 12, January 1994. Campbell, Tim, "Innovations and Risk Taking: Municipal The Engine of Reform in Local Govern- ment in Latin America and the Caribbean," 6.61 Local governments also have many World Bank, November 18, 1996. 6mportat.6 governments alis h em CONDERM, Piano de Acao Metropolitana - important roles and responsibilities with re- 1997, Recife, December 1996. spect to urban environmental management. Condominium, "Modelo para Gestao e Opera- Belo Horizonte and Recife are good exam- coes de Servicos de Agua e Esgotos no ples of how urban municipal governments Brazil: Managing Pollution Problems - Annexes 111 Municipio de Recife: Diagnostico," Recife, Rabinovich, Jonas and Leitmann, Josef, "Envi- January 1997. ronmental Innovation and Management in Deloitte Touche Tohmatsu, "Estabelecimento de Curitiba," Urban Management Program Marco Regulatorio para a Gestao de Servi- Working Paper, No. 1, June 1993. cos de Agua e Esgoto no Municipio de Re- SEPLAN/PE "Esgotos e Drenagem da Regiao cife: Diagnostico Inicial," January 13, Metropolitana do Recife - RMR," Recife, 1997. April 1997. Ferreira de Araujo Filho, Valdemar, "Antece- SEPLAN/PE, "Consolidacao e Complementacao dentes Politico-Institucionais da Questao de Diagnostico sobre Qualidade das Aguas: Metropolitana no Brasil" in IBAM, Gestao Termos de Referencia" Recife, April 1997. Metropolitana: Experiencias e Perspectivas, SEPLAN/PE, "Pernambuco 2000: Estrategia de Rio de Janeiro, 1996. Desenvolvimento Sustentavel," Recife FIDEM, "Piano Diretor da Regiao Metropolitana 1996. do Recife: Termos de Referencia," Recife, Tlaiye, Laura and Biller, Dan, "Successful December 1996. Environmental Institutions: Lessons FIDEM, "Sistema de Gestao do Tratamento e da from Colombia and Curitiba, Brazil," Destinacao Final de Residuos Solidos na LATEN Dissemination Note No. 12, 1994. RMR," Recife, January 1997. UFPE/ATERPE, "SGRS - Sistema de Gestao do FIDEM, "Sistema Gestor Metropolitano," Re- Tratamento e Destinacao dos Residuos cife, March 1997. Solidos na RMR: Concepcao Basica Oper- FIDEM, Regiao Metropolitana do Recife: Piano acional, Institucional e Financeira," Recife, de Desenvolvimento Integrado, Recife March 1996. 1976. World Bank, Brazil - Managing Environmental Government of Minas Gerais entitled "Programa Pollution in the State of Rio de Janeiro," de Saneamento Ambiental," Belo Hori- Report No. 15488-BR (two volumes), zonte, October 7, 1996. August 22, 1996. Kreimer, Alcira, et. al., "Towards a World Bank, Housing: Enabling Markets to Sustainable Urban Environment: The Work - A World Bank Policy Paper, Rio de Janeiro Study," World Bank Discus- Washington, D.C., April 1993. sion Paper No. 195, March, 1993. Zulauf, Werner E., "Cidade Ecossistema: Gestao Leitmann, Josef, "Rapid Urban Environmental Ambiental e Despoluicao," Inter-American Assessment, UMP Discussion Paper No. Development Bank, City Symposium, Bar- 15, Volume 11 ("Tools and Outputs"), celona, Spain, March 13-15, 1997. Washington, May 1994. Matallo, Heitor Junior, "Fundamentos e Criterios de Selecao das RMs Integrantes da Fase I do Componente," Fortalecimento da Gestao Ambiental das Regioes Metropoli- tanas, Brasilia, May 1996. Ministry of Planning and Budget (MPO)/IPEA, Projeto Aridas: A Strategy for Sustainable Development in Brazil's Northeast, Brasi- lia, October 1995. Prefeitura da Cidade do Recife, "Politica de Meio Ambiente para a Cidade do Recife," Recife December 1994. Prefeitura da Cidade do Recife, "Programa de Recuperacao Urbana e Ambiental Bacia do Rio Tejipio - PROEST I: Sintese do Pro- grama," 1996. Prefeitura da Cidade do Recife, Plano Diretor de Desenvolvimento da Cidade do Recife, Law No. 15.547/91, Recife 1992. 112 Brazil: Managing Pollution Problems - Annexes 7. MUNICIPAL SOLID WASTE MANAGEMENT1 SUMMARY OF ISSUES AND RECOMMENDATIONS ................. ... ............. - - .. .... .... -... - . . -. -..--.... There are a number of issues to be addressed if substantial improvements are to be achieved: * the extension of service coverage especially into favelas and other poor neighborhoods based on the concepts of demand management and affordability; * the closure or rehabilitation of existing open dumps while at the same time protecting the livelihood and health of waste pickers and their families; * the introduction of sanitary landfills as the backbone of disposal operations, often in the face of strong social opposition (the NIMBY syndrome); - the integration of complementary systems such as transfer, selective collection, recycling, composting and/or incineration, where it makes economic sense; * the definition of better hospital waste management systems; * the introduction of adequate user charges and collection'mechanisms so as to achieve self- financing, along with needed cost accounting and management information systems; * the promotion of private sector participation as a response to often weak municipal opera- tional capacity; and * the development of cooperative mechanisms that would enable municipalities to undertake regional disposal solutions especially in metropolitan areas. ~~~~~~~~~~~~~~~~~~~~~~............ ..,.,,,, .. ,........... ........... ,,,,, ..STRATG N EOMNAIN A more comprehensive policy framework is needed at the national and state level which should link public health, environmental and decentralization policies more closely together. Large municipalities and metropolitan regions should be encouraged to undertake city-wide strategic planning to design and implement integrated solid waste systems. Strategic planning starts with the formulation of short, medium and long term goals based on the needs of a par- ticular municipality, followed by a medium-term action plan to meet the goals that identifies a clear set of integrated actions, responsible parties and needed human, physical and financial resources. For Brazil, the following priorities have been suggested for strategic solid waste planning and management: * to collect all of the solid waste for which the municipality is responsible; * to provide adequate final disposal for all municipal solid waste; * to seek alternatives for treating and recycling municipal solid waste - keeping in mind that these alternatives will only yield positive and sustainable results when they make economic sense and meet environmental standards; * to implement educational campaigns and programs aimed at raising awareness about the importance of keeping cities clean and promoting actions to reduce waste generation; and * to facilitate municipal acces to credit for solid waste investments and to strengthen local financial management systems for cost-recovery, accounting and budgeting. This paper was prepared by Carl Bartone. The author gratefiully acknowledges review and comnments. provided by Luiz Edmundo Costa Leite, Fernando Paraguassui de Sa, Jose Henrique Penido and Christopher Wells. Brazil: Managing Pollution Problems - Annexes 113 7.1 According to a national survey on bers, however, mask considerable variation enviromnental sanitation conducted by the across urban areas and a trend toward better Instituto Brasileiro de Geografia e Es- MSWM, especially in the large and interme- tatistica (IBGE) in 1989, the population of diate cities of the south. For example, Table Brazil produced about 242,000 tons/day of 7.1 shows the variation in waste generation solid waste, of which 90,000 tons/day was and collection for the State of Rio de Ja- urban residential and commercial solid neiro.3 Most of the unserved population in waste.2 Roughly 60% of the urban solid the Municipality of Rio de Janeiro live in waste was collected. The remainder was left favelas where garbage collection is practi- in the streets, drains or empty lots, or is cally impossible by conventional trucks, and burned by households - in all cases creating at best, residents are asked to bring their a public health risk and contributing to deg- wastes to centrally located communal bins. radation of the urban environment due to Note that while the weighted service cover- noxious odors, the proliferation of flies, age in the State was about 62%, because of mosquitoes and rats, increased flooding, and the differences in per capita waste generation local air pollution from smoke. rates in larger and richer urban areas, the amount of solid waste collected was closer to 7.2 The same IBGE study found that 65%. only about 24% of the urban solid waste collected received environmentally sound 7.4 While MSWM has long been recog- treatment and disposal - 23% deposited in nized as a municipal responsibility in Brazil, controlled landfills (10% in sanitary land- the process of decentralization in place since fills), 0.9% composted, and 0.1% inciner- 1988 has raised the consciousness of munici- ated. The remaining 76% was dumped indis- pal administrators about the importance of criminately on open land or in water courses. this sector - both because the voting public is Further analysis showed that 88% of Brazil- now demanding improved urban services, ian municipalities practiced open dumping and because the provision of this service rep- and only 12% used landfills. With respect to resents a major expenditure item for local the landfills, 86% were controlled landfills, governments. At the same time, there is in- 10% sanitary landfills and 4% special land- creasing pressure on municipalities from fills. Only about 1% of the municipalities state environmental agencies to properly dis- had compost or recycling plants, or incinera- pose of the solid waste that is collected. tors. There are, however, a number of issues to be addressed if substantial improvements are to 7.3 On average, each urban resident in be achieved: large and intermediate cities in Brazil gener- ates 0.8 kg of solid waste daily. These num- * the extension of service coverage, espe- cially into favelas and other poor neigh- 2 See Fundarao IBGE, "Pesquisa Na- borhoods, based on the concepts of de- cional de Saneamento Basico, PNSB, mand management and affordability; 1989," Sao Paulo, 1992. For the study, municipalities with population greater than 20,000 were classified as urban. These ur- ban municipalities represent about 27% of 3 Reported in Paraguassui de Si, Fer- the total of 4,974 municipalities in Brazil nando, "Diagn6stico da Situacao de and account for 85% of the total national Residuos S6lidos no Brasil," report pre- population. pared for PAHO, May 1989. 114 Brazil: Managing Pollution Problems - Annexes Table 7.1: Rio De Janeiro Population, Per Capita Waste Generation And Service Coverage c. 1989. Municipaityb of Rio de Janeiro 6,000,000 1074 Other municipalities of the Metropolitan Region 5,000,000 0.8 60 Remaining municipalities in the State 2,600,000 0.6 40 (Source: Paraguassi, 1989) * the closure or rehabilitation of existing tive.4 (As just one example, consider the open dumps while at the same time pro.. difficulties that municipalities in watershed tecting the livelihood and health of waste protection areas encounter in finding a dis- pickers and their families; posal solution). It should also provide in- centives to municipal authorities to deliver * the introduction of sanitary landfills as better services, recover more costs from us- the backbone of disposal operations, of- ers, and cooperate with neighboring munici- ten in the face of strong social opposition palities. For smaller or weaker municipali- (the NIMBY syndrome); ties, there should be a focus on technical as- sistance and access to finance. * the integration of complementary sys- tems such as transfer, selective collec- 7.6 Second, large municipalities and tion, recycling, composting and/or incin- metropolitan regions should be encouraged to eration, where it makes economic sense; undertake city-wide strategic planning to de- sign and implement integrated solid waste 3 the definition of better hospital waste systems. Strategic planning starts with the management systems; formulation of short, medium and long term goals based on the needs of a particular mu- * the introduction of adequate user charges nicipality, followed by a medium-term action and collection mechanisms so as to plan to meet the goals that identifies a clear achieve self-financing, along with needed set of integrated actions, responsible parties cost accounting and management infor- and needed humnan, physical and financial miation systems; resources. For Brazil, the following priori- ties have been suggested for strategic solid * the promotion of private sector partici- waste planning and management:5 pation as a response to often weak mu- nicipal operational capacity; and * te development of cooperative mecha- 4' Se BM co; ut aioa or .. .. ....e......onula.N cioalsobe. nism tha wold eablemuncipaitie toGestao do Saneamento e do Meio Ambi- undertake regional disposal solutions, ente Urbano: Sintesis do Relatorio Final," especially in metropolitan areas. Rio de Janeiro, Janeiro 1995. 7.5 To better address this set of issues, 5 Suggested by IPT/CEMPRE, "Lixo Mu- progress on two other fronts is also needed. nicipal: Manual de Gerenciamento Inte- First, a more comprehensive policy frame- grado," Sao Paulo, 1995. For a description work is needed at the national and state level, of a detailed framnework strategic solid Itshould link public health, environmental waste planning, see Schubeler, Peter, et tal, It "~~~~~~~~~~~Conceptual Framework for Muniucipal and decentralization policies more closely SldWseMngmn nLwIcm together so that they are mutually suppor- Countries," Urban Managem.ent Pro- Brazil: Managing Pollution Problems - Annexes 115 * to collect all of the solid waste for which * Empresa Pzublica - a quasi-private entity the municipality is responsible; created by law and set up exclusively with public capital to carry out adminis- * to provide adequate final disposal for all trative functions, with limited freedom municipal solid waste; to define its organizational and financial structure. Some examples are LIM- * to seek alternatives for treating and re- PURB in Sao Paulo, LIMPURB in Sal- cycling municipal solid waste - keeping vador, EMLURB in Fortaleza, and EM- in mind that these alternatives will only LURB in Recife (the latter was only re- yield positive and sustainable results cently converted from an autarchy to a when they make economic sense and public company). meet environmental standards; and Sociedade de Ec6nomica Mista - a cor- * to implement educational campaigns porate entity created by law to carry out and programs aimed at raising aware- economic activities, with the govern- ness about the importance of keeping ment (federal, state or municipal) hold- cities clean and promoting actions to re- ing a majority of the voting shares. Ex- duce waste generation. amples are COMLURB in Rio de Ja- neiro, COMCAP in Florian6polis, and LESSONS OF DIFFERENT MANAGEMENT URBANA in Natal. APPROACHES 7.9 While these institutional arrange- 7.7 A number of different approaches to ments have served individual larger munici- MSWM are observed in Brazil today, some palities well and are adaptable to medium offering important lessons that could prove size cities, there is currently a real institu- useful to other municipalities. Several of tional vacuum in the metropolitan regions these are briefly summarized below. with regard to shared service arrangements. Although most metropolitan regions do have Institutional Arrangements metropolitan planning agencies that are de- pendent oni the state government, these 7.8 Three types of institutional ar- agencies generally are weak and lack any rangements defined by law are commonly capacity or authority for implementing met- adopted by Brazilian cities for the provision ropolitan plans or for mobilizing the needed of solid waste services: resources. Tlhus far, the only success has been where voluntary inter-municipal ar- * Autarquia - an autonomous legal entity rangements have sprung up. For example, with its own patrimony and revenues, in the Curitiba Metropolitan Region (CMR) set up to carry out typical public ad- the constituent municipalities are working ministration functions with a limited de- together to find a regional solution to their gree of management and financial de- disposal problems. As the Cachimba sani- centralization. Examples are DMLU in tary landfill of the Municipality of Curitiba Porto Alegre, the SLU in Belo Hori- is close to reaching capacity, the city needs zonte and the SLU in Brasilia. a new landfill site. The adjacent munici- palities, in turn, currently do not have any landfill and are dependent on the city for disposal of their wastes or simply engage in open dumping. A regional plan is being gramme Working Paper Series No. 9, St. prepared, coordinated by COMEC and Gallen, Switzerland, August 1996. funded by the Bank-supported Water Qual- 116 Brazil: Managing Pollution Problems - Annexes ity and Pollution Control Project (3503-BR), at a cost per ton far in excess of what a re- for raising waste collection in the outlying gional solution based on sanitary landfills municipalities from 40% to 90%, developing and transfer facilities would likely cost.7 a new sanitary landfill in the northern part of the CMR, and strategically locating transfer 7.11 A final example of interest is the stations to minimize the waste transport Recife Metropolitan Region (RMR) where costs. As part of the cooperative agreement, in the mid-1980s a Bank loan for a Metro- the city proposes to operate the new sanitary politan Development Project included a landfill in exchange for the landfill capacity solid waste component that failed over a it would utilize. landfill siting dispute. After the project had been approved and the sanitary landfill 7.10 Such cooperative arrangements are studies and design completed, municipal not always possible. In a similar Bank- elections led to an opposition party gaining supported endeavor for the Guarapiranga control of the municipality where the landfill watershed in the Sao Paulo Metropolitan was to be sited and where 120 squatter Region (SPMR), it is not possible for out- families would have to be relocated. The lying municipalities to agree on shared fa- refusal of the new mayor to agree to the cilities since most of them have local ordi- landfill construction became a stumbling nances prohibiting the import of refuse for block - a clear example of NIMBY. An treatment or disposal. This leaves munici- alternate site in another municipality was palities in the interior of the watershed with proposed, but again failed since the munici- an impossible situation as state public health pality was not a beneficiary of the project - laws prohibit them from siting landfills subsequent negotiations to include some within the watershed limits! Among the host community benefits were unsuccess- reasons for such ordinances appear to be a ful.8 Today, the RMR is trying once again combination of NIMBY and distrust of under the leadership of the Recife Metro- shared funding arrangements. At the metro- politan Development Council (CONDERM) politan level, EMPLASA and CETESB and the metropolitan planning agency, Fl- formulated an "Emergency Program for Solid Waste Disposal - SPMR" (1983) pro- posing 13 regional landfills to be managed by an Intermunicipal Consortium, but it was ' A rough comparative cost analysis of dis- never implemented. In 1993, EMPLASA posal options entirely within the munici- again proposed a comprehensive metropoli- pality is provided in the report of the Se- tan solid waste disposal plan, but it has not cretaria de ServiSo e Obras, "Diretrizes yet been possible to formulate and imple- para a Destinacao Final dos Residuos S61i- ment such a plan.6 In the absence of a re- dos no Municipio de Sao Paulo," Prefeitura gional solution, the Municipality of Sao do Municipio de Sao Paulo, Agosto 1992. Paulo developed its own plan for final dis- The disposal cost of a scenario based pri- marily on landfill was less than one-third posal of the 13,000 tons/day of municipal thril of a s bas on the disposal cost of a scenario based on and industrial (non-hazardous) solid waste primarily on composting and incineration generated in the capital city, based on a (US$31.7 million per year compared to combination of incineration and composting US$100.9 million per year, respectively). 8 The history of this component is described 6 See EMPLASA, "Fundamentos para o in Ford, Fitz, "Review of the Institutional Equacionamento de Destina,ao Final dos Development Subproject of the Recife Met- Residuos S6lidos na RMSP," Sao Paulo, ropolitan Region Development Project," June 1992. TWURD, June 1992. Brazil: Managing Pollution Problems - Annexes 117 DEM.9 A metropolitan plan for the "Man- and has given new impetus to the develop- agement System for the Treatment and Dis- ment of an integrated approach to solid posal of Solid Wastes in the RMR" has been waste management and the introduction of prepared by a university group, ATEPE, for strategic planning. Only a few large cities, FIDEM.10 The ATEPE report analyzes the however, have successfully formulated and technical and financial feasibility of an inte- implemented such plans - one of the most grated transfer, treatment and disposal sys- successful being Belo Horizonte as de- tem and also proposes two institutional scribed in Box 7.1."1 In most cities, how- schemes - one based on the creation of an ever, the basic components of collection and inter-municipal consorcio in which FIDEM disposal are still the priority. would participate as executive secretariat and technical adviser, and another based on Private Sector Participation FIDEM signing separate bilateral agree- ments with each municipality and taking on 7.13 Considerable progress has also been the role of manager of the integrated system. made on solid waste collection efforts. In There is no discussion in the ATEPE pro- 1982, a survey was conducted of 367 urban posal of the political feasibility of siting the municipalities covering 40% of the total transfer, treatment and disposal facilities population.'2 In spite of a finding a fleet of (bioreactor landfills) - such as consideration vehicles that numerically was sufficient to of land disappropriation, community con- collect more than all of the waste produced, sultation and participation in siting deci- the survey confirned high vehicle downtime sions, host community fees, implicit or ex- and low collection efficiency due to poor plicit subsidies, etc. These are crucial deci- operational management and maintenance sion elements that should be addressed very deficiencies. Only 14 of the cities could early in the siting process, not after the de- even provide data on the volume and weight sign studies are completed. of waste generated and collected, funda- mental management indicators for basic op- Strategic Planning erations. To complicate this problem, the economic crisis of the 1980s and poor local 7.12 Following the Rio Conference in financial management meant that, in many 1992, many Brazilian cities are giving in- cities, an aging fleet was not renewed, a creasing attention to solid waste manage- shortage of spare parts was evident and ment. With the adoption of Agenda 21, the skilled maintenance workers were hard to waste management hierarchy (minimize, retain - all factors leading to an erosion in recycle, treat, dispose) is widely accepted fleet capacity at the same time that urban population and waste generation was stead- 9 Both CONDERM and FIDEM are de- ily growing. scribed in detail in the companion docu- ment by Redwood, John, "Metropolitan Environmental Management in Brazil: " Described in Tavares Campos, Heliana Problems, Institutional Arrangements, Cur- Katia and Abreu, Maria de Fatima, "A rent Initiatives, and Recommendations," Gestao do Residuos S6lidos em Belo Hori- ENVLW, May 1997. zonte," in Mem6rias Tecnicas, XXV Con- 10 See ATEPE, "SGRS - Sistema de Gestao gresso Internacional de AIDIS, Mexico, ATEPE, "SGRS Sistema de Gest~o 1996. Also see a companion paper by the do Tratamento e Destinacao dos Residuos same authors entitled "A Coleta Seletiva de S6lidos do RMR: ConcepgAo Basica Oper- Lixo e a Reducao do Desperdicio." acional, Institucional e Financeira," Recife, Margo 1996. Paraguass(i, op cit. 118 Brazil: Managing Pollution Problems - Annexes Box 7.1: Integrated System Of Solid Waste Management In Belo Horizonte Manejpby o Dierenca doa sy dem tedo s M odelo ThSLstaenlgyinclueoh olw E | > 11 ! E 1Z -GEDs 4~~~~ deM P o lwse.Tu.etcnogolrQe nlds ffwe~itdct lb.n|teidad e SSEMA ITERDOD LIPEA URAM NA - ELHOIZNTEGAA ting . eco~Mnverso DieecidBeRes0i.uos Modl.o.Tecno.ogico . (oreTaIesand Aoreut .9 tl e sm SAN accounta / SWdos | ~~~~~Urdade de IDESnNAI O g 4 3 _ ( > 3 | DESll~tlJQ~ I~NALi MANTJO REINTEGRACAO TRATAMENTO AMBIENTAL (Source: Tavares and Abreu, 1996) Brazil: Managing Pollution Problems - Annexes 119 7.14 Today the situation has improved BOO. In practice, most Brazilian cities have significantly, largely as the result of a quiet limited private sector engagement to some but steady rise in the participation of the form of contracting out of collection or private sector in MSWM services. A recent street sweeping services, or of terceirizaqiao survey by the Associa do Brasileira de Em- of secondary activities such as vehicle presas de Limpeza Putblica (ABRELP) maintenance, security, or administrative found that the refuse of about 65% of urban services. residents in Brazil is already collected by private enterprises. The survey identified 7.16 An important benefit of increased some 40 enterprises ranging from large private sector involvement is that it permits contractors, originally in the road or dam local authorities to concentrate on regulating construction sectors, to small haulers and the quality of the service instead of being transportation companies.'3 bogged down in operations, and avoids the conflict of interest that arises from being 7.15 The experience with and the form of both provider and regulator of the service. private sector participation in Brazilian cit- In Volta Redonda, for example, the Se- ies vary greatly, but follow common models cretario Municipal de Serviqos Piiblicos e utilized in most industrialized countries. Meio Ambiente (SMSPMA) signed a techni- The most intensive and expensive compo- cal cooperation agreement with FEEMA to nent of a MSWM system is the provision of train local environmental inspectors, and has collection services - normally accounting focused attention on monitoring and super- for at least two-thirds of total costs - which vising contracted collection and disposal by nature has limited economies of scale but operations.14 Some contractors are develop- significant economies of contiguity. This ing their own TQC programs in order to makes it possible to divide a city into col- obtain ISO certification because the market lection zones and contract out each zone (customers like COMLURB) is beginning to independently, thus creating competition for demand it. the market. Under this contract arrange- ment, the municipality bills customers di- 7.17 In many of the large cities of Brazil rectly and pays an agreed price to the private like Sao Paulo and Curitiba the operation of operator for each ton of refuse collected. urban solid waste management systems have Zone franchising is also possible, with the been almost entirely put in private hands. In private operator charging customers directly other cities like Rio de Janeiro, Belo Hori- for collection services, but this system has zonte, Salvador, Manaus, Recife and Ni- not worked well in other developing coun- ter6i, private contractors already have a sig- tries (because of non-participation and nificant share of the service provision. Pri- dumping) and is not utilized in Brazil. vate sector participation is also observed to Other system components with significant be spreading rapidly in the medium size cit- economies of scale such as transfer stations, ies of the states of Sao Paulo, Rio de Janeiro landfills, composting or recycling plants, or and Parana. Box 7.2 illustrates how the pri- incinerators are amenable to bidding out as vate sector has been engaged in service pro- management contracts, or concessioning out vision in four large cities. Also, a significant through such arrangements as BOT, BTO or share of commercial and industrial waste 3 Reported in Costa Leite, Luiz Edmundo, 14 See PMVR, "Consulta Local de Volta Re- "Urban Solid Waste Management Privati- donda: Relat6rio sobre a Gestao do zation Schemes in Latin America," draft Saneamento e do Meio Ambiente Urbano," report for PAHO, March 1997. Volta Redonda, Agosto 1994. 120 Brazil: Managing Pollution Problems - Annexes Box 7.2: The Experiences Of Four Cities With The Private Delivery Of MSW Services. ffe~n~ ~tr 1~ ~y 198, all ~i~Aes ~iere cntracted ut icuIdingclet& n S S me t ; , aUnds~itay landfills.t Capital intensive assets such 's ~~i~st~ttons! treatment pI1;ts and landfillsstitll belong to the Municipality of Sao Paul'o, 'but b arid eqtipfient .useI tinoertilons$are prvided ;by the: private contractors. s7hemagntude 'andvarietyofthe servie,s beingcontracted out by So6 Paulo (to manage s fmuniipal and industrialsoid waste) that 16 different contracts are involyed. orentdd to hiean engineering management firm to control and monito the ' _ ts;i~tnde~ governmet supervi'siion. The totat payments disbursed by the' cityfor solidwe ;I'iie about US$3Ofmiion per imonth, ard the 6engineering management firm eclms to Xg the bill y-~ou % thro,ughbetter ma'nagement and control. ~fo'~4areir- Pror t 19Q, te Ri deaneio slid waste mngmn opn,CM ~LiB ~ ve$nte by ipal government policy from contracting out withprive T'od,1t engXgespri4ate contractorsu:nder several different arrangemendts. Oneis the trditional ontracdng 4&cdltection 'sevii in at zonXe ofthecity. A second type is the leasing of vehicles i&dfiers an'd ialzed=vq'uiprnent"fr;m'thek private 0.sector:0 totbe operatedebyo pCraLURB . A third jr enis acontract'utipeserviceswithin a zone nclud stret &r cdietWwitvl re,,s proucr genrating mrnore: than 1001 0 liters of re'fuse ,'per day;i' ~ shopping centers, supermarketsadiutrlpoucs,neof i dhS.e $ 'ii :is i i' : directIyi. COMLURB s:..Q.s> Lrf:.E zisEt. < :..i.tome prce ar .,e:t'b th market,but ih prLact.t0icei.= I..U ~pbrpan~ eDnd to oiperateonl|y incertain areas -of thne city takiong advantage of economies 'of con tiguity' iy a c B3lo, zonte -.=^ In Beloj Horizonte, tXthe state capital of Minas Gerais, solid waste mana ent srvices a;re'hatn'dled'by an autarc,hythe Supeitond6ncia de Limpeza Urbana (SLU). In recent yearsh the ^SLihas significantly.increased thea contacting out of operations with the private'sector Tlday, over half the operations are.contracted as shown in Table 7.2. Salvad.or - Inthe city of Salvadr "Bahia, solid Jwaste services are managed y the municipa LIMPURB. Todaiy there^' is acontacti,with'a single company to collect 50% o:fthe total waste ierreraed h in the city LlMPURB is responsible for the remaining share. Someotr serv- sare~als'o contracted ot su"ch as sanitary 'landfill operations, however,, problemso cotract pay*entavere,portedly ijeopardiz' the,proper operation of the landfill. from large generators are also collected by services.'5 In the Recife Metropolitan Re- private haulers and there is a trend across gion, the majority of constituent municipali- municipalities, and especially the larger cit- ies, not to provide services to these large generators, rather to have them contract di- rectly with private haulers. 7.18 Similar involvement of the private 15 Reported in EMPLASA, "Consulta Local sector is seen across metropolitan areas. In de Regiao Metropolitana de Sao Paulo: the SPMR, 21 of 39 constituent municipali- Relat6rio sobre a Gestao do Saneamento e ties contract out the entire service, and an- do Meio Ambiente Urbano," Sao Paulo, other four contract collection and transport Agosto 1994. Brazil: Managing Pollution Problems - Annexes 121 Table 7.2: Percent Share Of Service Provision In Belo Horizonte, 1995. Type of Service SLU Private > ˘ < ! - ; 0 (%) ~~~~~~~~~~~~Contractor (%/): Household and commercial waste collection 46 54 Container collection 62 38 Weed cutting 100 Street sweeping 40 60 Hospital waste collection 100 (Source: Costa Leite, 1997) ties contract out a broad range of solid waste niche opportunities for microenterprises and services as is shown in Table 7.3.i6 waste picker cooperatives.'8 7.19 Experiences in Brazil and elsewhere Innovative Technologies in LAC have shown that private sector par- ticipation can be an efficient and cost- 7.20 Among the innovations in solid effective way of providing this essential waste management in Brazil, four have had public service as long as conditions of com- some success - the bioremediation landfills petition, transparency and accountability are now in operation in several cities, the mo- mlet.' As this practice spreads to medium bile infectious waste incinerators utilized in size and small cities, with weaker local gov- Curitiba, the creation of waste-picker coop- ernments and less professional capacity, it eratives in a number of cities, and the recy- will be more difficult to ensure these condi- cling of construction debris. tions. Attention should be given to setting the legal and regulatory basis for the opera- tion of private enterprises in the market of solid waste management services; the devel- opment of guidelines and criteria for solid 18 A recent survey conducted by a consortium waste service provision and for environ- of NGOs examined the performance of mental protection; strengthening enforce- more than 80 microenterprises and coop- ment capacity to have the guidelines and eratives providing solid waste services in 8 criteria observed; upgrading the technical LAC countries. The results, soon to be and managerial capacity of professionals in published by WASTE, show that such mi- the sector so that they can manage, coordi- croentrepreneurs are providing cost- nate, monitor and regulate the private sector; effective and affordable services that poor and the development of appropriate tech- households are willing to pay for, in areas nologies in order to meet the needs and con- that larger private companies cannot serv- ditions found in poorer urban areas and open ice effectively by conventional technolo- dgies, and that when linked appropriately to the municipal solid waste management system are a sustainable form of private 16 See FIDEM, "Consulta Local de Regiao sector participation. An international as- Metropolitana de Recife: Relat6rio sobre a sessment of the current global experience Gestao do Saneamento e do Meio Ambi- with microenterprise activities in this sector ente Urbano," Recife, Agosto 1994. was formulated in an international work- shop held in Cairo in October 1996, and is 7 See Bartone, Carl, et al., "Private Sector Par- summarized in SKAT, "Micro and Small ticipation in Municipal Solid Waste Serv- Enterprises Involvement in Municipal Solid ices: Experiences in Latin America," Waste Management in Developing Coun- Waste Management & Research, 9:495- tries," SKAT WasteNet Infopage, October 509, 1991. 1996. 122 Brazil: Managing Pollution Problems - Annexes Table 7.3: Solid Waste Service Contracting In The RMR, c. 1994. Secto Patcp Abreu de Lima 80 Collection, transport, sweeping, disposal Cabo de Santo Agostinho 40 Collection, transport, sweeping, disposal Camaragibe 100 Collection, transport, sweeping, disposal lgarassu 100 Collection, transport, sweeping Ipojuca 0 - liha de Itamaraca 50 Collection, transport, sweeping, beach cleaning Itapissuma 0 Jaboatao do Guararapes 70 Collection, transport, sweeping, disposal Moreno 30 Disposal Olinda 70 Collection, transport, sweeping Paulista 70 Collection, transport, sweeping Recife 60 Collection, transport, sweeping, disposal S.L. da Mata 50 Collection, transport, sweeping (Source: FIDEM, 1994) 7.21 The term "bioremediation landfill" first such landfill was built in Americana (in is used in Brazil to describe a sanitary land- the state of Sao Paulo) some ten years ago fill design aimed at remediating existing with the aim of remediating an open mu- open dumps. Sanitary landfill cells are con- nicipal dump filled with municipal and in- structed and filled with a combination of old dustrial wastes. The project was a success, waste from the open dump and fresh waste and today the initial cell of the Americana (in proportions of 30%-70% up to 50%- landfill is being mined to recover recy- 50%). Leachate from the new landfill cells clables and combustibles as well as a hu- is collected, treated anaerobically and recir- mus-like soil that can be utilized on-site as culated back to the cell - a process leading landfill cover material or applied to depleted to the rapid biostabilization of the solid lands. The space recovered in the emptied waste deposited in the cell (on the order of 3 cell can then be refilled with fresh municipal to 5 years), the accelerated generation of solid waste, thus extending significantly the landfill gas rich in methane content (55- useful life of the landfill site.20 This tech- 70%), and ultimately to steady state condi- nology has spread to other cities for reme- tions with low pollution potential.19 The diating open dumps and converting them to sanitary landfills, as well as for implement- ing entirely new sanitary landfills. Cities 19 This bioremediation landfill design, which has been pioneered and promoted in Brazil aim of producing energy from methane and by Prof. Luiz Mario Queiroz Lima at the thus reducing the overall costs of disposal. University of Campinas, is equivalent to 20 The practice of excavating landfill cells to the "bioreactor cell" design being promoted recovery materials and space is known as by the USEPA and which is in operation in "landfill mining" and is carried out at sev- landfills in the USA, the UK, Sweden and "landfill ni the Us foriedoout a- elsewhere. Interestingly, the bioreactor de- eral landfills in the USA for economic rea- sign is being promoted in those countries sons. In the case of the Canabrava landfill for energy recovery purposes more than for in Salvador, andfilmngws seenias one of the Important features of the biore- bioremediation - for example, in Sweden mediation approach because of the diffi- bioreactor landfills are referred to as "en- culties the municipality has encountered in ergy cells.". The World Bank is currently finding new sites - primarily because of the preparing bioreactor landfill projects in La- NIMBY syndrome. hore, Pakistan and Riga, Latvia with the Brazil: Managing Pollution Problems - Annexes 123 include Belo Horizonte, Campinas, Caxias would be feasible utilizing mobile incinera- do Sul, Porto Alegre, Recife, and Salvador - tor units - with the added benefit of avoid- several of which have projects supported by iig the transport of infectious waste over the World Bank. The largest is the city streets. The CGRSS proposed the pro- Canabrava landfill in Salvador that is cur- curement of 10 mobile units each with ca- rently operating at 2,000 tons/day.2' Given pacity of 30 kg/hr from the only known sup- the apparent success of this innovative ap- plier of such incinerators, Kyowa Kako of proach, a serious technical evaluation should Japan. Because of lack of experience with now be undertaken to help refine the design this type of equipment and concerns about and disseminate it to other places. The lack local operation and maintenance capacity, of adequate documentation and technical the Bank initially approved the purchase of information about the design and operational two units for demonstration purposes. Pro- history of bioremediation landfills is a seri- curement arrangements included a 6-year ous impediment to the spread of this tech- warranty on the equipment, guaranteed pro- nology, especially outside of Brazil. vision of spares, and two months training in Japan for CGRSS operator staff. The 7.22 Among several Bank-supported CGRSS set up an evaluation program, oper- projects in Brazil that have hospital waste ating the two units in a fixed location for management components, the Water Quality two months followed by two months of mo- and Pollution Control Project (3503-BR) for bile operation. The study demonstrated that the Upper Igua9c Basin included financing the mobile units met all performance speci- for procurement and installation of a 16 fications including those for air emissions, tons/day infectious wastes incinerator for and could be operated satisfactorily by the Municipality of Curitiba. The existing CGRSS staff. It also permitted firmer cost hospital waste management system in Curi- estimates to be made (see below), and al- tiba included a municipal collection service lowed time for the CGRSS to initiate an in- by dedicated vehicles and disposal in a spe- tensive training program for hospitals and cial landfill cell. After careful technical clinics to improve on-site separation. An- study, the Comissdo de Gerenciamento dos other result was that the CGRSS decided it Residuos Solidos de Sauide (CGRSS) con- would only require 6 units rather than 10 to cluded that the actual amount of infectious service the municipality's hospitals, medical waste produced by hospitals and clinics in laboratories and blood banks. These were the metropolitan region after on-site separa- procured and the system is in full operation tion was only a small share of the total hos- today. A comparative analysis of the Curi- pital waste,22 and that on-site incineration tiba experience with that of other Brazilian cities utilizing standard fixed incinerators 21 However, after two years of successful op- for hospital wastes would be advisable in eration of the Canabrava bioremediation order to assess the relative merits and costs landfill, problems have since resulted from of these options. a change in administration and the failure to pay the contracted operator (Queiroz 7.23 A third area of innovation observed Lima, Luiz Mario, personal communica- in Brazil is in the development of coopera- tion, June 1997). tives of waste pickers (catadores). The or- 22 Out of a total of 18.3 tons/day in the CMR, ganization of these informal workers - in only 4.2 tons/day was classified as infec- double the WHO estimate of 0.12 tious while 11.9 tons/day was classified as kgube the WHO istimate to inert and 2.2 tons/day as recyclable. The kg/bed/day. This number is expected to infectious waste stream is still relatively come down as hospitals gain experience in high, averaging 0.25 kg/bed/day - almost on-site separation. 124 Brazil: Managing Pollution Problems- Annexes Box 7.3: "Catador Recycling Co-Ops A Success In Rio" (CEMPRE News, No. 24, August 1995) addition to improving their working condi- opment of alternatives like the waste picker tions and income eayhing opportunities - cooperatives, it will be very difficult to close can help to rationalize the selective collec- and/or rehabilitate many existing municipal tion and sorting of solid waste, reducing dumpsyand.shift toesanitary landfills. costs and augrenting the flow of recyclable materials. Thismactivity is actively supported 7.24 Finally, both Belo Horizonte and by the Compromisso Empresarial para Re- Sao Paulo htave successful ongoing pro- ciclagem (CEMPRE), 3 which together with grams to separately manage construction a group of NGOs has produced a educa- debris. In Belo Horizonte, where construc- tional kit to help waste pickers form co-ops, tion debris represents about one-third of the and has worked with municipalities and in- -total municipal waste stream, the city has dustries to marshal support for such coop- two recycling plants of 120 tons/day and eratives in Sao Paulo, Belo Horizonte, Porto 240 tons/day capacity. 24 Sao Paulo inaugu- Alegre, Salvador and other cities. Many rated the Itatinga special landfill for inert other organizations are also involved in wastes in 1990, and initiated operation of a These efforts, such as COMLURB in Rio de modern 1,800 tons/day construction waste Janeiro (see Box 7.3). Without the devel- processing plant for the production of pavement aggregates. 23 CEMPRE is a non-profit association dedi- cated to the recycling of waste materials Technical Resources For The MSWM within the framework of integrated solid Sector waste management. Members include Brahma, Coca-Cola, Enterpa, Gessy-Levert 7.25 Brazil is one of the few countries in Mercedes-Benz, Nestle, Paraibuna, Pepsi- Latin America to have reasonably well de- Cola, Procter E& Gamble, Rhodia-ster, veloped technical resources and professional Souza Cruz, Suzano, Tetra Pak and Vega development programs in the field of solid Sopave. In addition to assisting in the de- -waste management, even though the number velopment of waste picker cooperatives, of professionals working in the sector is still CEMPRE also manuals of selective collec- well below the number needed, particularly tion and recycling of municipal solid waste, assists industries in conducting waste audits and setting up waste reduction and recy- 24 Tavares and Abreu, op cit. cling programs, and evaluates the impact of plr such programs in Brazil. 25 Secretaria de Servicos e Obras, op cit. Brazil: Managing Pollution Problems - Annexes 125 in smaller municipalities. The training of maintain documentation centers of solid solid waste workers, however, is an area waste management that are tied to the Bra- requiring greater attention. zilian national network on environmental information (SISIMA) and to the Pan 7.26 Technical and managerial guidelines American Network for Information and have been produced by a number of organi- Documentation on Environmental Engi- zations. The following are just a few exam- neering and Sciences (REPIDISCA) man- ples: aged by CEPIS/PAHO in Lima, Peru. * A comprehensive strategic planning and technical guide has been prepared by Legislation,Regulations And Standards IPT and CEMPRE (Lixo Municipal: 7.28 Public cleansing (limpeza pzbica), Manual de Gerenciamento Integrado, more commonly known as municipal solid SAo Paulo, 1995). waste management, is constituted in Brazil * A simple guide on how to manage solid as one of the few public services that is the waste - in plain language and with clear exclusive responsibility of the municipal graphics - has been produced for local level of government. This normally in- decision makers and those responsible cludes the collection and disposal of resi- decision makers and those responsible drta oi at, n h laigo for solid waste actions by IBAM and dential solid waste, and the cleaning of MBES (O que e preciso saber sobre streets, storm drains, beaches, parks, mar- limpeza urbana, Rio de Janeiro, 1993). kets, etc. The Constitution of 1988, in arti- cle 23, established municipal responsibility - Technical manuals have been prepared for environmental protection in common by FEAM to orient and assist municipal with the Union and the States - more for staff carry out their responsibilities in enforcement than legislating, although arti- the area of solid waste disposal (Como cle 30 gives municipalities the power to Destinar os Residuos S6lidos Urbanos?, supplemnenit federal and state environmental Belo Horizonte, 1995) and basic sanita- legislation. tion (Manual de Saneamento e Protefao AOmbiental para os Municipios: Vuolume 7.29 For industrial wastes, the legal re- 2 - Saneamento, Belo Horizonte, 1995). sponsibility for transport and final disposal rests with the generator, and the State (and * The Secretary of Environment, State of Federal) governments are responsible for Sao Paulo, has produced educational promulgating the corresponding regulations material for the public on the problems and standards and enforcing them. The Con- of garbage and how cities can solve stitution of 1988 conferred on the Federal them (Lixo: Soluoes ao Alcance do Union the power to promulgate general Municipio, Sao Paulo, 1989). standards aimed at controlling pollution and preventing the degradation of the environ- 7.27 Education, training and research are ment, thereby establishing that solid waste also carried out by a number of universities disposal is subject to federal public health (UFRJ, UERJ, USP, USC, ISAM/UCP, and environmental legislation and regula- ATEPE/UFP), institutes and technical cen- tions. ters (IBAM, FIOCRUZ, FEEMA, COM- LURB, CETESB), and professional asso- 7.30 The States should also regulate and ciations (ABES, ABLP, ABRELP), in addi- enforce municipal disposal. In general, in tion to external sponsors such as PAHO and the large municipalities in the south and ISWA. Many of these same inhstitutionas southeast of Brazil, domestic solid waste is disposed of in controlled or sanitary land- 126 Brazil: Managing Pollution Problems - Annexes fills, and there. is a growing tendency to in- concessions, including the establishment of troduce compost plants. In other parts of the interniunicipal consortia.26 country, open dumping of municipal solid waste is the common practice. 7.34 The Associa.ao Brasileira de Nor- mas Tecnicas (ABNT) has promulgated a 7.31 As a result of a Federal order (por- number of national standards related to solid taria) in 1979 that obliged municipalities to waste management: incinerate infectious waste from hospitals and clinics, about 10% of Brazilian munici- * NBR 8418, Apresenta,do de projetos de palities now operate such incinerators - al- aterros de res(duos industriais perigo- most all in the south of the country. How- sas. ever, CONAMA Resolution No. 6 (Septem- * NBR 8419, Apresentaqao de projetos de ber 1991) moved away from obligatory in- aterros sanitdrios de residuos s6lidos cineration, opening the door to other forms urbanos. of treatment including sterilization by auto- claving, microwave, or chemical or thermal * NBR 8849, Apresenta,do de projetos de means, or by ionizing radiation. aterros controlados de residuos solidos urbanos. 7.32 Other Federal legislation related to NBR 8843, Tratamento de lixo em aero- specifically to solid waste or industrial portos. waste includes several resolutions: * NBR 9191, Sacos plasticos para acon- * Portaria 53, Ministerio do Interior, dicionamento de lixo. 1979, Disposiqdo de residuos solidos e * NBR 9690, Mantas de polmeros para de natureza t6xico. impermeabilizaC do - Resoluqao 05, CONAMA, 1985, Neces- * P-EB 558, Recipientes padronizados sidade de elaboraqao de EMI/RIMAra lizos para aterros sanitdrios, processamento r e destino final de residuos t6xicos. * NBR 10.004, Residuos s6lidos - Classi- - Resolu9do 06, CONAMA, 1988, Neces- ficaqdo. sidade dos Estados elaborarem inven- * NBR 10.005, Lixivaqao de residuos - tario de residuos solidos industriais. Procedimento. 7.33 Related Federal legislation includes * NBR 10.006, Solubilidade de residuos - a number of instruments on urban planning, Procedimento. and on public service concessions. The * NBR 10.007, Amostragem de residuos - Constitution of 1988 requires all munici- Procedimento. palities of more than 20,000 inhabitants to prepare a Plano Diretor along with a multi- * NBR 12.807, Residuos de servifos de year municipal plan for basic sanitation, Sauide - Terminologia. land use plans, and other planning and * NBR 12.808, Residuos de servi,os de budgeting instruments that apply to munici- Sazude - Classifica,do. pal services, including public cleansing. A set of laws on public licitations (8.666/93 26 A detailed presentation of federal legisla- and 8.883/94) and concessions (8.987/95) tion related to municipal services, and in provide the framework for public service particular to MSWM, in provided by IPT/CEMPRE, op cit., "Anexo A - Legisla- Brazil: Managing Pollution Problems - Annexes 127 * NBR 12.809, Manuseio de residuos de ECONOMICS OF MSWM servigos de Sauide - Prodecimento. 7.38 Solid waste services fall into the vigos de Sa1 0e - Procedimento. classical "public good" category being non- exclusive and non-divisible, in addition to * NBR 12.980, Coleta, variaqJo e acondi- being strongly linked to public health and cionamento de residuos solidos urbanos environmental concerns. Where the service - Teminologia is not provided, there is a proliferation of 7.35 While there appear to be an abun- rats, flies and mosquitoes that transmit many dance of federal legal instruments, an ex- comrnmon tropical diseases. The resurgence amination of the above lists reveals a col- of dengue fever observed in several LAC lection of casuistic measures, not closely cities, for example, has been linked to the interconnected, and which cannot be consid- breeding of Aedes aegypti mosquitoes in ered to provide or form part of a national rain water that collects in empty bottles and solid wast s rpoliCY.27 cans littered near homes, or in discarded solid waste sector tires.29 Rubbish blocking storm drains re- 7.36 Similar legislation, regulations and sults in increased flooding and damages to standards have also been promulgated by roads and walks, building foundations and some states and municipalities. For exam- the drainage system itself. Disposal sites are ple, CETESB has issued standards for the also the source of many negative impacts, State of Sao Paulo regulating sanitary land- including air pollution from uncontrolled fills and industrial wastes.28 COMLURB, in fires fed by methane from the anaerobic de- fils aissued its own technical standards that composition of garbage, and water pollution 1977, tosapply in tehniro today from leachate - made up of water formed by continue to apply in Rio de Janeiro today. the hydrolysis of organic wastes and rain 7.37 Finally, most major municipalities water that seeps through the waste piles have issued local ordinances governing the leaching out soluble pollutants. Groundwa- generation, storage, collection, transport and ter is particularly at risk from leachate infil- disposal of residential, commercial and in- tration and the pollution effects of a leachate dustrial solid waste within municipal plume reaching a high quality groundwater boundaries. A recent example is the Codigo source may be quasi-irreversible. do Meio Ambiente e do Equilibrio Ecol6gico da Cidade do Recife, with a special chapter 29 See for example Barrera, R., Navarro, J.C., on solid waste, which was signed into law Mor examplez, D., Nalez, J., by the Municipal Prefect on 13 September Mora, J.D., Dominguez, D. & Gonzalez, J., 1996. '"Public Service Deficiencies and Aedes Aegypti Breeding Sites in Venezuela," PAHO Bulletin, 29(3):193-205, 1995. Dengue has been reported as an emerging 27 In response to this lack of a comprehensive public health problem in Beldm as reported policy framework, Deputado Federal Ser- in SEGEP, "Consulta Local da Regiao Me- gio Aronca has drafted a proposal for es- tropolitana de Belem: Relat6rio sobre a tablishing a Sistema Nacional de Residuos. Gestao do Saneamento e do Meio Ambi- At the time of preparing this report, how- ente Urbano," Belm, Agosto 1994. A ever, the details of the proposal were not complete description of diseases linked to available (Costa Leite, Luiz Edmundo, per- deficient solid waste management is pro- sonal communications, June 1997). vided by Cointreau-Levine, Sandra, "Oc- 28 cupational and Environmental Health Is- Summarized in IPT/CEMPRE, op cit., sues of Solid Waste Management," draft "Anexo B - Normas." 128 Brazil: Managing Pollution Problems - Annexes Box 7.4: Relative Price Of MSWM Services In LAC. (Source: Costa Leite, 1997) 7.39 Some of the pollution impacts can placed on the local government sector and, be significant. Studies on sources of green- with tre exception of some industrialized house gas emissions have found that de- countries, is generally paid for out of local composing garbage in landfills is responsi- revenues or intergovernmental transfers .3 ble for between 6-20% of global methane On the other hand, there is some evidence in emissions.a In Rio de Janeiro, refuse burn developing countries of tousehold demand ing might be responsible f fo1o.me fS$ e for collection services to remove refsuse particulate emissions - an air pollution pa- from neighborhood streets and drains, but rameter known to pose major health hazards scant evidence of willingness to pay for dis- to the urban population.3 and renti posal services (similar to wastewater treat- discharges into Guanabara Bay from the ment and disposal). Also, services are not 9ramacho and Caju landfipelutionwml as from very expensive and should be affordable to similar disposal sites in the basin also repre- all but the poorest urbano households (see sent an important source of water pollution. Box 7.4). Local authorities should seek to ureatment of these leachate discharges has recover the full cost of service provision been identified as an essential element of a from benu eficiaries through user charges bost-effective program of control measures based on the average costs of residential to improve water quality in Guanabara Bay. waste management. To protect poor house- holds, targeted subsidy schemes can be de- 7.40 Thicuteemissin responsibility for man- veloped. Intergover mental transfers should tging urban solid waste in all countries is be limited to promoting environmentally sound disposal options. chapter for Inted ational Occupational and 7.41 The relative importance of MSWM Environmental Medicine, 1997. in tllte overall municipal operational budget 30 Methane is a greenhouse gas of particular is significa lt. For medium and small cities, concerns as its effects are estimated to be 20 times greater thante disares has 32con the fUll ostno sasserv provisonu of carbon dioxide. Global methane emis- of a fm befica orieathreg ah urowcing h - costivnse rogam ofi andonern meas ures ume based rates (e.g., pay by the bag) so estCimatedb theantege,v"Clmenate Change," that households that generate more trash oiPCr iMoeater qua, iCnimuane anbara y pay more. This is a sound principle to ap- IPPC/WMO/UNEPress Cambridge92.ivers ply in developing countries to large gen- 7.40 sThe ultimate responsibilityformaderators, but has little applicability to house- 31 See "Brazil: Managing Environmentai holds that presently do not generate exces- Pollution in the State of Rio de Janeiro," sive quanities of waste and have only lim- Report No. 15488-BR, The World Bank, ited opportunity for waste minimization. Washington DC, 22 August 1996. Flat user charges are recommended. Brazil: Managing Pollution Problems - Annexes 129 it may be on the order of 7-15% or higher, costs may represent as much as 95% of and the solid waste department is often the overall costs. The following data for col- largest employer in city government. In lection only have been reported for major large cities, this share is normally much cities:35 lower given the large programs that the big cities run in the areas of health, education, Sao Paulo, 1994 urban transport, etc. In Rio de Janeiro, -private contractors US$25/ton COMLURB's solid waste budget in 1990 was on the order of 10.8% of the total mu- Rio de Janeiro, 1997 nicipal budget with an average cost esti- -private contractors US$30/ton mated at US$27/ton when equipment depre- ciation is taken into account.33 In Sao Paulo Belo Horizonte, 1994 during the same year, the solid waste expen- -private contractors US$17/ton- ditures represented only 4.4% of total mu- -SLU US$23/ton nicipal budget with an average cost of US$41/ton for a high quality service.34 Natal, 1994 While these shares may seem low, recall -private contractors R$16/ton that Sao Paulo is currently spending US$30 -URBANA, leased vehicles R$34/ton million per month on solid waste services. -URBANA, own-managed R$53/ton 7.42 Only isolated cost data exist for 7.44 For medium and small cities, these solid waste services in Brazil, making cross costs are likely to be lower. In the Flori- city comparisons difficult. A selection of an6polis urban area, with a population of data from myriad sources is listed below, about 500,000, total costs for collection, but should only be considered as indicative transfer/transport and disposal by a private of costs in Brazil. contractor is US$24/ton. The disposal method is reported to be sanitary landfill.36 Collection 7.45 Street sweeping is another element 7.43 Collection costs generally represent of solid waste collection that can impact the largest share of total solid waste service significantly on overall costs. Street costs - about two-thirds of full service costs. sweeping costs were only reported for Rio Where open dumping is practiced, collection 35 Costa Leite, op cit.; FEAM/ABES, "Con- As reported by Beture-Setame, "Solid sulta Local de Regiao Metropolitana de Waste Management Regional Study: Case Belo Horizonte: Relat6rio sobre a Gestao Study of Sao Sebastiao de Rio de Janeiro," do Saneamento e do Meio Ambiente Ur- prepared for LATAD, February 1990. The bano," Belo Horizonte, Agosto 1994; Lins authors point out that the budget was higher Guimaraes, Joao Rafael and Magno de than previous years because a long-delayed Montenegro Miranda, Alexandre, "Avalia- renewal of COMLURB's fleet was under- cao de Custos Unitarios da Limpeza Ur- way. On the other hand, disposal costs rep- bana: Gestoes Pr6pria, Semi-Terceirizada e resented just US$0.90/ton as the dumpsites Terceirizada, " 180 Congresso de Engen- were not being operated as sanitary land- haria Sanitaria, 1994. fills at that time. With proper disposal in 36 See PMF, "Consulta Local do Municipio de sanitary landfills the average cost would likely have been closer to US$30-32/ton. Florian6polis: Relat6rio sobre a Gestao do Saneamento e do Meio Ambiente Urbano," 3 Secretaria de Servicos e Obras, op cit. Florian6polis, Agosto 1994. 130 Brazil: Managing Pollution Problems - Annexes Table 7.4: Comparative Costs Of Disposal Options Otsposal Optio ' $$ ; § + Operational^^ Cost ; ;f.7finvestment CostsC (US<$I tonS~ R;)rt; 9=^f0000 ;;;(US$Iton capacitylday) Sanitary landfill 7 - 12 5,200 Composting plants 20 - 45 25,000 - 45,000 Incinerators 20 - 60 80,000 - 130,000 (Source: IPT/CEMPRE, 1995; FEAM, 1995) de Janeiro where private sweepers are cur- fraction) or ash (15-20% after incineration). rently contracted at US$20/km.37 The comparative costs of these three options in Brazil have been estimated by CEMPRE 7.46 Source separation and selective as summarized in Table 7.4. collection of residential solid waste for sub- sequent recycling is practiced in a number Landfill of Brazilian cities. In 1994, CEMPRE car- ried out a study of the effectiveness and 7.48 Reported landfill costs are often costs in eight cities.38 On average, 4.6% of much lower than shown in Table 7.4, since the residential waste stream was diverted to landfills are not always run as sanitary land- recycling in the eight cities studied. The fills. Open dumping withi some waste lev- study found that the average cost of col- eling and compaction only costs about lecting recyclable materials is US$240/ton, US$1/ton. Also, there are significant while the average sale price of the recovered economies of scale in landfills. The 2,000 materials is only US$30/ton. An additional tons/day Salvador bioremediation landfill benefit is the avoided cost of conventional costs about US$5.50/ton to operate, but land collection and disposal which, in Brazil, is costs are not included and bottom liner on the order of US$25-45/ton, as shown preparation and storm drainage control are above. Thus, a simple benefit-cost analysis minimal.39 indicates that selective collection is not self- financing. While there may be other social 7.49 The strategic plan prepared for the and environmental benefits from recycling, Recife Metropolitan Region found that a lower cost alternatives to selective collection regional system of transfer and disposal in are needed to make it attractive for munici- four sanitary landfills (bioremediation de- palities, in addition to greater participation sign) would cost about US$12/ton, with the rates achieved through public education and landfill cost estimated at US$7/ton.40 Based awareness campaigns. on a number of site visits, observed tipping fees paid to contractors ranged from Disposal Options US$4/ton in Rio up to US$18/ton for a small landfill in Macae. Tipping fees, however, 7.47 The three main disposal options for only reflect current operational costs but do municipal solid waste are landfilling, com- not include recovery of investment costs.4' posting or incineration. When composting or incineration are utilized, there will still be a need for a landfill to dispose of rejects (40-50% after composting the organic waste 39 Notes from author's field visit, 1995. 40 ATEPE, op cit. 37 Costa Leite, op cit. 41 Johannessen, Lars Mikkel, "Brazil: The 38 IPT/CEMPRE, op cit. Emerging Approach to Landfilling of Mu- nicipal Solid Waste", Back to Office Re- Brazil: Managing Pollution Problems - Annexes 131 7.50 Landfill gas (LFG) recovery is not portedly invested US$30 million in a 1,200 common, even though bioremediation land- tons/day plant utilizing TRIGA technology. fills are ideal for this technology. One expe- The plant was commissioned in 1993, but rience has been developed by COMLURB at one year later was shut down because of the closed Caju landfill where an LFG re- operational and odor problems and remains covery system was built including gas wells, closed.43 a piped collection system, removal of car- bon dioxide and hydrogen sulfide, and gas 7.53 The largest successful composting compression. The compressed gas was used operation in Brazil, and possibly the world, to fuel part of COMLURB's vehicle fleet is in the Municipality of Sao Paulo where and over 60 taxis. COMLURB is consider- two materials sorting and composting plants ing extending LFG recovery to other land- based on the DANO design have been in fills in Rio de Janeiro. The economic vi- operation since the early 1970s - one in Vila ability of LFG projects depend on the value Leopoldina with a capacity of 900 tons/day of the energy end use in the form of fuel, and one in Sao Mateus with 600 tons/day electricity or steam. Hundreds of such sys- capacity. The plants have been modified tems are in use in the USA and Europe and and enlarged by the municipality since their demonstrate economic viability under a va- installation. A study of the efficiency of the riety of circumstances. Sao Mateus plant showed that for each ton of solid waste processed (input), the output Composting consisted of 53% compost, 4% recyclable materials and 43% rejects which are dis- 7.51 A survey conducted in 1990 found posed in sanitary landfills. After taking into 57 municipalities had composting plants account income from compost sales (most with materials separation and recov- (US$5.80/ton of compost, or US$3.08/ton of ery), of which only 18 were operating and waste processed) and recyclable sales, the 15 were under construction. The remaining municipality must subsidize the operation at 24 plants were shut down as the result of a cost of US$10.76/ton of waste processed.4 operational or financial failures. Compost- ing was promoted in Brazil by official cred- 7.54 There are also significant economies its from BNDES channeled to contractors of scale in composting operations. For ex- whose technical and marketing assumptions ample, a study of very small plants (1.5 were not always in line with municipal ton/day) in three interior cities of Rio needs and specifications. In many cases, Grande do Norte resulted in total costs on municipal managers were frustrated by an the order of US$56-62/ton of waste proc- erroneous vision of making a profit on the essed.45 These simplified plants trans- operation, or by the inability to produce compost of the quality required by the mar- ket or imposed by legislation.42 43 Costa Leite, Luiz Edmundo, personal communication, June 1997. 7.52 It is not only the small municipali- 44 Reported in Avezum de Castro, Marcus ties that have experienced difficulties with Cesar and Schalch, Valdir, "Avalia$ao da composting. The city of Rio de Janeiro re- Efficiencia de uma Usina de Reciclagem e Compostagem: Estudo de Caso," in port for 14-29 June mission, TWURD, 17 Mem6rias Tecnicas, XXV Congresso In- port 199 ternacional de AIDIS, Mexico, 1996. July 1997. 42 45 See Mesquita de Oliveira, Erivaldo, "Usi- The survey results and analysis are reported ' S in IPT/CEMPRE, op cit. ponas Simplificadas de Reciclagem e Con- postagem de Lixo," in Memorias Tecnicas, 132 Brazil: Managing Pollution Problems - Annexes formed 44-60% of the waste processed into cost of hazardous waste incineration in Sao compost and reclaimed 5-9% in recyclable Paulo of US$1,200/ton.47 materials. However, information on reve- nues derived from the operations were not 7.57 It is of interest to note that due to provided. federal regulation most of the international airports in Brazil incinerate their waste in Incineration well designed incinerators, including air- ports in Brasilia, Manaus, Belo Horizonte, 7.55 Today there are no major municipal Sao Paulo, Rio de Janeiro, Foz de Igua,cu solid waste incinerators operating in Brazil. and Belen. The airports also have their own The Municipality of Sao Paulo has called refuse collection system. Airports in Brazil for bids for two large incinerators with en- belong to INFRAERO, a public entity under ergy recovery (1,250 tons/day each), but has the control of the Air Force. The refuse col- not yet obtained the environmental operating lection and operation of the incinerators are license required from the State Environ- contracted out by INFRAERO. This federal mental Secretary. The estimated concession regulation requiring on-site incineration of price for operating these waste to energy waste also pertains to ports, but presently plants is on the order of US$65/ton net of there is no post in Brazil in compliance with energy revenues.46 The IFC is analyzing the this regulation.48 feasibility of participating in these conces- sions. Also, the IFC has been invited to Hospital Waste analyze another proposed incinerator for the Municipality of Campinas. 7.58 Two major cities in Brazil that have built proper municipal incinerator plants for 7.56 Hazardous waste incineration is hospital wastes are Brasilia (in 1974) and being carried out in Minas Gerais in a ce- Bel6rn (in 1988). The Municipality of Sao ment kiln licensed by the Conselho de Paulo has two aging incinerators (the Ponte Politica Ambiental (COPAM) at a cost of Pequena incinerator installed in 1959 and US$600/ton. This compares to a reported the Vergueiro incinerator installed in 1968 operating at a combined capacity of 175 tons/day) which are used to incinerate in- fectious hospital wastes from 15 munici- XXV Congresso Internacional de AIDIS, palities in the SPMR. Both are in serious Mexico, 1996. need of rehabilitation and the installation of 46 Reported by Zulauf, Werner, "Solid Waste emission control equipment.49 Management in the City of Sao Paulo, Bra- zil: A Macro-Recycling Strategy for Or- 7.59 A preliminary analysis of the Curi- ganic Wastes," paper presented at ESD tiba hospital waste system described above Conference on Recycling Urban Waste for shows an overall cost of US$215/ton for all Agricuilture, World Bank, 24-24 Septem- hospital waste, and US$1,055/ton of infec- ber 1996. However, a new pricing pro- tious waste incinerated (including all opera- posal is reportedly being considered by the municipality based on a rapid payoff of in- vestment costs to the private concession- 47 As reported in FEAM/ABES, op cit. aire: a payment of US$103/ton in the first seven years of operation, followed by pay- 48 Paraguassu de SA, Fernando , personal ment of US$30/ton for the remainder of the communication, June 1997. 20 year concession (personal communica- tion, Jerry Esmay, IFC, April 1997). 49 Secretaria de Servicos e Obras, op cit. Brazil: Managing Pollution Problems - Annexes 133 tional costs and amortization of the mobile dium and small municipalities, the resources incinerators). This appears to be high in collected through the taxa go directly to the comparison with experience in other coun- municipal treasury and may be applied to tries where infectious waste incineration other uses. This makes it difficult for the costs per ton run between US$500 to 900. city solid waste manager to properly budget Looked at from the point of view of hospital for and operate the service. Another com- administration, and recalling that the infec- mon difficulty in updating the taxa is that tious waste generation rate in Curitiba is many municipalities do not maintain suffi- 0.25 kg/bed/day, the incremental cost to ciently detailed and discriminated accounts hospitals is about US$0.26/bed/day.50 for service operations, and too often do not account for equipment depreciation. FINANCING MSWM 7.62 Investment financing requirements 7.60 Solid waste operations in Brazil are include short-term financing for collection financed primarily from a taxa de limpeza trucks, and medium- to long-term financing puiblica and from general municipal reve- for transfer, treatment and disposal facilities nues. In a case involving COMLURB, a and heavy equipment. Solid waste collec- 1980 Brazilian Supreme Tribunal decision tion is a labor intensive activity with high struck down the use of tariffs for solid waste operational costs, and sanitary landfill dis- collection services, arguing that it is an es- posal operational costs are high compared to sential and obligatory public ser-vice and initial investments. Thus, the investment therefore limited to remuneration through needs of the solid waste sector are not great taxes or user charges. The common practice by comparison to the water and sewerage in Brazil is to recover the service costs sector. For example, according to an ABES through a benefit tax or user charge (taxa) study of investment requirements in basic collected with the property tax. In some sanitation for the period 1988-90, solid municipalities, the taxa is computed based waste requirements represented only 6.3% on the previous year expenditures divided of the estimated water and sewerage invest- by the number of lots, or prorated by the ments needs. built-up area of urban lots. The taxa also 7.63 The increasing participation of pri- varies for residential or commercial serv- vate ope incte set mean of they ices Exeptin periods of high inflation, vate operators in the sector means that they ices. Except n o f high ton, will normally finance rolling stock and this approach normally leads to self- sometimes even heavy equipment. Facilities financing ratios on the order of 75-95%. fimeseven hevequipmost Fayslitie Many municipal prefects, however, find it financing, however, is almost always done politically difficult to update the taxa since by the public sector except in a few cases it equresthe approval of the municipal where BOT-type concessions are awarded it requires in apprealiof the lev- (such as the Sao Paulo incinerator proposal). council, resulting in increasingly lower lev- It would be advantageous to significantly els of cost recovery. Deficits need to be increase the use of BOT concessions for made up from local general revenues or large scale landfills and recycling and com- posting plants, as well as specialized facili- 7.61 For municipalities which have not ties such as hospital waste incinerators. established some form of autonomous pub- lic cleansing agency, including most me- 50 Notes from author's supervision visits, 1994-95. 51 Paraguassu, op cit. 134 Brazil: Managing Pollution Problems - Annexes 7.64 Municipalities seeking investment 7.65 Notwithstanding multiple financing financing can turn to federal or state sources sources, many municipalities have difficul- of loans or grants, such as: ties accessing these funds because they can- not demonstrate creditworthiness, have not * BNDESIFINAME Social line of credit done the necessary planning and project de- for financing collection vehicles and sign, or do not meet other eligibility criteria. heavy equipment for municipalities or On the other hand, the existing financing intermunicipal consortia with greater sources sometimes are not being accessed than 30,000 population. because of too much paperwork, or a mis- match between the restricted use of funds * BNDES special fund for recycling or compared to wlhat mayors want to do. Fed- composting plants, available to munici- eral and state grants should be more care- palities, autonomous agencies, or con- fully targeted to assisting municipalities in cessionaires. meeting environmental objectives. Lines of credit need to be accompanied by institu- * CEF/FAS (Fundo de Apoio ao Desen- tional development and technical assistance volvimento Social) for health, sanitation, for needed studies and pilot programs. education and other social projects in under-developed regions or for low- 7.66 Additional World Bank support for income populations. MSWM has been channeled through a vari- ety of other projects such as the integrated * FINEP (Financiadora de Estudos e water pollution control projects for urban- Projetos) for the promotion of research ized river basins in Minas Gerais, Parand projects and programs aimed at socio- and Sao Paulo, metropolitan development economic, scientific and technological projects in Salvador and Recife, the PRO- development. SANEAR project, and the Rio flood emer- * FIPEC (Fundo de Incentivo a Pesquisa gency project.53 Tecnico-Cientifica) of the Banco do Brasil for applied research and devel- Role Of External Assistance opment projects. 7.67 Refuse production in Brazilian cities * State Municipal Development Projects, is an inevitable phenomenon, occurring such as the World Bank-supported proj- daily with volumes and compositions that ects in Parand, Santa Catarina, Rio depend on the size of the population and the Grande do Sul and Minas Gerais, that can be used to lend for environmental pal Management and Environmental Infra- infrastructure and services including structure Project - SOMMA (3639-BR). solid waste management. 52 53 Minas Gerais Water Quality and Pollution Control Project (3504-BR), Sao Paulo Water Quality and Pollution Control Proj- 52 *ect (3503-BR), Paranas Water Quality and The Bank-supported projects include the Pollution Control Project (3504-BR), Sal- Parand Market Towns Project - PRAM vador Metropolitan Project (2681-BR), Re- (2343-BR), the Santa Catarina Small cife Metropolitan rego Project (1- Towns Development Project - PROURB cife Metropolitan Region Project (2170- Town3BR D hevelopMentciprojec DevopR R BR), Water Project for Municipalities and (2623-BR), the Municipal Development Low-income Areas -PROSANEAR (2983- Proects in theRStaGrandesdo Sul - PIMES BR), Rio Flood Reconstruction and Pre- (3129-BR), and the Minas Gerais Munici- vention Project (2975-BR). Brazil: Managing Pollution Problems - Annexes 135 level of economic development. This re- Sector strategy view has found that MSWM in Brazil is highly variable with larger municipalities 7.69 A simple starting point for the de- often, but not always, performing quite well, velopment of a sector strategy is to under- and medium and smaller municipalities do- take a national solid waste sector study. ing less well. Failures in performance are With the support of an interagency working evidenced by low service coverage rates and group, five LAC countries have already widespread open dumping, and result in conducted such studies.55 The approach - public health and environmental problems. based oni a consultative process - provides The task of solid waste management, always for a sector assessment, identification of key a municipal responsibility, is complicated by policy areas requiring attention including the such problems as:54 In1kages with basic sanitationl, environ- mental and decentralization policies, and the * lack of a coherent sector policy frame- formulationi of specific studies or follow-up work for municipal solid waste man- actions that can be incorporated in subse- agement; quent donor projects to complete the for- mulation of the sector strategy and initiate * financial limitations - inadequate budg- implementation. ets, unbalanced cash flow, out-of-date taxas, insufficient collection, and lack 7.70 In the case of Brazil, given its size of access to credit; and federal structure, it would be advisable to conduct the sector work in two stages; * need for better technical and profes- first, to conduct a nationlal consultation, and sional training - from the laborer to the second, to develop a detailed solid waste chief engineer; strategy at the state level in a group of se- lected states. These efforts could be linked * discontinuity in local policies and ad- to ongoing Bank-supported efforts such as ministration; and the PMSS or the Minas Gerais Municipal Management and Environimental Infra- * lax environmental controls. structure Project, or to future operations. In addition to federal and state sector agencies 7.68 External assistance should focus on and representative municipalities, the exer- these problems, providing technical and fi- nancial assistance to the federal and state governments as well as to municipalities. 55 The interagency working roup, compris- Specifically, support activities should focus , ing PAHO, IADB, USAID and the World on developing a national sector strategy, Bank, developed a methodological ap- formulating region-wide strategic solid proach that was initially field tested in Co- waste strategies and action plans for larger lombia and Guatemala with World Bank urban areas, strengthening the municipal support (PAHO, "Guideline for National management and investment capacity of Solid Waste Sector Assessments," Wash- smaller municipalities, and developing envi- ington, DC, 1994). Subsequently, the ap- ronmental management capacity at all lev- proach was applied in Cuba, Mexico and els. Uruguay. An assessment of the five coun- try experience, carried out in CEPIS, Lima in March 1997, confirmed the validity of the approach and recommended its use in other countries; it is now being applied in Bank-supported projects in Argentina, 54 IPT/CEMPRE, op cit. Bangladesh, Indonesia and the Philippines. 136 Brazil: Managing Pollution Problems - Annexes cise would benefit from the participation of provision of environmental infrastructure, such groups as IBAM, ABES, ABLP and including solid waste. The Minas Gerais ABRELP, and external support agencies project goes to the heart of the problems such as PAHO and IADB. Also, a national afflicting many weaker municipalities and training program covering all aspects of impeding their capacity to deliver public solid waste management is needed to sup- services - lack of clear priorities, poor op- port the sector, including courses to assist erational management capacity, financial municipal leaders in making decisions. limitations, turnover associated with chang- ing political administrations, and others. To Urban solid waste management strategies help municipalities be successful, the and action plans Bank's experience shows that municipal development projects should create local 7.71 A number of large metropolitan ar- demand for resources, stress demand man- eas in Brazil have already begun to develop agement and willingness to pay when re- and/or implement strategic solid waste forming service provision, increase munici- plans, many with World Bank support such palities' own resources for financing serv- as Curitiba, Belo Horizonte, Recife, Salva- ices, seek efficiency gains through institu- dor and Sao Paulo (IFC). This practice tional reform and private sector participa- should be extended to most of the 60 plus tion, aim to start up at the beginning of a cities with more than 500,000 inhabitants new mayoral cycle, and promote political which will be the future metropolitan areas continuity by having development plans re- and are of a size to require multiple facilities sponsive to community priorities. for transfer, recycling, treatment and dis- posal. Similarly, urban regions with clusters Environmental management of smaller cities can benefit from a shared strategic plan that allows them to capture 7.74 The decentralization of environ- major economies of scale, particularly in mental management in Brazil has primarily disposal operations. focused on the deconcentration of activities in the federal system, and from it to the state 7.72 The World Bank, as a member of environmental entities - the municipal role another interagency working group on solid visualized in the 1988 Constitution has yet waste management, is presently preparing a to be operationalized.6 Key local roles in- Guide for Strategic Solid Waste Planning in clude some exclusive ones such as land use Large Cities and field testing it in two Asian planning and licensing, some shared with countries. The IADB and PAHO have ex- the states such as control of industrial solid pressed interest in collaborating to test the waste, and some which should be developed guide in LAC. Within Brazil, IPT and jointly, such as within consortia, basin CEMPRE are among the vanguard institu- committees and metropolitan regions. An tions already promoting strategic solid waste exchange of international experience in the planning. effective decentralization of environmental management roles to the local level would Municipal development be of considerable benefit to Brazil and should be a focus of external assistance. 7.73 World Bank support for municipal development projects in Brazil has evolved significantly over the past decade, culni- 56 Conclusion of the national consultation nating in the latest operation in Minas on basic sanitation and the urban envi- Gerais which is specifically focused on the ronment, IBAM, op cit. Brazil: Managing Pollution Problems - Annexes 137 politan Region Development Project," References TWURD, June 1992. Fundacao IBGE, "Pesquisa Nacional de Sanea- ATEPE, "SGRS - Sistema de Gestao do Trata- mento Basico, PNSB, 1989," Sao Paulo, mento e Destinacao dos Residuos S6lidos 1992. do RMR: Concepcao Basica Operacional, IBAM, "Consulta Nacional sobre a Gestao do Institucional e Financeira," Recife, Marco Saneamento e do Meio Ambiente Urbano: 1996. Sintesis do Relat6rio Final," Rio de Janeiro, Avezum de Castro, Marcus Cesar and Schalch, Janeiro 1995. Valdir, "Avaliacao da Efficiencia de uma IPPC/WMO/UNEP, "Climate Change," Cam- Usina de Reciclagem e Compostagem: bridge University Press, 1992. Estudo de Caso," in Memorias Thcnicas, IPT/CEMPRE, "Lixo Municipal: Manual de XXV Congresso Internacional de AIDIS, Gerenciamento Integrado," Sao Paulo, Mexico, 1996. 1995. Barrera, R., Navarro, J.C., Mora, J.D., Domin- Johannessen, Lars Mikkel, " Brazil: The guez, D. & Gonzalez, J., "Public Service Emerging Approach to Landfilling of Mu- Deficiencies and Aedes Aegypti Breeding nicipal Solid Waste", Back to Office Re- Sites in Venezuela," PAHO Bulletin, port for 14-29 June mission, TWURD, 17 29(3):193-205, 1995. July 1997. Bartone, Carl, et al., "Private Sector Participation Lins Guimaraes, Joao Rafael and Magno de in Municipal Solid Waste Services: Expe- Montenegro Miranda, Alexandre, "Avalia- riences in Latin America," Waste Manage- gao de Custos Unitarios da Limpeza Ur- ment & Research, 9:495-509, 1991. bana: Gest6es Pr6pria, Semi-Terceirizada e Beture-Setame, "Solid Waste Management Re- Terceirizada", 180 Congresso de Engen- gional Study: Case Study of Sao Sebastiao haria Sanitaria, 1994. de Rio de Janeiro," prepared for LATAD, February 1990. Mesquita de Oliveira, Erivaldo, "Usinas Simpli- Cointreau-Levine, Sandra, "Occupational and ficadas de Reciclagem e Compostagem de Environmental Health Issues of Solid Lixo," in Mem6rias Thcnicas, XXV Con- Waste Management," draft chapter for In gresso Internacional de AIDIS, Mexico, ternational Occupational and Environ- 1996. mental Medicine, 1997. PAHO, "Guideline for National Solid Waste Costa Leite, Luiz Edmundo, "Urban Solid Waste Sector Assessments," PIAS, Washington, Management Privatization Schemes in DC, 1994 Latin America," draft report for PAHO, Paraguassu de SA, Fernando, "Diagn6stico da March 1997. Situacao de Residuos S6lidos no Brasil," EMPLASA, "Consulta Local de Regiao Metro- report prepared for PAHO, May 1989. politana de Sao Paulo: Relat6rio sobre a PMF, "Consulta Local do Municipio de Flori- Gestao do Saneamento e do Meio Ambi- an6polis: Relat6rio sobre a Gestao do ente Urbano," Sao Paulo, Agosto 1994. Saneamento e do Meio Ambiente Urbano," EMPLASA, "Fundamentos para o Equaciona- Florian6polis, Agosto 1994. mento de Destina/pao Final dos Resfduos PMVR, "Consulta Local de Volta Redonda: S6lidos na RMSP," Sao Paulo, June 1992. Relat6rio sobre a Gestao do Saneamento e FEAM/ABES, "Consulta Local de RegiAo Me- do Meio Ambiente Urbano," Volta Re- tropolitana de Belo Horizonte: Relat6rio donda, Agosto 1994. sobre a Gestao do Saneamento e do Meio Redwood, John, "Metropolitan Environmental Ambiente Urbano," Belo Horizonte, Management in Brazil: Problems, Institu- Agosto 1994. tional Arrangements, Current Initiatives, FIDEM, "Consulta Local de Regiao Metropoli- and Recommendations," ENVLW, May tana de Recife: Relat6rio sobre a Gestao 1997. do Saneamento e do Meio Ambiente Ur- Schubeler, Peter, et al. "Conceptual Framework bano," Recife, Agosto 1994. for Municipal Solid Waste Management in Ford, Fitz, "Review of the Institutional Devel- Low-Income Countries," Urban Manage- opment Subproject of the Recife Metro- ment Programme Working Paper Series 138 Brazil: Managing Pollution Problems - Annexes No. 9, St. Gallen, Switzerland, August do Saneamento e do Meio Ambiente Ur- 1996. bano," Belem, Agosto 1994. SKAT, "Micro and Small Enterprises Involve- Tavares Campos, Heliana Katia and Abreu, ment in Municipal Solid Waste Manage- Maria de Fatima, "A Gest§o do Residuos ment in Developing Countries," SKAT S6lidos em Belo Horizonte," in Mem6rias WasteNet Infopage, October 1996. T&cnicas, XXV Congresso Internacional de Secretaria de Servi,o e Obras, "Diretrizes para a AIDIS, Mexico, 1996. Destinacao Final dos Residuos S6lidos no Zulauf, Werner, "Solid Waste Management in Municipio de Sao Paulo," Prefeitura do the City of Sao Paulo, Brazil: A Macro- Municipio de Sao Paulo, Agosto 1992. Recycling Strategy for Organic Wastes," SEGEP, "Consulta Local da Regiao Metropoli- paper presented at ESD Conference on Re- tana de Belem: Relat6rio sobre a Gestao cycling Urban Waste for Agricuilture, World Bank, 24-24 September 1996. Brazil: Managing Pollution Problems - Annexes 139 8. INFORMATION IN POLLUTION MANAGEMENT: THE NEW MODEL' SUMMARY OF ISSUES AND RECOMMENDATIONS ISSUES AND RECOMMENDA TIONS Sound environmental management must be a continual process of information gathering and dissemination, negotiation, and adjustment by the interested stakeholders. Although much of the process should be participatory, the regulatory agency plays a leading role in the gathering and analysis of technical information about environmental quality and pollution sources. An effective regulatory agency will therefore allocate fewer resources at the margin to conven- tional enforcement and more to the generation and distribution of appropriate information prod- ucts. A pollution control agency is only one player in the environmental performance game. Agency activities which influence polluters indirectly, through other agents, may be as important as di- rect enforcement. Potentially high-leverage programs include community environmental educa- tion, public disclosure of factory performance ratings and technical training programs for envi- ronmental personnel in polluting factories. Equipped with appropriate information, regulatory agencies can play a key role in facilitating negotiations between local communities and neighboring factories. This role includes provision of reliable information on emissions and local ambient quality, technical advice on abatement altematives, and the transfer of experience from other locations. Agencies should initiate a variety of pilot projects, use their information systems to monitor de- velopments, and build larger programs as experience accumulates. Newly-industrializing economies can experience rapid changes in ambient quality across air- and watersheds. Since regulation should primarily serve environmental quality objectives, it should be focused on adaptation to these rapid changes. INTRODUCTION main reasons. First, it has become much cheaper to gather, process and distribute 8.1 This report describes the expanded environmental information. Secondly, ris- role of information in new models of pollu- ing levels of public education and political tion management. Timely, accurate and representation in many countries have wid- appropriately-packaged information is the ened the circle of participation in environ- key to several features of the new approach: mental management. These new constitu- tracking environmental quality; measuring encies need appropriate information in order and publicly rating the environmental per- to participate effectively. Finally, rising formance of polluters; and comparing the acceptance of cost-benefit analysis has in- benefits and costs of alternative approaches creased the demand for information which to pollution control. Information has be- contributes to the systematic assessment of come more important in regulation for three regulatory policy options. This paper was prepared by David 8.2 Section 2 provides an overview of papeler.was preparedbyDavid information in regulatory operations, with a Wheeler. particular focus on systems for monitoring 140 Brazil: Managing Pollution Problems - Annexes ambient quality and emissions. It stresses tiple actors, with diverse economic incen- the value of appropriate information in es- tives, environmenital interests, and willing- tablishing and achieving environmental ness or ability to pay for pollution reduction. quality objectives. Sections 3-5 examine In practice, sound environmental manage- new roles for regulatory information in the ment must be a continual process of infor- public domain. Section 3 describes ways in mation gathering and dissemination, nego- which information systems can strengthen tiation, and adjustment by the interested agency operations by promoting effective stakeholders. Although much of the proc- input from stakeholders. Section 4 consid- ess should be participatory, the regulatory ers the role of public information in 'infor- agency plays a leading role in the gathering mal regulation' -- the complex set of inter- and analysis of technical information about actions between polluters and non- environmental quality and pollution sources. governmental agents whose influence on environmental performance may be as pow- 8.5 Part of the agency's technical role is erful as that of formal regulation. Section 5 to discipline regulation by focusing on pol- uses a major environmental policy reforn in lutants which are the most serious threats to Indonesia to illustrate the new approach. human or ecosystem health. Once these Finally, Section 6 concludes the report by have been selected, environmental moni- identifying several key principles for effec- toring can focus on frequent and accurate tive use of information systems in pollution measurement. Figure 8.1 represents initial regulation. establishmenit of agency monitoring at sev- eral points for four pollutants: heavy met- INFORMATION IN FORMAL REGULATION als, fecal coliforms, biological oxygen de- mand (BOD), and phosphorus. The first and 8.3 To illustrate the development of an second pollutants can pose serious threats to information system for modern regulation, it human health, while the third and fourth can is useful to consider a simplified case of cause significant damage to ecosystems by river basin management. Figure 8.1 sets the reducing dissolved oxygen and promoting stage, depicting a pattern of diverse activi- eutrophication. In this illustration, a change ties along the river: a large fac- in the summary monitoring index from tory, numerous small ones, a farming district, and a riverside Figure 8.1: Pollution Sources community. Pollution from each activity has at least some adverse consequences for its downstream Identifying Sources of Pollution neighbors. The basic task of envi- ronmental management in the river basin is to assure that overall Large Plants Agriculture environmental damage is reduced to the point where the social bene- fits and costs of regulation just balance at the margin. ~~~~ 0 ~~Community Monitoring 8.4 While easy to state, this principle is difficult to implement because the basin is home to mul- Brazil: Managing Pollution Problems - Annexes 141 Green to Red reveals a pattern of progres- indexed as Green (no problem), Yellow sive decline in water quality as the river (cautionary), Orange (serious) and Red flows downstream. (potentially critical). The source indices measure potential for damage; the actual 8.6 Having established a pattern of po- impact of pollution on river quality depends tentially-damaging pollution, the next task on the assimilative capacity of the river it- of the information system is to identify and self (a function of flow rate, volume, tem- analyze its sources. These may include in- perature, etc.). dustrial facilities, households, and farms. Analysis involves monitoring to measure 8.9 Upstream, the first monitor reads all their relative contribution to different prob- 'Green' - no significant pollution of any lems, and identification of characteristics kind. Downstream from the monitor, a large which will have a bearing on cost-effective food processing plant is pumping effluent pollution control strategies. Included into the river. The plant reports a heavy among the latter are location, sector of ac- BOD load, but no significant volumes of tivity, operating scale, current pollution other pollutants. Somewhat further down- control efforts, and the likely cost of further stream, reports from a complex of small abatement. tanneries and textile mills indicate substan- tial volumes of heavy metals and some ad- 8.7 Information about pollution sources ditional BOD. The second river monitor is gathered in a variety of ways. Self- shows that these discharges are significantly reporting is a critical part of the system: all affecting water quality: BOD is now Or- significant polluters are expected to submit ange, and metals are Yellow. Below the periodic reports on emissions which have industrial area, several large farms abut the been certified by outside auditors. The river. Analysis of runoff reveals a heavy auditors' business is dependent on a phosphorus load from large-scale applica- reputation for accuracy and acceptance by tion of fertilizer to some of the crops. Fur- the regulatory agency. They will be ther downstream, the third river monitor unlikely to distort information for one indicates some assimilative action for BOD, polluter, since any short-term financial which has retreated to Yellow. However, advantage would be outweighed by the risk metals are now Red and phosphorus is Or- of discovery, agency 'blacklisting,' and ange. exclusion from further business. The agency keeps the probability of discovery at 8.10 Finally, the river flows past a com- credible levels with its own program of munity which is discharging untreated sew- random, surprise inspections and monitoring age. This contains heavy concentrations of of emissions. Furthermore, systems for BOD and fecal coliforms, along with phos- receiving citizen complaints and publishing phorus from household detergents. At the ratings of polluters' performance assure that fourth monitoring station, BOD and coli- the risk of cheating will be minimal. Other forms become Red, from the community important information on plant effluent; the metals reading improves to characteristics is entered in the system as Orange, because no further metals have en- part of standard licensing procedures for tered the stream and some have settled to the plant operation. bottom (later to appear in the tissues of fish caught in the area); phosphorus is Red from 8.8 Figure 8.2 illustrates the operation the combination of agricultural runoff and of the full reporting and monitoring system. community sewage. Monitors in the river and emissions reports from each source provide data which are 142 Brazil: Managing Pollution Problems - Annexes 8.11 To summarize, establishment of the Technical Analysis monitoring system has revealed a serious situation. As the river leaves the monitored 8.13 Monitoring of sources and ambient area, it is for all practical purposes 'dead': quality provides the 'raw material' for contaminated by pathogens, it is dangerous regulatory action. However, these materials to drink or swim in; its dissolved oxygen go througlh a process of refinement and level is too low to support many species of analysis before serving as the basis for pol- fish, and the metals content is too high for icy implementation. Figure 8.3 illustrates safe consumption of those which remain. some critical steps in the process. First, the Eutrophication is well-advanced, and the agency's technical team uses the informa- color and odor of the water are both strongly tion for building a dispersion model, which affected by the growth of algae. Communi- relates monitored emissions to river quality. ties further downstream are inheriting a very This provides the basis for rapid identifica- costly legacy from their neighbors' uncon- tioii of sources' contributionls to pollution trolled pollution. problems. Secondly, the team uses its own information and the best available impact 8.12 The regulatory infor- mation system has now exe- mation system has now exe Figure 8.2: Environmental Database cuted its first three responsibili- ties: identification of major pollution sources, measurement The Environmental Database of their effluent, and registration of the effect on ambient envi- * KeyVariables OnRly AmbientQuality ronmental quality. As shown in * Integrated Across / BD Figure 8.2, all relevant informa- Media Phosphorus tion is stored in a system of * Designed for Reliabl networked PC's using standard, Data Input user-friendly software. The * Extremely User- system is focused only on the Friendly important problems; it is not designed to be an unwieldy catalog of all possible environ- mental data. Pollution reporting software is integrated with a Meta_ Geographic Information Sys- co,irsa- tem, and simple 'point/click' queries call up tables or maps which can report ambient qual- models to estimate the cost of pollution to ity at each point on the river, and trace ex- the community: human health damage, and cessive pollution back to its sources. Infor- losses in aquatic life, economic output and mation on these sources can be called up recreational amenities. Third, the team uses with equal ease, and the system is geared to the available data on pollution source char- track compliance with regulations so that acteristics to identify polluters which can inspections and enforcement activity can be respond rapidly and at low cost to tighter targeted on the worst problem cases. regulation. Brazil: Managing Pollution Problems - Annexes 143 Figure 8.3: Regulatory Analysis implementation. Nevertheless, at the end of the day, the policy- .makers' job is to use the avail- Regulatory Analysis able information to develop clear statements about the current state of the environment; ambient quality goals; a timetable for reaching them; the pollutants Database Technical Analysis Policy Analysis wliich will be regulated; and the * Ambient Quality * Overall Damage * Policy Priorities inlstrumenlts which will be ap- * Health * Ambient Goals plied. Ecosystems * Required Abatement * Emissions * Damage Sources * Abatement Allocation 8.16 The finial step in formal O Scale * Regulatory Instrument regulation is implementation: Performance Settingsreuain simletton * Abatement * Enforcement Strategy applyinig the regulations case-by- *Other lnformation Options case to polluting factories, farms * Costs and communities. The regulatory instruments may be pollution charges, tradable permits, or Policy Analysis quantity-based emissions standards. While the market-based instruments are generally 8.14 Figure 8.3 also tracks the informa- preferable on efficiency grounds, none of tion flow to the next stage of regulation - these approaches can function well unless policy analysis. At this level, critical deci- the informationi system has laid the founda- sions are made about valuation, priorities tions for effective policies. Constant feed- and trade-offs. It is not economically feasi- back from the system is also necessary for ble to eliminate all pollution, and the cost of judging whether implementation is having abatement differs greatly across pollutants the desired effect. and polluters. Some pollution sources are large local employers, so regulatory deci- STAKEHOLDER INPUT sions are affected by local political and eco- nomic considerations. Pollutants also differ 8.17 The preceding description of infor- in their impacts on health, ecosystems and mation and regulation has stressed the environmental amenity, so different actors 'technical' side of the system. As Figure 8.4 in the river basin will experience very dif- shows, however, an equally important part ferent effects from alternative policy pack- of effective regulation is input from ages. stakeholders - polluters, pollutees, inter- ested citizens, academics, scientists, NGO's, 8.15 The poficymakers are faced with a etc. The second major task of the informa- complex set of decisions as they weigh all of tion system is therefore to promote effective these factors. Conceptually, their task is to communications withi these stakeholders. set regulations so that incremental social The river basin community, and the larger benefits and costs are just balanced for the community in which it resides, have access river basin community. To the extent possi- to many kinds of information which cannot ble, they use the available information to be collected and processed directly by the fulfill this task. Inevitably, some of their regulatory agency. The agency's informa- 'ideal' solutions will be modified by the tion system is structured to receive and util- process of political consensus-building and ize these inputs. 144 Brazil: Managing Pollution Problems - Annexes Complaints verse forms of community feedback to the regulators. 8.18 Damaging pollution will often be apparent to local citizens even if the envi- ronmental monitors haven't recorded it. To tap this information, the agency's system 8.20 The agency works better with in- provides facilities for rapid communication formation from stakeholders, but it also pro- and routing of citizen complaints about vides them with information. To participate pollution. Traditionally, the telephone has effectively in environmental management, been the primary instrument in this context. the public needs to be fully informed about However, the agency has also developed a the same factors which motivate regulatory PC-based reporting system, in which local policy: environwmental quality trends, goals, community centers have sites for menu- sources of pollution, damages, compliance driven on-line entry. The system provides records, and abatement costs. Therefore, the automatic logging, categorizing, routing and flow of information in Figure 8.3 does not storage of information about complaints. s Digital storage and retrieval make it much through to the public, in an easily digested easier for the agency's technical team to form. identify significant patterns. The user- friendly system also encourages citizens to 8.21 What happens once the public has engage in the process. information about polluters and their effect on the environment? Figure 8.5 summarizes Feedback what we know about the impact of public information. Recent research has shown 8.19 A regulatory plan reflects assump- that this information becomes an important tions about community values, modes of part of 'informal regulation' - the pervasive behavior, and implementation costs. Any of process by which communities and markets these assumptions can easily be wrong, and influence polluters' behavior even if formal continuous feedback from stakeholders pro- regulation is absent. Factories in developing vides a good basis for in-course correction. countries exhibit great variety in environ- Polluters are, of course, likely to provide mental performance despite the widely ac- self-serving feedback, but inap- propriate regulation may damage them in ways which affect the Stakeholder Input community's economic interests. Victims of pollution may also perceive problems which have escaped the notice of the technical team; scientists, academics,* Objective NGO's and concerned citizens t frequently have insights which 0 Desirability have not occurred to the regula- *Realism tors. For these reasons, and be- *Affordability cause consensus ultimately de- * Implementation pends on open communication, rProcedures the information system also in- 0 Proedre cludes facilities for entering, * Timing summarizing and channeling di- Figure 8.4: Stakeholder Input Brazil: Managing Pollution Problems - Annexes 145 knowledged weaknesses of their regulatory tories negotiate directly v.wth local commu- systems. Even in the poorest countries, nities, responding to social norms and/or some plants would satisfy OECD emissions threats of sanctions if they fail to reduce the standards. damages caused by their emissions. 8.22 In countries as different as China, 8.23 Market forces are also powerful Brazil, Mexico and Indonesia, local com- determinants of environmental performance munities find many ways of enforcing their under some conditions. Evidence from both environmental norms.2 Where formal the OECD and developing countries sug- regulators are present, they use the political gests that environmental reputation matters process to influence the tightness of en- for firms whose expected costs or revenues forcement. Where formal regulators are are affected by judgments of environmental absent or ineffective, 'infornal regulation' performance by customers, suppliers, and is implemented through community groups stockholders.3 For reputation-sensitive orNGOs. The agents of informal regulation companies, public recognition of good or bad performance may trans- late to large expected gains or Impact of losses over time. These can affect lending decisions by Public InformatioIl bankers, who may also be Citizens NGO's Consumers Investors concerned about legal or fi- uancial liability for polluters who are not complying with regulations. . ~8.24 Once informal regu- * Media * Demonstrations * Product * Lending 8aio is rea - Pressure * Direct Choices Liability latpon IS recogmzed as an im- * Reputation Negotiations * Price * Stock portant force, regulatory * Personal * Political Sensitivity Valuation agencies experience a role Contact Pressure change. While retaining ulti- mate responsibility for moni- toring and enforcement, they Figure 8.5: Impact Of Public Information assume new importance as sources of environmental in- vary from country to country -- local relig- formation. Figure 8.6 illus- ious institutions, social organizations, com- trates the effect of public information on munity leaders, citizens' movements or activities in the river basin: as full informa- politicians -- but the pattern is similar: fac- tioIl about environmental quality and pollut- ers' performance is released to the public, communities and market agents began to 2 For evidence from Asia, see Pargal and operate. Polluters find it impossible to Wheeler (1996), Hettige, Huq, Pargal and 'hide' from so many interested parties, and a Wheeler (1996), Huq and Wheeler (1993), complex set of new relationships and nego- and Huq, Hartman and Wheeler (1996). Evidence from Brazil and Mexico can be found in Wheeler and Witzel (1995) and Hettige and Witzel (1996). Most of these 3 See Hettige, et. al. (1996) and Laplante and papers can be found at PRDEI's Internet Lanoie (1994). Website, WWW.NIPR.COM. 146 Brazil: Managing Pollution Problems - Annexes Integrating Environmental Information in Regulation Information For Rio de Janeiro State4 Regulators Citizens NGO's Consumers Investor, 8.26 During the past two -w--I nsctrs[7[ years, the government of TilmL .- 1. L.Rio de Janeiro State has de- t s l veloped a new structure for environmental management. Part of the restructuring has involved integration of envi- Analysts AentQuaIitII ronmental information at FEEMA, the State's pollu- tion control agency. | N j I;;;onsl FEEMA's new information Da aase system provides a concrete illustration of many features Figure 8.6: Information In Regulation described in the earlier sec- tions of this paper. tiations is established. Pollution declines significantly in some areas, even though the Supporting Regulatory Policy Analysis regulatory agency takes no additional meas- ures. 8.27 Integrated information is the key to regulatory policy analysis, as depicted in Figure 8.3. INFORMATION IN ACTION: TWO CASES 8.28 An appropriate information system 8.25 The preceding sections have pro- should monitor ambient quality and emis- vided a simple illustration of an integrated sions from major polluters, along with their information system which can support both compliance records. FEEMA's new system formal and informal regulation of pollution. was designed to provide supporting infor- Is this just a hopeful concept, or is there mation in all three dimensions. When de- some prospect that environmental agencies velopment began in 1995, sufficient data in developing countries can actually imple- existed in the agency to establish a profile of ment such a system? In fact, several agen- ambient quality, an inventory of emissions cies are now putting these ideas into prac- sources, and a record of inspections and tice. In this section, we provide concrete complaints for each major source. Since examples from Brazil and Indonesia. the data were scattered across departments within FEEMA, however, the primary task was to develop an integrated information system. This section draws heavily on the experi- ence of a World Bank team which collabo- rated with the Rio State Government on re- structuring environmental management. For a detailed study of the restructuring is- sue, see Von Amsberg (1996). Brazil: Managing Pollution Problems - Annexes 147 Networking the Agency Integration with GIS 8.29 Before the new initiative, FEEMA's 8.31 To regulate effectively, FEEMA regulatory planning and implementation needed geographic information -- on pollu- were hampered by the division of planning, tion sources, air- and watersheds, transport monitoring and enforcement tasks among networks, and exposed populations. A Geo- several departments, with little information- graphic Information System (GIS) was the sharing or coordination of activities. The right tool for supplying this information, so difficulties were compounded by the lack of GIS capability was developed at the outset. an integrated digital information system. Three examples will serve to illustrate the Paper files were maintained separately by potential of the system after only a few each department, or stored in separate com- months of development: puters with different data formatting stan- dards. Much of the agency's critical infor- * Combined display of major water pollu- mation on pollution sources was stored on tion sources (industries, population an archaic minicomputer which could not centers) and readings from water moni- communicate directly with the agency's toring stations provided a systematic ba- scattered PC's. sis for addressing critical pollution problems in the State's rivers and 8.30 Without common digital hardware coastal bays. and software standards, FEEMA's managers had great difficulty in analyzing environ- * Combined display of major air pollution mental conditions, tracing problems to pol- sources, major transport arteries and af- lution sources, and effectively targeting their fected populations provided similar ca- limited monitoring and enforcement re- pability for critical air pollution prob- sources. The new initiative attacked this lems. problem directly, by developing and in- stalling a PC network based on low-cost * Once the GIS was integrated with hardware and standard commercial soft- FEEMA's environmental information, it ware. As the system came on-line, it be- became possible to move to a new level came possible for different departments to of monitoring and enforcement capabil- store records in a common database which ity. For example, the GIS provides could be accessed by any unit in FEEMA. 'point-click' access to information on Agency managers began asking for reports any data source which is identified on which required integrated analysis, and most the geographic display. A GIS map can department managers quickly perceived the be used to identify all large emissions political importance of participation in the sources in an area with a particular network. The demand for PC's expanded symbol. A click of the cursor on one of rapidly, and all departments began entering these symbols brings up the data file on new data in a standard format. Agency that source: its emissions, facility char- technical staff experienced a jump in effec- acteristics (e.g., sector, employment, tiveness, as it became much easier to ana- output, use of raw materials, energy use, lyze levels and trends in emissions, commu- etc.); inspection data; outstanding com- nity complaints, inspection reports, and plaints; and enforcement actions. air/water quality readings from many moni- Equipped with this kind of information, toring stations. agency managers are in a much better position to target their scarce monitoring and enforcement resources. 148 Brazil: Managing Pollution Problems - Annexes Involving the Community RATING ENVIRONMENTAL PERFORMANCE: INDONESIA'S PROPER PROGRAM5 8.32 FEEMA's system can also provide much better environmental information to Setting The Stage the public. The State's new approach to environmental management stresses com- 8.34 Environmental agencies in devel- munity participation in planning and imple- oping countries have a mandate to regulate menting pollution regulation. To play an industrial pollution, but they often lack in- effective role, the community needs good stitutional capacity. Although equipped information about ambient quality, goals for with conventional options such as regulatory the future, progress toward those goals, and standards and/or market-based instruments the regulatory status of major pollution (e.g., pollution taxes, tradable permits), they sources. FEEMA is now positioned to pro- remain hard-pressed to achieve substantial vide this information, through reports which results. A good example is provided by plot trends in ambient quality and emissions BAPEDAL, Indonesia's Environmental Im- against objectives, and maps which convey pact Management Agency. During the late detailed information about ambient quality, 1980's, BAPEDAL introduced several emissions sources and affected populations. measures to counter rapidly-increasing pol- lution from the manufacturing sector. How- 8.33 FEEMA also has the capability to ever, monitoring and enforcement problems prepare and publish detailed profiles or per- frequently limited the agency to voluntary formance ratings for major pollution sources agreements, out-of-court settlements and in the State. Such performance ratings are other ad hoc approaches. proving quite effective as a new tool for pollution control. In the following section, 8.35 This set the stage for experimenta- we describe a successful initiative on per- tion. In 1993, BAPEDAL's Deputy for formance ratings at BAPEDAL, Indonesia's Pollution Control began to develop the Pro- national pollution control agency. gram for Pollution Control, Evaluation and Rating, now known as PROPER. In PROPER, the agency would receive pollu- tion data from factories, analyze and rate their performance, and disseminate the rat- 5 This section draws heavily on the work of the PRDEI: the Environment, Infrastruc- ture and Agriculture Division of the World Bank's Policy Research Department. During the past two years, PRDEI has pro- vided technical assistance to the PROPER project. We gratefully acknowledge the support and inspiration provide by Mr. Nabiel Makarim, Deputy for Pollution Control in BAPEDAL, who has directed PROPER from its inception. This section has been prepared in collaboration with Shakeb Afsah, Benoit Laplante and David Shaman. Detailed information on public disclosure as a regulatory tool can be found at PRDEI's Internet Website, WWW.NIPR.ORG. Brazil: Managing Pollution Problems - Annexes 149 ings to the public. The initiative signaled a experience with regulation of water pollu- bold move toward transparency by recog- tion, BAPEDAL decided to focus on com- nizing the new power of the media and pub- pliance with water regulations in the first lic participation in a rapidly-industrializing phase of PROPER. Air and toxic pollution economy. BAPEDAL hoped that public would be incorporated in the next stage of performance ratings would recruit two ma- development. Combined with self- jor allies in its effort to reduce pollution. monitoring reports from polluters, the in- Local communities, worried about health formation from PROKASIH and JA- consequences, would pressure poorly-rated GATIRTA was judged sufficient for a care- neighboring plants to pollute less. Inftnan- ful compliance assessment in Phase I. The cial markets, access to capital or stock val- PROPER team designed a data management ues would fall for firms whose low ratings system for the program, and tailored it to increased the risk of liability suits, regula- help field teams organize and quantify re- tory shutdowns, or reduced product demand. sults of on-site inspections and monitoring By mobilizing these agents, BAPEDAL activities. The system also incorporated a hoped to strengthen the regulatory 'stick' broad range of information on economic faced by heavy polluters. But the program activity, emissions control equipment and was also designed to recognize excellent in-house pollution monitoring. performance, in the hope that this would promote the adoption of clean technologies 8.38 In February 1995, the PROPER and development of in-house environmental team sent survey questionnaires to approxi- management capabilities. mately 350 factories. The pilot group in- cluded plants from thirteen Indonesian Getting Started provinces, and from all fourteen industry sectors which had effluent discharge stan- 8.36 When it 'goes public' with perform- dards. In response, 176 plants provided suf- ance ratings, an agency invites close scru- ficient data for BAPEDAL to perform an tiny by many interested groups, including, initial rating. Eleven other factories volun- of course, those who receive poor ratings. teered to take part in the program, bringing From the beginning, it was obvious that total first-round participants to 187. The PrOPER had to focus on data integrity- in team supplemented the survey information collection, verification and analysis. One with a rigorous inspection program to verify bad mistake in the first implementation the data on site. might well undermine the entire program by destroying public credibility, or by inciting a Going Public successful lawsuit by a firm whose reputa- tion was wrongly damaged. 8.39 Since PROPER is apublic perform- ance rating system, its disclosure strategy 8.37 The first critical decisions con- has also been a primary focus of attention. cemed selection of pollutants and factories Certain problems had to be confronted at the for initial rating. While it had very limited outset. First, the grading system adopted by information on air pollution or hazardous the agency had to accommodate polluters waste, the agency had significant data on with widely different characteristics. Sec- industrial water pollution from two sources: ond, the ratings had to be simple and their its Clean River Program (PROKASIH), implications easily understood by the public. which was introduced in 1989, and its regu- Third, the system had to clearly discriminate latory monitoring and enforcement activity between firms in compliance with the regu- (JAGATIRTA). Given its relative depth of lations and those out of compliance. Fi- 150 Brazil: Managing Pollution Problems - Annexes nally, the program had to provide incentives Black. This announcement was, in itself, a for progressive firms to go beyond compli- remarkable exercise in self-criticism. By ance. BAPEDAL settled on the five-color announcing that almost two-thirds of the scheme shown in Figure 8.7. Its color- plants were non-compliant, BAPEDAL was coding is a simple but effective format for confessing its own previous ineffectiveness communicating environmental information to the Indonesian public. about individual plants to the public, media, judicial system and financial markets. The 8.42 BAPEDAL gave plants rated Black colors of the rating system are easily identi- or Red until December 1995 to improve fiable and, in the Indonesian cultural con- their performance before their names and text, symbolic of the polluters' environ- ratings were publicly disclosed. Under the mental performance. threat of public disclosure, ten factories managed to improve their rating to Red or 8.40 For its first disclosure, BAPEDAL Blue within six months. The primary driv- decided on a sequential strategy which ing force behind these improvements was would publicly recognize the best perform- probably concern about potentially strong ers at the outset and give others a chance to responses from local communities and mar- improve before bad ratings were revealed. kets. In December, PROPER was fully im- This approach was intended to serve several plemented: a sequenced disclosure cam- objectives. First, it would promote an image paign was launched by industry sector, with of fairness in the business community by new announcements at regular intervals to allowing time for adjustment to the new keep the media interested. Disclosure in- program. Second, it would develop a new cluded the color ratings, the locations and alliance between the regulatory agency and names of the plants, their managers, and firms whose good performance was publicly their parent companies. recognized. The latter, having already in- vested in costly abatement, could be counted 8.43 Figure 8.8 shows the evolution of on to support PROPER because it would ratings for PROPER's original 187 factories 'level the playing field.' Finally, and per- during the first fifteen months of the pro- haps most critically, BAPEDAL wanted gram. The movement of firms from non- time to gauge the possibility of extreme re- compliance to compliance is impressive. In actions to Red- or Black-rated plants by neighboring commu- nities. PERFORMANCE PERFORMANCE CRITERIA LEVELS Initial Impact Clean technology, waste minimization, GOLD i pollution prevention, conservation, etc. 8.41 P R O P E R PR O K A SIH .............. ...... ...... ......... .I .................. ......... ...................... .. _ ------- ..... 8.41nrodce PROPER PRunASe 1995Above standards & good maintenance, and was extensively covered in housekeeping, sludge management, etc. the national and interational Efforts meet minimum standards press. Five factories were pub- __ _ licly awarded the Green rating -f (no factories were rated Gold). Efflrts don't meet standards For the remaining 182 plants, only the distribution by color *No pollution control effort, rating was disclosed: 61 were -Serious environmental damages Blue, 115 were Red and 6 were Figure 8.7: Performance Criteria Brazil: Managing Pollution Problems - Annexes 151 June 1995, 65% of the facto- Figure 8.8: PROPER'S lImpact ries were rated Black or Red. By September 1996, non- PROPER's Impact compliant plants had dropped to 47%. Since it is highly un- June 1995 Dec 1995 Sept 1996 likely that other Indonesian polluters improved at the GOLD 0 0 0 same rate, this reaction sug- gests that PROPER is creating strong new incentives for 5 (3%) 4 5 pollution control. ! w w61 (33%) - 72 - 94 8.44 While incentives geared to preserve reputations - are obviously at work, it is 115 (61%) 108 87 interesting to note that PROPER was frequently the 6 (3%) 3 -0 1 means by which factory own- ers first learned about the en- vironmental performance of its data collection and verification. The in- their plants. In direct consultations between formation collected through PROPER also BAPEDAL and the owners, it became clear provides BAPEDAL with solid evidence of that PROPER performs a valuable educa- a factory's comnpliance status, supporting tional function, both by increasing the stronger action in cases where conventional awareness of owners, managers and em- enforcement action is appropriate. ployees and by providing guidelines for im- proved performance. The Lessons Of PROPER 8.45 It is also interesting to note that 8.47 BAPEDAL's initiative reflects factories volunteering to participate in powerful incentives for reducing negative PROPER doubled from June to December externalities from private or public activi- of 1995 (from I1 to 23). Clearly, these ties. A well-designed PPA (Public Perform- factories expected disclosure to enhance ance Audit) system can increase both the their market position. This illustrates a pri- transparency and accountability of public mary strength of the approach: unlike many institutions. It can improve resource alloca- previous environmental initiatives, PROPER tion by reducing transactionls costs and en- supplies incentives to polluters to move be- couraging socially desirable behavior. It yond compliance and toward attainment of can also induce improvements from private higher performance ratings. By improving a agents whose poor performance would oth- firm's reputation in the competitive market- erwise require costly enforcement activity place, higher ratings can raise expected and/or litigation. profitability. 8.48 The PROPER experience suggests 8.46 PROPER has also had an important four important principles for successful im- impact on BAPEDAL itself. The need for plementation of PPA: accuracy in the ratings has compelled the agency to increase its factory inspections, and to improve the quality and reliability of 152 Brazil: Managing Pollution Problems - Annexes Starting Small should be processed using a simple, pre- 8.49 While PPA provides many advan- determined methodology and provided to tages, developing a credible system is not an the public in a very clear summary format. easy task. Once public confidence in per- The details should be available to those who formance ratings is lost, it will be hard to are interested, but it is critical that the sum- regain. Therefore, it is crucial that a regu- mary information be easily understood by latory agency undertake a pilot program be- local communities, business managers, in- fore committing itself to a full PPA. The vestors and other interested parties. Experi- pilot could be confined to a geographical ence to date with PROPER suggests that area, a particular medium, an industry sector simple color coding of performance catego- or a limited set of critical polluters. The ries may be the most effective approach. important thing is to gain experience with PublicAcceptance careful data-gathering, validation, analysis, 8.52 A PPA will succeed in improving strategies for public communication, and mechaismsfor earnng fom eperince. environmental performance only if the pub- mechanisms for learning from experience. lic accepts and supports it. Inevitably, In the course of a pilot program, the agency some subjectivity will be introduced into can gain experience in dealing with multiple some ncubevaluitill e ioedito performance evaluations even when data stakeholders, managing a core PPA team, and methods are treated very carefully. At and effective public communications. The c m pilot will also provide the opportunity to oration of the ste,auppo nt pbi weigh the benefits of PPA against the costs operation of the system, a supporting public of developing and maintaining the system. consensus will be essential. For this reason, the PPA system should be developed in Integration close consultation with community leaders, 8.50 A successful PPA system requires industrialists and concerned academics. all relevant agencies to inPP gyate their in- Maximum transparency and continued con- formation systems and cooperate in pollu- sultation will be essential to long-term pub- formation~~~~~~ sytm anIoprt nplu ic support of the system. tion management. Because they reveal ex- isting compliance levels, public performance Conclusions ratings also provide an indicator of the 8.53 This new approach to regulation in regulators' own performance. Greater re- Indonesia is showing that local communities quirements for data reliability give regula- and market forces can be powerful allies in tors a strong incentive to operate more effi- the struggle against excessive industrial ciently. In addition, the need to verify, pro- pollution. PROPER's ratings are designed to cess and analyze comprehensive information reward good performance, and to call public for public performance ratings will substan- attention to polluters who are not in compli- tially increase the technical and analytical ance with the regulations. Armed with this skills of agency staff members. Given information, local communities can negoti- budgetary limitations, the positive pressure ate better environmental arrangements with from public performance ratings will also neighboring factories; firms with good per- give regulators a good reason to adopt the formance can advertise their status and earn most cost-effective regulatory tools. market rewards; investors can accurately Simplicity assess environmental liabilities; and regula- 8.51 A crucial element of a good PPA tors can focus their limited resources on the * . . ........... ~~~worst performers. Moreover, transparency program is simplicity. Although the sup- porting information should cover all major is increased because the environmental environmental performance factors, it agency itself is opened to public scrutiny. By committing itself to a public disclosure Brazil: Managing Pollution Problems - Annexes 153 strategy, it chooses to reveal its own ability information to make appropriate assess- to process information reliably and enforce ments of factories' environmental perform- the existing regulations. ance. An effective regulatory agency will therefore allocate fewer resources at the 8.54 Public disclosure seems to be hav- margin to conventional enforcement and ing an important impact on industrial pollu- more to the generation and distribution of tion in Indonesia. Encouraged by program appropriate information products. results to date, BAPEDAL plans to rate Orchestrate, Don't Dictate 2000 plants by the year 2000. Other coun- tries have also been inspired by this example 8.58 A pollution control agency is only of public information in action. Philippines one player in the environmental perform- has already launched its ECOWATCH pro- ance game. Agency activities which influ- gram, which is quite similar to PROPER, ence polluters indirectly, through other and Colombia and Mexico are moving rap- agents, may be as important as direct en- idly toward development of their own public forcement. Potentially high-leverage pro- disclosure programs. grams include community environmental education, public disclosure of factory per- INFORMATION IN POLLUTION REGU- formance ratings and technical training pro- LATION: FIVE PRItCIPLES grams for environmental personnel in pol- luting factories. 8.55 This report has highlighted the im- portance of information in modern systems Encourage Public Participation of pollution regulation. It is not difficult to 8.59 Equipped with appropriate informa- manage pollution more cost-effectively once tion, regulatory agencies can play a key role regulators have high-quality information, in facilitating negotiations between local more integrated information systems, more communities and neighboring factories. internal capacity for priority-setting, and This role includes provision of reliable in- stronger public participation. This new ap- formation on emissions and local ambient proach also implies a new role for regulators quality, technical advice on abatement alter- as public information agents. Although the natives, and the transfer of experience from state can and should have a continuing role other locations. in the regulation of pollution, the importance Learn From Policy Experiments of providing information to communities and markets must also be recognized. 8.60 Environmental policy implementa- tion is a complex business, which will in- 8.56 When these two sets of factors are evitably be subject to many uncertainties. taken into account, a new model of pollution Because it is difficult to know exactly what management emerges. It incorporates five will work in advance, new policy initiatives key principles for the use of information in should emphasize structured learning. regulation: Rather than pre-committing to broad-based programs, agencies should initiate a variety of pilot projects, use their information sys- 8.57 Effective pollution management is tems to monitor developments, and build impossible unless regulators have reliable larger programs as experience accumulates. data, integrated information systems and the Use Flexible Instruments capacity to set priorities which reflect com- parative benefits and costs. Markets and 8.61 Newly-industrializing economies communities need timely, accurate, public can experience rapid changes in ambient quality across air- and watersheds. Since 154 Brazil: Managing Pollution Problems - Annexes regulation should primarily serve environ- mental quality objectives, it should be fo- cused on adaptation to these rapid changes. Regulators should be empowered to counter environmental degradation by tightening existing regulations. On the other hand, the system should minimize disruption for in- vestors. Meeting both objectives implies: * Transparent adjustment rules, linked to publicly-available data from the agency information system on ambient quality and emissions; and * Adjustment which is, to the extent po- litically possible, automatically trig- gered by deterioration of ambient qual- ity below mandated levels. Again, the information system will play a critical role in successful implementation of this principle. References Hettige and Witzel (1996). PRDEI's Internet Website, WWW.NIPR.COM. Hettige, Huq, Pargal and Wheeler (1996), PRDEI's Internet Website, WWW.NIPR.COM Huq and Wheeler (1993), PRDEI's Internet Website, WWW.NIPR.COM Huq, Hartmnan and Wheeler (1996) PRDEI's Internet Website, WWW.NIPR.COM. Laplante and Lanoie (1994). PRDEI's Internet Website, WWW.NIPR.COM. Pargal and Wheeler (1996), PRDEI's Internet Website, WWW.NIPR.COM Wheeler and Witzel (1995) PRDEI's Internet Website, WWW.NIPR.COM Brazil: Managing Pollution Problems - Annexes 155 9. POLLUTION MANAGEMENT IN A FEDERAL SYSTEM' SUMMARY OF ISSUES AND RECOMMENDATIONS ISUES AND PROB-LEMS Environmental matters are not incorporated into macroeconomic and sectoral planning and con- tinue to be subordinate to economic decisions. Poor coordination among agencies within the same level of government and across levels caused largely by individual agencies pursuing localized and sectoral objectives. Lack of accountability due to unclear institutional assignments across tiers of govemments. Weak institutional capacity due to diminished budgets and lack of performance-based salary structure. Lack of priorities due to emphasis placed on green environmental issues. Limited range of instruments for monitoring and enforcement are rigid and do not reflect social, economic, political, and environmental differences. S T:TEGYAND RECOMMENDATIONS ::: -:: : i Environmental policy needs to be based on dynamic targets agreed upon across sectors, for example through Environmental Action Plans. Performance contracts with environmental agen- cies could be based on the targets of these plans. Better integration of environmental agencies in sectoral policy making and planning is important. It requires more realistic and gradual environmental targets and early participation of environ- mental agencies in sectoral policy making. The establishment of the Lei Complementar to clarify the roles of different government levels should receive high priority. The responsibility of the national government should focus on and be limited to: (a) the man- agement of genuine national pollution problems; (b) integration of environmental aspects in na- tional policies; (c) setting federal framework regulations; (d) setting some national minimum am- bient quality standards; (e) preventing unfair competition between states; and (f) providing as- sistance and information services, especially for weaker states. Outside of the direct national responsibilities, the federal government and its agencies should not enforce regulations directly with polluters unless specifically contracted to do so by the re- sponsible state. vention in the sector. Even in industrialized RATIONALE FOR A NATIONAL POLLUTION countries with established commercial envi- ronments, the reliance on market mecha- 9.1 The public good nature and the nisms in environmental policies has not pre- market failures that characterize environ- cluded strong government regulation. Fur- mental problems justify government inter- ther, striking income disparities, regional differences (urbanization and concentration This paper was prepared by Sergio Margu- of economic activity), and the federal politi- This paper was prepared by Sergio Margu- cal system in countries like Brazil call for lis government intervention. The demand for 156 Brazil: Managing Pollution Problems - Annexes such a regulatory framework partly conflicts tection. If neither local governments nor with the deregulation and divestiture of local communities choose to give priority to State enterprises, a top priority since the environmental issues, federal government early 1990's. involvement may indeed be questionable. However, the federal government does have 9.2 A pollution management strategy a major role to play in the management of consists of allocating responsibilities across pollution problems in Brazil: in addition to government agencies ensuring effectiveness being a constitutional assignment, this is and the minimization of costs. However, also economicallyjustified. since environmental problems are local problems, states and municipalities are in a 9.4 Two arguments justify federal gov- far better position to address environmental ernment involvement in relation to the envi- problems, and thus should have the freedom ronment. First, only the federal government to choose the most appropriate policies and can perform certain functions, such as ad- instruments to do that. This raises the ques- dressing international environmental prob- tions whether a national environmental lems, resolving inter-state disputes, coordi- management system is desirable and also nating with national economic and sectoral what is the role of the federal government in policies, etc. The second is essentially po- such a system. The degree of decentraliza- litical. Since environmental problems are tion is indeed subject to choice. Decentral- local, it is plausible to ask whether a set of izing environmental management has two minimum national environmental quality main advantages: (i) it reduces information standards should exist, not to mention a na- costs - residents of a jurisdiction know their tional environmental management system interests better; and (ii) it allows environ- itself. Minimum standards are required mental quality and policy instruments to mainly for health reasons. It is legitimate vary across regions according to their pri- for the federal government not to accept that orities for environmental protection and the health conditions of any citizen in the budgetary constraints. It has some prob- country fall below a set of minimum stan- lems, notably in cases where local govern- dards, which in turn converts directly to the ments do not set environmental standards formulation of minimum environmental high enough; it may lead to tax exporting, in quality standards. Since it is the federal cases where local governments have resi- government that establishes health standards dents of other jurisdiction pay for their envi- and also is the major financier of the health ronmental protection polices; and it can sector, it naturally follows that it is the fed- make it difficult to internalize externalities eral government that should set minimum created by spillovers. An upstream munici- national environmental quality standards. pality may have no incentive to curtail water The decision, however, remains political pollution if the suffered are residents of since it could still be argued that if neither other municipalities (World Bank 1993). local governments nor local communities care about environmental problems (having 9.3 As to the roles of the federal gov- access to all relevant information, including emnment, the Brazilian legislation says that potential health risks), then the national State and municipal governments are re- standards impose an inefficiency in local sponsible for implementing the control decisions. It is precisely the basic minimum strategies of most environmental problems. standards to be found throughout the coun- The efforts by these two tiers of govern- try that make it a federation of states, rather ment, which may include the federal gov- than a mere ensemble of them. Assuming emnment's assistance, clearly depend on their that this principle is accepted by all feder- level of commitment to environmental pro- ated states, it must take precedence over Brazil: Managing Pollution Problems - Annexes 157 Box 9.1: Pollution Management Systems of Federal Countries Like in Brazil, in most federated nations environmental policies and guidelines are established by the fed- eral governments, while states and lower levels are responsible for implementation and enforcement. The federal government through its agencies attempts to ensure compliance with the national standards, but different levels of income, of political support, of technical skills, plus other factors cause enforcement of environmental legislation not to be uniform across different states and regions. This is perhaps the overall major problem of most national environmental systems in the world. United States. In the United States the division of jurisdiction between state and federal authorities is not always well defined and has led to considerable debate and litigation. The main feature of the US system is its 'adversarial regulatory framework", coupled with an enforced compliance model. Courts have assumed a fairly prominent role in the system as a consequence. The federal agency (EPA) has responsibility and statutory authority for pushing the national system (ie., forcing states to comply with regulations) and for establishing national regulations (which States, in most cases, may go beyond). USEPA's enforcement role has been considered extremely interventionist within the States, often pushing for the adoption of the most stringent standards adopted by any one state (typically California). In other areas, however, it has been blamed for poor enforcement action. In addition to its enforcement role, the USEPA has largely been as- suming regulatory functions, through the expedition of detailed technical requirements and command and control regulations and standards such as New Source Performance Standards - NSPS: this has originated serious disputes with the national Congress and with various States, who want to have greater discretion in the enforcement of the national policies and guidelines. The European Union. The European Union (EU) is an integration of sovereign countries and this alone makes it difficult the establishment and acceptance of common legislation. The three key legal instruments of environmental policy in the EU are (i) directives, which are the main legal instrument: once approved by the Council of Ministers they become binding to all member states, although the choice of instruments and methods for states to implement and comply with are left for individual decision; (ii) regulatory acts, which must be directly implemented by states; and (iii) recommendations, which are non-binding. Like in national federated systems, the main problem of the EU environmental policy is the difficulty of enforcement and the different degrees of competence among member states. The main difference with the federal systems is that the EU is not expected or able to intervene: it essentially provides the guidelines and overall objectives, with the implementation being extremely decentralized. The areas where the guidelines become more in- terventionist have to do with trade, in a context where environment and health have typically been a barrier, typically standards for buses and trucks. As to the individual member countries of the EU, the major com- mon feature which is drastically different from the US is the negotiated compliance model, where regula- tions are not established before some form of agreement is reached between the various interested parties, rendering implementation more easy and certainly less conflictive. Mexico. Mexico has an extremely centralized political system, and so is the tradition of its national envi- ronmental management system. The new Environmental Law (following the 1988 Law) further decentral- izes enforcement responsibilities to the States; but the capacity of state environmental agencies remains very weak, since many of them are still being formed. The federal government usually does not have local capacity to implement policies or to make states implement the law. So the enforcement of environmental regulations has been most successful in areas where the federal government has a direct interest, such as the Mexico City Metropolitan area and various national protected areas, or in the States which have their own environmental agendas and better prepared agencies, such as in the Northern border and in the States around the Mexico City metropolitan Area, subjected to greater population pressures. other, more localized interests. This is a forcing national minimum standards (to- matter of political choice, and not of imme- gether with promoting the national pollution diate economic rationality. management system) - are justified on eco- nomic efficiency as well as on political 9.5 Therefore, the two core functions of grounds. But in the specific Brazilian con- the federal government - those which re- text an additional function of the federal quire above-State level decision-making government is crucial, and that is balancing power (international affairs, inter-state dis- between efficiency and equity objectives in putes, coordination with macroeconomic the federal pollution management system. and sectoral policies) and setting and en- To put it more explicitly, should environ- 158 Brazil: Managing Pollution Problems - Annexes mental policy in Brazil be used for redis- mental degradation in the Southeast are tributive purposes or should equity conse- much greater than in the other regions, the quences be managed by the central govern- returns to investment are likely to be greater ment through explicit distributional policies? in that region, making it a priority for fed- eral government intervention. This equity 9.6 One of the key reasons why the and efficiency dilemma is an extremely sen- Ministry of Environment has fundamentally sitive issue and, in practice, a balance will focused on green issues, in addition to re- only be achieved in political terms. As Se- sponding to international pressures, is the roa da Motta and Reis (1994) put it, "it is perception that brown pollution problems always possible to stick to the efficiency affect more intensely the richer states, and criteria and to propose compensation meas- that any support from the federal govern- ures to alleviate poverty and reduce ine- ment would mean an additional subsidy to quality. However, apart from the intrinsic them. In the case of the Mata Atlantica, for difficulties in the implementation of com- instance, the federal government is not sub- pensation schemes, inefficiencies are likely sidizing the richer states such as Sao Paulo to emerge elsewhere in the system." and Rio de Janeiro, while its position to- wards the states in Amazonia is almost pa- 9.7 Jack (1992) proposes another ra- ternalistic when supporting and defending tionale along similar lines: the choice "will local interests. Whichever type of environ- clearly depend on the efficacy of the redis- mental problem, a typical Northeastern State tributive programs. If these are weak or may consider it unacceptable for the federal non-existent, weight may also have to be government to spend resources in exerting given to the distribution of income in the control in the richer Southeastern States. On design of pollution control policies. For the other hand, since the costs of environ- example, suppose a low income town is ad- Table 9.1: Summary Of Environmental Responsibilities By Levels Of Government Target -Minimum national air -Ambient standards for -Ambient standards for quality standards State ecosystems at least Municipality ecosystems -Water Quality as stringent as national at least as stringent as Classification -Excludes noise and do- State standards -National zoning mestic solid waste -Municipal zoning -Noise standards Frameworkl -Criteria for licensing, -Establishing fines and -Domestic solid waste Guidelines including ElAs sanctions procedures/practices -Criteria and methods for -Creating and establish- -Noise pollution criteria sampling and analyzing ing guidelines for appli- and procedures for materials (air, water, soils) cation of environmental monitoring and enforcing -Classification and management instruments procedures for handling (complementary to ii- hazardous materials censing) -Legislation for nuclear, energy and waters Monitoring/ -Criteria for licensing -Procedures for licensing -Permits for location of enforcement -Federal ecosystems -Monitor State ecosys- polluting activities -Intemational issues tems (air, waters, soils) -Monitor and apply sanc- -Interstate ecosystems -Inspect and apply sanc- tions/fines on sources of -Resolving interstate tions/ fines to all polluting noise pollution disputes activities not under fed- -Collect and dispose of eral control (industries, domestic solid waste cars, etc.) Brazil: Managing Pollution Problems - Annexes 159 versely affected by the discharges of an up- (MMA); the National Environmental Coun- stream factory. Even if the property rights cil (CONAMA); the federal executing are distributed "evenly", the downstream agency (IBAMA); and State and municipal town may not be able to afford to pay for a environmental secretariats/agencies. further reduction in emissions. If redis- tributive programs are ineffective, it may be 9.10 The Ministry of Environment, Wa- better for the central government to directly ter Resources and Legal Amazon (MMA) intervene and force a further reduction. The was established in late 1992, with the pri- efficient discharge level may not result, but mary responsibility for planning, coordinat- without increasing the poor town's income ing and implementing control actions pre- explicitly, this central intervention may at scribed by the National Environment Policy least improve the outcome." (PNMA). The Ministry is organized into four Secretariats: Environmental Matters CURRENT ISSUES AND PROBLEMS (planning, international matters), Institu- tional Development (technical cooperation 9.8 Pollution control in Brazil is cur- and financial instruments), Legal Amazonia rently decentralized. The federal govern- (coordination of local agencies) and Water ment is responsible for establishing the gen- Resources (water management). The per- eral guidelines for pollution control (normas sonnel obtained from such diverse agencies gerais), and States and municipalities for the as the former Secretaria Especial do Meio formulation of supplemental legislation and Ambiente (SEMA), Companhia de Desen- its enforcement. The choice of enforcement volvimento do Vale do Sdo Francisco mechanisms is also largely left to the lower (CODEVASF) and the short lived Ministry levels of government within the constraints of Amazonian Affairs have diverse back- of relevant national laws (the tax system). grounds and different levels of understand- Table 9.1 summarizes the responsibilities of iig in relation to environmental matters. A the three tiers of government with respect to comprehensive career plan still does not policy definition and implementation. Box exist within the Ministry, so the incentives 9.1 summarizes the main features of the na- for real commitmnent by staff are minimal. tional pollution management systems of the United States, Mexico, and the one agreed 9.11 With regard to IBAMA, "since its by member States of the European Union. creation in 1989, it has suffered from a se- ries of difficulties that have hampered the Institutional Organization At The Federal accomplishment of its environmental man- Level agement functions. Those difficulties stem from both public administration conjuncture 9.9 Law 6938, enacted in 1981, estab- and from internal issues concerning the or- lished the national environmental system, ganization and shortage of human and fi- SISNAMA. The Constitution of 1988 made nancial resources. IBAMA was formed by provisions for vertical integration in the en- merging a number of agencies and by inher- vironment sector. However, these provi- iting their legal jurisdictions, staff, institu- sions have not been put into practice due to tional problems, and deficiencies. For in- delays in passing the Lei Complementar. stance, IBDF's two contradicting functions The current system is comprised of repre- of promoting forest development and pro- sentatives from all tiers of government (in tecting natural forests have been maintained addition to civil society and NGO's), and in IBAMA. The difficulties experienced in assigns the responsibilities of the following integrating the diverse staff and activities of key institutions: the Ministry of Environ- those agencies were aggravated by frequent ment, Water Resources and Legal Amazonia changes of high level administrative staff 160 Brazil: Managing Pollution Problems - Annexes (eight from 1989 to 1992) and policy direc- more as bureaucratic requirements of the tives" (IDB 1996). law than planning instruments. 9.12 Even though the underlying concept 9.14 Examples where environmental is- of the current system is quite advanced rela- sues have not been mainstreamed into eco- tive to most developing countries in theory, nomic and sectoral policies are abundant. an integrated environmental and pollution For instance, the sanitation sector is now management system does not exist in prac- coordinated by the Ministry of Planning: tice. The organizational difficulties faced by decisions regarding the privatization of both institutions are less important than the sanitation companies in the states have typi- incapacity to identify the core activities and cally been made without incorporating the functions of each, to clarify individual re- relevant environmental aspects. Another sponsibilities, and to work on priorities. recent example is the approval of the water IBAMA, designed to be the executive arm law by Congress. The main conflict was of the MMA, still today regulates a number whether revenues from water fees should be of activities. Its relations to State environ- channeled to the federal revenue system or mental agencies are almost entirely inde- remain under the control of water basin pendent from those established at a higher authorities which would both establish and level between MMA and State Secretariats collectthefees. Onlyafteryearsofpressure of Environment. The brown environmental and explanations regarding the benefits of agenda is determined more by periodic cri- the innovative system was the law passed ses and isolated individual initiatives than by and at least partly absorbed by other Minis- clearly established priorities and supportive tries. institutions. The major weaknesses of the national pollution management system in 9.15 In recent years, cases where the en- Brazil are discussed below. vironmental dimension has been incorpo- rated into the planning of sectoral policies Environmental matters not incorporated and projects are increasing in number. For into macroeconomic and sectoralplanning example, in the State of Rio de Janeiro, the environmental agency FEEMA has been an 9.13 Despite the immense progress active participant in the planning of the pro- achieved since the inclusion of environment posed gas-chemical complex to be installed issues in the Constitution, as well as the in- next to the Duque de Caxias refinery and a creased debate and awareness of environ- system of emission compensation has been mental problems at all levels of society, en- proposed. vironmental decisions continue to be subor- dinate to economic decisions in Brazil. At Poor coordination all levels of government, great resistance to incorporating environmental matters in the 9.16 Different governmenit agencies planning of core economic and sectoral de- within and across government levels have cisions remains. Even 15 years after SIS- different objectives. This derives from the NAMA was established, environmental fact that agencies do not have the common matters continue to be addressed in a reac- incentive to maximize social welfare, but tive, rather than a proactive, manner. Li- rather pursue localized, sectoral and often censing requirements for polluting activities, myopic objectives. Since environmental including the preparation of environmental targets depend on the costs and benefits of impact assessments (EIAs) and associated the various problems and proposed actions, public hearings, have been implemented, but and since the evaluation of such benefits and costs in turn depends on the level of gov- Brazil: Managing Pollution Problems - Annexes 161 emnment responsible for making the evalua- scarce resources as agencies from different tion, different government agencies will tiers of government engage in similar ac- typically have different objectives. This tivities, often competing for "political visi- applies to agencies within the same tier of bility" rather than attempting to provide government as well as across tiers. In prin- better public service through coordination. ciple, the federal government is best suited Even when formal contracts are signed or to assess the direct and indirect benefits and informal agreements are reached between costs associated with controlling environ- agencies of different tiers, actual compliance mental degradation. However, lower levels typically fails. At the federal level in par- of government have a much better under- ticular, there is little coordination between standing of the complexities of localized the various ministries involved with pollu- environmental problems, so the federal gov- tion issues. Even within the domain of the emnment may tend to underestimate local Miiistry of Environment, as mentioned, costs. IBAMA still establishes norms and regula- tions (instead of attending to its more ex- 9.17 Situations abound where the incen- ecutive duties), while the Ministry itself is tives given to polluters by environmental not technically organized to completely un- agencies conflict with those given by minis- dertake these regulatory functions. tries and secretariats in charge of promoting economic growth, such as agriculture, in- .. dustry and energy. For example, in the early Lack of accountablity 1980s, the fiscal incentives given by SU- 9.19 As institutional assignments across DAM to attract investments in cattle ranching tiers of government are not clearly estab- in Amazonia were proportional to the area lished, the responsibility for ensuring that cleared (deforested), while the IBDF (the the overall system functions, and that each National Forestry Agency) required the pres- agency is meeting its objectives, is also ervation of 50 percent of the original forest in poorly defined. For instance, is IBAMA the same region, responsible for checking the effectiveness of 9.18 Though the Constitution establishes state environmental agencies? Whose re- concurrent responsiblity.ov e sponsibility is this? Such lack of account- concurrent responsibility over environ-y ability provides a major disincentive for all mental matters, the complementary law (Lei aece oflilterlglasgmns Complementar) specifying the scopes of Even if the federal government agency operations of the three tiers of government (IBAMA in this case) would oversee the has not been passed as of yet. Manifesta- . .h tions of this lack of coordination include work of the state agencies, would it realisti- disputes between. states and municipalities cally impose any type of sanction or fine? regardist betwen tae and munsici paess; Has that ever happened or is likely to ever regar ding zonng finmh lnsigpoess; happen in the environmental sector? States bodies due to the fact that IBAMA's and have the perception that such an approach boies denvtronmenthe fagnctit insM t and does not work because it simply does not state envirnmedntal enies insection work in any other sectors (the most dramatic aoure regunco iordinae inamadeq oe waterre- example being found in the financial sector, from all tiers of government (state water where until very recently the Central Bank frompall tieranies, go ter entir(sta ntewate has always intervened in favor of State supplyes, Mpniest sa environment al Banks). To avoid being mired in the ineffi- agencies, Ministry of Envronment, in ciency of the government system, decisions varofEr undininglit, Ministar of Planning, must be transparent, allowing all segments valturio municipalitiers, seretriatsuof ag of society to exert control over the govern- culture, and others); and the misuse of 162 Brazil: Managing Pollution Problems - Annexes ment's performance. This applies evenly to Lack of priorities all tiers of government. However, in prac- tice, there is limited experience in involving 9.21 In 1996, CONAMA and its mem- all interested stakeholders in the decision- bers made its first attempt to identify an making processes for environmental man- agenda of priorities, but failed to incorporate agement in Brazil. Currently, the trend is to it into their annual meetings. Further, there make decisions more transparent and to was no agreement on the criteria for its work in greater partnership with various members to select their own priorities. segments of society. The more active and Since CONAMA's agenda is mostly dic- participatory involvement by NGO's is tated by the Ministry of Environment, brown slowly breaking the resistance of govern- pollution issues receive far less attention ment agencies, which are beginning to work than green issues, reflecting the priorities of in partnership. More progress needs to be the Ministry. In addition, the national made towards forging partnerships with in- brown agenda is almost entirely dictated by dustries and affected local communities. the more urgent needs of the State of Sao Paulo. The norms proposed by the technical "chambers" (cdmaras tecnicas) established Weak institutional capacity by CONAMA are typically approved with 9.20 Due to the government's attempt to little involvement of the poorer States. Con- cut the budget deficit, the hiring of new per- sequently, the norms are established on a sonnel has been extremely rare in the last national basis, even though they may be ten years at the federal and state levels. For neither appropriate to all states nor feasible the relatively new environment sector, this given the states' differing capacities of im- has hindered a better understanding of plementation and enforcement. At the fed- problems, the incorporation of knowledge eral level, the focus on brown issues is more and experience from other countries, and in terms of projects than on the systematic maintenance of staff who are familiar with establishment of norms and policies. At the effective and efficient management tech- state level, priorities for brown issues are in niques. Due to the structure of salary in- most cases also non-existent. Lack of in- centives which has little to do with perform- formation, political pressures to cover all ance, the "stability" of civil servants, and areas, and the incapacity to involve relevant resource constraints, training has also not stakeholders prevent the establishment of proven sufficiently effective. At the federal effective priorities. level, the new Ministry of Environment, Water Resources and the Legal Amazon has Limited range of instruments not yet managed to create a clearly estab- lished career plan and associated salaries for 9.22 Management of brown pollution its own staff resulting in job insecurity and issues in Brazil is essentially limited to li- minimal accumulation of experience. At the censing, with little follow-up or inspection, state level, the financial crises of the public except in the case of Sao Paulo. There is an sector have led to an acute deterioration of overall tendency in the government sector to institutional capacity, like in Rio de Janeiro. regard the exertion of police power as the Currently, environmental agencies are being primary function of the state, even though forced to take on greater responsibilities due the capacity to do so is minimal. Flexible, to increased social pressure while, at the market based instruments are in the early same time, financial crises are causing re- stages of formulation and encounter resis- sources to diminish. tance from most stakeholders, including the government environmental agencies. For Brazil: Managing Pollution Problems - Annexes 163 pollution problems, the main exception is Management Of National Pollution water discharge fees on industrial effluents, Problems which are relatively common in the laws of many states even though actual collection is 9.24 The Federal Government is directly less frequent. Water basin authorities and responsible for a range of pollution prob- agencies are only now beginning to be lems of an international or interstate scale, formed. Cooperation with various as well as pollution from sectors where stakeholders (private sector, affected com- highly specialized knowledge is necessary munities, NGO's, the scientific community for monitoring and regulation. Examples of and other government agencies) is rather these problems that must be addressed by limited, as is the transparency of decisions the federal government include the imple- mentioned above. mentation of commitments to address global environmental issues (greenhouse effect, ROLES OF THE NATIONAL GOVERNMENT IN ozone layer depletion, international waters); POLLUTION MANAGEMENT the management of international and federal rivers (rivers that cross State boundaries); 9.23 According to Law 6938 (1981) and coastal zone management. In addition, which established the national environ- the federal government directly controls the mental management system, the federal implementation of multi-state, nuclear en- government is responsible for promoting ergy and other highly technical and sensitive and supervising the system, including en- projects. The federal government is also suring that all state environmental agencies responsible for establishing programs of are performing their assignments and also national interest, creating a cadastre for and are accountable for their work. The law es- licensing polluting activities under federal tablishes that in order for this system to jurisdiction, as well as monitoring them, and work effectively and efficiently, priorities also has to act suplementary to States and must be established at all levels, including municipalities following decisions by the the national level. With the enactment of Justice, the Public Ministry or by CO- the 1988 Constitution, the definition of the NAMA. roles of the three tiers of government as -staed n La 698 (nd al pior awsand 9.25 The federal government, however, stated in Law 6938 (and all prior laws and should not directly intervene into areas out- decrees) require adjustments. In fact, the side the responsibilities mentioned above. Lei Complementar should clearly define Even th ough the frequency of such inter- responsibilities and functions of the various ventions differs from State to State, it un- tiers of government. This section presents dermines the States' accountability and the core responsibilities of the federal gov- causes confusion as to which level of gov- ernment in a national pollution management enmient has the authority to do what. The system. Two. functions relate directly to future Lei Complementar should clearly es- national environmental policies: (i) man- turet e federal gould cope agement of national pollution problems; and tablish that the federal government's scope (ii) coordination with other national policies. of responsibility and authority does not in- Three functions relate to oversight of the pude areas outside typical national pollution federal system: (iii) federal framework problems. regulation; (iv) prevention of unfair compe- tition; and (v) provision of assistance and Coordination With Other National Poli- information services. cies. 9.26 Environmental policies have not permeated macro and sectoral planning in 164 Brazil: Managing Pollution Problems - Annexes Brazil. To a large extent, environmental ment has a major, but not exclusive, role in matters are still seen as obstacles to growth disseminating information about the real and are not addressed in a preventive way in benefits involved in combining economic the planning phases of projects and policies, and sector policies with sound environ- but rather through more expensive, remedial mental policies. actions. Nevertheless, Law 6938 makes explicit reference to the need for the federal 9.28 Since direct environmental policies government to "make compatible economic have proven costly and largely ineffective in and social development with environmental too many cases, future environimental poli- quality." It also makes the federal govern- cies will have to be incorporated into poli- ment responsible for "imposing on polluters cies of other sectors and programs, includ- the obligation to pay for recovering envi- ing fiscal, industry, energy, mining, trans- ronmental degradation, or compensating port, water and sanitation, privatization pro- damages, as well as a fee for the utilization grams, among others. Key challenges re- of natural resources." The latter is an at- main in the water sector where major insti- tempt to introduce the Polluters Pay Princi- tutional and power changes are taking place. ple in the national system, but the difficulty (and often alleged unconstitutionality) of Federal Framework Regulation introducing taxes with environmental pur- poses requires more subtle mechanisms and 9.29 An optimal pollution management arrangements. strategy allocates responsibilities across government agencies, maximizing effi- 9.27 The principle that environmental ciency and minimizing associated costs. matters are better addressed in a preventive Effective allocation of responsibilities in- rather than curative manner makes clear the cludes deciding which level of government need to incorporate environmental issues and which agency (i) sets environmental into national public policies (export incen- objectives; (ii) chooses the appropriate in- tives, macroeconomic stabilization and mar- struments; and (iii) implements the control ket-reforms), national sectoral policies (in- strategy. In addition, for the strategy to dustry, energy, water supply, sanitation, and work, it is necessary to make the responsible transport policies), as well as proj- agencies accountable for their work. In ects/programs of a national scope (Brasil em Brazil, CONAMA is the technical and po- A,ao, privatization, PROALCOOL, energy litical forum where such basic elements of cogeneration). Policies and actions in these the national system SISNAMA are dis- various sectors may both affect and be af- cussed and eventually approved. Imple- fected by environmental considerations. mentation of the national guidelines are left The non-consideration of environmental to States and municipalities. factors will typically lead to excessive social costs, in the short or long terms, whereas 9.30 The federal government is responsi- prevention will typically impose minimum, ble for ensuring that the Constitutional con- often negative costs on projects and policies. cepts and principles, as well as the resolu- The fear of integrating environmental issues tions from CONAMA are translated into most often results from lack of information clear laws and regulations. These include regarding the real benefits and costs of envi- national minimum standards and all specific ronmentally safe policies (i.e. the common laws, regulations, procedures, methodolo- misconception that pollution control is nec- gies and criteria for actions, practices, and essarily costly and leads to decreased out- analyses of the national environmental sys- put, employment and tax revenues still pre- tem which serve as references for all agen- vails). Undoubtedly, the federal govern- cies integrating the SISNAMA. In one form Brazil: Managing Pollution Problems - Annexes 165 or another, this requirement is explicit in NGO's and the scientific community). All Law 6938 and in a few subsequent modifi- norms and regulations are initially proposed cations and include the following responsi- by CONAMA's technical chambers. In re- bilities: ality, however, Brazil has no research ca- pacity on many issues in the brown pollution * establishment of criteria, norms and agenda, and basically has been following procedures for environmental licensing, WHO standards and OECD countries including defining activities which re- norms, criteria and procedures. Sao Paulo quire full environmental impact assess- has taken the lead in proposing new norms ments; and usually serves as the spokesperson for IBAMA. Technical agreements between the * establishment of criteria for the classifi- two agencies are in fact almost permanent. cation of waters; The practice is that CONAMA is the main legislative body in environmental matters, * establishment of air and water quality and the federal government is responsible standards, and criteria and methods for for organizing and pushing its agenda sampling and analyzing materials; and (originally through IBAMA, now through * definition of classes of hazardous mate- the Directorate of Norms and Planning of rials and establishment of criteria and procedures for their safe handling and 9.32 Even though most of these "um- disposal. brella" functions appear clear, the specific roles of the federal, state and municipal m establishment of a national environ- governments in environmental legislation mental zoning; are far from precise. The main reason is - standardization of data requirements and probably the fact that although the Constitu- information by all agents, such as envi- tion establishes concurrent responsibilities inforomatio byually aentus,l suchastreni of the three tiers of government over envi- ronmental quality, industrial cadastres ronmental legislation, the Lei Complemen- and emissions inventories; tar defining the specific assignments of each - establishment of the penalties and fines tier has not been passed. The question of related to non-compliance with the law, whether the federal government should or criteria for states establishing them; regulate more or less than it is now doing and essentially has to do with the degree of de- centralization of the pollution management * definition of criteria and procedures for system discussed above. the utilization of environmental funds particularly the National Environmental 9.33 In addition, the fact that the federal Fund (FNMA), aswell as assurancelthat government has never really challenged resources as well as assurance state governments on any major economic resources are utilized in a cost-effective issues lhas prompted states to implement en- vironmental policies without regard to na- 9.31 Most of these legislative functions tional norms and standards. Actions by fed- are in fact the responsibility of CONAMA, eral government agencies, particularly which serves as a consulting body to the IBAMA, are uncoordinated with those by Superior Environmental Council (consisting state environmental agencies. As indicated of the President, all Ministries, and repre- above, IBAMA regional offices in turn act sentatives from the national Congress, largely independently from Brasilia and do not necessarily monitor the activities of state 166 Brazil: Managing Pollution Problems - Annexes agencies. In addition, most decisions at all 9.35 In addition to unfair competition, tiers of government lack transparency. Lack the federal government has a role in resolv- of coordination and transparency result in ing the "moral hazard" incentive: states may environmental agencies not being account- correctly assume that the federal govern- able for their work. Environmental agencies ment will end up ensuring compliance with should open up the process, working more minimum national standards, either by di- closely with polluters, NGO's, affected rectly exerting control on polluters or by communities, and the media. Pressures subsidizing the state environmental agency. from the Public Ministry and the Ministry of Penalizing states for not enforcing the na- Justice may also accelerate the introduction tional minimum standards is, in practice, a of accountability into the system, and the near impossibility. Real mechanisms do not federal government again has a lead role in exist inside the system that make agencies promoting such changes. accountable for their actions (although there is a clear tendency to change, if the experi- Prevention Of Unfair Competition ence from other sectors, such as the finan- cial sector, is followed). Unless local gov- 9.34 Even after a national system has ernments are really interested in enforcing been endorsed by all federate members, the legislation, there may be little the federal State and local governments may have a real government can do. In the end, enforcement incentive not to enforce the environmental of national environmental standards will legislation. On the one hand, there is the require some form of subsidy from the fed- perception that non-enforcement will in- eral government. crease economic activity and thus generate 9.36 Fortunately, the reality is less severe more employment and revenues in the form the Fortunase thesribed. sept of state taxes. In attracting new investment, than the extreme case just described. Except for instance, states may indicate to investors for specific problems which may warrant their interest by providing different kinds of some assistance or subsidy from the federal incentives, which may include more lenient government,2 State governments do per- environmental standards (the standards per ceive the costs imposed by pollution and se, or their enforcement). There is clearly a thus have the internal incentive to control role for the federal government in prevent- the most serious problems. Even today, the ing this kind of unfair competition (assum- state environmental agencies in the South- ing that there are indeed the minimum na- eastern States, particularly CETESB in Sao tional standards that are to be applied uni- Paulo, and until the mid-80's FEEMA in formly to all states). In addition, federal Rio de Janeiro, are technically better pre- environmental agencies may have to protect pared than federal government agencies, and state environmental agencies engaged in internal disputes with different secretariats 2 Such problems include the cases where the within state governments, typically the sec- state government does not have defacto the retariats of planning, finance, industry and technical or financial capacity to address a commerce, and others whose ultimate as- very serious pollution problem, or prob- signment is to push economic activity at any lems which may have effects on a national cost. Politically, environmental agencies are scale. An example could be the pollution typically in a fragile position in relation to of the Guanabara Bay in Rio de Janeiro these other secretariats, and the federal gov- State, which has an international visibility emnment can provide major support to them that may affect tourism in the entire coun- by enforcing State compliance to national try (particularly in face of the city's and the standards. country's desire to host the 2004 Olympic Games). Brazil: Managing Pollution Problems - Annexes 167 in fact give support to these federal agencies which are often replicated at the State and in assisting the poorer states. In the more local levels. One of the main attributes in developed states, IBAMA's role in pollution this regard is the demonstration effect, in issues is rather limited, if not counterpro- that the federal government provides a ductive, due to its poor coordination with model for states to carry out their legal re- state environmental agencies, limited capac- sponsibilities. This includes institutional ity, lack of a clear agenda and poor central structure, information management, use of (Brasilia) control over the work by its re- policies and instruments, participation by gional inspectors. In the poorer Northeast- stakeholders, coordination with other gov- em states, IBAMA is perhaps not doing ernment agencies, establishment of priori- enough: the average number of inspections ties, and all relevant activities and functions on brown issues has been below I per year. involved in environmental management. In relation to the green agenda, especially in Deficient coordination among federal agen- the case of the Amazon region where inter- cies, or corrupt behavior of any of them, national pressures are greater and national also have major influence on states, so the sovereignty issues are involved, subsidies federal environimenital agencies again have a from the federal to state governments are lead role in serving as a model. Other rele- more prevalent. vant functions include the following: 9.37 There is a political economy caveat * Articulating activities carried out by to what has been mentioned regarding the agencies faced with similar problems, role of the federal government in preventing merging dispersed initiatives and pro- unfair competition and supporting weaker moting synergism; states: the federal government is perhaps in a more favorable position to better resist * Disseminating best practices (informa- pressures from both polluters and green ac- tion systems, establishment of priorities, tivists towards (or against) pollution control decentralization, participation, applica- because it is more distant from the real tion of instruments and policies, and problems. On the other hand, however, too other similar activities involved in envi- much power and discretion is given to in- ronmental management); spectors from federal agencies, who then become prone to corruption in much the * Disseminating environmental informa- same way as inspectors from the lower tiers tion and data to interested parties and of government. There is no reason to be- civil society more generally, such as on lieve that federal government inspectors are environmental quality, cadastres of currently less susceptible to bribes than emission sources, affected and inter- those from state or municipal governments, ested groups and organizations, exis- so the undermining of the implementation of tence of research centers and firms the system can come from all tiers of gov- working in the environment field, etc.; emiment. Promoting pollution control by high- lighting its private benefits (productivity gains) and indicating methods of as- sessing the costs and benefits involved. 9.36 In a national pollution management Snebnft agl cret oit system, the federal government naturally Sance benefits largely accrue to society takes on the responsibilities for its promo- .roei de final ncing o hap s tion and supervision. This includes basic b s .iding om fisacont, as drs- functions of the federal administration subsidizing, some of this control, as dis- cussed above; and 168 Brazil: Managing Pollution Problems - Annexes Proposing and implementing funding the auspices of the MMA may in this sense instruments (such as the national envi- be inadequate. ronmental fund), and creating laws and incentives to channel general govern- 9.38 The national licensing system, ment revenues for environmental pur- SLAP (Sistema de Licenciamento de Ativi- poses. This not only secures its own re- dades Poluidoras), is currently under revi- sources, but also finances pollution sion by a committee headed jointly by abatement. 1BAMA and ABEMA (the association of state environmental agencies). The most Final Considerations iimportant clhanges should be made in the following areas: (i) further decentralization 9.37 Three additional issues in environ- of responsibilities to local governments mental management will become increas- (with states being responsible for all li- ingly important in Brazil: the privatization censes, they easily get overburdened with process, environmental management by licensing and monitoring activities far more newly created water basin agencies, and the appropriate to the local levels of govern- review of the licensing system. The process ment, such as gas stations, laundries, baker- of privatization of state enterprises will cre- ies, garages, etc.; (ii) simplification of the ate a unique opportunity for the preparation rigid and often bureaucratic requirements of of comprehensive environmental audits of permits (licenses are often repetitive and all major State polluting companies. The non-specific to each project; environmental earlier and more comprehensively this pas- impact assessments are often too academic, sivo ambiental is evaluated, the better it will with little analyses of alternative investment be both in economic and environmental which might mitigate the impacts); and (iii) terms. The process will also likely intro- linkage of the licensing process to clear en- duce new, independent regulatory bodies in vironmental targets, economic incentives, the states, and the environmental responsi- and other instruments, such as voluntary bilities may in turn be redeployed. While agreements which by definition require states are already facing such problems and greater flexibility on the part of the licensing resolving them on an ad hoc basis, the fed- agency. The role of licensing in the creation eral government must propose a model to be of water basin authorities should also be followed by states. addressed. 9.40 With the passing of the new Na- 9.39 Finally, to be successful the national tional Water Law, the creation of water ba- environmental system must count on the sin committees and agencies is imminent support of the broadest base of stakeholders and will cause a "shake-up" in the entire as possible. A common vision of the future environmental management system since is fundamental. However, such a vision can other loci of decision-making will be cre- only arise out of consensus. The more open ated, forcing the three tiers of government to and transparent the vision is, the more likely more quickly define their individual roles. it is to be successful in introducing account- In this context, government environmental ability and making policies far more accept- agencies should limit themselves to being able, and thus easier to implement. normative bodies: agencies which are water users should not remain together with envi- ronmental regulators since conflict of inter- ests will clearly arise. For example, the fact References that the irrigation sector is currently under IDB. 1996. "Environmental Management in the Southern Cone: A Study on the Legal and Brazil: Managing Pollution Problems - Annexes 169 Institutional Framework - Background Study on Brazil." Jack, William. 1992. "Power Sharing and Pollu- tion Control: Coordinating Policies Among Levels of Government." World Bank Pol- icy Research Department Working Paper WPS 887, Washington, D.C. Seroa da Motta and Reis. 1994. "The Applica- tion of Economic Instruments in Environ- mental Policy: The Brazilian Case," in OECD/UNEP Workshop on the Use of Economic Policy Instruments for Environ- mental Management. Paris. World Bank. 1993. "Brazil Water Pollution Control Management: Selected issues," Draft Report 11402-BR. Washington, D.C. 170 Brazil: Managing Pollution Problems - Annexes Brazil: Managing Pollution Problems - Annexes 171 10. POLLUTION MANAGEMENT PRIORITIES IN MINAS GERAIS 1 SUMMARY OF ISSUES AND RECOMMENDATIONS The major problem of the current environmental management system appears to be weak monitoring activity by FEAM, in part caused by a deficient environmental information system. Coordination between departments of environmental quality and control is poor. Licensing, monitoring and enforcement are done independently by each department or division, with no adherence to a common set of priorities. Many polluting activities do not presently have an environmental license. This problem may grow if FEAM follows its plan to abandon open-ended licenses in favor of fixed expiration dates, which will force all polluters into a renewal process. The following brown priority problems were identified: * Water pollution in Rio das Velhas and Paraopeba basins; * Air pollution in Belo Horizonte Metropolitan Region; * Localized pollution - critical hot spots in the following areas/regions: = mining areas - sparse mining areas in the Quadrilatero Ferrifero and Vale do Jequitinhonha (garimpo) leading to water pollution and soil contamination; > largest municipalities - 20 largest are responsible for 50 percent of the total organic load in water bodies in the State; urban solid waste (fix6es); and = industrial poles water pollution and potential hazardous waste disposal- Doce/Piracicaba Rivers, Juiz de Fora region, and Uberaba. There is a need for improving the environmental information system, particularly at FEAM. This involves gathering existing information, pufting it in standard formats, disseminating it, and linking it with other databases. The use of simulation models and GIS coupled with careful analysis and organization of data can provide fundamental support for policy decisions, including the establis h- ment of priorities between hot spots and low pollution concentration problems affecting large populations (such as air pollution in Belo Horizonte. The link between the participatory process and technical analyses is perhaps missing. This in fact calls for the preparation of a State Environmental Action Plan, where first-cut priority prob- lems could be identified, greatly compensating for the lack of information and primary data. Ideally, such a process should be as transparent and participatory as possible. Preliminary estimates suggest that the investments required to save a statistical life by control- ling industrial PM10 emissions are in the order of US$ 50,000. To save a statistical life by pro- viding urban piped water the costs are in the order of US$ 6,000. Even though water costs are much lower, the willingness to pay to have access to this service is unlikely to be so high, par- ticularly for the poorer population, probably calling for some form of government intervention. For sewerage provision the situation is even worse, since the costs of provision are higher and the willingness to pay for the service is lower. This paper was prepared by Sergio Margulis with inputs from David Wheeler. 172 Brazil: Managing Pollution Problems - Annexes major stakeholders. This is fundamentally INTRODUCTION important because it legitimizes decisions and ensures a much greater likelihood of 10.1 A rational environmental manage- involvement and compliance with the estab- ment strategy involves three basic compo- lished policies by polluters. Participation is nents: also critically important in a State like Mi- nas Gerais because local communities can * identifying priority environmental best identify their most critical problems and problems; propose appropriate solutions. While Minas Gerais' participatory tradition is probably * setting realistic targets; and the strongest in Brazil, it should be com- bined with sound technical analysis for * choosing appropriate policies and in- maximum effectiveness. struments. 10.5 Objectives of the report. The 10.2 Each of these components requires a main objective of this report is to help the minimum set of reliable data and informa- government establish an environmental tion. For example, when identifying priori- strategy for the State. This involves estab- ties and targets, it is necessary to know the lishing environmental priorities, analyzing extent of the various problems - the level of pollution management instruments and insti- environmental degradation, the number of tutional arrangements (with a focus on eco- people affected, the irreversibility of eco- nomic aspects), and formulating criteria for logical damage - and the social costs of making decisions. The report illustrates the each of these effects. Identifying cost- benefits of economic analysis by providing a effective policies requires knowledge of the detailed assessment of benefits and costs for trade-offs between the costs of alternative selected pollution control alternatives in Mi- abatement strategies and the benefits which nas. The results can assist in the identifica- they generate. tion of priority problems and interventions. The report consists of four sections: (i) a 10.3 Such data are not presently available summary of the current environmental man- in Minas Gerais, or at least have not been agement system in Minas Gerais; (ii) identi- gathered from dispersed sources and con- fication of priority issues from existing in- solidated into a consistent framework. This formation; (iii) a discussion of appropriate hinders State environmental agencies from goals and instruments for managing water launching technically sound policies and and air pollution, and solid and hazardous actions. A high priority for FEAM (the waste problems; and (iv) a summary of the State Environmental Agency) is therefore main findings and key recommendations. the creation of an integrated environmental information database. However, the existing SUMMARY OF THE CURRENT limitations should not prevent SEMAD ENVIRONMENTAL MANAGEMENT SYSTEM (State Environment Secretary) and FEAM from using the best available information to 10.6 Minas Gerais is located in the define priority problems, set realistic targets Southeastern part of Brazil and is the coun- and identify appropriate policies and instru- try's second largest industrial center. With ments. an area of 587 thousand square kilometers and 16.5 million inhabitants, the State is di- 10.4 In addition to the 'hard' data needed vided into 853 municipalities. Minas is to support technical analyses, these three Brazil's largest producer of mining ores, components also require participation by with iron ore reserves estimated at 30 billion Brazil: Managing Pollution Problems - Annexes 173 tons. It has 14 major river basins, making sensual solutions and deadlines. Less the State the second largest producer and promising results have been achieved with consumer of electric energy and a major site state companies and the public sector more for irrigated agriculture. Minas reflects generally, as well as with the agricultural Brazil's marked differences in socioeco- sector. Experiences with small enterprises nomic conditions: the poverty in the Jequit- have been mixed, although negotiated inhonha basin is comparable to that found in agreements with the federation of industries the Northeast, while the 3 million inhabi- provide a promising approach. tants of Belo Horizonte Metropolitan Area enjoy higher income levels and relatively 10.9 The system of chambers for licens- good access to services. ing and resolving disputes at COPAM is extremely democratic and appears to have 10.7 The environmental management support from all stakeholders. It is a strong system in Minas Gerais is largely centered barrier against corruption, since decisions around the decisions and actions of COPAM are made in a public forum rather than pri- - the Council of Environmental Policy - and vately between industry and FEAM techni- its executive secretariat (FEAM). The main cians. This system may, on the other hand, feature of COPAM is its extremely demo- introduce a certain climate of collusion be- cratic and participatory nature. With 24 rep- tween the government and the private sec- resentatives from govermnent, NGO's and tor. private business, COPAM is responsible for establishing norms, giving licenses for pol- 10.10 Another important issue for luting activities, establishing sanctions, and COPAM and the current FEAM administra- serving as a specialized tribunal on envi- tion is the decentralization of licensing and ronmental matters. Such activities are car- inspection activities to municipalities. ried out by special chambers comprised of 7 FEAM has actively promoted municipal members, which meet once a month.2 environmental secretariats, and has written COPAM also serves as a forum for educa- simple manuals for the most important envi- tion and dialogue among the agents repre- ronmental activities. However, due to the senting different interests. large number of municipalities, it is nearly impossible for FEAM to work with each one 10.8 The use of a transparent environ- individually. It might be useful to promote mental management system that avoids liti- regional inter-municipal consortia, follow- gation and works through consensus- ing the model developed by the health sec- building has produced significant progress, tor. The current creation of river basin particularly on actions by industry, mining agencies and consortia may be helpful in companies and larger enterprises. Accord- this respect. For FEAM itself, decentraliza- ing to FEAM, the participatory system has tion outside of the Belo Horizonte Metro- made it possible for various stakeholders to politan Region is probably not cost-effective form constructive partnerships. For in- because economic activity, population and stance, COPAM has signed a number of environmental problems are localized and agreements with unions and federations of sparse. the more polluting sectors to work on con- 10.11 Minas resembles other Brazilian States in relying essentially on the com- The chambers are on environmental policy, mand-and-control regulations of the national mining, industrial pollution, water basins, system. The most recent and innovative ecosystems protection and agricul- instrument is the ecological ICMS (VAT ture/forestry. system), by which allocation of State taxes 174 Brazil: Managing Pollution Problems - Annexes to municipalities depends on the area under ing is only sporadic. Industry has no incen- environmental protection and/or the invest- tive to report emissions honestly, and pres- ments made in sanitation and solid waste sure from FEAM is not significant. The collection. The new system has been at- major force for emissions control is the set tracting strong interest from the smaller of agreements reached at COPAM. While municipalities. these may work in many cases, they should not preclude inspections of major polluters. 10.12 In 1995, the new Secretariat for FEAM could cover the cost of inspections Environment and Sustainable Development with modest charges levied on emissions (SEMAD) was created, into which both sources. COPAM and FEAM are now incorporated. Despite some overlap in officially-defined 10.15 FEAM's information system re- roles, SEMAD has focused on political and mains poorly developed. GTZ has already overall planning functions while COPAM financed an attempt to gather all data avail- and FEAM have assumed most of the ad- able at FEAM, but this has produced no re- ministrative tasks. The latter two entities sults. A new attempt to introduce computers seem to work well together. Another institu- and systematize information was negotiated tion which has existed for a long time and with the Bank mission, and seems to be pro- may now gain importance is the water re- gressing as part of PROSAM. sources agency - DRH. Its potential overlap with COPAM was not important as long as 10.16 Another area of concern is the poor DRH remained inactive, but its new rela- coordination between the departments of tionship with COPAM and the water basin environmental quality and control. Licens- agencies will have to be worked out care- ing, monitoring and enforcement are done fully. independently by each department or divi- sion, with no adherence to a common set of 10.13 FEAM currently has only 130 em- priorities. The problem may be reduced ployees (105 professional and 25 support when the information system is upgraded staff), because it has pursued a successful (this will also ease excessive staff competi- policy of contracting services to the private tion for the few existing computers), but sector. Salaries are close to (but yet below) more concerted actions are needed in this market levels. An increase (perhaps 30 per- area. cent) in both technical and administrative staff may be justified, since a number of 10.17 With regard to COPAM's participa- divisions are now under extreme pressure. tory approach, the risk of collusion between FEAM has also managed to increase reve- government and industry may be lowered by nues from its services, although it remains separating the licensing technicians from fundamentally dependent on government those responsible for monitoring and en- budgets. forcement as the latter activities are in- creased. Although participation is desirable, Major Weaknesses And Summary the current system is very time-consuming Recommendations and may divert attention from some priority issues. This may explain why many pollut- 10.14 The major problem of the current ing activities do not presently have an envi- environmental management system in the ronmental license. This problem may grow State appears to be weak monitoring activity if FEAM follows its plan to abandon open- by FEAM. At present there is little monitor- ended licenses in favor of fixed expiration ing of major ecosystems in the State. Even dates, which will force all polluters into a for Rio das Velhas, the major river, monitor- renewal process. Brazil: Managing Pollution Problems - Annexes 175 IDENTIFYING PRIORITY PROBLEMS information was incorporated into the final document. Without technical analysis, the Criteria participatory approach did not yield a coher- 10.18 Fiscal adjustments in the Brazilian ent strategy for improving environmental economy, combined with tight budget con- quality in Minas Gerais at feasible costs. straints in all the States, have forced gov- ermnents to restrict the range of problems to Introducing Technical Analyses be addressed. This has reinforced the need 10.21 For a coherent strategy, priority- to prioritize environmental problems and setting must be given a focus: pollutants, interventions. regions (ecosystems), major polluters, or 10.19 Determining priority problems is some combination of these. It should be ultimately a political process. Communities based on adequate and reliable information. affected by environmental degradation, Commonly used criteria for ranking objec- major polluters, environmental experts, tives are : (1) ecological, such as physical NGO's and government agencies should impacts and irreversibility or recurrence of reach a consensus on the most critical envi- problems; (2) social, such as the number of ronmental issues. This consensus must be people affected, health effects, and inci- supported by sound technical and economic dence among the poor; and (3) economic, analyses. such as effects on economic productivity and growth, and factors such as risk and uncertainty. Participation 10.20 Minas Gerais has a remarkable 10.22 Economic analyses have been tradition of stakeholder participation but, as gaining increasing attention, primarily be- noted previously, this has not yet been cause comparison of the social costs of envi- complemented by appropriate technical ronmental problems and the costs of reme- analysis. For example, the state government diation can guide priority-setting within and prepared for the 1992 UNCED Conference across sectors. However, application of in Rio with 33 pre-conferences (involving economic criteria can be difficult because 160 municipalities), and a large final con- the links between environmental problems ference where priority problems and actions and outcomes are not always easy to estab- were discussed with representatives from all lish. For instance, predicting the impact of segments of society. This exercise revealed BOD discharges depends on knowledge of that local governments and communities the receiving waters (flow rate, volume, have a serious lack of technical knowledge etc.) and the availability of an appropriate about environmental issues. Not surpris- dispersion model. Even when the physical ingly, 'environmental education' was iden- impact can be predicted with a reasonable tified as a major priority by all municipios. degree of confidence, it may be difficult to However, no municipio requested more sci- value in monetary terms. entific/technical knowledge about environ- 10.23 Although precise predictions are mental quality or the health effects of pollu- often difficult, the Bank's interational work tion. Despite many recommendations for has identified certain common problems better collaboration, enforcement, etc., the which should be accorded high priority. For incentives of polluting agents or the eco- instance, it now seems clear that fine par- nomic costs and benefits of their decisions ticulate matter (PM2.5) is the air pollutant were not considered. As a result, no attempt which causes the greatest damage to health. to address the incentive problem or set pri- consesethe reatest air pollth. orities was made, and little or no technical Consequently, regulation of air pollution 176 Brazil: Managing Pollution Problems - Annexes Table 10.1: Population/Pollution Concen- populations being continuously exposed to tration Matrix some level of non-critical but relevant pol- lution, such as lower concentrations of sul- Sz~~1J~~ . ge ~fur dioxide in large metropolitan areas, nun~b~r of number and/or intense pollution levels affecting people of pe~.lesmaller municipalities, typically found in Small pollution Least Im- ?? isolated and highly polluting industrial concentrations portant poles. Large pollution ?? Most concentrations Serious 10.25 The selection of priorities in the case of Minas Gerais involves a critical as- should focus primarily on PM2.5 unless sessment of the trade-offs (in terms of what other pollutants have reached alarming lev- is considered more important, such as costs) els. For water pollution, the quantitative re- between the various conditions involved in lationships between the lack of access to the two situations denoted by the question safe water supply and sanitation and mor- marks in the box above. Economic analy- bidity and mortality rates have been estab- ses, as indicated below, may greatly facili- lished, and willingness to pay analyses for tate such an assessment. obtaining these services have been con- ducted in a number of different countries 10.26 Two additional factors must be ac- and contexts. Even though some of these counted for when identifying the most criti- relationships may be unique to specific cal problems. First, for some problems, conditions, the Bank's knowledge can be continuous exposure to low concentrations generalized to different contexts as a first- of pollutants (for instance, heavy metals) is, cut identification of priority problems. Such given certain limits, more damaging than an exercise can hopefully serve as an input occasional exposure to high concentrations. to the government's overall effort to estab- In other problems, such as fecal coliforms in lish priorities by combining more rigorous water, the reverse is the case. Second, technical analyses with the involvement and maximum acceptable levels of pollution for participation by all segments of society. a given population and region must exist. Exposure of small populations to severe 10.24 The Bank mission met with experts levels of pollution may be considered unac- at FEAM to identify the priority brown envi- ceptable, rendering such problems priorities ronmental problems in the State of Minas in the state brown agenda, even though the Gerais. While there is a clear indication of total social costs incurred are not so high. certain pollution hot spots in the State, some indecision remains as to the relative impor- 10.27 Based on the above factors and in- tance of two particular types of problems, terviews at FEAM, the following brown pri- namely the levels of pollution and the num- ority problems were identified: ber of people affected. As illustrated in Table 10.1, small concentrations of pollution * Water pollution in Rio das Velhas and in unpopulated areas, the most common Paraopeba basins; situation in the largest part of the territory, clearly poses no problem. Large concentra- * Air pollution in Belo Horizonte Metro- tions of pollution affecting large numbers of politan Region; people are clearly the priority problems, and usually occur in the greatest metropolitan * Localized pollution - critical hot spots in regions. The two most difficult situations the following areas/regions: are the intermediate cases of either large Brazil: Managing Pollution Problems - Annexes 177 => mining areas - sparse mining areas in across interventions. However, the lack of the Quadrilatero Ferrifero and Vale do information on the actual willingness to pay Jequitinhonha (garimpo) leading to wa- in Minas Gerais for attaining different levels ter pollution and soil contamination; of environmental quality prevents such benefit-cost analysis from being conducted > largest municipalities - 20 largest are for all problems. responsible for 50 percent of the total organic load in water bodies in the 10.30 In general, rather than conducting a State; urban solid waste (lixoes); and full benefit-cost analysis of the various envi- ronmental problems and possible interven- = industrial poles water pollution and po- tions, governments use the cost- tential hazardous waste disposal- effectiveness criterion. Under this criterion, Doce/Piracicaba Rivers, Juiz de Fora the desired level of environmental quality is region, and Uberaba. not determined according to the individuals' willingness to pay, but rather by legislation, CONTROLLING PRIORITY FEAM or another government agency, or CONLMSSTROLING PRORITYAN through direct negotiation between various PROBLEMS: SETTING GOALS AND agents. Once the target is determined, the cost-effectiveness criterion requires that the 10.28 Assuming the above to be a reason- instrument(s) chosen attains the established able list of priority brown environmental target at the least possible cost. This in turn problems in Minas Gerais, it is then neces- requires knowledge of the range of available sary to identify the immediate and underly- instruments, their costs and their likely ef- ing causes of each problem and then estab- fects in terms of improving environmental lish problem-specific goals and objectives. conditions. In this subsection, economic Establishing such goals is a consensus- analyses of available information are con- building process requiring a balance of rig- ducted, providing important clues about ap- orous technical analysis with consultation propriate strategies for cost-effective envi- among relevant actors. This process will ronmental regulation in the identified prior- eventually lead to the appropriate level of ity areas/ecosystems. pollution control and to the selection of ap- propriate instruments and actions. Water Pollution In Minas Gerais 10.29 The establishment of goals depends 10.31 Water pollution has been on the on the costs of controlling environmental agenda of priority problems in Minas Gerais degradation. In principle, environmental and, overall, may be considered a more sig- legislation provides an indication of the de- nificant problem than air pollution. Too sired ambient environmental conditions to many water bodies have deteriorated to lev- be reached. Such conditions must be re- els below their legal classification, and pol- garded as indicators, rather than strict ob- lution from organic material, heavy metals jectives to be reached at any cost. Ideally, a and eutrophication are common to many benefit-cost analysis should be performed important rivers in the State. In terms of on each specific problem: in general, the health, even though the population around costs of control should never be greater than the major industrial areas typically has ac- society's willingness to pay for improved cess to sanitation services and is thus less environmental conditions, which reflect the prone to contracting water-related diseases, benefits associated with the control. In ad- the poorer populations in both urban and dition, efficiency conditions require that the rural areas are at greater risk. incremental benefit-cost ratios be the same 178 Brazil: Managing Pollution Problems - Annexes 10.32 Unlike air pollution, the effects on 10.34 This subsection therefore concen- human health from the discharge of a ton of trates on four key aspects of water pollution a pollutant in a river are entirely unpredict- problems in the State. The first is the iden- able: even if the resulting effects in terms of tification of the most polluted river basins, concentrations of the pollutant in the river including the sources of pollution. The sec- are known, the more important effects in ond is the application of a specially con- tenns of human health cannot be predicted structed dose-response curve (relating inci- (unlike the dose-response curve which is dence of diseases to lack of sanitation serv- relatively well known in the case of air pol- ices and other socioeconomic variables) to lution). This is because people may live the municipalities of Minas Gerais. This very close to polluted rivers, as is the case in may help indicate policies to mitigate the most metropolitan regions, but not be ex- incidence of such diseases. The third is the posed to waterborne diseases if sanitation identification of a cost-effective industrial conditions are good. Even without good pollution control strategy. This is done for sanitation, better educated families can the specific case of Rio das Velhas. The fi- avoid contact with polluted waters by filter- nal subsection reviews some of the initia- ing/boiling water before consumption and tives in Minas regarding water management minimizing children's direct contact with systems, focusing on two additional major contaminated waters. None of these factors, river basins - Doce and Paraopeba. however, imply that there are no relation- ships between discharges of effluents in water bodies and pollution levels, or be- Identification of the sources of tween pollution and health effects. But the problems approach for understanding such linkages is Biological Oxygen Demand (BOD) different from the case of air pollution. 10.35 Organic water pollution (BOD) has two major sources: industrial emissions and 10.33 The previous discussion is not a household sewage. Knowledge of relative mere technical analysis of dose-response e v emissions volumes and abatement costs for relations in the case of water pollution: it the two sources is critical for formulating a has very important implications in terms of regulatory strategy. If BOD pollution from policy choices. In the analyses of the envi- large plants is the main problem, careful ronmental impacts of pollution problems, targeting of monitoring and enforcement priority is given to their consequences on activities can significantly reduce emissions human health, since they are likely to be the in a short period of time. On the other hand, highest in terms of the overall social costs. if household sewage is the main problem, it However, the above discussion implies that may be necessary to construct sewage and even if the most polluted rivers in Minas treatment systems for large areas. Gerais were identified, identifying the loca- tions where the most serious cases of water- 10.36 Household BOD is directly propor- borne diseases occur may not be possible at tional to population, while industrial BOD this time. A corollary for policies in this depends on the distribution and scale of ac- area is that two fronts have to be addressed tivity in BOD-intensive industry sectors. simultaneously to control the health effects For the industry analysis, emissions of all from water pollution: controlling emissions major pollutants were estimated using an (from both domestic and industrial sources) IBGE database of approximately 156,000 and targeting more sanitation services and Brazilian factories, categorized by 266 4- other instruments, including education for digit CNAE codes, employment size, and the poorer segments of the population more location (for over 5,000 municipios). vulnerable to waterborne diseases. Brazil: Managing Pollution Problems - Annexes 179 Table 10.2: Household And Industry Shares Of BOD Emissions Belo Honzonte 1 1 45,997 2,021 48,018 95.8 Contagem 2 5 9,981 859 10,840 92.1 Juiz de Fora 3 9 8,748 607 9,356 93.5 Uberleindia 4 6 8,288 809 9,097 91.1 Montes Claros 5 10 5,498 589 6,088 90.3 GovemadorValadares 6 7 5,116 715 5,830 87.7 Uberaba 7 4 4,728 875 5,603 84.4 Ipatinga 8 118 4,094 46 4,140 98.9 Betim 9 34 3,817 218 4,035 94.6 Divinopolis 10 16 3,389 352 3,741 90.6 Sete Lagoas 11 11 3,248 568 3,816 85.1 Ribeirio das Neves 12 383 3,062 5 3,068 99.8 Teofilo Otoni 13 39 2,857 188 3,045 93.8 Pogos de Caldas 14 14 2,466 467 2,933 84.1 Caratinga 15 33 2,418 218 2,636 91.7 Patos de Minas 16 189 2,206 21 2,227 99.0 Barbacena 17 67 2,128 112 2,240 95.0 Ibirit6 18 209 2,100 19 2,119 99.1 Araguari 19 61 1,998 124 2,122 94.2 Emissions have been estimated using inter- household sewage is treated. Paradoxically, national parameters established in previous however, relative abatement costs are so work with FEEMA (Rio) and FEAM (Minas skewed in favor of industrial BOD abate- Gerais). This large database has enabled the ment that it makes sense to begin a program assessment of the distribution and severity of organic pollution control with targeted of Minas' industrial pollution problems at an regulation of emissions from large factories. unprecedented level of detail. For Minas Gerais households, the incre- mental cost of BOD removed through sew- 10.37 Map 10.1 (Maps 10.1-10.3 at end of erage is approximately $1775/ton. In con- report) and Table 10.2 provide evidence on trast, Table 10.3 provides a schedule of es- the distribution of BOD emissions by timated relationships between % abatement source. Map 10.1 makes it clear that house- of BOD and incremental cost for industry as holds are the major source in the vast ma- a whole. Even at 99% abatement, the in- jority of municipios. However, significant cremental cost of BOD control in industry is threats to aquatic ecosystems are more likely only $300/ton: less than 20% of the cost of in areas with heavy emissions volumes. As Table 10.2 shows, emissions from top- Table 10.3: Abatement Cost For Industrial ranked municipios are also dominated by BOD Emissions household sewage. Among the top group, BOD Eso households are accountable for over 90% in 10 8 15 cases and over 80% in the remaining 4. 15 100 30 110 10.38 Clearly, organic water pollution in 90 110 Minas Gerais will not be controlled until 95 220 99 330 180 Brazil: Managing Pollution Problems - Annexes BOD control through sewerage. Minas Gerais, two sources of information have been drawn upon. The first is an esti- 10.39 Where should a targeted regulatory mate of industrial heavy metal emissions to program begin? A complete answer de- water for each area. The second is a risk- pends on knowledge of receiving waterways weighted index of industrial toxic emissions (volume, flow rate) which is not available to water (including heavy metals). The lat- for this analysis. However, good candidates ter measure weights estimated emissions of are factories in municipios where total BOD individual toxins and heavy metals by loads are high (indexing the potential threat Threshold Limit Values (TLV) for human to ecosystems) and industrial loads' are also exposure developed by the American Con- significant (providing scale economies for ference of Governmental Industrial Hygien- regulation). Municipios which rank high in ists. Across chemicals, TLV's may differ both categories are Belo Horizonte, Conta- by 1000:1 or more. They provide a more gem, Juiz de Fora, Uberlandia, Montes realistic estimate of risk than assessments Claros, Governador Valadares, and based solely on emissions volumes. How- Uberaba. These municipios should be in- ever, a separate estimate for emissions of vestigated further to determine the areas heavy metals has been included because of where BOD-related damage is most severe. the additional risk of bio-accumulation. Heavy Metals and Toxic Risk 10.41 As in the case of other pollutants, 10.40 Exposure to heavy metals and other heavy metals from industry are highly con- toxins can pose serious short-'and long-term centrated in a few municipios. Map 10.2 risks to human health. Heavy metals can provides evidence on the geographic distri- also accumulate in the food chain, ultimately obution of estimated metals emissions to wa- manifesting in dangerous concentrations. ter, and Table 10.4 lists the top 20 mu- To assess the relative risk for municipios in nicipios in Minas Gerais. Both suggest that Table 10.4: Estimated Metal Emissions By Municipality Contagem 1 1 373 201 Belo Horizonte 2 2 330 160 Ipatinga 3 6 300 93 JuizdeFora 4 3 182 145 Belo Oriente 5 53 172 10 Timoteo 6 17 156 38 Divinopolis 7 8 154 79 Ouro Branco 8 19 135 34 Sete Lagoas 9 7 132 82 Betim 10 9 119 71 Arcos 11 13 109 49 Joao Monlevade 12 28 86 24 Pocos de Caldas 13 20 84 32 Itauna 14 4 79 106 Santana do Paraiso 15 22 78 31 Uberaba 16 29 67 24 Uberlandia 17 11 61 57 Barbacena 18 10 58 66 Santos Dumont 19 16 48 39 Para de Minas 20 12 39 51 Brazil: Managing Pollution Problems - Annexes 181 heavy metal emissions are concentrated in a way into waterways through runoff.3 Map few areas. In Table 10.4, for example, the 10.3 shows clearly that, under the 20 percent municipio ranked 20th in priority (Para de assumption, the major potential loadings in Minas) has approximately 10% of heavy the state are in the northern agricultural re- metal emissions of the top-ranking mu- gion. The data on distribution by source in nicipio (Contagem). Table 10.5 compares potential contributions by both sectors - domestic and agricultural. 10.42 Table 10.4 also shows that the dis- If further investigation reveals that eutrophi- tribution of risk-weighted toxic emissions is cation is a problem in a specific area, the significantly different than the pattern for results suggest where the regulatory atten- heavy metals alone. For example, Belo Ori- tion should be focused. In some municipios, ente ranks 5th in volume of toxic metals to treatment of household sewage would not water, but only 53rd in risk-weighted toxic significantly contribute to the solution of volume. Itauina ranks 14th in heavy metals, this problem. but 4th in risk-weighted toxins. Health effects from water pollution Phospho*us and socioeconomic conditions 10.43 Phosphorus is another significant 10.46 Diaheal diseases are a major cause threat to aquatic ecosystems because it is an of mortality among young children in Brazil, inportant determinant of eutrophication. accounting for 13% of deaths of children Its two major potential sources are house- from 0 to 4 years old. There is ample evi- hold waste water and runoff from agricul- dence that access to improved water supply ture. As in the case of BOD, appropriate and sanitation can have a significant impact targeting of regulation depends on three in reducing the incidence of both morbidity factors: the scale of phosphorus loading and mortality associated with diarrhea, in- relative to the absorptive capacity of local testinal nematodes, and other water-related waterways; the relative magnitude of phos- diseases. A detailed cross-sectional epide- phorus loading in different municipios; and miological study of the impact of water and the shares attributable to households and sanitation on infant and under-5 mortality in agriculture. Brazil was made to estimate and rank the net 10.44 Evidence on the incidence of eu- benefits of improvements in water and trophication problems by waterway is cur- sanitation. This study is presented in detail rently unavailable. This analysis will there- fore be limited to identifying areas which 3 Because phosphorus compounds are so may pose problems, and tracing potential tightly bound to the soil, even very heavy phosphorus loading problems back to fertilization does not lead to the leaching of household and agricultural sources. much phosphorus into groundwater and surface water. Fertilizer phosphorus that 10.45 Map 10.3 and Table 10.5 provide reaches waterways does so almost entirely information on the geographic and sectoral by being carried along in eroded soil parti- distribution of estimated phosphorus loads. cles. Even in the water, most of that phos- For agriculture, the estimate is based on the phorus remains in suspension (not in solu- assumption that 10 to 20 percent of total tion) so it is not readily accessible for use by aquatic plants. By far the largest source phosphorus fertilizer applications find their of souble phosphor in wates s of soluble phosphorus in waterways is municipal sewage, which contains phos- phorus both from excrement and from de- tergents (Ehrlich, P.R et al., 1977). 182 Brazil: Managing Pollution Problems - Annexes Table 10.5: Phosphorus Emissions From Households And Agriculture: Top 15 Municipios Unal 65 753 1,507 818 1,572 8 4 Uberlindia 400 365 730 765 1,130 69 35 Uberaba 228 414 829 642 1,057 35 22 Patos de Minas 106 460 921 566 1,027 9 10 Tocantins 841 11 22 852 863 99 97 Juiz de Fora 422 161 322 583 744 72 57 Porteirinha 45 294 589 349 633 13 7 Janurda 74 270 541 344 615 21 12 Jojo Pinheiro 45 277 554 322 599 14 8 Montes Claros 265 125 251 390 517 68 51 Contagem 482 2 4 484 485 100 99 Caratinga 117 182 364 299 480 39 24 Presidente Olegnrio 21 228 456 249 477 8 4 Gov. Valadares 247 84 168 331 415 75 59 Buritis 17 180 361 197 378 9 4 in Annex 2 of this volume. This sub-section $13,600 for urban water supply and $33,600 summarizes the main results and applies for urban sewers. Converting investment them to Minas Gerais. Since sewage treat- costs to annualized costs and allowing for meent on its own yields minimal or zero operating cost narrows the relative differ- health benefits, it is not included in the ence somewhat with average costs of $2,700 analyses.4 and $3,820 per DALY on an annual basis. 10.47 Epidemiological analysis. The 10.48 Other results obtained from the epidemiological analysis conducted on data study indicate that about 83% of all urban from four states (see Annex 2) suggest that, residents in Minas without piped water live in Minas, over 600 cases of under 5-year in municipalities for which the cost per deaths could be avoided through better wa- DALY saved is less than $6,000. The corre- ter and sanitation. It is possible to rank states sponding figure for urban sewage is 76%. and municipalities by the cost per DALY Providing every urban resident with access saved as a result of expanding access to to piped water followed by sewage networks water supply and sewers. The average in- should be the first priority for reducing the vestment per DALY per year saved is burden of disease and ill-health via invest- ments in water and sanitation. 4 The overall burden of ill-health associ- ated with transmission through contact with 10.49 In terns of cost per DALY saved untreated sewage outside the local neigh- by expenditures on urban water supply and bourhood is relatively small. Children and sewers, estimates have been made for Belo adults may develop diarrhoea, cholera, ty- Horizonte and Contagem. The urban popula- phoid, or hepatitis as a result of bathing in tions without piped water and sewers are contaminated waters or eating contaminated 41,000 and 262,000 respectively (Belo Hori- shellfish, but both mortality and the overall zonte) and 13,000 and 145,000 (Contagem). loss of DALYs from such causes is small in The annual cost per DALY saved by provid- countries where access to water supply and ing piped water is US$ 2,310 and 2,070, and some form of sewage removal is widespread, by providing sewers US$ 3,270 and 2,990 for such as in China. Brazil: Managing Pollution Problems - Annexes 183 Table 10.6: Estimated Pollution Loads In Arrudas And Onca Basins BOD 9,620 6,319 66 3,301 34 COD 28,311 20,029 71 8,282 29 Suspended Solids 15,170 10,302 68 4,868 32 Arsenium 0.002 0.002 100 0.000 0 Cadmium 0.004 0.002 50 0.002 50 Lead 36.195 35.690 99 0.505 1 Copper 5.210 3.917 75 1.293 25 Cromium 1.964 1.287 66 0.677 34 Tin 3.441 3.407 99 0.034 1 Mercury 0.003 0.003 100 0.000 0 Nickel 4.613 3.956 86 0.657 14 Silver 0.004 0.002 50 0.002 50 Selenium 0.002 0.000 0 0.002 100 Zinc 23.049 20.483 89 2.566 11 Total Heavy Metals 74.487 68.749 92 5.738 8 Phenols 378.50 365.25 96 13.25 4 Total Phosphorus 53.72 31.74 59 21.98 41 Sulfates 2869.91 2623.98 91 245.93 9 Cyanides 11.45 11.33 99 0.12 1 (Source: PROSAM 1996) Belo Horizonte and Contagem, respectively. tries (87%) have less than 50 employees, Multiplication of these numbers by the aver- with 601 having less than 5. Table 10.6 age of 34 DALYs for each death of a child summarizes the estimated pollution loads in under 5 years old and with no discounting both Oncas and Arrudas basins. would give an average figure of US$ 78,000 to save a statistical life by providing water in 10.51 Table 10.7 summarizes the classifi- urban Belo Horizonte and Contagem, and cation and loads of the 32 major polluting US$ 102,000 by providing sewerage. industries in the Rio das Velhas basin and is based on industries with highest BOD (not A cost-effective industrial pollution shown), COD, suspended solids and heavy control strategy for Rio das Vel*as basin metals emissions. The bottom part of Table 10.50 Rio das Velhas is the main water 10.7 includes industries with heavy metals body in the Belo Horizonte Metropolitan emissions above 0.1 kg/day, irrespective of Area and indirectly supplies water to over their emissions of other pollutants. Table 1.7 million people. Ribeirao do Arrudas and 10.7 indicates that only 32 industries are Ribeirao do Onca are the two main contribu- responsible for 84 percent of the volume of tors, draining an area of 42,000 ha within industrial discharges, 86 percent of DQO, up the BHMA. Appendix 10.1 shows the ge- to 95 percent of suspended solids, 96 per- ography of the basin. In the Rio das Velhas cent of heavy metals, and 83 percent of basin, there are over 3,125 industries of BOD loads (not shown). which 211 are actually polluting, 1,365 po- tentially polluting and 1,549 non-polluting. Non-industrial emissions The 1,576 polluting and potentially polluting industries are extremely concentrated geo- 10.52 The apparently heavy loads from graphically and in termns of their total water industrial emissions are in fact minimal consumption. Almost 1,400 of these indus- when compared to domestic effluents, at least in terms of organic loads, phosphorus 184 Brazil: Managing Pollution Problems - Annexes Table 10.7 Industries Responsible For The More Relevant Pollution Loads Mannesmann SA Steel 4,197,226 10604.3 37.4 5147.0 33.9 19,770 26.5 Frgorifico Modelo Ltda Meat 255,291 3043.9 10.7 4338.4 28.5 - - CIa. Belgo Mineira Metallurgy 364,165 2483.1 8.7 219.8 1.4 42,860 57.5 Fricon SA - Frigorffico Meat 74,460 836.4 2.9 140.3 0.9 0.024 0.0 Industrial Horizonte Textil Textile 154,864 729.7 2.5 36.0 0.2 0.293 0.4 Cia. Renascenca Indust. Textile 230,600 1402.5 4.9 135.2 0.9 0.133 0.2 Franco Matos Maihas Textile 193,033 792.1 2.8 - - 0.201 0.3 Tecelagem Sao Geraldo Textile 43,253 611.3 2.1 58.5 0.4 0.357 0.5 Refrigerantes Del Rey Lida Beverage 58,606 645.4 2.3 7.7 0.1 - - Estampara S.A, Textile 116,089 562.9 2.0 - - 0.095 0.1 Coop Central Prod. Rurais Dairy 102,200 339 1.2 89.6 0.6 - - Carnes Delivados Sao Jogo Meat 45,051 533.2 1.9 25.4 0.2 0.025 0.0 Mate Couro S.A. Beverage 135,154 557 1.9 90.7 0.6 0.963 1.3 Frigorifico Perrela Ltda Meat 30,660 192.3 0.7 108.7 0.7 0.074 0.1 ModLine Perfilados Ltda Metallurgy 8,028 251.6 0.9 4.8 0.0 0.016 0.0 Asea Brown Boveri Ltda Metallurgy 52,185 85.6 0.3 3705.8 24.4 0.480 0.6 Magnesita S A. Refractant 81,000 92.4 0.3 178.3 1.2 - - Textil Ferreira Guimaries Textile 18,884 65.7 0.2 58.0 0.4 0.007 0.0 Colortextil Participac6es Textile 148,920 322.3 1.1 18.7 0.1 0.233 0.3 Meta Gaivaniza,io Ltda Gaivanizat 14,596 0.7 0.0 - - 1,352 1.8 Galvanoplaslia Modema Galvanizat 58,625 88.9 0.3 - - 1,244 1.7 Isomonte Ltda Galvanizat 34,229 52.4 0.2 - - 0.920 1.2 IndLstria Micheletto S A Galvanizat 10,060 14.5 0.1 0.4 0.0 0.713 1.0 Industria Santa Clara S.A Galvanizat 10,877 58.2 0.2 - - 0.505 0.7 Melalurg. Triangulo Metrila Mechanic 4,367 8.6 0.0 0.8 0.0 0.361 0.5 Nansem Instrum. Precisio Galvanizat 7,526 3.1 0.0 - - 0.282 0.4 FIAT Allis Latino Americana Mechanic 41,382 0.0 0.0 0.0 0.0 0.206 0.3 Brafer Industrial SA. Galvanizat 17,296 11.2 0.0 0.2 0.0 0.169 0.2 Madson EletrometalOrgica Galvanizat 7,821 13.6 0.1 - - 0.132 0.2 Paraibuna Papeis S.A. Paper proc 2,162 1.5 0.0 - - 0.130 0.2 ABC EMEP El.Me Precisao Electronics 14,600 3.6 0.0 2.7 0.0 0.122 0.2 Pohlig Heckel do Brasil Mechanic 8,884 31.8 0.1 - - 0.111 0.1 Total due to these industries 6,542,105 24,440 14,365 71,778 Total estimated for On;a and Arrudas 7,791,455 28,311 15,170 74,487 Percentage due to these industries 84% 86% 95% 96% (Source: PROSAM 1996) and in volume terms. Table 10.8 summa- with specified limits, so as not to threaten rizes the relative contributions by each sec- the infrastructure, including operation of the tor. treatment plants, and prevent serious risks of accidents. Some indecision remains as to the The proposed pollution control strategy level of treatment which is desired, essen- tially whether it should be primary or secon- 10.53 The industrial pollution control dary. strategy is part of a broader sanitation pro- gram of the Rio das Velhas basin, which the 10.54 The graph in Figure 10.1 illustrates Bank is helping to finance. In addition to the expected impacts in terms of improved expanding and upgrading the collection water quality under primary and secondary network, two sewerage treatment plants are treatments. The Bank has recommended to be located in each of the two major con- that some economic analyses be made in tributors - Ribeiroes do Arrudas and Onca. order to estimate the potential benefits under Industrial discharges would be allowed in the two scenarios: even a primary level of the sewage system as long as they comply treatment might be economically hard to Brazil: Managing Pollution Problems - Annexes 185 Table 10.8: Total Pollutant Loads From Domestic And Industrial Sources Domestic 118,431 92.5 5,871 99.1 0 0 0 0 6.16 96.1 Industral 9,620 7.5 54 0.9 75 100 378 100 0.25 3.9 TOTAL 128,051 100.0 5,925 100.0 75 100 378 100 6.41 100.0 (Source: PROSAM 1996) justify. This is essentially because once the be focused on industries rather than munici- Rio das Velhas leaves the Belo Horizonte palities. As discussed previously, the reason Metropolitan Region, there is extremely low is that industry's abatement costs are much population density and limited economic lower, in addition to the fact that controlling activity. The 1996 projected population of and regulating industries is easier (lower the 23 downstream municipios together is transaction costs) than municipalities. 974,640: however, only 93,255 live in rural areas served by the river. 10.57 Apart from the emissions from the two major industries - Mannesmann S/A and 10.55 Fundacao Joao Pinheiro has pro- Cia. Belgo Mineira - all industrial effluents duced an extremely rough estimate of the could be discharged into the sewage system potential health benefits associated with the with simplified pre-treatrnent processes implementation of the two treatment plants without disrupting the system. The corre- in terms of reduced incidence of water- sponding tariff would be lower than for each related diseases, and has found an annual industry undertaking comprehensive pre- benefit of only US$ 610,000 (no details are treatments of its own effluents and paying a provided on the methodology and how the discharge fee with reduced pollution loads. calculations were made). Potential benefits Mannesmann and Belgo Mineira must do a include utilization of the sludge in agricul- more comprehensive treatment of their ef- ture, reduced cost of drinking water treat- fluents. ment or water supply from more expensive sources, increased water use in agriculture 10.58 In the strategy being considered by and industry at a perhaps lower cost, various the government, priority has been given to recreation and amenity benefits (bathing, the 32 industries with highest total emissions sports), reduced incidence of water-borne of major pollutants (Table 10.9). However, diseases, additional fisheries production, and the one aspect which has not been consid- increased ecosystems production. Even un- ered is cost-effectiveness. The list was se- der the most "generous" assumptions, the lected based exclusively on loads, but are estimated benefits have to be compared with the costs of controlling unit pollutant levels investments ranging from US$ 45.4 million necessarily the lowest possible? And how (low case scenario of primary treatment in do costs compare among these 32 indus- both plants) to US$ 135 million (high case tries? scenario of secondary treatment), and an- nual operating costs between US$ 3.1 to 10.59 Information contained in the gov- 11.2 million. Such costs are to be financed ernment financed study has been used to by increases in domestic water and sewerage estimate the (operating) costs of each of the tariffs of about 25-30% plus adjustments in 32 priority industries to abate 1 kg of each industrial tariffs. major pollutant - COD, Suspended Solids and Heavy Metals, in addition to volumes. 10.56 With regard to industrial emissions, Since the proposed control is not made for it is legitimate to ask why attention should each specific pollutant, but rather for total 186 Brazil: Managing Pollution Problems - Annexes Figure 10.1: Rio das Velhas Water Quality Water Quality of Rio das Velhas Under the Proposed Project 9 E8 0 0 0, o 01 0 < < U) co S e 0) t N 1 N C Un O LO LO( 0 v ye _ ---- 60,000 2 ~ * X - / 30,000 n n 0 205210215220225230235238240243245247250253260265267268275280385 0 Monitoring station Median dissolved oxygen Median fecal coliforms 11.2 The primary environmental prob- ter the ocean and, in some cases, for many lems in Pernambuco concern the poor qual- kilometers upstream. In particular, levels of ity of water in the lower reaches and estuar- fecal coliforms are extremely high and dis- ies of its rivers, especially those which pass solved oxygen levels are frequently less than through Recife metropolitan area. Many of 2 mg/l. the rivers in the coastal zone of the state are grossly polluted at the point where they en- 11.3 Figures I 1 .1-1 1.6 show the results Figure 11.4: Water Quality--Ipojuca River Water quality in the Ipojuca river Dissolved oxygen (mg/I) Fecal coliforms (N per 100 ml) 10 100,000 8 _ A 80,000 6 - 60,000 4 \ A t 0 f \ -0 / < 40,000 2 20,000 O O 205 207 210 215 220 225 232 240 245 250 255260 264 265 270 275 280 285 290 295 Monitoring station Median dissolved oxygen Median fecal coliforms 204 Brazil: Managing Pollution Problems - Annexes Figure 11.5: Water Quality--Jaboatao River Water quality in the Jaboatao river Dissolved oxygen (mg/I) Fecal coliforms (N per 100 ml) 10 200,000 8 - - -t A 160,000 6 . 1tS 47 \t t .- A A 120,000 4 --- - ---- 8 - -- 40,000 2 \ t\.- --- . 40,000 125 205 210 215 220 255 322 330 335 340 341 345 350 355 375 Monitoring station Median dissolved oxygen Median fecal coliforms of water quality monitoring for 6 of the most 11.4 Comparison of the Beberibe and important rivers in the Atlantic littoral re- Capibaribe rivers shows the impact of urban gion of the state. The Goiana, Capibaribe, discharges of sewage. For most of its and Ipojuca rivers extend a moderate dis- length, the Capibaribe river has low levels tance inland, whereas the Beberibe, of fecal coliforms and dissolved oxygen in Jaboatao, and Piripama rivers are short excess of 6 mg/I. However, as it passes coastal rivers. The graphs plot the average through the Recife metropolitan region -- of annual median values for 1987-95. An- monitoring stations 277 and higher -- the nual median values were used because the level of fecal coliforms exceeds 20,000 per annual averages for some monitoring sta- 100 ml at most stations and the level of dis- tions are heavily influenced by one or two solved oxygen falls below 6 mg/I. Indeed, extreme values. These are usually the result the oxygen demand of discharges is so high of heavy discharges of BOD from sugar that the river becomes completely anoxic for factories during their peak operating sea- some distance. The same pattern is even son.2 more exaggerated for the Beberibe river, most of which lies within the Recife metro- politan region. At 8 out of 13 monitoring 2 Note that the monitored values of fecal coli- stations the level of fecal coliforms exceeds forms were censored at 160,000 per 100 ml, 80,000 per 100 ml, while the level of dis- so that this value means that the actual value solved oxygen is below 2 mg/l at 5 moni- was greater than or equal to 160,000 per toring stations. For certain periods of the 100 ml. This censoring only affects a small proportion of the annual median values - -- tespcally between Januarytand Ma -- the aualit of water in some stretches of e.g. station 330 on the Bebenbe river, and q Ba stations 255 and 322 on the Jaboatao river -- the Beberibe and Jaboatao rivers is little so that the downward bias should not be better than somewhat diluted sewage. large. Brazil: Managing Pollution Problems - Annexes 205 Figure 11.6: Water Quality--Piripama River Water quality in the Piripama river Dissolved oxygen (mg/1) Fecal coliforms (N per 100 ml) 10 75,000 8 - -- - - 60,000 6 _- __-- ----. _V 45,000 4 _ v <^30,000 2 --. ..... ........ . ................. 1051652102152202252302352402452502553603683703753800 Monitoring station Median dissolved oxygen Median fecal coliforms 11.5 However, the costs of such poor alternative water supplies or to provide water quality may be quite low: more extensive treatment will again be very small. - With the ocean so near, the amenity value of the rivers for recreational pur- * What is left is the amenity cost of hav- poses is low. There is a risk that tidal ing rivers and -- even more important -- movements and ocean currents may canals that carry pollution to the rivers carry the pollution to-the main bathing which smell and are simply unpleasant beaches. This question is addressed in to be near. This cost is certainly not more detail below. zero and could be substantial. Still, more evidence on willingness to pay for * The productive value of the tidal river this amenity benefit of reducing pollu- basins (Jaboatao, Pina & Teijipio) -- for tion would be required before it would both fish and shellfish -- is almost zero be reasonable to conclude that such because of current levels of pollution. costs can justify extensive programs to This has clearly affected the income of improve water quality. those who have previously relied upon such fisheries, but with ample other 11.6 Evidence from other countries in fisheries along the coast the economic broadly similar circumstances -- e.g. Philip- cost will be modest (relative to the po- pines -- suggests that willingness to pay to tential costs of cleaning up the basins). improve the quality of bathing waters and for the general amenity benefits of cleaner * Since the most polluted sections of the rivers is rather low. However, tourism is an rivers are tidal, there would be no ques- important source of income for Recife and tion of using their water for drinking neighboring municipalities, so that protect- water or industrial consumption. Thus, ing bathing beaches is a major concern for any losses arising from the need to seek them. 206 Brazil: Managing Pollution Problems - Annexes Figure 11.7: Quality Of Bathing Waters Quality of bathing waters % of observations < coliform standard 100 80 PAL_40 0LD_97 OLD_60 OLD-20 REC-70 REC_30 JAB-70 JAB_30 PAL_20 OLD-80 OLD-40 REC-90 REC_50 REC_10 JAB 50 JAB 10 Beach monitored Average 1985-90 Average 1991-96 11.7 Figure 11.7 shows the proportion of 11.8 Comparing the averages for 1985- weekly samples of bathing waters which 90 and 1991-96 suggests that the influence meet the standard for coliform levels (less of polluted rivers on the quality of nearby than 1,000 per 100 ml) for beaches in the bathing waters has increased. This is par- Recife metropolitan area. The solid line ticularly marked in Jaboatao for which there gives the average of annual percentages for has been a statistically significant deteriora- 1991-96 and the dotted line the average for tion in bathing water quality for 5 out of the 1985-90. The municipalities are identified 8 beaches monitored. The population of the by the suffixes PAL for Paulista, OLD for municipality is growing rapidly as a result of Olinda, REC for Recife, and JAB for industrial and suburban residential devel- Jaboatao, while the beaches monitored are opment. At the same time, many new hotels listed from North to South. The results have been built or are proposed, so that the show that the quality of the bathing waters municipality's income from tourism is also along the main tourist beaches from rising. Clearly, measures to protect the REC_70 to JAB_30 is reasonably high. bathing waters used by tourists from further Olinda's beaches are not so clean, though deterioration are required. In the short run, the worst spots, OLD_30 and OLD_20, are this may involve the separation of tourist located close to the mouth of the Beberibe facilities from the main sources of pollution. river. The influence of heavily polluted riv- In the longer run, the key to keeping ers can be seen in the poor or very poor beaches clean lies in the development of quality of bathing waters in Paulista, the sewer networks accompanied by either northern beaches of Recife close to the port wastewater treatment or the construction of and the Pina basin (REC_90 and REC_80), a satisfactory submarine outfall. and in Jaboatao near the mouth of the Jaboatao river (JAB_1 0). Brazil: Managing Pollution Problems - Annexes 207 SOURCES OF WATER POLLUTION suspended solids, the comparable figures are 914 TPD in total, of which almost 67% 11.9 Estimates of total discharges of comes from the sugar industry alone with BOD and suspended solids by municipality non-sugar industries accounting for another and river basin have been prepared. These 3% of the total. For practical purposes, are based on: controlling water pollution is a matter of dealing with emissions from the sugar in- * population data and proportions of dustry and from domestic sources. households with sewer connections, septic tanks, and no sanitation from the 11.12 Barely one million people -- about 1991 Census; 20% of the urban population -- have sewer connectionis in Pernambuco. The section on * the database of pollution sources main- the benefits of expanding coverage of water tained by the state environmental and sanitation showed that investments to agency CPRH; and ensure that all of the urban population of the state has access to sewers would save over * data on industrial employment supplied 140,000 DALYs per year at an average an- by IBGE which was used to prepare ini- nualized cost of about $1 100 per DALY tial estimates of pollution loads using saved. Thus, it is worth examining what the IPPS database. would be the increase in the amount of pol- lution discharged into the state's rivers if 11.10 The information in the CPRH data- sewer networks were expanded to cover the base is limited to estimates of potential and entire urban population without any increase actual emissions of BOD for major plants, in the amount of sewage that is treated. but this was sufficient to scale the estimates derived from the IPPS database. The most 11.13 Under this scenario, it is assumed important adjustment concerned the sugar that local sewer networks simply discharge processing industry. In this case it was nec- into canals or directly into rivers, as is essary to impute values of actual emissions largely the case now. Consequently, there for approximately one-half of the plants in would be a significant increase in the pollu- the CPRH database by using the actual to tion loads which reach rivers. Much of the potential pollution ratios for plants of similar BOD and suspended solids currently dis- capacity. All of the emission estimates are charged to septic tanks and in the open is expressed in tons per day, because there are effectively treated by soil filtration and soil wide variations across industries in the bacteria. With 100% access to urban sew- number of days per year that plants operate. ers, the total loads of BOD and suspended For example, most sugar plants only operate solids would increase to 524 TPD and 1006 150 days per year. Thus, the figures present TPD respectively, corresponding to in- a picture of pollution loads when all plants creases of 25% and 10% on the current to- are operating. tals. Domestic sources would account for 70% of the total load of BOD but still only 11.11 This approach yields an estimate for 37% of suspended solids. total emissions of BOD from domestic and industrial sources in the state of about 418 11.14 Table 11 .1 provides a more detailed tons per day (TPD), of which 261 TPD breakdown of discharges under the two sce- (62%) comes from domestic sources and narios by river basin. For the purpose of 157 TPD from industrial sources. The sugar this analysis, the small littoral river basins industry accounts for 140 TPD or nearly have been combined with their larger neigh- 90% of industrial discharges of BOD. For bors. The main sources of data are organ- 208 Brazil: Managing Pollution Problems - Annexes Table I 1.1: BOD Loads By River Basin And Source P 6; r l ' "'-' g :E4S@Disharge of BD intonis per day ;X Gosana 54.2 32.9 2.3 30.6 41.3 Capibanibe 10.8 3.9 9.9 135.5 196.5 Ipojuca 24.0 17.0 1.7 19.5 29.0 Sirinhaem 34.0 23.7 0.1 5.7 8.3 Una 17.2 17.2 0.1 19.8 27.5 All inland basins 0.2 0.2 2.1 49.9 65.2 Total 141.0 95.1 16.2 261.0 367.8 ized by municipality, so each municipality discharges. To illustrate what would be the has been assigned to the river basin which level of discharges if all sugar plants came accounts for the largest proportion of the closer to the performance achieved by the area of the municipality.3 As a result, better plants, the second column of the table Olinda (Beberibe river basin) was combined gives the level of emissions from the sugar with the Capibaribe river basin as also were industry if all plants were required to re- Jaboatao dos Guarapes (Jaboatao river ba- move at least 90% of the BOD in their raw sin), and Sao Lourenco da Mata. This wastewater. This would reduce total dis- meant that almost all of the Recife metro- charges by a little over 45 TPD without im- politan region -- with the exception of Mo- posing substantial costs on the industry. reno and Paulista (both in the Goiana river basin) -- was included in the Capibaribe 11.16 In the Capibaribe basin, as well as river basin. Hence, the Capibaribe basin inland river basins, at least 90% of the total accounts for over 50% of domestic BOD BOD loads comes from domestic sources. It discharges under both the domestic scenar- follows that different kinds of pollution ios. management strategies will be required in the various river basins. Combining the 11.15 The figures show that the sugar in- earlier analysis of water quality with the dustry is the largest source of water pollu- estimates of sources of pollution suggests a tion in the Goiana, Ipojuca, and Sirinhaem. broad classification with some initial con- This would remain true for the Goiana and clusions for the focus of management poli- Sirinhaem basins even with 100% coverage cies: of urban sewers. Many of the smaller sugar plants remove less than 80% of the BOD in * Category 1: Capibaribe and inland their raw wastewater, whereas the best river basins. Water quality is largely plants remove 95% of potential BOD emis- determined by pollution from domestic sions, largely by using most of the molasses sources. The share of domestic sources and bagasse that they generate as fertilizers will increase as sewer networks are ex- or fuel, but also by treating their wastewater tended. The crucial issue is to evaluate the benefits of treating sewage that is 3 This assignment was carried out using data collected, largely in terms of the im- on hydrographic basins in the Annuario Es- provement in amenity and protection of tatistico de Pernambuco 1992, pp. 33-35. tourist facilities, against the alternative of continuing to rely upon rivers as Brazil: Managing Pollution Problems - Annexes 209 natural treatment systems. Low cost primarily a problem of reducing emis- measures to reduce emissions from in- sions from the sugar industry. Unfortu- dustry should be adopted where avail- nately, the improvement from enforcing able, especially with respect to dis- the minimum 90% BOD removal stan- charges containing heavy metals and/or dard would only reduce emissions from toxic chemicals. In practice, this im- sugar plants in the basin to just under 24 plies an emphasis on industrial pre- TPD. Thus, the question is whether the treatment rather than biological treat- cost of relatively expensive controls to ment. Further, insistence that all sugar reduce emissions from sugar plants yet plants remove at least 90% of the BOD further can be justified in terms of the that they generate would reduce emis- benefits generated. Water quality is ex- sions of BOD from this industry in the tremely poor in some stretches of the Capibaribe basin to no more than 3.9 river -- notably at station SI 2-02 and TPD. between stations SI 2-20 and SI 2-25 -- and readings of fecal coliforms are sur- * Category 2: Goiana, Ipojuca, and Una prisingly high along most of the river. river basins. Currently, the sugar in- There might be a case for considering dustry is responsible for the largest some form of wastewater treatment for share of BOD loads, but this will be the town of Ribeirao, and perhaps for matched or overtaken by domestic Sirinhaem too. However, in general, it sources as sewer networks are extended. is likely that further reductions in both Discharges from sugar plants cause high industrial and domestic discharges in peak levels of pollution, especially when this basin beyond those permitted by river flows are low during the dry sea- low cost measures will have a relatively son from October to March. Manage- low priority. ment strategies for these basins should be selective, focusing on reducing peak 11.17 There are a small number of plants levels of BOD and/or coliforms both in the metallurgy sector -- largely based in over the year and along the length of the the municipalities of Itapissuma, Recife, rivers. Priority should be given to loca- Jabaotao, and Cabo -- whose potential dis- tions where pollution has a clear eco- charges of toxic heavy metals are a matter nomic impact, either by increasing for some concern. These plants should also treatment costs of water for industrial or be the focus of specific regulatory and en- municipal use that is abstracted from the forcement attention with appropriate moni- river or by jeopardizing the develop- toring of levels of heavy metals in their dis- ment of tourist or other activities. In the charges and in the receiving waters. longer term it will be necessary to treat more of the sewage that is collected in 11.18 Table 11.2 shows the costs that the larger urban areas in these basins, would be required to reduce BOD loads in though advanced primary treatment will each river basin by 50% for the scenario probably be sufficient for the next 20-30 under which the minimum requirement of years. Emissions from the sugar indus- 90% BOD removal is applied to all sugar try could also be reduced by about 21 factories, and that all urban households have TPD for the Goiana river basin if a access to sewers. In most of the river ba- standard of at least 90% BOD removal sins, the level of BOD removal exceeds 50% were enforced. since the cost curves are step functions as it is assumed that wastewater treatment plants * Category 3 : Sirinhaem river basin. In are always constructed to treat all of the this case, managing water quality is sewage collected in a municipality. Thus, 210 Brazil: Managing Pollution Problems - Annexes Table 11.2: The Costs Of Reducing BOD Loads By 50% In Each River Basin < :;' '''g'~Dmestic ouce industrial, s--rE-M;s Goana 6253 132 29.4 88 1 0.3 6 Capibanibe 1179 202 41.6 51 5 A1.1 63 Ipojuca 4719 71 15.3 78 1 0.39 Sinnhaem 14745 31 6.7 86 64 _ 37.0 38 Una 6134 86 18.9 82 0 0.0 1 All inland 1200- 96 20.4 - 2 0.3 basins 1930 1 Total - 617 132.3 _ == 73 39.8 the marginal cost shown in the table repre- Goiana basin, both because the total BOD sents the marginal cost of removing BOD load in the basin is large -- over 76 TPD -- for which the 50% target is reached or ex- and because sugar plants account for nearly ceeded. Note that these marginal costs are 45% of that total. Reducing BOD loads in very high for the Goiana, Ipojuca, Una, and the inland basin is relatively much easier. (especially) Sirinhaem basins. This is a Marginal costs differ across basins as a re- consequence of the relative balance between sult of wide variations in the urban popula- industrial and domestic loads in these ba- tions of municipalities which affects average sins. Moving from 90% BOD removal to treatment costs because of the economies of 95% or even 98% removal can be very ex- scale in building larger treatment plants. By pensive for sugar plants -- for example, in comparison witlh Goiana for which an in- the Sirinhaem basin a total investment by vestment of $132 million is required to re- sugar plants of $64 million would be re- move 38 TPD, the total investment for the quired to meet the target. Thus, it may be inland basins would be $96 million to re- more cost-effective to meet the overall tar- move 34 TPD, which is about 20% lower get by opting for a higher level of treatment per TPD. for domestic wastewater. In practice, high marginal costs are a signal that the target of MUNICIPAL WASTEWATER TREATMENT IN 50% load removal may be unreasonable for THE CAPIBARIBE BASIN these river basins. 11.20 In terms of costs and potential im- 11.19 A total investment of about $620 11.19 A totral tment of aout $620 pact, the most important questions of envi- million for the treatment of domestic a ronmental management in the state revolve water would berequired aspart of an overall around the level and extent of municipal strategy to meet the target for each basin. wastewater treatment in the Recife metro- The Capibaribe basin accounts for the larg- politan region and, more generally, the est share of this total, so the costs of reduc- Capibaribe river basin. In analyzing this ing BOD discharges from domestic sources issue, it is appropriate to assume that the in this basin are examined in more detail investments required to achieve 100% urban below. Costs will also be large in the coverage of water supply and sewers in the Brazil: Managing Pollution Problems - Annexes 211 Figure 11.8: Marginal Cost Curve For Domestic BOD Removal--Capibaribe Basin Marginal cost curve for domestic BOD removal in Capibaribe basin Marginal cost per tonne of BOD in $ 10,000 8,000 6,000- 4,000 / 2,000 l 0 40 60 80 100 120 140 160 180 200 Total amount of BOD removed in tpd region will be made as rapidly as resources curve is relatively flat up to the removal of permit. If it is thought that financial con- about 135 TPD with marginal costs in the straints imply a real trade-off between range from $1,100 to $2,000 per ton re- spending money on expanding urban water moved. Thereafter, the marginal cost curve and sewer networks and investing in waste- becomes increasingly steep with marginal water treatment, then the choice should be costs in excess for $4,000 per ton removed simple. Absolute priority should be given to if the target were to reduce total discharges ensuring that all urban households have ac- in the basin by more than 175 TPD. cess to piped water supplies. Thereafter, the extension of local sewer networks should 11.22 Two options dominate the measures have priority. Only when these goals have that would be implemented in the lower been (almost) met should attention turn to portion of the marginal cost curve. The wastewater treatment. As an alternative, if a main one is advanced primary treatment decision were made to split up COMPESA with relatively high doses of chemicals to and to invite proposals for privately fi- remove BOD, suspended solids, and phos- nanced and operated concessions in the met- phorus. The analysis is based on the as- ropolitan region, there should be no such sumption that this treatment option would trade-off and network expansion could pro- remove 70% of BOD and 90% of suspended ceed in parallel with investments in treat- solids. In fact, the preliminary results of ment plants. experiments currently under way in Sao Paulo and Rio de Janeiro suggest a combi- 11.21 Marginal and total cost curves for nation of ferric chloride and a polymer at the removal of BOD from domestic sources lower dosage rates would produce almost as in the Capibaribe river basin are shown in good results (60-65% BOD removal, > 90% Figures 11.8 and 11.9. The marginal cost TSS removal) but with lower investment 212 Brazil: Managing Pollution Problems- Annexes Figure 11.9: Cost Curves For Domestic BOD Removal--Capibaribe Basin Cost curves for domestic BO D removal in Capibaribe basin Annualized cost in $ million per year Investment cost in $ million 140 700 120 - 600 100 500 80 -400 60- -300 40 200 20 1 00 0 0 40 60 80 100 120 140 160 180 200 Total amount of BOD removed in tpd Investment cost Ann ualized cost and operating costs.4 The higher removal ban sewers -- by about 125 TPD. Of this rate for suspended solids would permit dis- total, almost one half would be accounted infection of water discharged from the for by the treatment of all sewage collected plants -- by chlorination or ultra-violet in Recife -- rather than the small share that treatment. This would deal with the very is currently treated. poor bacteriological quality of water at many points in the basin and improve the 11.23 The second option that falls in the quality of bathing waters that are currently lower part of the marginal cost curve is the affected by pollution loads in various rivers. installation of septic tanks in villages and The implication is that the marginal and to- semi-rural communities. Quite apart from tal cost curves presented probably overstate the reduction in BOD loads, this may yield the costs associated with advanced primary significant health benefits, though -- as dis- treatment. If all municipalities with urban cussed in Annex 2-- the epidemiological populations of 20,000 or more in the basin evidence on their size is ambiguous. were to rely upon advanced primary treat- ment for the sewage that is collected in their 11 .24 The cost of building advanced pri- urban areas, then this would reduce dis- mary treatment plants capable of treating all charges -- assuming 100% coverage of ur- of the sewage that would be collected in municipalities with an urban population of at least 20,000 would be about $270 million 4 This is because the addition of a polymer to with an annualized cost of about $55 million the salt greatly reduces the settling time of per year (assuming a real interest rate of solids in the settling basin, which allows for 12%). Dependin on the size of the munici- a much higher overflow rate. This translates pa). tphi wo translae tof cthe mnc- into a reduction in the number (or size) of pality, this would translate to a cost of $18- settling basins required to treat a given flow 25 per person per year. Such a sum is not of sewage, thus lowering the investment and trivial for a state whose average income per operating costs of the plant. person is about $1800, but it is not totally out of reach. By comparison, the cost per Brazil: Managing Pollution Problems - Annexes 213 person of advanced primary and biological and/or projects for Fortaleza, Rio, and San- treatnent (the only other efficient treatment tos suggest that an outfall with 6-8 km under option in the least cost analysis) would be the sea, 10 km of trunk sewer, and pumping approximately double that for advanced stations might cost $100-120 million. This primary treatment alone for an increase in would be the additional cost on top of the the amount of BOD removed of about 35%. cost of interceptors and trunk sewers that would be required to transport sewage to 11.25 There is one other option which treatment plants. This is about 60% of the should be considered for the coastal munici- investment cost of building advanced pri- palities in the Recife metropolitan region. A mary treatment plants for Recife, Jaboatao, submarine outfall could be constructed to and Olinda. Since operating costs would be discharge all of the sewage collected in the low, the annualized cost of this option metropolitan region at a sufficient distance would be about one half of the annualized away from the shore. Submarine outfalls cost of advanced primary treatment plants. have often been controversial because they have been poorly located, too short, and 11.27 If a submarine outfall were to be badly built or maintained.5 Nonetheless, an seriously considered, the project should be outfall of 6-8 km in length built out from designed so as to permit the construction of Recife, Jaboatao, or Olinda could be a cost a primary treatment plant at the point where effective option, especially if provision were the interceptors link up with the main trunk made for advanced primary treatment and sewer carrying the sewage to the submarine disinfection before discharging the waste- portion of the outfall. In this way, it will be water from the outfall. Careful analysis of possible to add advanced primary treatment tidal and ocean currents is required before a at a later date -- either when the necessary location for an outfall is chosen in order to resources are available or if there are con- ensure that these do not carry pollution in- cerns about the impact of the sewage being shore, either close to the mouth of the outfall discharged from the outfall. or further along the coast. This approach is used in a nunmber of large cities including SETTING ENVIRONMENTAL GOALS San Diego and Australia and is planned for the suburban area of Barra de Tijuca in the 11.28 Drawing together the various Rio de Janeiro metropolitan region. strands of the analysis it is possible to iden- tify the main options for addressing the 112 Iti o osbe opoieago problems associated with water pollution estimate of the total cost of building a sub- from arious ates of sour pern marine outfall here since this will depend buco. upon location, sea-bed conditions, and other factors. However, data from detailed studies Sugar Industry 5 Leakage from the joints between sections of 11.29 All plants should be required to outfalls has been a problem for a number of achieve a minimum level of 90% removal of cities in Brazil including Santos in Sao BOD before discharging wastewater. It is Paulo and Rio de Janeiro. In part, this is a estimated that this would reduce total emis- problem of design because not enough at- sions of BOD from the industry by about tention was paid to the stresses experienced one third -- equivalent to 45 TPD. during storrns, but poor maintenance has also meant that problems were not identified and corrected quickly enough. 214 Brazil: Managing Pollution Problems - Annexes Other Industrial Sources plus advanced primary treatment for the other municipalities in the region. The im- 11.30 These account for about 4% of total mediate saving in investment cost would be BOD emissions in the state. As far as pos- about $70-80 million. In the longer termn, sible, plants should be encouraged to pre- the combination of a submarine outfall and treat their discharges of wastewater, par- advanced primary treatment for all sewage ticularly those in the metallurgical and metal would require about $100 million less in finishing industries. The adoption of low investment than advanced primary plus cost measures to reduce discharges of BOD biological treatment for all sewage and by plants in the Recife metropolitan region should result in better water quality both in will make a small contribution to improving river basins and along the coast. For rea- water quality in certain locations. Overall, sons of amenity and tourism, treatment of CPRH's relatively low key approach to sewage from Recife, Jaboatao, and Olinda regulating these sources seems entirely rea- should have priority over other municipal- sonable. ities in the region. Nonetheless, the case for giving equal or even greater priority to Urban Sewage Outside The Recife Met- treating sewage from these municipalities ropolitan Region rather than allocating more resources to the construction of sewers hias not been con- 11.31 The construction of advanced pri- vincingly made. To the extent that re- mary treatment plants in urban areas with sources for sanitation investments are lim- populations of more than 20,000 could be ited, priority should probably be given to considered once sewer networks have been sewers and a longer time scale adopted for completed. The total investment required to the construction of facilities to treat the sew- install such plants would be about $200 mil- age that is being or will be collected. lion with an annualized cost of $40 million per year. However, the benefits of this ex- OPTIONS penditure are not likely to be large except in places where discharges of sewage are hay- 11.33 But does a choice have to made ing a substantial localized impact on amen- between investment in water and sewer net- ity or on the use of river water for industrial, works and in sewage treatment? Under pre- agricultural, or other purposes. Except in sent institutional and financial arrangements, the few cases where earlier measures can be such choices cannot be avoided. The state justified, a time period of 1 0-1I5 years m ight government is not creditworthy and COM- be appropriate for meeting a target of ad- PESA does not generate a sufficient cash vanced primary treatment for sewage col- flow from its operations to finance the new lected in medium and large towns. investments required as well as to service debt incurred in m-aking past investments. A Urban Sewage In The Recife Metropoli- financial projection for the period 1996- tan Region 2055 envisages a total investment of about $615 million at 1995 prices. Even this is 11.32 Advanced primary treatment for all only feasible with a combination of conces- urban sewage in this region would involve sional loans and rather optimistic assump- an investment of at least $250 million and tions about operational performance -- given an annualized cost of $50 million per year. the company's past record. This level of One alternative would be to rely upon a investment would sufficient to: submarine outfall for sewage from the mu- nicipalities of Recife, Jaboatao, and Olinda Brazil: Managing Pollution Problems - Annexes 215 * complete the Piripama water supply * service targets of 98% access to piped scheme (about $200 million); water supply within 5 years; * achieve almost 100% access to piped * 40% coverage of sewers within 5 years, water supplies for the urban population increasing at 20 percentage points each of Recife metropolitan region (about 5 years thereafter up to a maximum of $275 million); and 90% with advanced primary treatment for all sewage that is collected from year * increase the number of households in 6 onwards; the metropolitan region with sewer con- nections by 180,000 (about $140 mil- * completion of the Piripama water supply lion) -- but with no investment in scheme within 5 years; and wastewater treatment. * construction of a submarine outfall for 11.34 However, since the population of Recife, Jaboatao, and Olinda within 5 the metropolitan region is growing at nearly years, and construction/rehabilitation of 3% per year, the investment program im- wastewater treatment plants to provide plies that the proportion of urban households advanced primary treatment for a sew- in the region without sewer connections age flow of 2 m3/s with the effluent be- would be higher in 2005 than it was in 1995. ing discharged to the submarine outfall. The logic of the situation is inescapable. Without a radical change, the State will have 11.36 These assumptions imply a heavy to chose between: investment obligation for concessionaires. Total investment in years I to 5 would be a) meeting the water supply needs of its about $920 million at constant prices, with a people, but allow sewers and wastewater further $470 million in years 6 to 10. Gross treatment to fall further and further be- cash flow will be negative for the first 5 hind the growth in its urban population; years of the concession. Nonetheless, the or concession could generate a satisfactory re- turn on capital over a 30 year concession b) investing more in sewer networks to period if tariffs are increased by 10% in real keep up with population growth, while terms from their 1997 level and held con- relying upon unspecified finance to ex- stant thereafter -- at the equivalent of pand reservoirs and water treatment R$0.77 per m3 for water and the same for plants with a corresponding increase in sewage at 1995 prices. tariffs to cover the sharp increase in bulk water costs. 11.37 The State Government would have to assume the debts of COMPESA relating 11.35 Neither of these options is attrac- to projects in the metropolitan region and to tive, nor would they be necessary if the fund severance payments to COMPESA State Government were to adopt a different employees laid off as a result of the transfer approach to the organization of water and of the company's metropolitan operations to sanitation services. As a very broad indica- a concession. There would be a small an- tion of what might be necessary, a simple nual lease paymen-t for the concession but financial model has been constructed for a this would not be sufficient to cover these private water concession covering the whole debts and transfer costs. Some combination of the Recife metropolitan region. The key of higher tariffs (e.g. a tariff increase of assumptions include: 20% rather than 10%), a longer time period for investments, or Federal/State guarantees 216 Brazil: Managing Pollution Problems - Annexes for concessional loans would enable these costs to be covered by the transaction as well. 11.38 The overall implication of this study is that the Government of Pernambuco does have to make a choice in formulating its goals for the water and sanitation sector with their resulting implications for the quality of life enjoyed by the state's population and their environment. However, this choice need not be one between competing quality of life or environmental goals. The intro- duction of private finance via the offer of a concession -- or even two concessions if the State wishes to promote some form of yard- stick competition -- for water and sanitation services in the metropolitan region of Recife would permit the investments required to meet these goals over a reasonable period of time. Thus, the choice is better seen as one between the costs of changing the State's role in the water and sanitation sector versus the costs of persisting with an entrenched but inefficient institutional structure. Brazil: Managing Pollution Problems - Annexes 217 12. LESSONS FOR POLLUTION MANAGEMENT FROM WORLD BANK FINANCED PROJECTS' SUMMARY OF ISSUES AND RECOMMENDATIONS :ISSUES: AND RECOMMENDATIONS:: Financing for industrial pollution control suffers from limited demand and dissipated environ- mental effects unless linked closely to specific environmental quality targets and enforcement programs. Sectoral projects (water and sanitation, transport, urban and municipal) can be potent instru- ments for improved pollution management if clear environmental targets are defined and close collaboration between environmental and sectoral staff in Government and the Bank is assured. Technical assistance is only effective if objectives are clearly defined and institutions enjoy nec- essary political support. Future Bank support would focus on: (a) economic approaches for priority setting and cost ef- fective strategies; (b) modernization of instruments, particularly the use of economic instruments in water basin systems; (c) integration of environmental aspects in sectoral policies and plan- ning; and (d) the participation of the private sector in pollution management. INTRODUCTION tion management policies as a central ob- jective: water quality projects and industrial 12.1 A number of World Bank projects pollution control projects.2 in the sanitation, urban transport, and mu- 12.2 The overall lessons drawn from this nicipal development sectors in Brazil indi- 12.2 are that lessons on rometly rectly improve environmental conditions. chapter are that the Bank has only recently Frectlyxmpl,rove en nmetayreduce exposure begun to address the brown agenda and that For example, projects mayreuexpse improvements in the policy environment to polluted water with expanded sewerage will require a continued dialogue, not only coverage and drainage infrastructure, reduce with envirental alogue, but with vehicle emissions from improved traffic with environmental authorities, but with patterns and maintenance and inspection sectoral agencies that regulate important programs, and improve the collection and pollution sources (notably sanitation, trans- disposal of solid waste. While many of port, and urban management). The chal- these projects also attempt to improve the lenges facing the Bank include: institutions and policies that govern each sector (transport, water supply and sanita- 2 A third group considered was the urban tion, municipal finance), few Bank projects transport projects (Rio Mass Transit; Belo have directly targeted the existing policies Horizonte Metropolitan Transport, Recife and tools for pollution management in Bra- Metropolitan Transport) which include a zil. The purpose of this chapter is to present component related to air quality manage- preliminary lessons from two groups of ment (vehicle inspection and maintenance projects that have targeted improved pollu- program and traffic studies); however, these projects are not yet approved or the relevant components have not yet been im- This paper was prepared by Laura Tlaiye. plemented. 218 Brazil: Managing Pollution Problems - Annexes * perseverance in promoting the policy tion made thus far by the projects and, to the instruments already introduced in proj- extent possible, determine the areas where ects under implementation (e.g., water the Bank can make an even greater contri- basin management in water quality proj- bution; and (ii) to encourage key ects); stakeholders in the current debate concern- ing the establishment of basin agencies to * selectivity in defining areas of assis- work towards fruition of the efforts made tance in sectors where Bank has strong- thus far and initiate integrated basin man- est leverage to introduce pollution man- agement. 1997 appears to be a critical year agement objectives, or in regions where for demonstrating commitment to basin impact is likely to be greatest and repli- management given that the legal and techni- cated elsewhere in Brazil; cal groundwork for basin management is or will be mostly concluded, and that extension * better integration of disciplines of staff of Bank projects is also being considered. working on infrastructure, municipal fi- nance, and environment to arrive at 12.5 Appendix 12.1 summarizes the more comprehensive though realistic status and lessons of the subcomponents of objectives and policy recommendations; these projects that are relevant to pollution and management. The Appendix and lessons are based on brief discussions with the project * more critically review the rationale of team and supervision reports and may not Bank involvement in projects with un- represent complete knowledge of the status clear objectives and small policy devel- of project execution. opment (e.g., industrial pollution control credit lines). Key Lessons 12.3 The following sections summarize The projects have helped catalyze the the key lessons learned to date from Bank debate about the establishment of basin projects that have attempted to introduce management in Brazil and have sup- pollution management as a key project ob- ported preparation of enabling laws at jective. The categories of instruments intro- the State level (example of Guarapi- duced by the projects can be classified in two areas: (i) water basin management in nga law deeoped udr the prjc urban areas; and, (ii) directed credit for in- brella" law). dustrial pollution control, including direct lending to polluters (e.g., CVRD). * The studies under the projects are con- tributing to a deeper understanding of LESSONS FROM WATER QUALITY water quality dynamics from a more in- PROJECTS tegrated perspective (relative contribu- tion of industry, agricultural run-off, 12.4 This section presents preliminary sewage discharges, and other diffuse lessons of the contribution of the Bank's sources) and are providing decision- ongoing water quality projects to progress in making tools previously not available water pollution management in Brazil (e.g., flood modeling in Parana). (Loans 3503, 3504, and 3505-BR for Sao Paulo, Parana, and the Paraiba do Sul fed- * The project team has introduced discus- eral component, and Loan 3554 for Minas). sion of the economic rationale of water The objectives of this section are twofold: treatment goals which is enabling more (i) stimulate discussion about the contribu- rational decisions (e.g., the original das Brazil: Managing Pollution Problems - Annexes 219 Velhas project proposed two secondary past interventions in Brazil failed to reverse treatment plants which has been debated the deteriorating water quality trends be- and reassessed). cause government action was fragmented and weak, and failed to address pollution * There is a continued need to incorporate issues from an integrated approach using the economic analysis in setting long-term natural ecosystem of a basin (or sub-basin) water quality objectives as is now being as the management unit. The Bank further done for the das Velhas basin (e.g., in- indicated that certain local constituencies troducing cost-effectiveness in load re- had expressed interest in organizing their duction targets). efforts at the basin level and that the Bank had selected those with the apparent highest * The actual setting of the long-term water level of commitment. quality targets ought to take into consid- eration the views of users, state and iia- 12.7 The following three issues deserve tional environmental restoration goals, furtlher exploration in assessing the progress and affordability of the investments; this made on these projects to date: exercise was started by projects but should be fostered when the basin agen- a) basin management implies a devolution cies are in place. of power to the local level (from federal to state in federal rivers) as well as a co- • Bank lending to the sanitation sector can ordination of functions; how willing are be an important lever to introduce in- water companies to devolve that power centives for improved pollution man- considering the position of other key agement when actively managed in that stakeholders (on the regulatory side, direction (e.g., the Bank is pushing SA- State Water Resources and Environment BESP to connect two large plants to the authorities; and on the user side, indus- sewerage network which reduces impact try and downstream users); on surface water quality). b) can the Bank more effectively leverage * The Bank needs to reassess the interests influence to facilitate the gradual nego- of stakeholders in each basin to identify tiation of interests among these groups? how best to channel lending as a catalyst for negotiations about the transfer of c) what are the constraints to a more effec- power from state to basin agencies. In- tive "brokerage" role for the Bank? Will stitutional evolution is likely to exceed the new Bank structure enhance this the life of these projects: will the Bank role? remain involved? 12.8 Now that the legal framework for 12.6 In developing these lessons, it is the establishment of basin agencies is in useful to remember the rationale for the place, or will be developed in 1997 (e.g., Bank's inclusion of water basin manage- framework federal law, umbrella law in Sao ment as an innovation for pollution man- Paulo, Minas law under revision, and Parana agement within sanitation sector investment law reaching at approval stage), political projects.3 The Bank's diagnosis was that agreement needs to be reached to make ba- sin management a reality. Thus, it may be 3 The sanitation investments supported under these loans were priority works in drainage, tempt here is to assess the synergy of sewerage, resettlement, etc. that justify the working with the sanitation sector to ad- sewerojets,on their own merits; thus, the atvance the agenda of pollution management. projects on their own merits; thus, the at-vacthagnao lutnmngen. 220 Brazil: Managing Pollution Problems - Annexes appropriate to analyze again the underlying need to be controlled, which leads to bu- incentives of each stakeholder in each water reaucracy in review and approval; basin in order to assess the Bank's role. For example, what negotiating position can the * bureaucracy in credit administration is municipal consortium in Piracicaba offer in clearly highlighted by beneficiaries as a discussions with the more state-led com- drawback of these programs (both in mittee? How do they view pricing and how BNDES's program and PROCOP); could the political gains be distributed among state and local representatives? * government administered credit suffered interference/interruption in the flow of 12.9 Finally, it is important to recognize funds irrespective of the program exe- that no major crisis or active constituency cution (PROCOP); yet exists to force the government to accept accountability for water quality improve- * because of low utilization, open-ended ments. Thus, the process of concentrating credit programs (state-wide in Sao accountability in basin agencies will take Paulo, national for BNDES's program) time (except when a "political champion" were justified on the basis of increasing assumes leadership, as in Ceara). The Bank the chances of credit utilization and eq- should establish interim benchmarks for in- uitably allocating the "benefits" of these stitutional reforms and remain involved programs, although this result has not through projects when feasible, sector work, been directly obtained; or dissemination activities. * when pollution control programs were LESSONS FROM INDUSTRIAL POLLUTION targeted and enforced (Cubatao, 1994 CONTROL PROJECTS state of Tiete), credit was effectively Credit Lines utilized and helped agencies prove that poolluters had "no excuse" but to invest 12.10 The main lessons drawn from Bank in pollution control; experience with two loans (loans 1822 and 2831) to Sao Paulo for the Programa de * long-term credit in Brazil carries finan- Controle 6 Poluiqdo (PROCOP) as well as cial risk that banks are unwilling to ac- the experience to date with a third loan to cept for the typical compensation paid BNDES for industrial pollution control are (2.5%) except for the most credit- as follows: worthy firms, for which they sell more profitable products -- this explains why * credit has tended to be underutilized beneficiaries of credit tend to be mostly mainly due to lax enforcement and ad- firms with annual sales above US$15 verse macroeconomic conditions (high million; and interest rates); * credit programs tend to become ends * except for firms with export markets cratherams for asisin enfc ratlier than means for assisting enforce- and sophisticated management, most ment for environmental quality objec- firms in Brazil perceive pollution con- tives. trol as an expense rather than as an in- vestment and will react only when the perceived penalty is greater than the ex- pense; * credit programs are difficult to admin- ister since unintended uses of funds Brazil: Managing Pollution Problems - Annexes 221 12.11 Despite the above lessons, a tar- be needed in such cases, includinig the envi- geted credit program or a Fund may be use- ronmental and liealthi benefits of such an ful when a clearly identified pollution prob- intervention. lem is associated with a set of creditworthy firms that could accelerate investments by Loans 1822 and 2831: Sao Paulo Indus- reducing financing costs with long-term trial Pollution Control Program - Phases credit. If the objective is to reduce pollution I and II and if important non-industrial sources can be credibly reduced simultanieously (firms 12.12 Since the early 1980's, the World are very aware of unfair blaming of indus- Bank has supported the State of Sao Paulo trial sources when the public sector does not Industrial Pollution Control Program (PRO- do its share in addressing domestic sources COP--a special project account of the Basic for organic loads in water and transport for Sanitationi State Fund-(FESB) thirough loans air pollution), credit may be justified even to 1822 and 2831). PROCOP is a good exam- large firms. The key is to choose credit only ple of a program that was originally moti- when targeted interventions are needed for vated by priority pollution problems but that specific objectives and when the benefits later lost its focus in an attempt to improve outweighi the administrative costs to the disbursements performance. The project government. If small and medium firms are was also adversely affected by government important pollution contributors (e.g., when interruptions in the flow of funids for reasons large numbers of small firms dispose of unrelated to the project. heavy metals and other toxic pollutants), a direct subsidy may be a more effective in- 12.13 The origins of PROCOP date to the strument. An economic justification would late 1970s when the Bank was preparing a Box 12.1: Bank Experience With Institutional Strengthiening Components For State Environment Agencies While a comprehensive evaluation of institutional strengthening components intended to support State Environment Agencies (SEPAs) in various projects (Water Quality loan for Minas, Espiritu Santo Water, certain components of NEAP, National Industrial Pollution Control Project) is not yet available, preliminary lessons from concluded and ongoing projects indicate the following results: * the financial support provided by these components represent a significant contribution to the investment budget of these agencies and represent, at times, the only source to build the as- set base (both human and capital) of these agencies; * a typical aspect that is neglected in designing these components is strengthening first the ca- pacity to administer resources, i.e., efficiently spend the allocated resources -- planning, budgeting, and procurement aspects should be addressed during preparation; * a clear definition of the specific policy objectives and associated functions to be strengthened tend to be missed, as well as the indicators to measure improvement; and . political support for the component's objectives is highly desirable; however, since priorities shift in political cycles, some portions of the component need to be flexible to respond to changing circumstances. The important question to ask after the studies have been completed, the computers have been installed, the staff's technical skills have been enhanced, etc. is how have these inputs changed this agency's performance? Some outcomes are easier to evaluate (e.g., faster information proc- essing capabilities provide more reliable and faster issuance of licenses) while others require de- cisions by policy-makers (e.g., the results of a study leading to changes in regulations). The ulti- mate outcome of these efforts often depends on the ability of project executors to elevate conclu- sions to political decision-making levels. This task is often times difficult and is a place where the Bank can make an important contribution. 222 Brazil: Managing Pollution Problems - Annexes sanitation project that would finance an control of additional pollutants (e.g., S02 early stage of SANEGRAN (the state of Sao emissions and toxic solid waste); and, (iv) Paulo's master plan for sewage collection simplifying procedures for approval and and treatment). PROCOP was thought to making subloan maturities more flexible. A provide the necessary financing for indus- highly motivated governor prioritized Cu- trial pre-treatment prior to discharge in batao as the target of CETESB's control about 400 companies and treatment at the efforts and signed a formal agreement with planned biological treatment plants. In the 22 most polluting firms. The increased 1977, Brazilian authorities requested that the public awareness, enforcement, and im- Bank expand PROCOP's scope to include proved local economy brought about in- financing for particulate matter pollution in vestment by these firms, which completed the rapidly deteriorating Greater Sao Paulo PROCOP I's commitments and disburse- Metropolitan Area (GSPMA). As finally ments. prepared, PROCOP's first phase (PROCOP I) constituted the first program in South 12.16 The particulate matter emission tar- America designed to control industrial pol- get for industry for the GSPA was met (al- lution in a highly urbanized metropolitan though the project only contributed 10% of area. Based on comprehensive inventories the reduction), but ambient concentrations of industrial sources, the project developed failed to improve due to contribution of 10-year strategy for reducing particulate other sources underestimated in the original matter concentration which averaged project studies (transport sector). The S02 130,ug/m3 (geometric mean) during the target in industrial emissions reductions was 1983-85 period to the standard of 80gg/m3. also met although the project only contrib- uted 8% of the reduction. In Cubatao, the 12.14 Despite the slightly favorable finan- project was responsible for 80% of the 186 cial terms of the subloans compared to ton/day reduction in dust emissions experi- credit programs for equipment purchases enced by the end of 1986 because industries available at the time, the loan encountered were the main source of pollution. Also, the very limited demand because of the lengthy incidence of emergency concentrations was review and approval procedures, the severe reduced from 6 to zero during the period recession affecting firms' credit-worthiness, 1982-86. and lax enforcement. The water pollution. control subprojects never materialized as the 12.17 This phase of the program left a SANEGRAN program was significantly pipeline of subprojects representing about scaled down and delayed. For firms, this US$77 million in investments, 70% of meant that the establishment of treatment which were accounted for by the then state- plants was highly uncertain and; if the pub- owned entity, COSIPA. The Bank's second lic sector was not investing in controlling loan for Sao Paulo's PROCOP was justified domestic sources of pollution (for Tiete they on the basis of this pipeline, although no account for 70% of organic load), why credit-worthiness analysis had been done for should they invest in pre-treatment facilities. the identified pipeline, and the risk of CO- SIPA becoming ineligible by debt exposure 12.15 In view of the limited disburse- limits to State banks already under discus- ments, the project was restructured in 1984 sion at the time was not fully taken into ac- by (i) reducing the loan size, (ii) increasing count. The loan was approved in 1988, but the share of project costs that the Bank became effective in 1990. It's implementa- could finance to 50%; (iii) opening the tion was problematic from the start. The credit to the entire State, including the initial stages did not confirm the demand highly polluted region of Cubatao, and for that had been projected mainly because of Brazil: Managing Pollution Problems - Annexes 223 the high recession in the country until 1992, 12.20 After two one-year extensions of the and CETESB's institutional instability closinig date, the loan was closed on June 30, which reduced its focus on enforcement. 1996, with about US$4.1 million undis- The approval process by both the Bank and bursed and was rated unsatisfactory in im- CETESB was also lengthy. plementation performance by the Bank. The positive side of PROCOP was the institu- 12.18 The subsequent phases suffered tional development component for CETESB from interruptions in the flow of funds be- of US$5.2 million (not so for the Federal yond the control of CETESB and the Bank. government which was canceled in mid- As in the first phase, the loan was guaran- 1994). CETESB used these resources to teed by the federal government and the train its personnel, to conduct research proj- funds flowed from the World Bank through ects which led to development of new BNDES (the federal government's interme- norms, and to establish a new air quality diary), Sao Paulo's Secretaria da Fazenda, monitoring network. In addition, the credit and BANESPA, which disbursed the funds program provided CETESB recurrent funds to final borrowers. New regulations re- (1% of the outstanding debt) to invest in stricting state bank exposure to debt from special projects, including telecommunica- state-owned enterprises eliminated COSIPA tions and computing equipment. Indirectly, as a potential borrower from BANESPA. In polluters have paid the agency for part of the addition, Sao Paulo became ineligible for administrative costs of the program. PRO- federal transfers in 1991-92 period whichi COP has a balance today of about US$21 meant that BNDES (the federal government million and CETESB is evaluating how to intermediary for this loan) interrupted dis- best allocate these resources. bursements to BANESPA. 12.19 During these periods, CETESB and Beneficiary Assessment of PROCOP II BANESPA stopped promoting the program Program because it was uncertain when the transfers 12.21 During the months of November would be resumed. Once the interruption and December of 1996, the Bank contracted was lifted, commitments had to reach 100% a . ' of the loan amount by the end of 1993 acosligfrtonevew6pluig of the loan amount by the end of 1993 firms in Sao Paulo and assess the usefulness which meant that CETESB actively wenti of the PROCOP II program from the per- after loan applicants (not so much enforce- spective of beneficiaries. In addition, the ment drove them to PROCOP although this Bank was interested in drawing conclusions did occur for firms in the Tietd basin where for the effectiveness of directed credit as an enforcement began to be costly). A new instrument for pollution management. The difficulty related to the transfer of funds oc- curred in 1994. The State's liquidity crisis specific goals of the assessment were to motivated an temporay rheStentionif transfes conduct a with/without credit comparison of motivated a temporary retention of transfers (athminoivinsfrnetngn fromBNDS; manwileBANESPA was : (a) the main motivations for investing in from BNDES; meanwhileB NS pollution control; (b) how PROCOP 1I com- instructed to use PROCOP's own fund to pared with other financing sources; (c) cover the retained funds. The Fund was -whether credit made any measurable differ- nearly depleted by the end of 1994. When eiice in iiivestmeiit decisioiis; and (d) how the new administration took office in 1995, beneficiaries of PROCOP evaluated the im- transfers were normalized and the Fund was reimbursed to its original level. However, many subprojects had been canceled either 12.22 Sample Composition. The sample because firms used other financing sources consisted of two groups of 30 firms each: or because they postponed their projects. 224 Brazil: Managing Pollution Problems - Annexes PROCOP-participants and non-participants. present a technical project, 2 were re- A participant was defined as a firm that pre- jected at the Carta stage). sented a technical project to CETESB,4 and the sample was arranged so that interview- This group was selected in part from ees could report their opinions about the CETESB's list of polluting firms (from re- different stages of approval, including a per- gional control offices) and at random within spective from firms that applied for credit the same industrial subsectors (namely gal- but did not ultimately obtain approval. vanoplasty/metallurgy, sugar/alcohol, tex- tiles, fertilizers/agroindustry, and chemical). 12.23 Thus, the first group of 30 PRO- In addition, the entire set of 60 firms were COP-participant firms was comprised of: classified into small, medium, and large ac- cording to annual sales volume as shown in * 15 firms that received loans from PRO- Table 12.1. COP (out of a total of 61 firms); Table 12.1: PROCOP II Assessment * 15 firms that were rejected (3 in the Study Participants technical review and 12 in the financial Firms Annual hNumberof Numberof review stage). SalePROCQP J i No- (S$ mfillions) Particpants Priiat This first group was selected mostly on the Large: over 50 20 6 basis of availability of firm staff that could Medium: be- 5 18 tween 50 and recount the firm's experience with the 5 PROCOP 11 (1988-96). Small: less 5 6 than 5 12.24 The second group of 30 non- participants consisted of: 12.25 The sample of the two main groups did not exactly match the distribution by * 22 firms that did not approach PROCOP size. This was not possible primarily be- at all; cause of the difficulty of finding interview- ees that knew about the program during the * 8 firms that had some contact with period of the survey, and finding firms that PROCOP (2 requested but did not sub- did not participate in PROCOP II willing to mit the Carta Consulta, 4 passed the take the time for the interview. Carta review by BANESPA but did not 12.26 Main Motivating Factors for In- vesting in Pollution Control. The majority 4 A firm interested in obtaining a loan from of firms in both samples (83% of interview- PROCOP had to: (a) present a Carta Con- ees) ranked CETESB's enforcement action sulta, a brief profile of the project and the as the principal motivating actions for in- firn's financial aptitude to qualify for a vesting in pollution control. In particular, a loan, (b) once passing this screen, the firm group of firms located within the area of hired consultants or prepared the technical influence of the Tiete clean-up project re- project for presentation to CETESB; (c) ported that CETESB's stringent enforce- with CETESB's approval (judged using ment action required, in their opinion, best available technology and lowest cost shorter compliance timetables for industry technology criteria), the firm's application than it took to obtain a loan from PROCOP. was passed to BANESPA for credit- . . worthiness evaluation, (since 1994 this step This is an interestng lesson about the dis- included compliance with all forms of taxes connect between enforcement actions and and social contributions). the credit instrument, which in part may be Brazil: Managing Pollution Problems - Annexes 225 explained by the appendix nature of PRO- scale, small firms participating in PROCOP COP lI in CETESB's organization (formerly 11 ( 2 of 5) invested more than the $100,000 linked to the Presidency, later as dependent minimum, whereas all of the small non- on Administration and quite separated from participating firms invested below $100,000. enforcement functions (see implementation Medium firms in both groups appear to be feedback below)). equally distributed by investment scale. Although the sample size is small and fur- 12.27 A secondary motivating factor cited ther segmentation may render these numbers by firms in both samples was the existence of even smaller statistical significance, the of an environmental corporate policy (about conclusion that credit facilitated larger in- 40% of respondents in both samples) al- vestments in larger firms is intuitively con- though this was more evident in the larger sistent. In the absence of credit, small firms firms. prefer to invest the bare minimum when faced with CETESB's enforcement actions. 12.28 Comparison of PROCOP II with Other Financing Sources. Firms were 12.30 Feedback from Beneficiaries on asked to compare PROCOP II to four other Implementation Performance. Overall, main financing sources: own resources, 13% of participating firms evaluated PRO- other government credit lines, private banks, COP II as highly satisfactory, 50% as satis- and export credit from foreign banks linked factory, 15% as less than satisfactory, and to equipment purchases. The main advan- 20% as not satisfactory. The participation tages of PROCOP II cited were its longer process, from technical review to disburse- grace and loan repayment periods and the ments, was ranked by these interviewees. technical assistance provided by CETESB. Firms representing 49% of respondents (27 The main disadvantage cited was the finan- firms), indicated that CETESB's technical cial guarantees required by PROCOP II (7 review process was ranked "reasonable", firms ranked this aspect as a "minus", com- with the balance indicating that the review pared to only 3 firms that ranked "minus" process was "unreasonable." (this was a for the interest rate). Non-participants pri- subjective scale left to respondents to marily financed its pollution control re- judge). As for the credit approval by sources with own resources (27 firms) and a BANESPA, 54% of respondents (26 firms) few (5 firms) also used BNDES's credit indicated that the review process was "bad," program. Interestingly, despite the more 23% indicated it was "normal," and an equal favorable financial conditions of the official share of respondents indicated the review credit programs compared to private banks process was "good." Although these re- or own resources, these firms indicated that sponses indicate relative unhappiness with bureaucracy and lack of understanding of the efficiency of the program, 93% of all the credit program by bank agencies dis- firms indicated that the existence of credit couraged them from using these lines, indi- programs like PROCOP 11 are extremely cating that the transaction costs for firms is useful and necessary because, in their opin- much higher than the financing conditions ioIn, investments in pollution abatement are of long-term credit. considered expenses (non-productive in- vestments); thus, using the firm's working 12.29 Investment Volume in Pollution capital as a financing source is extremely Control by Firm Size. Large firms partici- unfavorable to its finanicial health. As for pating in PROCOP II invested higher vol- suggestions, firms offered the following umes than large non-participant firms (70%, ideas in order of frequency: vs. 33% in each group, respectively). On the lower range of the investment and size ^ disseminate the program more widely; 226 Brazil: Managing Pollution Problems - Annexes * introduce a large number of financial PROCOP and NIPCP was that the lead intermediaries/agents; manager was a federal bank (BNDES) and not an environment agency. This proved to * establish differentiated conditions for have the disadvantage of a greater distance small and medium firms; between enforcement strategy and credit. The advantage has been a better disburse- * increase the fee paid to intermediaries; ments performance (after a slow start) since BNDES has had more flexibility in directing * devise a more effective program moni- the program to various investment subpro- toring system; jects as explained below. * expedite review and approval processes; 12.32 Based on a broad assessment of the principal industrial pollution in a number of states, NIPCP was intended to provide fi- • train bank agencies and decentralize nancing for the main sources of pollution nation-wide. However, the allocation of the relatively small credit volume was left com- pletely open-ended and no environmental • give longer compliance periods to per- pely o mit process modification and not just performance indicators were developed at end-of-pipe solutions. project design. In other words, no measure endof-ip soof the benefits in terms of environmental quality of any otler program was developed Loan 3480: National Industrial Pollution to evaluate the effectiveness of the program. Control Project (NIPCP) Therefore, the Bank has made an effort to develop indicators for the specific subpro- 12.31 Partly based on the experience with jects being financed (primarily the large PROCOP, BNDES established its own envi- steel industry clean-up projects). Another ronment credit program and the Bank agreed aspect wortlh notin1g is the relatively small to provide a loan for US $50 million with an loan amounts compared to the apparent de- equivalent amount lent by the Export-Import manid identified in the Bank's appraisal re- Bank of Japan for a total of US$100 million. port. In Minas Gerais, the Bank's appraisal BNDES' overall environment credit pro- gram, which uses NIPCP for part of its funding, disburses about US$ 400 million Direct operations carry the TJLP + 1.5% per year.5 The main difference between for BNDES spread and up to 3% risk rate. BNDES can finance up to 75% of the in- 5 BNDES environmental credit program dis- vestment, maturities run up to 8 years, and bursed about US$422 million in 1995 in grace period is up to 6 months. Indirect baourse cabegoutes US$422 mills whin h 1 n operation carry TJLP + 0.5% for small various categories of programs which can firms/I1.5% for medium and large firms and be broadly grouped into two: direct opera- financial itrmediar ad ofrless an tions between BNDES and the borrowing a financial intermediary spread of less than firn and indirect operations through an- 3%. (TJLP for the period ending August other banki The TJLP (Taxa de Juros de 1996 was 15.44% p.a.) Compared to other Longotherban The Tlong(tax dnteret Juras ddevelopment programs, these financing Longo Prazo) a long-term Interest rate IS conditions are slightly more favorable than the BNDES's reference rateifrtis po- those available at BNDES for technological eram whndich sorefls (FATh instituion'slong training (BNDES covers 10% less of the term funding sources (FAT, the Worker' toasnetet n o ntlain x Support Fund, PIS/Pasep, Social Integra- totaninvestment) and for installation, ex- tion Programs for both private and public pansion, and plant modernization (BNDES sectors) and FMM Merchant Marine Fund). s 1 Brazil: Managing Pollution Problems - Annexes 227 report estimated investment needs of only entire loan if regulations were strongly about US$300 million for air pollution. enforced; 12.33 The loan was designed to consist of * for State Environment Agencies to en- numerous small loans distributed through force regulations, political incentives financial intermediaries, and State Environ- had to have been in place (this is now ment Agencies (SEPAs) were expected to the case in Sao Paulo because the Min- enforce regulations for pollution control. isterio Publico and the public are now Compared to the intended design, BNDES' after CETESB for not making COSIPA environmental credit program targeted envi- comply with regulations, but this did not ronmental "liabilities" of past operations in happen in the past and certainly not industrial sectors under modernization (e.g. when the project was prepared, since steel, mining, petrochemicals, etc.) inlvolv- COSIPA was still a public company); ing little opoortunity for process efficiency gains. The more favorable credit terms of * a very small technical assistance com- the environmental program are intenided to ponenit with grant financing (equivalent provide incentives for pollution control. to 1% of the loan amount passed on by The bulk of the loan amount (70%) is com- BNDES to SEPAs and a supplementary mitted to large investment projects in Japanese Grant) was an irrelevant in- USIMINAS and COSIPA, whicih, after pri- centive for SEPAs to become actively vatization in 1992, carried a huge backlog of engaged with large polluters; and environmental liabilities. Both subloans are a component of larger modernization loans * BNDES wanted to concenitrate its ef- for substantial plant upgrading and mod- forts on high impact projects with direct ernization. BNDES has coordinated the operations (not through intermediaries) evaluation of these projects with State Envi- that complemented its ongoing credit ronment Agencies partly because national program in the steel industry and its legislation on official banks requires them to main objective (as was the Bank's) was verify compliance with environmental li- to see those projects implemented. censing requirements prior to loan approval, and partly in an attempt to ensure adequate 12.35 The result has been an interesting monitoring of the supported investments. experiment of how a development bank has However, this task has proved difficult due taken the place of a broker between SEPAs to capacity constraints faced by many state and large polluters. BNDES was at times in environment agencies and the relatively lit- the middle of difficult negotiations of Ter- tle priority given to the specific pollution mos de Compromiso in an attempt to im- problems addressed by these investments. prove broken relationships from decades BNDES has relied more on the adoption of past. The case of COSIPA is an interesting a "total quality" mentality by large compa- case study. A generally neglectful company nies, which includes environmental compli- when in public hands, COSIPA has since ance, than the enforcement drive from the experienced a slow but gradual transforma- environmental agencies. tion of the managerial attitude towards CETESB and environmental management in 12.34 In retrospect, the World Bank general. The role of BNDES and the World should have more carefully analyzed the Bank may have helped by adding additional incentives of each stakeholder: pressure to both CETESB and COSIPA to meet their side of the compliance agreement. * large polluters in each state could po- The general difficulty has been the pace at tentially consume a large portion of the which manufacturing facilities neglected for 228 Brazil: Managing Pollution Problems - Annexes decades can be brought to compliance. projects, relying more on BNDES's su- Compliance agreements are constantly being pervision efforts. renegotiated with the associated friction and unfulfillment of Bank operational disburse- Environmental Conservation And Reha- ment targets. The challenge is to forcibly bilitation Project (CVRD Loan) apply penalties when targets are not being met and make the most cost-effective use of 12.37 In 1995, the World Bank lent the limited credit program. US$50 million to Companhia Vale do Rio Doce (CVRD) to support priority invest- 12.36 Fncluderther prelmwinary lessonsoftments in its comprehensive environmental program. The program was intended to re- duce the impact of mining, industrial, rail, BNDE. tePoecthna srd tostrengthen port and commercial forestry operations of BNDE' tehnial ad neotitingca- the CVRD conglomerate and to compensate pacity with large polluters, allowing it to the soia disruti ind by pat fostr a ew vew o envronmntal for the social disruptions induced by past fostger ena nwview of e onmental and current operations. This project is in- mangementSIPAs withingthesecompan cluded in this chapter to draw lessons about (eigo, Cof PA's willtingness and adop- the Bank's role regarding pollution control tionmeofal recommendationstof)an;nv- components in the context of the contribu- tion of Bank projects to the development of => the Project empowered SEPAs to the pollution management policies. The social extent that BNDES and the Bank were and natural resource aspects of the project asking them for their "no objection" to are excluded from this discussion. investment projects and compliance 12.38 The Bank justified its involvement deadlines in order to disburse and ap- in this loan on the basis that (i) the planned prove subloans- prove sub'oans; investments fitted into federal and state pri- the loan's procurement limits and Bank orities given the scale of environmental im- procedures proved a major difficulty be- pacts; (ii) CVRD's environmental manage- cause the large steel companies now in ment and social policies could serve as a private hands had large procurement model for other large polluters in the coun- packages for which commercial prac- try; (iii) the prevention of further environ- tices were used (incompatible with Bank mental and social degradation in the Carajas ICB and LCB)e Corridor was necessary; and (iv) the project ICB and LCB); would allow the Bank to gain additional in- = the incentives for active SEPA partici- sight into how large industrial and mining pation in the Project (TA grants), both concerns should identify and mitigate envi- for subproject monitoring and environ- ronmental and impacts of large projects in mental quality evaluation, were insuffi- ecologically sensitive areas. Regarding cient as project design did not analyze in pollution control, the overarching goal was detail the institutional feasibility of the to help CVRD meet its obligations under SEPA responsibilities under the Project; compliance agreements with state and fed- and eral authorities (Termos de Compromiso). > the dispersion of the Project on a na- 12.39 The loan is under implementation tionwide basis coupled with the Bank's and some unforeseen aspects about the limited supervision budgets contributed Bank's involvement are emerging, namely: to limited physical supervision of sub- Brazil: Managing Pollution Problems - Aniexes 229 * the Bank is acting as an honest broker between CVRD and environmental authorities and is facilitating agreements that could have taken much longer; and * CVRD, with its US$2.5 billion in annual sales, did not come to the Bank for a US$50 million loan, but for access to international experience, best practice advice, and for a "certifier" to the inter- national community that CVRD's man- agement takes the environmental im- pacts of its operations seriously. 12.40 The latter point was important to CVRD given the privatization process that would unfold after 1995. On its part, the Bank intended to extract a model of how large polluters should set up and implement environmental and social policies. The project did not, however, include a compo- nent to document this model, and thus, re- mains dependent on the Bank's supervision efforts. While the direct reduction of pollu- tion may have justified the pollution compo- nents on their own merit, it is important for the Bank to attain a wider development im- pact by drawing and disseminating CVRD's successes and failures and by highlighting the regulatory and institutional constraints that slow or prevent faster correction of polluting activities to the government. The project offers fertile ground for learning about how to induce constructive behavior by privatizing enterprises and about how governments should implement policies for correcting large environmental liabilities. Appendix 12.1: Bank Loans: Status And Lessons Loan # WaterBasinRelevnt Coponents2and ln- atsLsos oWoltonMngmn 3504 Guarapiranga reser- - TA leading to creation of water - institutional design completed; consulta- - the most critically affected municipality voir-SP (sub-basin of basin agency; pollution invento- tive committee of municipalities formed; (SP) is taking the lead in basin coordina- Tiete) ries, modeling, and charges state law expected to pass in late 1997 tion; - improved laws for headwaters creating basin agency; - some water treatment investments being protection - basin development plans with quality undertaken by SABESP may not be cost- targets under preparation; effective - marketing survey of low-polluting users - link to urban land use management has started; proved very important. - water quality modeling studies well ad- vanced; - water charges law draft under review. 3505 Upper lguazu in Curi- - TA leading to creation of water - studies completed but no law has been - too early to tell. tiba basin agency; state water law; passed; no committees to date pollution inventories, modeling, - investment by state water company un- and charges derway 3503 Piracicaba-SP - preparatory studies for invest- - basin agency can be created under Jan. - difficulties in agreeing on basin agency (federal river) ment plan 97 Federal law; committee created but structure and membership proves com- consortium of municipalities precedes it; plexity of political process involved. form of funding under Federal law likely to - water quality goals should drive definition determine final basin agency; of investment proposals using economic - complementary law for water pricing analysis to guide the infrastructure plan. under preparation 3503 Paraiba do Sul -basin management leading to - CEIVAP created by Decree on 03/96; - inter-state coordination requires more (federal river shared by integrated resource management state management units established; time than expected SP, MG, and RJ) and investment program studies underway with results expected fall 1997 3554 Arrudas and das Vel- - TA leading to creation of water -State Counsel exists but no basin - producing institutional change and laws has-MG basin agency; pollution invento- agency or committee created yet; has not kept pace with other components ries, modeling, and charges -industrial pollution control strategy com- - cost-effectiveness has not been an easy - enhancement of state water law pleted but needs to incorporate cost- concept for project proponents; and related laws. effectiveness; - quality objectives may need to be revis- -economic evaluation of water quality ited when basin agency is in place; goals underway; - industrial pollution control strategy should -das Velhas water basin agency and in- prioritize the most cost-effective load re- struments studies to be completed by duction sources mid-1997 3767 Grande Vitoria and -institutional strengthening com- - SEAMA restructured; leadership - slow start: too early to tell Guarapari-ES coastal ponent ($8.7 million): changed; some studies underway. zone water quality monitoring; hydro- - tools to be supported include: licensing logical data bases; water re- of polluting sources (industries); industrial sources plan; industrial pollution effluent standards; manual for small firms; control program; ecosystems water quality modeling and coastal man- conservation program; env. info. agement plans systems program; env. educa- tion. IBRD 28938 Q UYANA AAu00 455 ENEZUELA R -a -. 4 _VESPASIANO tV ALAGOAS i0.~,* */ ' o A sSalvador < B O L I V I A f , ,, r GOlOt9a OAjrmd / i DO SUL J SooJosed° Hanieonte_7 jTuaon5 P ChS H do Vildria ~~~ i P~~~~~O PpRlo5rNota a °or,LtoP.0 Rio B,. m "O. A udoO aCan CHILE? / '~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Sa~~~~~~~~~~ Paulo,~~~~~~~~~~~~~~~~~~l- 65?_N/ / (t. ,.ry:._ANTA CATARINA BRAZIL PSOUTH M/ A Tno 1i5 MANAGING POLLUTION PROBLEMS 1*o.sBrasoIo * | G RIO GRANDE DO SUL00 S3 Notion,l Capitol AMERICA P>\no orplroAlogre' TranondLl a SelfotedTnown. .K - I r . 0 KILOtAETErsO 1 o s 00 *00 00 0 -State Boundaries ; } <~~~~~~~~~~~~', Pelo losO___________ Region Boundaries N0 t j0 \ Rio Gronde MIE I 0 0 300 - - International Bgundaries N r~~~~~URUGUAY r ivr so a6q F0 o0 30der19