81064 The World Bank Group 2010 Environment Strategy Analytical Background Papers Assessing the Environmental Co-Benefits of Climate Change Actions Kirk Hamilton and Sameer Akbar1 November 15, 2010 1 The authors are grateful to Ana Bucher, Viju Ipe, Akiko Nishimae, and Per Ryden (all from the Environment Department) for their inputs. Peer reviewers included Julia Bucknall (Water Unit), Marjory Anne-Bromhead (Agriculture and Rural Development Department), Ajay Kumar (Transport Unit, Africa Region), and Jane Olga Ebinger (Energy Sector Management Assistance Program). Additional comments on the draft paper were received from Eduardo Ley (Economic Policy and Debt Department), Astrid Hillers (Environment Department), Rakesh Nangia and Armin Fidler (Health, Nutrition and Population Team), Elisabeth Goller (Transport Unit, Latin America Region), Mike Toman and Jon Strand (Environment & Energy Team, Development Research Group), David Georg, Marian Delos Angeles and Pablo Benitez (all from the World Bank Institute). Table of Contents 1. Introduction ..............................................................................................................................................3 2. Organizing Framework ...........................................................................................................................4 3. Examples from the World Bank Portfolio ......................................................................................11 4. Enabling Conditions ..........................................................................................................................14 5. Implications for the Environment Strategy ....................................................................................16 References ....................................................................................................................................................17 Annex 1: Climate policies in priority sectors - Global climate impacts and co-benefit opportunities ...............................................................................................................................................20 Annex 2: Summary of results from the FY 09 and FY10 Portfolio Review ........................................30 1. Introduction The draft 2010 World Bank Environment Strategy is built on three pillars: leveraging natural resources for growth and poverty reduction; managing the environmental risks to growth and development; and transforming growth paths. As part of its exploration of these three pillars, the Strategy considers the question of environmental co-benefits of climate change actions 2 . In particular, it poses the question of potential trade-offs between actions to address climate change and other local and regional environmental priorities, and considers how to maximize co-benefits arising from climate action. Climate change has for the first time raised basic environmental questions to the highest levels of national government, including presidents and finance ministers. Flows of climate finance could be substantial, on the order of ODA as a share of high income country GNI, and the potential for environmental co-benefits from this finance is correspondingly large. The primary objective of this background paper is to assess the potential for climate change mitigation and adaptation actions to provide environmental co-benefits, particularly in the quality of environmental media, flow of ecosystem services, and maintenance of biodiversity. To accomplish this, the paper is organized in five sections: 1. Provision of an organizing framework to identify and classify potential co-benefits; 2. Summary of the external literature on co-benefits; 3. Review of examples from the World Bank portfolio; 4. Initial thoughts on creation of enabling conditions for co-benefit provision, and 5. Review of implications for the Environment Strategy. In doing so, it explicitly addresses two of the Strategy’s three pillars: leveraging climate change interventions and financing to better manage natural resources and deliver growth and poverty reduction; and transforming growth paths by factoring environmental co-benefits into the equation. It indirectly addresses the third pillar of managing environmental risks, particularly in the case of adaptation to climate change, by viewing risk management through a co-benefits lens.. 2In this paper co-benefits are defined as the benefits for the local environment as a result of (mitigation/adaptation) actions that are targeted at addressing global climate change. 3 ramework 2. Organizing Framework co-benefits The potential for environmental co benefits lies at the intersection of development and climate change actions (Fig. 1). co-benefits Figure 1: Identifying environmental co ‘win-win-win’ solutions which are robust under a range of future A highest priority should be ‘win s and which create environmental benefits while simultaneously contributing to climate scenarios mitigation. development, adaptation, and mitigation prone area For example, in drought-prone nagement practices increase areas, improved soil management increa fertility and soil quality, and enhance adaptation to drought by improving soil water content and resource conservation. In addition, soil and water management enhance soil carbon sequestration by returning more organic matter r residues to soil, and help reduce emissions from land use, land use change and intensive agriculture practices. In turn, these actions can play an important role in the voluntary carbon markets by promoting creation of large carbon sinks and stocks. Another win-win-win example is reduction of black carbon emissions from biomass cookstoves and dirty diesel vehicles. Because black carbon particles are associated both with local and regional warming and health impacts, there are important benefits associated with reducing their emissions, ranging from reduction in glacier melt and pressure on local natural resources to improved vehicle fuel efficiency. benefits of climate actions for the local environment are not clear and In some instances the co-benefits immediate, and there may be trade account Tables 1 and 2 trade-offs or co-costs to be taken into account. provide indicative examples of climate mitigation and adaptation actions, along with their potential co-benefits or co-costs. 4 Table 1: Mitigation actions and environmental co-benefits (or costs) Mitigation action Environmental Co-benefit or cost Electricity generation Improved ambient air quality - low carbon fuels Solar technologies have potential costs linked to large - carbon capture and storage (CCS) land footprints - solar, hydro, geothermal Other combustion (household, industrial) Improved ambient and indoor air quality - low carbon fuels - CCS (for major emitters) Transport Improved ambient air quality, reduced pressure on land, - low carbon fuels reduced congestion - modal switch Switching from gasoline to diesel may increase - fuel efficient vehicles and transport operations particulate matter emissions Development of alternative energy sources Potential costs, e.g. natural forest clearance or pressure - biofuels on / degradation of agricultural land Reducing deforestation Conserving environmental services and biodiversity Sequestering soil carbon Potential improvements to soil fertility, reductions in soil - maintaining land cover degradation, improved water infiltration Reducing black carbon emissions Improved indoor air, reduced pressure on local biomass, - improved cookstoves Improves ambient air quality - clean diesel Reducing methane emissions Improved water quality - flaring and leakage Improved ambient air quality - landfill Reduced odor - water pollution control Reduction nitrous oxide (N2O) emissions Reduced fertilizer runoff, protection of the ozone layer, - fertilizer application, fertilizer material reduced air pollution Table 2: Adaptation actions and environmental co-benefits (or costs) Adaptation action Co-benefit or cost Increasing buffering capacity, especially for water Dams have potential environmental costs (as well as - dams issues with methane generation), while natural buffers - natural buffers like forests, mangroves and wetlands become more Expanded protected areas for species and biodiversity valuable protection Siting of dwellings and infrastructure Siting decisions may preserve ecosystems and the - dwellings services they provide - other infrastructure Protection Barrages may have environmental costs. Control of - sea walls, levees, barrages disease vectors may provide benefits or costs. - human health, esp. water, sanitation, vectors New technology Greater crop diversity will conserve biodiversity. Water - crops, and crop diversity use efficiency will protect ecological flows. Land cover - water use efficiency monitoring will assist with environmental conservation. - weather monitoring - land cover monitoring New techniques Better land and vegetation management will have - agriculture – vegetation cover environmental benefits. - agriculture – soil management Landscape-scale and ecosystem management will assist - landscape-scale management with protecting ecosystems and their services. - ecosystem management, incl. for fisheries 5 The framing of the co-benefit and co-cost issues represents a first step towards staff guidance on identification and possible integration of co-benefits into project design. As Tables 1 and 2 show, the linkages between climate actions and environmental co-benefits are well established for certain actions, such as reduced health impacts of local air pollution arising out of mitigation actions, and less well established for others. Designing good projects to deal with climate change and achieve co-benefits will need more than co-benefit identification. It will also require good valuation approaches which are not routinely employed in standard project economic analysis, significantly deepened knowledge of the inter- linkages between climate actions and local environmental co-benefits, and improved quantitative methods for assessing co-benefits. The economics of co-benefits and co-costs From an economic perspective, co-benefits are outcomes of climate change actions that increase the measured flow of total benefits and thus the measured benefit/cost ratio of these actions. In climate change related projects, which are not always the lowest cost interventions, this is often the case. For a solar thermal generation project, for instance, if the alternative is a coal-fired power plant, then the value of emissions reduction (SOx, NOx, particulates) associated with not building the coal plant becomes a benefit. The present value of direct project benefits plus co-benefits, minus project costs, determines the net economic benefits from the project. Climate finance is also an element. While the client country may not gain value directly from CO2 emissions reductions (because the country does not have a binding emissions cap, for example), the carbon offset markets will value “additional” reductions, and selling a stream of carbon credits would therefore become part of the project benefits. If the sum of the value of co-benefits and carbon credits is high enough, the net benefits of the solar project may exceed those of the coal project, at which point it becomes the preferred project for the client. If the net benefits of the solar project are still not high enough when co-benefits and carbon credits are taken into account, then a subsidy provided by climate finance instruments such as the Climate Investment Funds (CIF) may be required before the client is willing to invest in the project. Similar logic applies to actions such as black carbon emissions reduction. A project to provide more efficient cooking stoves or access to cleaner fuels ensures climate, health and natural resource benefits, all of which would be valued in making the decision to invest in the project. Here there may be few or no carbon market benefits if only direct CO2 emissions are being traded, but there may still be a need for a further climate finance subsidy to make the project viable. The economic analysis of adaptation projects is more complex.. Increased risk of storm surges arises for the client country, then a specific adaptation project, such as planting mangroves, may be required. To the extent that the mangrove forest provides co-benefits to local fisheries (for example), these should appear as benefits in the economic analysis of the project. Here there is 6 another potential interaction with climate finance, in this instance finance that is specifically targeted to assisting developing countries to adapt to a changing climate. While adaptation finance could be provided for mangrove cultivation, the amount of finance needed would (in principle) be net of the co-benefits - given the local nature of the co-benefits and the assumption above about targeting of the adaptation finance. Another example would be making infrastructure such as roads more climate-resilient. Assuming that building roads differently is more costly, the incremental costs of increasing climate resilience would become eligible for adaptation finance. Again, however, if there are co-benefits such as reduced vehicle maintenance associated with higher quality roads, then (in principle) the adaptation finance provided would be net of these co-benefits. Upgrading roads to become climate resilience also offers the potential of reducing traffic related emissions – with local and global benefits - for a small incremental cost. The same general principles apply to climate projects with co-costs, but the signs are reversed. Co-costs drive up the cost base of the climate project and therefore reduce the net economic benefits. Carbon markets could still be interested in buying carbon credits, but while the carbon credits stream becomes a part of project benefits, the increased cost base may make the net benefit from selling the carbon credits less attractive. The provision of co-benefits from climate actions may also be central to whether governments deal with climate change by transforming how they develop or by making incremental changes to the development paradigm. It is certainly possible that transformation is unavoidable – for example, high population numbers and scarcity of land in many developing country cities may make high use of private vehicles for urban transport untenable, for reasons both of congestion and pollution. But a broader conception of co-benefits could also drive transformation – for example, designing greener, more livable cities could substantially increase the quality of life for urban dwellers in developing countries, and attract more investment and businesses to the city – thus making it economically more vibrant. These considerations suggest that the issue of valuing and integrating co-benefits or co-costs is likely to be complex, since those activities could make a large difference in what projects are undertaken, how they are implemented, and where the needed resources come from. But they do not override the fundamental economic principles involved – co-benefits can make climate investments more attractive, just as co-costs can make them less attractive. Finally, placing economic values on the co-benefits or co-costs of climate change actions ultimately depends upon valuing the changes in human well-being linked to environmental change. Health outcomes are particularly important in this regard, as will be highlighted in the next section. 2. Messages from the Literature Review of the literature on the environmental co-benefits of climate change policies and actions shows that the sectors with significant co-benefits are energy, transport, agriculture, forestry, ecosystems and biodiversity, and water. In the review, three overarching messages emerge. 7 First, it becomes clear that identification of mitigation co-benefits is relatively straightforward as compared to adaptation, given the established linkages between local emissions and human health. Second, particularly in the agriculture, forestry, and natural resource management (NRM) sectors, there is a fine line between an action to adapt to climate threats and a development practice that promotes conservation and quality of environmental services; the underlying assumption is that any action that enhances environmental quality and /or provision of ecosystem services (e.g. increased water availability, biodiversity conservation, soil carbon sequestration) will also enhance local climate resilience to future climate trends. Third, it is not all about co-benefits; in nearly all relevant sectors, there are often co-costs generated by adverse environmental impacts that cannot be overlooked. The messages from the literature are summarized below by sector and presented comprehensively in Annex 1. Energy: Energy sector interventions that generate environmental co-benefits, particularly reduced air pollution and improved health, are improvement of energy efficiency of plants, fuel switching, and renewable energy uptake.. Quantitative information on these environmental co- benefits remains primarily limited to health effects in developed countries, with many co-effects not quantified due to a lack of information/data. Studies by Swart et al., (2003), Beg, (2002) and Hagen et al., (2005) demonstrate air quality improvements and health benefits from improving energy efficiency of power plants, fuel switching to nuclear energy and renewable energy sources. Benefits – in terms if health - from avoidance of air pollution control costs as a result of energy sector interventions have been estimated by various authors, mostly in Europe and United States; Syri et al. (2001), van Harmelen et al. (2002), van Vuuren et al. (2006), EIA (1998 ). Analysis of co-benefits from development of new energy technologies and renewables have mostly concentrated on economic benefits like creation of employment, cost savings and development of industries. Agriculture: Policies and measures to reduce greenhouse gas (GHG) emissions from agriculture and adapt agricultural systems to climate change have environmental co-benefits that are predominantly positive, but some trade-offs exist (DeFries et al., 2004; Viner et al., 2006) above certain levels or intensities of implementation. Climate policies in the agricultural sector that have significant co-benefits/costs include soil carbon sequestration, tillage and other agronomic practices for mitigation and adaptation, production of bio-energy crops, sustainable agricultural practices and organic agriculture and land retirement. Carbon conserving practices are found to sustain or enhance future fertility, productivity and resilience of soil resources (Lal, 2004a; Cerri et al., 2004; Freibauer et al., 2004; Paustian et al., 2004; Kurkalova et al., 2004). However, in some instances where there is increased use of inputs, there may be risks of soil depletion through mechanisms such as acidification or salinization (Barak et al., 1997; Díez et al., 2004; Connor, 2004). Agricultural tillage practices for mitigation of GHGs and adaptation can have both co-benefits and costs on water conservation and on water quality. When mitigation measures such as reduced tillage promote water use efficiency, they provide 8 potential benefits. But in some cases, the practices could intensify water use, thereby reducing stream flow or groundwater reserves (Dias de Oliveira et al., 2005). Practices like reduced and zero tillage could reduce soil carbon loss and generate co-benefits like reduced soil erosion and degradation, runoff and nitrogen and positive water quality impacts (Schneider et al, 2007). Practices that diminish productivity in existing cropland (e.g., set-aside lands) or divert products to alternate uses (e.g., bio-energy crops) may induce conversion of forests to cropland elsewhere. Conversely, increasing productivity on existing croplands may spare some forest or grasslands (West and Marland, 2003; Balmford et al., 2005; Mooney et al., 2005). Practices that reduce N2O emissions often improve the efficiency of N use from these and other sources (e.g. manures), thereby also reducing GHG emissions from fertilizer manufacture and avoiding deleterious effects on water and air quality from nitrate pollutants (Oenema et al., 2005; Dalal et al., 2003; Olesen et al., 2006; Paustian et al., 2004). Co-benefits from bio-energy crops include reduced nutrient leaching and soil erosion and additional environmental services such as soil carbon accumulation, improved soil fertility, removal of cadmium and other heavy metals from soils or wastes, and biodiversity benefits. They may also include increased nutrient recirculation, aid in the treatment of nutrient-rich wastewater and sludge; and provision of biodiversity habitats in the agricultural landscape (Berndes and Börjesson, 2002; Berndes et al. 2004). Intensification of agriculture and large-scale production of biomass energy crops may have costs, however, as they may lead to loss of biodiversity where they occur in biodiversity-rich landscapes (European Environment Agency, 2006), further clearing of natural habitats (either for biofuels themselves or for new agricultural land to replace converted crop lands), possibility of biofuel crops becoming invasive, and potential social and environmental costs like intensified competition for land and water and possibly deforestation. Some high-productivity, evergreen, deep-rooted bio-energy plantations generally have a higher water use than the land cover they replace (Berndes, 2002, Jackson et al., 2005). Sustainable and or organic agricultural practices increase resilience to the health effects of climate change and provide more immediate co-benefits for health by protecting populations from extreme weather events, reducing risk of infectious disease, and improving air, soil, and water quality. Forestry: Climate policies in forestry and ecosystem-based activities that generate co-benefits include stopping or slowing deforestation, afforestation and reforestation programs including forest plantations, restoration of wetlands, grasslands, and protected areas, and investment in biofuels and bioenergy opportunities. While promoting carbon sequestration, these policies also create co-benefits in the form of ecosystem services, watershed protection, reduction of soil erosion, and provision of fuel wood, timber and fodder. They also produce biodiversity benefits, especially through creation of a wider selection of species, planting of native species and accommodation of the range of needs of native wildlife needs. Forest plantations can have either positive or negative impacts on biodiversity depending on management practices. There are potential co-costs, however. Forest plantations may negatively affect biodiversity if they replace biologically rich native grassland or wetland habitats. Intensively managed plantations also have nutrient demands that may affect soil fertility and soil properties (Perez-Bidegain et al., 2001; Carrasco-Letellier et al., 2004), and changes in biological properties (Sicardi et al., 2004) if the 9 choice of species is not properly matched with site conditions. Some of the tree species have high water demands that could lead to depletion of surface and groundwater resources. Transport: Climate policies in the transportation sector include improving the efficiency of motorized vehicles and transport system, promotion of mass transit, policies (including land use measures) to reduce congestion on road, highways and urban metropolitan centers, and promotion of non-motorized transport. These policies produce co-benefits in the form of reductions in local air pollutants leading to improvement in air quality and health benefits, reduction in congestion, noise and accidents (HEATCO, 2006; Syri et al., 2001; Aunan et al. 1998; McKinley et al. 2003; Transport for London, 2006). Other examples of transport policies with significant co-benefits include internalizing the marginal social costs caused by freight transport types (Beuthe et al., 2002), and decreasing truck weight (MacKinnon, 2005; Leonardi and Baumgartner, 2004). While there are many synergies in emission controls for air pollution and climate change, there are also trade-offs. Diesel engines, for instance, are generally more fuel- efficient and have lower CO2 emissions than gasoline engines, but they increase particle emissions, generating co-costs (Kahn et al. 2007). Water: In the water sector, improving distribution and usage efficiency and reducing waste has been found to generate significant co-benefits (Canadian Water and Wastewater Association, 2009). Renewable energy systems such as hydro-electricity can contribute to the security of energy supply and protection of the environment but may also cause ecological impacts on existing river ecosystems and fisheries, induced by changes in flow regime (the hydrograph) and evaporative water losses, in the case of dam-based power-houses. Positive effects are flow regulation, flood control, and availability of water for irrigation during dry seasons (IPCC, 2007). Bio-energy crops raised with waste water and sludge also generate co-benefits in the form of habitats for biodiversity in the agricultural landscape, soil carbon accumulation, improved soil fertility, and removal of cadmium and other heavy metals from soils or wastes (Borjesson, 1999; Eriksson & Ledin, 1999). Health: Outcomes from climate actions in the health sector are generally derived from intermediate environmental outcomes, such as reductions in urban air pollution. Haines and others (2009) highlight a range of positive health impacts resulting from strategies to reduce GHG emissions, including reductions in non-communicable diseases such as acute respiratory infections and heart disease, linked to improved cooking stoves and generation of electricity from renewable and low-carbon sources. Markandya and others (2009) focus specifically on low- carbon electricity generation and the potential health benefits in the European Union, China and India. In both China and India, the health benefits from clean electricity are substantial, with the value of health benefits in India simulated to actually exceed the incremental costs of carbon emission reductions in 2030. 10 3. Examples from the World Bank Portfolio A sampling of the World Bank3 project portfolio for this paper has highlighted a broad variety of opportunities for environmental co-benefits of climate change mitigation and adaptation actions, and vice versa4. (See outline in Table 3 and details in Annex 2.) The portfolio review includes the same sectors and similar classification challenges as in the literature review. Table 3: Examples of projects with co-benefits based on a selected World Bank portfolio review Mitigation Adaptation Environmental Co- Project Description benefits benefits benefits Agriculture Agricultural Carbon Carbon Carbon Enhanced Reduced soil erosion Project - Kenya sequestration sequestration resilience to and depletion of soil through adoption of climate variability nutrients. sustainable land through improved management productivity. practices. Increased yields and productivity are expected. Mainstreaming Adoption of Carbon Reduced farmer Improved natural Sustainable Cattle Silvopastoral sequestration and vulnerability to resource Ranching - Colombia Production Systems reduction of climate change management, and for cattle ranching methane impacts on cattle enhanced emissions environmental services (biodiversity, land, carbon, and water) Ecosystems/Biodiversity TIEN SHAN Improved Carbon Increased Improved eecosystem ECOSYSTEM ecosystem sequestration in potential for management, DEVELOPMENT- management and forest biomass water retention biodiversity, water Kyrgyz Republic. sustainable forestry and snow conservation harvesting. Water Oum Er Rbia Improved Odor reduction Waste water Sanitation- Morocco wastewater and and methane treatment, improved treatment systems capture for local sanitation potential productive uses Bioenergy Sugar Reduced GHG Reduced methane Improved water Ethanol Wastewater - emissions emissions from quality through Thailand waste water improved water treatment treatment 3 Includes the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). 4 Climate (mitigation and adaptation) benefits of environmental actions 11 Transport EDSA Bus Reduction Reduced GHG GHG (CO2) Reduced air pollution Project - Philippines emissions from emissions along the highway buses. reduction Sustainable Urban Promotion of GHG emissions Reduced emissions of Transport Project - environmentally reduction air pollutants resulting India sustainable urban in health co-benefits transport Forestry Shandong Ecological Demonstration of Carbon Water conservation, Afforestation - China afforestation sequestration reduced soil erosion, models for increased biodiversity, environmentally improved landscape degraded areas and micro climate, and protection of agricultural land Mid Himalayan Pilot to improve Carbon Increased Reduce soil loss, Watershed rural livelihood sequestration recharge capacity biomass productivity, Management Project - through carbon of local aquifers local biodiversity India sequestration by conservation, recharge adaptive capacity of local environment aquifers by 20%. friendly technologies based on watershed treatment practices Energy Coal-Fired Generation Improvement of Reduction of GHG Improvement of air Rehabilitation - India energy efficiency of emissions pollution (reduction of selected coal-fired PM10, SO2, NOx) power generation units Eco-Farming - China GHG emissions The annual Improved sanitation, reduction through emission better air, soil and methane reduction amount water quality. combustion and estimated to reduced burning of about 60,000 ton coal and firewood C02. The main messages emerging from the portfolio review are: • Many energy and transport sector projects address GHG emissions reduction as well as local air pollution emissions. • Water sector projects bring adaptation benefits in some cases through strengthening resilience to increased weather variability. 12 • Emissions reduction or methane gas recovery can create carbon credits in a cost-effective way, while improving environment quality through cost-effective waste management and environmental management. • Multi-benefit projects, all mapped under agriculture or forestry sector, improve carbon sequestration and reduce farmers’ vulnerability to changing climate, while improving soil productivity, reducing soil erosion, or conserving biodiversity. • Global Environment Facility (GEF) additional grant funding and carbon finance have both played a key role in addressing environmental co-benefits of mitigation actions. Considering also that some projects categorized under IBRD/IDA are co-financed by other funds such as the CIF’s Climate Technology Fund (CTF), financial incentives are critical for addressing climate co-benefits. • More co-benefits are addressed through exploring environmental consideration in mitigation actions rather than through exploring mitigation benefits in environment interventions. • The review shows that while environmental impact assessments flag adverse impacts and co- costs, the co-benefits are usually not given credit. There is a need to develop a way to maximize these benefit opportunities for client countries,. Apart from the project-based approach, some countries have embarked on a broader initiative to address co-benefits in more comprehensive manner, such as the example of the Andhra Pradesh Drought Adaptation Initiative (see Box 1 below). Box 1: The Andhra Pradesh Drought Adaptation Initiative (AP-DAI) In Andra Pradesh, India, conservation of water resources poses an enormous challenge to locals as competition for water increases in the face of potential scarcity and loss of quality. Climate change could accelerate water deficit and impact on the most vulnerable livelihoods. The AP-DAI project aims to reduce vulnerability to climate risks and change by increasing local resilience while reinforcing sustainable use and protection of natural resources. In AP-DAI, adaptation co-benefit measures to protect the environment and adapt to climate change are mainly related to soil, land, and water management. Examples of these actions include increased soil erosion control; better soil and water management to improve soil water content, soil fertility, and enhancement of groundwater recharge; afforestation and rural energy management to meet household fuel needs; and livestock management and pasture development to increase diversification of income. With regard to common property resources, better management of water storage tanks results in opportunities for fish farming while improved management of common land is important not only for grazing livestock but for reducing run-off and improving rainwater infiltration into groundwater aquifers. Mitigation co-benefits are mainly related to increasing the stock of carbon in soil and/or in above-ground vegetation. This opens up opportunities and incentives for co-financing this type of adaptation project with various voluntary carbon funds. In addition, mitigation actions involve reduction of GHG gases by livestock and land management. In order to ensure completion of the objectives, APDAI must be complemented by a set of institutional and policy conditions allowing the innovations to take root in society (continue protection of environment and provision of ecosystem services) and to be sustained in the institutions responsible for their scaling-up. 13 4. Enabling Conditions While conceptually the idea of co-benefits (and co-costs) is easy to appreciate, ensuring that environmental co-benefits are realized requires enabling actions on the part of both the client country and the World Bank. Client actions Policies and regulations: Governments that have or are establishing a Green Growth strategy may provide a fertile ground for capturing co-benefits in their assessment and implementation of policies. This includes coordination across sectors and agencies to increase the capture of positive synergies. However, in some cases policies can become barriers, such as when bio-fuel cultivation is driven by energy security concerns, or fuel subsidies are established for political reasons. Financing: This is an issue for both the client country and the Bank. If projects with larger co- benefits are more costly, then additional financing will be needed, and the Bank will need to have financing sources that can be tapped. IBRD and IDA can meet these financing needs, but it may be possible to leverage GEF finance or other grant-based resources as well. Financing is also linked to the carbon market, as noted, but this will depend on standards of eligibility for projects that provide co-benefits as well as additional GHG reductions. World Bank actions Economic analysis of projects: Valuing the co-benefits of projects will increase the overall measurable net economic benefits. This requires increased valuation of environmental benefits in project design as well as appraisal, including the benefits of foregone damages if the alternative project was dirty (coal power generation with weak emission controls, for example). Knowledge: Guidance is needed for identifying and maximizing potential co-benefits in project design and implementation. Knowledge products will also have to support the co-benefit portion of project economic analysis, particularly valuation of environmental costs and benefits. This will entail more than the gathering and management of existing knowledge. Because knowledge in this area remains limited and the community of practice is still relatively small, a significant investment will need to be made to improve the tool box and increase its application. Innovative approaches should be considered, such as the use of the Global Expert Teams (GETs), e-learning modules, and tailored clinics. Creative mechanisms could be used to apply the knowledge to amend existing projects with new climate information and economics. The World Bank Institute (WBI) could be very helpful in furthering the knowledge agenda related to co-benefits. Project design: The development objective needs to be explicit for capturing co-benefits, so that mechanisms for monitoring (including indicators) are put in place throughout the results chain. However, this also represents new and additional efforts that need to be resourced, as there is a 14 knowledge gap that must be addressed in the context of Bank operations, especially in the case of adaptation options. Institutional coordination: Co-benefit creation may span institutional boundaries, which will require senior management commitment to coordination across operational and sectoral Vice Presidential Units. This is no less true within the client country. However, implementation may still be a challenge unless coupled with incentives at the working level. 15 5. Implications for the Environment Strategy The framework presented in this paper can be very helpful in enhancing communications with stakeholders and shareholders alike. While climate change is a divisive issue between developed and developing countries, there is overall agreement on the need for significant additional financing for climate action. If that financing can be leveraged to deliver both local and global benefits, there may be room for agreement on how the additional funds can best be used to maximize development and environment benefits. The framework can also help leverage the high level of interest in climate change within the Bank and in client governments towards policy actions that are important for core environment and development objectives, and which may have been neglected. Good examples include the emerging links between natural capital conservation and climate change adaptation, and addressing urbanization issues and GHG mitigation. Specific implications for the Environment Strategy include: Leveraging interest in climate change. Co-benefit provision needs to become part of the policy dialogue and country strategy development with client countries, particularly given the growing level of interest in climate change in Ministries of Finance and Planning. Sectoral focus. It is clear that co-benefits will be concentrated in the energy, transport, agriculture, ecosystem and biodiversity, forest, NRM, and water sectors. This can help focus priorities for the Strategy. But to succeed in establishing priorities, much more needs to be invested in co-benefit assessment to see how it might change strategic priorities when considering climate change. Innovative finance for conservation. Wetlands, mangroves, and conservation forests merit increased efforts at conservation as natural assets which will increase climate resilience, as well as sequestered carbon. But these will not be traditional conservation projects, such as the creation of a national park, and so may require new sources of finance. Guidance to staff. Staff guidance dealing with the identification of co-benefits, trade-offs and co- costs, with examples from the project portfolio, will enable wider application of co-benefit capture. Knowledge and analysis. Because co-benefits would increase the measured net economic benefits of climate change projects (and the reverse for co-costs), there will be increased need for analytical tools to quantify co-benefits and to value them. 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Agricultural sector policies and co-benefit opportunities: Carbon sequestration and adaptation policies in agricultural sector Policy action Global climate Local co-benefits Co-costs References benefits Afforestation of Carbon sequestration Reduced soil erosion Plantinga and Wu (2003) agricultural lands Reduction in nitrate pollution and nitrate in surface and ground water Reduction in atrazine pollution Enhanced wildlife habitat Improvement in water quality Retiring agricultural lands Carbon sequestration Reduction in sediment loads in watersheds Feng, Cling and Galssman (2007) Reduction in nitrate pollution and nitrate in surface and ground water Improvement in water quality Reduction in atrazine pollution and other agricultural chemicals Conservation tillage Reverse the loss of Reduced soil erosion Lal ( 2004) practices such as no till, soil carbon on Reduction in nitrate pollution and nitrate in DeFries et al., 2004 ridge till, or chisel plough croplands and surface and ground water Viner et al., 2006 planting promote C sequestration Reduced fertilizer Reduction in Ecosystem benefits-less pollution from Freibauer et al. (2004) application and manure emissions from fertilizers management fertilizer industry Planting cover crops and Soil carbon Reduced soil erosion and sedimentation Some cover-crops may become Paustian et al.(2004) reduce fallow periods sequestration Reduction in nitrate pollution and nitrate in invasive surface and ground water Raising bio-energy crops Carbon sequestration Reduced agricultural pollution from Deplete water resources if water Berndes (2002) fertilizers and chemicals use efficiency of the genotype is Freibauer et al. (2004) low Substitution of fossil Reduce soil erosion and sedimentation May deplete soil nutrients fuels with bio-fuels Soil carbon Improvement in soil properties, Possibility of bioenergy crops accumulation becoming invasive species 20 1. Agricultural sector policies and co-benefit opportunities: Carbon sequestration and adaptation policies in agricultural sector Policy action Global climate Local co-benefits Co-costs References benefits Biodiversity impacts-flora biodiversity Diverting croplands to bio-energy crops by induce deforestation Biodiversity impacts-increased insect, soil, Possible impacts on biodiversity invertebrate and avian diversity when bio-energy crops are raised in grasslands and set aside areas Better visual impacts Reduce nitrate leaching Provide habitats for biodiversity in the agricultural landscape Reduce soil erosion Increase nutrient recirculation, aid in the treatment of nutrient-rich wastewater and sludge Reduced use and Reduction in GHG Phytoremediation (polishing): removal of Dalal et al. (2003) management of emissions from nitrates, cadmium, other nutrients and DeFries et al., 2004 manufactured fertilizers, fertilizer industries heavy metals from municipal waste, Viner et al., 2006 nitrate fertilizers agricultural drainage, and sewage sludge Reduction in N2O If the bio-energy crop is deep-rooted emissions perennials it may prevent land degradation and increase soil quality Organic agriculture and Both an adaptation Reduction in nitrate leaching and water sustainable agricultural and mitigation pollution practices strategy Increases resilience to health impacts from Kurkalova, Kling, and Zhao climate change (2004) Health co-benefits by protecting populations from extreme weather events Reduces risk of infectious diseases Improves air, soil, and water quality 21 2. Climate policies in forest and ecosystem sector: Co-benefit opportunities Policy action Global climate Local co-benefits Co-costs benefits References Climate policies in natural ecosystems Aforestation and Reduction in CO2 Reduced nitrogen deposition reforestation emissions Carbon sequestration Ecosystem services Watershed protection Reduced soil erosion Biodiversity benefits Restoration of wetlands Carbon sinks that Protection for large mammals (tiger, rhino, Balmford et al., 2005 that include swamp store/sequester tapir, etc.), migratory birds and breeding forests, mangroves, peat carbon populations of rare birds and animal species, lands, mines and marshes spawning and nursery grounds for inshore fisheries Protection of mangroves provide ecosystem services including coastal defense, protection against extreme weather events Restoration/preservation Terrestrial carbon Biodiversity benefits preserving grassland Mooney et al., 2005 of grasslands like grazing storage/sinks dependent birds, plant species and herbivore management, protected species grasslands and set-aside areas, grassland productivity improvements and fire management Preserving protected Reduces emissions Biodiversity and ecosystem services Berndes and Börjesson, areas from habitat 2002 degradation Berndes et al. 2004 Serves as a buffer against impacts of climate change 22 2. Climate policies in forest and ecosystem sector: Co-benefit opportunities Policy action Global climate Local co-benefits Co-costs benefits References Promotion of biofuels and Substitute fossil fuels Clearing of natural habitats, Berndes (2002) bio-energy crops and thus reduce either for biofuels themselves Freibauer et al. (2004) emissions or for new agricultural land to replace converted crop lands Intensified competition for Perez-Bidegain et al., 2001; land and water and possibly Carrasco-Letellier et al., deforestation 2004 Clearance and loss of natural ecosystems, with consequent loss of biodiversity Deforestation Climate policies in forest sector Increasing or maintaining CO2 mitigation, Biodiversity conservation forest area, Reducing avoided emissions deforestation and forest and carbon Protection of watershed degradation sequestration Prevention of land/soil degradation Amenity values, nature preserves Aesthetic and recreational values Conserve water resources Reduces sedimentation and silting Afforestation/ CO2 mitigation and Biodiversity conservation Mono-specific plantations Sicardi et al., (2004) reforestation carbon sequestration replacing biodiverse grasslands or shrub lands may affect biodiversity Protection of watershed Soil properties might be negatively affected in case of some species Prevention of land/soil degradation Use of water-hungry species deplete water resources Amenity values, nature preserves Losses in stream flow 23 2. Climate policies in forest and ecosystem sector: Co-benefit opportunities Policy action Global climate Local co-benefits Co-costs benefits References Aesthetic and recreational values Conserve water resources Reduces sedimentation and silting Agroforestry CO2 mitigation and Biodiversity conservation Use of water-hungry species carbon sequestration deplete water resources Protection of watershed Losses in stream flow Prevention of land/soil degradation Amenity values, nature preserves Aesthetic and recreational values Conserve water resources Reduces sedimentation and silting Forest management in CO2 mitigation and Biodiversity conservation May affect biodiversity if they plantations carbon sequestration replace biologically rich ecosystems Protection of watershed Prevention of land/soil degradation Amenity values, nature preserves Aesthetic and recreational values Conserve water resources Reduces sedimentation and silting 24 Sustainable management CO2 mitigation and Biodiversity conservation of native forests carbon sequestration Protection of watershed Prevention of land/soil degradation Amenity values, nature preserves Aesthetic and recreational values Conserve water resources Reduces sedimentation and silting Bioenergy production Reduced emission If production of fuel wood is the objective it May affect biodiversity if a Berndes (2002) from forests from substitution of may prevent deforestation single species replace Freibauer et al. (2004) fossil fuels by biologically rich ecosystems bioenergy fuels Short rotation plantations may cause land degradation and affect water and soils 3. Transportation sector policies: Co-benefit opportunities Policy action Global climate Local co-benefits Co-costs impacts References Improving efficiency of transport systems Renovation of taxi fleet Reduction in road Reduction in particulate matter HEATCO, 2006; Syri et al., transport emissions 2001; Aunan et al. 1998; McKinley et al. 2003; Transport for London, 2006 Promote use of natural Reduction in gas emissions Introduction of hybrid Reduction in GHG Local air quality benefits buses emissions from road transport 25 Internalize marginal social Shift from trucking to Reduction in congestion Beuthe et al. (2002) cost of freight transport rail and waterways types Reduction in local air pollution Noise pollution reduction Heavy vehicle fee policy Decrease in CO2 Local air quality benefits Beuthe et al. (2002) in Sweden, UK and emissions Netherlands Promotion of non- Decrease in CO2 Local air quality benefits Aunan et al. (1998) motorized transport; For emissions example in India Health benefits Use of diesel engines Lower CO2 emissions Increase particle and NOx Kahn et al. (2007) emissions Policies o reduce congestion on roads, highways and urban center Mass transit and metro Reduction in GHG Health benefits-improvement in local air HEATCO, 2006 expansion emissions from road quality transport Congestion charge in the Decrease in CO2 Local air quality benefits McKinley et al. (2003) city of London emissions from Transport for London, 2006 transport sector Reduction NOx Health benefits emissions Reduction in particulate matter Develop mass transit Decrease in CO2 Local air quality benefits systems in urban centers emissions from transport sector Reduction NOx Health benefits emissions Reduction in particulate matter 26 4. Climate policies in the energy sector: Co-benefit opportunities Policy action Global climate Local co-benefits Co-costs References benefits Policies to reduce CO2 emissions Carbon tax Reduction in CO2 Reduction in particulate concentrations, SO2 The carbon tax may lead to Garbaccio, R.F., M.S. Ho and emissions and thus local air pollution benefits. higher prices for electricity and D.W. Jorgenson (2000) Reduction in premature deaths and cases of modern fuels leading to bronchitis increase in use of biomass and other traditional fuels and thus increased indoor air pollution and health costs. Carbon tax on crude oil Reduction in CO2 Increase in price of crude oil Mazzi, E., and H. emissions may lead to increase in oil Dowlatabadi (2005), prices and consequent increase in use of solid fuels and biomass which results in indoor air pollution and health impacts Carbon pricing Reduction in CO2 Reduction in SO2 and particulate matter Garg, and others (2003) emissions concentration and health benefits Combining CO2 emission CO2 reduction When tCO2 reduction is combined with LAP Chae, Y., (2010) reduction policies with improvement policies the total costs were local air quality found to be less and thus results in a win-win improvement programs situation Integrated mitigation of GHG gas emission Integrated mitigation of SO2, NOx and CO2 Van Harmelen and others SO2, NOx and CO2 to reduction could reduce average air pollution control (2002) achieve the LAP and GHG costs significantly emission reduction targets Emission trading CO2 Emission Savings in local air pollution control costs Van Vuuren and others mechanisms to control reduction under (2006) Kyoto scenarios Introduction of a global Global GHG emission Co-benefits could cover a sizable part of the Bollen and others (2009) carbon price reductions mitigation costs and avoided costs of LAP policies 27 Promotion of renewable energy Tap into wind energy for Avoided emissions Local air quality benefits Loss of aesthetic values electricity generation from electricity generated from wind sources Generation of electricity Impacts on avian species from hydro-power plants Solar power generation Sewage and biogas Avoided emissions Indoor air quality benefits from substitution Borjesson (1999); Eriksson energy for electricity from electricity of kerosene lamps and Ledin (1999) generation for lighting generated Use of geothermal, Avoided emissions energy from seawater from electricity currents generated Generation from landfill Reduction in CO2 and Local air quality benefits gases methane emissions New/improved Reduction in CO2 Reduction in local air pollution from SO2 and Aunan et al. (2004) technology-CO2-abating emissions Nox and consequent health benefits for coal based power plants- Clean coal technology, co- generation, Modified boiler design, Boiler replacement, Improved boiler management, Coal washing, and Briquetting Fuel switching from coal Reduction in CO2 LAP and health benefits from reduced fired power plants to less emissions Particulate Matter, SO2 and other local air CO2 intensive pollutants technologies Carbon capture from Reduction in CO2 Reduction in local air pollution from SO2 and large point sources- emissions Nox and consequent health benefits Installation of carbon capture mechanisms 28 5. Climate policies in water and waste water: Co-benefit opportunities Policy action Global climate Local /cobenefits Co-costs References benefits Improve efficiency of Reduced energy Water conservation Canadian Water and distribution usage inwater sector Wastewater Association, 2009 Hydropower generation Avoided GHG Ecological impacts on IPCC (2007) emissions Flow regulation and flood control catchment areas, ecosystems Availability of water for irrigation during dry Impacts on river ecosystems seasons Raise bio-energy crops Reduce methane and Local air quality benefits Borjesson (1999) Eriksson with waste water and landfill gas emissions and Ledin (1999) slufge Habitat for biodiversity in the agricultural landscape Soil carbon accumulation Improved soil fertility Removal of cadmium and other heavy metals from soils or wastes Note: Global climate benefits mentioned above include other adaptation and mitigation benefits. 29 Annex 2: Summary of results from the FY 09 and FY10 Portfolio Review Objective A portfolio review was undertaken as part of the study to identify co-benefits with adaptation to and/or mitigation of climate change in the projects targeted to environment protection and vice versa. Methodology Projects reviewed are either those approved or in pipeline in FY 10 (as of May 10, 2010) under the product line of IBRD, IDA, GEF and GEF medium size. In addition, FY09 projects review was done with Energy, Transport, and Water sector to underpin the review. These sectors are selected according to the results of the literature review indicating stronger linkage with climate change than other sectors. Projects selected were filtered for Environment Theme Codes (Biodiversity, Climate Change, Environmental policies and institutions, Land administration and management, Pollution management and environmental health, Water resources management, Other environment and natural resource management) to find the benefits for adaptation to and mitigation of climate change in environment-related portfolio, and environment benefits of climate-related projects. Projects screened in this way are 155 in total with 103 for FY10 and 52 for FY09, which excluded the projects without project document available. In this study, co-benefits were assessed simply by reviewing project documents for their project objectives, thematic coverage and project components. The assessment was undertaken in a relatively conservative way. Environmental benefits were reviewed in terms of quality of environmental media, the flow of ecosystem services and maintenance of biodiversity, in consistency with the framework of this study. Mitigation benefits were assessed against emission reduction of greenhouse gases (e.g. CO2, methane and nitrous oxide), while quantitative assessment of the reduced amount is not attempted. In this study, projects addressing “Mitigation benefits” are limited to those being explicit in emission reduction. On the other hand, identifying adaptation benefits in project documents was more challenging since adaptation efforts are highly integrated in the development projects and currently no indicator exists, as opposed to mitigation. For instance, an intervention strengthening resilience to increased risk of drought would constitute adaptation measures to climate change only if future climate is taken into account, and it fits the future climate scenario projected. However, due to its time-lag, the risks posed by climate change are often missed out. Aware of the complexity, this study limits the boundary of projects with “adaptation benefit” to those explicitly addressing strengthened resilience/adaptation to changing climate. 30 Findings Overall Some of the project documents reviewed provide a partial to full listing of co-benefit opportunities. Projects with adaptation co-benefits are found most in agriculture and water sector. Mitigation co-benefits are found most in energy sector followed by waste management, agriculture and transport sector. Multi-benefit projects (with mitigation, adaptation and environment benefits) are limited to agriculture sector. In general, the adaptation benefit has been sought through the activities such as capacity building, awareness raising or institutional strengthening as opposed to the mitigation benefits with emission reduction. Projection of future climate or estimated emission reduction was hardly undertaken except for GEF-financed of carbon financed projects. Few project PADs provide qualitative analyses of co-benefits. Co-benefits projects reviewed are distinguished by its project design into two; projects addressing both climate and environment benefits simultaneously by using a single technology/technique under one component and projects bringing co-benefits at project level by attaching environment components into climate component and vice versa. An example of the former includes rehabilitation projects of coal-fired plant to introduce more efficient technology resulting in improved air pollution and emission reduction of carbon dioxide. The latter, on the other hand, includes methane capturing from landfill gas with consideration with leachate prevention which provides additional benefit to simple mitigation project. Almost all the project identified falls into the second category. Several projects address multi benefit with mitigation, adaptation and environment. Most multi- benefit projects are mapped under agriculture or forestry sector, which improve carbon sequestration and reduce farmers’ vulnerability to changing climate, while improving soil productivity, reducing soil erosion, or conserving biodiversity. Water sector is another potential area for multi-benefit but no project was identified in this study. Co-benefits for each sector Water sector projects bring adaptation benefits in some cases through strengthening the resilience to increased weather variability (e.g. flood or drought). A Small hydroelectric project in Honduras is expected to bring social and environmental (both air and water) benefits as well as the mitigation benefit. A water resources management project in Peru aims to improve the resilience to expected impacts of climate change, such as increased variability of runoff and intensification of floods and droughts. However project review showed that some opportunities for addressing co-benefits with climate action seem to exist though are not explicitly addressed, as the case of flood and watershed management project in China - that contributes to strengthening resilience to flood but did not explicitly address adaptation to a changing climate. Agriculture sector projects present a unique opportunity to capture all of the benefits on adaptation, mitigation and environment including improved productivity, sustainability and 31 adaptation of agricultural sector under changing climate, prevention of land degradation, soil erosion, biodiversity conservation and carbon sequestration. Co-benefits projects under this sector cover wide range of project from small methane capturing from livestock waste management to large scale land management projects. For the forest sector, quite a few projects under the Forest Carbon Partnership Fund and GEF projects are seeking these multi benefits, though their main objectives and approaches are different. The objectives of the energy sector projects reviewed were mainly increasing efficiency of power plants, upgrade and rehabilitation of coal-power plant, biogass power generation, gas flaring reduction and so on. Climate benefit of energy projects is emission reduction of carbon dioxide (CO2) associated with energy generation and its environmental benefit is air pollution reduction such as NOx, Sox or PM, often resulting in improved health impact. Estimated environmental benefits brought about by the projects are highly dependent on the alternative technologies to be compared with or the existing technologies to be replaced. The largest number of mitigation co-benefits project falls under energy sector and the hurdle for addressing co-benefits seem to be lowest in light of the fact both benefits can be easily assessed quantitatively. Thermal Power Efficiency project in China, for example, quantified benefits both for climate and environment to be incorporated into project economic analysis. Objective of Transport project includes inducing mode switching away from private vehicles, reduced road congestion, improved air quality and CO2 reduction. Co-benefits opportunities explored are relatively large. As seen in a landfill gas recovery project in Philippines, and a livestock waste management project and wastewater management project in Thailand, emission prevention or recovery of methane gas can create carbon credits in a cost effective way, while improving environment quality through cost effective waste or environment management. The general objectives of projects that fell under the theme natural resource management are improved management of flora and fauna, natural habitats, watershed and landscapes through capacity building, empowerment of communities, development of institutions and direct assistance. The co-benefits identified include sustainable management of water, land and natural resources and adaptation benefits, improved productivity and sustainability of ecosystems, biodiversity conservation, reduced flooding; watershed management. Financing The review showed that the funding source is a determinant in the treatment of co-benefit opportunities. For instance, the GEF additional grant funds must, as per the conditions for GEF financing contribute to global environmental benefits as well as local benefits and hence co- benefit opportunities tend to be mainstreamed in GEF projects. In particular, GEF financing seems to help exploring adaptation opportunities more than others (Table 1). 32 Table 1: Link of funding sources with co-benefits co-benefits co-benefits benefits w/ Total # of co-benefits projects w/ w/ adaptation co-benefits of all (env and adaptation mitigation &mitigation cc) projects IBRD/IDA 7 10 2 19 26.7% of (71 projects) Carbon offset 0 18 2 20 62.5% (of 32 projects) GEF 8 9 6 23 44.2% of (52 projects) The review further showed that carbon funding plays a key role in addressing environmental co- benefits of mitigation actions. About a half of co-benefits projects for mitigation are financed by various carbon funding. Above others, Community Development Carbon Fund, aiming at extending the benefits of carbon finance to the poor communities, would be characterized for its innovative project with co-benefits for local environment. One of the imperatives for carbon financing in addressing environmental co-benefits is scaling up the projects that are relatively small Considering also that some projects categorized under IBRD/IDA project line are co-financed by other funds such as Climate Technology Fund, financial incentives such as GEF or carbon financing are critical in addressing the climate-benefits. A scheme for covering incremental cost for monitoring or assessing emission reduction or resilience to changing climate would enable to explore huge opportunities for climate benefits in existing environment portfolio and vice versa. As seen in table 2 below, more of mitigation co-benefits are addressed through exploring environmental consideration in mitigation actions rather than through exploring mitigation benefits in environment interventions, considering the ratio for aggregate cc-themed and aggregate env-themed is opposed to the ratio of mitigation co-benefits. This might be because more demand for incorporating environment benefits comes from client countries compared with the demand for addressing mitigation benefits. Table 2: Climate change action with environment benefit(s) VS environment action with climate change benefit(s) adaptation and (Total # of projects adaptation mitigation mitigation reviewed) thm1 =cc 4 27% 29 78% 5 50% (49) thm1=other env. 11 73% 8 22% 5 50% (107) Total 15 100% 37 100% 10 100% For co-benefits project with adaptation, further analysis is required, to find which approach are taken more often than the other of the path starting from environment or the path starting from climate change. 33 Regional distribution The percentage of co-benefits projects of all environment-targeted projects (including climate change) range from about 20% to 60%. The rationale for this diversity could not be identified through reviewing project documents, and more detailed analysis is necessary. In all regions except for MENA, the number of mitigation projects exceeds those for adaptation. Other findings The operational policy of the World Bank requires completion of an Environmental and Social Impact Assessment and development of plans to mitigate such adverse impacts. However, the operational policies do not suggest valuing the co-benefits and mainstream these opportunities in project design and evaluation. The review shows that while environmental impact assessments flag adverse impacts, co-costs, the co-benefits are not given credit. There is no guidance on quantification of environmental co-benefits in project design and appraisal. So there is a need to develop guidance and tool to maximize these benefit opportunities for the client countries, in some cases with only marginal investments. Some projects seem to have addressed the global benefits to maintain the consistency with CAS. Climate change DPL in Indonesia is innovative as it highlights and promotes bringing the co- benefits of climate action for environment improvement. Higher strategy or broader policy lending might be a vehicle for co-benefits projects that is influential over individual projects. Institutional arrangement might be another key (i.e. engagement by institutions in charge of climate change), though the supporting information was not obtained from the review. Many unique and innovative projects addressing mitigation and other environmental concerns were found under carbon offset project. Most of these projects are in pilot phase and relatively small in their size. Scaling-up these relatively small projects would be another imperative to overcome. 34