XJDp 2 2 9 224 HI World Bank Discussion Papers Toward an Environmental Strategy for Asia Carter Brandon Ramesh Ramankutty Recent World Bank Discussion Papers No. 166 The Buildinq' Blocks of Participation: Testing Bottotn-uip Plannitng. Michael M. Cernca No. 167 Seed System Developtnent: The Appropriate Roles of thie Private and Public Sectors. Steven Jaffee and Jitendra Srivastava No. 168 Enviroanietital Mantangetnetit and Urban Vuinerability. Alcira Kreimcr and Mohan Munasinighe, cditors No. 169 ComotnOt Property Resources: A Missing Dimeinsion of Developn7ent Strate ies. N. S. Jodha No. 170 A Chtinese Province as a Refonn Expertinent: The Case of Hainan. Paul M. Cadario, Kazuko Ogawa, and Yin-Kani Wen No. 171 Issuesfor lInrastructure Manayefnent in tle 1990s. Arturo Isracl No. 172 Japanese National Railiways Privatization Study: The Experience ofjapan and Lessonsfor Developin,g Countries. Koichiro Fukui No. 173 The Livestock Sector in Eastern Europe: Constraints and Opportunities. 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Edward Elmcndorf No. 182 Privatization Problems at Industry Level: Road Haulage in CentIral Europe. Esra Bcinathan and Lotus S. Thompson No. 183 Participatory Developtrent and thle World Batik: Potential Directionsfar Change. Bhuvan Bhatnagar and Aubrey C. Williams, editors No. 184 Agriciltiral Researclh in Southern Africa: A Framewvorkfor Action. Andrew Spurling, Teck Y. Pee, Godwin Mkamanga, and Christopher Nkwanyana No. 185 Military Expenditiure and Ecotiomic Developtnerit: A Symposiumtti oan Researcih Issues. Edited by Geoffrey Lamb with Valeriana Kallab No. 186 Efficiency and Suibstitutioni in Pollutiont Abatemetit: Thlree Case Studies. Dcnnis Anderson and William Cavendish No. 187 The State Holding Company: Issuies a,id Options. Anjali Kumar No. 188 Indigenouis Viewvs of Land and thte Enlvirotinetit. Shelton H. Davis, cditor No. 189 Poverty, Population, atid tle Envirotitnenit. Stephen D. Mink No. 190 Natiural Gas in Developitig Cowntries: Evaluating the Beniefits to the Environmenit. John Homer No. 191 Appropriate Mfacroecontomic Management int Indotnesia's Open Economy. Sadiq Ahmed No. 192 Teleconmunications: World Bank Experience and Strategy. Bjorn Wcllenius and others No. 193 Infortnationt Systems Strategiesfor Puiblic Finaticial Management. Hywel M. Davies, Ali Hashim, and Eduardo Talero No. 194 Social Gaitisfrom Fetnale Education: A Cross-National Stuidy. K. Subbarao and Laura Raney (Continued on the inside back cover.) 224 121 World Bank Discussion Papers Toward an Environmental Strategy for Asia Carter Brandon Ramesh Ramankutty The World Bank Washington, D.C. Copyright © 1993 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. 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Permission to copy portions for classroom use is granted through the Copyright Clearance Center, Inc., Suite 910, 222 Rosewood Drive, Danvers, Massachusetts 01923, U.S.A. The complete backlist of publications from the World Bank is shown in the annual Index of Publications, which contains an alphabetical tide list (with full ordering information) and indexes of subjects, authors, and countries and regions. The latest edition is available free of charge from the Distribution Unit, Office of the Publisher, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66, avenue d'1ena, 75116 Paris, France. ISSN: 0259-21OX In the Environment and Natural Resources Development Division in the Asia Technical Department of the World Bank, Carter Brandon is an environmental economist and Ramesh Ramankutty is an economist. Library of Congress Cataloging-in-Publication Data Brandon, Carter, 1954- Toward an environmental strategy for Asia / Carter Brandon, Ramesh Ramankutty. p. cn. - (World Bank discussion papers, ISSN 0259-21OX 224) Includes bibliographical references. ISBN 0-8213-2735-6 1. Environmental policy-Asia. 2. Environmental protection-Asia. I. Ramankutty, Ramesh, 1960- . II. Tide. III. Series. GE190.A78B73 1993 363.7'0095-dc20 93-44599 CIP CONTENTS FOREWORD vii ABSTRACT ix ACKNOWLEDGMENTS x ABBREVIATIONS. ACRONYMS AND DATA NOTES xi EXECUTIVE SUMMARY 1 INTRODUCTION 19 1 THE STATE OF THE ENVIRONMENT IN ASIA 21 Trends and Impacts of Environmental Degradation 21 The Underlying Causes of Environmental Degradation 27 2 A FRAMEWORK FOR IMPROVING ENVIRONMENTAL MANAGEMENT 33 Actions Required 33 "Top-Down" Versus "Bottom-Up" 41 Economic and Social Impacts of Improved Enviromnental Management 43 3 URBAN ENVIRONMENTAL MANAGEMENT 47 Urbanization in Asia 47 Tackling Key Environmental Problems 52 Institutional Framework 56 The World Bank's Role in Urban Development 59 4 APPROACHES TO INDUSTRIAL POLLUTION 65 Overview of the Problem 65 Addressing Pollution Problems 73 The World Bank's Role in Pollution Abatement 83 5 MINIMIZING ENERGY SECTOR IMPACTS 89 The Energy and Power Sectors 89 Minimizing Energy Sector Environmental Impacts 96 Technical Approaches to Cleaner Energy 102 Mitigating the Environmental Impact of the Asian Energy Sector 108 The World Bank's Role in Energy and the Environment 109 6 NATURAL RESOURCES MANAGEMENT: LAND, FORESTS AND BIODIVERSITY 115 Land Resource Problems 115 Underlying Causes of Natural Resource Degradation 122 A General Strategy for Natural Resource Management 127 Technical Approaches to Land Resource Management 129 The World Bank's Role in Natural Resource Management 134 7 WATER RESOURCE MANAGEMENT 139 Water Resource Problems 139 Environmental Considerations in Water Resource Development 144 A Comprehensive Framework for Water Resource Management 147 The World Bank's Role in Water Resource Development 153 8 THE WORLD BANK ENVIRONMENTAL STRATEGY 159 Setting Priorities-an Ongoing Process 159 Priority Areas for Investment 159 Beyond Project Lending 162 New Analytical Work 165 Next Steps 166 APPENDIX A: Statistical Profile of Key Environmental Issues in Asia 169 APPENDIX B: Analysis of the World Bank Project Pipeline (Fiscal 1993-95) 189 APPENDIX C: Environmental Activities by Various Donors in Asia 197 BIBLIOGRAPHY 201 TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA iv BOXES Box 1: World Bank Priorities for the Environment 15 Box 1. 1: Water Pollution in New Delhi 22 Box 1.2: Megacities in Asia 31 Box 2.1: An Analytical Approach to Setting Priorities 34 Box 2.2: Policy and Entrepreneurial Responses to the Montreal Protocol: Evidence from the Dynamic Asian Economies 36 Box 2.3: Potential Gains from Forestry Policy Reform in Indonesia 37 Box 2.4: "Best Practices" for Strengthening Environmental Institutions 39 Box 2.5: Examples of Commercial Credit for Pollution Control 40 Box 2.6: Approaches to Making Environmental Interventions More Self-Financing 41 Box 2.7: Global Enviromnental Operations 42 Box 2.8: Technological Requirements for Improving the Environment 43 Box 2.9: A Framework for Improving the Environment 44 Box 3.1: Sewage Treatment in India 49 Box 3.2: Institutional Arrangements in Jakarta 56 Box 3.3: The Metropolitan Environnental Improvement Program (MEIP) 58 Box 3.4: The Beiing Environment Project 60 Box 3.5: The East Java/Bali Urban Development Project 61 Box 3.6: Mass Transit and the Asia Urban Transport Agenda 61 Box 3.7: The Singrauli Development and Environmental Strategy Study 61 Box 3.8: Urban Environmental Projects in Asia 63 Box 4.1: Industrial Pollution in Beijing 66 Box 4.2: Leather Tanning in Asia 69 Box 4.3: Water Pollution from the Iron and Steel Industry in India 69 Box 4.4: Industrial Pollution in Surabaya, Indonesia 70 Box 4.5: Industrial Accident at Bhopal 71 Box 4.6: Industrial Pollution and Health in Thailand 72 Box 4.7: Industrial Output Share of Small- and Medium-Scale Industries 74 Box 4.8: The Pollution Discharge Permit System in Beijing 75 Box 4.9: Subsidies and Industrial Pollution Abatement: Why and When 77 Box 4.10: Cost-Effective Clean Technology Investments in the United States 81 Box 4.11: Industrial Pollution Project in India 82 Box 4.12: The Chronology of Pollution Control: A Case Study from Malaysia 83 Box 4.13: Direct Lending for Industrial Pollution Management 86 Box 5.1: Demand-Side Management 100 Box 5.2: Energy Efficiency in China 101 Box 5.3: The Prospects of Nuclear Power in Asia 105 Box 5.4: Innovative World Bank Alternative Energy Projects 110 Box 6.1: Types of Land Degradation 117 Box 6.2: Impacts of Deforestation 125 Box 6.3: Subsidies on Agricultural Inputs 125 Box 6.4: The Relationship Between Land Tenure and Conservation in Asia 126 Box 6.5: Elimination of Pesticide Subsidies in Indonesia 130 Box 6.6: Salinity Control and Reclamation Projects (SCARPS) in Pakistan 130 Box 6.7: Vetiver Grass 132 Box 6.8: Vetiver Network 135 Box 7.1: Water Demand in India 140 Box 7.2: Water Quality Constraints in the Hun-Taizi River Basin 142 Box 7.3: Increasing Costs of Water Supply in Chinese Cities 142 Box 7.4: Pollution in Hlangzhou Bay and Zhousan Fishing Area 142 Box 7.5: Ecological Damage Due to Low Water Flows 144 Box 7.6: Overdevelopment of Water Resources in South India 144 Box 7.7: South to North Water Transfers in China 146 Box 7.8: Land Subsidence in Bangkok 147 Box 7.9: Water User Associations 150 Box 7.10: Environmental Impact Assessment of the Pak Mun Hydropower Project in Thailand 151 Box 7.11: World Bank Role in Water Resource Management 155 Box 7.12: Future World Bank Research Projects 156 Box 8.1: World Bank Priorities for the Environment 160 Box 8.2: Innovative Institutional Strengthening Projects 163 v CONTENTS Box 8.3: The National Environmental Action Plan for Sri Lanka 164 Box 8.4: Revising Environmental Standards 165 Box 8.5: Priority Areas For Additional Environment-Related Analytical Work 167 Box B.1: What are Environment Projects? 189 Box B.2: Traditional Versus Newer Approaches to World Bank Environmental Lending 193 FIGURES Figure 1.1: Emissions in Greater Bombay 23 Figure 1.2: Incremental Carbon Dioxide Emissions 1990-2000 24 Figure 1.3: Current and Projected SO2 Emissions 25 Figure 1.4: Solid Waste Generated in Asian Cities 26 Figure 1.5: Population Growth 30 Figure 1.6: Number of Poor 30 Figure 1.7: Growth of Urban and Rural Populations in Asia 1965-2025 31 Figure 3.1: Number of Cities in Asia by Size, 1960-2000 47 Figure 3.2: Incidence of Poverty in India 1961-89 48 Figure 3.3: Total Motor Vehicles in Use in Selected Asian Countries 50 Figure 3.4: Total Bank Lending and Bank Finance of Environmental Components for Urban/Infrastructure Projects in the Asia Region, Fiscal 1990-92 and Fiscal 1993-95 62 Figure 4.1: Estimated Total Pollution in Selected Asian Countries 67 Figure 4.2: Geographic Distribution of Industrial Output 68 Figure 4.3: Industry Toxicity Indicators 73 Figure 4.4: Total Bank Lending and Bank Finance of Environmental Components for Industry Projects in the Asian Regions, Fiscal 1990-92 and Fiscal 1993-95 84 Figure 5. 1: Growth of Electricity Consumption and GDP in Selected Asian Countries 1980-90 89 Figure 5.2: Total Energy Requirement in Asia, 1989 90 Figure 5.3: Energy Consumption in Asia 1989 91 Figure 5.4: Projected Carbon Dioxide Emissions, 1990 and 2000 93 Figure 5.5: Current and Projected SO, Emissions 94 Figure 5.6: Household Energy Ladder for South Asia 95 Figure 5.7: Energy Intensity in Asia (1989) 99 Figure 5.8: Range of Costs in Power Generation 106 Figure 5.9: Range of Incremental Costs of Emission Control 106 Figure 5.10: Cost of Electricity in Rural Areas 108 Figure 5.1 1: Total Bank Lending and Bank Finance of Environmental Components for Energy Projects in the Asian Regions, Fiscal 1990-92 and Fiscal 1993-95 II1 Figure 6.1: Cereal Production Increase, Broken Down into Yield Increase and Area Expansion, 1961-90 116 Figure 6.2: Deforestation, 1981-90 120 Figure 6.3: Bank Lending in Land Resources in the Asian Regions 135 Figure 7.1: Per Capita Availability of Water in Selected Asian Countries 141 Figure 7.2: Major River Basins in Asia 141 Figure 7.3: Freshwater Withdrawals by Sector in Selected Asian Countries 143 Figure 7.4: Annual Withdrawal of Water Resources 143 Figure 7.5: Large Dams in China and India 145 Figure 7.6: Enviromnental Impacts of Interbasin Transfers 146 Figure 7.7: Conserving Water as an Alternative to Expanding Supply in Beijing 149 Figure 7.8: Lending for Water Resources in the East Asia and South Asia Regions 154 Figure 8.1: Amount of Bank Lending for Environment Projects and Environmental Components in the Asian Regions by Sector, Fiscal 1993-95 161 Figure 8.2: Amount of Bank Lending for the Environment, Fiscal 1990-95 162 Figure 8.3: Applying the Asia Environmental Strategy 168 Figure B.1: Total Bank Lending and Bank Finance of Environmental Components in the Asian Regions 191 Figure B.2: Amount of Bank Finance for Traditional and New Environmental Projects in Asia by Sector, Fiscal 1990-92 and Fiscal 1993-95 192 Figure B.3: Bank Lending in the Brown Sector Asian Regions, Fiscal 1990-92 and Fiscal 1993-95 194 Figure B.4: Bank Lending in the Green (Natural Resources) Sector Asian Regions, Fiscal 1990-92 and Fiscal 1993-95 195 Figure C. 1: Amount of Combined Donor Environmental Funding in Asia, 1991 197 TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA vi TABLES Table 1.1: Air Pollution in Asian Cities 22 Table 2.1: Estimates of Additional Investment Required for the Environment in Asia by 2000 40 Table 3.1: Contribution of Motor Vehicles to Air Pollution in Selected Asian Cities 50 Table 3.2: Solid Waste Generated in Asian Cities 51 Table 3.3: Annual Cost of Congestion and Air Pollution in Some Asian Cities 52 Table 3.4: A Taxonomy of Instruments to Control Automotive Air Pollution 54 Table 3.5: Urban Mass Transit Systems in Asia 55 Table 4.1: Industrial Production Growth Factors in Asian Economies, 1965-90 65 Table 4.2: Growth Factors of Toxicity Intensity of Production 74 Table 4.3: Agencies and Legislation for Industrial Pollution 75 Table 4.4: Market-Based Policy Instruments to Reduce Pollution 76 Table 4.5: Direct Industrial Lending in Asia, 1989-95 85 Table 5.1: Major Direct and Indirect Environmental Impacts of Fossil Fuels 92 Table 5.2: Acid Rain in Asia 94 Table 5.3: Energy Pricing in Selected Asian Countries 98 Table 5.4: Costs of Renewable Electricity, 1980-2030 107 Table 5.5: Estimated Carbon Dioxide Emissions from the Use of Fossil Fuels in Asian Developing Countries 109 Table 5.6: Energy Sector Projects with Environmental Components 110 Table 6.1: Countries in Asia with Extensive Grassland 116 Table 6.2: Forest Areas in Asian Countries, 1989 117 Table 6.3: Estimates of Land Affected by Soil Degradation in Selected Asian Countries 117 Table 6.4: Area Affected by Shifting Cultivation in Asia 121 Table 6.5: Loss of Original Habitat in the Indo-Malayan Realm 122 Table 6.6: Countries in Asia Which Do Not Meet Basic Dietary Requirements 123 Table 7.1: Bank-supported Water Resources Development Projects by Country and Type (1948-90) 154 Table 8.1: Current and Planned Economic and Sector Work (ESW) with an Environmental Emphasis, 1993-95 166 Table A. 1: Basic Indicators 170 Table A.2: Structure of Production, 1965 and 1990 171 Table A.3: Growth of Production, 1965-80 and 1980-90 172 Table A.4: Total Population and Average Growth Rate, 1960-2025 173 Table A.5: Population (1950-2000) of UrbanAreas inAsia with 4 Million or More Inhabitants in 1990 174 Table A.6: Urban Population in Asia, 1960-2025 175 Table A.7: Access to Safe Drinking Water and Sanitation in Urban Areas in Asia, 1988 176 Table A.8: Total Motor Vehicles in Use in Selected Asian Countries, 1965-89 177 Table A.9: Energy Consumption in Asia, 1980-90 178 Table A.10: Fossil Fuel Consumption in Asia, 1990 179 Table A.I 1: Power Sector: Projected Installed Capacity (1999) andAverage Annual Growth Rate (1989-99) 180 Table A.12: Structure of Manufacturing, 1970 and 1989 181 Table A. 13: Share and Growth of Some "Dirty" and "Clean" Industrial Sectors in Selected Countries in Asia 182 Table A. 14: Selected Air and Water Quality Indicators 183 Table A. 15: Land Use in Asia, 1989 184 Table A.16: Cropland in Asia, 1989 185 Table A.17: Area Expansion and Yield Effects of Cereal Production, 1961-63 and 1988-90 186 Table A.18: Fertilizer Consumption, 1961-63 and 1987-89 187 Table C. 1: Environmental Activities in Asia by Different Donors, 1991 198 FOREWORD During the past decade, the developing countries of Finally, Asian countries have shown a commitment Asia have exhibited vigorous economic growth un- to health and education. This commitment not only matched elsewhere in the industrial or developing helps create a popular base for environmental activ- world. This impressive record, however, has been ism but also lays the foundation for building capac- marred by significant deterioration of the environ- ity in the region's environmental institutions. ment. Rapid growth-especially in the region's cit- At this point, what is most needed is the politi- ies and industries-has combined with high popula- cal will, commitment, and action-in the form of tion densities and widespread poverty to produce investments, education, and policy reform-to re- excessive environmental degradation. Pollution of verse the alarming environmental degradation still air, water, and land exceeds WHO safety guidelines being observed. The World Bank is committed to in many Asian cities. Land degradation, deforesta- providing analytical, financial, and educational assis- tion, and loss of biodiversity are widespread. tance to help shape these environmental actions over The environment in Asia is one of the greatest the next several critical years. This Discussion Paper development challenges in the world today. The rea- is part of the Bank's effort to assist countries in Asia son is not only the complexity of environmental is- in developing environmentally sound development sues themselves but also the complex linkages be- strategies. The Executive Summary was published as tween growth, population, poverty, and the a separate booklet (under the same title) to encour- environment. Asia has already dramatically shown age wider distribution. that economic growth can reduce population growth Toward an Environmental Strategy for Asia is rates and the incidence of poverty. However, to sus- intended to stimulate discussion on important envi- tain the recent economic gains, greater priority will ronmental policy and investment issues. It stops short need to be given to the development of sound envi- of giving definitive recommendations for any particu- ronmental policies and of public and private institu- lar country, as this is beyond the scope of the exer- tions capable of implementing these policies. cise. By building on the World Bank's experience and Although the environmental challenge is formi- analytical work in Asia, it offers a set of principles dable, there are also opportunities in Asia that do not and priorities for addressing key enviromnental prob- exist in many other parts of the world. First, of course, lems in Asia. In addition to being informative, it is is the high rate of growth itself, combined with a high our hope that this document contributes to the debate rate of domestic savings, which provides public and on environmental priorities, the role of the World private capital to invest in the necessary technologies. Bank and other donors, and the need for concerted Second, in East Asia the incidence of poverty is fall- action across several fronts. ing dramatically-from 30 percent of the population in 1970 to only 10 percent today. Third, Asian coun- tries have generally embraced the principles of sound 0 4Wi macroeconomic management. Good economic poli- cies are, by and large, environmentally sound. In addition, the economic management skills demon- Daniel Ritchie strated in Asia form the basis for additional policies Director that will be required to safeguard the environment. Asia Technical Department ABSTRACT This paper addresses the need arising from both greaterlatitudeto address theirenvirounental prob- within and outside the World Bank for a document lems than others. that discusses the natur and magnitude of environ- The paper proposes a framework for ac- mental problems in Asia, explores technical and complishing improved environmental manage- policy approaches to solving these problems, and ment. The first of its five components is the need documents World Bank experience in assisting to set priorities-an obvious but difficult step im- Asian countries to deal with environmental prob- posed by shortages of financial and administrative lems. The paper does not set out specific strategies resources. The paper then addresses the four key for any particular country, as that would be beyond components of national environmental strategies: its scope. It does, however, make a clear statement designing cost-effective policy instruments; im- on World Bank principles and priorities for the near proving institutional capacity; increasing public future. and private sector investments; and improving tech- Economic growth and population densities nology, even in areas not fully supported by the have had severe negative impacts on the Asian en- market. This framework is then applied to specific viromnent. Pressure on the region's resources is sectoral issues in the urban, industry, energy, agri- intense and growing. There are serious problems culture, forestry, biodiversity, and water sectors. in the areas of urban environmental degradation; The report emphasizes that there are real institu- industrial pollution; atmospheric emissions; soil tional and resource constraints in all sectors and that erosion and land degradation; water resource deg- any strategy to achieve greater sustainability must radation; deforestation; and loss of natural habitat. be continually updated as these constraints change. The real costs of environmental degradation are The last section of the report outlines the mounting in the form of increasing health costs and World Bank's role in assisting Asian countries to mortality, reduced output in resource-based sectors, address environmental issues. The environmental and the irreversible loss of biodiversity and over- focus of the Bank's lending program and analyti- all environmental quality. cal work has grown over the last several years, and The answer to these problems does not lie in is expected to grow further. The strategies em- tryingto stop the trends toward greaterurbanization ployed vary by country, as do the relative areas of and industrialization in Asia. Rather, these funda- emphasis (such as natural resource management vs. mental economic trends can be made far more sus- pollution abatement), partnerships with other do- tainable through targeted environmental policies nors, NGOs, and the private sector, and the role of and investments. In fact, Asia's achievements-its technical assistance. Still, there remain areas in relatively high levels of growth, economic effi- which there is potential for the Bank to do more, ciency, human resource development, and declin- as outlined at the end of the report. ing levels of poverty-give many Asian countries ix ACKNOWLEDGMENTS This report was prepared with the assistance of a Cadario, Christopher Couzens, Rob Crooks, grant from the Royal Norwegian Ministry of De- Maureen Cropper, Hennan Daly, Stephen Dice, velopment Cooperation, whose support is greatly Antonio Estache, Harald Frederiksen, Richard appreciated. Daniel Ritchie, Gloria Davis, and Grimshaw, Jeffrey Hammer, Christian Keil, Maritta Koch-Weser provided overall guidance. HemantaMishra, Glenn Morgan, Djamal Mostefei, The study was a collaborative effort that drew on Loretta Schaeffer, Richard Scurfield, Jitu Shah, the resources not only of the World Bank Asia En- Susan Shen, Sudhir Shetty, William Smith, An- vironment Division but also of the six country de- drew Steer, Carolyn Tager, Walter Vergara, David partments working in Asia. Wheeler, David Williams, Chong Hua Zhang, and The report was written primarily by Carter Yaacov Ziv offered critical comments, as did many Brandon together with Ramesh Ramankutty. It also others in the World Bank. These comments are incorporates background papers by the following gratefully acknowledged. Final editing and prepa- authors: Roger Batstone (Industry), Arthur Bruestle ration ofthe paper for publication were undertaken (Water), Jack Fritz (Energy), and Todd Johnson by Charlotte Maxey and Julia Lutz. Any remain- (Emissions). Salenna Wong provided invaluable ing errors or omissions are the responsibility ofthe research assistance. Jean Aden, Dennis Anderson, authors. Nick Anderson, Robert J. (Andy) Anderson, Paul x ABBREVIATIONS, ACRONYMS AND DATA NOTES ADB Asian Development Bank ml milliliter BAPEDAL Environmental Impact Management NEAP National Environmental Action Plan Agency (Indonesia) NGO Nongovernmental Organization BATEA Best Available Technology Economi- NIC Newly Industrialized Country cally Achievable N20 nitrous oxide BOD biochemical oxygen demand substance NO2 nitrogen dioxide BPT Best Practicable Technology ODA Official Development Assistance CD Country Department (World Bank) OECD Organisation for Economic Co-operation CFC chloroflourocarbon and Development CGIAR Consultative Group for International OECF Overseas Economic Cooperation Fund Agricultural Research (Japan) CO carbon monoxide O&M operation and maintenance CO2 carbon dioxide PFI participating financial institutions COD chemical oxygen demand substance R&D research and development DSM demand-side management SAL Structural Adjustment Loan EA environmental assessment SAR Staff Appraisal Report (World Bank) EGAT Electricity Generating Authority of SMI Small- and Medium-Scale Industries Thailand SO2 sulfur dioxide EOP end-of-pipe SPM suspended particulate matter EPA Environmental Protection Agency (U.S.) TA technical assistance ESCAP Economic and Social Commission for TRI toxic release inventory Asia and the Pacific TSP total suspended particulates ESW economic and sector work (World Bank) TSS total suspended solids FAO Food and Agriculture Organization TVEI Township and Village Industrial Enter- FGD flue gas desulfurization prises (China) FY fiscal year (July-to-June in the World UNDP United Nations Development Bank) Programme GDP gross domestic product UNEP United Nations Environment GEF Global Environment Facility Programme GHG greenhouse gas UNCED United Nations Conference on Environ- GNP gross national product ment and Development ha hectare USAID United States Agency for Intemational IAEA Intemational Atomnic Energy Agency Development ICDP integrated conservation and develop- WDR World Development Report (World ment project Bank) LEA International Energy Agency WHO World Health Organization IFAD Intemational Fund for Agricultural De- WRI World Resources Institute velopment IPPS Industrial Pollution Projection System IPM integrated pest management LPG liquified petroleum gas LRMC long-run marginal cost DATA NOTES MEIP Metropolitan Environmental Improve- All dollar figures ($) referto current US dollars unless oth- ment Program (UNDP and World Bank) erwise noted. MITI Ministry of Trade and Industry (Japan) Billion is equal to one thousand million. xi EXECUTIVE SUMMARY This report is intended to serve three purposes: (a) health costs and mortality, reduced output in re- to assess the trends and impacts of environmental source-based sectors, and irreversible loss of problems in Asia, (b) to synthesize policy and tech- biodiversity and overall environmental quality. nical approaches to solving these problems, and (c) These are strong statements about the state of to provide a clear statement on World Bank prin- the environment in Asia, but they are supported by ciples and priorities for envirornent-related assis- available (though incomplete) data. The most reli- tance in the near future. able data on existing levels of degradation are on After briefly summarizing the nature and specific locations and are not geographically com- magnitude of environmental problems in Asia, the prehensive. More comprehensive data, such as report presents the key components of a strategy national vehicle registration and total industrial to improve environmental management. The pro- emissions, do not address ambient conditions di- posed strategy is clearly general and emphasizes rectly btut help illustrate worrisome trends that will that local decisionmaking on priorities and types continue to worsen without targeted efforts to of interventions is required. The report also empha- change the direction of the trend. sizes that achieving sustainability is a process-a There are several underlying causes of envi- process thatmust work within real institutional and ronmental degradation in Asia. The first-which resource constraints, and therefore must be con- Asia shares with most of the world-consists of tinuously updated as these constraints change. Al- fundamental market and policy failures concem- though the environmental emphasis of the World ing natural resources and the environment that have Bank's lending program and analytical work has received little corrective action. These failures vary grown over the last several years, this report out- by resource and location, but are found in all sec- lines areas in which the Bank can potentially do tors. A second cause is the strain on the resource more. base imposed by Asia's large and growing popu- The State of the Environment in Asia lation, which is projected to rise from 2.8 billion today to 4.3 billion in 2025-and will represent Economic and population growth has led to severe over 50 percent ofthe total world population by that negative impacts on the Asian environment. Pres- time. This strain is exacerbated by the 700 million sure on the region's resources is intense and grow- people currently living in absolute poverty. A third ing. There are serious problems in the areas of ur- underlying cause is rapid urbanization and indus- ban environmental degradation, industrial trialization, which impose complex demands on the pollution, atmospheric emissions, soil erosion and assimilative capacity of the environment, as well land degradation, degradation of water resources, as on human and institutional abilities to respond. deforestation, and loss of natural habitat. Questions A fourth cause is the common perception (caused, about the sustainability of current economic growth in part, by lack of information) that there is a di- are more than an abstraction conceming limits to rect tradeoff between environmental protection and growth. The real costs of environmental degrada- economic growth. This paper argues that there is, tion are mounting, taking the forms of increasing in fact, no tradeoff: rational policies will cost less I TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 2 to implement than the resulting reduction in exter- tensity of public concern over risk. nal costs, leading to a net increase in economic Ultimately, governments must decide on the efficiency and social return on investment. basis of these inputs what level of environmental The environmental strategy presented here quality is politically and economically feasible and does not directly address population growth, al- what instruments should be employed in achiev- though decreasing the rate of population growth ing those environmental goals. The framework would reduce a major source of environmental proposed in this report highlights four key areas for pressures. Similarly, the report does not question consideration when shaping national environmen- Asia's steady urbanization and industrialization, tal strategies: adopting cost-effective policy instru- which reflect fundamental economic trends that can ments, improving institutional capacity, increasing be made far more sustainable. Rather, the strategy public and private sector investments, and foster- proposes a framework for taking steps to minimize ing improved technology, even in areas not fully the enviromnental impacts of these major eco- supported by the market. nomic trends. Policy Reform. The second element in the frame- A Framework for Improving work is to design cost-effective policy instruments that minimize costs and economize on scarce ad- The range of actions required to improve environ- ministrative skills. Environmentally appropriate mental management in Asian countries is ex- policies are not inconsistent with policies that fos- tremely wide, from using innovative policy analy- ter growth and trade, but they do attempt to cor- sis and implementation to securing large amounts rect the bias of market and policy failures that lead of new investment. The complexity of the actions to overexploitation of nonpriced and underpriced required, combined with real financial and institu- environmental resources. Although the exact de- tional constraints, means that the first element of scriptions and intensities of environmental prob- any framework must be to set priorities. lems vary by country, the underlying causes ofthe Actions Required degradation vary little. The causes can be traced to both market failures (such as lack of information, Priority Setting. Priorities for action are ideally price externalities, public goods and free riders, and based on the collection and analysis of available inadequate property rights) and policy failures data, careful valuation of the costs and benefits of (concerning pricing or trade policies). various types of interventions, assessment of the Policy reforms used to achieve improved administrative burden of alternatives, and partici- sustainability can be clustered into three distinct but patory decisionmaking. Unfortunately, it is much complementary groups: easier to analyze the symptoms of nonsustainable * Market-based policies, which use pricing, development than to make difficult choices con- taxes or marketable permits to modify ceming priorities for intervention. How should behavior countries set priorities between local and global * Regulatory or administrative policies that im- pollutants, and between policy reform and capital pose quantitative restrictions, enforce prop- investrnent? A full cost-benefit comparison of al- erty rights, and screen investments (both pub- temative scenarios is unrealistic because it requires lic and private) too much data and covers too many * Extraregulatory approaches to pollution con- hypotheticals. In practice, priorities are best set as trol, such as the introduction of public disclo- the result of a process involving both technical and sure requirements and the increased use of public inputs and taking into account scientific, court systems in environmental liability suits. economic, and medical evidence as well as the in- Most Asian countries have developed envi- 3 EXECUTIVE SUMMARY ronmental policies that draw heavily on the second cars. (These steps have all been taken in group-which is consistent with the traditional Singapore.) Further examples for both the transport path taken by the industrial countries as well-but and energy sectors are programs to upgrade tech- less so on the more innovative approaches of the nologies and fuels, such as the introduction of un- first and last groups. The emphasis on regulatory leaded gasoline in Malaysia and Thailand, switch- policies has had relatively high administrative ing from coal to natural gas in Seoul, and upgrading costs, as well as relatively low economic efficiency. to higher grade coal in China. For the agricultural For both reasons, efforts to encourage reform in the and forestry sectors, investments in technology other two groups promise both greater cost- development, information dissemination, and ex- effectiveness and better use of scarce administra- tension are required to introduce more sustainable tive skills. practices. Improved land titling and resource ten- The most important type of market-based ure also show positive correlation with environ- policy reform is pricing reform. "Full-cost" pric- mental management. ing (that is, removing subsidies and intemalizing Although interest is rising, Asian countries the extemalities imposed by the resource use or have turned only recently, when at all, to innova- pollution emitted) is fundamental to reducing the tions in the area of extraregulatory approaches to consumption of resources in virtually all sectors. pollution control. For example, requirements for Taxes or tradable permits levied on pollution and public disclosure of point-source pollution data can congestion are equivalent to raising the price on air, lead to direct negotiations between polluters and water, and land resources. Depending on the rel- communities, consumer boycotts or liability court evant elasticities, tax-based policies will lead to cases. Disclosure is relatively low cost, requires some increase in financial flows to the "owner" of relatively little direct government involvement, and the resource-which is often the govemment. invokes the power of the market into the environ- These revenues can be reinvested in the resource mental arena. (Increased local participation, how- itself, particularly in the case of investments in ever, is not a substitute for more comprehensive public infrastructure (for example, in water supply environmental policies.) Although specific ex- and energy) and public goods (such as air and for- amples of direct community participation in indus- ests). In addition, both price increases and fiscal trial pollution control have arisen across Asia, no instruments can help stimulate technological adap- country has formalized the right of communities tation that favors greater efficiency and reduced to know. pollution. Non-market-based policy reforms-includ- Strengthening Public Institutions. The third el- ing regulatory, legal, and administrative reforms- ement in the framework is to build sufficient insti- are required to complement market-based ones. No tutional capacity to accomplish the important steps country has relied solely on market-based environ- of priority setting and policy reform. Institutions mental policies to reduce pollution. The "command constrain the choice of policies. The policy mix and control" approach to pollution control, in which must be weighed not only against an analysis of the govemments specify allowable factory emissions efficiency of the approach but against a country's and often even specify the technologies to be used, ability to implement. Weak institutions typically is very common. Examples of other types of non- lack both the technical skills and political author- market-based reforms are nontax methods to re- ity to change the behaviors of firms, households, duce transport emissions and congestion, such as and farmers. Weak enforcement agencies often emissions standards, aggressive vehicle inspection lack both the information (such as emissions data) programs, traffic management, tighter zoning, and and the means (such as consistent and fair enforce- investments in public transit altematives to private ment capabilities) to implement policy. Weak le- TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 4 gal and administrative procedures undermine the ties. The overall costs of sustainable policies have government's ability to enforce resource tenure, been shown to be large in absolute numbers but particularly in agriculture and forestry. small in relative terms: the World Bank estimates Political commitment to protecting the envi- that developing countries need to expend 2 to 3 ronment is increasing throughout Asia. It is at the percent of gross domestic product (GDP) per year level of implementation-monitoring environmen- to achieve greater sustainability. In Asiathis trans- tal impacts and enforcing regulations-that lates into about $38 billion per year by 2000, two- government institutions are weakest. For donors, thirds of which would be in East Asia. The most an emphasis on institutions must mean more than financially viable environment-related investments working with environmental agencies: it also are those that are good for both economic devel- means commitment to the notion that environ- opment and the environment, including energy mental lending cannot be divorced from national conservation, waste minimization in industry (as policy and investment planning. Unfortunately, the opposed to end-of-pipe investments), recycling in countries most in need of environmental assistance the urban sector, fuel efficiency in the transport are often those with the least absorptive capacity. sector, soil conservation, and sustainable forestry. The technical areas in which Asian environ- Increased private sector investments should mental institutions need strengthening range from be promoted through pricing and policy reform and the ability to set standards and analyze policy at the through improved access of the private sector to national level to the ability to perform actual moni- commercial loans, to supplier credits and, under toring and enforcement at the local level. Most special r;rcumstances, to government incentives. environmental institutions would benefit from in- Public sector investment decisions should incorpo- viting broader participation-by the private sector, rate shadow prices that reflect the full social cost parastatals, nongovemmental organizations of resource use. In the case of public infrastructure (NGOs), and community groups-in environmen- investments, donor support should be contingent tal assessments and other activities. Also, decen- on financial plans that encourage project cost re- tralization is a well-established trend in Asia. The covery to the extent possible. When public invest- decentralization of monitoring and enforcement ments address cross-border or global problems, authority for urban environments and industrial such as global wanning, ozone depletion, pollution can be positive for the environment, but biodiversity, and pollution of the seas, strong ar- only if local agencies have adequate resources, guments exist for intemational cost-sharing. central support, and local accountability for achiev- ing their mandates. Similarly, the decentralization Improved Technologies and Technology Trans- of fiscal and planning authority for local infrastruc- fer. The last element of the basic environmental ture investments can bring public expenditures management framework is the need to foster tech- more into line with local environmental concems. nological improvements and efficiency gains, even However, decentralization is a particularly multi- when the research, development, and demonstra- faceted issue, and there are few successful Asian tion costs are not fully bome by the market. Im- case studies from which to draw convincing provements in productivity and efficiency are es- lessons. sential to making continued economic growth possible at a time of growing populations, urban- Increasing Public and Private Sector Invest- ization, and industrialization, and of an increasingly ment. The fourth element in the framework is to degraded resource base. mobilize private sector investment, in line with Economic and trade openness is fundamen- more sustainable pricing policies, and public sec- tal to technology transfer. In the polluting sectors tor investment, in line with environmental priori- (urban, transport, industry, and energy), "clean" 5 EXECUTIVE SUMMARY technologies will be most available in those Asian tal degradation: they are less buffered than the countries with open trade regimes and business nonpoor from water pollution, toxic wastes, solid climates that foster foreign investment. Since many wastes, high traffic, and air and noise pollution. high-efficiency industrial and transport technolo- Urban environmental investments will probably gies pay for themselves over a few years, relatively help the poor more than middle- and upper-income little public sector intervention is required (except city-dwellers. Therefore, investments in urban en- for, perhaps, information dissemination to smaller vironmental cleanup can be considered to be so- firms). However, in the "green" sectors (agricul- cially progressive. ture, forestry, and natural resources), public sec- However, in rural areas the poor are often tor involvement in technical issues has a much disproportionately, and usually inadvertently, the higher priority, especially for devising sustainable perpetrators of environmental degradation. The production technologies for marginal agricultural environmental policies required to bring about in- lands and forests. creased sustainability involve both positive and The Impact of Improved Environmental negative impacts on the poor. Reforms in land ten- Management on the Poor ure, to the extent that the poor gain tenure, would be positive. The truly landless, however, would be Strategies for achieving sustainability that use pric- increasingly cut off as others gain title. Solutions ing and regulatory measures to reduce to the landless poor have to be site and area spe- overexploitation of natural resources have direct cific. One trend that may help to relieve some of and often inequitable impacts. Concem about the the pressure in East Asia is that the rural popula- impact on the poor of improved environmental tion is actually decreasing as urban populations management is particularly great in South Asia, grow. A second trend that should be supported which has more than half the world's poor. through government and donorprograms is the di- This concem is similar to that of ensuring versification of rural employment into nonfarm ac- social equity during periods of structural adjust- tivities. Nonfarm employment is usually less re- ment. For both structural and "environmental" source-intensive than farming, and therefore has adjustment, efficiency considerations should be less environmental impact. Finally, expanded in- paramount. Nevertheless, adverse impacts for cer- tensification on irrigated lands and higher value- tain population subgroups should be identified and added through mixed cropping on marginal lands addressed separately-and in a manner comple- should help to absorb the labor surplus of the rural mentary to, not substituting for, the underlying ef- landless poor. ficiency measures. For example, in cities the most important adverse impacts on the poor from full- Urban Environmental Management cost resource pricing are likely to be in the areas Rapid urbanization, one of the most important de- of water, electricity, and fuel (including biofuels). raphi and social one ofthe cent has Through the combination of market differentiation mographic and social changes of the century, has (ahlower leveloofiserviceoforrthe poorestntiation both positive and negative environmental impacts. (a lower level of service for the poorest codutniu- In Asia, eighty-seven cities have more than I mil- ties) and financially strengthened utilities, lion inhabitants; of these cities thirty-eight are in achieved, in part, through pricing reforn, the op- China and twenty-three in India. By 2005 more tion of cross-subsidization of the poorest commu- than half ofthe population in East Asia will live in The measures required to offset inequitable urban areas. In South Asia the urban population impacts of environmental policies will be very dif- will overtake the rural population by 2025 (see fig- impatsf enviroanend tal p ieas. wl urban pory d- ure 1.7). The negative environmental impact of ferent in urban and rural areas. The urban poor are, cities comes from the high levels of pollution they disproportionately, victims of urban environmen- engender. The positive impacts-which need to be TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 6 more fully realized-are that pollution is more jor health threat. Comprehensive water resource concentrated and can potentially be addressed more management, which encompasses the specific cost-effectively and that pressure on rural lands is problems of urban water pollution but takes a far reduced to the extent that urban growth reduces ru- broader view of all demands (urban, industrial and ral population growth. agricultural) on a nation's water resources, will be Urban pollution is caused by high population one of the most difficult set of issues to be faced in densities, rising urban income and consumption Asia in coming years. levels, and large industrial concentrations. Infra- The health and welfare impacts of urban structure and services are unable to keep up with water pollution have to be tackled on two fronts: these trends. Local governments lack the capacity provision of safe water supply and reduction of to collect and dispose of municipal sewage and effluents. On the water supply side, actions are solid wastes, or to control emissions and toxic required to improve cost recovery, conserve wa- wastes. The concentration of wastes overwhelms ter, maintain infrastructure, establish financially the assimilative capacity of natural ecosystems. strong and commercially oriented delivery institu- Human health is threatened by the highly concen- tions, and establish independent and effective regu- trated discharges of pollutants in urban areas. latorvymstitutions. On the pollution control side, the The cost to Asian economies of urban envi- problem can be divided into municipal waste and ronmental degradation has not been calculated, but industrial waste (which is discussed separately initial estimates show that the environmental costs below). There is evidence of increasing public will- of air and water pollution in Jakarta and Bangkok ingness to pay for sanitation services, although exceed $1 billion and $2 billion per year, respec- research is needed in more cost-effective and com- tively. Costs in Asia's other large cities are com- munity-based approaches to sewerage and sanita- parable. Furthermore, these costs are rising as tion. Although the public sector is expected to con- safety thresholds for a large number of pollutants tinue to play an important role in water supply, and toxics are exceeded in increasingly large geo- treatment and disposal, it is important to encour- graphic areas. These costs would be 10 to 40 per- age private sector and community participation- cent higher if vehicle costs and the value of time which may require that water and sewage tariffs be lost in traffic congestion were included. raised. Such efforts are already beginning in Asia. In general., four environmental problems need to be addressed in Asian cities: water pollution, air Air Pollution and Congestion pollution, solid waste management, and inappro- Urban air pollution is at critical levels. Data from priate land use. Of the four, water and air pollution the World Health Organization (WHO) show that issues (including congestion) will require the great- twelve of the fifteen cities with the highest levels est investment expenditure. of particulate matter, and six of the cities with the Water Pollution highest levels of sulfur dioxide, are in Asia. Of the seven cities in the world with the worst Water pollution is largelyv caused by domestic sew- air pollution, five are in Asia: Beijing, Calcutta, age but is compounded by industrial wastes. Sur- Jakarta, New Delhi, and Shenyang. The trends for face water contaminants such as fecal coliform and suspended particulate matter-the air pollutant dissolved mercury often exceed recommended with the most serious health impacts-are rising standards many times over. Groundwater resources in virtually all Asian cities (except in the Republic also are increasingly polluted, both from industrial of Korea), regardless of income level. wastes and from salination due to overpumping. Urban transport is the largest cause of air Given the lack of water treatment or alternative pollution in most tropical and subtropical Asian clean water sources, water contamination is a ma- cities. Vehicle populations are doubling every 7 EXECUTIVE SUMMARY seven years (see figure 3.3), and a large share of the general lack of attention to solid waste issues these are high-polluting two-stroke and diesel ve- in Asia, donor attention could be catalytic. hicles. Furthemmore, fuels in Asia are among the dirtiest in the world, especially with regard to sul- Inapproprate Land Use fur in diesel fuel and lead in gasoline. Industry and In many Asian cities urban sprawl has grown at the building heat sources are the other major sources cost of ecologically sensitive areas. The availabil- of air pollution, particularly in the colder climates ity of good land for expansion on the urban fringe of northem India and northem China. lags behind population growth. Also, the poor typi- Reducing emissions in the urban transport cally move to marginal lands such as waste dumps, sector requires attention to vehicles, fuels, and al- hillsides, and sites adjacent to industries close to temative modes of travel. (Air pollution strategies the city center, with environmental and health con- are described separately, below, for the industry sequences. Given the scarcity of land in most Asian and energy sectors.) Investment in unleaded fuels, cities, high-density development should be encour- taxes on leaded fuels, and tightened standards for aged. Urban zoning and related regulations (such vehicles are among the most important and cost- as the Urban Land Ceiling Act in India) should be effective short-term changes to be made. Unleaded adjusted to allow greater private sector initiative fuels are being introduced in Thailand and Malay- in land development, but with tighter public over- sia. Low-cost responses to congestion include traf- sight and environmental assessments of new devel- fic management, bus lanes, and demand manage- opments. Careful placement of public infrastruc- ment (such as parking fees, staggered office hours, ture is fundamental, followed by reform of land and carpooling). However, without the provision titling andtransferprocedures. Finally, government of transit alternatives to private vehicles, higher or environmental NGOs need to ensure that envi- taxes and traffic management will simply make ronmentally sensitive land is set aside for conserva- transit more costly but not much less congested. In tion use. other words, both carrots (transit alternatives) and sticks (taxes and traffic management) are required r to reduce congestion and air pollution. To improve urban environmental management in In East Asia capital-intensive investrnents in these areas, the top priority is to strengthen the public transit are becoming increasingly viable capacity of local governments. One broad area for because of massive congestion, rising incomes, and work is increasing the capacity for planning and exponential growth in the numbers of vehicles. In implementation. Most local govemments in the re- South Asiathe emphasis should remain on low-cost gion lack the capacity to carry out effective urban modes of public transit, except where congestion environmental planning and management and have is extremely high. an impossible task of brokering between national, provincial, and local agencies and interests. World Solid Waste Management Bank and United Nations Development Programme (UJNDP) experience in six Asian cit- Asian cities have invested relatively little in solid iesras dmNsrt texvalue of a colaborat- wast mangemet todat, an the ten notto es has demonstrated the value of a collaborative waste management to date, and they tend not to approach-in which government agencies, the pri- recover costs. Recycling is limited to "ragpickers vate sector, NGOs, and community representatives in the informal sector. Newer solid waste manage- strive to achieve a consensus on priorities and strat- ment approaches pursue opportunities for greater egies-provided that local governments are suffi- participation by private sector and community ciently strong to broker disagreements and execute groups. Contracting out the management of trans- decisions. The details of institutional roles, dispute fer stations, treatment plants, landfills, and special resolution, and urban management techniques, industrial waste facilities is a feasible option. Given however, are very city specific. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA S A second large area for urban capacity build- groundwater. ing is municipal financial management. In the con- To reduce industrial pollution in Asia, a text of tariff reform for local services, decentrali- multipronged approach is required. This must start zation, and increased investment in infrastructure, with government commitment and a demonstrated the creditworthiness of cities and local utilities has wl to clean up the most polluting industries. Ef- become extremely inmortant. fective pollution control systems require the re- Although urban pollution problems are wide- moval of economic distortions (subsidies) and the spread across Asia, World Bank urban environ-.. Asosn ia definition of clear standards, followed by a com- mental lending is more concentrated in East Asia bination of incentives, regulations, and monitoring because of the region's relatively higher urban biaonficetvs guton ndmitrg bcncentration and regiov'reral perly. Ther urbank h activities to enforce the standards. This is already concentration and overall prosperity. The Bank has aneoouchlng,ndsmtreigwllb recently doubled its lending for urban environmen- an enoreous challenge, and some targeting will be tal management (to a total of $1 billion between required-for example, toward the most polluting 1993 and 1995), but it is still active in only twelve subsectors or the most polluted regions. of Asia's eighty-seven largest cities. Expanding the If there is sufficient institutional capacity to Bank's work on institutional strengthening is prob- implement industry-specific programs, some gov- ably as important to urban environmental quality ernments may also provide information and other management as its lending and should receive high incentives to encourage the adoption of clean tech- priority. nologies. Still, two difficult areas remain that re- quire additional public resources and technologies: Approaches to Industrial Pollution common treatment facilities for small and medium industries, and facilities for the treatment and dis- The industrial sector in East Asia is now more than posal of toxic and hazardous wastes. Public sector nine times its size in 1965, and in South Asia, four leadership is required in both areas. Avoidance of times larger. The total pollution load contributed these particularly difficult issues will only lead to by the industrial sector has grown exponentially. higher mitigation costs in the future. Estimates of industrial pollution in Asia indicate It is easier to clean up industrial pollution in that between 1975 and 1988 emissions of sulfur agrowing economy than in astagnantone. Because dioxide, nitrogen dioxide, and total suspended par- of the magnitude of investment required, higher ticulates increased by factors of ten in Thailand, growth allows for more rapid turnover of aging eight in the Philippines, and five in Indonesia (see technology, more rapid restructuring of industry figure 4.1; note that these are increases total pol- and its product mix, greater opportunities for at- lutants, not ambient levels). Toxic pollutants, mea- tracting foreign partners and technology, and sured by an index of airbome, waterbome, and solid higher public revenues. In Indonesia it is projected toxic wastes, also increased several times during that by 2010 new investment will account for 85 this period. (It should be noted that these estimates percent of total industrial capacity. are not based on direct measures of Asian pollu- The World Bank has initiated three "first- tion but are estimates derived from applying U.S. generation" industrial pollution control projects in pollution coefficients to Asian industrial produc- Asia, each of which takes a different approach. The tion data.) The public health impacts of these pol- Industrial Pollution Control Project in India focuses lutants are compounded by the high geographic on the worst chemical sector polluters in four states; concentration of industry (especially in East Asia) the Beijing Environmental Project takes an inte- and the water shortages in industrial areas (particu- grated approach to citywide industrial and urban larly during dry seasons) that often lead to high pollution; and the BAPEDAL project m Indonesia concentrations of pollutants in surfahce and focuses on strengthening the national environmen- 9 EXECUTIVE SUMMARY tal protection agency. Although the projects have China and India. China alone consumes 55 percent different areas of emphasis-a subsector in India, of all energy in Asia, and India another 20 percent. a metropolitan area in China, and an institution in Coal accounts for 92 percent of energy reserves for Indonesia-they all give top priority to strength- all of Asia, and China and India account for 94 ening government pollution control agencies. percent of annual coal consumption. Both Chinese Building on this experience, the Bank is planning and Indian coals are fairly high in ash content, and industrial pollution studies and projects in China, some Indian coal is also relatively high in sulfur. India, Indonesia, Malaysia, the Philippines and The least-cost approach to reducing the im- Thailand. While it is appropriate that more of the pending growth in emissions is to increase both Bank's industrial pollution projects are located in supply-side and demand-side efficiency, while si- East Asia than in South Asia, more work is needed multaneously promoting clean, renewable energy in South Asia, particularly in Pakistan. technologies. These goals will not be achieved unless energy subsidies are reduced. Many Asian Minimizing Energy Sector Impacts countries show a pervasive bias toward low energy With Asia's high population and economic growth, prices in certain markets, including coal in India energy demand there is doubling every twelve and China, electricity in South Asia, and kerosene years (the world average is every twenty-eight and diesel in significant markets across Asia. years). The demand for electricity is growing even (Cross-subsidy issues complicate the picture, but faster: two to three times faster than GDP for most only rarely should energy sources be offered at of the newly industrializing East Asian countries below cost, which is now common.) Assuming an and up to two times faster for most of South Asia average energy price demand elasticity of minus (see figure 5.1). The amount of investmentplanned 0.5, even a 10 percent price change in the direc- in the Asian power sector during the 1 990s ($290 dion of removing subsidies would immediately re- billion) is two-thirds of all new power investment duce all emissions by 5 percent-without allow- being made in developing countries and would ing for the effects of price reform on supply-side double Asia's capacity by 2000. Given that the efficiency. energy intensity of Asian economies is among the After price reform, operational improvements highest in the world, about 20 percent of this and institutional strengthening in both regulatory planned investment could be avoided through ag- agencies and utility companies will help foster gressive energy efficiency programs. energy efficiency and adherence to environmental The negative environmental impacts from the standards. Not only would full-cost pricing serve Asian energy sector are primarily attributable to efficiency and emissions objectives, it would also high growth in energy use, inadequate pollution have a major impact on strengthening the power standards for thermal power plants, and high de- sector and encouraging private sector participation. pendence on coal. Although Asia's emissions are One crucial benefit of increased commercialization small in relation to its population, the projected in- of the power sector is the potential for tapping the creases will have regional and global conse- private sector for investment capital needed to ex- quences. In absolute terms, Asia could easily ex- pand capacity. ceed Europe in sulfur dioxide emissions by the year Efficiency gains in Asia, on both the supply 2000 and surpass Europe and the United States and demand sides, can realistically achieve a sav- combined by 2005. By 2015, Asia is expected to ings of 20 percent of the amount of raw energy catch up with all the industrial countries in carbon being converted to electricity and can do so at dioxide emissions caused by the burning of fossil higher rates of return than for investments in new fuels. generating capacity. A 20 percent efficiency gain Energy use in Asia is heavily dominated by by 2000 would reduce the level of new capital in- TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 10 vestment required by $90 billion (50,000 mega- essary large-scale investment in pollution control watts). Not only are these savings very large, they technologies will not be made unless Asian gov- are three times the cost of installing cleaner tech- emments are convinced through clear economic nologies on the facilities still to be constructed. and social analysis that they will realize commen- In addition to efficiency gains, additional surate benefits. An important role for the World measures for reducing the negative environmental Bank is to assist the efforts of Asian countries to impacts of existing and future plants are required. analyze their energy-related environmental costs, As mentioned, the required capital expenditures for benefits, and priorities and to help put in place regu- additional power capacity in Asia are $290 billion latory systems designed to achieve their target for the 1990s, to be concentrated in China and In- pollution standards. dia. This figure includes an estimated $50 billion for necessary pollution control equipment. Unlike Natural Resource Management: Land, in industry, where many clean technologies and Forests, and Biodiversity processes lead to significant savings, the cost of clean coal-fired thermal technology is almost en- Arable land resources in Asia are facing intense tirely add-on. Therefore the highest priority in Asia pressure from farmers seeking to maintain food is strategies to reduce the most damaging pollut- self-sufficiency. Forests and marginal lands are ants with the least possible expenditure for add-on suffering from serious degradation for a variety of technologies. reasons, including excessive conversion to agricul- The first priority for pollution control equip- tural land, commercial logging, and excess demand ment should be curbing emissions of particulates, for firewood and fodder. Asia faces the difficult which is important for human health. Particulate problem of trying to secure production increases reduction is relatively cheap-I to 2 percent of the in agriculture and forestry without destroying re- total capital costs of thermal power. The second maining land, forest, and habitat resources. priority should be on finding the most cost-effec- Land degradation is a significant problem tive solutions for reducing sulfur emissions, which across virtually all agro-ecological zones in Asia, is usually coal beneficiation. More medium-term although the nature and scale of this degradation strategies include investments in expanding natu- vary widely among and within countries. Land ral gas networks, hydropower, small rural renew- degradation occurs in a variety of ways: nutrient able energy systems, and cost-effective wind, so- depletion, structural decline and compaction, bio- lar, biomass, and geothermal installations that are logical decline, chemical deterioration (for in- large enough to be connected to the national power stance, through acidification or salinization), and grid. All of these altematives would become more soil erosion. Data on land degradation and soil loss viable with the full-cost pricing of fossil fuels. are not widely available for Asia, and figures cited World Bank policy requires government by intemational organizations are often contested commitment to improving energy sector efficiency by governments as too high. With this caveat, as a precondition for World Bank energy sector United Nations data suggestthat erosion is particu- loans. This is important, since the main areas of larly severe in India (where 50 percent of the total sector reform-pricing reforms, transparent regu- land area is considered degraded, although esti- lations, increased commercialization and mates of human-induced degradation are much corporatization of the energy sector, and supply- lower), Viet Nam (also 50 percent), Thailand (34 side technical efficiency-complement pollution percent), China (30 percent), and Indonesia (24 abatement. However, additional Bank support is percent). Localized soil waterlogging and salinity recommended in the areas of demand-side energy is most severe in India (27 percent of irrigated efficiency and renewable energy. Finally, the nec- land), Pakistan (20 percent) and China (15 percent). 1t EXECUTIVE SUMMARY Among all tropical regions, East Asia expe- able resource management, primarily through rienced the highest rates of deforestation during better-targeted research (see below), exten- 1981-90 (1.4 percent per year; see figure 6.2). sion services, and expanded roles for farner Furthermore, deforestation rates in East Asia in- and community groups in these areas. creased during the 1 980s. in contrast to other tropi- * Modification of policy and regulatory framne- cal regions of the world. Once-dominant export- works that encourage inappropriate resource ers such as Philippines and Thailand have use (for example, sector reforms in agricul- exhausted their forests, and the remaining forest- ture and forestry). Forestry pricing reform is surplus countries-Indonesia, Lao People's Demo- particularly important, given the trade bias in cratic Republic (Lao P.D.R.), Malaysia, Myanmar some Asian countries that encourages excess and some of the Pacific Island nations-are facing logging. excessive deforestation. South Asia has lower de- * Strengthened land tenure. Tenurial rights and forestation rates (0.6 percent) because of far fewer investments in conservation measures are forest reserves. China and most of South Asia are correlated (although in South Asia the impor- net importers of wood and wood products, and by tance of communal lands makes the link less 2000 imports may cost nearly $20 billion per year. direct than in the land-surplus countries of The underlying causes of land degradation, Southeast Asia). Clarification of property deforestation, and biodiversity problems include: rights, through expanded programs in land (a) market and policy failures-such as registration and titling, is more critical as underpricing of resources, input subsidies, and lack population pressure increases, as open access of information about viable technologies on mar- and communal property rights systems break ginal lands-that lead to resource-degrading exter- down, and as land values increase. nalities; (b) a rapidly growing population that ex- * Improvements in public sector capacity to erts pressure on land resources for both subsistence design, target, implement, and ensure com- and commercial needs; (c) resource tenure struc- pliance with resource management programs, tures that encourage short-term exploitation rather especially in forestry. than longer-term conservation; and (d) institutional * Encouragement of public participation in weaknesses that encourage mismanagement of re- decisionmaking through the promotion of sources. The mix and influence of these factors education, mass-media coverage, NGO in- vary widely from location to location, given the volvement, consultation with community- wide diversity in Asia. based farmer and land management groups, A strategy for addressing natural resource and local-level conflict resolution. degradation in Asia should address both the short * Promotion of social programs in education, and long terms. The immediate strategic objective health, and population planning to help settle should be to stabilize areas of rapid land, forest, and rural populations, and provide options that habitat degradation. The longer-term objective is enable them to take a longer-term perspective to minimize the underlying causes, including in managing their family and land resources. causes in areas broader than agriculture and for- From the outset, it should be said that this estry, through such broader social reforms as land strategy will fail if there is not a strong political reform, population planning, and poverty allevia- commitment to rural sustainability. The agenda is tion. A sixfold strategy for breaking out of the cur- too complex (requiring, for example, long-term rent patterns of natural resource degradation is commitment to introducing new production tech- suggested: nologies) and politically charged (because of the Aggressive promotion of locally relevant high political cost of reducing "rents" in the for- technical innovations that promote sustain- estry sector, of addressing community conflicts in TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 12 protected areas, of facing the equity aspects of ter soil conservation characteristics than an- strengthened land tenure, and so on) to succeed nuals. The difficulty of this strategy is that otherwise. such cropping models are highly site-specific To undertake this ambitious strategy, serious and need to be tested and adopted locally- weaknesses and biases in public institutions must preferably as part of a strengthened extension be addressed. Examples of shortcomings include system working directly with farmers. irrigation authorities with a bias toward investment * Sustainable techniques for commercial for- over management, and forestry institutions with a estry, natural forest management, and social bias toward short-term commercial exploitation. It forestry, with careful consideration of tenure is not recommended that the powers of public sec- and community organization issues. tor agencies involved in agriculture, forestry, and * Management techniques for public and com- park management be greatly expanded. Rather, munal lands, especially forest lands in need existing institutions need to be recast and made of rehabilitation and forest reserves in need more responsive to the wider range of issues at of protection. hand, including extension and other forms of in- * Preservation techniques, both physical and formation dissemination, applied research, decen- financial, for parks and protected areas. tralization, and participation. Physical techniques involve including com- Underlying this strategy are a number of dif- munities on the perimeter of protected areas ficult technical issues concerning natural resource in integrated conservation and development management that impede the adoption of sustain- projects (ICDPs). Financial techniques in- able practices. The technical agenda for research clude broadening the financial base to support and demonstration in Asia should extend in sev- parks and protected areas, through such chan- eral directions: nels as direct fundraising, NGO support, and High-yield technologies and management ecotourism. practices for intensified agriculture that is In sum, reducing natural resource degradation environmentally sound. In the absence of involves more uncertainty and technical unknowns surplus arable land, continued agricultural than do most areas of pollution abatement. The intensification is Asia's highest agricultural underlying causes of land degradation are all long- priority. Continued intensification can also term problems with long-term solutions. Pricing help reduce pressure on marginal lands and reform and the strengthening of land markets and is therefore a strong environmental priority tenure systems will help, but even these must be as well. Specific environmental concerns re- combined with strong government and donor com- lated to intensification are soil waterlogging mitment to institutional reform and technical re- and salinity, and adverse impacts from agro- search, demonstration, and extension. chemical use. Viable strategies for crop diversification on Water Resource Management marginal lands that do not degrade land re- Problems related to water quality and quantity in sources and could even rehabilitate them. Asia will worsen with economic, urban and popu- (The priority strategy does not generally in- lation growth. Competition between users will in- clude the more expensive process of reclaim- crease; availability will constrain growth in areas ing heavily eroded lands.) Various models such as northem China and southern India; and sur- exist for developing agriculture on marginal face and groundwater quality will decline as it has lands, usually involving systems of diversi- in many areas, such as Bangkok, Jakarta, Jiangsu fied combinations of shrub, tree, and other Province (China), Karachi, and Madras. The com- crops with greater drought tolerance and bet- bination of surface water pollution and large with- 13 EXECUTIVE SUMMARY drawals for agriculture is adversely affecting both resource management and price reforms rec- river fisheries and coastal ecology. Finally, water ognize the needs of the poor. resource development projects (such as darns, * Legislative and institutional reform. Institu- transfer schemes, flood control, and groundwater tional reform should reflect the findings that withdrawals), while having undisputed economic (a) water sector institutions function more benefits, often have adverse environmental and efficiently as they are decentralized to river- social impacts. These impacts are often prevent- basin and subbasin levels, and (b) water ser- able, mitigable, or compensable-although with vice providers function more efficiently as more effort than is commonly accorded today. they become more commercialized, with per- Improved water resource management and formance-based accountability. Both prin- environmental protection of water resources are ciples have broad implications for legislative mutually reinforcing. Concem for both water qual- reform, institutional strengthening, planning ity and efficient use (that is, quantity) is implicit methodologies, water quality monitoring and in improved water resource management. Simi- enforcement, and the role of local groups. larly, the need to preserve water quality and to * Improved water planning, project preparation minimize alterations to water-dependent ecosys- and implementation, and maintenance. Mar- tems is imperative in environmental protection. ket failures concerning upstream-down- The integrated water resource management ap- stream problems argue for adoption of the proach adopted at the Dublin Intemational Confer- river basin as the basis for planning. Planning ence on Water and the Environment in 1992 and priorities include identifying, promoting and endorsed by the World Bank recognizes these implementing nonphysical measures; repair- complementarities and forms the basis for environ- ing and upgrading existing infrastructure; mentally sound use of water resources. improving real-time operations and mainte- On the basis of this emerging consensus, a nance; and planning and implementing five-element strategy is suggested for better and projects that reflect multisectoral economic, more environmentally sound water resource man- social, and environmental priorities. In decid- agement in Asia: ing between water development options, full Immediate and low-cost actions to prevent environmental and social costs must always further irreversible damage to water re- be incorporated. sources. Examples are enforcement of water- * Increased institutional capacity. Reform of shed and protected area designations; tempo- the water resource sector will also require rary storage for toxic wastes (while more improved analytical capability for planning, permanent solutions are being sought); and management, and regulatory functions, espe- tightened industrial zoning in areas of cially as the system is decentralized. In this groundwater recharge. regard, improvements in data collection sys- Water sector policy reform, with explicit rec- tems and data-sharing arrangements, both ognition of water as an economic good. Wa- within and across river basins, are recom- ter pricing can be used to signal users, pro- mended. mote efficiency, reduce pollution, and foster Through country dialogue, technical assis- cost recovery. Market-oriented valuation can tance, and lending, the World Bank can be of great also help in resolving conflicting uses and in help in promoting the strategy outlined above. Al- integrating water policy with land, industrial, though some Bank projects already incorporate agricultural, and environmental policies. elements of this strategy, the more broadly inte- Linking water policy with national develop- grated approaches-such as multisectoral and mar- ment objectives also helps ensure that water ket-oriented approaches-have not yet been widely TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 14 adopted in Asia. A specific analytical area in which Project Lending the Bank is placing immediate emphasis is incor- Traditional World Bank lending has not addressed porating full environmental and social costs into the full range of environmental problems. This is water resource planning. Decisionmakers are of- not surprising, since many environmental problems ten deterred from making appropriate decisions have only become widely recognized within the because these costs are not included in the analy- past decade. In response to these problems, the sis. In the case of protecting watershed areas and Bank has significantly increased its lending for the water quality, the costs of doing nothing are under- environment and has redesigned some of its estimated, particularly in comparison with other approaches sectors. There are several substantive areas on which Real or impending water crisis areas should the Bank places high priority and in which it is also receive priority World Bank attention. The pushing to expand its activities (see box 1). In the examples are well known. China has long discussed "brown" sectors, these areas are urban and indus- a major transfer scheme between the Yellow and trial pollution, energy sector efficiency (as an ini- Yangtze rivers-a project whose economic and tial priority within a larger energy sector environ- environmental costs and benefits need to be care- mental agenda), and urban transit. In the "green" fully assessed. Water conflicts exist in the sectors, these areas are soil protection and rehabili- Ganges-Brahmaputra delta between India and tation (each requiring dramatically different strat- Bangladesh, and both countries are engaged in egies depending on local conditions) and improved uncoordinated water resource development pro- management of remaining forest resources. Com- grams. There are current or potential water short- prehensive water resource management-which ages in southern India and around the Mekong cuts across the brown and green sectors-is also a delta. high World Bank priority, since the approach has Most major Asian cities have severe resource only recently been introduced in Asia. The final constraints. As a result of these and other water area, institutional strengthening, underlies progress resource stress points, the World Bank is actively in virtually all sectors. promoting its comprehensive water resource The recommended priorities are substantially strategy. but not fully represented in the 1993-95 World The World Bank Environmental Bank planned lending program. The largest gaps concern definition of the fiscal and administrative Strategy details of cost-effective approaches to urban and industrial pollution; investment in energy effi- ciency and urban transit (two "win-win" ap- This report has emphasized a framework for im- proaches with economic as well as environmental proving environmental management in Asia. The benefits); lending that incorporates integrated ap- first step in that framework is for countries to es- proaches to water resource management; projects tablish priorities-a process that is analytically and that address fundamental resource tenure issues in (sometimes) politically difficult. The World Bank, rural areas; and a long-term commitment to through its analytical work and policy dialogue, can strengthening environment-related institutions in help countries set priorities, accept the conse- Asia. Obviously, the World Bank cannot ad- quences of policy reform, narrow the terms oftheir equately cover all of these areas single-handedly, environmental strategies, and implement selected but it can make greater efforts to work with instruments. To better support this process, the other donors and to provide intellectual leadership World Bank has stepped up its environmental lend- to its borrower countries. ing, policy dialogue, and research. Environmental lending in Asia will roughly 15 EXECUTIVE SUMMARY double between 1990-92 and 1993-95, from nearly in East Asia. The sectors of lending reflect, to a $600 million to $1.2 billion per year, and from 6 large extent, the development priorities in the two or 7 percent of total lending to 12 percent (see fig- regions. Not included in the above estimates are ure 8.2). The fiscal 1995 estimates probably under- areas of Bank lending that indirectly help the en- state the eventual size, since the program will be vironment, through such intermediate interventions partly based on analytical work now being done. as population planning, health and education pro- Two-thirds of the Bank's Asian environmental grams, poverty alleviation, agricultural research, lending will occur in East Asia. There, the level of and sector reforn. Also, the Global Environment lending in the brown sectors is more than double Facility (GEF) is not included in these totals. that in the green sectors, although both are grow- Investing in institutions is potentially the ing rapidly. In South Asia brown-sector lending most cost-effective component of the Bank's en- also exceeds green-sector lending; while both are vironmental strategy, since the basic policies and expanding, they are doing so at a slower rate than institutional characteristics of Asia's fledgling Box 1: World Bank Priorities for the Environment Sector Status and Needs Urban Environmental Bank lending addresses urbanpollution in only twelve of the eighty-seven cities in Asia with popu- Management lations over I million. Incremental investment is especially required in India and East Asia. How- ever, activities designed to help improve urban environmental management-and to benefit more cities than those receiving Bank loans-should proceed in tandem with investment. Industrial Pollution Of the twenty-six countries in Asia, eight have serious industrial pollutionproblems. All need tech- Control nical and financial assistance to address the problems, particularly in the areas of policies, enforce- ment, small scale industry, and hazardous wastes. World Bank analysis may be as important as funding. Energy Pricing and Energy subsidies are still pervasive in Asia and are a barrier to sectoral efficiency and emissions re- Efficiency duction. In addition, only three Asian countries are actively promoting energy efficiency strategies. Efficiency strategies are underinvested on both the supply and demand sides. Again, World Bank analysis may be as important as funding. Urban Transit Vehicle emissions and urban congestion are growing exponentially across Asia. Only strategies that increase the cost of using private cars and provide alternatives can address both issues simultaneously. Asian investments in public transit, cleaner fuels, and vehicle standards are all increasing. There is a need for more World Bank involvement in these areas-including in mass transit, where viable. Water Resources Water quality is worsening inAsia generally, with majorpublic and ecologic health costs. Increasing Management agricultural, industrial, and urban demands are difficult to meet, given the deteriorating quality. Ris- ing costs force efficiency improvements and policy and institutional reform. Bank support for appro- priate policies, multisectoral planning within riverbasins, anid decentralized management are all recommended. Sustainable Agricul- Agriculture on both irrigated and marginal lands is leading to excessive soil degradation. No country ture in Asia has the techniques and financing necessary for a concerted effort against soil degradation. Pricing reform and strengthening of land tenure will help but must be combined with strong commit- ment to institutional reform and technical research, demonstration, and extension. Forest Management The World Bank has defined forest-surplus and forest-deficit countries in Asia, with different strat- egies for each. In forest-surplus countries, pricing and trade policy reforn are critical, along with improved management of public lands and research on more sustainable commercial and social for- estry. In forest-deficit countries, management, tenure, pricing, protection of remaining reserves, and reforestation are important. National and Local Except for Japan and Korea, no Asian country has successfully implemented its approved standards Institutions and enabling legislation. Long-term support (five or more years) for policy implementation, moni- toring, and enforcement-using innovative means-are of the highest priority. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 16 environmental agencies will be largely shaped in consultation with and participation by those af- the next five to eight years. Given that past experi- fected by the project. Consultation refers to the ence with traditional technical assistance shows it process in which interested groups can express their to be the weakest part of the Bank's portfolio, in- opinions at discrete points during project design. novative approaches to institutional strengthening Participation suggests a broader involvement by are needed, involving longer time horizons and affected parties in both project design and imple- more sustained resources. mentation. (Participation can lead to the sharing of decisionmaking authority, whereas consultation Beyond Project Lending does not.) For both, there is a need for improved Much of the World Bank's strategy for the envi- field-oriented guidelines for Bank task managers ronment extends beyond investment projects. The and borrower country officials. following areas require broad-based emphasis. Establishing Appropriate Environmental Stan- Active Policy Dialogue. As mentioned, the World dards. The environmental standards applied by the Bank-better, perhaps, than other donors-can Bank in the assessment of urban, industry, and help countries analyze and acceptthe consequences energy sector projects are being updated in order of policy reform, model scenarios for more sustain- to make them more flexible and appropriate to able growth, and refine the economic and admin- project environmental assessment. There is a role istrative details of policy instruments. for the Bank to assist Asian countries in adopting Integrating National Environmental Action new standards, especially in shifting from concen- Plans (NEAPs). An important part of NEAPs is to tration-based standards to load-based standards in merge environmental and development concerns. the industry and energy sectors. Priorities for the World Bank are not only to assist countries to complete their NEAPs, but also to pro- Encouraging Private Sector Involvement. Pri- vide the ongoing support necessary to get NEAP vate sector involvement is essential in advancing recommendations implemented. NEAPs could also the key elements of an environmental strategy. A be used as a common framnework for coordination one-sided "punitive" regulatory approach will be of donor-funded, environment-related activities. In less effective than one in which industry is actively the future, planning exercises that are more tar- consulted on standards and engaged in self-moni- geted, geographically or sectorally, may be less toring. A favorable business environment will also unwieldy and less political than the first round of help facilitate the mobilization of required capital, NEAPs. technologies, and service industries. Strengthening Environmental Assessments Strengthening Internal Processes. The World (EAs). There is need to provide more sector-spe- Bank can do more to improve its intemal processes, cific training on environmental assessment for task especially on projects with environmental or social managers and borrower country officials. Increas- impacts. Four areas are: ing the capacity of key agencies in borrower coun- * Strengthening the Bank's role in project tries to improve all EAs-whether tied to World implementation. Without adequate supervi- Bank lending or not-is an important long-term sion, the conditions imposed by environmen- goal. tal assessments may not be enforced, and the EA process itself will be marginalized. Strengthening Consultation and Participation. * Strengthening the Bank's role in policy The quality of project design, EAs, and implemen- implementation. The Bank should increas- tation can be considerably improved by increased ingly address the "nuts-and-bolts" issues as- 17 EXECUTIVE SUMMARY sociated with policy implementation-taking to be completed in the areas of urban envi- into account the compromises necessitated by ronmental lending, industrial pollution, and institutional weaknesses, corruption, and lack energy. of data. Examples ofways to do this are: help- ing countries calculate optimal levels of pol- Conclusion lution taxes, by pollutant; suggesting opera- Pursuing environental sustainability in Asia is tional approaches to improved pollution crucial in light of what is at stake. Both urban and monitoring, auditing, and enforcement; and rural problems are approaching thresholds of un- introducing cost-effective approaches to data acceptably high social and economic costs. The collection and use. As mentioned above, in- future environmental balance in Asia is also criti- stitutional strengthening and policy imple- cal for the global environent, particularly for mentation go hand-in-hand and must be greenhouse gas emissions, forestry, and viewed as a long-termn prospect. biodiversity. Although economic growth in Asian Expanding the Bank's analytical work pro- countries has given these countries some room to gram. There are gaps in the Bank's research address environmental issues, the financial and programn related to the environment. A few technical resources required are beyond the capac- key areas for expansion are (a) learning from ity of any individual country or donor. the experience of others, on both macro and The World Bank's role, as described above, sectoral levels; (b) valuation of environmen- is to assist Asian countries to determine environ- tal costs and benefits, for the purpose of set- mental priorities, identify sustainable economic ting investment priorities; (c) practical regu- policies, estimate full project-level costs and ben- latory and institutional guidelines on efits, and increase administrative skills for imple- approaches to urban and industrial pollution; menting the recommended policies and projects. and (d) innovative financing mechanisms for As was emphasized at the outset, the Bank's stint- large sewerage and urban transit investments. egy is to support a process for achieving Drafting detailed strategy or guidance docu- sustainability-a process that must involve every ments for projects that address brown-sector government and most donors active in Asia. This pollution. The World Bank has recently com- document is only one element of the broader set pleted strategies for Asian forestry, water of World Bank activities designed to contribute resource, watershed management, and toward achieving greater sustainability in Asia. biodiversity projects. Similar work remains INTRODUCTION This report was prepared to address the need aris- making on priorities and types of interventions is ing from both within and outside the World Bank required. for: (a) an assessment of the trends and impacts of As is made clear throughout the report, insti- environmental problenms in Asia, (b) a synthesis of tutional constraints are as binding as financial con- the World Bank's experience in assisting Asian straints. Even the first step of the proposed frame- countries with environmental management, and (c) work-setting priorities-is extremely difficult in a clear statement on World Bank principles and any open political system, especially when envi- priorities for environment-related assistance in the ronmental problems span most economic and geo- near future. The report is intended for several au- graphic sectors, and when the pressures to try to diences: do too much are great. Therefore, one ofthe great- ) For readers inside the World Bank, it pro- est challenges in the environmental area is to help vides an analysis of current environmental countries establish detailed priorities and to expand issues in Asia and a systematic treatment of their institutional capacities to act on these priori- topics that are appropriate to the Bank's fu- ties. ture lending, research, and policy dialogue. The second section of the report (chapters 3 * For interested readers in Asia and elsewhere, through 7) addresses each of five sectors in greater it summarizes World Bank analysis of detail (urban, industry, energy, natural resources environmental issues in Asia, and suggests a and water resources). The technical and policy ap- broad strategy for achieving environmental proaches to environmental problems that are pro- sustainability. posed are clearly general and must be tailored to The report has three sections. The first sec- the needs of any given country. tion (chapters 1 and 2) describes the nature and Although this report emphasizes priorities, it magnitude of environmental problems in Asia, and does not advocate that some sectors require atten- outlines a framework for improving environmen- tion while other do not. Priorities across sectors are tal management. The emphasis ofthis section is on not a "zero-sum" game, in which attention to in- a process for achieving sustainability-a process dustrial pollution implies that reforms in forestry that must work within real institutional and re- should be deferred. It is more important, within the source constraints, and therefore must be continu- resource constraints of each sector, to identify sec- ally updated as these constraints change. tor-specific priorities and to start acting on those. The first step of the framework is to set real- No line ministry should be oblivious to the funda- istic priorities for immediate action. This report mentals of cost-effective policy refonn-which cannot do this in detail for any one Asian country, may actually cost very little. The central govern- as the local situations, priorities, and starting points ment can and will, of course, alter the overall thrust vary tremendously across Asia. Rather, the report of its economy-wide policies and the sectoral allo- lays out elements of economy-wide and sector-spe- cation of public resources. However, not all com- cific strategies that are applicable to most Asian ponents of an environmental sustainability are "top- countries and identifies areas where local decision- down" or capital-intensive. Local-level and 19 20 INTRODUCTION institutional components are equally important. this area. By focusing on a process, the report high- The last section (Chapter 8), outlines the lights areas in which the World Bank can offer World Bank's potential role in assisting Asian analytical and financial assistance to countries grap- countries to address environmental issues. The pling with the fundamental elements of their envi- environmental focus ofthe Bank's lending program ronmental strategies. and analytical work has grown over the last sev- To assist those interested in researching eral years, and is expected to grow further. How- sectoral topics, an extensive bibliography is pro- ever, there remain areas in which there is the po- vided at the end of the report, organized by chap- tential for the Bank to do more, as outlined in this ter. The listings for Chapter 1 are the most general report. references, and the listings for the other chapters This report is not a detailed blueprint for are more specialized. All citations in the main text achieving sustainability in Asia. Neither is it a de- can be found in the bibliographyfor that chapter. tailed blueprint for World Bank commitments in 1 THE STATE OF THE ENVIRONMENT IN ASIA Trends and Impacts of Environmental son re-emerges often: the cost of early action is less Degradation than the cost of rehabilitation. The most serious problems in Asia are urban envi- Water Pollution ronmental degradation; industrial pollution; atmo- spheric emissions; soil erosion and land degrada- Water pollution is the most widespread environ- tion; water resource degradation; deforestation; and mental problem in Asia. The demand for water loss of biodiversity. These problems are caused by continues to rise rapidly across all sectors, lock-step a variety of activities: pollution from rapid urban- with the growth in urban areas, industry, and irri- ization, industrialization, and increasing energy gation systems and hydroelectric power. Also, the use; land degradation due to deforestation and associated costs of long-term water resource unsustainable agricultural practices; unsound man- cleanup and sustainable management are most agement of water resources and watersheds; eco- likely the highest of any resource. Water pollution logical damage attributable to large infrastructure is responsible for substantial mortality and sickness projects; and loss of biodiversity due to widespread in Asia, particularly among children. The overall developmental and population pressures. Environ- impacts of water pollution in urban areas are espe- mental problems are cross-cutting in nature, and cially telling on the poor (see chapter 3). impacts of activities in one sector often have cas- Water pollution comes from three main cading effects across other sectors. sources: domestic sewage, industrial effluents, and This chapter contains a non-technical over- run-off from activities such as agriculture and min- view of environmental issues and trends in Asia. ing. Domestic sewage is the primary source of Data is not equally available across all sectors: for water pollution in Asia, especially in and around example, urban air pollution is much better docu- large urban centers. Sewage treatment is very lim- mented than rural land degradation attributable to ited or non-existent in most cities, and most domes- human factors. Many problems are highly localized tic sewage is dumped untreated into surface water. and highly seasonal. In the absence of comprehen- Asian rivers have high levels of fecal contamina- sive data, the report uses data from specific sites, tion,' that in the absence of good water treatment, such as the incidence of water pollution in selected present a major threat to human health and aquatic cities. It also presents well-documented trends, life (box 1.1). In addition, groundwater is polluted such as the growth in vehicle registrations and en- by cesspools, septic tanks, leaking sewers and land- ergy demand. The site-specific data is meant to il- fill sites. lustrate the magnitude of costs in areas where in- Industrialization compounds the water pollu- adequate actions were taken. The trend data is tion from domestic sources, because most indus- meant to illustrate how current situations will tries are located in or near cities and discharge their worsen without targeted efforts to change the di- wastes into the same waterbodies. As the region's rection of the trend. Although all such data must industrial structure shifts into highly polluting sec- be subjected to more country-specific analysis be- tors such as chemicals, electronics, electroplating fore priorities for action are determined, one les- and machinery, industrial effluents increasingly 21 TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 22 ter for domestic and industrial purposes has in- Box 1 .1: Water Pollution in New Delhi creased the incidence of another problem-saline In the Jamuna River the coliforn count is 7500 organisms intrusion into groundwater, making it unfit for con- per 100 ml when entering New Delhi, and a staggering 24 sumption. The problem is particularly severe in million per 100 ml leaving the city. In addition, 5 million Bangkok, Manila, Jakarta and Madras. gallons of industrial effluent, including 125,000 gallons of I)DT waste. are picked up by the river every day as it passes Air Pollution through the city'. World Health Organization data indicates that Source: ESCAP 1992. twelve of the fifteen cities with the highest levels of particulate matter, and six of the fifteen cities contain heavv metals and non-degradable toxic and with the highest levels of sulphur dioxide, are in contin havymetas ad no-deradale oxicand Asia (table 1. 1). Of the seven cities worst ranked hazardous waste, posing high health risks. For ex- air (tion by the seven cisis Commite ample, the level of dissolved mercury in Asian riv- for air pollution by the Population Crisis Commit ers far exceeds the recommended standard, espe- tee, based on a range of physical indicat fi cially during times of low flow.2 Groundwater are in Asia. In addition, Asia is rapidly emerging ciall durng tmes f JO flo.2 Goundater as a major contributor to acid rain and global warmn- sources are also increasingly contaminated by ing gases. leaching from industrial wastes. In some countries The maor sources of air ollution in Asia are in East Asia. the pollution of water sources from Th e mnsor energy aur indutrial sectore industrial effluent is responsible for serious losses the transport, energy and the industrial sectors. to fisheries and tourism. Transport contributes the most to air pollution in Water resources are also contaminated by many Asian cities, and this contribution is rapidly non-point pollution, such as run-off of agrochemi- growing (see figure 1.I for Bombay).h While Asia cals from farms and leaching of tailings from min- has a smallpopulationofmotorvehicles compared ing activities. Increased use of both fertilizers and to word totals, the vehe poput ha been pesticides has polluted surface water and ground- rapidly expanding-at rates above 10 percent per pater in many agricultural regionsc with complex annum in several countries-and studies indicate impacts on aquatic life and other animals higher in a doubling of the vehicle populatiOn by 2000 (see the food chain. In addition, increased use of pesti- cides has led to growing pest resistance, precipi- Table 1 .1: Air Pollution in Asian Cities tating futile spirals of ever higher applications. Contamination during pesticide application and Worst ranking ingestion through food and water also pose threats Highest levels of Highest levels of by the Population to human health and welfare. particulate matter sulphur dioxide Crisis Committee Excessive withdrawal of groundwater has Shenyang Shenvang Calcutta lead to the lowering of groundwater tables, loss of Xian Seoul Jakarta water pressure, and salt water intrusion. These New Delhi Xian New Delhi problems are widespread in China, India, Indone- Beijing Beijing Beijing Calcutta Manila Shenvang sia, Korea, Sri Lanka and Thailand. For exarnple, Jakcuta Mangahon 5 n ~~~~~~~ ~~~~~~Jakarta Guangzhou increased pumping of groundwater near Bangkok Shanghai caused a decline of about 50 meters in groundwa- Guangzhou ter levels during the period 1955-82, and has led Illigan City to land subsidence of about 60 centimeters over the Bangkok to ~~~~~~~~~~~Bombay last 25 years, aggravating the flooding problem. Kuala Lumpur Since a large part of Asia's population lives in cit- ies along coastal areas, increased use of groundwa- Source: WRI, IIED and UNDP 1988. 23 THE STATE OF THE ENVIRONMENT IN ASIA chapter 3, figure 3.3). Diesel vehicles and motor mental dysfunctions to lead poisoning in children. cycles powered by two-stroke engines, both highly "Dose-response" functions (that is, probabilistic polluting technologies, make up a large share of the functions that estimate the incidence of sickness vehicle population. Also, many of the vehicles have and death due to a given level of ambient pollution) no pollution control, and the fuels used are among are being applied to Asian cities, with estimates of the dirtiest in the world, especially with regard to the costs of health and productivity impacts mea- sulphur and lead. suring in the hundreds of millions to billions of dol- Air pollution is further exacerbated by pol- lars per year, per city (see chapter 3, table 3.3). The lution from industry, energy generation and domes- health impacts of indoor air pollution are less quan- tic sectors. While air pollution loads from indus- tified, but evidence indicates that pollution levels try are often significant in large cities, there are also are often higher in rural households using biofuels large numbers of small cities in Asia that have very than in even the most polluted urban environments severe air pollution problems resulting from their (see chapter 5). development as industrial centers close to raw ma- The Asia region contribution to global warm- terials-such as the Singrauli region in India and ing or greenhouse gases (GHGs) is rapidly increas- Illigan City in the Philippines. In some cities, es- ing (figure 1.2), led by China and India. The region pecially those in China, pollution from coal uses accounted for about 20 percent of the worldwide for domestic cooking and heating is a major source emissions of GHGs in 1985, and this share is ex- of airpollution. In addition, buming of biomass for pected to rise to 25 to 30 percent by the year 2000. cooking creates severe indoor air pollution prob- Incremental growth of anthropogenic4 carbon di- lems in lower income urban households and in ru- oxide in Asia by the year 2000 is expected to more ral areas throughout Asia. than offset any savings to be achieved by limiting Both outdoor and indoor airpollution causes emissions in OECD countries to 1990 levels. considerable sickness and death. The links between (These numbers do not reflect, of course, the enor- respiratory diseases and air pollution are fairly well mous cumulative contribution to GHGs by OECD documented, and recent studies have also linked countries.) The threat of Figure 1.1: Emissions in Greater Bombay acid rain is growing rapidly in the region. Totil Embslons In tonnes per day Although data on sul- phur dioxide emis- sions for the Asia re- gion is incomplete, it 1,400 . . . - is estimated that the 1,000 . . ..... .. region emits approxi- ... ~~~~~mately 35 million tons (1 990) per year, with 600' ~~~~~~~~~~~~more than half the Soo A ; . ! z 7rn,o emissions being ac- 400 ~~~~~~~~~~*Iduty counted for by China. 11200 ~~~~~~~~~~~Two-thirds of the O 111 Power emissions originate 1973 1978 1983 1986 U Domeic from coal-fired power and industrial plants, Source: Municipal Commission of Greater Bombay with the rest coming TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 24 and dispose of them. Uncollected solid Figure 1.2: Incremental Carbon Dioxide Emissions waste presents major health hazards to 1990-2000 populations, particularly the poor. High-Incoe . .Toxic and Hazardous Waste High-Income -::: Countries Toxic releases from industry include Latin America- | : . heavy metals, cyanides and pesticides, Caribbea. . and can be discharged into the air, wa- ter, or as solid wastes. The only estimates Sub-Saharan - . to date of the toxic wastes generated in Africa : . Asia are based on the production param- Europe - .1 . eters of OECD countries (see chapter 4). Euroe - :Monitoring is typically done only for the Middie East:conventional pollutants of biochemical Middle East . . . oxygen demand (BOD), chemical oxy- _ N. A:fica gen demand (COD) and total suspended South Asia- : : solids (TSS) in the effluent stream; and there is very little monitoring of toxics. Oqther_ - _ _ w i . . Hence, even in the most industrialized ................ ... f _ .Asian nations, regulators and industrial East Asia _ _ _ _ _ . managers are largely ignorant of the ex- ........... ............ tent and range of pollutants being re- I leased into the environment. Neverthe- 0 200 400 600 800 less, the rapidly increasing trend lines in Million tons of carbon the volume of toxic wastes are clear. In Note: Incremental carbon dioxide emissions from high-income countries addition, many cities dump industrial are held at zero, according to the UNCED ceiling. Source: World Bank 1 992a and World Bank staff estimates. toxic and hazardous waste along with domestic waste, further aggravating health problems and increasing the cost from residential sources. Given the projected of future cleanup-as toxics require special han- growth of energy consumption, sulphur dioxide dling and treatment. emissions are expected to increase to 53 million Land Degradation tons by the tum of the century, and Asia will sur- pass both Europe and the United States in sulphur Data on land degradation are not widely available dioxide emissions (figure 1.3). for Asia, but it is estimated that nearly 20 percent of the vegetated area in Asia was affected by hu- Solid Waste man induced land degradation between 1945 and While the per capita amount of solid waste gener- 1990. Soil degradation is a broad term that includes ated in Asian cities is small, the total amount of not only erosion, but also loss of soil fertility (due waste generated is significant (figure 1.4). Cur- to loss of vegetation, nutrient depletion, waterlog- rently, large metropolitan areas in Asia generate ging and salinization), and structural decline (such over a million tons of waste per year, and this is as compaction). Although it can be safely general- expected to increase rapidly with economic growth ized that soil degradation is a significant problem and continuing urbanization. The growth of solid across virtually all agro-ecological zones in Asia, wastes has strained the capacity of cities to collect both the nature and scale of this degradation var- 25 THE STATE OF THE ENVIRONMENT IN ASIA million per year in Figure 1.3: Current and Projected SO2 Emissions 1989. MMT S02fYear Waterlogging and 80 salinity are particular problems in China, In- Asi a dia and Pakistan. India has the highest amount 60 - of land affected by sa- linity (estimates vary, but range from 10-20 >< Europe million hectares), fol- 40 - = / -I I lowed by China (7 mil- lion hectares) and Paki- USA stan (3 million hectares). Increased 20 - , waterlogging and salin- ity in soils leads to re- duction in output, loss 0O l l l l of irrigated cropland, 1985 1990 1995 2000 2005 2010 and increased salt load- Source: World Bank and ADB data. ings on return flows and aquifers. Also, standing water provides ies widely among and even within countries in the a breeding site for vectors that transmit diseases region. In India, for example, it is estimated that such as schistosomiasis and malaria. about 27 percent of the total land area is degraded, Deforestaon and up to 50 percent is susceptible to erosion (see chapter 6). The forest resource base in Asia is being rapidly For erosion, the most widespread hazard is depleted. Once dominant exporters such as the water erosion, caused mainly by excessive expo- Philippines and Thailand have virtually exhausted sure of bare soil (due to poorly managed logging their forests; India, historically self-sufficient, has operations, indiscriminate land clearance, wide- become a major importer; and the remaining for- spread use of annual crops in farming systems, bare est surplus countries (Indonesia, Lao People's fallowing, overgrazing, and thinning of vegetation Democratic Republic, Malaysia, Myanmar and by stripping the land of fuelwood) and inadequate some of the Pacific Island nations) are facing ex- management of runoff. Wind erosion hazards are cessive and nonsustainable rates of deforestation. restricted mainly to Mongolia, westem China, and During 1981-90, the highest deforestation the drier parts of India and Pakistan. Soil erosion rates in the world were in continental southeast can cause considerable on-site and off-site costs. Asia (Cambodia, Lao P.D.R, Myanmar, Thailand, Agricultural production data do not yet reveal ab- and Vietnam), followed by insular Southeast Asia solute declines in output due to soil erosion, partly (Indonesia, Malaysia, and the Philippines). Defor- because very little work has been done to measure estation rates in both these sub-regions increased the impacts of soil erosion. However, one detailed by more than 50 percent over the previous decade. study in Java, Indonesia,' estimated the total of on- In Indonesia, more than 500,000 hectares are de- site and off-site costs of soil erosion at $340-400 forested annually. In India, Lao P.D.R., Malaysia, TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 26 for migrant settlers and Figure 1.4: Solid Waste Generated in Asian Cities for the shting a- for the shifting cultiva- Million tons per year tion that follows in the 12 wake of logging. The economic im- |. .............. ........................................... 7 . pact of deforestation can 10- be partially measured in terms of the loss of in- ......................................................... come due to inefficiency, over-exploitation of re- 6 - .. ............................................ ...... . sources, and loss of future production. A natural re- . ........ I................................... ........ sources accounting 4 - . C7 framework estimated the costs of forest depletion 2 - . 7 _ . in Indonesia, Papua New iiw cll - - _Guinea and the Philip- 0 pines at nearly $50 billion Bombay Colombo Manila Bangkok Jakarta Beijing Seoul in the six years betveen 1980 and 1985 (in 1985 Source: UNCRD 1989. Source: UNCRD 1989. prices). An even more immediate indicator of Myanmar, andThailand the extent of deforestation the impact of deforestation is the estimate of fu- exceeded 100,000 hectares per annum in each ture import requirements by countries that have tra- country. ditionally been wood exporters. Based on current Deforestation is caused by a variety of fac- trends, imports of timber and forest products will tors: conversion to agricultural land, demand for cost Asian countries nearly $20 billion a year by fuelwood and fodder, and commercial logging for 2000.6 timber, although it is difficult to assign proportion- There are other indirect economic impacts of ate blame to these factors. It is estimated that be- deforestation and degradation, most of which are tween 30 and 80 million people are involved in noteasily quantifiable. Deforestation impoverishes shifting cultivation, affecting between 75 and 120 rural populations dependent on nearby forests for million hectares of land. Fuelwood and charcoal their basic needs (including nonwood products like production accounts for nearly 77 percent ofthe to- protein and shelter in addition to fuelwood and tal wood production in the region. In poorer fodder). Deforestation in upper watersheds has countries (Bangladesh, Bhutan, Cambodia, India, been associated with increasing soil erosion, dam Lao P.D.R., Nepal, Pakistan and Sri Lanka) siltation, and increased flooding in the wet season fuelwood production accounts for more than 90 followed by droughts during the dry season. For- percent of the roundwood production. ests play an important role in sequestering carbon, Controversy surrounds the effects of logging and hence mitigate global warming. It is estimated on deforestation. While sustainable logging meth- that the destruction of tropical rainforests in Asia ods may not lead to serious forest depletion, such has increased the global atmospheric loading of methods are rarely used. Logging also has cascad- carbon by 6 percent. Finally, deforestation is the ing effects that can lead to deforestation. For ex- most important cause of habitat loss leading to loss ample, opening up of access roads is an attraction of biodiversity. 27 THE STATE OF THE ENVIRONMENT IN ASIA Loss of Biodiversity people currently living in absolute poverty. A third underlying cause is rapid urbanization and indus- Deforestation is the major cause of habitat loss intm lzto,wihipoecmlxdmnso h Asia, threatening the region's extraordinary range of biological diversity. About 20 to 25 percent of assimilative capacity of the environment, as well the earth's plant species and the greatest number as on human and institutional abilities to respond. of fauna in the region is found in the rainforests of Afourth is the common perception (caused, in part, by lack of information) that there is a direct trade- Southeast Asia. Biological diversity In the wet for- ofbewnevinmtapreconndc- off between environmental protection and eco- ests of southwestern Sri Lanka, forests of easte nomic growth. There is, in fact, no trade-off: ra- Himalayas, and the moist deciduous forests of the tional policies will cost less to implement than the Western Ghats in southem India are under serious resulting reduction in external costs, leading to a threat, as well as some low-diversity systems such net increase in economic efficiency and social re- as the mangroves in the Sunderbans, Bangladesh. In addition, biodiversity is also threatened by loss of wetlands, degradation of marine resources, loss Market/Policy Failures and of grasslands, and a variety of other indirect mecha- Institutional Weakness nisms such as introduced species, over-exploitation Market failure. Markets worldwide fail to reflect of plant and animal species, pollution of soil, wa- the full economic and social cost of environmen- ter and air, and global climate change. tal problems, or the HIll value of conserving natu- Nearly three-quarters of the natural habitat in ral resources and biodiversity. For example, indus- the region has been lost or irreversibly degraded. tries are allowed to spew solid, liquid, and gaseous Within individual countries, natural habitat loss has wastes into the environment without having to in- been very acute in India, Bangladesh, Sri Lanka, cur the costs for doing so; households, to dispose coastal Myanmar, south China, Java and the cen- of garbage in the neighborhood without taking into tral island of the Philippines. It is estimated that account the social costs that result; cities, to dis- Asia will lose a higher proportion of its species and charge untreated municipal waste into rivers with- natural ecosystems than any other region during the out having to account for the impact on water re- next twenty-five years. sources; farmers, to farm marginal lands for short-term gain in disregard for the resulting ero- E Underly Cause .of sion and desertification; farmers, to use excessive pesticides without concern for the downstream en- A multitude of complex and interacting root causes vironmental impacts, the resistance created in pest are responsible for the environmental problems in populations, or the health impacts to humans; and Asia. The first and most important, which Asia deforesters, to clear forests in disregard for the non- shares with most of the world, is the fundamental market benefits of forest cover (such as market and policy failures concerning natural re- biodiversity, non-timber products, carbon seques- sources and the environment that have received tration, protection of watersheds, and some protec- little corrective action. These failures-which vary tion against flash flooding). by resource and location-underpin most other causes, including population pressures. A second Policy Failure. Market failures are further aggra- is the strain on the resource base imposed by Asia's vated by government actions or policy failures that large and growing population, which is projected encourage inefficient resource use-such as the to rise from 2.8 billion today to 4.3 billion in subsidized provision of water, sanitation, electric- 2025-over 50 percent of the projected world to- ity, and agricultural inputs. For example, provision tal. This strain is exacerbated by the 700 million of water at subsidized prices encourages excessive TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 28 water use in the agricultural sector, with potential on the population. Although they are shackled by negative impacts on cropland due to waterlogging their lack of capacity, most public institutions rarely and salinization. and negative impacts on fisheries involve the private sector, local community, or and estuaries downstream due to reduced flow. other interested actors in environmental activities. Similarly, low water tariffs encourage industries This lack of user participation usually results in and households to use too much water. Data from inadequate support for environmental management the Indian pulp industrv indicate that water con- activities. sumption in water-scarce regions is several times higher than in water surplus regions elsewhere in Population and Poverty the world. Other policy failures are tied to inappro- Asia, with the two most populous countries in the priate tax incentives, trade policies and exchange world (China and India), is home to about 2.8 bil- rates that can lead to environmental problems (see lion people, or over halfthe global population. The chapter 2). huge size of the population and the large propor- tion of youth ensures great momentum for contin- Institutional Weakness. Related to policy failure ued growth. Despite recent declines, fertility re- is the lack of strong environmental institutions mains over replacement levels: total fertility is capable of formulating, implementing, and enforc- above four children per woman in most Asian ing environmental policies. Weak institutional ca- countries, with the exception of China, Indonesia, pacity is further weakened by jurisdictional com- Korea, Malaysia and Thailand. By 2025, Asia will plexity, insufficient information, and lack of have added another 1.5 billion people to its popu- broader participation. While all Asian countries lation (figure 1.5). In 1985, more than 35 percent have some environmental legislation, most govern- of Asia's population were children under 15 years ments lack the capacity to carry out effective en- of age. Although the percentage of young depen- vironmental planning and management. Regula- dents to total population is expected to decline by tions, guidelines and standards are often not well the year 2000, the absolute number will increase. developed, nor do they reflect the institutional ca- The old age dependency ratio is also expected to pabilities and scientific knowledge available within increase from 7 percent in 1985 to about 9 percent the country. in year 2000. Institutional weakness is acute at the level of South Asia contains half of the world's poor, local governments and agencies who are respon- and nearly half of the region's population lives in sible for monitoring and enforcement. These agen- poverty (figure 1.6). In East Asia, nearly a fifth of cies usually have low status in the bureaucracy, the population live in poverty, most of them in have inadequate powers, and lack adequate staff, China. Further economic growth is necessary to skills and equipment. A multiplicity of actors (na- sustain the gains already made in poverty allevia- tional and regional sector agencies, state orprovin- tion and to make further advances. cial govemments, local governments) with over- Population growth contributes directly to en- lapping, uncoordinated, or poorly defined vironmental damage, as economic, social and po- responsibilities aggravates institutional weaknesses litical systems fail to keep up with the growing and hampers the development and implementation demands. Market and policy failures have already of a broader environmental management strategy. been mentioned. Social and political rigidities, in Environmental management is further con- the face of tangible human needs and at times of strained by the lack of environmental information rapid change, also lead to nonsustainability. In ri- and analytical frameworks for understanding the ral areas, traditional land and resource management problems. Most governments are not fully aware systems fail as population increases and land of the magnitude of the problems or the impacts parcelization leads to overuse. Skewed land distri- 29 THE STATE OF THE ENVIRONMENT IN ASIA bution often compels the poor to survive by culti- Urbanization and Industrialization vating marginal land-erosion-prone slopes and In urban areas, environmental problems are largely cleared forests-leading to erosion and other en- caused by the high concentration of domestic and vironmental problems. Without tenure, and often industrial wastes that, in the absence of adequate with only passing claims on the land they cultivate, collection, treatment and disposal, overwhelms the the poor are less likely to make investments to pro- assimilative capacity of the environment. In addi- tect natural resources. Govemments also have dif- tion, ecosystems are destroyed as urban and indus- ficulty keeping up with the infrastructural and hu- trial development consumes land in environmen- man needs of a growing population. The lack of tally sensitive areas. The urban-industrial pollution adequate public investment in human capital has problem is largely a "sink" capacity problem, limited the productivity of the poor, and hence re- though there is an element of "source" extraction duced their options for livelihood. Even the richer problem in terms of demand for raw materials.9 segments of the population in both the poorer and Also, the urban-industrial sector can have an ad- richer countries, being fully aware of economic and verse impact on the rural sector through the extrac- social trends affecting the resource base, exhibit tion of natural resources and through the down- short-sightedness and greed.7 stream impact of polluted rivers, creating problems Already, the region is facing heavy resource for rural domestic and agricultural use. pressures. Fourteen of the twenty-six countries in Nearly a third of Asia's population currently the region have population densities of over 100 live in cities and towns. Urban population growth persons per square kilometer. Though food produc- accounted for 45 percent oftotal population growth tion has historically risen faster than population, since 1960, tripling the number of city dwellers this has been due to intensified agriculture, bring- from 266 million to 840 million. ing its own set of environmental problems (chap- This dramatic demographic shift is continu- ter 6). Further expansion of the area cultivated is ing unabated-the urban population is expected to barely possible, as it would have to be at the triple again to 2.5 billion by 2025, when nearly 60 expense of increasingly marginal forests, range- percent of Asia's population will be living in cit- lands and wetlands, offering limited agricultural ies and towns (figure 1.7). This will account for returns and contributing to cumulative environ- more than 100 percent of total population growth mental degradation. overthe period, implying some net reduction in the The lack of non-farm employment opportu- rural population. In fact, the net decline in rural nities for the rural poor and scarcity of agricultural population may have already begun in East Asia; land encourage migration by landless families.8 and the East Asian urban population is projected Some migrate to the cities, seeking employment, to exceed the rural population by the year 2005. In where they contribute relatively little to the major South Asia, the surge of urbanization is not ex- sources of urban degradation (due to low per capita pected to exceed the rural population until 2025. consumption). The rest migrate to other rural des- The rapid population explosion is concen- tinations, and occupy parcels of marginal land of- trated in a few cities in the region. Megacities (cit- ten cleared by others (such as lumber companies ies of more than 8 million people) are growing rap- exploiting government concessions). It is in the idly in size and number in Asian countries. In 1950, rural areas-where land markets do not function there were no megacities in Asia; by 1990. there well, labor productivity is low (due to marginal and were nine, accounting for nearly half the megacities decreasing land productivity), production risks are in the world. By the turn of the century, there will high, and investment time horizons are very short, be thirteen in Asia, again accounting for nearly that poverty and environmental degradation are half of the worldwide total (box 1.2). Bombay, most closely linked. Calcutta and Shanghai will each have more than TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 30 in cities by the tum of Figure 1.5: Population Growth the century. By then, Billions Billions rural poverty is ex- I0 pected to show a slight decline, while B -------------------------------------- urban poverty w ill in- crease to match the 6 --- - .. -6-level of rural poverty. X X X : . . Already the poor 4 - '~~~~'4-1-4- ---VX(7 4 ~~~~account for 60 per- cent of the popu- 4. ~~~~~~~~~lations of Calcutta 2--. ---.t2 'land Jakarta, 45 per- cent of Karachi and 0 ......0 Madras, and 35 per- t990 20 00 2025 cent of Manila. _East Asia Zi2J South Asia ~' World Urbanization is East Asa ~M/,South Aia i~E Worldfueled by economic Source: UN projections. fueled by e oc growth. The loca- tional advantages and the economies of 15 million inhabitants. scale of large cities enable them to generate goods With further rapid urbanization in the region, and services far in excess of their share of the na- even with lower incidence of poverty in urban tional population. Shanghai, with only 1.2 percent areas, increasing numbers of the poor will be found of China's population accounts for about 12.5 per- in the cities and towns of Asia. It is estimated that cent of the nation's industrial output. Bombay, nearly halfthe households in poverty will be living India's leading financial and business center, has just over I percent of the country's population, but generates 1O percent Figure 1.6: Number of Poor (in millions) of India's industrial jobs and handles more than a Est As5X 18o quarter of foreign trade. South Asla, 51 % It is estimated that the 520 ~~~~~~~~~~~~~Bangkok metropolitan region, with 16 percent of Thailand's popula- tion, accounts for 48 per- cent of GNP, and 75 per- cent of manufacturing.10 In Bangladesh, nearly R ostl Wbrld, 31% half the manufacturing 316 jobs are in Dhaka, inhab- Source: World Development Report 1990. ited by just 6 percent of the country's popula- 31 THE STATE OF THE ENVIRONMENT IN ASIA Figure 1.7: Growth of Urban and Rural Box 1.2: Megacities in Asia Populations in Asia 1965-2025 1990 2000 (Projected) East Asia Shanghai Dhaka Calcutta Karachi L d Bombay Bangkok Seoul Bangalore Beijing 1.200 Flf _ Tianjin * _ _ < : Jakarta New Delhi Metro Manila /m~ Piu ~: : :and relax trade regimes. Also, most of the indus- 300 - .tries are located in urban areas and add to the con- centration of urban pollution problems. ,091 196 0 l MMMM2010 2016 2= 26 Population growth combined with economic development and industrialization is generating an South Asia extremely rapid growth in demand for energy. At current growth rates, energy demand in Asia is ld i ao doubling every twelve years (compared to a glo- 1,600 . . . . . bal rate of every twenty-eight years). In addition, energy intensity (the amount of energy per unit out- :0 : : : : : :put) in Asia is the highest in the world. soo . . .; . . - - -7 '.The challenge before Asia, therefore, is to find ways to make fundamental trends in economic .0 . . . /. .and population growth more sustainable, and to re- verse the pollution and resource degradation trends xo . ~ ............. that are already apparent. What the resulting form -- m P. N ,n of sustainability will ultimately "look like" is the 0 ; ; ; ; subject of strong debate, and must be addressed on sses 19O 19CMM 2000 2w5 e010 201S 2=eo 2ws an economy-wide basis for each Asian country. Source: United Nations 1991. The next chapter describes a frarmework for focus- ing on the great number of economic, political and social decisions required in each country attempt- tion. Given these advantages, economic growth and ing to achieve greater sustainabilitv, compatible urbanization are bound to remain linked. with continued growth. Similarly, industrialization will continue to be the driving force of economic growth in Asia, Notes although this trend is more pronounced in countries I . According to data from the Global Environmen- in the East Asia Region. While industry accounts tal Monitoring System (GEMS) of the United for nearly 20 percent of GDP across all of Asia, Nations. China, Indonesia, Malaysia and Korea have indus- 2. GEMS data. trial sector shares of more than 40 percent. The 3. The total emissions data for Bombay includes rapid pace of industrialization is expected to con- sulfur dioxide, nitrogen dioxide, carbon monox- tinue as countries in the region liberalize markets ide, particulates, and hydrocarbons. Admittedly, TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 32 a summation across all of these pollutants is less in Asia that are unemployed or underemployed meaningful than the disaggregated amounts, but has fallen from 58 percent in 1970 to 47 percent the disaggregated amounts are not readily in 1985, the absolute number has increased from available. 289 to 410 million. 4. Anthropogenic carbon emissions are the result of 9. The term "sink" refers to the local ecosystem's human activities, such as fuel consumption and absorption of pollution. "Source" refers to envi- various industrial processes (such as cement pro- romnental problems created when resources are duction). An important non-anthropogenic source extracted for human use. Water pollution caused of carbon is the rotting of biomass. by industrial waste is a sink problem. Loss of 5. World Bank 1990, pp. 60-62. biodiversity attributable to low river flows caused 6. World Bank 1992b, pg. 7. by high water extractions forurban use is a source 7. Hilbom, Ludwig, and Walters 1993. problem. 8. According to the International Labor Organiza- 10. Mingsarn 1992. tion, while the proportion of the total workforce 2 A FRAMEWORK FOR IMPROVING ENVIRONMENTAL MANAGEMENT At a broad level, the debate about environmental Actions Required management has shifted from concerns overphysi- cal limits to growth, to concerns over achieving Setting Priorities sustainable growth, using appropriate policies and The complexity of actions required, combined with incentives. Evidence suggests that where environ- real financial and institutional constraints, means mental policies are publicly supported and firmly that the first element of any framework be to set enforced, dramatic improvements in sustainability priorities. Priorities for action are ideally based on consistent with the physical resource base can be collection and analysis of available data, careful achieved. valuation ofthe costs and benefits of various types The range of required activities is extremely of interventions, assessment of the administrative wide-in terms of the policy instruments, the af- burden of alternatives, and participatory fected economic sectors, and the affected popula- decisionmaking. This is clearly a daunting and tions. Agenda 21, presented by the world's politically difficulttask, which is why government developing countries at the 1992 United Nations priority-setting processes are rarely made explicit. Conference on Environment and Development Unfortunately, it is much easier to analyze the (UNCED), is an ambitious document in every symptoms of non-sustainable development than to sense. As in any situation where public opinion and make difficult choices concerning priorities for public behavior are important, changes will take intervention. How should countries set priorities time to be absorbed and realized. Equally impor- between local and global pollutants, and between tant, long-term political commitment is required to policy reform and capital investments? A full cost- support and enforce the required policy reforms. benefit comparison of altemative scenarios is of- This chapter proposes a framework for im- ten unrealistic, since it requires too much data and proving environmental management. The first of covers too many hypotheticals. In practice, priori- its five components is the need to set priorities- ties are best set as the result of a process involving * ~~~~~~~~~~~both technical and public inputs. and taking into an obvious but difficult step imposed by shortages of financial and administrative resources. It then account scientific, economic, and medical evidence addresses four key areas of national environmen- (box 2. 1). tal strategies: designing cost-effective policy in- Ultimately, based on these inputs, gover- ments and communities set priorities among dif- stcruents;imping publicandprinatestitutorionalca ; ferent environmental problems. But this is only the increasing public and private sector investments; beinn,a.te hie utas emd. and improving technology, even in areas not fully First, governent s must aleo en- supported by the market. Two final sections ad- virsomentq is polita wan eonoial vironmnental quality Is politically and economically dress the need to combine national level (top-down) feasible. Second, governments must decide what and local-level (bottom-up) approaches, and the instruments should be employed in achieving its economic and social impact of improved environ- environmental objectives. If all social costs and mental policies. benefits of each incidence of environmental deg- 33 TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 34 Box 2.1: An Analytical Approach to Setting Priorities Setting priorities is basically a process of rankingfuture actions, such that the things to be donefirst will achieve the greatest gain relative to the available resources. Priorities, therefore, determine the path by which improvements in environmental man- agement are to be achieved. How/ar one travels down the path-and howfast-ore determined by many factors that change over time, such as the level of resources available, the administrative capacity of the government, and the role played by the public through participatory or political processes. Setting priorities involves ranking alternative policies and expenditures such that those with the highest rafio of benefits to costs are implementedfirst. The benefits to society of mitigating environmental damage due to a specific cause needs to be compared with the economic and social costs of achieving that mitigation. There may exist inexpensive (partial and upgradable) measures that achieve significant improvements and therefore have a high benefit-cost ratio. This is especially the case where future harm can be prevented. There are a variety of measures that can be used to address environmental problems, including economic policy reforms (such as energy pricing), specific environmental policies (such as new regulations, adequately enforced), and targeted environ- mental expenditures. Because these measures must be applied simultaneously and in a complementary manner, it is necessary to have a good understanding of the likely future effects of economic and environmental policies to ensure that investment and expenditures undertaken todaywill notbe made redundant in thefuture by policy measures. Similarly, it is important to identify and address institutional and other implementation constraints first before making policy and/or expenditure commitments. Experience has taught us the lesson that prevention is much better than cure, so that it is ever important to ensure, for example, that appropriate standards for the disposal of toxic wastes are introduced and enforced. A second lesson is that partial solutions at a modest cost may be preferred to "permanent" but expensive measures that may have relatively low benefit-cost ratios. In setting prioritiesfor environmental management, it is the incremental benefit-cost ratios that mailer. Source: Adapted from World Bank 1 992b, pp. 1-1 5. radation were available, then optimal levels of in- ties of environmental problems vary by country, the tervention could be determined. However, neither underlying causes of the degradation vary little. availabledatanorcurrentmethodologiesallowthis. The causes can be traced to both market failures Environmental objectives and instruments must be (such as lack of information, price extemalities, determined by linking available data and valuation public goods and free riders, and inadequate prop- of costs and benefits with such factors as the fea- erty rights) and policy failures (conceming pricing sibility of enforcement and the intensity of public or trade policies). concem over risk. These issues, as well as the im- Policy reforms used to improve sustainability portant role of public participation in the setting of can be clustered into three distinct but complemen- environmental objectives, are discussed through- tary groups: out the sector-specific chapters. * market-based policies, which use pricing, taxes, or marketable permits to modify Policy Reform behavior; The second element in the framework is to design * regulatory or administrative policies that cost-effective policy instruments that minimize impose quantitative restrictions, enforce costs, economize on scarce administrative skills, property rights, and screen investments (both and are broadly acceptable to society. Environmen- public and private); and tally appropriate policies are not inconsistent with * extra-regulatory approaches to pollution con- policies that foster growth and trade, but they do trol, such as the introduction of public disclo- attempt to correct the bias of market and policy sure requirements and increased use of the failures that lead to over-exploitation of non-priced court system in environmental liability suits. and under-priced environmental resources. Most Asian countries have developed envi- Although the exact descriptions and intensi- ronmental policies that draw heavily upon the sec- 35 IMPROVING ENVIRONMENTAL MANAGEMENT ond group-which is consistent with the traditional important. In practicality, user willingness to path taken by the OECD countries as well-but less pay for water exceeds willingness to pay for so on the more innovative approaches of the first sanitation and solid waste disposal. Pricing and last groups. The emphasis on regulatory poli- policies that help water utilities recover costs cies has had relatively high administrative costs as and that discourage wasteful use are an essen- well as relatively low economic efficiency. For tial first step to solving water crises. In the both reasons, efforts to encourage reform in the transport sector, pricing measures (fuel, emis- other two groups promise both greater cost-effec- sions and/or parking taxes) are a partial step tiveness and better use of scarce administrative to reduce emissions and congestion, but must skills. be combined with other sticks (such as traf- fic management) and carrots (public trans- Market-based Policies. The most important type port) to be effective. of market-based policy reform is pricing reform. * The industrial sector. Market-based ap- "Full-cost" pricing (that is, removing subsidies and proaches to industrial pollution should- intemalizing the externalities imposed by the re- based on experience more than source use or pollution emitted) is fundamental to theory-combine strong disincentives (pol- reducing the consumption of resources in virtually lution charges, permits, or presumptive all sectors. Taxes and/or tradable permits levied on charges) with mild fiscal incentives (tempo- pollution and congestion are equivalent to raising rary financial subsidies, accelerated deprecia- the price on air, water, and land resources. Depend- tion, or lower customs duties) (see box 4.9). ing on the relevant elasticities, market-based poli- The incentives should be more time-bound cies will lead to some increase in financial flows than the disincentives, and designed to accel- to the "owner" of the resource-which is often the erate abatement during the transition from the government.2 These revenues can be reinvested in period of little industrial pollution control (the the resource itself, particularly in the case of pub- 1970s-1980s) to the period of broad compli- lic infrastructure investments (for example, in ance (1995 and beyond). Sound sector poli- water supply and energy) and public goods (such cies combined with proper pollution-related as air and forests). In addition, both price increases policies will also stimulate technological ad- and fiscal instruments can help stimulate techno- aptation and clean technology investments logical adaptation that favors greater efficiency and (box 2.2). reduced pollution. * The energy sector. Full cost pricing of en- Pricing policy is appropriately applied to both ergy inputs and electricity will stimulate goods (such as electricity, water, road use, park- higher supply-side efficiencies, modeyiza- ing, land, and trees) and to incidences of resource tion of equipment, demand-side conservation, degradation (such as pollution and vehicle emis- and capital flows from the private sector. All degraatio (suc as olluton ad vehcle mis-are importaSnt. In addition, such reforms could sions). Specific areas in which pricing reforms are . i particularly important in Asia are summarized be- stimulate investment in clean and renewable low (see also chapters 3-7 for details). energy sources, particularly for rural areas that remain off the national grid. Where coal re- sThe urban sector. Asian municipalities, mains the overhelming choice for energy struggling to keep up with rapid urbanization and power generation, pollution abatement and industrialization, face continual infra- will only result from direct pollution controls, structure expansion and maintenance prob- whether market-based or regulatory. Price re- lems. Increased user fees to attempt to make forms are essential to help utility companies water supply, drainage, sewage, and solid finance coal beneficiation and clean coal waste more financially self-sustaining are technologies. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 36 Box 2.2: Policy and Entrepreneurial Responses to the Montreal Protocol: Evidence from the Dynamic Asian Economies A recent OECD study examined how the governments and firms of Hong Kong, Korea, Malaysia, Singapore, Taiwan and Thai- land responded to the challenge posed by the Montreal Protocol to reduce their consumption of ozone-depleting substances (primarily chlorofluorocarbons [CFCs]). Although the strategies and costs incurred varied by country, some lessons emerged. First, it is clear that countries thatput inplace quantitative restrictions on CFCs sent a clear signal to firms to begin con- serving, and this was important. Initial reductions were often quite dramatic as fimns that had few prior incentives to conserve introduced better housekeeping and engineering controls. These reductions came at a small marginal cost and with high benefits (i.e. CFC reduction by half). This implied a strong case for early implementation of control measures, even if, technically, the countries had a ten-year grace period. Second, costs tended to rise rapidly after the initial 50 percent reduction. However, faced with the right set of incentives, firms exhibited considerable ingenuity for least-cost solutions. Harnessing this ingenuity is an important consideration in the design of policies. Third, the finrs were helped by governments, which played a positive role in diffusing technical and market information to CFC users. In some cases, governments provided centralized recycling services and helped firms evaluate alternative tech- nologies. These services were particularly helpful to smaller firms. Finally, once CFC quotas were in place, governments did well to devise an allocation system (permits) that enabled them to capture the bulk of the quota rents. These rents were then used to finance measures designed to facilitate the CFC phase-out effort. Clearly, a similar approach could be taken for other industrial pollutants, with the primary difference being that the po- litical commitment to pollution reduction would have to be generated domestically, and not through a binding international agreement. An example of this is the recent tradable sulphur dioxide permit system introduced in the United States. Source: O'Connor 1991. The agricultural sector. The two most over- clearly defined property rights. exploited agricultural resources are marginal lands (which lack clear tenure arrangements) Command and Control and Other Regulatory and water, both of which are often treated as Policies. Non-market-based policy reforms-in- free goods by farmers. Water conservation cluding regulatory, legal and administrative re- can be directly affected through the higher forms-are required to complement market-based pricing of irrigation water. (In comparison ones. No country in the world has relied solely on with energy, demand elasticities for water are market-based environmental policies to reduce pol- lower-at least in the range of politically re- lution. The command and control approach to pol- alistic increases-and therefore the percent- lution control, in which govemments specify age conserved would be less.) The use of allowable factory emissions and often even specify marginal lands for agriculture, however, is the technologies to be used, is very common. Ex- typically less of a pricing issue than one of amples of other types of non-market-based reforms property rights (see below). are non-tax methods to reduce transport emissions Forestry. Forest concessions and stumpage and congestion, such as emissions standards, ag- fees have been priced traditionally very low gressive vehicle inspection programs, traffic man- in Asia, leading to massive deforestation with agement, tighter zoning, and investments in public excessive social costs. Setting higher rates transit altematives to private cars. (These steps requires careful valuation of forest resources have all been taken in Singapore). Further ex- and their extemalities (box 2.3). The use of amples for both the transport and energy sectors are public lands for grazing and social forestry programs to upgrade technologies and fuels, such can also be made more sustainable through as the introduction of unleaded gasoline in Malay- pricing, enforcement of access, and more sia and Thailand, switching from coal to natural gas 37 IMPROVING ENVIRONMENTAL MANAGEMENT Box 2.3: Potential Gains from Forestry Policy Reform in Indonesia Indonesia would gain significant financial and environmental benefits from policy reform in the forestry sector. The two main reform areas required are in pricing policy and in trade liberalization. The required adjustments would place considerable pres- sure on the wood industry, but could be phased in over three to five years. Currently, Indonesia captures only about 30 percent of the surplus or rent accruing from logging, compared to about 85 percent in Indonesia's other major natural resource based sector, petroleum. Moreover, trade restrictions on the export of logs and wood products have reduced domestic log prices to about half the world level, and the Government captures only 12 percent of the rents that could accrue if log prices were double. Raising forestry fees (which include royalties and license and reforesta- tion fees) and removing export restrictions could generate up to $2.6 billion in additional revenue. Also, higher fees would reduce incentives for unsustainable forest exploitation, and therefore help internalize the environmental cost of excess defores- tation. In addition, fees should be levied on the value of standing timber, not only on processed wood, which encourages waste in logging and processing. Forestry-based trade controls are by far the most important category of export regulations in Indonesia today. These en- compass prohibitions on exports of unprocessed logs, rattan and veneer, the regulation of exports of sawn and processed tim- bers and plywood, and prohibitive export taxes on sawn timber. These controls have a major impact on resource allocation, revenues and the environment. They were introduced to encourage greater domestic value-added, but were subsequently (and wrongly) justified as policies to ensure sustainable forest management. The resulting low prices have induced rapid growth in wood processing industries, and plywood has grown to be a leading export (total exports were about US$3 billion in 1991). However, the log export ban is an ineffective conservation measure because it does not slow the rate of logging for do- mestic consumption or for processing for re-export. On the contrary, artificially low domestic log prices have led to over-cutting and over-investment in processing capacity. The "sustainable" level of log production in Indonesia has been estimated at about 25 million cubic metersper year. However, logging of natural forests increased from about this level in 1980 to an estimated 37 million cubic meters per year in the late 1 980s. Moreover, due to over-investment, the wood industry now has the annual capac- ity to process well over 50 million cubic meters of logs. Lowprices have also reduced the profitability of timber plantations in Indonesia, meaning that a greater proportion of wood must come from natural forests. Source: World Bank data (Indonesia Country Department). in Seoul, and upgrading to higher grade coal in sumer boycotts, and/or liability court cases. Dis- China. Cost recovery programs, recycling, and lo- closure is relatively low-cost, requires relatively cal involvement (often with the infonnal sector) little direct government involvement, and invokes can improve the prospects for solid waste disposal. the power of the market into the environmental In the natural resource sectors, examples of arena. (Increased local participation, however, is non-market-based policies include public efforts to not a substitute for more comprehensive environ- promote better adapted technologies through the mental policies.) Although specific examples of dissemination of technical information, applied direct community participation in industrial pollu- research, and improved extension services. Im- tion control have arisen across Asia, no country has proved land titling and resource tenure also formalized the right of communities to know. show positive correlation with environmental The introduction of public disclosure require- management. ments in both Japan and the United States moti- vated dramatic public response with corresponding Extra-regulatory Policies. Although interest is impacts on corporate behavior. The use of court rising, Asian countries have turned only recently, systems in environmental liability suits has in- when at all, to innovations in the area of extra-regu- creased in Eastern Europe. South Asian countries latory approaches to pollution control. For ex- appear to be more active in these extra-regulatory ample, requirements of public disclosure of approaches than East Asian countries (with some point-source pollution data can lead to direct ne- exceptions in Thailand and Indonesia), perhaps gotiations between polluters and communities, con- because the public has more forcefully demanded TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 38 involvement through such channels. environment assessments and other activities. Beyond these technical areas is a set of broader questions relating to decentralization, a The third element in the framework is to build suf- well-established trend in Asia. The decentralization ficient institutional capacity to accomplish the of monitoring and enforcement authority for urban important steps of priority setting and policy re- environments and industrial pollution can be posi- form. Institutions constrain the choice of policies. tive for the environment, but only if local agencies The policy mix must be weighed not only against have adequate resources, central support, and lo- an analysis of the efficiency of the approach but cal accountability for achieving their mandates. against a country's ability to implement. Weak Similarly, the decentralization of fiscal and plan- institutions typically lack both the technical skills ning authority for local infrastructure investments and political authority to change the behaviors of can bring public expenditures more in line with firms, households, and farmers. Weak enforcement local environmental concerns. However, decen- agencies often lack both the information (such as tralization is a particularly multifaceted issue, and emissions data) and means (such as consistent and there are few successful case studies from which fair enforcement capabilities) to implement policy. to draw convincing lessons. Weak legal and administrative procedures under- Institutional strengthening will not progress mine the government's ability to enforce environ- significantly in any of these areas without a long- mental compliance in almost all sectors-whether term political commitment to environmental goals. compliance by polluters to pollution standards, or Similarly, donors, must accept a long-term horizon, access by migrant fanners to state-owned forests. often of five to fifteen years. Unfortunately, those Political commitment to protecting the envi- countries most in need of environmental assistance ronment is increasing throughout Asia. Almost all are often those with the least absorptive capacity. Asian countries have promulgated legislation to The last chapter discusses some innovative donor protect their air, water and land. Many ofthem have approaches to institutional strengthening (see created Ministries of Environment and/or special- box 8.2). ized agencies at the Federal and Provincial levels. While some ofthem have produced guidelines and increasing Public and Private standards in order to enforce the legislation, oth- ers are currently involved in this process. It is at The fourth element in the framework is to mobi- the level of implementation-monitoring environ- lize private sector investment, in line with more mental impacts and enforcing regulations-that sustainable pricing policies, and public sector in- government institutions are weakest. vestment, in line with environmental priorities. The Although the donor organizations have rela- overall costs of sustainable policies have been tively little experience with strengthening environ- shown to be large in absolute numbers, but small mental institutions, current ideas on "best practices" in relative terms: the World Bank estimates that are summarized in box 2.4. Included inthis box are developing countries need to expend 2 percent to six technical areas in which environmental institu- 3 percent of GDP per year to achieve greater tions need strengthening. These range from the sustainability.3 In Asia, this translates to about $38 ability to set standards and analyze policy at the billion per year by 2000, two-thirds of which is in national level, to the ability to perfonn actual moni- East Asia (table 2.1). toring and enforcement at the local level. Most The highest projected costs are for water sup- environmental institutions would benefit from in- ply and sanitation ($12.4 billion per year by the viting broaderparticipation-by the private sector, year 2000), followed by natural resource manage- parastatals, NGOs, and communities groups-in ment ($11 billion), energy sector and transport-re- 39 IMPROVING ENVIRONMENTAL MANAGEMENT Box 2.4: "Best Practices' for Strengthening Environmental Institutions "Best Practices" for strengthening enviromnental institutions-a concept for guiding both govertnent and donor interventions withenviromnenital institutions-canbe approached via two sets of questions. The first is the set of technical areas tobe covered by technical assistance (TA). The second question concerns the steps requiredto lead to increased project or TA effectiveness. In terms of the first concern, there are six broad areas in which technical know-how, methodologies, and processes are often needed: * Strengthening the ability of national-level environmental agencies to create environmental policies and set standards; * Reinforcing the need of government finance andplanning ministries to align pricing and trade policies with sustainable development objectives; * Strengthening the ability of national, provincial, and municipal agencies to monitor and enforce environmental regulations; * Assisting government agencies and parastatals (such as power utilities and water/irrigation authorities) in conducting EAs of planned capital projects; * Assisting governments to complete their NEAPs and to do follow-up; and * Encouraging broader public participation in the EA and NEAP process, including the participation of local NGOs. In terms of the second question, the steps for strengthening environmental institutions is similar to those for other gov- emnment agencies. First and foremost must be aninstitutional andpolitical agreement on overall goals and objectives. Maintain- ing an institutional focus on goals is also the most promising way to get the political process in line. Also, the agreement on goals should not be limited to the environmental institutions alone, or they will likely be marginalized in the broader policy formulation and budgeting process. Even in the context of decentralizing authority and responsibility, local institutions can be marginalized in the absence of central support. Second, emphasis must be given early on to the quality of personnel recruited to the environmental agencies. Unlike in many developing Asian countries, Japanwas able to fill the initial positions in its nascent environment institutionswithtechni- cally qualified personnel. If not done early on, such institutions are likely to become civil service back-waters that no amount of TA can fix. Third, the issue of corruption cannot be avoided, especially in the context of monitoring and enforcement. Adequate institutional incentives to support honest inspectors are fundamental to achieving broad-based compliance to environmental standards. Fourth, donors must expect and accept that results will only come in the long-term, perhaps after a 5-15 year commit- ment. A hurried attitude to get results may not only not work, it may also make corruption and other inefficiencies worse. lated investments ($6.5 billion), industrial pollu- Increased private sector investment should be pro- tion ($4.8 billion), and population and educational moted through pricing and policy reform, and services ($3.3 billion). These levels of financial and through improved access of the private sector to technical resources are beyond the capacities of information, commercial loans, supplier credits, individual country government and donor agencies, and, under special circumstances, to government and require the involvement of the private sector incentives (box 2.5). to the extent possible. Second, to what degree can public-sector in- Several issues arise concerning the financing vestments-which are presumed to be economi- ofthese investments. First, to what degree can they cally viable using shadow prices, be made more be made financially viable? The most financially self-financing? Viability issues arise in such pub- viable environment-related investments are those lic services as water and sanitation infrastructure, that are good for both economic development and agricultural extension and research, and education the environment, including energy conservation, and family planning programs. Donor support for waste minimization in industry (as opposed to end- infrastructure projects should be made contingent of-pipe investments), recycling in the urban and on financial plans that encourage project cost-re- industry sectors, fuel efficiency in the transport covery to the extent possible. Even if capital costs sector, soil conservation, and sustainable forestry. cannot be recovered, user fees and taxes should try TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 40 Table 2.1: Estimates of Additional Investment Box 2.5: Examples of Commercial Credit for Required for the Environment in Asia by 2000 Pollution Control East Asia SouthAsia Total Two World Bank projects that provide credits for pollution (US$ billions per year) control are the industrial pollution projects in India and China. Inboth cases, subsidized lines of credit arejustifiedforpollu- Water supply and tion control investments that include prototype technologies, sanitation 7.0 5.4 12.4 have a demonstration effect, have inherently high risk, or treat hazardous wastes with high social benefits. Reducing emissions The GEF portfolio also includes examples of donor- from energy generation 2.0 0.7 2.7 assisted credits for pollution control, such as the China Ship Waste Disposal project and the Pakistan Community Inte- Changing to unleaded grated Waste to Energy project. fuel; controls on vehicle pollution 2.9 0.9 3.8 Reducing industrial nized in the GEF and the Montreal Protocol (see pollution 3.6 1.2 4.8 box 2.7). Finally, to what degree do market-based Soil conservation and policy reforms assist, through efficiency gains, to afforestation 5.0 3.6 8.6 financially strengthen agencies investing in envi- Additional resources for ronmental sustainability? For example, price re- agriculture and forestry form for stumpage fees in Indonesia would transfer research 1.4 1.0 2.4 significant rents now accruing to the private sec- tor to the public sector, providing needed revenues Familyplanning 1.4 1.0 2.4 to invest in environmental protection. Electricity Primary and Secondary and water tariff increases would not only reduce education for girls 0.7 0.2 0.9 inefficient use, but help restore profitability to util- ity companies currently unable to adequately their Total 24.0 14.0 38.0 distribution and billing systems. Such efficiency Source: World Bank andAsian DevelopmentBankestimates, gains help offset the up-front costs of policy re- forms and environmental investments. to cover operating and maintenance costs. More Improved Technologies and analytical work is required, both conceptually and Technology Transfer practically, on ways to make environmental inter- The last element of the basic environmental man- ventions more self-financing (box 2.6, and chap- agement framework is the need to foster techno- ter 8). logical improvements and efficiency gains, even Third, to what degree do investments under when research, development and demonstration consideration address environmental problems costs are not fully borne by the market. Improve- with cross-border or global impacts, such as glo- ments in productivity and efficiency are essential bal warming, ozone depletion, biodiversity, and to making continued economic growth possible at pollution of the seas? In these cases, strong argu- atime of growing populations, urbanization, indus- ments exist for intemational cost-sharing to help trialization, and an increasingly degraded resource finance the investment costs. Such payments base (box 2.8). should not be thought of as development assistance, Economic and trade openness is fundamen- but as economically efficient allocations of costs tal to technology transfer. In the polluting sectors and sharing of benefits. These concepts are recog- (urban, transport, industry, and energy), "clean" 41 IMPROVING ENVIRONMENTAL MANAGEMENT Box 2.6: Approaches to Making Environmental Interventions More Self-Financing The most fundamental approach is to expand the use of user charges and "polluter pays" principles, although the "ability to set the price," the "ability to pay," and the "ability to collect" are not often all inplace. Another promising idea is to use revenues generated from "green" revenue-producing policies, such as increased stumpage fees or land rents to cross-subsidize technical research and extension in more sustainable agricultural and forestry practices. This idea has direct appeal in Indonesia, Malay- sia, and the Philippines, where the need for technologies for marginal and degraded lands is increasingly urgent. A third ap- proach is to build on the Environmental Fund concept used in Europe, based on earmarked revenue sources, to help finance pollution control projects. A fourth and perhaps most promising approach is the use of "improvement levies" to help finance large infrastructure investmnentswith positive environmental impacts (such as mass transit, sewage and sanitation, andwater treatment plants). Im- provement levies have been widely used in the U.S. and Latin America. The idea of improvement levies is to broaden the tax base from those who directly use the investment (i.e. metro system riders or water consumers based on usage), to those who enjoy the externalities (i.e. real estate owners whose property values rise as a result of improved access, and the wealthier com- munities whose marginal utility from improved urban sanitation exceeds what they would have to pay based solely on water bills). There are many variations of improvement levies, but in all cases, their use can make or break the financial viability of urban infrastructure investments. technologies will be most available in those Asian Intensification technologies with negative environ- countries with open trade regimes and business mental impacts need attention. On marginal lands, climates that foster foreign investment. Combina- low-cost measures for soil and moisture conserva- tions of supplier credits, export-import financing, tion need to be adapted and demonstrated locally technology sharing agreements, royalty agree- to farmers. On rainfed uplands, more diversified nments, and joint ventures make the importation of cropping models incorporating more perennials and such technologies easier and less expensive. In fewer annual foodcrops need to be researched and these markets, relatively little public sector inter- tested. In forestry, local research on sustainable vention is required-except for, perhaps, informa- management techniques is needed, differentiating tion dissemination to smaller firms. between sustainable commercial forestry, natural In addition, many high-efficiency industrial forest management, and sustainable social forestry. and transport technologies pay for themselves over The Consultative Group for International Agricul- a few years (see chapter 4, box 4.10). The biggest tural Research (CGIAR), including the recently exception is the case of emissions reduction tech- established Center for Forestry Research in Indo- nologies for thermal plants, which typically repre- nesia, are the lead intemational bodies working sent add-on costs. Since these investments do not with developing country govemment on these is- pay for themselves financially, they will only be sues. installed if the regulatory environment is suffi- ciently tight. "Top-Down" Versus "Bottom-Up" In the green sectors, technological issues have The framework outlined above calls for increased an extremely high priority. Public sector involve- willingness to cut across the traditional sectors of ment in technological research, development, and public investment and donor-funded projects. Cer- demonstration has a much higher priority than in tain aspects of the framework are "top-down" the pollution sectors, due to the less commercial- policy approaches that affect the economic envi- ized and more site-specific nature of the technolo- ronment in which market decisions and investments gies. In agriculture, continued intensification will are made. Other aspects are more "bottom-up," be essential to both expanding food production and consisting of either local policies, monitoring and reducing pressures on marginal lands and forests. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 42 Box 2.7: Global Environmental Operations Global Environmental Facility The Global Environmental Facility was established in 1990 with $1.3 billion to provide grants and concessional funds over a three yearpilot phase. The Facility assists developing countries address four global environmental problem areas: global warming, loss of biological diversity, pollution of international waters, and depletion of stratospheric ozone (addressed alnost entirely through the Montreal Protocol for which the Bank manages the investment operations). The GEF draws collaboratively on the experience and expertise of the UNEP, UNDP, and the World Bank. The participating governments are currently work- ing out the details of the restructured GEF to go beyond thepilot phase. Since 1990, $241 million (33 percent of the total) have been directed towards Asia through investment projects, technical assistance, and research. Four of the investment projects have been approved and are under implementation (shown with an *). The others are in various stages of preparation. Project Cost GEF Funding Bank Funding Country ProjectName (US$ millions) (US$ millions) (US$ millions) Bhutan Trust Fund for Conservation* 20.0 10.0 China Ship Waste Disposal* 64.0 30.0 15.0 Laos IntegratedProtectedAreas 25.5 5.5 10.0 Philippines Integrated Protected Areas 301.0 20.0 224.0 Philippines Leyte Geothernal 1300.0 30.0 365.0 India Non Conventional Energy Project* 30.0 120.0 Thailand Promotion of Electric Energy Efficiency* 15.5 30.0 Indonesia Biodiversity Conservation 12.0 22.0 China Sichuan Gas Transmission 10.0 300.0 India Cost Effective Options for Limiting Greenhouse Gas Emissions (TA) 1.5 Montreal Protocol Operations Under the Montreal Protocol for protection of the ozone layer, five projects have been prepared in Asia, of which four have been approved (shown by an *). Country Project Cost(US$ millions) Philippines ODS Phase-out Engineering* 0.18 Thailand ODS Phase-out Engineering* 0.40 China ODS Phase-out Engineering* 1.50 Indonesia ODS Phase-out Engineering* 0.25 Malaysia Halons and MAC Recycling 1.63 Other Global Conventions Two other international agreements were negotiated at the UNCED conference in 1992-the Biodiversity Convention and the Climate Change Convention. These are not yet operational. enforcement, or specific investment projects consider the environment a separate add-on, but (box 2.9). mainstreamns environmental concerns across sec- The distinction between "top-down" and tors, at all levels. In pursuing improved environ- "bottom-up" approaches is usefuil in laying out the mental management, each country should include full geographic and administrative scope of an both top-down and bottom-up components in its environmental strategy. The framework reinforces strategy, and any country that fails to do so will the notion that a "sustainable" economy does not have an incomplete approach. 43 IMPROVING ENVIRONMENTAL MANAGEMENT Box 2.8: Technological Requirements for Improving the Environment Industry The conventional approach to "end-of-pipe" technologies, although important, is less optimal than invest- ments in new processes that combine higher efficiencies with less waste. The introduction of "clean" tech- nologies often require foreign suppliers or partners-and a business environment that can foster such relationships. Energy A wide range of both supply and demand side technologies can improve efficiency, and are cost-effective in many sectors. The choice of fuel is equally fundaamental. Asia is heavily committed to coal, but some peripheral movement towards natural gas and renewable technologies should be promoted through both pricing and technology transfer. Urban and Further refinement of cost-effective sewage systems is required, as traditional sewage collection is too costly Transport for much new investment in many Asian cities. In transport, more aggressive emissions control on cars, diesel vehicles, and two-stoke engines is required-with a particular emphasis on the rapidly growing fleet of two-stroke engines. Agriculture New farming practices and technologies are essential to maintaining the momentum of "intensification", which must contribute at least 95% of increased food output at atime of increasing soil degradation throughout Asia. On marginal lands, diversified cropping models and techniques to upgrade degraded lands need to be researched and applied. Forestry Sustainable forestry management techniques are not yet common (whether commercial or community-based), and need to be more widely researched, adapted, disseminated and implemented. Economic and Social Impacts of natural resource use, especially in the forestry and Improved Environmental Management fishery sectors. The clearest example of this is the forestry sector, where, in the absence of efficient The Impact of Structural Adjustment pricing of forestry resources, the liberalization of on the Environment either high tariffs or log export bans would lead to Structural adjustment processes have mixed im- expanded production. The expansionary effects of pacts on the environment, although any resulting structural adjustmnent would lead to excess extrac- adverse impacts are better addressed through more tion unless appropriate sector-specific pricing poli- targeted environmental policies than through ma- cies are in place. nipulation of macroeconomic policies. The four The Impact of Improved Environmental areas of adjustment with potential environmental Management on the Poor impacts are: (a) restoring macroeconomic stabil- Strategies to achieve sustainability that use pric- ity; (b) adjusting relative prices, through tariff lib- ing and other regulatory measures to reduce access eralization and removal of subsidies; (c) short-tenn to and over-exploitation of natural resources have recessions and government cutbacks; and (d) insti- direct and often inequitable impacts on the poor. tutional changes. Of these, the first and the last ( a Concern about the impact on the poor of improved and d) have primarily positive impacts, and most environmental management is particularly great in Asian countries have already worked through many South Asia, which has over half the world's poor. of the effects of (c). There are parallels between analyzing the Therefore, the potential for adverse impacts social impact of environmental policies and ana- lies primarily in the adjustment of relative prices. lyzing the social impact of structural adjustment on The removal of subsidies (such as energy, agricul- the poor. In the case of structural adjustment, effi- tural inputs, and stumpage fees) almost always un- ciency considerations are paramount in order to set ambiguously favors the environment. However, the the macroeconomic and sector preconditions for expansionary impacts of currency devaluations, growth. Nevertheless, adverse impacts for certain tariff liberalization, and reduction of real interest population subgroups have been identified and rates may be most directly and adversely felt in addressed separately-in a manner complementary TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 44 Box 2.9: A Framework for Improving the Environment National-level Local-level Key elements (Top-down approach) (Bottom-up approach) Setting priorities National priorities, as analyzed and Local determination of local priorities. expressed in national environmental action Decentralized capacity to address local issues. plans, capital budgets and sectoral Local participation. planning documents. Openness in decision-making. Policy reform Sound economic policies. Policies for local environmental management, Market-based environmental i.e., incentives and regulations based on the policies (pricing and taxation). local ambient pollution and resource base. Regulatory and legal reforms. Adequate data collection and monitoring. Public disclosure. Institutional Capacity-building for national-level Capacity-building for local-level policy strengthening policy analysis and implementation implementation, monitoring and (e.g. tax, pricing, and legal reforms). consistent and fair enforcement. Choice of policy instruments in light of Community organizations and NGOs. institutional capacities. Financing for public Favorable business environment. Pricing and institutional reform to increase the and private sector Donor lending for sector adjustment viability of investments favoring the investment and policy reform. environment. Increased "commercialization" of public infrastructure. Technology Open trade policies. Public and donor involvement in selected Favorable business environment for research, development, and demonstration, technology transfer. particularly in the areas of agriculture and forestry. Public information services for small and medium -sized firms. to, and not substituting, the underlying adjustment level of service for the poorest communities) and measures. financially strengthened utilities (achieved, in part, A similar approach should be taken in the through pricing reform), the option of cross-sub- case of mitigating unacceptable social impacts of sidizing the poorest communities becomes environmental policies. Where price reforms are available. introduced, for example, adverse social impacts for The measures required to offset inequitable certain population subgroups should be addressed impacts of environmental policies will be very dif- in a targeted and time-bound manner that does not ferent in urban and rural areas. The urban poor are, offset the intent of the underlying adjustment pro- disproportionately, victims of urban environmen- cess. For example, in cities the most important tal degradation: they are less buffered than the adverse impacts on the poor from full-cost resource nonpoor from water pollution, toxic wastes, solid pricing are likely to be in the areas of water, elec- wastes, high traffic, and air and noise pollution. tricity, and fuel (including biofuels). Through the Urban environmental investments will help the combination of market differentiation (a lower poor probably more than middle and upper class 45 IMPROVING ENVIRONMENTAL MANAGEMENT city-dwellers. Therefore, investments in urban en- extent that the poor gain tenure, would be positive. vironmental cleanup can be considered to be so- The truly landless, however, would be increasingly cially progressive. cut off as others gain title. Solutions to the land- In the case of water supplies, poor commu- less poor have to be site and area specific. One trend nities already often pay exorbitant prices to private that may help to relieve some ofthe pressure in East hawkers, and these prices should eventually fall Asia is that the rural population is actually decreas- through the provision of adequate and more effi- ing as urban populations grow (see chapter 1, fig- cient public supplies. Poor households also may use ure 1.7). A second trend that should be supported very dirty water from local supplies, which they through government and donor programs is the di- either have to boil (imposing a financial cost for versification of rural employment into nonfarrm ac- fuel and time, estimated at 1 percent of GDP for tivities. Nonfarm employment is usually less Jakarta) or consume (with commensurate health resource-intensive than farming, and therefore has and productivity costs). Therefore, the impact of less environmental impact. Finally, expanded in- higher water prices in poor communities may be tensification on irrigated lands and higher value- less than first thought. Also, as mentioned above, added through mixed cropping on marginal lands market differentiation (such as community stand- should help to absorb the labor surplus of the rural pipes) can be very low-cost, and even cross-subsi- landless poor. dized from other water users with in-house service. Notes The situation in rural areas is more compli- cated. The rural poor are often disproportionately, 1. O'Connor 1992, pg. 35. and usually inadvertently, the perpetrators of en- 2. Marketable permits, which also intemalize exter- vironmental degradation. The environmental poli- nalities, do not necessarily transfer revenue to the cies required to bring about increased rural government. They would only do so if they were ciesu require to b ot ineasd rural auctioned and not allocated along some formrula sustainability involve both positive and negative to be ditiue. reohre impacts oteorRomilto be distlbuted free of charge. impacts on the poor. Reforms in land tenure, to the 3. World Bank 1 992a, pp. 170-4. 3 URBAN ENVIRONMENTAL MANAGEMENT Urbanization in Asia poor will be found in the cities and towns of Asia. For example, in India there is evidence that the Growth of Cities incidence of rural and urban poverty is converg- By 2025, as many people will be living in Asian ing (figure 3.2). The poor form a significant por- cities as there are in all of Asia today. Of these tion of the population in some of the largest cities- projected 4.3 billion people, nearly 2.5 billion are 60 percent in Calcutta and Jakarta, 45 percent in expected to live in urban areas. In East Asia, the Karachi and Madras, and 35 percent in Manila.' urban population is projected to exceed the rural The poor who live in squatter settlements close to population by 2005; and by 2025 about 1.5 billion waste dumps and industrial sites, and put up with people (63 percent of the total population) will be overcrowding, lack of potable water and sanitation living in urban areas. In South Asia, the urban facilities, disproportionately bear the impact of population is also expected to exceed the rural environmental degradation. population by 2025, when more than I billion Key Environmental Problems people will be living in cities (see figure 1.7, chap- Given high population densities, high incomes, and ter I). There is, therefore, a dramatic demographic large industrial concentrations, cities have serious shift taking place in Asia, as the urban population evinental poblentatructie ave serice is expected to triple between 1990 and 2025. envirormental problems. Infaistructure and service The number of large cities is also growing needs are unable to keep pace with the rapid gmwth rapidly in both East and South Asia. Currently, fifty-six cities in East Asia have more than I million inhabitants (thirty-eight ofthem in Figure 3.1: Number of Cities in Asia by Size, 1960-2000 China), while in South Asialthirty- 120 - Number of Ci6es one cities have more than I million 100 _ people (twenty-three of them in India). Six cities in East Asia and 80.-._ three cities in South Asia are so- 5 3. megacities with more than 8 mil- 40 - lion people. Not only is the num- 2 . ber of large cities increasing, the 20 rate at which smaller cities are be- 0- coming larger is also increasing 1980 1970 1980 1990 2000 (figure 3.1). 1-2 million people D 2-4 million people To date, cities have had a 14-8 million people U >8 million people lower incidence of poverty than rural areas, but with rapid urban- Source: United Nations 1991. ization, increasing numbers of the 47 TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 48 micrograms per liter) also far ex- Figure 3.2: Incidence of Poverty in India 1961-89 ceedsthe recommended standard Headcount Index (%) of 0.001 micrograms per liter. s0 Fish and shellfish absorb sub- stantial amounts of waterbome 50. ............................ mercury, which humans then .0 Rural.consume. 40 < ,{m ~~~~~~~~~ . R r.. . . . . . . . . . . . . . . . . . . . .. . . .. --cnue - Water pollution in Asian 30 .....rban cities is largely caused by un- treated domestic sewage. For ex- 20 ........................am........... ample, in Metro Manila, about 65 1 0 .......................................percent of water pollution is from 10.....................domestic waste; and in Bangkok, om , . ., ., ,, ,, ,,, ,,,, ,,,,,,,,, , about 75 percent of pollution in 1961 1968 1971 1978 1981 1966 the lower part ofthe Chao Phraya River comes from domestic Source: World Bank data. waste. Industrial effluents, which present difficult and expensive regulatory problems (chapter 4) in urban population. The total pollution load from compound domestic sewage pollution, but are, by the different sectors in urban areas exceeds the volume, significantly less. capacity of local govemments to collect and dis- Govemments have intentionally focused pose of municipal sewage and solid wastes and to more on water supply than on sanitation or sew- control toxic wastes and emissions. This concen- age treatment. Official data in Asia indicate that tration of wastes overwhelms the assimilative ca- average urban access to safe drinking water is 82 pacity of natural ecosystems, leading to environ- percent of the population, and that 77 percent has mental degradation. Because discharges of access to some form of sanitation facilities, gener- pollutants in urban areas are spatially concentrated, ally onsite disposal of human and solid waste. they are potentially more dangerous to human These sanitation facilities, however, are often health. poorly constructed and badly maintained. Liquid wastes overflow into open drains, spreading pol- Water Pollution. Probably the most pervasive luted water. Flooding during the rainy season environmental problem in Asia is water pollution, spreads sewage into residential neighborhoods. and cities cause most of it. Water pollution is re- Finally, where sanitation and sewerage has re- sponsible for substantial mortality, particularly ceived high priority (usually the more affluent among children. United Nations GEMS data show neighborhoods), sewage treatment is very limited that levels of fecal coliform (500 pern 00 milliliters) or nonexistent and the wastewater is dumped un- in Asian rivers far exceed the maximum recom- treated into rivers and streams (box 3. 1). mended for potable supplies (O0 perl 00 milliliters) Many Asian cities are located in coastal ar- and even the maximum that defines surface water eas, and excessive withdrawal of groundwater has, aspolluted(l00 perlOO milliliters).2 Giventhe lack in some cases, resulted in salt water intrusion, of adequate water supply altematives, surface wa- making the groundwater unfit for consumption. ter pollution is a major health threat to those who This problem is acute in Bangkok, Jakarta, Madras use surface water for consumption. The median and Manila (see chapter 7). In Bangkok and else- level of dissolved mercury at the sampling sites (0.2 where, surface water pollution has forced public 49 URBAN ENVIRONMENTAL MANAGEMENT following the introduction of unleaded fuel. The Box 3. 1: Sewage Treatment in India trends for SO2 differ by city, but are getting worse Of India's 3,119 towns and cities, only eight have full sew- in most Chinese and Indian cities and staying age collection and treatment facilities; 209 havepartial facili- steady or improving slightly in some of East Asian ties. The Ganges River alone carries the untreated sewage of middle-income cities. NO, concentrations are still 1 14 cities, each with 50,000 or more inhabitants. India's sec- generally below WHO guidelines, but levels of CO ondary and tertiary towns suffer even more from lack of ad- exceed WHO guidelines in urban areas with heavy equate infrastructure than primary cities. traffic. With few exceptions, motor vehicles are the utilities to extend water lines to more distant major cause of air pollution in Asian cities (table sources, or treat water from increasingly polluted 3. 1).3 Vehicle populations have been growing ex- sources. In Shanghai, pollution forced water in- ponentially throughout Asia, doubling every seven takes to be moved upstream more than 40 kilome- years (figure 3.3). Beyond the number of motor ters at a cost of about $300 million; in Jakarta, in- vehicles, however, vehicle characteristics also ag- vestments exceeding $1 billion are required to gravate pollution. Domestically manufactured bring in water from more distant watersheds. motor vehicles, especially in India and China, have The impacts of water pollution are especially performance and emission characteristics of telling on the poor. Where access to safe drinking 1950-60 vintage vehicles and lack pollution con- water is limited, polluted water is consumed by the trols. Owing to the high cost of vehicle ownership, urban poor, who have little altemative other than scrappage rates are low, resulting in a vehicle fleet to pay exorbitant prices to purchase water from that is of old and often poorly maintained. The private vendors. In Manila, diarrhea in shanty concentration of motorcycles is not only higher towns is twice as common as in the rest ofthe city. than in other areas ofthe world, it is generally much Studies in Calcutta and Delhi show higher rates of greaterthan the rest ofthe four-wheel vehicle popu- disease in many slum areas and longer duration per lation. Many motorcycles are powered by old de- illness. sign two-stroke engines that emit up to ten times more hydrocarbons and smoke per kilometer than Air Pollution. WHO data show that twelve of the do the four-stroke engines of cars and trucks. In ad- fifteen cities with the highest levels of particulate dition, diesel vehicles in Asia account for a greater matter, and six of the fifteen cities with the high- proportion of the vehicle population and total ki- est levels of sulfur dioxide are in Asia (see chapter lometers driven than in other regions of the world. 1, table 1.1). Overall, ofthe seven cities worldwide Further, some ofthe fuels used are among the dirti- that received the worst ranking for air pollution in est in the world, especially with regard to sulphur 1988, five are in Asia: Beijing, Calcutta, Jakarta, in diesel and lead in gasoline. New Delhi, and Shenyang. Insufficient urban road space and ineffective Air quality is worsening in virtually all Asian traffic management cause traffic congestion. Cit- cities, except perhaps in Korea. (Elsewhere in the ies such as Bangkok and Jakarta have massive traf- world, middle-income cities are showing broader ficjams that delay commuters by hours: peak-hour improvements.) Data from GEMS air pollution speed in Asian cities averages around 16 kilome- monitoring provides evidence that ambient concen- ters per hour. Few cities have made serious efforts tration of suspended particulate matter (SPM) is to reduce congestion and have accepted it as a way worsening in every city monitored, and generally of life. Besides being costly in terms of time lost exceed WHO guidelines. However, the cases of and the drag on commerce, stationary vehicles sit- lead, SO2 and NO, emissions are not as uniform. ting in traffic contribute significant incremental air Lead emissions are improving in Kuala Lumpur, pollution. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 50 Table 3.1: Contribution of Motor Vehicles to Air Pollution in Selected Asian Cities Total emissions all sources Percentaee attributable to motor vehicles City Year ('000 tons/year) CO HC NOx SOx SPM Total Beijing 1989 n.a. 39 75 46 n.a. n.a. n.a. Bombay 1981 546 86 20 44 n.a. 3 31 Calcutta 1978 537 87 15 25 n.a. n.a. n.a. Delhi 1987 428 90 85 59 13 37 57 KualaLuinpur 1987 435 97 95 46 1 46 79 Manila 1987 496 93 82 73 12 60 71 Seoul 1983 n.a. 15 40 60 7 35 35 n.a. Data not available. Source: World Bank 1992a. Industry is the next major source of gaseous Finally, in some cities domestic heating/ emissions (see chapter 4). Although large indus- cooking is a major contributor to air pollution. For trial plants discharge many times the emissions of example, coal smoke from home and commercial individual small plants, clusters of small-scale heating is the main air quality problem in Beijing plants operating obsolete equipment, and under and other Chinese cities. In New Delhi, the resi- little regulation, can also be significant polluters. dential sector is the largest source of SO2 (46 per- cent) and NO, (37 per- cent) and contributes a Figure 3.3: Total Motor Vehicles in Use in Selected Asian Countries significantshare of CO Millions of Motor Vehicles (33 percent) and SPM 6 China India Korea, Rep.Thailand (18 percent). Dust, es- pecially from eroded 5 areas, quarries, cement plants, and unpro- tected building sites, 4 - / 8 adds to the urban air pollution problem. 3 - Air pollution causes considerable 2 suffering, and, unlike water pollution, affects all residents. Lung 1 - cancer mortality is four to seven times , I I I I I0 )I higher in Chinese cit- 1965 1970 1975 1980 1985 1 990 iesthaninthenationas a whole. Sixty percent Sources: MVMA, "World Motor Vehicle Data", 1 991; International Road Federation, of Calcutta residents "World Road Statistics", various years. 51 URBAN ENVIRONMENTAL MANAGEMENT suffer from respiratory diseases, compared to the national average of 2.5 percent. A 1990 US Agency Table 3.2: Solid Waste Generated in Asian for International Development (USAID) study in CitiesWaste generated Bangkok estimated that SPM causes up to 1,400 '000 tons Kilogramsper capita deaths per year, and that lead pollution causes City per year per day 200,000-500,000 cases of hypertension, 300-900 cases of heart attack and stroke, and 200-400 Seoul 10512 2.80 cases oheratcansrkBeijing 3580 1.59 deaths per year. The long-term effects of lead poi- Jakarta 1800 0.75 soning on Bangkok children include Bangkok 1800 0.88 400,000-700,000 total IQ points lost per vear-3.5 Manila 1380 0.50 IQ points per child through age seven. Bombay 1150 0.55 Kuala Lumpur 730 1.29 Colombo 160 0.75 Solid Waste. In the low-income Asian countries, large cities such as Calcutta and Karachi generate Source: ITNCRD 1989 around 0.4-0.7 kilograms of solid wastes per capita per day; in middle-income countries, cities like Bangkok, Kuala Lumpur and Manila generate high cost of cleanup. around 0.5- 1.0 kilograms of wastes per capita per day. The amount of solid waste generated in large Inappropriate Land Use. Urban encroachment Asian cities typically exceeds I million tons per into ecologically sensitive areas in Asia has been year (table 3.2). responsible for watershed degradation, floods, Most Asian cities dispose oftheir solid waste landslides, biodiversity loss, fish catch loss, and in landfills. Recycling is limited to "ragpickers" in coastal degradation. In many Asian cities, the avail- the informal sector. The difficultv of finding and ability of good land for expansion on the urban managing landfills combined with the strain of fringe lags behind population growth. Urban sprawl keeping up with growing demands have led to in- has reclaimed wetlands, converted prime agricul- adequate solid waste collection, recycling, and dis- tural land and forests, and settled on fragile slopes posal systems. When cities fail to collect garbage, and along waterbodies and coastal zones. Also, households and industries dump solid waste on the with better areas cut off from use, the poor have roadside or in waterways and drains, causing wa- typically moved to marginal lands such as waste terways to block and flood. Even when dumped in dumps, hillsides, and sites adjacent to industries landfills, solid waste creates problems, including near the city center, with environmental and health odors, smoke from fires, leaching of chemicals into consequences. surface- and groundwater, and breeding of rats, Since the poor use wood and other biomass flies, and other disease vectors. In addition, many for household fuels, urbanization has indirect im- cities dump toxic and hazardous waste together pacts on surrounding forests. In India, wood pro- with domestic waste, increasing the hazards to vides 50 percent of the urban cooking energy, and human health. it is estimated that forest cover around many In- Solid waste generation is expected to increase dian cities declined by 15 to 60 percent during substantially with economic growth. For example, 1972-82. Though fuelwood prices have increased, while Bombay produces 1.2 million tons of solid the urban poor cannot afford other alternatives such waste per year, Tokyo-with about the same popu- as kerosene stoves (chapter 5). lation-produces 4.5 million tons. The increasing amount of industrial toxic waste adds to the prob- Costs. The total cost to the Asian economies of lem, both because of its impact on health and the urban environmental degradation has not been cal- TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 52 culated. However, some estimates have been made for selected environmental problems. For example, Table 3.3: Annual Cost of Congestion and Air Pollution in Some Asian Cities (US$ Millions) in India, waterbome diseases cause loss of 73 mil- lion work days per year, valued at $428 million per Region Congestion Air Pollution year.4 Rough calculations show that the environ- mental costs due to air pollution in Bangkok could Bangkok Metropolitan be $1 billion to $3 billion per year (table 3.3). En- BangkokMetropolitan 380-580 vironmental costs in Asia's other megacities are Region, 1993 400 1,300-3,100 equally significant. Seoul 154 n.a. It should be noted that these and other esti- Manila 51 n.a. mates ofthe cost of urban environmental degrada- Jakarta 68 400-800 tion are controversial, because in order to reflect n.a. Datanot available. costs in monetary terms it is necessary to place Sources: Shin and others 1992; Ostro 1992a; and World Bank economic values on human sickness and death. analysis. These estimates are most appropriate when used to compare benefits and costs of alternatives within chapters 4 and 5 respectively. cities and countries. They are much less appropn- ate for comparing costs and benefits across Water Pollution countries. The health and welfare impacts of water pollution have to be tackled on two fronts: provision of safe water to urban populations and reduction of water Managing urban development in an environmen- resource pollution. tally sound way is extremely complex because of the cross-sectoral and cross-jurisdictional nature of Provision of Safe Water. Assuring the provision the urban economy. Urban infrastructure and ser- of potable water to the growing populations of vice provision encompasses transport, communi- Asian cities has been an urban sector goal for de- cations, industry, energy, shelter, zoning, water cades, and environmental concerns enhance rather supply and sanitation, flood control and drainage, than diminish this goal. The basic technologies for solid waste, education, health, and recreation. The water supply systems are well known in the region spatial planning, pricing, service levels, and man- and reasonably efficient. However, action is re- agement of all of these aspects of urban manage- quired in service mix and cost recovery, water con- ment may impact on the environment. As a result, servation, demand management, and regulatory environmental concems should be integrated into and delivery institutions. In most Asian countries, may urban planning and management decisions. As consumers pay a fraction of recurrent and capital always, the choice of action will depend on the costs of urban water supply. This prevents water economic, social, and geographic characteristics of authorities from recovering financial resources the specific metropolitan area. necessary for maintenance and capacity expansion. In general, there are four environmental Pricing water to reflect the cost of providing problems that need to be addressed in Asian cities: it would serve both development and environmen- water pollution, air pollution, solid waste tal objectives. Cleaning up water supplies, as well management, and inappropriate land use. This as expanding services to rapidly growing urban and section addresses these problems with particular industrial consumers, requires high levels of both emphasis on the municipal, domestic, and transport investment and operating capital. Financially sectors. Approaches to reducing pollution in the strong water agencies/utilities would be better industrial and energy sectors are addressed in equipped to provide better services to an expand- 53 URBAN ENVIRONMENTAL MANAGEMENT ing population with increasing needs. Affordability room for application of altemative technologies that studies indicate that the vast majority of the urban could make a significant difference. These include population (including the poor) would be willing altemative low-cost sanitation options such as to pay more if service were provided to meet their condominial sewer systems, pour-flush latrines, or needs. If complete cost recovery were possible small-bore sewers. from most consumers, then it would also become Sewerage tariff reform-whether combined possible to subsidize services to the poorest com- with water supply tariffs or applied separately- munities through cross-subsidies. (For a more de- are needed to expand investment. Assuming ad- tailed discussion of water resource management, equate revenues through tariff reform, investment see chapter 7). can be both public and private. Malaysia, for ex- One approach to minimizing future capital ample, is encouraging the privatization of 43 mu- expenditures is through conservation, which is less nicipal sewage systems. Community groups can expensive and more environmentally sound than also play an effective role in the distribution of new investment. To the extent water can be con- water and the organization of sanitation systems in served-and little work has been done in this poor settlements. Such efforts are already begin- area-a corresponding amount of new investment ning in Asia. can be postponed. More effective maintenance can Transportation andAirPollution help overcome the problems of leaks and pilferage. Recycling water in the industrial sector can provide There are two basic approaches to reducing vehicle water to firms at a fraction of the investments pollution: reducing emissions per vehicle mile trav- needed to supply clean water. Demand manage- eled and reducing the total number of vehicle miles ment can be achieved through both financial incen- traveled. In theory, an emission tax is the most ef- tives (such as higher prices for both water supply ficient means to reduce pollution, as it would pro- and fees to firms for discharging industrial waste- vide consumers with incentives to choose the least- water) and technological intervention (through, for cost options across these two approaches. However, example, installing new toilet fixtures). It is also such a tax would be weighed down by need for important to look at the demand for water in other effective emission monitoring, which is difficult. sectors. For example, irrigation is the largest use More common are strategies to reduce both emis- of water in Asia. Increasing the efficiency of irri- sions and congestion, using a mixed set of instru- gation can release water for growing industrial and ments, including taxes on fuels, vehicles, and park- domestic demand. ing; incentives and regulations affecting vehicles; and traffic management and the provision of pub- Reduction of Water Pollution. As stated above, lic transport alternatives (table 3.4). even though domestic sewage is the main cause of Specifically, there are a number of ways to water pollution in Asian cities, treatment and dis- meet the first objective of reducing emissions per posal of sewage is given lower priority than the vehicle mile traveled: (a) enforcing higher main- provision of clean water. Most govemments refrain tenance standards on existing vehicles, in order to from providing waterbome sewage collection and keep emissions closer to the design standards ofthe treatment systems due to the prohibitive investment vehicles; (b) introducing vehicles designed to meet costs to overcome the enormous initial deficit of new emission standards; (c) introducing unleaded infrastructure. However, piped sewer systems fuels (with or without catalytic converters) for the (costs ranging from $300 to $1000 perhousehold, rapid reduction of atmospheric lead;5 and (d) ret- not including the cost of sewage treatmnent facili- rofitting motor vehicles to use other kinds of fuel ties) appear to be the only viable option for the modifications or fuels, such as liquefied petroleum high-density cores of cities. Elsewhere, there is gas (LPG). Thailand successfully shifted the fuel TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 54 of three-wheel taxis from a mixture of gas and fuel to private automobiles, which can be in favor of oil to LPG. Some of these measures to reduce eitherlarger vehicles (vans, buses, or mass transit), emissions per vehicle are more cost-effective than ornonmotorized options, primarily bicycles. With- others depending on the characteristics of the city out viable transit altematives, the higher road user under consideration. A strategy for reducing emis- fees would lead to higher financial costs of travel sions would begin with the least-cost measure, and with relatively little decrease in actual travel. slowly move up the marginal-cost curve to more When planning investment in public transport costly measures. systems, the modal choice requires careful atten- The second objective is to reduce total vehicle tion. Many cities are attracted toward mass transit miles traveled. This can be accomplished by either systems, but few are financially viable (Hong reducing the total demand for travel or altering the Kong's is the striking exception). Mass transit sys- mix of vehicles used to carry travellers. The first tems cost $50-150 million per kilometer to build, option may be achieved in part by increasing the and light rail transit systems between $8-60 mil- cost of travel, but urban travel demand is relatively lion per kilometer; for both, operating costs are inelastic. More important is improved spatial plan- about 10-25 cents per kilometer per rider. ning to reduce the total demand for travel. Busways, on the other hand, cost about $1 million Altering the mix of vehicles used to carry per kilometer (at ground level), and $10 million per travellers requires policies to move people away kilometer (for elevated stretches), or about 2-8 from the use of private automobiles towards other cents per person to operate, and could move the forms of transportation. Here, experience has same number of passengers with dedicated shown that a two-prong approach is required. The busways. first prong is to raise the cost of private vehicle use. However, the mere provision of public trans- Options include traffic management (for example, port is not enough to lure commuters away from one-way systems, closing streets, downtown pedes- their cars onto public transport. Simultaneous dis- trian zones, provision of exclusive bus lanes) and incentives for private vehicle use are required to demand management (such as increased parking achieve ridership. Similarly, the provision of pub- fees, road tolls, fuel taxes, and carpooling pro- lic transport altematives is not sufficient to achieve grams). The second prong is to provide alternatives reduced congestion or emissions. As some motor- Table 3.4: A Taxonomy of Instruments to Control Automotive Air Pollution Target area Command and control Market-based incentives Fuels Fuel quality standards Fuel pricing/taxes Vehicles Emission standards Vehicle taxation Fuel efficiency standards Inspection and maintenance Vehicle scrappage programs Transport Management Traffic management (bans, high Congestion charges occupancy vehicle lanes, etc.) Parking charges/taxes Parking restraints Public transport policy Land-use regulations Source: World Bank 1992a. 55 URBAN ENVIRONMENTAL MANAGEMENT ists switch to public transit, others will start driv- ing upon seeing the congestion slightly relieved. Table 3.5: Urban Mass Transit Systems in Thus, it is always essential to attack urban conges- Mass rapid tion through comprehensive measures-both traf- transit Light-rail fic management and pricing-that restrict automo- City (Metros) transit Total bile use. In many Asian cities, given rapid urbaniza- Beijing 1 o 1 tion, growing income levels, and constraints im- Bombay 0 1 1 posed by current transport infrastructure on eco- Calcutta 1 1 2 nomic growth, large-scale investments in public Dalian 0 1 I transit are increasingly required and viable. Cur- Nianila 0 1 1 Pusan I (I 1 rently there are ten mass transit systems in nine Seoul 1 0 1 cities in Asia (table 3.5). Manila is extending its Tianjin I 0 1 light-rail system, and ongoing studies in Jakarta are examining the feasibility for guided bus transit and light rail. Karachi is considering the development strive to recover the costs of collection through user of a 90 kilometer partially-elevated bus/light-rail charges, while disposal costs could be met through transitway. Bangkok is seriously considering sev- local taxes and/or intergovemmental transfers eral mass transit investments. These investments given the environmental benefits of sound disposal. are the first step in urban programs to alleviate The potential role of the private sector (both congestion and transport-related pollution, which informal and formal) in solid waste management are mutually reinforcing objectives. Additional needs to be explored. Recycling of solid wastes work related to achieving financial viability is ad- could reduce the pressure on the collection, dis- dressed later in this report (chapter 8) as a high posal and handling systems. Informal scavengers priority for Asia. already operate marginal recycling operations in Solid Waste Management many Asian cities. In Jakarta, it is estimated that Solid Waste Management aabout 200,000 people eam a livelihood in this man- Disposal of domestic and industrial solid waste, ner. Twenty thousand people live around a dump like sewage, is given relatively low priority in many called "Smokey Mountain" in Manila-and resist Asian cities. Municipal waste collection and dis- relocation, as they derive their livelihood out of posal agencies are often stretched for collection scavenging for recyclable material. vehicles, transfer stations, and disposal facilities. There are ample opportunities for participa- Cost recovery is not emphasized, and the finan- tion by the private sector and community groups cially starved agencies are unable to meet operat- in dealing with household wastes. Contracting out ing and maintenance costs and capacity expansion the management of transfer stations, processing needs. facilities, landfills and special industrial waste fa- Institutional strengthening and sound man- cilities is a feasible option. agement practices are required to ensure efficient LandManagement service provision. Collection should be decentral- ized to the local municipal level or lower, while Fromthe 1950sthroughthe 1970s, public agencies disposal responsibilities should be at the level of were the pfimary actors in land development. Their the metropolitan region to ensure that the process record was dismal as they were overwhelmed by is environmentally sound. More attention needs to the speed and pressure of rapid urbanization that be paid to financing capital requirements as well resulted in high costs, high subsidies, and tortu- as meeting recurring costs. Municipalities should ously involved development processes. In India, TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 56 undue faith in the public sector (and great suspi- described in the earlier section, stronger institu- cion of the private sector) combined with such re- tional frameworks and actions on the part of pub- strictions as the Urban Land Ceiling Act (which lic and private actors are necessary for environmen- limited the private assembly of land for develop- tally sound urban management. Political and social ment), constrained urban land development. complexity in urban areas often results in weak Now, govemments are increasingly recogniz- govemance at the local level, which becomes a ing the need for private markets to play an impor- hurdle in developing an environmentally sound tant role in urban land development. This arrange- urban development program. ment has been successful in the United States, The management of urban development in- where public partners do the planning and provide volves numerous agencies, typically at municipal, incentives for private developers to include design provincial and central government levels. The features that are in the public interest. Two types multiplicity of actors with overlapping, uncoordi- of reforms are needed to facilitate private land de- nated, or poorly defined responsibilities aggravates velopment: (a) reforming land development regu- the institutional weakness and hampers the devel- lations by revising or eliminating standards requir- opment and implementation of a broader urban ing high-cost materials and processes, simplifying management strategy that also includes the envi- other regulations, and streamlining review pro- ronment (box 3.2). Separate agencies often provide cesses; and (b) reforming land titling by revising individual services with little coordination in their laws to permit unambiguous transfers of owner- activities. ship, clarifying tenurial rights, improving land In most Asian countries, govemance is domi- ownership records, and streamlining the process of nated by the central govemment. Local govem- title transfers. ments in cities have little power to raise revenue However, more efficient titling and regula- and implement programs. While cities are rela- tory environments cannot by themselves guaran- tively wealthy, city govemments are often unable tee environmentally sound land development strat- to tax this wealth base to generate revenues. In tum, egies. Rigid controls have to be replaced by flexible allocation of revenue to city govemments is more graded systems with (a) critical (environmentally often dictated by political considerations than by sensitive) zones where tight controls would be needs of cities. applied; (b) zones with simpler and more flexible Also, most local governments in Asian cities standards, and (c) zones totally free of controls. In lack the capacity to cany out effective urban plan- addition, governments have to play a leadership ning and management that integrates environmen- role by siting public infrastructure (roads, public transit, electricity connections, water supply, and sewerage) to induce development away from en- Box 3.2: Institutional Arrangements in Jakarta vironmentally sensitive lands. Developers and vironmentally sensitive lands. Developers and Six central ministries, two semi-autonomous centrally admin- communities have to be monitored to ensure that istered agencies, and nine provincial public agencies have a they do not develop on ecologically sensitive land. direct effect on urban environmental quality management in High-density development should be encouraged Jakarta. In general, central ministries and central agencies play given the scarcity of land in most Asian cities. Fi- an important role in formulating policy and compiling ambi- t(or environental NGOs) could ent standards, whereas the provincial agencies formulate regu- nally, government (or envlronmental NGusJ could lations and carry out monitoring and enforcement. In certain buy the most sensitive land and put it to conserva- functions such as reviewing environmental impact assess- tion use. ments, both central and provincial level agencies participate. Given the bureaucratic culture in Indonesia, agencies respond Institutional Framework only to vertical lines of command, and there is resistance to interagency cooperation. To support the technical and policy approaches 57 URBAN ENVIRONMENTAL MANAGEMENT tal concerns. While lack of capacity is widespread mendations to help strengthen urban institutions. in all local government agencies, it is particularly * Focus on the entire metropolitan area, notjust so in fledgling environmental agencies responsible on political areas (that may no longer be rel- for monitoring and enforcing environmental regu- evant anyway), and give importance to pro- lations. These agencies usually have low status in viding and operating basic urban services. the bureaucracy, have inadequate powers, and lack * Involve all actors who influence environmen- adequate staff, skills and equipment. Consequently, tal quality in urban areas, particularly the pri- neither the regulatory agencies nor the private sec- vate sector, NGOs and community groups. tor take environmental regulation seriously. * Set up a process for strategic planning that Environmental planning is also hampered by balances and prioritizes environmental man- the lack of environmental information for urban agement activities across sectors and build areas. Much information is not collected, and even them into capital planning and budgeting when collected it is often stored in different agen- processes. cies and not easily accessible for planning pur- * Establish capacity for financial management, poses. This is compounded by the lack of analyti- revenue generation, and program implemen- cal frameworks for understanding the problems. tation at the local level. Most local government authorities are not fully * Build local capacity to monitor environnen- aware of the magnitude of the problems or the tal trends and to apply the analytical impacts on the population. Also, there are limited framework necessary for environmental professionals who have the capacity to conduct en- management. vironment-related analysis. This strategy takes on obvious importance in Although they are shackled by their lack of light of the rapid rate of urbanization presented capacity, most public institutions rarely involve the earlier: there will be at least 1 12 cities with over private sector, local community, or other interested one million people by the year 2000, and the rate actors in environmental activities. This lack of user at which smaller cities are graduating to this sta- participation in urban service provision usually tus is increasing. This strategy is also being applied results in less support for long term operations and by the UNDP/World Bank Metropolitan Environ- maintenance than would otherwise exist. ment Improvement Program (MEIP, see box 3.3). However, there are encouraging signs to- Each of the five elements is elaborated below. wards decentralization in Asiathat address both the functional and fiscal needs ofmetropolitan govem- Metropolitan Region Focus and the Role of the ments. For example, cities in China are more or less Public Sector. Urban program development and autonomous entities; in the Philippines, there is a implementation should be targeted on cities and move towards decentralization; and in India, their immediate hinterland. The public sector though the provincial governments dominate, met- should have a basic role in setting standards, moni- ropolitan-wide agencies have been established for toring, enforcement, and certification. With the many large cities. Although not all decentralization past failure of the public sector to deliver its ser- efforts to date have had full success, the trend is vices, there are positive initiatives to shift functions important and positive for urban environmental to the private sector. However, environmental qual- management. ity management is not something that can be left solely to the private sector to resolve. While the private sector can participate in the process of plan- To address the multidimensional nature of urban ning, standard setting, and provision of urban ser- development issues, efficient institutional mecha- vices, the public agencies must retain responsibil- nisms are needed. This report makes five recom- ity for implementing legislation, defining TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 58 ment for action between the different agencies and Box 3.3: The Metropolitan Environmental groups who influence urban environmental qual- Improvement Program (MEIP)1a ep ity, can help. MEIP is a Bank-executed, UNDP-funded pilot program cur- At the metropolitan level, there are a variety rently active in Beijing, Bombay, Colombo, Jakarta, of actors whose activities influence the urban en- Kathmandu and Manila. In each city, MEIP assists in the vironment-govemment agencies, the public sec- preparation of an enviromnental management strategy (EMS) tor under the guidance of a steering committee, with a series of , the prvate sector, community groups, and the workshops and discussion sessions to ensum transparency and media. A network can be developed by holding participation. The EMS is expected to be integrated into the frequent in-country meetings and workshops at- planning and budgeting process for the city. MEIP assists the tended by all the identified groups. The workshops cities in preparing high-priority investment projects to tackle could be the forum for advising on the scope of the critical environmental problems, some of which will be funded by the World Bank or by other donors. urban environmental programs and/or for measur- MEIP also assists NGOs and other cormnunity groups ing progress achieved on such programs. This can with small demonstration projects in wasterecycling, environ- go a long way toward building public awareness, mental education, and slum upgrading, with a view to applying public pressure for environmental man- upscaling the project. MEIP brings its participants from the different cities together once every year to learn from one agement, gaining agreement on an analytical another and to debate on the future course of the program. framework for environmental management, and Finally, in some cities such as Colombo, MEIP has been suc- motivating public and private participants. cessful in taking the leadership in defining a framework for Establishing this process of dialogue and con- urban environmental management, with the cooperation of estbliing is process o dale and cn other donors sensus building IS beginnig to make progress in other donors. The MEIP approach has been quite successful (though some Asian cities. For example, under MEIP, some unevenly so across the different cities) in highlighting envi- cities have formed steering committees composed ronmental issues, and bringing a wide variety of interested of govemment agencies, private sector, NGOs and groups together to develop a program of action. The process community groups, to develop environet P of consensus building has been time consuming, but the high degree of support and ownership of MEIP in the participating grams for their respective metropolitan areas. An cities, and the low cost of demonstration projects are show- early lesson from this process is that informed con- ing new ways to work in the urban sector. It is important to sultation, based on an agreed-upon analytical ernsure thatthe MEIP strategies and feasibility studies are fol- framework, is a requisite for this network approach. lowed up with investment. Strategic Planning and Budgeting Process. Fol- guidelines, regulating both private and public bod- lowing the demise of urban master planning,6 the ies, providing incentives for the private sector to emphasis of urban managers shifted to identifying meet environmental goals, and providing services feasible projects and expediting their implementa- where the private sector cannot play a role. tion. However, problems associated with uncoor- dinated project-by-project activities are mounting, Environmental Network. While urban environ- especially since most urban infrastructure is pro- mental problems are cross-sectoral in nature, most vided by sectoral agencies of the central or provin- of the planning and investment work in urban ar- cial governments, rather than the local government. eas is still done in sectors-industry, water supply One appropriate response to this situation is and sanitation, housing, transportation, energy, and the increased use of capital budgeting (multi- so forth. In addition, policies formulated at differ- sectoral public infrastructure investment plan for ent levels-national, provincial, municipal-have a city for a year or several years) to encourage some an impact on urban activities and environmental coordination. Capital budgeting must still be tied quality. To combat these problems, experience has to good strategic and physical planning. Unlike a shown that a network, that is, an agreed arrange- master plan, however, capital budgeting requires 59 URBAN ENVIRONMENTAL MANAGEMENT a direct plan of action which agencies are to ness of environmental issues in the community. implement. The capital budgeting process is as important The World Bank's Role in Urban as the final budget itself. First, it should build on a Development planning process that has set priorities based on an analysis of alternatives. Second, a capital budget Past Activity can help spotlight environmental objectives by For more than two decades, World Bank involve- specifically looking at the environmental impacts ment in the urban sector in Asia has addressed some of each budgeted investment. Third, provincial and urban environmental problems through water sup- national authorities should remain within the pro- ply and sanitation projects. The Bank's urban strat- cess, as they have complementary and residual re- egy during the 1970s focussed on low-cost infra- sponsibilities. Fourth, the strategic planning and structure improvements, often on behalf of the budgeting process has important implications for urban poor. The strategy was implemented through the private sector and the public, and needs its par- three basic types of programs: (a) slum upgrading, ticipation, through the above-mentioned network where basic water supply, sanitation, drainage and or other formats appropriate to the municipality. other infrastructure were installed in existing slums without altering the buildings; (b) sites and services Financial and Program Management. The pro- schemes, where new land was subdivided and pro- cess outlined above requires that local govemments vided to poor families with infrastructure but with- improve their capacity for financial management, out completed new housing; and (c) improvements revenue generation, and program implementation. to citywide water, sewerage, and drainage systems. In the context oftariff reform for local services, de- These programs increasinglv emphasized cost re- centralization (with possible expanded fiscal au- covery, as it become evident that it was necessary thority) and increased investment on infrastructure, to reduce government budget constraints to achieve the credit-worthiness of cities and local utilities is the high coverage required for the growing urban extremely important. populations. In addition to these more traditional types of Local Capacity for Environmental Analysis. urban projects, in recent years there has been in- Within the context of a priority-setting and budget- creased recognition of broader urban environmen- ing process, it is necessary to have a good under- tal issues. For example, the Ganga component of standing ofthe environmental quality trends in the the Bank's Uttar Pradesh Urban Development metropolis, and the cost and benefits of alternate Project (fiscal 1988) supported the establishment strategies for achieving different environmental of sewage treatment facilities and river pollution quality goals. Monitoring environmental quality is monitoring equipment to reduce the pollution in the essential. Capacity for data collection and analy- Ganges River. There is growing realization that sis has to be built up at the local and regional lev- institutional strengthening is often the key to im- els. Government institutions need not be the sole proved environmental management. Since 1990, repositories of such capacity. Private industry can Bank assistance for institutional strengthening and develop the capability to monitor and analyze the support to land use planning agencies, pollution implications of industrial pollution and recommend control boards, and river basin management au- mitigation strategies; community groups can focus thorities reflect this trend. For example, the on the impacts of environmental degradation on Jabotabek Urban Development Project III (fiscal human welfare and recommend actions for miti- 1990) carries an environmental protection and pol- gation; and the media can play a useful role in dis- lution control component which deals with insti- seminating this information and raising the aware- tutional strengthening and training in monitoring TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 60 and enforcement at the provincial level. The Tianjin Urban Development and Environmental Box 3.4 The Beijing Environment Project Project (fiscal 1993) assists in the strengthening of the Tini Eniomna Protection Bureau. The project will assist Beij ing Municipality in planning cost- the Tianjin Environmental Protection Bureau. effective strategies for a comprehensive environmental pro- The most innovative approaches to urban in- tection program, strengthening the policy and institutional frastructure and service provision in an environ- fi-amework, andsupportingpriorityinvestmentsneededto start mentallv sound manner have been in projects fo- theprocess. Itwilladdresspollutionproblemsassociatedwith cussing on individual metropolitan areas. In air and water quality and the disposal of domestic and indus- cussing on individual metropolitan areas. In trial solid wastes. The physical works will include: (a) the Beijing, environmental impacts from all urban ac- constnmction of sewer networks to prevent pollution of ground- tivities (including industry) are being analyzed, and water and the city's waterways; (b) the construction of apres- a comprehensive environmental management and surized hot water piping system for district heating to allevi- investment strategy is being developed, taking into ate air pollution from the buming of coal at domestic account telgtreoocresidences; (c) renovation of a number of highly polluting account the long-term economic development stirat- industries, and in some cases, relocation of these industries egy for the metropolitan region (box 3.4). The Bank from the inner city area; and (d) construction of a sanitary has also supported innovative methods of financ- landfill and procurement of equipment for municipal solid ing for environmental management. The Tianjin waste disposal. Urban Development and Environmental Project A study component, called the "Beijing Environmen- talMaster Plan Study" will produce an integratedplan for air supports the establishment of a revolving fund quality, water quality, and urban refuse management in the to finance pollution mitigation investments by Beijing region to the year 2015. Among other things, the study industries. will develop least-cost strategies to achieve the targeted envi- In addition, Bank assistance has helped ronmental quality goals within the context of development objectives and to assess the economic, financial, and institu- strengthen the capacity of local governments to tional feasibility of achieving those goals. prepare infrastructure projects which are environ- mentally sound. The East Java and Bali Urban Development Project (fiscal 1991) is an innovative ies in Malaysia are nearing completion. A Bank approach in this direction (box 3.5). paper, "Urban Transport and the Environment in In the transport sector, much of the environ- the Asia-Pacific Region," highlighted the issues of mental focus has been on components to mitigate inefficient fuels and motor vehicle emission stan- the environmental impacts of projects. The steps dards, described above. The strategy also recom- required by the environmental assessment process mended that the Bank revisit the question of urban have formed the building blocks for improved ur- mass transit in Asian cities (box 3.6). Studies have ban environmental management. For example, the been completed that examine the feasibility of mass Shanghai Metropolitan Transport Project (fiscal transit systems in Jakarta and Karachi. The Envi- 1991) established a pollution monitoring unit in the ronmental Strategy Paper for China (fiscal 1992) Municipal Environmental Protection and Sanita- underscored the implications of rapid urbanization tion Bureau. The Ship Waste Disposal Project (fis- and industrialization. Also, the Bank has begun cal 1992) in China will help reduce pollution of in- work with the Government of India on an environ- temational waters caused by oily wastes and bilge mental action plan for the Singrauli region slops from ships. (box 3.7). A regional overview of the urban sector is planned for fiscal 1994, with a significant focus on The environmental impacts of urbanization have environmental issues. Urban sector or related work received significant attention. Detailed studies on is planned for: India (Bombay Urban Review fis- costs, benefits, and strategies for reducing pollu- cal 1994), Pakistan (Urban Sector Strategy, fiscal tion in Bangkok, Manila, Jakarta and several cit- 1994), Nepal (fiscal 1994), Bangladesh (fiscal 61 URBAN ENVIRONMENTAL MANAGEMENT Box 3.5: The East Java/Bali Urban Development Project In this project, the Bank lends funds through the Government of Indonesia to forty-five local govenmments in East Java and Bali for ins estment in small urban infrastructure subprojects such as equipment for water supply, urban roads, kampung improve- ment, public markets, solidwaste management, drainage, and sanitation. Theproject applies two Indonesian planning vehicles- the Integrated Urban Infrastructure Development Program (IUIDP), and the Environmental Assessment Process (AMDAL-- to urban infrastructure. IUrDP, designed in 1984, is a framework for improving government programs in urban infrastructure, with the responsibilities on the local government. Established in 1986, AMDAL defines the environmental assessment process, and is being applied for the first time for small urban infrastructure. The East Java/Bali project is the Bank's first serious attempt to integrate environmental concems into decentralized urban planning and implementation. Box 3.6: Mass Transit and the Asia Urban Transport Agenda The Urban Transport Agenda Paper for Asia (1991) identifies four important steps toward the sound development of mass tran- sit systems: (a) Take an incremental approach to the development of mass transit systems built on present needs and constraints, but allowing for physical, operational and technical evolution; (b) Find ways to reduce the capital and operating costs of mass transit systems and to expand their benefits to users, devel- opers, and society at large; (c) Define the role of mass transit within the urban transport system in terms of demand management and relative to other modes of public transport (including nonmotorized transport); (d) Assess the potential interrelationships between mass transit and urban development in managing urban growth and pro- ductivity more effectively. 1995), and Sri Lanka (Infrastructure Development Box 3.7: The Singrauli Development and Strategy, fiscal 1994). These reviews are expected Environmental Strategy Study to identify strategies to deal with urban environ- mental issues. In addition, MEIP-assisted Environ- The Singrauli region in India contains the largest coal depos- mental Management Strategies are expected to be its in India. The availability of water from nearby Lake Rihand completed in Bombay, Colombo, Jakarta, and and the abundance of coal have stimulated the development Manila; a daof super-thernal power stations and industries in the region. Manila;'and detailed understanding of the urban en- The population in the area more than tripled from 200,000 in vironment and intersectoral linkages should 1971 to 700,000 in 1991. Rapidurbanization has led toava- emerge. MEIP has also begun the Asia Urban Air riety of environmentalproblems-deforestation of rural areas, Quality Strategy and Action Plan that will estab- pollution of Lake Rihand, air pollution from emissions of the lish baseline information for air quality in the thermal power stations and industries, and dust from mining. program's six cities, identify emission sources, and Weak govemance in the region exacerbates the problem of assist cities to develop least cost air pollution abate- providing basic services to the region. The Singrauli Development and Environmental Strat- ment strategies. egy Study is an attempt to remedy the above situation. Previ- LendingProgram ously, the Bank has been involved in eight studies on the region (with a total cost of $4.9 million). These studies have During the fiscal 1990-92 period, the Bank lent identifiedthenatureandmagnitudeofproblemsintheregion, nearly $5.1 billion in the urban sector in East and linkages and causes. This new Strategy study, financed by South Asia (about 20 percent of the total Bank lend- the Overseas Development Administration (ODA), will make recommendations on infrastructure and services provision, help prepare high priority infrastructure and service projects, nents accounted for nearly $372 million, or about and assess ways to strengthen local institutions and 7 percent of the urban lending. The size and share govemance. of urban environmental lending was much higher TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 62 in East Asia ($339 million, or 10 percent of urban lending) than in South Asia ($33 million, and 2 Figure 3.4: Total Bank Lending and Bank Finance of Environmental Components for percent of urban lending). Urban/infrastructure Projects in the Asia During fiscal 1993-95, the Bank expects to Region, Fiscal 1990-92 and Fiscal 1993-95 lend nearly $8 billion to the urban sector in Asia (about 26 percent of total lending). Preliminary ESSAsia analysis indicates that urban environmental lend- MlIlbM. USS ing is expected to more than triple to about $1 bil- 7.000 lion and will account for about 14 percent of total s.ooo 5.892 urban lending. East and South Asia lending for the 5 - urban environment are expected to increase to 4W000 - 3.)o about $696 and $354 million, respectively (figure 3.4). The increase in environmental lending reflects the increased attention being paid to urban envi- 2,000 ronmental issues. 1.000 m es 894_ Future Directions 199042 1993416 Urbanization in Asia represents one of the most South Asia important demographic and social phenomenon of Mitna's this century and facilitates economic growth. How- 2,000 ever, there is need to manage urban growth in an 1,641 environmentally sound manner if the benefits of 1.500 economic growth are not to be overwhelmed by the costs of environmental degradation. The problems 1,00 of pollution and environmental degradation de- mand concerted action and huge investments in im- 3° S64 proving water quality, sewerage and sanitation, 03 solid waste management, and air quality. One es- 1990-92 1993-96 timate for water quality and sanitation improve- ments in Asia alone is $12.4 billion per year by I o tEC" 2000 (see chapter 2, table 2.3). EZmnianaWa Govemments in Asia are making serious be- ginnings to address these problems. By more than ating enthusiasm and support, a strategy which doubling its urban environmental lending Asia, the lends a special urgency to policy, pricing, effi- Bank is supportive of these initiatives. While Bank ciency and integrated management, will engender support for investments is important, Bank pollcy innovation and help cities mobilize financial re- guidance may make a more widespread impact. sources from domestic and extemal sources. The Bank's approach is to focus on metropolitan The megacities in Asia also face enormous regions and help metropolitan authorities develop transportation problems. The problem will be es- environmental sound infrastructure programs with pecially acute in the cities of East Asia, where ve- local accountability. At best, the process involves hicle populations are doubling in less than seven all the actors in cities-govemment agencies, pn- years. The Bank has not supported mass transit in vate sector, NGOs, and community groups-as a the past. However, given the current conditions in means to arrive at a broadly agreed strategy for Asia there is a broad need to assess the economics managing the urban environment. Besides gener- of mass transit as a possible component of a 63 URBAN ENVIRONMENTAL MANAGEMENT sia, and the Philippines. Box 3.8: Urban Environrnental Projects in Asia Public health issues related to safe water and East Asia. Urban environmenital projects are being prepared sanitation are the most serious in the South Asia in Liaoning, Shanghai, Zhejiang, and Southern Jiangsu Prov- region, and the lending program reflects this con- ince with similarities to the Beijing Enviromnental Project. In cem. The expanded environmental focus is rela- Indonesia. urban environmental efforts will be addressed tively weaker in the South Asia program, and the through an Urban Environment Project (FY94). The Indus- water supply and sanitation projects are being pre- trial Efficiencv and Pollution Control Project inthe Philippines is attempting to develop an environmental management strat- pared with little consideration of other polluting egy for Metro-Manila. A Petroleum Product Reformulation sectors, and without the guidance of any environ- and Air Quality Control Project is being prepared for mental management strategy. However, there are Thailand. some emerging initiatives that could provide the South Asia. Sri Lanka is currently preparing (with foundation for an enhanced urban program that in- MEIP assistance) an environmental management strategy for tegrates environental concers (box 3.8). Urban- Colombo. Work is just beginning in Bombay, with MEIP guidance and Bank assistance, to prepare an envirornental ization is reaching crisis proportions in India with management strategy for Bombay. However, in both these accompanying environmental problems, and the cities, follow-up investment arraiigements are yet to be made. Bank could play a useful role by assisting not only In Pakistan, the Punjab Urban Environment Project (FY94) the megacities. but also the rapidly expanding sec- is expected to introduce environmental focus into the urban sector, including the industrial sector. The Bank is also pre- ondary cities. paring a project to assist Karaclii build bus-ways. Kathmandu Notes became a participant in MEWP in early 1993. 1. UNDP 1991. 2. GEMS, the Global Environmental Monitoring multimodal transport strategy, at least in theSytmhabenoetdbyWOndUE megacities. While the crisis in secondary cities may since 1974. not yet be at hand, it is also useful to look at op- 3 The exceptions are northern cities with unusually tions for large investments in public transit as a high seasonal concentrations of SO2 due to win- proactive action than a reactive one. This assess- ter coal burning. ment should take into account the environmental, 4. CSE 1989. urban planning, and financial implications of such 5. Unleaded fuels are not available in many Asian systems. countries, including Bhutan, Cambodia, The environmental problems associated with Myanmar, Nepal, Pakistan, the Philippines, and urbanization are more widespread in East Asia, and Viet Nam. Malaysia and Thailand are introduc- Bank urban projects reflect this concem. The inte- ing unleaded fuels. Where unleaded fuels are in- grated city/regional approach to urban inf:astruc- troduced, taxing leaded fuel is needed to shift de- ture and service provision is well established in mand aver to the unleaded fuel. 6. Master plans were common in the 1960s and China and making progress in Indonesia and the 1970s, but urban nasterplans have been criticized Philippines (box 3.8). The Bank could assist in for being too dominated by physical planners developing similar programs in other major urban without regard to the economics of infrastructure areas in the region, such as Bangkok and Kuala provision and urban growth. Lumpur, and in secondary cities in China, Indone- 4 APPROACHES TO INDUSTRIAL POLLUTION Overview of the Problem its share of total output from 32 percent to 45 per- The industrial sector in East Asia grew at the ex- cent in East Asia, and from 21 percent to 26 per- tremely high rate of 9.1 percent per year between cent in South Asia-and this structural shift is 1965 and 1990, and is now nine times its size in expected to continue into the future. 1965 (table 4.1). Manufactuning growth has been An expanding industrial sector affects the even higher. Industrial growth in South Asia has pollution load in two basic ways. The first is to also been high (5.6 percent between 1965 and increase the total volume of pollutants in the short 1990), and the sector has quadrupled in size. There and medium terms. (In the long tern, total pollut- has also been a region-wide structural shifttowards ants may decline if dramatic shifts into cleaner in- increased industrialization-industry has increased dustries take place, or if the share of the industrial sector itself falls. Neither shift is imminent in Asia.) The second is to change the pol- lution intensity of industrial out- Table 4.1: Industrial Production Growth Factors in Asian put (the amount of pollution Economies, 1965-90 (constant 1990 US dollars) generated per unit of output). In Industrial production Asia, both the growth and the in- (iS$ million) Growth tensity effects are leading toward 1965 1990 factor heavier pollution loads in the short and medium tern. EASTASIA Taiwan (China) 485 66,774 137.6 Nocomprehensivedataex- Indonesia 2,722 42,743 15.7 ists on either total pollution loads Korea, Rep. of 6,984 109,819 15.7 orpollution intensities in Asia- Tailand 2,985 31,810 10.7 aconstraintto full understanding Malaysia 2,084 16,536 7.9 of the extent and cost of the in- China 20,937 155,331 7.4 ofthe exten proble Pa- Philippines 4,567 15,466 3.4 dustrial pollution problem. Par- TOTAL 40,279 355,930 8.8 tially in response to this constraint, the World Bank's In- SO JTHASIA dustrial Pollution Projection Sys- Pakistan 1,964 10,010 5.1 o India 22,212 85.772 3.9 tem (IPPS) has been developed to Bangladesh 1,130 3,359 3.0 provide an approximate means to TOTAL 26,010 101,769 3.9 estimate trends in industrial pol- lution. The IPPS uses pollution DEVELOPED COUNTRIES Japan 320,914 1,234,938 3.9 coefficients from United States Australia 46,893 91,571 2.0 manufacturing concems for 1988, Gennany 402,585 583,608 1.5 and applies them to industrial out- put in Asia. ' The system captures Source: World Development Indicators 1992. shifts in subsectoral output but 65 TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 66 not shifts in technology over time. not shifs in tecnology oer time.Box 4.11: Industrial Pollution in Beijing Since IPPS estimates are not directly based on Asian pollution data, it is not known if they are There are some 5,700 industrial enterprises (excluding town- biased low or high. Their accuracy depends on how ship and village enterprises) in Beijing, employing 1.7 mil- closely Asian technologies mirror United States lion people. They produce about I million cubic meters per technologies in 198 8. Also, since it is arguable that day ofwastewater, contributing approximately 45 percent of the volume and 60 percent of the total water pollution load in industries are less regulated in Asia than in the the municipality. In addition, they produce 24 percent of the United States, pollution loads may be higher in soot and dust emissions of the city, and 4 million tons of in- Asia. A possible bias in the opposite direction is dustrial solid wastes each year, ofwhich267,000 tonsare toxic that Asian technology is, on average, youngerthan and hazardous. Half of these enterprises, producing 70 per- cent of the output, are in the most densely populated 5 per- in the United States, and therefore inherently cent of land in the municipality. Many polluting industries cleaner. It is not possible to reconcile these and are being moved out of these densely populated areas, and other factors at the present, so the estimates pre- occasionally the moving costs are financed by the "sale" of sented here are meant to be indicative only. the land. Others are simply being shut down. The most common industrial approach to pollution The resulting indicative trends for industrial control in Beijing has been through end-of-pipe (EOP) tech- pollution in Indonesia, the Philippines and Thai- nologies. Byl988atotalof692wastewatertreatmentplants land are shown in figure 4.1.2 The six pollutants hadbeeninstalledinfactoriesinBeijing. However,asurvey shown are two indicators each for water pollution showed that many of the EOP treatment systems were not (BOD and suspended solids), air pollution (SQ and being operatedbecause ofthe high electricity demand and high > x operating costs. As a result, the municipality now favors a particulates), and toxic wastes (a composite index cost-effectiveness approach to the solution of individual in- of various toxics emitted into the air or water, or dustrial pollution problems. In many cases, this leads to pol- in solid wastes and heavy metals). Between 1975 lutionprevention at source through technical transformation, and 1988, these three countries had broad-based ratherthayEOPtreatment. increases in pollution intensity across all forms of pollution, including ten-fold increases in Thailand, tamination of water resources, including pollution eight-fold increases in the Philippines, and four- of groundwater, (b) unacceptable levels of air pol- fold increases in Indonesia. In comparison, the lution, and (c) unsafe handling and disposal oftoxic toxic indicator in Japanfell by two-thirds between substances. These costs are increasingly measured the late 1960s and 1987. in terms of contaminated water, air, and land; ad- The severity of these pollution problems var- verse health impacts; and damage to local fisher- ies widely in different locations. Industry is highly ies and wildlife. Public health impacts (such as concentrated in East Asia, leading to high concen- cancers and respiratory ailments), are now being trations of pollutants. Provincial industrial output found in and around industrial areas, particularly data (figure 4.2) shows that industrial activities are in the vicinity of heavy metallurgical, chemical, heavily concentrated in Indonesia and China but and coal-fired industrial processing plants. These less concentrated in India.3 There are extremely impacts are the direct result ofusing both dirty fuels heavy pollution loads in the ambient environment (coal) in highly inefficient thermal processes (boil- of Indonesian and Chinese cities. For example, box ers, heating, coking, and so forth) and of the manu- 4.1 presents a profile for Beijing, which is not con- facture and application of chemicals with sidered to be a heavily industrialized city. Other in- inadequate treatment facilities. dustries, such as tanneries, may be found in rural As mentioned, the existing data on industrial areas but are often clustered, with severe localized emissions and effluents is extremely sparse and impacts on the environment (box 4.2). provides little basis for making local and regional The environmental costs of rapid industrial comparisons. The availability of data in the urban, growth in Asia can be broken down into (a) con- transport, and energy sectors is generally much Figure 4.1: Estimated Total Industrial Pollution in Selected Asian Countries INDONESIA PHILIPPINES THAILAND 1200Index 11975 1001 Index 11975 100) Index (1975 -DD} 1200 1975 1977 1979 1991 1993 t9B5 1997 1975 1977 1979 1981 1993 1985 f917 1989 1975 1977 f979 19B1 1983 1985 1987 0 BOD -+- Suspended SOx -a- Particulates -)-( Toxicity -e- Heavy Solids Metals - Growth in Real GDP Ifor referencel 0 Source: Calculated from IPPS, World Bank 1 992 (see caveats in text). z TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 68 Figure 4.2: Geographic Distribution of Industrial Output betterthanforthe industrial sector. As (using provincial or state data) a result, recommended approaches to Land Area Ranked by Degree of Industrialization the industrial pollution problem both Indonesia, 1989 recognize the need for additional data and include strategies that can function Percent of IndustnWal Cpul relativelv efficiently even in the ab- sence of good data. 80x-. . . . . . . .- Water Pollutants. Large quantities of 60%- . /// - - - - - - - - - - - - - ---waterbome pollutants result from in- 40%- - /// - - - - - - - - - - - - - --dustrial production-especially ineffi- cient production-and from natural 20%- - - - -resource use and conversion (box 4.3). / % 2s The major categories of waterbome 0% I I -/ / ox-_La. meccadl0%Th,,,O% ,, .........B 17771pollutants include: oxygen demand substances, measured by biochemical China, 1990 oxygen demand (BOD) and chemical oxygen demand (COD); other standard Percent of Industisal QLnput industrial pollutants (such as total sus- toox- pended solids, ammonia, phosphorous, 131:D -- - - - - - - - - - - - - - - - - - - - - sulfide, nitrate, sulphate, chloride, and oil and grease); and polluting charac- 00%- -um - - - - - - - - - - - - - - - - - - teristics (such as pH). There is very little systematically collected data from the region on indus- . 20 - - zcs trial water pollutants. Among the ex- //% 777 7os vs vsceptions are some urban data on BOD ox- EJW _~ E 7Z 2/ / pollutants released bv industrv: the in- Top 10% Second 10% Thid 10% Fourth 10%Botomn 60p dustrial contribution of BOD pollutants India, 1983-84 is estimated at approximately 25 per- cent in Bangkok and 35 percent in Ma- Percerd otinckusldaS ctAptn nila.4 However, it is generally known that rivers in Asia are becoming satu- eos- - rated with BOD and COD compounds and that there are declining levels of eos - - oxygen in over half of the rivers moni- tored in Asia. Most riverine industrial 40% - 2%- 25. pollution is confined to river systems 20% - -77 1 -- -4 - within countries, with the important 0%V// 0V/1 , V//, exceptions of the Ganges and the Top 1 8ec(d 10 Thr 1 1 Mekong. Other major transboundary Top lOS Second lOS Third 10% Founh lOS Bottomq eos Sources: Data for Indonesia compiled from World Bank data; 'The rivers such as the Brahmaputra, Statesmen's Year-book 1992-1993". Data for China compiled from Salween, and tributaries of the Indus China Statistical Yearbook 1 991; "The Statesman's Year-book 1992- 1993". Data for India compiled from World Statistical Yearbook 1987; are not (yet) heavily polluted with in- 'The Statesman's Year-Book, 1992-1993" dustrial waste. 69 APPROACHES TO INDUSTRIAL POLLUTION Box 4.2: Leather Tanning in Asia The leather tanning industry in China and India is made up of a few large export-oriented units and a large number of manual, small scale units producing mainly for the domestic market. Most of these facilities are rather primitive and do not meet minimum discharge standards. Release of wastewater seriously compromises groundwater quality, and problems are com- pounded by the discharge of heavy metals. Most of the small tanneries are concentrated in clusters that would facilitate com- mon treatment facilities after heavy metals and sulfides have been removed by pretreatment. Toxic solid residues and sludge are now disposed without treatment, producing noxious gases causing air pollution. In Indonesia, leather tanning includes about 540 enterprises processing 123 million tons of hides to manufacture 50 million tons of finished leather. Small-scale enterprises (fewer than twenty workers) process in 470 plants about 12 percent of the total; the remaining production comes from medium- and large-scale plants. The tanneries cause water pollution prob- lems with high BOD and COD values in their discharges together with chromium, phenols, sulfides, amnmonia, dyestuff, heavy metals in dyestuff, detergents, and antiseptic agents. Average compliance with national discharge standards is esti- mated at 2 percent. Even the largest tanneries remove less than 20 percent of the required pollutants, and 435 tons (at least thirty-six times the standard) of highly toxic chromium compounds are discharged annually into the rivers of Java. In addi- tion, substantial amounts of solid waste, approximately 73 million tons a year, are disposed of in an unknown way. Source: Kent 1991; Mulckhuyse 1991. Box 4.3: Water Pollution from the Iron and Steel Industry in India In 1986, India's iron and steel subsector produced 10 million tons of steel, with a capacity of about 15 milliontons per year. About 65 percent of the production capacity is in the public sector. These public sector plants run at low efficiencies. No direct data on the environmental impact of the public sector industries are available. Using the Bank's best estimate of wastewater production figures as a guide, the public sector plants with a production of 6.5 million tons of pig iron (with a capacity of about 9 million tons) generate: Million cubic meters Gas water 19.5 Quench water 9.1 Pickling solution 7.8 Condensate 0.9 Ammoniawater 0.3 Wastewater streams also contain suspended solids, oils, waste acids, chromium salts, phosphates, ammonia, cyanides, phenols, chlorides, fluorides, sulfides, and heavy metals. Contaminated gas water, quench water, and condensate are in many cases being discharged without treatment. The cooling water needs of 585 million cubic meters are partly recycled through cooling towers. This mitigates some of the thermal pollution caused when warm condensate is otherwise dumped into nearby rivers. Based on experience elsewhere, major indus- cilities are not operated and the wastes are simply trial sources of these pollutants include fertilizer dumped into the sewer system or available water plants, refineries, pulp and paper mills, metal plat- bodies. Almost always, afew large industries con- ing factories, and the chemical and metallurgical tribute a large proportion of total pollutants industries. In terms of the more specific organic (box 4.4). waste load (BOD), the major polluting industry Increasingly during the dry season, industrial subsectors are food industries, alcohol distilleries, wastewater is an important constituent of total tanneries, pulp and paper mills, oils and fats, and water flow. As total urban, industrial, and agricul- pharmaceutical plants. While some plants in Asia tural demand on water resources increases, dry have pretreatment facilities, in many cases these fa- season shortages can cause sharply higher concen- TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 70 Box 4.4: Industrial Pollution in Surabaya, Indonesia Surabaya, the second largest city in Indonesia (population 3 million), illustrates the environmental effects of concentrated urban and industrial growth on water quantity and quality. By 1977 shortages of raw water (particularly in the dry season) were so obvious that the Governor of East Java issued a decree imposing a moratorium on the further development of industries using water from or disposing wastes into the Surabaya River. While this pushed development upstream and into certain outlying areas, it did not address the roots of the problem. By the early 1 980s, pollution of the Surabaya River had reached such a mag- nitude that the river had become virtually anoxic and was untreatable by conventional methods. A detailed study at that time found that 80 percent of the river's pollution was caused by industry, despite the heavy use of the Surabaya River for domestic waste. The majorpolluterswerepulp andpaper, monosodium glutamate, dyeing, sugar, tile, coconut oil and metal fabrication plants. Of twenty-eight firms surveyed in detail, only four (14 percent) complied with appli- cable BOD standards and eleven (30 percent) with COD standards. Also, four major polluters contributed 94 percent of the total BOD load from industrial sources. If these four problem polluters were to comply with regulations, the total industrial pollution load would be reduced by 75 percent. Through direct intervention by the Governor's office, compliance by the four firms was achieved in late 1987. Pollution levels in the Surabaya River have improved, but not enough. In the downstream portions of the Surabaya River in 1991/92, average BOD concentrations were 6-8 milligrams per liter, and COD concentrations were 26 milligrams per liter. These levels are still at or above the acceptable levels for water to be treatable for domestic use. During one recent dry season, pollution became so concentrated that both Surabaya's water treatment plants and water-demanding industries had to be shut down because they could not function. Heavy agricultural withdrawals furtherconstrain the ability of the river to flushthe steadily increasing amounts of upstream human wastes. PROKASIH, a nationwide clean river campaignprogram, has been active in Surabayato bring greater public and politi- cal pressure onto industrial polluters. As a result, more industries have installed treatment facilities. Some evidence indicates that among those firms who signed voluntary PROKASTH agreements in 1991, BOD and COD pollution loading fell by over 50 percent. However, anecdotal evidence also indicates that some firms only rarely operate these treatment facilities (in order to save on operating costs), due to lack of effective enforcement. The lesson from Surabaya is that targeted pressure on major polluters can lead to short-term improvements, and that a partial degree of compliance may be achieved without strong enforcement institutions. However, such targeted pressure does not reduce the long-term importance of developing more inclusive and systematic enforcement systems. The regulatory regime in Surabaya is still inadequate, and pollution charges (and/or incentives) need to be implemented in order to force (or convince) companies to reduce pollution levels. In addition, enforcement is demonstrably haphazard, and needs to be strengthened. The Indonesian Government. together with PJT (Perum Jasa Tirta, a state corporation charged with water resource management for the entire river basin), must address these major outstanding issues before the Surabaya River will become cleaner. trations of pollutants. The combination of increased Malaysia, Myanmar, and Viet Nam. As a result, industrial output and increased withdrawals of river energy efficiency is one of the most important and water means that whatever dilution effects were least-cost investments that industrial firms can previously observed are no longer achieved. This make to reduce air pollution. Energy efficient tech- is particularly true in the urban areas and densely nologies are implicit in most investments in clean populated river basins of China, India, and technologies (see below), which reduce pollution Indonesia. through reduced inputs and lower pollution intensities. Air Pollution. The list of conventional air pollut- As shown in the previous chapter, the air in ants from industry includes: SO., NO, total sus- Beijing, Calcutta, Jakarta, and New Delhi exceeds pended particulates (TSP), CO2, CO, and WHO air quality guidelines most of the time. In hydrocarbons (such as methane). Industrial air Beijing, it is estimated that industry emits 59 per- pollution primarily comes from energy use. Indus- cent of particulates and 39 percent of SO2 (more try consumes more than 40 percent of all commer- than power plants, which emit 24 percent of SO2). cial energy5 in Bangladesh, China, India, Korea, In Bangkok, industry emits about 21 percent of TSP 71 APPROACHES TO INDUSTRIAL POLLUTION (slightly less than power plants, which emit 33 and industrial output (box 4.6). percent). In addition to these megacities, there are In the absence of Asia-specific data, a second- a much larger number of smaller cities with even best approach to estimating Asia toxic releases is more severe air pollution problems, often because to use coefficients of toxic pollution intensity de- these cities were developed specifically as indus- rived elsewhere (see the previous caveats). The trial centers close to raw materials and fuel sources. World Bank IPPS project combines United States Shenyang and Taiyuan in China, Illigan City in the coefficients of some 320 toxic pollutants and cre- Philippines, and the Singrauli region of India are ates a toxic-intensity index that combines the quan- prominent examples. tity and toxicity releases across air, water and solid discharges. It should be remembered, however, that Toxic Pollutants. Toxic pollutants released from these are indices of total releases, not of estimated industry include heavy metals, cyanides, and pes- ambient pollution levels. ticides and can be emitted into the air and water, The results of this analysis show extreme or in solid wastes. Little is known about the quan- sectoral variation in toxic pollutant intensity, rang- tities or precise sources of chemical and toxic re- ing from fertilizers and pesticides with an index of siduals, since almost no governments or industries 105 per $1,000 of product, to soft drinks and car- do any sampling of toxic pollutants anywhere in bonated waters with only 0.22 per $1,000 (figure Asia (with some exceptions in India). However, 4.3). The subsectoral composition, the level oftech- their impacts are found in polluted groundwater, nology and the status of environmental controls surface water, and urban and periurban refuse will vary from nation to nation. However, these dumps. toxic intensity indicators can be used as a first ap- High concentrations of industry in urban ar- proximation of how shifts in national industrial eas compound the risks. These wastes tend to ac- output have affected the relative level of toxic re- cumulate in the poorer sections of the city, and leases. As shown in figure 4.1, the estimates of direct contact with local populations (mostly chil- toxic releases for Indonesia, the Philippines, and dren) occurs daily. These risks were realized in Thailand show fourfold to tenfold increases in the tragic extreme with the deaths in Bhopal in 1984 total volume of toxic wastes emitted. However, (box 4.5). In addition to toxic releases and residues perhaps an even more important conclusion of the in the ambient environment, occupational hazards IPPS analysis is that the intensity, or unit volume increase with both increasing pollution intensity of toxic releases per unit of output, is also increas- Box 4.5: Industrial Accident at Bhopal In December 1984, a pesticide factory belonging to Union Carbide at Bhopal, India, accidently released over 30 tons of methyl isocyanate. The toxic release resulted in the death of more than 2,800 people living in the vicinity and caused severe respiratory damage to over 20,000 others. Victims continue to suffer from the debilitating effects of the disaster. The Bhopal incident illustrates how a rapidly growing city witnessed industrial growth without commensurate invest- ments and regulations concerning industrial safety, pollution control, and zoning. Union Carbide assumed full responsibility for the accident. However, for its part, the city government was historically reluctant to adopt stricter safety and pollution control measures forthe fear of adversely affecting employment. Another aspect of the Bhopal tragedy was the lesson it provides concerning land use. In Bhopal, a rapidly increasing population and high land and construction costs caused a severe housing shortage. Many migrants were forced to occupy shanty settlements in and around industrial plants. They served as a cheap pool of labor for industry, construction, and domestic help in the city. By 1984, Bhopal had 156 such communities containing one-fifth of the city's population. Two of these colonies, Iaya Prakash Nagar and Kenchi Chola, were located close to Union Carbide, even though the area was not zoned for residential use. The proximity of high-density, unzoned housing near one of the city's largest toxic industries was the result of prolonged inaction on the part of the city government. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 72 Box 4.6: Industrial Pollution and Health in Thailand Industrial activity in Thailand has resulted in increasing occupational exposure of workers to toxic chemicals. As a result, Thai workers have experienced significant occupationally linked healthproblems. A survey of five regional hospitals in 1983 found that over 7 percent of total poisoning cases were occupationally related. In 1984, an investigation into occupational disease showed that the average lead levels in the blood of workers in various tasks at a Thai battery plant was in the range of 12 to 48 milligrams per 100 milliliters of blood. Allowable levels in non-occupationally exposed people are set at between 0.025 and 0.10 per 100 milliliters-implying that lead exposures in workers were 480 times greater than health standards. Since the study included less-exposedworkers, such as administrative staff, in its sample group, the health riskmay be even more extreme than indicated in the study. Another study performed by the Ministry of Public Health showed that the incidence of environmentally related health cases increased from 2.00 casesper 100,000 people in 1978 to 8.88 per 100,000 in 1987. These results are summarized below. Incidence of Occupational Disease per 100,000 workers, 1978-87 1978 1983 1987 Annual increase(%) Insecticidepoisoning 1.97 4.76 8.64 17.9 Leadpoisoning 0.01 0.02 0.10 29.2 Manganese, Mercury and arsenic poisoning 0.01 0.01 0.04 16.7 Petroleum products poisoning n.a. n.a. 0.02 n.a. n.a.: Data not available. Source: Ministry of Public Health, Thailand Two caveats are in order. First, the studies do not indicate that adequate control groups were used to properly attribute all the impacts to the workplace. Lead ingestion, for example, iswidespread, due to waterpipes, paint, and particulates from leaded gasoline. Second, improved diagnosis and reporting will appear as higher incidence. Therefore, these data are perhaps better used to illustrate the seriousness of the problems than to show detailed trends. ing dramatically in Asia-particularly in East Asia. ployee skills, as well as the technology used, are of a low level, leading to wasted resources, high Small- and Medium-Scale Industries. The im- pollution levels, and high health and safety risks portance and dynamism of small- and medium- to employees. Second, the economies of scale of scale industries (SMIs) is one ofthe distinguishing higher technology pollution abatement equipment features of the industrial sector in Asia (box 4.7). do not work in favor of SMIs. Third, their poor ac- SMIs are an important source of employment for cess to financial resources make it difficult for SMIs low-income earners, and therefore, politically as to upgrade their technology or install EOP treat- well as economically, provide an important func- ment systems. Finally, limited access to informa- tion in alleviating the effects of poverty. Also, in tion constrains their awareness of both the problems India and parts of China that are undergoing fun- and solutions. damental industrial sector reforms, SMIs are the China is particularly aware of the pollution most dynamic industrial subsector. potential of township and village industrial enter- SMIs pose difficult pollution abatement prob- prises (TVIEs). In southern Jiangsu Province, lems. Although they are not be the major polluters TVIEs are growing 15-20 percent per year and in most subsectors, they often pollute more per unit account for 45 percent of industrial output. Their of outputthan large firms operating in the same sec- serious contribution to environmental problems has tor, for several reasons.6 First, managerial and em- prompted the municipal and provincial govern- 73 APPROACHES TO INDUSTRIAL POLLUTION Addressing Pollution Figure 4.3: Industry Toxicity Indicators Problems Linear Acute Human Toxicity Intensity In the past decade, most FertliPers & eFst. - I I l l l l l l l l l I l l l l l l l l l l I I I Asian developing countries Industrial Chernicals- have enacted laws and regu- TaSneries & Leather - I I I I I I I I I I I I I l lations concerming industrial Pap Con. ners -P lI l I l l I pollution and created or Plastic ProdictS- strengthened agencies to en- Prindtnq & Publish.-l force these regulations (table Nonferrous Mtals - 4.3). Legislation for toxic and Iron & Steel - 1 l l l l l l l . . . . hazardous wastes is the most Rubber Prodlct s recent component of this ef- Fabricated Metal Pro . . fort. Some countries have Nonmetal Furniture - gone further and set up a sys- Samills & Laru Mill - tem of incentives and penal- Petroleum Refineries - ties for pollution control (box Drugs & Medidnes - 4.8), drafted safety codes for Pottery & China-X , et & Wood Machin. - m . factory workers, and crafted Cufiery, Hand Tools - = public awareness campaigns. Elect pliances - LO All of these are steps in the Oils & Fats- Soap, Cleaning Prod. - right direction. However, it is Wearing Aowel - I at the level of implementation Glass & GlHss Pwdr- n (that is, monitoring of envi- Dairy Products- 1: ronmental impacts and en- Presved Fructs & Veg - [1 : : : : forcement of regulations) that For d Products- I industrial pollution manage- Agr Machine. & EPuip ment is weakest. Carpets & Rugs - To reduce industrial Sugar Relinedes : : : pollution in Asia, a multi- CementUAme & Pbst - . . .e.r. Soft Drinks I I I I I prongedapproachisrequired. This must start with govem- 0 20 40 60 80 100 ment commitment and a dem- Note: Linear acute human toxicity intensity is a composite index of over 300 toxic onstrated will to clean up the releases, weighted according to human toxicity. Source: World Bank, IPPS 1992. most polluting industres. Ef- fective pollution control sys- tems require the removal of economic distortions (subsidies) and the definition ments to pursue detailed specialized strategies for of clear standards, followed by a combination of TVIEs involving relocations, closing, changes in incentives, regulations, and monitoring activities the production line, changes in raw materials, pre- to enforce the standards. This is already an enor- treatment and common treatment facilities, and mous challenge, and some targeting will be re- financial incentives. These policies can be best dis- quired-for example, toward the most polluting cussed in light of a broader strategy for addressing subsectors or the most polluted regions. If there is industrial pollution. as presented below. sufficient institutional capacity to implement indus- TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 74 Table 4.2: Growth Factors of Toxicity age the adoption of clean technologies. Intensity of Production Policy and Institutional Approaches Country Years covered Growth Factor Enforceable and Appropriate Standards. Gov- ernments set both ambient pollution standards and Indonesia 1976-86 5.40 industry standards. Ambient standards are often Pakistan 1974 84 3.17 based on WHO guidelines, which indicate at wvhat Malaysia 1977-87 3.05 Korea 1977-87 2.50 point public health is adversely impacted. Indus- Thailand 1976-86 2.48 try standards set allowable pollution levels for China 1977-87 2.12 firns, and are the basis for regulating them. With India 1976-86 1.97 few exceptions (such as tradable permits), indus- Bangladesh 1976-86 1.75 Sri Lanka 1977-87 1.59 trial pollution control policies must be premised on Philippines 1977-87 1.12 clearly defined industry standards. It is the respon- Japan 1977-87 1.11 sibility of policymakers to ensure that aggregate pollution levels do not exceed the ambient Note: Toxicity intensity is a measure of toxicity per unit of output. The growth factors are the ratio of toxic intensities for standards. the beginning and end of the 10-yearperiod shown., when the There are different types of industry stan- toxic releases are linearly weighted for degree of human dards, such as standards that define acceptable lev- toxicity. els of pollutants per unit of output (load-based Source: IPPS, World Bank, 1992. standards) or acceptable levels of concentration in the effluent streams (concentration-based stan- dards). It is generally conceded that although try-specific programs, some governments may also widely used, concentration-based standards are less provide information and other incentives to encour- effective, as industries can simply dilute their waste Box 4.7: Industrial Output Share of Small- and Medium-Scale Industries TIhe table below summarizes available statistics on the importance of SMIs in the industrial sector in Asia. They account for more than 50 percent of the total industrial sector output in China and India, and for 10-25 percent in most other Asian coun- tries. Unfortunately, sufficient datato more carefully analyze the relative concentration of SMIs inpolluting industries (vs. cleaner industries) in Asia does not readily exist. Country Medium (%) Small, Cottage, or Household (%) China (1989) 19.0%' 49.4%' Korea(1988) 17.2% (20-99 empt.) 4.6% (5-19 empl.) Indonesia (1986) 6.9% (20-150 empl.) 11.1 % (< 19 empl.) Philippines (1983) 10.4% (10-99 empl.) 2.4% (< 10 empl.) Thailand (1986) 1.7% (10-19 empl.) India (1988/89) 57.8% (< 2 million Rs. investment) Pakistan (1985/86) 12.3%(10-99 empl.) 0.9% (< 10 empl.) a. Chinese definitions are based on production capacity. Sources: Statistical YearBook of Indonesia, 1990; Korea Statistical Yearbook, 1990; Government of Pakistan, Census ofManu- facturing Industries, 1985-86; World Bank, Philippines SAR: Fourth Small and Medium Industries Development Project, March 15, 1989; State Statistical Bureau of the People's Republic of China, Statistical Yearbook, 1991; India: Economic Information YearBook, 1990-91. 75 APPROACHES TO INDUSTRIAL POLLUTION Table 4.3: Agencies and Legislation for Industrial Pollution Year Legislation Enacted Country Agency Air Water Toxic/Land China National Environmental Protection Agency 1985 1985 1989 lidia Ministry of Environment andForests/Pollution Control Board 1974 1981 1986 Malaysia Department of Environment 1977 1977 1979 Philippines Department ofEnvironment and Natural Resources 1974 1974 1990 Thailand Environmental Quality Board/Department of Industrial Works 1975 1975 1989 Source: Vergara 1992. Box 4.8: The Pollution Discharge Permit System in Beijing In recent years. Beijing has introduced a range of environmental management systems for reducing industrial pollution, includ- ing the pollution discharge permit and fee system. Other systems address environmental impact assessment and quantitative reporting; the design, construction and operation of pollution abatement facilities in coordination with production units; dead- line control; and annual "pragmatic" performance systems. Beijing has shown success in its development of strong regulatory (command and control) framework and environmental institutions, but has not widely incorporated market-based instruments in its efforts to reduce industrial pollution. The pollutant discharge permit system is an approach that addresses phased pollution-loading reduction based on the results of environmental audits and pollution prevention-that is, clean technologies, reduced consumption of raw materials, energy efficiency, waste minimization, and EOP treatment only as needed. The Beijing Environmental Protection Bureau began by making an analysis of current pollution levels, goals, and required reductions. It then initiated detailed discussions with in- dustrial enterprises to agree on reduction plans, involving awide range of technical and managerial changes. Since Beijing fo- cused on the control of heavy metals and major poisonous substances during the 1 980s (and shows a 90 percent reduction in ambient levels of mercury, phenol, cyanogen, chromium, and arsenic), the pollutant discharge permit system was targeted on COD discharges (including organic BOD substances). Investments are ranked using a ratio of COD reduction (measured in terms of COD discharge per unit of output) to 10,000 yuan investment, and the most cost effective approaches have consistently been new "clean" or "whole process control" tech- nologies, as opposed to EOP treatment. On average, for every 10,000 yuan investment, whole-process control technologies (which are often imported) eliminated as much as 5.9 tons per year of COD discharge, as opposed to 1.8 tons for EOP invest- ments-a three-fold difference. Projected production increases are also part of the analysis, with the condition that pollution increases due to increased output must be offset by further pollution reductions either by the same enterprise, by other enter- prises discharging pollutants into the same water area, or by other enterprises in the same subsector in the Beijing area. The results betxveen 1988 and 1990 for three of Beijing's largest chemical polluters were a 5 percent increase in output and a 6 percent (1,000 tons per year) decrease in COD discharges. It is projected that by 1995, total output will have risen by 50 percent, and COD discharges reduced by 16 percent. Comparable results are expected in other subsectors. streams to meet the standard. For example, it has economy than a stagnant one. Higher growth al- been shown that pulp and paper plants in water- lows for more rapid tumover of aging technology, scarce India were using four times the amount of more rapid restructuring of industry and its prod- water as used in water-rich Canada, partly for this uct mix, greater opportunities for attracting foreign reason. Load-based standards, on the other hand, partners and technology, and higher public rev- allow for flexibility and innovation by the regulated enues. In Indonesia it is projected that by 2010 new firms.7 investment will account for 85 percent of total in- dustrial capacity. Therefore, policies pursued to Industrial Growth. Given the magnitude of in- control pollution should be consistent with vestment in pollution abatement required, it is economy-wide policies adopted for sustainable easier to clean up industrial pollution in a growing national economic growth. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 76 out leaded gasoline would have little effect. Table 4.4: Market-Based Policy Instruments to Pollution charges or taxes are best levied Reduce Pollution when monitoring, enforcement, and competition Direct instruments Indirect instrwnents are all in evidence. If competition is lacking, then firms can pass on higher costs without having an Effluent charges Input/output taxes and subsidies incentive to reduce pollution levels. If monitoring Tradable permits Subsidies for substitutes and and enforcement of specific pollutants is costly or Deposit refund systems abatemnent inputs difficult, then the more blunt indirect market mea- Source: Eskeland and Jimenez 1992. sures are easier. Indirect taxes are not common in Asia, however. Diesel fuels and energy prices, for example, are not taxed commensurate with their environmental costs. A carbon tax has been widely Development of Market-Based Instruments. A discussed but not implemented. One new indirect host of incentives and creative financial arrange- tax policy newly introduced in Thailand is an in- ments have been used in the developed countries novative approach requiring industrial firms to post to encourage environmental compliance, including performance bonds based on projected levels of higher pollution taxes, tax incentives, emissions hazardous wastes. These payments are then subject and discharge permit trading, and possible lines of to environmental audits, and rebates are paid if credit for facilities (table 4.4). These are being in- firms attain lower wastes per unit of output. creasingly considered for use in Asia, to supple- Even though "optimal" taxes may be difficult ment more traditional command and control to calculate or introduce in many countries, the use approaches. of pollution taxes has a number of benefits. First, Almost all Asian countries have adopted the with limited administrative capacity of govem- "polluter pays principle" as the foundation of their ment, they induce the private sector to find ways environmental laws and regulations to control pol- to control pollution. Second, if the response to the lution. However, this principle has not yet been tax is elastic, then pollution abatement will be effectively implemented, primarily because the achieved. If not, then the revenue generated will levels ofpollution taxes or charges, combined with still be efficiently collected, the polluter will be their level of enforcement, are too low to have paying, and additional measures can be invoked. much effect. These are fundamental issues in deal- Third, taxes involve the ministries of finance as ing with industrial pollution. well as the ministries of environment, and help The most common forms of financial disin- convince policymakers that damaging the environ- centives in Asia are pollution (effluent or emis- ment is a real cost. sions) charges. Such charges can be highly efficient but only if rates are set high enough to alter behav- Tradable Permits. Tradable permits have been ior. In many Asian countries, these charges are far advocated for their greater potential efficiency in too low. In China for example, these charges tend abating pollution than traditional command and to be lower than the operating costs associated with control approaches. Under such a system, a regu- industrial pretreatment. In addition, the experience lator would issue enough tradable permits for the in China has illustrated that state-owned enterprises marginal benefits and costs of abatement to be are particularly insensitive to policies that use eco- equated overall, thus saving the regulator the need nomic incentives because they are generally not to estimate individual plant costs. Rather, each held accountable for high costs. In India, the lack plant is forced to calculate its own abatement costs. of competition in the refinery sector means that A plant with high abatement costs would tend to using charges alone to reduce pollution orto phase purchase pollution permits, whereas one with 77 APPROACHES TO INDUSTRIAL POLLUTION cheaper abatement options would prefer to reduce OECD countries, partly to accelerate abatement emissions and sell its excess pennits. The flexibil- during the transition from the period of little indus- ity ofthe permit system is designed to allow indus- trial pollution control (the 1 960s and 1 970s) to the trv to innovate, invest and adjust its compliance present period of broader compliance. There is an strategy in the least costly manner. argument for a similar time-bound role for subsi- In spite of their theoretical appeal, the appli- dies in Asian countries to help ease the adjustment cation of tradable pollution permits worldwide has of industry into a tighter regulatory environment. been limited, partly because govemments are not The argument for subsidies, however, is weak: in yet ready to create this new market. Even with trad- all cases, the carrots should only be offered in the able permits, there is still a need for government context of strong sticks, and for a limited period. monitoring and market supervision, and this abil- The general case for why, if ever, governments may ity has been lacking in most countries. In the United choose to offer subsidies is presented in box 4.9. States, tradable permits are limited options used If a country chooses to offer subsidies, the primarily in the case of coal-fired thermal power most common forms are investment tax credits and plants, a sector traditionally used to a more com- accelerated depreciation relating to investments in mand and control approach. pollution control equipment. Only profitable Subsidies. Subsidies have been commonly used in firms-and typically medium and large industrial Box 4.9: Subsidies and Industrial Pollution Abatement: Why and When The "polluter pays" principle, simply stated, does not allow for public subsidies to polluters to encourage them to undertake investments and modifications that they should be doing anyway. Similarly, the common debate between command and control vs. market-based policies for industrial pollution control does not carry over into the extra dimnension of why and when subsi- dies are theoretically and practically justified. Therefore, the reasons for pollution control subsidies are based more on politics than economics. The reasons that subsidies are commonly used worldwide in pollution control efforts include: Firms that made investment decisions in an earlier, less strict regulatory environment, face one-time adjustment costs. Governments have offered to ease that cost. * Governments recognize thatthe costof information in clean technologies is far from zero, and that apublic good is achieved by bearing some of this cost-whether through demonstrationprojects, public R&D, or technical resource centers. This type of subsidy goes to the pollution control industry, not to the polluters directly. An alternate phrasing ofthis argument is that there is a need for a domestic pollution control service industry to provide such types of information. This industry is currently lacking in developing countries. As per the "infant industry" argument, public benefits accrue from assisting in the startup phase of such an industry. * Governments view subsides as a cost tradeoff for monitoring, especially when monitoring is difficult or expensive. The argument is that if firms are encouraged to invest in pollution control, then they are more likely to actually reduce their pollution. This argument, which needs empirical verification, would apply only to the short timeframe when firms are making initial pollution-related investment, during which the government gains time to strengthen its monitoring capac- ity. * Subsidies serve a purely political or public relations function by showing that the government does not always rely on sticks but can also provide carrots. These arguments are theoretically weak. Nevertheless, virtually all OECD countries, and increasing numbers of Asian countries (India, Korea, the Philippines, Singapore, and Taiwan [China])rely on subsidies to meet their environmental policy objectives. In Brazil, Estache and Zheng (1992) found that subsidies, when combined with a strong stick, actually improved the effectiveness of pollution taxes and lead to an overall net increase inpublic revenues. In all cases, subsidies-if used-should focus on a finite period (such as five years) during which time the country's enforcement activities become binding. Many Asian countries are now in such a period. However, none of the above arguments apply after such a period has passed, when industry has learned of the tighter regulatory environment, public monitoring and enforcement has improved, and a domestic environmental service industry has emerged to meet local needs. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 78 enterprises that file taxes-are eager to take advan- developing countries where emphasis has often tage of tax incentives. Other forms of incentives are been placed on production volume at the expense eliminating or reducing tariffs and import duties on of product quality upgrading.8 pollution abatement equipment and environmen- tally related instrumentation and control equip- Monitoring. Adequate monitoring of enterprises ment. This can be especially attractive in countries for compliance with pollution standards is funda- that charge high duties and have to import most of mental to the success of pollution abatement poli- the equipment. Some countries have eliminated cies, and depends on a mutual understanding such duties outright, on the basis that pollution- between governments and polluters. Experience related investment has social benefits. Finally, as shows that five conditions, all institutionallv de- mentioned in box 4.9, some governments choose manding, are essential if policies are to have the to subsidize an "infant" pollution control equip- intended effect: (a) a local framework for negotia- ment and services industry rather than polluters. tion between parties; (b) a clear and publicly avail- able statement of standards and agreements Market-Based Energy and Resource Pricing. reached; (c) ameans of monitoring and spot-check- Full-cost resource pricing has a role in promoting ing pollution; (d) a means of penalizing defaulters; industrial pollution abatement, especially in the and (e) a fair and equal application of the regula- case of energy prices and water charges. Price re- tions to all parties. form would encourage industries to conserve and Asian countries have adopted several ap- to invest in cleaner technologies. In the case of proaches to lighten the administrative burden of energy, the first priority is to raise prices to world monitoring, but no Asian country (other than per- levels (see table 5.3 in the next chapter). The sec- haps Korea) has developed a workable system. To ond priority is to consider energy taxes, as is in- be most cost effective, pollution monitoring should creasingly being done in OECD countries, in order be delegated as much as possible to industry itself, to internalize environmental costs. Industrial wa- with unannounced checks by the environmental ter prices also tend to be below cost, and should be agency. Pollution permits should stipulate how fre- raised to improve conservation and overall effi- quently the industries must monitor and report ciency (chapter 7). pollution levels. The govemment can also play a Pricing is also an issue for ores and other role in helping to develop a local private sector material inputs, especially when regulated prices pollution control industry that can be contracted by for separated and upgraded raw materials do not both govemment and industry for monitoring and reflect their increased economic value. When this abatement-related services (as in Thailand). Gov- happens, there is no incentive for the producer or emments can also enlist community involvement generatorto effect this separation. Examples of raw in monitoring and approving agreements, as suc- material quality upgrading that can be done at the cessfully achieved in Bangladesh.9 source are: the beneficiation of minerals and coal; flotation and separation of ores; magnetic separa- Zoning and Industrial Location. The use and tion of iron ores; and the separation of glass, plas- importance of industrial zoning has been over- tics, aluminum cans, and paper for recycling looked in many Asian countries. Zoning codes purposes before disposal of solid wastes. But with- customarily have been ignored.'0 The result has out proper pricing, the result is that poor-quality been the irrational dispersal of industry, inefficient raw materials are produced, often increasing trans- access to utilities and transportation, pollution of portation costs, and causing greater environmen- aquifers that may be supplying water elsewhere, tal impacts and reduced efficiency in the processing and the lack of adequate water and solid waste in- steps of the end user. This problem is pervasive in frastructure in many areas. From an environmen- 79 APPROACHES TO INDUSTRIAL POLLUTION tal point of view, the lack of effective industrial low-cost collective treatment that would otherwise zoning means that infiastructure improvements are cost the finns far more. On the Rungkut Industrial disperse and inefficient. More efficient approaches, Estate in Surabaya, Indonesia, a central effluent such as common treatment facilities, are difficult treatment facility achieves full cost recovery for to implement. treatment of industrial effluents. Its effluent treat- To begin to correct the situation, more care- ment system is so effective that treated effluent is ful zoning should be applied to all new industrial being offered back to industries at lower cost for investment, and planned in the context of current use as non-process water (for example, for and future investments in utilities, transportation, cooling). and wastewater treatment facilities. Stricter zoning, therefore, should become part of a standard envi- Programs for Small- and Medium-Scale Indus- ronmental assessment process for new investment. tries. In order to reduce the pollution intensity of Second, special attention should be given to the SMIs, special programs are needed. Their large location choices and options of small enterprises, numbers and dispersed locations present logistical which are so important in Asia. Third, active relo- problems as well as high monitoring and enforce- cation of polluting industrial umits to more central- ment costs. ized locations should be pursued. As pollution In response, aggressive land use zoning and charges are raised, enforcement is strengthened, industrial clustering offers the most viable and cost and investments in common treatment facilities are effective option for treating wastes generated by increased, relocation can become financially pref- small and medium scale industries. Common treat- erable to industries compared with remaining iso- ment facilities can assist firms that often do not lated and facing even higher investments to come have the technical know-how nor the investment into environmental compliance. funds to treat their own wastes. To achieve this end, extra project effort is required to encourage small Least-Cost Effluent Treatment Facilities. The and medium industries to undertake, through indus- least-cost solution to industrial, power sector and try associations or managers of industrial estates, municipal pollution will, in many cases, argue for common treatment facilities. Financial incentives, some coordination of treatment. The most typical such as to underwrite moving costs to areas with combination includes pretreatment of industrial collective treatment facilities, can be used to help effluents which are subsequently treated in munici- bring small industries into environmental compli- pal systems. This approach, while optimal, will not ance. Virtually all of these approaches, including happen unless one or more industry leaders works some $30 million in financing, are being pursued together with local government to press for this in southern Jiangsu Province, China. type of cost-effective investment. Intemational agencies, with first-hand experience of how this has Public Disclosure and Community Participa- worked elsewhere, also have an important role to tion. Government efforts alone to reduce industrial play. pollution have been disappointing in Asia, as they Another approach is collective treatment in have been around the world. A relatively low-cost industrial estates. In a few cases, industrial estate and potentially important improvement in the regu- authorities have achieved-usually with govem- latory environment in Asia would be to introduce ment support-the centralization of previously public disclosure requirements. The Toxic Release disperse firms (and even, at times, similar types of Inventory (TRI) in the United States has had a dra- industries). Bangladesh has proposed relocating a matic effect in bringing public pressure to bear on cluster ofhighly polluting tanneries onto the Dhaka polluting corporations. This public pressure- industrial estate. Industrial estates can then offer which is often mobilized through a efforts of com- TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 80 munity groups, labor unions, NGOs, and the me- in any of the above areas. The institutions charged dia-is felt in terms of damage to corporate repu- with setting standards, designing and implement- tations and revenue loss. ing pollution control policies, and managing moni- Research is needed on the modes and infor- toring and enforcement systems, need more mation costs of disclosure, but anecdotal evidence authority, autonomy, facilities and skilled human from Asia shows it to be locally effective. The resources. Prokasih program in Indonesia is proving to be Some policies are more demanding of scarce fairly successful, at low cost. Part of the success administrative capacities than others: the World of Prokasih is to encourage community participa- Bank has recently recommended a system of pre- tion in obvious industrial pollution problems, and sumptive charges for urban industrial pollution in to involve NGOs in important watch-dog and both Thailand and Malaysia, partly on the basis that followup functions. Beyond the scope of individual it is administratively easier than more traditional "hot-spots," however, effective public participation command and control approaches. Nevertheless, requires training of company managers, workers, there are a few crucial areas in terms of institutional civil servants, and the general public, to create strengthening that must be addressed. higher awareness of and respect for standards. * Do the basics. The adoption of industrial pol- lution standards, and the creation of viable Liability. The potential of future liability forhealth monitoring and enforcement systems are re- and environmental damages provides an incentive quired, regardless of the choice of market- for firms to reduce pollution. Liability rules are based versus regulatory policies-so these administered by the court system, in contrast to the need attention. administration of pollution taxes and charges by * Set priorities. The choice of policies for pol- govemment agencies. Where polluters know with lution control may be time-consuming-and certainty that they will be required to pay compen- what works for BODs will be different for sation for damages resulting from pollution, a li- emissions and for toxics. Therefore, institu- ability system can be effective in dealing with tions must begin to think more explicitly in environmental problems. terms of which pollutants need immediate A benefit of liability systems is that they are attention. largely independent of govemment regulatory ac- * Use economy-wide policies wherever pos- tivities. A drawback is that they can initiate long sible to achieve pollution reduction. It is and expensive litigation, which may not be worth- easier to clean up industrial pollution in a while in smaller cases or where the environmental growing economy than in a stagnant one. injury is long-term in its effects (and hence where * Use market incentives (pricing and taxes) causation is difficult to establish)."' Liability sys- wherever possible. Beyond efficiency argu- tems play almost no role in Asia today, but will ments, pollution taxes also involve the min- become potentially more important as (a) court istries of finance as much as the ministries of systems become more sophisticated, (b) environ- environment, and help convince policymak- mental damages become worse and/or more appar- ers that damaging the environment is a real ent to the public, and (c) international conventions cost. on environmental liability, such as are being nego- * Involve the private sector. Several of the ap- tiated in both Western Europe and across all of proaches discussed above require private sec- Europe, become more common. tor participation, such as pollution monitoring, planning for least-cost treatment Institutional Development. Without progress on facilities, improved industrial location, and the institutional level, little progress will be made the reduction of liability. 81 APPROACHES TO INDUSTRIAL POLLUTION The issue of institutional strengthening, a uct mix, and greater opportunities for attracting cross-cutting one, is of highest priority (chapter 2). foreign partners and technology. Investments in As argued throughout this report, institutional con- plant modernization generally lead to lower pollu- straints to improved environmental management tion intensities, since new processes and plants are as binding as financial ones. This observation typically use fewer inputs, are more efficient, and is as true in the industrial sector as elsewhere. rely on more materials recycling than older tech- nologies (box 4.10). Clean technologies often pay for themselves in terms of both lower input costs Industrial Modernization. As mentioned, it is and allowing firms to remain competitive with new easier to clean up industrial pollution in a growing product specifications. Whereas clean technologies economy than a stagnant one, since higher growth can pay for themselves, investments in EOP pol- allows for more rapid turnover of aging technol- lution control equipment never do (see the case of ogy, more rapid restructuring of industry's prod- Beijing, discussed in box 4.1). Box 4.10: Cost-Effective Clean Technology Investments in the United States A survey of more than 500 companies in the US that adopted cleaner production processes found that each company reduced industrial wastes by between 85 and 100 percent; even more importantly, the investment paybackperiods were only one month to three years. These types of benefits accrued to old industries as well as to high-technology industries. Technological changes included the incorporation of advance technologies; process modifications involving the replacement of an old substance by a new, less-polluting material; and the adoption of processes that were less chemical-intensive and more mechanical-intensive. The most dramatic case was that of a photographic firm, shown below. The initial cost of $120,000 for the process modification was paid back in a few months by annual savings in the cost of developing solutions ($1.2 million) and silver recovery ($ 1.4 million)-a total savings of $2.6 million. Industry Method Reduction of Waste Payback period Pharmaceutical Water-based solvent 100% < I year production replaced organic solvent Equipment Ultrafiltration 100% of solvent and oil; 2 years manufacture 98% of paint Farm equipment Proprietary process 80% of sludge 2.5 years manufacture Automotive Pneumatic cleaning process 100% of sludge 2 years manufacture replaced caustic process Micro-electronics Vibratory cleaning 100% of sludge 3 years replaced caustic process Organic chemicals Absorption, scrap condenser, 95% of cumene I month production conservation vent, floating roof Photographic Electrolytic recovery ion 85% of developer; < 1 year film processing exchange 95% of fixer, silver and solvent Source: Huisingh 1989. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 82 Short of installing new equipment, large ef- through improved real-time efficiency), and high- ficiency gains can often be made through factory efficiency motors and variable frequency drives. housekeeping, process modifications, smart prod- The most importantpower-related investments for uct design, and consolidation of inefficient units. industry are often cogeneration plants, for simul- Raw materials can be conserved and recycled. taneous electricity and thermal production. Finally, Waste minimization and upgrading of energy sys- other investments that lead to reduced industrial tems should be identified via energy and environ- power consumption are more efficient heating, mental audits. For conventional EOP systems, a cooling, and refrigeration equipment; energy effi- monitoring system should be put in place to ensure cient lighting and fixtures; and building improve- that they are properly operated, and not bypassed. ments, such as windows and insulation. Energy Efficiency. Energy-efficient technologies Lines of Credit for Feasibility Studies and In- are implicit in most investments in clean technolo- vestments. In 1989, industrial sector investment in gies, which reduce airpollutiongenerated attthe site EastAsiaand SouthAsiawere $135 billion and $20 through reduced energy inputs. Energy-efficient billion respectively. The share of this investment process technologies include upgraded boilers, going directly into pollution control, while less than upgraded controls (which lead to reduced loads 5 percent, is still measured in billions of dollars per Box 4.1 1: Industrial Pollution Project in India The experience in India illustrates that a blend of enforcement actions and thepromotion of limited incentives has yielded re- sults that surpass initial expectations. Since the project became effective, about 50 percent of the financial resources available in the credit line have been committed-mostly for the financing of waste minimization and resource recovery actions (see below). A rough estimate of why firms borrow these resources indicates that one-half borrows because the investments are cost-effec- tive, one-quarter because of a threat of closure unless they do so, and the remaining quarter because of a corporate interest in improving their reputation. Indian industrial associations have also been involved in self-help operationsto help finrs improve efficiency and learn about newer technologies. Scope of some industrial pollution projects being fmanced in India Problem Solution Indirect benefits Mercury emissions at caustic soda Installation of membrane electrolyzers Reduced energy consumption plants Black liquor discharge at pulp and Chemical recovery systems By-product steam paper mills Evaporation Stillage discharges from sugar/ Anaerobic digestion By-product fuel ethanol plants SO, emissions from fertilizer plants Double contact absorption Sulphur recovery and scrubbing Dust emissions at plants Filter bags power Fly ash recovery for use as building materials Plastic waste Collection and reprocessing Reduced raw materials Source: World Bank data. 83 APPROACHES TO INDUSTRIAL POLLUTION year, perhaps as high as $5 billion to 10 billion per year. (In Europe, Japan, and the United States, capi- Box 4.12: The Chronology of Pollution tal investment in pollution abatement in the late Control: A Case Study from Malaysia 1970s and early I980s averaged 5 percent of total Malaysia achieved successful results in phasing in pollution industrial investment.) While this cost must be born charges for palm-oil and rubber factories. Fees were first lev- primarily by the firms themselves, there are means ied in 1978, which were raised incrementally until 1984-by to provide small incentives that serve the public which time, technological breakthroughshad occurred inpalm- interest-subj ect to the overall caveats concerning oil effluent treatment technology. The key elements account- subsidies as presented in box 49 ing for the success of the program were: Regular dialogue and consultation with industry; One increasingly common approach is a line . Firm government enforcement of regulations; of credit (box 4.1 1), where funds are put in a dedi- Cooperation of industry, government, universities, and cated reserve for financing enviromnentally ben- research institutions in developing new technologies; eficial projects. Projects must qualifv for such and eficia- prjcs.Poecsmst a Fines that were set high enough by the end to induce funding according to pre-set criteria. Since pollu- real changes in behavior by the polluting factories. tion abatement projects are often perceived as risky As a result, the palm-oil processors reduced their dis- by lending institutions, the government may guar- charges of BOD by alrnost 90 percent between 1982 and 1987. antee a portion of the loan, typically 50 to 90 Source: ESCAP 1992; World Bank 1992a,p. 76. percent. For pollution control funds, priority projects should be those that: demonstrate new, low-waste ficient time to respond to the demand for pollution technologies; set up centralized waste treatment abatement (but in the context of a strong stick) is facilities for groups of industries; and offer tech- the Malaysia palm oil industry (box 4.12). nical assistance. If initially underwritten by donors The objective of increased public/private or govemments, the line of credit should strive to collaboration is to replace the more traditional become self-financing through revenues generated punitive regulatory approach with ones in which by a pollution charge system, combined with re- industry actively participates in protecting the en- payments by borrowers. Donor-financed projects vironment. Such approaches are also more cost- should also require that the participating firm be effective to governments, as the private sector financially viable and not supported by subsidies assumes an increased share of the cost of monitor- or other mechanisms (especially public enterprises) ing and enforcement. which distort the actual cost of operations. The World Bank's Role in Public-Private Collaboration in Specific Indus- Pollution Abatement tries. Collaboration and cooperation between gov- emnment and private industry is important in many Past Experience of the areas cited above: (a) finding collective so- The World Bank's experience in lending for indus- lutions, especially for small industries and at indus- trial pollution control is limited. Pollution has not trial estates; (b) planning coordination between traditionally been the priority that it is now, and industrial and downstream public water treatment while traditional Bank's loans to specific industrial facilities; (c) providing technical and market infor- plants may have included EOP technology, they did mation; (d) cooperating on environmental assess- not address the broader policy or institutional is- ments and permitting requirements associated with sues. However, this situation has changed dramati- new investment; and (e) agreeing on a realistic cally, and the Bank's current and future pipeline timetable for industries to adhere to standards. One shows a large increase in lending for industrial example of a timetable that allowed technology suf- pollution control in East Asia (figure 4.4). TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 84 ing ozone-depleting emissions. These four catego- Figure 4.4: Total Bank Lending and Bank ries of projects are discussed below. Finance of Environmental Components for Direct Investment Projects. Direct investments in Industry Projects in the Asian Regions, Fiscal the industrial sectorare becoming asmallerpart of 1990-92 and Fiscal 1 993-9 5 the Bank pipeline, as the Bank has moved from the East Asia traditional type of direct investment in public en- terprises to industrial subsector restructuring. Mllbn USS Nearlv all industrial projects financed by the Bank 1,eOC are "A" projects that have significant environmen- tal impacts and hence require detailed environmen- 1,200 tal assessments.'2 %4 1.047 Direct industrial lending represented about 39 -3: - percent of industrial sector lending in the two Asia regions between 1990 and 1992. Most of these in- vestments are in the cement, fertilizer, and petro- 400 - 281 chemical subsectors, and are typically capacity 25 |expansion, renovation, or subsector restructuring 0 -2s _ . _9002projects (table 4.5). The only future projects ofthis 199D-92 1993-95 type during fiscal 1994-95 are two projects in China. South Asia Industrial lines of credit. This category included MINIon US$ approximately 54 percent of World Bank industrial 1,Q0o lending between 1990 and 1992, and poses specific 1,379 1,407 problems for industrial pollution management. 1.200 - These lines of credit are managed by participating financial institutions (PFIs) in the borrowing coun- ___ -tries. Although the Bank specifies that environmen- tal criteria be used in project appraisal, the Bank is rarely involved in identifying or appraising indi- 400 - 55 202 vidual subprojects. As a result, the scope for inter- 155 _ _*ventions to ensure adequate environmental 0 13* _*_ assessment and adoption of cost effective pollution 190-92 1 95control measures is limited. Sank Flimom at ErManment The Bank's EA requirements for sector and Bwnlu R o LondwnV CocSo financial intermediary lending put the responsibil- 21 J* LindhB | ity for the EA on the PFIs, even though it is recog- nized that many PFIs are not qualified to do this. There are three categories of World Bank The incentive for the PFI to do so is to reduce its loans in the industrial sector (in order of most tra- future liability for adverse environmental impacts. ditional to the newest): (a) direct investment in Although Asian countries do not currently pursue industrial establishments, (b) industrial lines of liability suits against financial institutions, this hap- credit, and (c) lending for industrial pollution con- pens increasingly in the United States-with com- trol. In addition, the World Bank is involved in mensurate interest by United States financial implementing Montreal Protocol projects for reduc- institutions in certifying that proper environmen- 85 APPROACHES TO INDUSTRIAL POLLUTION Table 4.5: Direct Industrial Lending in Asia, 1989-95 Environmental Loan size component Year Country Project (US$ million) (US$ miillion) 1989 China Hubei Phosphate $137 $0 1990 India Cement Industry Restructuring 300 0 1991 India 2nd Petrochemicals Development 245 0 Indonesia Fertilizer Restructuring 222 13 Pakistan Cement Supplemental 56 0 1992 China Regional Cement Industry 83 0 1994 China Electronics I 250 0 1995 China Shenyang Engineering Industries 100 8 tal procedures are being followed at the time of Direct Industrial Pollution Control. Three investment. projects begun in fiscal 1991 and 1992 in China, To help PFIs fulfill this Bank-mandated func- India, and Indonesia, are part of a "first generation" tion, the Bank incorporates EA institution-build- effort to design comprehensive industrial pollution ing components into financial intermediary control projects. The three projects take different projects. In some cases, the project institutional approaches. The Industrial Pollution Control component is geared towards the PFI itself. In other Project in India focuses on the worst chemical sec- cases, the project institutional component is geared tor polluters in four states. the Beijing Environmen- towards the government pollution control agency, tal Project takes an integrated approach to citywide which would have the responsibility of approving industrial and urban pollution. The BAPEDAL the environmental impact assessment associated project in Indonesia focuses on the national envi- with the new investment. Although the latter strat- ronmental protection agency (box 4.13). egy is better for long-term strengthening of gov- Although the projects have different areas of emment pollution control agencies, the former has emphasis, they all place strengthening of govem- been a second-best compromise in countries where ment pollution control agencies as a top priority. the govemment is not capable of doing adequate Two projects (India and China) provide financial environmental screening. resources for enterprises investing in equipment- Examples of this type of institutional support either new waste-minimizing processing equipment are the fiscal 1991 Philippines Industrial Restruc- or EOP equipment. These to projects are also in- turing Project, with a TA component of $2.3 mil- vesting in public infrastructure for pollution con- lion to assist the govemment's Environmental trol, although with some differences: China is Management Bureau in strengthening monitoring investing in urban infrstructure, while India is and enforcement of environmental standards; and investing in common treatment facilities for indus- the Sri Lanka Fourth Small and Medium Industries tries clustered in industrial estates. Clearly, the Project, with a $0.3 millilon program to assist the te lsee nidsra sae.Cery h P Enironmetlgnc in d oping in- demand for both of these types of investment will Central Envronmentalbe increasing across Asia. dustrial subsector environmental guidelines. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 86 Box 4.13: Direct Lending for Industrial Pollution Management Three projects begun in fiscal 1991 and 1992 represent the latest Bank effort to directly lend for industrial pollution control. The projects have different approaches: the India project has a subsectoral focus; China, a geographical focus; and Indonesia, an institutional focus. The three project approaches are not mutually exclusive; in fact, there is much overlapping of project componients. The India Industrial Pollution Control Project targets the major polluting manufacturing subsectors: that is, chemi- cals; fertilizers; leather tanning; dyestuffs; pesticides and insecticides; pharmaceutical; petrochemicals; pulp and paper; sugar; and alcohol distilleries. The project is initially limited to the four major industrial states of Maharastra, Gujarat, Tamil Nadu and Uttar Pradesh, and is designed to achieve better compliance to existing legislation and regulations by working with both govermnent and industry. It has three components: (a) an institutional component to work with the Central and four State Pollution Control Boards; (b) an investment component to finance investments in pollution control equipment, including common facilities and demonstration projects (see also box 4.9); and (c) a technical assistance component to work with gov- ernment, financial institutions, and firms on problems, technologies, and feasibility studies. The Beijing Envirotnmental Project takes an integrated approach to the industrial and urban pollution problems citywide (see box 3.4). The Indonesia BAPEDAL Development Project chose an institutional development approach because of the lack of na- tional capacity to develop and enforce pollution control programs at anv level of government. BAPEDAL is the Pollution Mionitoring and Control Agency at the central level. The project has four substantive activities: (a) clarifying and strengthening the mandate for pollution control, including dispute resolution; (b) design and development of pollution control systems, in- cluding permit systems, incentives, technical advisory support, and public awareness; (c) support forregional agencies and labo- ratories; and (d) support of a BAPEDAL recruitment and training program. Interim Multilateral Fund under the Montreal of CFCs for mobile air conditioners and is likely Protocol. As with the GEF, the World Bank is the to be adopted as the model for intervention in other primary implementing agency for investments countries. Engineering design studies for substitu- funded under the Montreal Protocol. This fund tion of ODS in the solvents sector have been com- assists developing countries reduce their emissions pleted forthe Philippines and Thailand. The project of ozone depleting substances. Investment projects in Thailand has been designed in conjunction with are began in 1992 in four Asian countries-China, similar efforts of assistance provided by Japan Malaysia, the Philippines, and Thailand. These (MITI) and the United States Environmental Pro- projects address options for substitution, recovery tection Agency. and recycling of ozone-depleting substances in the six main contributing sectors of aerosols, mobile F D air conditioning, refrigeration, foams, solvents, and Asia-Wide. Previous sections outlined policy, in- halons. Estimates of investment funds are: China stitutional, and industry-specific approaches to re- ($15 million); Malaysia ($13 million); the Philip- ducing pollution rates in Asia. Simultaneous pines ($10.4 million); and Thailand ($15.5 million). actions on standards, pricing, institutional strength- Projects in China include conversion of a ening, and attention to financial incentives for pol- CFC aerosol plant to LPG, a pilot project for con- lution abatement investments are all needed. verting a refrigeration plant from CFC-12 to Therefore, setting priority actions requires picking HCFC-22, two projects to reduce CFC-I 1 in the specific instruments, subsectors and geographic foam sector, and three projects to reduce halon regions to target, rather than on implementing only emissions used in fire extinguishers. The projects part of the basic multipronged approach outlined in Thailand, Malaysia and the Philippines target above. mobile air conditioners. For example, the Malay- There are several justifications for a targeted sia project will demonstrate recovery and recycling approach. First, relatively few subsectors release 87 APPROACHES TO INDUSTRIAL POLLUTION the majorproportion of pollutants into the environ- tration of industrial activities. The Bank is under- ment, and a cost-effective pollution control enforce- taking industrial pollution studies in Indonesia, Ma- ment program should give these highest priority. laysia the Philippines, and Thailand, which should Cost effectiveness would be achieved not only by lead to projects in Indonesia, the Philippines and the regulatory agency in deploying its limited re- Thailand in fiscal 1994. (In Malaysia, current work sources but also by industry (since the marginal cost is expected to lead to concrete recommendations of environmental control is typically inversely re- for implementation, although not necessarily a lated to pollution intensity). World Bank loan.) In China, in addition to the Second, geographic targeting responds to the Beijing project, Bank-financed work is progress- need to curtail pollution where significant health ing in Jiangsu Province, Liaoning, Shanghai, thresholds and toxic concentrations are being Shenyang, Tianjin, and Zhejiang. In spite of the crossed. It is appropriate that the greatest effort be impressive amount of work being done in China, expended in industrial cities and other industrial even more could be done. centers (such as Singrauli and Jiangsu Province) In South Asia, outside of India, the World and where clusters of polluting industries (such as Bank has focused less directly on industrial pollu- cement factories, tanneries, and coal mines) are tion. The biggest gap appears to be in Pakistan, located. although a small industrial pollution component is Third, given limited institutional capacities in planned in the Punjab Urban Environment Project. Asia, priority should be given to establishing a In India, in spite of the fiscal 1992 Industrial Pol- successful institutional track record in a few criti- lution project and its successor in fiscal 1995, there cal areas rather than run the risk of diluting re- is much to be learned about the depth of the prob- sources in pursuit of overly broad objectives. Once lems. A major data collection and analysis effort an effective but limited program has been achieved, is a priority for India, in orderto broaden the knowl- then it can be replicated in other subsectors. edge base for future industrial pollution strategies. One area in Asia in which the World Bank is not yet engaged is that of toxic and hazardous Notes wastes. As additional data becomes available on 1. Wheeler and others 1991. both the magnitude of toxic pollutants and the pub- 2. These are trends for total emissions of pollutants, lic health costs incurred, the problem of toxic and not ambient pollution levels. hazardous waste collection and disposal should be 3 The Gini coefficients for Indonesia, China, and pursued. (However, treatment of contaminated India (which measure the concentration of indus- sites is costly and may not be a priority investnent.) tral output) are 0.16, 0.33, and 0.67, respectively. Whereas bioloicalvastesBODa y 4. Preliminary data from World Bank industrial pol- Whereas biological wastes (BOD) and many COD lution studies in Bangkok and Manila. compounds can be effectively cleaned up within a 5. The term commercial energy includes all sources relatively few years, the heavy metals and other of energy except for traditional fuels such as toxins are much more persistent and have far higher wood and dung (see chapter 5). cleanup costs. Further avoidance of adopting sound 6. Kent 1991. toxic and hazardous waste policies will only im- 7. The World Bank Industrial Environmental ply higher mitigation costs in the future. Guidelines were drawn up in the early 1980s to the standards of Best Practicable Technology Region-Specific. In the near future, more of the (BPT). Newer technologies can meet the stricter Bank's industrial pollution projects will be located Best Available Technology, Economically in East Asia than in South Asia, because of Er Achievable (BATEA) Standards. Enforcement Asa' higr le .,of industrialization, the higher problems arise in the case of older technologies, Asiaes higner level of andthe tne coner such as those characteristic of village enterprises rate of industrial growth, and the higher concen- in China, which, even after renovation, may not TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 88 be able to meet BPT standards. In recognition of and with failing to meet international standards. this, revised World Bank Environmental Guide- 9. World Bank 1992a. lines recognize distinctions between new and 10. Vergara 1992. oldertechnologies, sincetheseobsoletetechnolo- 11. Bernstein 1993, pg. 17. gies cannot be simply regulated away without a 12. All World Bank Projects are screened according well-considered period of transition. to criteria specified in Operational Directive 4.01. 8. For example. the Chinese steel industry has had "A" projects have potentially significant environ- serious problems with the quality of its products mental impacts. 5 MINIMIZING ENERGY SECTOR IMPACTS The Energy and Power Sectors rope and the United States combined by 2005. In Overview terms of CO2 emissions caused by the buming of fossil fuels, Asia will catch up with all OECD coun- Along with rapid development and high population tries by 2015 (see chapter 1). By any measure, the growth, energy demand in Asia is growing ex- growth of the energy and power sectors in Asia tremely rapidly. At current growth rates. Asian is one of the most crucial areas-in terms of both energy demand is doubling every twelve years- economic growth and potential negative environ- as compared to the world average of every twenty-eight years. The demand forelectricityis growing Figure 5.1: Growth of Electricity Consumption and GDP in even faster: two to three times Selected Asian Countries 1980-90 faster than GDP for most of the Electricity Consumption Growth (%) newly industrializing East Asian 30 countries (10-25 percent per year) and up to two times faster Y ep. d for most of South Asia (5-10 per- 25 cent per year; see figure 5.1). Only China shows demand for electricity growing slower than 20 GDP, which is consistent with its effort to reduce its historically Ma I high energy intensity. The amount of new invest- 15 ment planned in the Asian power Nepal / sector during the 1 990s is two- Phlinm thirds of all power-related invest- 10 - /hd. / ment being made in the develop- l Ir i ing world during the period, and . 'pai /Chna would double the sector's capac- - Bagla%uh ity by 2000.1 Asia's fossil fuel- 5 PNG related emissions will increase dramatically and will more than offset any reductions in emissions 0 I I l achieved in OECD countries. In 0 5 10 15 20 absolute termns, Asia could easily surpass all of Europe in SO2 emis- GDPo Growth Rate (%) sions by 2000, and surpass Eu- Source: World Bank data. 89 TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 90 mental impacts-in the region's next phase of natural gas (figure 5.3). Over 80 percent of all en- development. ergy is derived from fossil fuels, and 95 percent from fossil and biomass fuels-both of which are The Energy Sector. The potential for large future contributors to global warming. China and India negative environmental impacts from the Asian consume 94 percent of all coal in Asia. In addition, energy sector is a direct result of high growth and coal accounts for 96 percent of remaining fossil fuel high dependence on coal. Even though all forms reserves in these two countries, and 92 percent of of fossil fuels have adverse environmental impacts, the energy reserves for all of Asia.2 whether local, regional, or global (see below), coal The breakdown of fuels is not projected to has the most severe. The high use of relatively dirty change significantly over the next two decades, in coal in Asia makes the growth of this component spite of some investment in hydropower. Coal use of the energy sector particularly problematic. is expanding at 6.5 percent per year in both East Energy use in Asia is dominated by China and and South Asia, a rate which exceeds regional eco- India to a surprising degree (figure 5.2). China nomic growth. While the use of natural gas is ex- alone consumes 61 percent of all commercial en- panding at 9.3-10.1 percent per year in East and ergy (not including traditional fuels such as biom- South Asia, respectively, gas use is limited to coun- ass), and 55 percent of all energy in Asia includ- tries with their own reserves (Bangladesh, China, ing biomass. India consumes another 20 percent of India, Indonesia, Malaysia and Thailand), and all energy in Asia. Combined, China and India con- Korea, which has invested in the capital infrastruc- sume three-fourths of the total: any Asia-wide strat- ture required to import liquified natural gas. Hv- egy to address the environmnental impacts of the dropower is projected to increase fairly rapidly in energy sector must target these two countries. East Asia (II percent per year), but at a nmuch In both East and South Asia, coal is the domi- slower rate in South Asia (2.9 percent per year). nant energy source, followed by liquid fuels, bio- India and Pakistan have ambitious plans to develop mass (fuelwood and charcoal), primary sources hydropower installations, but progress on these (hydropower, nuclear, geothernal, and wind), and plans will be subject to major feasibility, finan- cial, and resettlement-related delays. Figure 5.2: Total Energy Requirement in Asia, 1989 (Petajoules) The use of energy and power is distributed differ- China 55% ently across the economy in 23,805 different Asian countries. While industry consumes two-thirds of all commercial energy in China, it consumes t tt; 0; a ; G; I Do I; 1. I I -only half in India. While the .......... ..i . ,n : t| X @ transport sector in China con- sumes 5 percent of all energy, Others 13% it consumes 25 percent in In- Korea, Rep. 6X \ w 6,931 dia and more than 50 percent 3,165 in Sri Lanka and Thailand. In India 20% ndonesia 5% Sri Lanka and Thailand, there- 10,693 fore, a focus on transport-re- Note: Not including Japan. lated energy efficiency is rela- Source: U.N. data from WRI, UNEP and UNDP 1992. tively more important than in _ _ _ _ __ China. 91 MINIMIZING ENERGY SECTOR IMPACTS Figure 5.3: Energy Consumption in Asia 1989 (millions of tons of oil equivalent) East Asia South Asia Total = 944 Mtoe Total = 300 Mtoe 219 69 543 35 19 58% 4% 6% 5% ~~~~7%7 | LUquid Fuels D Solid Fuels Primary Electricity Blomass Gas Source: World Bank 1 992a. The Power Subsector. On average, Asia converts add-on. Unlike industry, where some clean and distributes 30 percent of its energy to electric- technologies and processes lead to significant ity, in what is known as the power sector. This sec- savings in material inputs and recyclable tor is far more important than the percentage im- wastes (see box 4. 10 in the previous chapter), plies for several reasons: this is notthe case for coal-fired thermal. This * The power sector is the fastest growing com- means that the cost of pollution control in- ponent of the energy sector. vestments for coal-fired thermal power must * The investments required to keep up with be justified interms ofthe environment alone. demand are huge-nearly $300 billion dur- The developing countries of Asia have ing the 1990s (see below). 250,000 megawatts of electrical generation capac- * The scale of many power sector investments ity (1990), 70 percent of which is thermal-gener- can be orders of magnitude larger than most ated, mostly coal-fired. The remaining 30 percent industrial investments (hundreds of millions is primarily hydropower, with scattered nuclear and of dollars, as compared with millions), with geothermal power installations. To date, few coal- environmental impacts to be felt well into the fired thermal pollution abatement technologies next century. As a result of their large scale, have been installed in the developing countries of other investment options that might be more Asia; they are expensive and have not been a pri- environmentally sound are effectively pre- ority of utility companies and large industrial cluded for years to come. coalbumers. * In the case of coal-fired thermal power, the Planners forecast an additional 240,000 cost of clean technology is almost entirely megawatts will be needed by 2000 to keep pace TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 92 with expected development. This will require ap- be how to find the most cost-effective ways to re- proximately $290 billion in capital expenditures, duce energy sector emissions with minimum lev- assuming an average cost across all forms of power els of investment in costly technologies. generation of $1,200 per kilowatt. (This average unit cost is based on estimated costs in the Asia re- Environmental Impacts of the Energy Sector. gion for 1991/92, and is lower than unit costs esti- The highly coal-based energy sector in Asia is, and mated elsewhere.3) These expenditures will be will continue to be, a significant contributor to glo- concentrated in China (approximately $140 billion) bal warming, acid rain, and other air pollution prob- and India ($ 100 billion). Given the high proportion lems. However, there are other problems associated of coal-fired plants. future power plants will require with most other sources and forms of energy. This investment in expensive new technologies-over section summarizes the main emissions data for $50 billion in the 1990s alone-to meet interna- Asia, as well as provides a technical overview of tional standards for greenhouse gas and acid rain the pollution issues (table 5.1). The environmen- emissions, particulate emissions, and ash disposal tal impact of hydropower is discussed in chapter problems. A key question for Asian planners will 7, in the broader context of water resource man- Table 5.1: Major Direct and Indirect Environmental Impacts of Fossil Fuels Impact Scale Impact Scale Impact Scale Plant type on land of impact on air of impact on water of impact Coal-fired Particulate and Regional] Gaseous Regional/ Acidification Local/ plant gaseous emissions national emissions global of surface regional may affect soils (SO2, NO2, water by acidic CO/Co2) deposition to water and soil Solid waste land Local Particulate Local/ Thermal and Local/ requirements emissions regional chemical regional (ash disposal) discharges in cooling water Groundwater Local contamination Oil-fired Suspended and Regional Gaseous emissions Regional] Acidification of Local/ plant gaseous emissions (S02,XN, global surface waters by regional may affect soils CO/C02,some acidic deposition particulate to water and soil emissions) Thermal and Local] chemical regional discharges in cooling water Discharges from Local! plant operations regional and oil spills Natural gas- Gaseous emissions National] Discharges from Local fired plant (NOX, CO/CO2) global plant operations (greenhouse effect) 93 MINIMIZING ENERGY SECTOR IMPACTS agement issues. China in GHG emissions, with CO2 emissions in The combustion of fossil fuels creates three the range of 150 million tons per year. material waste streams-gaseous, liquid, and Between 2010 and 2015, Asia will catch up solid-and one thermal waste stream. The most with all OECD countries' CO2 emissions from fos- far-reaching of these are the air pollutants, which sil fuels and cement manufacture, if OECD coun- can be divided into greenhouse gases, precursors tries fulfill their UNCED pledges to level off CO2 to acid rain, and particulates. emissions at 1990 levels.4 If OECD emissions con- tinue to grow at apace closer to "business as usual," Greenhouse Gases (GHGs) consist of a complex Asia's emissions will catch up between 2015 and mix which includes CO2, CH4, N20 (related to but 2020. The incremental growth of Asian CO2 emis- distinct from NOX), and other minor gases. GHGs sions, by 2000, more than offsets any savings to be are emitted from both anthropogenic (from human achieved in OECD countries by limiting emissions activity) and natural sources. Asia, excluding Ja- to 1990 levels (figure 5.4). pan, accounted for about 20 percent of the world- Acid Rain is a collective term used to describe the wide emissions of GHGs in 1985, of which 22 result of sulfur dioxide and nitrogen oxide emis- percent was CO2, 45 percent was CH and 27 per- sions. At least two-thirds of acid rain emissions in cent was N20. China is the largest emitter of GHGs Asia come from coal-fired vower plants and indus- in Asia. In China, anthropogenic CO2 emissions for trial sources, and the rest from residential heating 1985 (the last year for which complete data sets and cooking. If cleaned and burned in modem exist) were approximately 540 million tons, or plants with SO2 and NOX controls, Asian coals 60-70 percent of the total (the balance is made up would have a minimal impact on the environment. of emissions from rice fields, rural residential cook- However, most power plants in Asia have either no ing and heating, and livestock). India is second to pollution control equipment or only rudimentary particulate control. Figure 5.4: Projected Carbon Dioxide Emissions, Sulfur and nitrogen oxide 1990 and 2000 emissions have both local and re- Million tons of carbon gional impacts. Depending on the 3000 height of smoke stacks and the pre- vailing wind conditions, sulfur and 2500 _ ...... .......... .......... nitrogen oxide emissions can be carried hundreds of miles. Major 2000 _ .. .. [ t ..........:.. weather pattems in Asia move from land to sea in the winter and 15S00 _ . the reverse in summer. Emissions of SO2 and NOX are thus carried ..... ..... ,Er - . 3;t;;@ from China to Korea and Japan, 1000 . ...... from Southeast China to Vietnam, 500 ~~~~~~~~~~~~~across southeast Asia, and from wWh. - t;;;;/ . c, S _ . . Indiato Bangladesh (table 5.2). O i__ r Although data on SO2 emis- 1090 2000 sions for the Asia region are in- complete, there is a growing body O E55 Asia * South Asia Hlgh Income m ROs of ths of knowledge from the major source countries. Total sulfur diox- Source: World Bank 1992a. ide emissions from China are ap- TOWARD AN FNVIRONMENTAL STRATEGY FOR ASIA 94 Table 5.2: Acid Rain in Asia FHigh Emissions Hfigh Depositions Region Current Future Current Future Ecological Sensitivities Northeast China X X X Vegetation Japan, Korea X X Soil, vegetation South China X X X Soil, vegetation Southeast Asia X X X X Soil, vegetation Southeast Asian Islands X X X X Soil Northem India X X X Vegetation Southwestem India Borderline X Soil, vegetation Northeastern India X X Soil Sri Lanka, Maldives Borderline X Siberia. Mongolia X Vegetation Source: Bhatti, Streets, and Foell 1992. proximately 18 million tons, with around 7 million emissions by 2000 and will emit more than the tons produced from the power industry. On the combined total of SO2 from all OECD countries whole, China is responsible for about two-thirds of by 2010 (figure 5.5). Similar results are obtained Asia's coal use and a corresponding level of sul- for NOX. phur dioxide emissions. Coal is also the dominant fuel in India, where approximately 200 million tons Airborne Particulates may be in solid or liquid of coal are consumed per year. Indian coals are gen- form (resulting from condensed gases). They are erally low in sulfur (around 0.5 percent): based on often carbon particles but may also contain heavy coal production and sulfur content figures, India metal and organic compounds (such as in diesel emits between 3-4 mil- lion tons ofSO, per year. Figure 5.5: Current and Projected SO2 Emissions Given the projected MMT S02/Year growth of energy con- 80 sumption over the next ten to fifteen years, acid Asia g2Z Europe ltUSA rain emissions will also 60- increase. One detailed study predicts that SO2 emissions will increase from 35 million tons in 40 - - - - - 1990, to 53 million tons by 2000, and to 76 million . A --- tons by 2010 if no sub- 20 - K . - , . stantial efforts to limit :., emissions are taken.5 I I Based on these projec- 0 tions, Asia will surpass 1985 1990 1995 2000 2005 2010 both Europe and the Soulrce: World Bank and ADB data. United States in S02 95 MINIMIZING ENERGY SECTOR IMPACTS smoke). Suspended particulate matter is an impor- sludge. Coal consumption of 980 million tons in tant measure of local air pollution due to their China (1988) required the disposal of approxi- costly impact on health (see chapters I and 3). Par- mately 100 million tons of ash, fly ash, and sludge. ticulates are emitted largely through fossil fuel Not included are other solid wastes such as boiler consumption by the power, industry, transport, and blowdown and sanitary wastes. In general, these commercial/residential heating sectors. In all cit- materials are landfilled. ies, the problem of re-suspended particulates, pri- Biomis Fuels and Indoor Air Polluton manly bv vehicles, compounds the problem. The means for controlling particulates from While global and regional issues have dominated power plants are easy and relatively cheap (as dis- discussions on the environmental impact of energy, cussed later in this chapter). Since particulate re- there is growing realization that there are consid- duction has high health benefits, it is among the erable negative impacts from indoor air pollution highest priority environmental investments for the as well. The vast majority of rural inhabitants in power sector. Reducing particulates from the trans- Asia use fuels at the lower end of the "energy lad- port, commercial, and residential sectors is more der" (see figure 5.6), such as twigs and grass, dried costly, and requires a broader review of options animal dung, crop residues, followed by wood, concerning choice of fuel, choice oftechnology, ef- charcoal, coal, and kerosene-in the order of in- ficiency, and standards. Liquid and Thermal Wastes Figure 5.6: Household Energy Ladder for South Asia originate from several sources, cost including ash-quenching sys- tems, cooling water, coal storage Ebcticlty (14%) runoff. boiler blowdown water, and water from flue gas desulfu- rization systems. Thermal power Kerons5 Coal, & Chwoal (20M) plants are generally located near Commercial rivers or other water bodies so - - - - - - - - - - - - - - - - - - that coolino water is readily Noncommercialbod a22) available. Wastewater streams Crop Residues (18%) tend to be warm, acidic, and laden with metals and other in- Dunr (8%) organic chemicals. Whereas in OECD countries these streams are usually treated and recycled, > EmIsslorS in most Asian countries they tend to be discharged directly into riv- Note: This energy ladder is for cooking fuels in South Asia. The percentages ers or municipal waste water sys- shown are rough estimates of the percentage of people presently at each rung. tems. Unfortunately, the impact There are regional variations in these estimates. For example, in India, there is tems' Unfortunaterelatively less use of wood and more use of grass, twigs, dung and crop of energy-related water pollution residues. In China, the use of coal is relatively greater, but kerosene use is less. has been virtually ignored across hasbend littualeld exists. across The dotted line marks the approximate point for the transition between Asia and little data exists. noncommercial and commercial fuels. About half of the world's households fall above or below this line. Power Plant Solid Wastes: bot- tom ash, fly ash, and scrubber Source: Adapted from Smith 1988, p. 19. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 96 creasing affordability. Besides having adverse emissions reduction, stoves with high efficiency, health impacts, these fuels cause other indirect en- low emissions, low cost, and social acceptability vironmental problems. For instance, the demand are yet to become reality. Given the many variables for fuelwood is a major cause of deforestation in involved in biomass fuels and patterns of use, more Asia, and the buming of dung instead of using it research on stove design needs to be conducted. for fertilizer deprives the soil of needed nutrients The economic and logistic barriers to allow- (see chapter 6). ing rural households to switch from biofuels to Most homes that burn biofuels are smoky and cleaner altematives are considerable. For this rea- have inadequate ventilation. Biomass smoke is a son, problems associated with biofuels will persist combination of gases and aerosol (droplets and for years among the rural poor. Fuel upgrading (up solid particles). The gases include carbon monox- the energy ladder) is more likely in the medium ide, particulates, hydrocarbons, and nitrogen ox- term in East Asia (for example, Thailand, where it ides, which are common components of outdoor air is already happening) than in South Asia where pollution. Aerosol components contain many ad- altematives are less affordable. As a result, efforts ditional organic compounds thought to be toxic- to minimize the negative impacts of biofuels should similar to many present in tobacco smoke, another include more sustainable methods of harvesting, biomass substance. Air pollution levels have often research on affordable buming and ventilation tech- been shown to be higher in rural household mi- nologies, and means to expand the use of upgraded croenvironments than in even the most polluted forms of biofuels, such as charcoal, alcohol and urban environments.6 biogas. Despite problems in implementation, A number of studies were carried out in the biogas has had notable success in China. 1980s to understand the magnitudes and health impacts of such exposures.7 The majority of these Minimizing Energy Sector studies were done in South Asian homes buming Environmental Impacts biofuels or in Chinese homes burning coal. In From an environmental point of view, there is no Nepal, chronic bronchitis in women was correlated simple answer to the broader question of how to with time spent near stoves, and acute respiratory best double and triple Asian energy consumption. infections among infants was associated with ex- In orderto address such a wide range of issues, each posure to household smoke. In India, several stud- country must map out its own specific energy sec- ies correlated respiratory distress with smoky fu- tor policy that is consistent with its resource base, els. In China, decreased lung function was reported geography, and energy users. for women using coal stoves when compared to Intersectoral linkages between energy and those using gas stoves. While earlier reports of other sectors are quite fundamental to how energy nasopharyngeal cancer seem to be exaggerated, is used and affects the environment. Energy and several studies in China found smoke to be a fac- transport, energy and industry, and energy and tor for increased cancer risk among nonsmoking construction industry standards are all linked. For women.8 example, industrial policies that promote clean For decades, govemments and NGOs have technologies (as opposed to end-of-pipe technolo- made attempts to disseminate more efficient stoves gies) also foster energy efficiency. Strategies to im- in rural areas, while achieving only mixed success. prove transport sector efficiency (through, for ex- Unfortunately, most design changes to date have ample, emission standards, road user fees, and improved energy efficiency and convenience of op- investments in public transit) also reduce energy- eration but have led to increased emissions.9 Al- related emissions. though there is no theoretical reason why efficiency In general, the least-cost, most-balanced ap- improvements cannot be achieved together with proach to minimizing the impending growth in 97 MINIMIZING ENERGY SECTOR IMPACTS emissions is to simultaneously increase both sup- markets, including coal in India and China, elec- ply-side and demand-side efficiency, and to pro- tricity in South Asia, and kerosene and diesel in mote clean energy technologies on the supply side. significant markets across Asia. (Cross-subsidy These goals can be achieved through combined issues complicate the picture, but only rarely should policy measures (particularly full-cost pricing), energy sources be offered at below cost, which is technical and operational improvements, and insti- now common.) Assuming an average energy price tutional strengthening in regulatory agencies and demand elasticity of minus 0.5, even a 10 percent utility companies. The remainder of this section price change in the direction of removing subsidies elaborates on the policy and institutional measures would immediately reduce all emissions by 5 per- required to achieve efficiency gains on both the cent-not even allowing for the effects of price re- supply and demand sides. Technical advances form on supply side efficiency. on the supply side are discussed in the following Some Asian countries have made significant section. progress in the last few years in price reform, no- Policy and institutional barriers are the prin- tably China and Korea. Coal prices in China range cipal impediment to successful implementation of from 60 percent of world prices to full parity, and an ambitious energy sector strategy in Asia. The the average is rising as the free market component combined price reforns and management practices has expanded recently from one-third to one-half required to bring about supply- and demand-side ofthe total market. Similarly, electricity prices have efficiency will lead to the adoption of higher-effi- increased substantially since 1987-88, butthe com- ciency technologies.'0 plexity of the tariff system has dampened the in- Not all utility companies in Asia are ineffi- centive for efficiency improvements. China's re- cient: for example, the Korea Electric Power Com- cent policy of "new-plant new-cost" has resulted pany and the Thai generating utility, EGAT, have in a steady increase that should reach the level of performed well. However, the majority of compa- long-run marginal cost (LRMC) by 1996. Most nies are characterized by a lack of financial au- Chinese petroleum product prices are close to in- tonomy and by poor financial discipline, as well as ternational prices, but some heavier petroleum by a lack of commercial incentives in many mar- products and natural gas are subsidized. In India, kets. Many utilities in the region are plagued with coal prices are 15-40 percent below world prices, majorproblems such as high transmission and dis- and electicity prices are only half of long-run tribution losses, brownouts or load sheddng, and marginal production costs, indicating serious lev- old and inefficient power stations. Often, more at- els of subsidy in both markets. Indian petroleum tention is given to new plants than to the more dif- ficult tasks of increasing efficiency, reducing ipnces range fom far above world prnces for gaso- losses, and establishing more accurate billing pro- cedures. In order to help change this picture, re- naphtha. The average subsidy of petroleum prod- ucts in India has been calculated to be about 50 frsari ( el n f n percent." The Philippines actually protects its lo- cal coal industry, which leads to the domestic use Energy Pricing. Low energy pricing is the major of coal that is dirtier than cheaper intemational al- Energy majorg Lw etematives. te mJo barrier to long-term financial stability in the power tema ovest sector. It also has major environmental implica- It fosterin energefi th rough tions. Virtually all Asian countries have complex latitude for fostering energy efficiency through pricing policies that differentiate the energy mar- price reform in coal, electricity, and petroleum ket by product and end user. Table 5.3 illustrates a markets. Subsidies for electricity and petroleum pervasive bias toward low energy prices in many products are higher in South Asia than in East Asia. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 98 Table 5.3: Energy Pricing in Selected Asian Countries Range of domestic prices Average Ratio of domestic COAL (US$ per metric ton) (USS per metric ton) price to border price East Asia China (1992) 20 - 35 n.a. 0.6 - 1.0 Philippines n.a. 58 1.2 South Asia India (1991)' n.a. 291 0.6 - 0.9 Average electric tariff as proportion of incremental ELECTRIC POWER (1987 prices) cost of system expansion East Asia China (1992)b 0.90 - 0.95 Indonesia 0.88 Korea, Rep. 1.00 Philippines 1.32 South Asia Bangladesh 0.73 India 0.54 Sri Lanka 0.67 PETROLEUM PRODUCTS Ratio of domestic price to international pricesC (January 1990 prices) Premium gasoline Kerosene Diesel fuel Heavy fuel oil East Asia China(1992) 1.22 n.a. 1.11 1.30 Indonesia 1.37 0.32 0.69 1.16 Philippines 2.02 0.76 1.38 1.59 Thailand 2.10 0.82 1.46 1.17 South Asia India (1991) 3.75 0.62 0.80 1.39 Pakistan 2.58 0.48 1.11 0.94 Sri Lanka 3.20 0.56 1.49 1.00 n.a. Data not avalable. a. Wholesale price in Bombay, referring to coal (2330 kilocalories) from the Majra mine, Chandrapur, delivered to Bombay. b. Current retail electric price divided by the LRMC of supply in East China. c. End user domestic prices compared with international spot prices for gasoline, diesel fuel, and heavy fuel oils; and with the average CIF prices in Singapore, Hong Kong, and Japan prices (net of taxes) for kerosene. Sources: World Bank China and India Departments; World Bank 1992a; Tele-Drop, Inc. 1990; and World Bank data. Higher pricing would not only serve the immedi- Inefficient Utility Management and Operation. ate environmental objective of reduced emissions, Both technical and non-technical energy losses are it would have a major impact on strengthening the a major problem, particularly in the poorer Asian power sector and encouraging greater private sec- countries. In 1988, they ranged from 6 percent to tor participation-which would help foster, in tum, 8 percent in Korea, Taiwan and Thailand, to 12 broader sectoral efficiency. percent in China (which is close to normal), 17 99 MINIMIZING ENERGY SECTOR IMPACTS percent in Indonesia, 22 percent in the Philippines, Investments in energy efficiency, on both the 25 percent in Pakistan, 26 percent in India, and 38 supply side and the demand side, generally have percent in Bangladesh.)2 Reasons for these high high rates of return and are far more cost-effective losses include theft, badly maintained transmis- than expanding energy use without putting such sions and distribution systems, lack of spare parts efficiency investments in place. Since many energy and poor operating procedures. In addition, low efficiency investments are financially viable with- capacity utilization factors (Bangladesh and Indo- out regard to any environmental benefits, they are nesiaare at 31 percent and 33 percent, respectively, called "no-regrets" strategies for reducing emis- for thermal plants) make the production of electric sions. A recent World Bank paper cites several power very costly from a capital standpoint. studies that illustrate how, at current relatively low energy prices and with the present state oftechnol- Energy Conservation and Efficiency. Energy ogy, a savings of 20-25 percent of energy con- intensity, which measures primary energy con- sumed in many developing countries could be sumed per unit of GDP, is high in Asia, and is of- achieved without sacrificing the economic benefits ten double many middle income and developed of energy use.13 This average does not apply equally countries (figure 5.7). Energy intensity in China is to all Asian countries, but would certainly apply to the highest in the world, although it is dropping those with transmission and distribution losses steadily as both a function of energy efficiency and above 10 percent, and with energy prices below ofthe removal of economic distortions in the mea- production or intemational costs. sure itself. India and Pakistan are also among the An efficiency gain in Asia of only 10 percent least efficient consumers of energy in the world. by 2000 would reduce the level of new capital in- vestment required by 20 percent, or by $90 billion =_____________________________________ _ =(50,000 megawatts). Not only are these savings enormous, they are three times what is required to Figure 5.7: Energy Intensity in Asia (1989), install cleanertechnologies on the remaining facili- ties that would still need to be constructed. Clearly, 0- .5 - o-1. 5 -2.0 energy efficiency on both the supply and demand China sides is an essential ingredient to any cost-effec- lnidonBw tive and environmentally-sensitive long-term Kore growth plan in the energy sector. Mhia Once suitable pricing and institutional reform PhllIpmnr. has been achieved, efficiency on the supply side Thaill" becomes possible through improved operations at Ba deh the power plant itself and in the electricity trans- India mission and distribution grid (see the following Nepl section). Efficiency on the demand side becomes Paklat! possible through the introduction of new technolo- ad Lank gies in the industrial, commercial, and residential sectors, such as new boilers, motors, electrical drive UnN*d Stu systems, motor controls, lighting, process modifi- France cations, and heating, cooling, and refrigeration im- Ge rrmany provements (box 5. 1). Minimum energy efficiency standards and energy awareness campaigns, have Note: kgoe = kilograms oil equivalent been effective in Japan, Korea, and China in Source: Caluclated from World Bank data, 1992. achieving demand side efficiencies (box 5.2). Di- TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 100 rect government involvement with industrial and taxes-are increasingly being adopted for environ- commercial enterprises, supplemented perhaps by mental reasons in Europe. aggressive power company demand side manage- ment techniques, can help bring about efficiency Plant Siting. Zoning and site permits can minimize changes that go beyond the effects achieved by the local environmental impacts of power plants. market-based policies alone. In most Asian countries thermal power plants are located close to their load centers. Shanghai, Energy Taxes. Energy taxes are an indirect mecha- Jakarta, and the Singrauli area of India all suffer nism for accomplishing energy-related pollution from air pollution attributable to power plants. In abatement (see box 4.4 in the previous chapter). As China, nine new plants being built along the south- noted, indirect taxes are often easier to administer eastem coast will be located in part based on dis- than direct charges on polluters. One objective of persion modelling so as to avoid creating pollution such taxes is to intemalize the environmental costs "hot spots". A strong environmental assessment of emissions (based on carbon, sulphur, or particu- process would provide a structured framework for late consumption) in the operating costs of fossil due public and donor consideration before energy fuel producers and users. Energy taxes are rela- investments are made. tively easy to administer, since the number oftrans- actions atthe pointatwhich fuels are firstproduced Private Power. Even though the power sector in or enterthe economy is relatively small.4 Although Asia is mostly state-owned, there is a broad range taxes on transport fuels are very common, more of ownership and control. Some enterprises are broadly based energy taxes-such as carbon direct govemment undertakings, some are govem- Box 5.1: Demand-Side Management One aspect of demand-side energy efficiency is called demand-side management (DSM). DSM commonly refers to programs, policies, technologies, and rate structures that reduce or shift electricity demand. Power companies promote DSM as a way to reduce high marginal costs of generation. High marginal costs may relate to high peak loads, high fluctuations, or high capital growth requirements. In order to minimize energy costs (and energy-related emissions), industry and commercial users must be encouraged to examine where and how electrical energy reductions can be made on a least cost basis. Then, by altering management practices and investing in more efficient equipment-often in response to incentives offered by the power company-both the industry and power company benefit. DSM technologies include: * Cogeneration plants, for simultaneous electricity and thermal production, typically in industry, and for both onsite use and for resale back to the power company; * Load management systems, which offer substantial load control to the power company at the time of system peak; * Energy management systems, which lead to reduced loads through increased efficiency; * High efficiency motors and variable frequency drives; * More efficient heating, cooling, and refrigeration; * Energy efficient lighting and fixtures; and * Building improvements, such as windows and insulation. DSM programs initiated by utility companies require that they finetune their pricing (based on the time of day and season), initiate a DSM campaign, and possibly share the costs of energy efficient equipment through rebates to end users. Other measures include information centers to industrial and commercial consumers, and guaranteeing the purchase of ex- cess electricity from private power generators. DSM savings can be very significant. Two Califomia (United States) companies have achieved efficiency gains of 6- 14 percent overthe past eight years (Nadel 1991). DSM programs in the United States are projected to reduce demand by an average of 3-7 percent over the next decade. The projected U.S. savings are equivalent to 30 percent of new capacity require- ments over the same period and will reduce carbon dioxide emissions by about 150 million tons. 101 MINIMIZING ENERGY SECTOR IMPACTS Box 5.2: Energy Efficiency in China China has made notable progress in reducing unit energy consumption levels over the last decade. Progress has been made in widespread promotion of rudimentary energy management practices, energy housekeeping measures, and a variety of retro- fitting projects. Government units in all provinces have been established to provide training and technical assistance ser- vices, and local testing stations have been established to enforce energy consumption standards. The institutional system which China has developed has succeeded in prodding a wide array of enterprises to under- take technical and managerial measures to improve energy efficiency. Unlike the U.S. approach, in which utility companies are instrumental, in China (as in Japan and Korea as well), the government works directly with industrial enterprises. China's program is now strong in its broad coverage of enterprises, monitoring of consumption practices, promotion of energy effi- ciency goals, and information dissemination. Efforts to improve energy efficiency have become a more integral aspect of the energy planning process than in most developing countries. The system seems to work well for disseminating information on consumption norms between provinces, providing incentives for enterprises to adopt efficiency measures, and promoting generic energy conservation investments. On a technical level, China's energy conservation strategies revolve around two basic themes: (a) linking energy effi- ciency with the broader process of industrial growth, and (b) upgrading the efficiency of existing equipment. The first theme is based on the opportunity presented by new investment taking place in the industrial sector. Much new industrial capacity installed in the 1 980s was below international efficiency standards, and now carries long-term penalties in terms of high recurring costs and high energy consumption rates. More aggressive introduction of energy efficient technologies as part of overall modernization would bring more cost-effective benefits than selective retrofitting. A lasting impact can be achieved through a relatively focussed effort on high efficiency boilers and electric motors, pumps, and fans. The second theme-upgrading the efficiency of existing equipment-has many components. These include the pro- motion of industrial cogeneration facilities, reduction of power transmission and distribution losses, improvements in coal quality, and aggressive replacement of inefficient motors and boilers. China has some 400,000 industrial boilers, with aver- age efficiencies of 55-60 percent, as compared with targets of 75-80 percent. The government boiler strategy includes new product design, restructuring of the boiler industry, and training programs to improve operations. ment corporations under special statutes, and some by the utility, and (b) a fair basis for determining are government companies govemed by normal the price paid by the utility.'6 company laws. It can be assumed that power utili- In some circumstances, privately-owned re- ties in Asia will remain largely state owned for a newable systems-primarily wind farms and mini- number of years to come. Privatization will con- hydropower-are cost-effective investments to sist of partial rather than complete sale, such as feed directly into national grids. In India, for ex- divestiture of selected assets, or privatization of ample, a non-subsidized fund designed to encour- management and/or service functions. A main rea- age investment in wind fanns has already solicited son Asian countries are taking even these steps is 20 applications for installations ranging from 200 to help mobilize the huge investment resources kilowatts to 20 megawatts. As part of this effort, required for expansion. the Indian government has offered fair rates for There is a modest trend in Asia toward pri- purchased energy, and 100 percent depreciation of vate power investments."5 Evidence shows that investment in the first year. India is estimated to early private investors have succeeded in part be- have a maximum potential of 20,000 megawatts of cause they introduced efficient innovations, such wind resources, and equivalent to one quarter of its as "slip-form" technology in the construction 1992 power sector installed capacity. phase, computer applications, and gas-fired tur- The benefits of private power from the envi- bines. Private power is, and should be, increasingly ronmental perspective are due to higher sectoral encouraged through laws and financial incentives. efficiency, not to any inherent private sector will- The incentives required to develop a private power ingness to spend more on the environment. If regu- industry are: (a) guaranteed purchase of the energy lations are not properly enforced, private power TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 102 providers are not necessarily cleaner than public coal beneficiation to be cost-effective on the sector counterparts. However, experience has grounds of transport cost savings alone, quite apart shown that in addition to overall efficiency ben- from any environmental benefits. efits, governments can more easily enforce regu- lations on private sector companies than on public Expanded Development of Natural Gas Re- sector ones. sources and Networks. The use of natural gas in- stead of coal or a mix of the two reduces the quan- Technical Approaches to Cleaner tity of CO2 emitted into the atmosphere. A Energy 1.000-megawatt power plant fired with coal emits After policy and institutional measures, the second about 900 tons per hour of CO,, as compared with basic approach to a cleaner energy sector is the 520 tons per hour (42 percent less) for a gas fired pursuit of clean technologies on the supply side. As plant. Oil would emit 720 tones per hour (20 per- mentioned, pursuit of clean technologies is inad- cent less than coal). An added benefit of cofiring equate without the simultaneous pursuit of full-cost natural gas and coal is reduced NOX emissions. It energy pricing. In the energy sector, clean tech- is relatively easy and inexpensive to retrofit aboiler nologies refer to a range of technical options, such for natural gas-the principal issues are the cost as retrofitting existing plants, new conventional and availability of natural gas. energy technologies, and investments in non-con- In Asia there are large amounts of natural gas ventional energy. in China, India. Indonesia, and Malaysia not being utilized for both economic and technical reasons. Convenfional Thermal Power Strategies to increase the exploitation of these re- Whereas energy efficiency reduces all types of sources could have significant environmental ben- emissions, albeit on the margin, some level of efits. The constraints to expanded gas utilization emission-specific investments in thermal power are its current lack of price competitiveness with plants will be required to minimize energy emis- coal, and, partly as a result, the lack of investment sions in Asia. The first three options listed below in extraction and distribution. are fuel resource options, and the next few are However, as coal prices in Asia are raised to power system options. world market levels, and the environmental ben- efits of burning natural gas are considered, the use Coal Beneficiation. Asian coals tend to have a ofgasforpowerproduction can be shownto be one higher ash content (20 percent to 30 percent) but of the least-cost strategies. Korea and Thailand lower sulfur content (I percent to 2 percent) than have invested in natural gas infrastructure using United States and Korean coals. In India, some imported liquified petroleum gas (LPG), but have coals have such a high ash content (up to 40 per- primarily done so for economic efficiency and stra- cent) that power plant thermal efficiencies have tegic purposes, not environmental purposes. In fallen to as low as 25 percent, requiring the use of China, the strategy of full-cost coal pricing has an additional 33 percent coal to generate the power accelerated the production of natural gas. The prob- that would have been generated at more standard lems facing gas development in China stem from thermal efficiencies." the declining productivity of its known reserves, Coal beneficiation (i.e. grinding and washing) the aging gas transmission/ distribution system, and reduces the ash content significantly and removes the lack of integrated petroleum sector planning, other impurities to produce an optimal particle size pricing, and exploration that would lead to ex- for more efficient pulverized coal combustion. panded supplies. Proven gas reserves are only 3 Other benefits include alowermoisture content and percent of potential reserves. On the whole, natu- lower transport costs. In China, studies have shown ral gas prices (as well as most petroleum product 103 MINIMIZING ENERGY SECTOR IMPACTS prices) are artificialy low. More rational petroleum veyor system, fuel handling system and a complete sector pricing would help expand gas supplies, for control system. These high-cost upgrades require which there is broad proven demand in China. major commitments of funds, including a major foreign exchange component. Pollution Control Retrofit. To reduce power plant emissions, a wide range of options exist. Specific Interregional Transfer and Dispatching. Opti- residuals call for specific technological interven- mal dispatching and interregional energy transfer tions. For example, reducing acid rain emissions are not widely practiced in Asia. Improved dis- requires limiting the use of coal containing sulfur, patching can help reduce pollutants by putting on and/or equipping power plants with flue gas des- line plants that pollute less, such as hydropower and ulfurization or similar sulfur removal technology. gas fired facilities. In each country additional study Removing NOx emissions requires either catalytic is needed to determine how much energy could be reduction, which is 50-80 percent effective, or saved through improved transfer and dispatching, more expensive atmospheric or pressurized fluid- and to determine how this may be done on a prac- ized bed combustion technologies. Reduced par- tical basis. ticulates is achieved through electrostatic precipi- Renewable Energy tators, fabric (baghouse) filters, and wet scrubbers. Reduced greenhouse gas emissions requires im- Renewable energy sources are improving in cost proved thermal combustion efficiencies, and can- competitiveness with conventional energy. For not generally be achieved by add-on pollution con- Asia, the most promising technologies are smaU trol equipment. and medium-scale hydropower plants (a few mega- The required level of investment in pollution watts to 100 megawatts, which are less detrimen- control equipment depends on local standards, age tal to the environment than large dams), photovol- of the plant and other plant specific characteristics. taics, solar thermal, wind, and geothermal For a typical coal-fired thermal power plant, the installations. These technologies are well devel- installation ofthe standard particulate control, des- oped and there is a great deal of technical and eco- ulfurization, and denitrification technologies com- nomic experience upon which to draw. Renewable monly used in developed countries adds up to 20 energy production is limited by the natural re- percent to the cost of electricity (see the section on sources available, such as sunlight, rivers, wind, Comparative Costs, below). and biomass, and renewable installations are al- ways very site-specific. Philippines, with a rela- Power Plant Upgrades. Power plant upgrades, or tively large endowment of geothermal resources, retrofits, usually mean the installation of new boil- plans 1,000 megawatts in geothermal production ers, turbines and other major components to gain by 1997, at a projected costs of $1 billion."8 India efficiency improvements, although less expensive has created a $125 million fund for commercial in- improvements are also important. Low-cost im- vestments in wind-generated power. provements imply the replacement of valves, gas- Most renewable systems other than biomass kets, control sensors, conveyor belts and other have less environmental impact than conventional items that frequently wear out. Taken together, energy.19 Each kilowatt-hour of photovoltaic, wind, these items can have a significant impact on over- or hydropower avoids production of 1.3 kilogramn all power plant efficiency. Medium-cost items in- of CO2. On this basis, if 5 percent of China's elec- clude pumps, blowers, compressors, major boiler tric power could be provided in this manner, 26 or turbine components, and control system ele- million tons of CO2 emissions, or nearly 5 percent ments. Major cost items include a new boiler, tur- of CO2 emissions from fossil fuel sources, would bine, condenser, pollution control unit, ash con- be avoided. Recommendations concerning the suit- TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 104 ability of renewable forms of energy are made be- vate power investment in developing countries. low, following cost comparisons with conventional The capital costs of hydropower cover a much energy. larger range, but, in general, the largest and the Nuclear Power smallest installations have the lowest capital invest- ment costs per kilowatt: the largest because of Where the safety and waste management issues are economies of scale, and the smallest, called run- adequately addressed, nuclear power has the envi- of-river systems, because they require no reser- ronmental advantage of emitting little or no air voirs. Micro-hydropower systems have average pollution. In certain situations, nuclear power can investment costs in India of $600-1 000 per kilo- be cost competitive with conventional technolo- watt, and the number of installations is expanding gies. However, the environmental problems asso- rapidly-partly because they have none of the so- ciated with radioactive wastes have not been fully cial and environmental impacts of large dams. Fig- resolved in the OECD countries, and as a result, ure 5.9 shows the increased cost of electricity gen- costs have soared and worldwide construction has eration in coal-fired plants due to the addition of slowed dramatically. It is expected that the contri- pollution control equipment. Starting from a base bution of nuclear power to total energy supply in generation cost of $.05 per kilowatt-hour, the cost Asia will remain insignificant, because of: (a) the rises by over 20 percent with full treatment of par- ready availability of less expensive altematives; (b) ticulates, sulfur, and NOX, to $.06 per kilowatt- the shortage of investment capital; (c) nuclear hour.21 The basic technologies referenced in this power's stringent requirements of competent, vigi- table are: lant and effective management of plant operations, * electrostatic precipitators or fabric filters for and of strict adherence to rules and regulations; and particulates, which remove 99 percent of par- (d) safety concems and public opposition in the ticulates, at a cost increment of 2-5 percent; post-Chemobyl era (box 5.3). * coal beneficiation, or cleaning, which re- Co_Warative Costs among Conventional moves both ash and some sulfur, at an addi- Comparative Costs among Conventional toa ecn ot Energy Technologies tional 2 percent cost; * wet or dry FGD systems for SO2 removal. T he comparative costs of various conventional which are 70-95 percent effective, at a cost energy technologies in Asia are summarized in fig- premium of 8-12 percent; ures 5.8 and 5*9.2° The top chart shows the aver- prcmbut oficanto age capital costs of power generation options. Coal catalytic reduction-two methods that are fired power generation costs $1,000-$1,500 per 50-80 percent effective-add 5-s percent to kilowatt depending on the level of pollution con- enercen costs. trol installed, while oil and gas-fired themnal instal- generation costs. ' ~~~~~~~~~~Alternatively, atmospheric and pressurized lations are less, because they do not require the Aluedabedycombstoare newerehooies same pollution control equipment. Gas turbines are thatdare effctiv ufriot a nd Oection muchcheaer (500-00 er Uwatt, du, inpaM that are effective for both S02 and NOX reduction, much cheaper ($500-600 per kilowatt), due, in part, a ot oprbetoteaoeatmtvs to their higher thermal conversion efficiency (45 Depending o the requiremetsvfsp percent as opposed to 33-35 percent). Cogenera- s esand the miaiosfenos in- tion is a much cheaper altemative to stand-alone sted, al emiinstcontrol cstsowiv fro powerplants, because of the way energy is more stle,oalmiinsctrlotswlvrvfm powerplts because of the way energy ismore the generic costs shown here. These costs will come efficiently shared by power (electricity generation) down as newer, more efficient processes become and thermal (steam and heat generation) processes. The low cost of cogeneration )inesmen slnd commercially and technically viable. Also, lower- cost approaches (providing lower performance as strong support to the argument for enhanced pri- 105 MINIMIZING ENERGY SECTOR IMPACTS Box 5.3: The Prospects of Nuclear Power in Asia Nuclear Power in Asia. Asia generates 3 percent of the total nuclear power generated worldwide. Asian countries with nuclear- generating capacity are India, Japan, Korea, and Pakistan, as well as China, which started operating its first nuclear power station only at the end of 1992. A nuclear power plant was almost completed in the Philippines in 1986, but construction was halted as a result of safety concerns. Indonesia continues to explore the nuclear option. Since nuclear power in Asia is pro- jected to grow at only 2.4 percent per year through 2005, its share of Asia's energy use is expected to fall from 4 percent in 1989 to 3 percent by 2005. In Korea, the nuclear power program has proved to be one of the most economically successful in the world, achieving low costs and good operating perfornance. Nuclear power accounted for 49.1 percent of the country's total electricity gen- eration in 1990. Two factors that contributed to the success of nuclear plants in Korea are institutional and technological factors. Institutionally, the centralized form of the Korean political and administrative structures enabled the government to maintain relatively coherent nuclear policies and thus to cope effectively with the rapidly changing domestic and interna- tional environment. Technically, the dynamic growth of the overall scientific and technological infrastructure enabled Korea to enter into the highly sophisticated nuclear power industry rapidly and effectively. In terms of costs, fossil fuel alternatives in Korea must be imported, and are hence very costly. Competitiveness of Nuclear Power. Estimates of the costs for nuclear power in developing countries show them to be un- equivocally higher than those of fossil fuel alternatives in countries with a fossil-fuel resource base. At the higher discount rates found in most World Bank borrower countries, nuclear power is even less competitive. In OECD countries, nuclear power capital costs tend to be nearly twice as high as those for thermal power plants. Ntuclear plant capital costs range from $1,800-2,000 per kilowatt in France and Canada to $3,000-3,500 per kilowatt in the other five G-7 countries. Actual costs in the United States are even higher, and were running $5,500 per kilowatt in the late 1980s, primarily because construction costs were double those of the 1970s. The operational performance (load factors) of nuclearplants tend to be unpredictable and 10-30 percent lower thanprojected. The levelized costs of nuclearpower are 50 percent higher than fossil-fuel alternatives in the G-7 countries ($.057-$.065 per kilowatt-hour as opposed to $.037-$.044 per kilowatt-hour for coal, in 1987 prices) except for France and Canada, where coal and nuclear are closer to parity. In all countries. nuclear costs vary significantly with the cost of capital, cost of fuels, the scale of the nuclear industry, technical efficiency, the regulatory environment, and waste management costs. In Indonesia, estimates show nuclear options to be significantly more expensive than coal, even when full pollution abatement technologies are installed on coal plants (they currently are not). Also, expected costs are routinely higher than projected costs, primarily due to the great uncertainty that surrounds many installations. Projects are subject to higher safety and environmental standards in the post-Chernobyl era-and ways to meet these standards are not yet fully worked out. Tighter requirements have lead to higher costs, longer delays, and a virtual halt in most OECD countries other than Japan. Public opposition to nuclear technologies is strong in many countries, and has slowed construction as well. Even in Korea, the economics of nuclear power are deteriorating in the face of difficult enviromnental safety issues, increasing plant construction costs, and the recent socio-political change taking place in the country. Environmental and Safety Aspects of Nuclear Plants. Although some routine emissions of radioactive material in solid, liquid, and gaseous forms result from nuclear power plants, of greater concern to the public is the handling and disposal of radioactive wastes. The burial of low-level wastes (including tailings from uranium mining, contaminated materials from nuclear plants, and wastes produced from plant decommissionings, in landfills or bunkers) is technically straightforward. Techniques for high level wastes (primarily spent fuel) are far more difficult and costly, and long-term solutions are still being sought. Hence, the disposal of high-level wastes is a complicated and technically demanding undertaking that is be- yond the reach of many developing countries possessing or aspiring to a nuclear power program. The World Bank and Nuclear Power. The World Bank has not lent to any nuclear projects since lending to Italy in the 1950s, and is not currently considering doing so. For this to change, the Bank would need to be convinced that nuclear power was the least-cost solution, that environmental concems were fully addressed, that supplier export credits were not available (and they usually are, and at terms more favorable than offered by the World Bank), and that the International Atomic En- ergy Agency (LAEA) and other parties endorse all safety and management provisions. In the case of rehabilitation of existing plants, the Bank is involved in discussions with several other international parties on appropriate technical and financial strategies. Sources: IAEA 1992; IEA 1992; Park 1992; Adamantides and others 1990; and Adamantides 1991. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 106 Figure 5.8: Range of Costs in Power Generation US$ per kW Installed Capacity 4,500 4,000 3,600 2,700 t1,800 1,500 .>- 1,600 0.100 o- 9E00Z 1, E 9 1,200 1,00o 900 700800 60 0 1 1 coal OilVGas Gas Cogener- Large Mini Hydro Wind Turbine atlon Scale Hydro Turbines Note: Solar power for small installations (not shown) costs $6-S12 per watt of peak output. Figure 5.9: Range of Incremental Costs of Emission Control (Coal-Fired Power Plants) USS per kilowatt-hour 0.06 .... ±~~~~~~~~~~~~~~45-8%. * * Ss ......... .. . +-8%............ . . . . . . . . . . . . . . . . . . . . 0.06 ~ ~ ~~~~~ 81 2% __ +2-5% +2% _____ 0.05 .... ............................. 0-I II Average Particulate Coal S02 NOx Cost Removal Cleaning Reduction Reduction of elect. Note: Percentages show recommended increased over the basic "levelized" cost. Source: Adapted from ADB 1991. 107 MINIMIZING ENERGY SECTOR IMPACTS well) are under development. As these low-cost priority should go to the most cost-effective solu- systems come on line, their performance will im- tions to reducing sulfur, which is usually coal prove and become more predictable-and more beneficiation. Some new technologies are being prevalent. developed that may compromise some of the high An example puts some of these figures in per- standards of the OECD countries in favor of easier spective. In China for example, by the year 2000, use and lower cost foruse in developing countries. some 60,000- 90,000 megawatts of new thermal Ultimately, however, the choice between more and capacity will be required, mostly fueled by coal. less expensive technologies should be made on the SO, control is very costly. If Japanese or European basis of country-specific cost-benefit analysis, standards were applied, the investment for flue gas which can take into account the local health costs desulfurization could total $20-25 billion for a of air pollution. high-cost, high-capacity scenario. This cost would have to be financed by an approximately 10 per- Comparative Costs between Conventional cent increase in electricity tariffs. A lower cost, andAlternaive Energy Technologies lower effectiveness process for partial SO2 reduc- Table 5.4 shows the projected cost of renewable tion is coal beneficiation. The cost of this option, electricity through 2030. The declining unit costs based on United States and European data, is $5-7 are the result of improved technology, of more per ton of coal cleaned, and $150-200 per ton of aggressive research and development, and of sulfur removed.22 The up-front investment required economies of scale as the volume of production in- would be much less, and the tariff increase only creases. Over the past decade, the cost of solar ther- one-fifth as much. mal power has decreased over 70 percent, wind For Asian countries seeking to minimize ex- power 75 percent, and photovoltaics 66 percent. penditures on pollution control equipment, the first The rates shown are best compared with avoided priority should be to curb emissions ofparticulates. costs of conventional power sources, which aver- Particulate reduction is relatively cheap-l-2 per- age $.05 per kilowatt-hour. cent of the total capital costs of electricity genera- At current cost levels, renewable energy tech- tion-and is important for human health. Second nologies are most competitive with: (a) conven- Table 5.4: Costs of Renewable Electricity, 1980-2030 1980 1990 2000 2030 Technology (dollars per kilowatt-hour) Wind .32 .08 .05 .04 Geothermal (various technologies) .04-08 .04-07 .04-06 .04-05 Photovoltaic .89 .30 .15 .05 Solar thernal Trough with gas assistance .24' .08 .06" n.a. Parabolic dish .85 .16 .08 .05 Biomass .06 .05 .05 .04-05 Note: All costs are averaged over the expected life of the technology, and assume high returns to government R&D. n.a.: Data not available. a. 1984 cost figures. b. 1994 Cost projection. Sources: Finnell, Cabraal, and Kumar 1991; World Bank Alternative Energy Unit data. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 108 goes up and the requisite finan- Figure 5.10: Cost of Electricity in Rural Areas cial and support services ex- Cost of Electricity (USS/iWh) pand into the growing market. * Micro Hydro the $6 .......................................... PV------ ............... .... E nl ImMitigatingt EBwlnd Environmental Impact WnDlesel of the Asian El DieselEnrySco $4............. ....... ESGrid* Extension-i-Ok,n EnrySco The previous two sections have given a overview of the mea- $2 . .. ....... .. ................ .. sures required to improve en- ergy sector efficiency and re- duce negative environmental $O _ ; . . B _M//¢ I _ _ g g impacts. It is asserted that a 10 kWh 50 kWh concerted effort on pricing and per day per day managerial efficiencv could Electricity Consumption lead to savings of 10-25 per- Source: USAID 1991. cent in the raw energy con- sumed. In a recent studv, the tional power in rural areas that are currently off- ADB projected comparable savings in CO, emis- grid, and (b) selected wind, biomass and geother- sions assuming a strong regional emphasis on en- mal installations that can be incorporated into the ergy efficiency (table 5 5) 24 More than 80 percent grid. Figure 5.10 compares the costs of providing of these savings would be in the form of reduced electricity to remote communities using renewable coal use, with correspondingly decreased emission energy sources with (a) diesel generators and (b) ofparticulates, sulfur dioxides, and nitrogen oxides. grid extension of 10 kilometers. The levels of elec- Investments in pollution abatement technolo- tricity consumption-I0 and 50 kilowatt-hours per gies, fuel-switching, and the use of renewable en- day-represent the needs of 5 and 25 families, re- ergy sources could reduce emissions by another spectively. As shown, renewable systems are 8-15 percent by 2010, depending on the rate of uti- cheaper than diesel power or grid extension where lization of natural gas and the adoption of renew- the renewable resource base exists. At higher con- able energy technologies. This is a low estimate sumption levels, micro-hydropower remains the based on the strategies laid out above. However, cheapest option, and photovoltaic and wind are the World Bank has outlined a scenario with far comparable to diesel power or grid greater adoption of alternative energy technolo- extension. gies.25 In this example, continued reliance on fos- The constraints to increased adoption of re- sil fuels would lead to a tripling of emissions by newable systems in rural Asia are (a) the capital cost 2050, whereas with an aggressive shift into renew- of systems; (b) the availability of financing (long- able energy sources the increase would be only 25 term loans) to spread out the cost over time;23 (c) percent. This shift of technologies, which is can- the availability of standardized and proven tech- didly described as "unprecedentedly rapid," could nologies, especially for wind and mini-hydropower only occur with dramatic price reforms to reflect installations; and (d) the availability of local tech- economic costs, larger share of energy R&D ex- nical support. All of these factors will be less con- penditures in renewable technologies and finan- straining over time, as the volume of installations cial assistance. In addition, it would be necessary 109 MINIMIZING ENERGY SECTOR IMPACTS Table 5.5: Estimated Carbon Dioxide Emissions from the Use of Fossil Fuels in Asian Developing Countries (Metric Tons of carbon) Actual Year 2000 Year 2010 Region (1986) Scenario A Scenario B Scenario A Scenario B Scenario C East .sia Cambodia/Lao P.D.R./Myannar 3 6 6 10 9 9 China 549 938 790 1,353 1,047 994 Indonesia 26 5 111 101 89 Korea. DPR 36 54 43 72 51 44 Korea, Republic of 48 99 90 127 107 93 Malaysia 9 16 16 29 26 23 Pacific Islands 2 4 3 5 4 3 Philippines 7 18 17 28 26 24 Thlailand 12 44 43 94 92 86 Viet Nam 4 8 8 14 12 12 South Asia Bangladesh 3 6 5 8 6 6 India 114 224 218 388 348 33(0 Nepal 0 0 0 1 0 0 Pakistan 13 31 27 49 38 35 Sri Lanka 1 2 2 3 3 2 Totals 827 1,455 2,024 2,292 1,870 1,750 Scenario A: --Business as Usual" Scenario B: Emphasis on energy conservation to improve environmental quality. Scenario C: Energy conservation and fuel switching to improve environmental quality. Source: ADB 1991. to include environmental benefits of renewable power generation, and, more recently, in energy technologies in the economic evaluation of energy sector adjustment loans. In contrast to traditional projects. loans, sector loans have provided valuable oppor- Finally, efficiency gains can reduce the need tunities to address sectorwide efficiency issues, and for capacity expansion by 2000 by 20-30 percent, have allowed the Bank to support institution build- based on a 10 percent increase in overall efficiency. ing, sectorwide efficiency, and policy-based While these savings are significant (nearly $100 reforms. billion), major investments in capacity expansion Like many other donors, the Bank has in- will still be required. vested much less in the areas of demand side man- The World Bank's Role in Energy and agement, altemative energy technologies, coal The EnvirorldmBank's RoleinEnergyand beneficiation, or lending for in emissions control the Environment equipment. However, its more recent lending strat- Past Experience egy has included several new components, includ- ing: (a) energy efficiency and altemative technolo- Projects. The Bank has long invested heavily in gies; (b) applied research on technical and policy TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 110 Table 5.6: Energy Sector Projects with Box 5.4: Innovative World Bank Alternative Environmental Components Energy Projects 1990 Philippines, Energy Sector India Renewable Resources Development Project. The World Bank's first stand-alone project for developing renew- 1991 Bangladesh, LPG Distribution able energy and other resources was approved in India in India, Private Power Utilities December 1992. The project, which has GEF support, has total funding of $450 million. A $280 million renewable- 1992 Malaysia, Power System Development energy component will be financed through a combination China, Daguangba Multipurpose of loans, credits, grants andprivate sector equity. The project China, Ertan Hydro will finance over 185 megawatts of small-hydropower, wind China, Yanshi Thermnal and solar photovoltaic projects. China, Zouxian Thermal Power Thailand Promotion of Electricity Energy Effi- Indonesia, Surabaya Thermal Power ciency Project. The proposed $188.5 million project, sup- India, Maharashtra Power II ported by the GEF, comprises a five-year (1993-1997) de- India, Power Utility Efficiency Improvement mand-side management (DSM) plan for improving energy Nepal, Power Sector Efficiency efficiency and reducing future CO2 NO. and SO,) emissions. Sri Lanka, Power Distribution II The Thai program has a savings target of 238 megawatts and 1427 gigawatt-hours of electricity per year by the end of 1993 India, Renewable Energy 1997. The project is a large scale demonstration of the po- India, Jharia Mine Fire Control TA tential for electricity savings in the industrial, commercial and residential sectors, and the ability of the electric power 1994 Philippines, Leyte Luzon Geothermal sector to realize these savings. Philippines, Leyte Cebu Geothermal China, Sichuan Gas Development Pakistan, Karachi Hydrocarbon lending scheduled over the next three years. In January 1992, the Bank established the Al- 1995 Philippines, Casecnan Transbasin temative Energy Unit in the Asia Technical Depart- Vietnam, Energy Sector ment (ASTAE), which is devoted to incorporating India, Coal Sector Restructuring Pakistan, Private Sector Energy in Development energy conservation and renewable energy options Pakistan, Private Sector Energy II Developmen in sector strategies and lending in Asia. ASTAE is active in most borrowing countries in Asia. Opera- issues; and (c) regional and global activities in the tional programs include: preparation of renewable energy sector through the GEF. Table 5.6 lists energy project components (including solar pho- World Bank energy projects with environmental tovoltaic, mini-hydropower, and wind) in India, In- components in Asia. donesia, Lao PDR and Sri Lanka. A major energy The region's largest program of energy/en- efficiency/DSM project is being supported in Thai- vironment lending is in China. This program is land. Further analytical work is being undertaken being integrated with parallel programs for urban in Malaysia (energy efficiency); Thailand, Philip- and industrial environmental management, includ- pines, and Indonesia (market studies); Korea (a ing pollution control, institution building and some DSM strategy); and China (renewable energy as- financial restructuring. India is also making signifi- pects of the greenhouse gas study). Two innova- cant investments in energy efficiency and altema- tive alternative energy projects are described in tive energy sources, as part of its large power in- box 5.4. vestments in recent years. Most other Asian The two priority areas for World Bank sup- countries have had power projects with some en- port to renewable energy sources are: (a) rural ar- vironmental component during the 1989-92 period eas that reinain off the national grid and (b) stand- (Bangladesh, Indonesia, Malaysia, Nepal, Pakistan, alone installations based on favorable local the Philippines, and Sri Lanka), with additional conditions (such as geothermal or wind resources) 111 MINIMIZING ENERGY SECTOR IMPACTS that can be linked into the na- Figure 5.11: Total Bank Lending and Bank Finance of tional grid. The Alternative Environmental Components for Energy Projects in the Asian Energy Unit is endeavoring to Regions Fiscal 1990-92 and Fiscal 1993-95 expand its activities through a EaSt Asia process of successful demon- stration projects, promotion of Millbn USS necessary regulatory changes, 4,000 3,76l and financially sound analysis. Figure 5.11 shows Bank 3,020 expenditure on energy-related 3,000 0 pollution control equipment, demand side management, and 2,000 - renewable energy. There is little projected increase across Asia in these areas, and more 1,00o should be done. However, 428 much ofthe Bank's work in the 34 energy sector is for sector-wide ° 19W92 10e-o96 price reform and efficiency gains, which are important SoUth ASia parts of any strategy to reduce energy sector environmental impacts, even if they stop short MillOio USS of full involvement in pollution abatement lending. s3ooo 2.980 2.846 Analytical and Demonstra- 2.600 tion Work. Analytical sector 2.000 work in the energy sector has generally proceeded along two 1.600 fronts: country-specific work 1 000 that addresses sector develop- ment strategies, pricing, and in- SW 24S stitutions; and regional and 0 global work focussing on emis- 1I0-02 10046 sions issues, mostly funded by the GEF. In terms of the mSk Rrof dl 6am_ Comnm Bank's more traditional sector a.d L studies, significant analytical work has been done in the important areas of fu- relate to the measurement and management of acid els, pricing, and institutions. This work is essen- rain precursors are: tialto apolicy-basedapproachto energy efficiency, * Acid Rain and Emissions Reduction in financial strengthening, and private sector partici- Asia. This multiple-donor study has three pation-all key elements of an environmentally ap- components: (a) to improve current estimates propriate energy strategy. Two regional studies that of SO2 and NOx emissions in the Asia region TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 112 and make projections based on scenarios of environmental impact of the energy sector: policy- economic and energy growth; (b) to assess based reforms, with an emphasis on pricing; pri- where the emissions of SO2and NO. will ul- vate sector power development; and supply side timately be deposited as acid rain; and (c) to efficiency. A recent World Bank policy paper ar- estimate the impact and cost of acid rain gued that government commitment to improving deposition on croplands, forests, soils, water, sector efficiency should be a precondition for a animals, materials, and humans. World Bank loan.26 The study identified transpar- Siting Thermal Power Plants. As part of the ency and consistency of decisionmaking, pricing, Zouxian electric power project in China, and and demand-side management as integral to an financed by the Japan Grant Facility, this acceptable framework. It further argued for aggres- project will study the optimal siting of ther- sive commercialization and corporatization of, and mal power plants-including ways to mini- private sector participation in, developing country mize local and regional air pollution prob- power sectors. These strategies are appropriate to lems originating in China's coastal provinces. Asia and should be adhered to in countries where If successful, this effort could prove useful to the energy framework is unacceptable. other countries for similar siting exercises. However, the important areas of demand-side The GEF provides an opportunity to study the management-large-scale renewable energy in- national and regional environmental impact of the stallations connected to the main grid and small- power sector, and to follow up with demonstration scale renewable energy technologies for rural ar- projects-in areas of emissions reduction, energy eas-are much less prominent in the Bank's efficiency, and renewable technologies. Projects in- program. Although expenditure in these areas is ris- clude a demand-side management project in Thai- ing slightly, it should be expanded further. land, a renewable energy project in India, green- The level of Asian investment in pollution house gas studies in China and India, and a landfill control equipment will be determined by govern- gas collection project in Pakistan. ments through emissions standards and their time- GEF-funded studies concerning greenhouse tables for meeting those standards. In order to bring gases are being undertaken in China and Asia-wide. all power generation facilities planned to be built The China study, begun in 1991, focuses on a least- in Asia during this decade up to European stan- cost strategies for investment, including two de- dards, an incremental investment of up to $50 bil- tailed technological case studies conceming the im- lion will be required. This investment-with or provement of coal quality and the upgrading of without a significant share of World Bank funds- boiler efficiency. A similar India study is under will not be made unless Asian govemments are consideration. The Asia regional study will be con- convinced through clear economic and social cemed with establishing a standardized methodol- analysis that they will accrue commensurate lev- ogy for estimating sources and sinks of greenhouse els of benefits. An important role for the World gases. Such analysis is a necessary prerequisite to Bank, therefore, is to assist in the efforts of Asian the establishment of intemational accords to deal countries to analyze their energy-related environ- with greenhouse gas emissions. mental costs, benefits, and priorities-and to help Future Directions put in place regulatory systems designed to achieve their target pollution standards. The objectives of increased macroeconomic effi- ciency, energy sector efficiency, and environmen- Notes tal protection are to a large extent consistent. The 1. Bates and Moore 1991. role of the Bank has been and will continue to be 2. British Petroleum Company 1991. strong in several areas that can help reduce the 113 MINIMIZING ENERGY SECTOR IMPACTS 3. For example, costs estimated by the Asian De- the government is developing guidelines for pri- velopment Bank (ADB 1991) are about 20 per- vate power through industrial cogeneration and cent higher than those used here, and those by the a 55 megawatt plant is currently under develop- World Bank (Moore and Smith 1990) are 50 ment. Finally, in China, a policy has existed re- percent higher. The point remains that the mag- garding private power since 1988, and the pace nitude of the required investment-hundreds of of private power investment in China is acceler- billions of dollars-far exceedspublic sector and ating in response to the increasingly urgent need donor resources, and requires private sector for capital. In November 1992, the Chinese Min- involvement. istry of Energy identified 32 projects (48,000 4. Anthropogenic CO2 is the result of fossil fuel con- megawatts) for private investors, and formally sumption and various industrial processes such as announced the goal of "developing various mod- cement manufacturing. Other major sources of els for [private sector] cooperation in the power atmospheric CO2 are deforestation and agricul- sector." To encourage private investment, China ture, which are not included in these estimates. has approved many policies and regulations relat- 5. Foell and Green 1990. ing to the protection of foreign investment. 6. Smith 1988, pg. 19. 16. The most conmmonprice basis is "avoided cost," 7. For a review of these studies see Smith 1987. which is the marginal cost of energy the utility is 8. Chen and others 1990, pp. 127-138. not required to produce because of the amount 9. Although this appears counter-intuitive, the main supplied by the private seller. The avoided cost factors operating at cross-purposes seem to be can change by time of day and time of year, de- burn rate and temperature, which are optimally pending on the load shape. A third incentive pro- lower for increased efficiency and higher for re- vided in the United States involved tax incentives duced emissions (Smith 1987, pg. 315). forprivate investment, but these were largely re- 10. World Bank 1992d. pealed in 1987. They are not necessary to stimu- 11. World Bank 1992a. late private investment in the power sector. 12. Derived from World Bank databy the Asia Tech- 17. Thermal efficiencies of 33 percent are standard, nical Department, Energy Division. and are achieved in Indonesia. Higher efficiencies 13. World Bank 1992b, pg. 57. are achieved in Korea, Malaysia, and Thailand. 14. The efficiency of a carbon tax would be higher 18. US.-Philippine Business News, Sept-Oct. 1992, than a sulfur tax, for the reason that carbon emis- pg. 4. sions, for a given fuel, are less easily effected by 19. Even some biomass systems can be an improve- a actual technology employed than is sulfur. In the ment over traditional energy sources. For ex- case of sulfur, several scrubber and flue gas des- ample, an ambitious biomass scheme for China ulfurization technologies can be used to reduce has been proposed, based on substituting wood for emissions. Therefore, a tax on sulfur content in coal, that could theoretically generate significant fuels would penalize the plant operator that in- CO2 savings. Wood, as a fuel, emits comparable vested in desulfurization technology. levels of CO2 as compared with coal. The source 15. Private power investments are being made on a of the CO2 savings would be carbon sequestration trial basis in several Asian countries. Examples in the forest areas producing the wood, combined include a 200-megawatt gas turbine under con- with careful harvesting of the wood to avoid rot- struction and a 300-megawatt coal-fired BOT ting-which would otherwise release carbon. (build-operate-transfer) plant under bid in the 20. Capital costs in Asia, based on World Bank ap- Philippines. In Pakistan, the government hopes to praisal reports, are often 20 percent less than provide 35 percent or 2,300 megawatts of new worldwide average costs estimated by the World generation capacity from private sources over the Bank. See note 3. next 10 years. In India, the government is encour- 21. The cost figures cited here refer to levelized costs, aging the private sector to build 20 percent of new which incorporate both operating costs and am- generation (including 7,800 megawatts in coal and ortized capital costs. Specific operating costs are hydropower capacity in Karnataka). In Thailand, difficult to forecast because of site specific char- TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 114 acteristics such as capacity factor, heat rate, fuel where monthly payments are comparable to what costs, and labor. families might pay forkerosene, communities are 22. The amount of sulfur removed depends on the reluctant to invest in a renewable system. An in- nature of the coal, but is typically in the 5-40 vestment in a renewable system requires a long- percent range. A more expensive beneficiation term commitment of future income, whereas the process called "advanced physical cleaning" is purchase of kerosene is more discretionary, month required to remove 35-85 percent of the sulfur, by month. at an average cost of $800-$1200 per ton of sul- 24. ADB 1991, pp. 57-62. fur (ADB 1991, pg. 149). 25. World Bank 1992a, pp. 161-3. 23. Even in cases where financing is available, and 26. World Bank 1992d. 6 NATURAL RESOURCES MANAGEMENT: LAND, FORESTS AND BIODIVERSITY Arable land resources in Asia are facing intense The first reviews the land resource base in Asia and pressure from farmers seeking to maintain food discusses major resource problems by land, for- self-sufficiency. Forests and marginal lands are estry, and biodiversity issues. The second section suffering from serious degradation for a variety of discusses the underlying causes of natural resource reasons, including excessive conversion to agricul- degradation. The third section presents general tural land, commercial logging, and over-exploi- policy and institutional responses to addressing tation of firewood and fodder. Asia faces the diffi- these problems; and the fourth section reviews cult problem of trying to secure production technical approaches and needs. The last section increases in agriculture and forestry without de- reviews the relevant past and future role of the stroying remaining land, forest, and habitat World Bank. resources. This chapter provides an overview of these Land Resource Problems "green" sector issues, and identifies the key ele- ments of a strategy to address the problems of land Land Use degradation, deforestation, and loss of biodiversity. The total land area in Asia is about 2 billion hect- While these key elements may not be uniformly ap- ares. About 390 million hectares (20 percent) has plicable to all Asian countries, the elements them- been brought under cultivation and classified as selves-policy, institutional, and technical priori- cropland; about 500 million hectares (25 percent) ties-should be a useful and consistent basis for is classified as forest or woodlands; permanent country strategies. pastureland accounts for another 500 million hect- Land resources are common to agriculture, ares (25 percent); and the rest (30 percent) is clas- forests, and habitats (with the exception of aquatic sified as other land, which includes mountains, habitats), and one theme of this chapter is that ag- deserts, wetland, unused grassland, and built-on riculture, forestry, and habitat preservation benefit areas. by being looked at as a continuum of natural re- source management issues. Intensified agriculture Cropland. During the last three decades the net is at one extreme of land use, and natural ecosys- expansion of cropland has been minimal (about 6 tems are at the other. Between is a complete spec- percent) and growth in food production was prima- trum of lower-yielding land uses, including rainfed rily achieved through intensification (higher yields agriculture, grazing land, and all types of non-natu- per hectare). In East Asia, yields have increased 2.5 ral forests (such as commercial, mixed-use, and times and account for 95 percent ofthe increase in degraded forests). This chapter addresses the natu- food output over the last three decades (figure 6.1). ral resource management problems of these lower- Though the yield effect was less pronounced in yield land uses as much as the more familiar prob- South Asia, yields nearly doubled, and accounted lems of intensified agriculture and destruction of for 88 percent of the output growth. natural forests and other ecosystems. Irrigated cropland, which currently accounts This chapter is organized into five sections. for one-third ofthe cropland in Asia, has made food 115 TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 116 500 million hectares) is Figure 6.1: Cereal Production Increase, Broken Down into Yield Increase forest land, either and Area Expansion, 1961 -90 coe roe.Toi closed or open. Tropi- South Asia East Asia cal forests account for nearly 90 percent ofthe Yield Yield total productive natural 88% 9%forests in the region (and are a quarter of the world's tropical for- ests), and are most common in Southeast Asia (Indonesia, Ma- laysia, and the Philip- Area E12%sion Area expansion pines). Deciduous for- 12 5% ests are found mostly in South Asia and conti- Source: Calculated from World Bank data. nental Southeast Asia, while temperate forests self-sufficiency in Asian countries possible. The are most common in India's Himalayan region and other two-thirds of the cropland is rainfed, and still in Northeast China. Table 6.2 shows the amount of supports large sections of the rural population. For land under forests in Asian countries. The classi- example, in the Philippines, while about 40 percent fied forest areas also include forest lands under of the area under paddy cultivation is rainfed, it shifting cultivation, degraded to grassland, or contributes nearly 30 percent of the total paddv hacked for fuelwood and fodder. production. Less productive cultivation (with tra- Asian exports of forest products were $8.5 ditionally longer fallow periods) is also done on billion in 1991. Three countries (Malaysia, Indo- marginal land resulting from conversion of forests nesia, and the Philippines) have traditionally ac- or grassland. counted for the dominant share of the of the Grassland. Nearly a quarter of the land, or about 500 million hectares are grassland in Asia (table Table 6.1: Countries in Asia with Extensive 6.1). Northem and Westem China contain the Grassland world's most extensive grasslands, which occupy more than a third of the country. In tropical and Extent of subtropical regions, most grasslands are the result (milgon Percentage of of forests being converted (following, perhaps, a Country hectares) total land area period of swidden agriculture) to pasture land, commercial grass production-or, as in many ar- China 319 34 eas of Southeast Asia, simply being overtaken by Afghanstan 12304 46 imperata cylindrica, an aggressive climax grass. India 12 4 However, even man-induced grasslands can be Indonesia 12 7 highly productive, and provide important economic Pakistan 5 6 and ecological services. Nepal 2 15 Source: World Bank data. Forests. Nearly a quarter of Asia (approximately 117 NATURAL RESOURCES MANAGEMENT shown in table 6.3, although this data is on the high Table 6.2: Forest Areas in Asian Countries, end since it includes all land (including deserts, Forests Percent of wetlands, and mountains) that is degraded, non- Country (,000 hectares) Total land arable, or highly susceptible to erosion. Given the wide range of soil conditions that constitute deg- With more than 100 million hectares radation (see box 6.1), consistent estimates of only China 1123,460330 63 that amount of land that has been degraded by hu- man activity are not available across Asia. With high percentage offorested land Papua New Guinea 38,230 84 Malaysia 19,100 58 Table 6.3: Estimates of Land Affected by Soil Cambodia 13,372 76 Degradation in Selected Asian Countries Lao P.D.R. 12,800 55 Korea 6,485 66 Estimated Bhutan 2,605 55 degraded land Percentage of Solomon Islands 2,560 91 Country (,000 hectares) total land area Fiji 1,185 65 Vanuatu 914 75 SOUTH ASIA India 148,100 50 With low percentage offorested land Pakistan 15,500 17 Mongolia 13,915 9 Bangladesh 989 7 Afghanistan 1,900 3 Sri Lanka 700 11 Maldives 1 3 Pakistan 3,500 5 EAST ASIA China 280,000 30 Others Indonesia 43,000 24 India 66,736 22 Thailand 17,200 34 Myanmar 32,418 49 Vietnam 15,900 50 Thailand 14,240 28 Lao P.D.R. 8,100 35 Philippines 10,550 35 Philippines 5,000 17 Viet Nam 9,800 30 Myamnar 210 3 Nepal 2,480 18 Western Samnoa 32 32 Bangladesh 1,950 15 Tonga 3 5 SriLanka 1,747 27 Western Samoa 134 47 Source: ESCAP 1992. Source: World Bank data. Box 6.1: Types of Land Degradation Land degradation can occur in a variety of ways: nutrient depletion, structural decline and compaction, biological de- region's timber export revenues (over 90 percent cline, chemical deterioration (acidification and salirity), and in the 1980s, and 80 percent in 1991). This small soilerosion.Nutrientstatusofthesoildeclinesifthelosses- decline is partly accounted for by the depletion of outputs in crops and animal products, leaching, runoff, ero- Philippine reserves, as well as the increase in ex- sion, mineralization and volatization-exceed the gains from ports from Myam ar, Lao P.D.R., and Cambodia. the weathering of parent rock, atmospheric accession, bio- ports from Myanrnar, Lao P.D.R., and Camboala logical fixation and fertilization. Loss of organic matter, often Land Degradation hastened by cultivation, leads to loss of soil structure that can reduce soil moisture-holding capacity, increase runoff, Estimates are that nearly 20 percent of the veg- and reduce aeration within the soil. etated area in Asia has been affected by human Soil conservation measures should do more than pre- vent erosion: they should also address broader soil fertility, induced land degradation since 1945.1 One estimate crop protection, structural, and moisture conservation as- of the magnitude of soil degradation in Asia is pects. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 118 While data on soil degradation caused specifi- to overflow more frequently. Erosion can also re- cally by loss of vegetation, nutrient depletion, and sult in changes in the hydrology of catchment ar- structural decline is not available, there is increas- eas, which can increase flood frequency, flood se- ing evidence on soil erosion, waterlogging, and verity, and reduce availability of surface water salinity. Although it can be safely generalized that during dry seasons. As a result, floods during the soil degradation is a significant problem across rainy season can be followed by worsened droughts virtually all agro-ecological zones in Asia, both the during the dry season. In Indonesia offsite costs of nature and scale of this degradation varies widely soil erosion from degraded upland forests and among and even within countries in the region. rainfed agricultural land on Java were estimated at $26 million-$91 million per year.3 Costs would be Soil Erosion and Fertility. Both water and wind much higher in India, where flooding is worse, and erosion are important problems in the Asia region, where erosion and sedimentation have significantly although wind erosion hazards are mainly restricted reduced lives of reservoirs. to Mongolia, western China, and the drier parts of As noted above, soil erosion is only a subset India and Pakistan. The most widespread hazard is of soil degradation issues, which also include loss water erosion, principally caused by excessive of soil fertility due to loss of vegetation, nutrient exposure of bare soil (from poorly managed log- depletion and structural decline (such as compac- ging operations, indiscriminate land clearance, tion). Some argue that erosion has been over-rated widespread use of annual crops in farming systems, in comparison to these other more pervasive prob- bare fallowing, overgrazing, and stripping the land lems. Technical approaches to soil and moisture of vegetation or fuelwood), and inadequate man- conservation encompass this broader problem agement of runoff. In addition, parts of Asia have definition. highly erodible soils, such as loess soils in China, limestone-derived soils in Malaysia and southem Waterlogging and Salinity. Badly designed and Thailand, dispersible soils such as those associated managed irrigation systems and practices can lead with the Pelambang formation in eastern Sumatra, to waterlogging and salinity-which are separate and geologically young soils in Nepal. phenomena but are often linked in areas predis- TIhe impacts and costs associated with soil posed to such problems. The consequences can be erosion can be severe. Onsite impacts include re- severe. Unlined canals and other water channels duction of yields due to degraded soil structure, contribute to groundwater recharge. When water surface sealing and crusting, and desertification. In is used for irrigation in excess of crop requirements, India, the average annual loss of plant nutrients it also leads to waterlogging and groundwater re- from eroded soil is estimated to account for a loss charge. The rising groundwater table then draws up of 30 to 50 million tons of agricultural production.2 the salts found in the soil, and then deposits them In Java, itwas estimated (1988)thatthe onsite costs on the soil when the water evaporates ortranspires of soil erosion amounts to $315 million annually. through plants. Also, irrigation with poor quality In the hills of Nepal, overall yields of cereal fell groundwater can lead to salinity or sodicity of soil. by over I percent per year from 1970-71 to In time, the top soil accumulates a high salt con- 1980-81. While the influence of erosion for this de- tent and becomes less fit for cultivation. cline is not clear, in the Terai where erosion is less In Asia most of the waterlogging and salin- significant, yields were constant. ity occurs in China, India, and Pakistan. Data on Soil erosion can cause serious offsite impacts salinization and waterlogging are limited. India has as well. Some of the eroded soil may be deposited the highest area of land affected by waterlogging in drainage channels, irrigation ditches or reser- and salinity-by 1988 the productivity of nearly 20 voirs, thereby reducing capacity and causing them million hectares of cropland (30 percent of the ir- 119 NATURAL RESOURCES MANAGEMENT rigated cropland) had been seriously affected,4 and Poorly-managed pesticides have health im- farmers had to abandon 10 million hectares of pro- pacts through contact during transport and appli- ductive cropland.5 In Pakistan, about 3 million cation, through ingestion of contaminated food or hectares (20 percent of irrigated land is affected by water, or through release of chemicals via runoff waterlogging and salinity (see box 6.6). In China, into surface- and groundwater. Contact during use 7 million hectares (15 percent of the irrigated crop- is probably the most severe problem. Although the land) is feared to be suffering from waterlogging chronic impact and long-term effects on health are and salinity, not very well understood, increasing exposure and Increased waterlogging and salinity in soils build up of toxins in the body are causes for con- leads to a reduction in output, loss of irrigated cem. For example, in India, HCIP is widely used lands, and increased salt loadings on return flows as a pesticide on many crops including rice, and and aquifers (which, if used for irrigation, spread increasing residues have been noticed in food and the damage to other farm lands). Whereas average in mother's milk. In Indonesia, the widespread use yields exceeding 6 tons per hectare can be achieved of endosulfan in rice is believed to cause a signifi- under well-irrigated systems, yields in saline areas cant problem of fish kill, and the growth of veg- can be only about 1.5 to 2.0 tons per hectare.6 Also, etation in ponds and rivers has significantly altered standing water provides a breeding site for vectors fisheries and habitat. The risks of pesticides in sur- that transmit diseases such as schistosomiasis and face water are clearly greater if sensitive produc- malaria. tion systems, such as aquaculture, are located downstream. Agrochemical Pollution. The green revolution in Increasing use of pesticides has also led to Asia was achieved through use of high-yielding growing pest resistance and reduction of the pests' varieties and increased application of chemical natural predators, forcing a vicious cycle of stron- fertilizers, pesticides, and water. The environmen- ger and more frequent applications. While an ex- tal impacts of increasing agrochemical use is evi- tensive documentation of pest resistance is not dent in some locations (particularly China), al- available, specific instances in the region indicate though the absence ofdataimakesacharacterization the widespread prevalence of the problem. In In- of the extent of the problem very difficult. In the donesia, the brown plant-hopper outbreak in the most impacted areas, overapplication of chemical mid- 1980s ultimately led to the banning of several fertilizers has lead to eutrophication in nearby sur- dozen pesticides and helped usher in integrated pest face waters and some accumulation of phosphates management. In Shandong Province (China), and heavy metals in soils. deltamethrin was first introduced in 1982 to com- There is growing evidence of declining yields bat heliothis armigera affecting the cotton crop. By in response to increased application of agricultural 1985, resistance had developed and spraying was inputs, under current technologies. For example, a increased from five or six times per year to twenty- study of 146 rice farmers in Suphan Buri, Thailand, five times. The same problem exists with the cot- showed that between 1982 and 1988 increases of ton crop in Andhra Pradesh in India. 24 percent in nitrogen fertilizer, 53 percent in pes- Environmental Issues in Forestry ticides, and 35 percent in seeds led to a mere 6.5 percent increase in yields.7 As a result, further yield Among all tropical regions, East Asia experienced increases are either going to require proportionately the highest rates of deforestation during 1981-90 much larger applications of inputs, which would (1.4 percent per year, see figure 6.2). Furthermore, have significant adverse environmental impacts, or deforestation rates in East Asia increased during be the result of new technologies and overall im- the 1980s, in contrast to other tropical regions of proved farm management techniques. the world. Deforestation rates were the highest in TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 120 2.1 million hectares of Figure 6.2: Deforestation, 1981-90 forests are newly logged Anuual Percentl every year in Asia. This 1.6- number represents over 1.4 half ofthe total estimated 1.4 - area being deforested (see 1.2 -above). Logging opera- tions are the major con- 1.0 - 0.9 tributor to deforestation. 0.8 In addition, logging has 0. 8 S other cascading effects 0.6 0.6 that lead to deforestation, the most important being 0.4 - the use of forestry access roads by migrant settlers. 0.2 - Commercial log- 0.0~ ___ ___ ging across Asia is in- East Asia South Asia Sub-Saharan Latin Armrrica creasing, even as some Africa and Caribbeani countries are depleting Sources: World Bank 1 992a; WRI, UNEP and UNDP 1 992. their resource base. Offi- cial data on commercial logging, moreover, seri- continental southeast Asia (Cambodia, Lao P.D.R., ously underestimates the magnitude of operations. Myanmar, Thailand, and Viet Nam), followed by Nevertheless, FAQ data indicates that between insular southeast Asia (Indonesia, Malaysia, Phil- 1978 and 1989, annual industrial roundwood pro- ippines). South Asia has lower deforestation rates duction in East Asia has increased by 28 percent, (0.6 percent) due to far fewer forest reserves. and in South Asia by 30 percent. Of all East Asian Across Asia, some open forest areas where trees countries, only Korea and the Philippines show a are widely spaced, and forest fallow and shrub ar- decline in output. In South Asia, only Bhutan shows eas (which comprise about 180 million hectares in a decline in output. the region) are being further degraded. Uncontrolled logging causes extensive un- The major causes of deforestation include necessary damage to forests. For example, a study commercial logging, conversion to agricultural by FAQ carried out in Sarawak (Malaysia) showed land, and demand for fuelwood and fodder, al- that subsequent, significant soil erosion took place though it is difficult to assign proportionate blame after logging on about 40 percent of the logged to these factors. Also, not all deforestation is envi- area, because the soil had been left denuded.9 Also, ronmentally or economically inappropriate. It is when only the most valuable trees (selection fell- inevitable that large amounts of forests in Asia will ing) are logged for commercial timber, other trees continue to be converted to altemative land uses. are damaged. The same FAQ study found that for The economic and environmental objective of every twenty-six trees cut and removed per hect- sustainability is to allow conversion where it leads are, thirty-three others were broken or damaged. to higher-yield land uses without imposing unac- Excess logging is induced by the high prof- ceptable or irreversible environmental costs. its offered to concessionaires through govemment policies designed, in part, for that purpose. The Commercial Logging. It is estimated that about nexus of the ruling oligarchy with logging inter- 121 NATURAL RESOURCES MANAGEMENT ests has been a major obstacle to outside efforts at Then, continued disturbance leads to a different reducing rampant logging. vegetative form such as grasslands or complete degradation and desertification. This process is Conversion of forest land to agricultural land. widely observed in India, Nepal, the Philippines, It is estimated that 30-80 million people are in- and Thailand. volved in shifting cultivation affecting 75-120 Most land converted by migrant farmers is million hectares of land.10 The practice is widely land outside established farming areas that is not prevalent in the northeastern and drier central states subject to effective control. In densely populated of India, Kalimantan island in Indonesia, the cen- areas like Java, these peripheral lands are usually tral highlands in the Philippines, and parts of unsuited to sustainable agriculture (due to exces- Myanmar, Thailand and Bangladesh (table 6.4). sive slope, instability, infertility, and so forth). In Swidden agriculture with long fallow periods, less densely populated areas, the peripheral land is as traditionally practiced by indigenous groups, did soften designated by the state for other purposes, not lead to ecologically severe impacts. The main such as conservation or forestry. In either case the impact of long fallow agriculture is that primary result is basically the same, incompatible land use. forests change to secondary formation, with only localized reduction in biodiversitv. Demand for Fuelwood and Fodder. Ofthe more However, for fundamental socio-economic than I billion cubic meters of wood that Asia har- reasons, traditional swidden agriculture has be- vests per year (1988), 77 percent is used for come less prevalent, and new migrants, primarily fuelwood. Fuelwood production in the region grew from more densely populated lowlands, practice at an average rate of 2 percent per year over the last short fallow swidden with more negative long term decade, and accounted for more than 90 percent of effects. Here, the composition ofthe forest initially total roundwood production in all of South Asia, changes from a high forest to a low profile second- and Cambodia and Lao P.D.R.. Among the rural arv forest as in the case of the long fallow system. and urban poor, most energy needs are met through the use of fuelwood and other biomass. Where fiuelwood is not available, grass, crop residue, cattle Cultivation in Asia dung and other biomass is substituted-depleting an important source of fertilizer. Area affected by Deforestation caused by cattle grazing in for- shifting cultivation ests for fodder is especially acute in India, where Country (thousand hectares) forests are the only places for cattle to find vegeta- Indonesia 35,000 tion. India is home to 15 percent of the world's Viet Nam 8,000 cattle, 10 percent of its sheep and goats, 50 percent Thailand 4,000 of its buffaloes, but has only 4 percent of the glo- Malaysia 4,700 bal land area. Papua New Guinea 4,000 Lao PDR 3,000 Loss of Biodiversity India 2,696 Philippines 2,000 Nearly three-quarters of the natural habitat in Asia Myanmar 1,420 has been lost or irreversibly degraded (table 6.5). SriLanka 1,000 It is estimated that Asia will lose a higher propor- Fiji 200 tion of its species and natural ecosystems than any Solomon Islands I other region during the next twenty five years. Biodiversity status and trends, key elements of Source: ESCAP 1992. biodiversity conservation, and a regional strategy TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 122 feared that in Indonesia over 1500 local rice vari- Table 6.5: Loss of Original Habitat in the eties have been lost during the last 15 years.12 lndo-Malayan Realm About two-thirds of forest areas have been Loss of original lost in this century. More than half of Asia's wet- Region habitat (%) lands have been lost, and of those remaining of international significance, more than half again are SriLanka 83 under threat-especially in Bangladesh, coastal India 80 China, Malaysia, the Philippines and Sri Lanka. Viet Nam 80 The majority of mangroves in the Indo-Malayan Pakistan 76 realm have been lost, mainlv for aquaculture. Off- Phihppines 76 shore habitats are also being degraded: pollution Thailand 74 and destructive fishing practices have significantly Lao PDR 71 degraded reefs in Indonesia, Malaysia, the Philip- Nepal 54 pines and Thailand. Fishing industries are overhar- Indonesia 4 vesting resources, especially in the eastern Indian Myalnar 43 Ocean and in coastal waters from Viet Nam to Malaysia 4 1 South China 39 beyond Korea. Bhutan 34 Within individual countries, overall habitat losses have been most acute in India, Bangladesh, southwest Sri Lanka, coastal Myanmar, south China, Indo-China, the island of Java in Indonesia, for conservation are presented in the recent World and the central islands of the Philippines. In the Bank report, Conserving Biological Diversity: A Oceanic realm, while the destruction has not been Strategy for Protected Areas in the Asia-Pacific very widespread, lowland rainforests have been Region."' destroyed in Westem Samoa and Tonga, and are There are a wide range of factors leading to threatened in Fiji, the Solomon islands, and parts habitat loss. Some relate to rural activities, includ- of Papua New Guinea. However, because of the ing habitat destruction from clearing and buming high proportion of endemics in the area and the forests, conversion of natural ecosystems for agri- small population sizes of many isolated species, culture, desertification of natural grasslands, rec- threats of extinction are among the highest in the lamation of wetlands, and poaching and illegal har- world. Only on the island of New Guinea (Irian vesting of animal and plant wealth. Others relate Jaya and Papua New Guinea) are there large ex- to urban and industrial development, such as panses of pristine ecosystems. sprawling urbanization, coastal development, and pollution. Other direct mechanisms for loss of Underlying Causes of Natural biodiversity include introduced species, industrial Resource Degradation agriculture and forestry, and (potentially) global The underlying causes of land degradation, defor- climate change. Genetic erosion, which is the end estation and biodiversity problems include: (a) result of biodiversity loss, can result from market and policy failures-such as underpricing monocropping practices in agriculture and animal of resources, input subsidies, and lack of informa- husbandry. Over 40 percent of Asia's farms tion about viable technologies on marginal lands- adopted the green revolution's high yielding vari- that lead to resource-degrading extemalities; (1) a eties within fifteen years oftheir introduction; and rapidly growing population that exerts pressure on now more than 80 percent of the farmers in Indo- land resources for both subsistence and commer- nesia and the Philippines plant these varieties. It is cial needs; (c) resource tenure structures that en- 123 NATURAL RESOURCES MANAGEMENT courage short term exploitation rather than longer- term conservation; and (d) institutionalweaknesses Table 6.6: Countries in Asia Which Do Not that encourage mismanagement of resources. The Meet Basic Dietary Requirements mix and influence ofthese factors vary widely from Country Dietary energy supplies 1986-88 location to location, given the wide diversity in (calories per capita per day) Asia. SOUTHASIA Afghanistan 2110 Population Pressure Bangladesh 1925 India 2104 The link between population and resource degra- Nepal 2034 dation is not straightforward, since it cannot be said Pakistan 2167 that population density, per se, leads to resource EASTASIA degradation. There are examples of densely popu- Cambodia 2162 lations with relatively low degrees of erosion, and Maldives 2140 less densely populated areas-where there are Philippines 2238 fewer incentives for resource protection-with Thailand 2288 widespread degradation"3. For example, the highly Viet Nae u 2227 populated island of Java reveals relatively fewer problems with erosion than with pollution, al- Note: the U.N. recommended level is 2350 calories per day. though admittedly Java does not exhibit high de- Source: Calculated from FAO 1991. grees of biodiversity. Overall, population pressures have exacerbated fundamental market failures that have gone unaddressed for years when resource per capita production, cereal output will have to demands were smaller (see next section). increase at the same rate as population growth, or The most significant pressure exerted by 1.3 percent per year. Given the shortage of under- population on Asia's natural resources is the ever- utilized agricultural land in Asia, output increases increasing demand for food, followed by the de- will continue to be dependent (as they have been mand of both rural and urban poor for fuelwood. historically) on yield increases. This implies, in These demand-induced pressures on natural re- turn, that yields will have to increase at the same sources require that governments take basic deci- rate as population growth, 1.3 percent per year, to sions concerning extensive versus intensive supply simply keep up. strategies for land, food, and energy. Achieving this target presents an enormous challenge and exceeds current projections. Pro- Total food requirements. Although there has been jected yield increases from plant breeding in rice an increase in per capita cereal production in sev- and wheat are expected to be about 1 percent per eral Asian countries, this does not necessarily mean year in high potential irrigated areas and about half that there is enough to eat. Assuming a basic di- of that in low-potential rainfed areas. While yield etaly requirement of 2350 calories per person per levels in marginal areas can be increased by ex- day (U.N. recommendation), many Asian countries panding irrigation, most easily irrigable areas in fall short of meeting the dietary requirements of Asia are already irrigated. New irrigation systems their populations by 10 percent or more, especially are expensive and often accompanied by environ- in South Asia (table 6.6). In addition, Asia's popu- mental and social impacts. lation is expected to add 1.5 billion more people The difficulty of achieving Asia's food tar- by 2025, an increase of 60 percent. get can be looked at from aland perspective as well. If yields increase at only halfthe required rate (0.65 Need for intensification. To maintain the current percent), Asia would need to add another 30 per- TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 124 cent to its cropland by 2025 to remain food self- shortages will worsen in many parts of Bangladesh, sufficient. Such an expansion is unrealistic: one China, India, Java (Indonesia), Nepal, the Philip- recent study estimated the potential for cropland pines, Sri Lanka, and Thailand. Solutions to this increases to be only 8 percent in Southeast Asia, crisis must be based in more careful market defi- and zero in South Asia.14 nition and pricing, which would create incentives for more efficient stoves, forest rehabilitation (in- The trade option. Of course, food self-sufficiency cluding on communal properties), and research into need not be a top priority of Asian economics, as alternative energy sources. the food needs of Asia's growing population can be met by importing food from surplus regions Market and Policy Failures of the world. Pressure from the world's grain ex- Marketfailures combine withpopulation pressures porting countries for increased exports to Asia will and lead to overexploitation of land and forest re- increase, as production costs rise in Asia. These sources (see chapter 2). For example, market eco- pressures will be opposed, however, by the avowed nomics of commercial logging and subsequent goal of food self-sufficiency in many Asian conversion to subsistence agriculture do not cap- countries. ture the value of the foregone environmental ser- vices provided by the forest-biodiversity, carbon The rural poor. The increasing rural population sequestration, hydrological buffering, soil stabili- is an important factor leading to degradation of zation, biodiversity, nonwood products, and recre- marginal lands in both South and East Asia (see ation (box 6.2). In Asia as elsewhere, the costs above), but is particularly acute in South Asia. of deforestation are mostly extemal to present-day Surprisingly, the East Asian rural population may markets for timber and forested land. Similarly, have already peaked (see chapter 1, figure 1.7). The market incentives facing subsistence upland farm- South Asian rural population may not peak before ers emphasize short-term gains and do not capture 2015. the environmental costs of longer-term degrada- In both regions, even if rural populations were tion, such as the loss of future onsite productivity, steady, the pressure on the resource base would or the cost of downstream effects (siltation, continue due to the ongoing process of land deg- flooding)."5 radation that forces even existing populations to Policy failures compound these market exter- migrate onto underutilized lands. In the face of this nalities. In the case of agriculture, subsidies and pressure, efforts to reduce overall population market supports encourage farming on marginal growth rates, create nonfarn employment oppor- land that might not otherwise be farmed, as well tunities in rural areas, and facilitate urban growth as excess application of inputs (box 6.3). Poorly through improved planning and resource pricing, defined and executed land tenure-another policy all have positive benefits on rural lands. failure, discussed below-is perhaps the single largest barrier to stabilization of marginal lands. In The fuelwood crisis. Growing populations lead to the case of deforestation, government policy fail- increased demand for fuelwood. The resulting ures lead to unsustainably low forest-stumpage fuelwood deficits are estimated to rise from a cur- fees, trade policies that encourage overproduction, rent level of 150 million cubic meters per year (ex- and failure to adequately restrict access to public cluding China) to 500 million cubic meters by resources (see chapter 2, box 2.3). 2000. Although these estimates do not take price Asian govermnents have progressed signifi- effects and the possibility of fuel substitution into cantly in reducing agricultural subsidies, but much account, the poor have little capacity to rely on less so in correcting such policy failures as forestry commercial fuels for their domestic needs. Acute pricing and resource tenure. Beyond asserting these 125 NATURAL RESOURCES MANAGEMENT Box 6.2: Impacts of Deforestation The economic impact of deforestation can be partially measured in terms of the income foregone due to inetficiency, overexploitation of resources, and loss of future production. A natural resource accounting framework estimated the cost of forest depletion in Indonesia, Papua New Guinea and the Philippines to be nearly $50 billion in six years between 1980 and 1985 (in 1985 prices). A more immediate indicator of the impact of deforestation is the estimate of future import require- ments by countries that have traditionally been wood exporters. Based on current trends, imports of timber and forest prod- ucts will cost Asian countries nearly $20 billion a year by 2000. There are other indirect economic impacts of deforestation and degradation, most of which are not easily quantifiable. Deforestation impoverishes rural populations dependent on nearby forests for their basic needs (including nonwood products like protein and shelter, in addition to fuelwood and fodder). In upper watersheds, deforestation is associated with increasing soil erosion and floods in the wet season followed by droughts during the dry season. In the Philippines, studies showed that uncontrolled logging of one 7,830 hectares watershed imposed net costs on the economy in excess of $43 million, primarily because of damage caused to downstream fishing and tourism activities. Forests play an important role in sequestering car- bon, and hence mitigate global warning. It is estimated that the destruction of tropical rainforests in Asia accounts for over 6 percent of global atmospheric loading of carbon. Finally, deforestation is the most important cause of habitat loss leading to loss of biodiversity. Box 6.3: Subsidies on Agricultural Inputs Agricultural input subsidies became widely prevalent in Asia and elsewhere after the oil shocks of the 1970s as a measure to cushion the impact of rapidly increasing prices of agro-chemicals. These subsidies, over time, have become a burden on government budgets. The subsidies on fertilizers are often the most widespread. For example, the fertilizer subsidy bill in India has grown nearly 40-fold (in constant 1990 dollars) from $57 million (in 1990 dollars) during 1973-74 to $2.63 billion by 1989-90. As a share of GDP, these subsidies increased from 0.06 percent to 1.2 percent over the same period. In Indone- sia, subsidies on fertilizers and pesticides during 1983-84 were about $330 million (in 1990 dollars), rising to a peak of $643 million in 1986-87 (in 1990 dollars). The pesticide subsidy was abolished in 1988-89 due to environmental concerns and the reduced effectiveness of broad spectrum pesticide applications andthe introductionof integratedpestmanagement. By 1990-91, total agricultural subsidies had fallen back to about $380 million. In Bangladesh, agricultural subsidies have been relatively small, and nominal rates have declined between 1970 and 1990. Sources: Raju 1992; Renfro 1992; and World Bank data. general themes here, however, policy reform agen- incentives; failure to recognize future problems das must be very country and location-specific. associated with degradation; lack of appropriate They must also be reinforced with localized incen- location-specific technologies; and low levels of tives that encourage greater investment in education among rural farmers. Therefore, the lack sustainability, as discussed in the next section. of conservation-oriented investment by farmers and communities is a result of inadequate incentives and information to change current practices.' Farners and communities in Asia, as elsewhere, Current behavior is also affected by land ten- are profit maximizers. They often invest less of ure. There is a positive correlation between tenur- their time, effort, and money in resources manage- ial rights-whether through direct ownership, ment than are required for sustainability. The rea- stable sharecropping arrangements, or long-term sons forthis divergence are widely known: lack of use rights-and investments in conservation mea- adequate land and resource tenure; relatively short sures (see box 6.4). Although past empirical work time horizons on investments and low profitabil- in Asia does not show the relationship to be as ity of alternatives;16 high aversion to risk, given the strong as is commonly presumed, worldwide and uncertainty of alternatives; market and policy dis- historically, marginal lands have been stabilized TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 126 Box 6.4: The Relationship Between Land Tenure and Conservation in Asia Land tenure includes the formal (state-recognized) and informal (customary) rights of access to land, the rights to control products of that land, obligations to maintain the land, the rights of transfer, and the rights to determine changes in the use of that land. Some of the common types of tenure types in Asia are: * stable land-tenure systems, such as those found in Java or Taiwan (China), where there are few communal lands, more or less clearly demarcated state-owned lands, and complex owner-cultivator and tenant-cultivated arrangements; * ancient, state-recognized land-tenure systems, such as those found inparts of China, India, Myanmar, and Nepal, where common property resources are an important part of the formal and customary tenure rights; * frontier areas, in the outer islands of Indonesia, Malaysia, the Philippines and northern Thailand, where a limited pro- portion of cultivators has state-recognized tenure rights, and a large proportion of forested and unforested land is des- ignated as state forest. Cultivators in such areas include indigenous ethnic minorities who have a long-standing land use tradition and informal tenure based on ancestral rights; settlers, often belonging to the major ethnic group whose actual tenurial arrangements tend to emulate those elsewhere in the country; and recent migrants on newly cleared land. Research in Asia supports the argument that with secure tenurial rights, farmers are more likely to invest in erosion control techniques. Conversely, the absence of these rights discourages such investment. In Java, a transition from a shifting cultivation system with poorly defined property rights to an agroforestry system with well-defined rights resulted in high levels of investment for preventing soil erosion.'8 In Viet Nam, policy reforms giving long-term land leases to farmers have led to an increase in soil conservation measures.'9 In India, there is strong evidence that where land is farmer-owned, land prices reflect conservation improvements, and thus provide a real incentive.20 Tenure also affects a farmer's access to credit for land improvements where written title is a prerequisite for credit-worthiness. Therefore, titling or land consolidation on private land in areas with socially recognized tenure rights, and increasing tenurial security in frontier areas, provides some incentive to farmers to invest in resource conservation. Also, in areas with traditions of common property resources, ownership can be recognized and management systems strengthened. Clarification of property rights becomes more critical as population pressure increases and as open access and communal property rights systems break down. when land is individually owned and enclosed. over management, and agricultural institutions that To alter current behavior, more profitable played a major role in research, training and exten- farming systems are required, especially on mar- sion services for intensified agriculture during the ginal lands. There are primarily technical, informa- green revolution but neglected low potential crop- tion, and tenure issues. Even where sufficiently land and cropping models for upland agriculture. low-cost technologies for conservation appear to Institutional weaknesses are even more pro- be viable, the process of technology transfer and nounced in the forestry sector. Forest institutions adaptation has proven to be ineffective, and adop- in many Asian countries suffer from their colonial tion rates remain low. As a result the technical and heritage-they manage forests as a source of raw tenure issues loom prominently in achieving more material for large industry. Their emphasis has sustainable agriculture, as elaborated in the next been on revenue maximization, enforcing techni- sections. cal regulations on loggers, collecting licensing fees, Ineffective Institutions and preventing people from trespassing. Their char- ters and mandates have not forced them into such The final major cause of excess natural resource new areas of forest management as involving lo- degradation is weak institutions. Public institutions cal people in managing forests, mediating in con- devoted to natural resource management have di- flicting demands between agriculture, industry, and rectly contributed to unsustainable practices in ag- ecological needs, or conducting research in sustain- riculture, forestry, and degradation of habitats in able forestry practices. Attempts to improve for- protected areas. In agriculture, examples are irri- estry management by a proliferation of legislation gation authorities with a bias towards investment have often been counterproductive, putting unin- 127 NATURAL RESOURCES MANAGEMENT tended obstacles in the way of responsible private causes, including causes in areas broader than ag- investment, rights of forest dwellers and local riculture and forestry, through such broader social people, and activities of NGOs. Also, forest insti- reforms as land reform, population planning, and tutions have very low status in the govemment hi- poverty alleviation. erarchy with weak bargaining position in relation The strategy applies across the spectrum of to other agencies. The skills commonly available rural land use, from intensified agriculture to de- within these institutions are not capable of address- graded forests and grassland. On a strategic level, ing the diverse problems associated with manag- the same principles apply. It is on the technical ing forestry. level that issues pertaining to specific land uses and While technical issues in agriculture have land types become important. received a certain level of attention, they have been The Strategy inadequately addressed in forestry. Research and adoption of new technologies in forestry has lagged A sixfold strategy for breaking out of the current far behind agriculture. It is estimated that fewer pattems of natural resource degradation is: than 1,000 scientists (not including those in China) * Aggressive promotion of locally relevant conduct forestry research in Asia, compared to technical innovations that promote sustain- 5,000 scientists working on rice research alone. In able resource management, primarily through India, expenditures on forestry research are less better targeted research (see below), technol- than 0.01 percent of the value of forest products ogy transfer, extension services, and ex- consumed annually. As a result, policy is based on panded roles for farmer and community inadequate understanding of forest ecosystems. groups in these areas. A commitment to fur- Also, while improvements in technology can be ther agricultural intensification is a necessary rapidly adopted in agriculture, it is much slower in result of population growth. forestry, largely due to the long term nature of for- * Modification of policy and regulatory frame- estry outputs and predominantly state ownership works that encourage inappropriate resource of forests. use, such as price distortions in agriculture Finally, agencies charged with managing and forestry. Forestry pricing reform is par- parks and protected areas are hampered by weak ticularly important given the trade bias in legal frameworks, extremely limited operational some Asian countries that encourages excess capabilities and political influence, insufficient logging. prestige to resolve local conflicts, inadequate finan- * Strengthened land tenure. Clarification of cial resources, and inadequately trained staff. Other property rights is critical as population pres- than India and Sri Lanka, most Asian governments sure increases, open access and communal have yet to institute policies or devise land man- property rights systems break down, and land agement systems that will secure the conservation values increase. of protected areas in the future. * Improvements in the public sector capacity to design, target, implement and ensure com- A General Strategy for Natural pliance with resource management programs. Resource Management In addition to agricultural and forestry insti- The proposed strategy for addressing natural re- tutions, agencies charged with managing pro- source degradation in Asia addresses both the short tected areas also need support. and long terms. The immediate strategic objective * Encouragement of public participation in is to stabilize areas of rapid land, forest, and habi- decisionmaking through the promotion of tat degradation. The more fundamental and longer- education, mass-media coverage, NGO in- term objective is to minimize the underlying volvement, consultation with community- TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 128 based farmer and land management groups, tom-up, or "learning by doing" integrated pest and local conflict resolution. management approaches in Indonesia and the Phil- Promotion of social programs in education, ippines-are only now being tested in new and health, and population planning to help settle varied circumstances. There are expanded roles that rural populations, and provide options that the private sector can play in providing informa- enable them to take a longer-term perspective tion to farmers as well. The technical agenda for in managing their family and land resources. research and demonstration is elaborated in the next section on technical issues. Implementing the Strategy To undertake this ambitious strategy, the serious Institutional requisites of strengthening re- weaknesses and biases in public institutions noted source tenure. Even though broad-based land re- in the previous section must be addressed. From form is not on the Asian political agenda, more the outset, it should be recognized that this strat- modest approaches are being pursued. Most involve egy will fail in the absence of strong political com- forms of community management, improved land mitment to rural sustainability. The agenda is too titling (which may be very difficult in the cases of complex (requiring, for example, long-term com- traditional peoples and recent migrants), revised mitment to introducing new production technolo- terms on leasing arrangements, and the creation of gies) and politically charged (because of the high land markets. Legal channels to enforce land own- political cost of reducing "rents" in the forestry ership and lease arrangements will become even sector, of addressing community conflicts in pro- more important. Since land reform is often contrary tected areas, offacing the equity aspects of strength- to equity considerations, the need for a rural safety ened land tenure, and so on) to succeed otherwise. net to address the needs of the landless poor will To undertake this ambitious strategy, serious also be needed. weaknesses and biases in public institutions must be addressed. Examples of shortcomings were cited Expanded professional skills within forestry above. It is not recommended that the powers of agencies. The professional focus of forest agencies public sector agencies involved in agriculture, for- needs to be widened to include management ob- estry, and park management be greatly expanded. jectives other than production. Policy analysts need Rather, existing institutions need to be recast and to link forestry issues with issues raised by agri- made more responsive to the wider range of issues culture, livestock and water agencies. Staff trained at hand, including extension and other forms of to deal with social and participation issues-includ- information dissemination, applied research, decen- ing modes of linking local communities and com- tralization, and participation. mercial forestry interests-are in short supply. In spite of the economic and social importance of Applied research and extension and other forms forests in Asia, forestry agencies do not yet com- of information dissemination. The single great- mand the full range of issues that need to be est institutional need is to strengthen the ability of addressed. both agricultural and forestry institutions to con- duct applied research, and provide information and Legal and administrative strengthening of agen- extension services to farmers and foresters on lo- cies charged with protected area management. cally relevant technical innovations. This alone is Legal, physical, and financial means are needed to an enormous challenge. The lack of area-specific improve the ability of agencies to manage protected trials and demonstrations, particularly on marginal areas. The legal and political support given to park lands, has contributed to current degradation. Tra- managers is typically weak, particularly in terms ditional extension services have not been adequate, of enforcement against encroachment. Conserva- and innovative approaches-such as FAO's bot- tion responsibilities normally reside in forestry 129 NATURAL RESOURCES MANAGEMENT ministries and agencies with a production focus ecological characteristics of the land. Earlier, this rather than conservation. Improved physical tech- report divided rural land types into: (a) high-yield niques involve incorporating communities on the irrigated cropland; (b) lower-yield lands, covering perimeter of protected areas in integrated conser- a complete spectrum from rainfed agricultural land, vation and development projects (ICDPs). To date, to grasslands, to degraded forests, and to combi- there have been few initiatives to resolve conflicts nations of the above; and (c) natural forests and between protected areas and people, or to involve other natural habitats. Far less technical research community groups and NGOs in protected area and development has been focussed on marginal management. Improved financial management in- lands (category b) than on high-potential land, al- cludes broadening the agencies' financial base to though both are important for food production. In support parks and protected areas, through such the case of natural forests, technical questions cen- channels as direct fundraising, international NGO ter around the need to balance the wood and support, and ecotourism development. nonwood requirements of industry and society with the urgent need to protect pristine habitats and Decentralization of decisionmaking and public boiest participation. The design and implementation of biodiversity. agricultural, forestry, and integrated conservation Irrigated Cropland and development projects benefit from the devo- The objective of sustainable intensified agriculture lution of planning down to the local level. Tech- in high yielding irrigated cropland areas is to niques such as rapid rural appraisal can be used in achieve an equilibrium between high output and problem definition, and participation in project conservation of the resource base, through careful design and implementation. Agricultural and for- management of exteral inputs. Priorities are to: estry technologies, particularly on marginal lands, maximize biological fixation, increase efficiency are highly location specific, and the greater involve- of fertilizer use, improve weed control, improve ment of local organizations in trials, demonstra- w iion, ad disemnatin o resltsis iporant water management at the farm level, and substitute tions, and dissemination of results is important. agronomic and biological tools for chemicals to Public infrastructure investments. One last is- control pests. There are two priority environmen- sue conceming rural land use is the need for better tal problems that need to be addressed in irrigated analysis of the impact of public infrastructure in- areas: sustainable intensification, and waterlogging vestments-such as roads, irrigation, electricity, and salinity.2 and markets-on land use and settlement pattems. In the absence of direct controls on land use (such Sustainable Intensification. Intensified agricul- as zoning in urban areas), decisions on public in- tural systems in Asia's high-potential lands will be vestment and leasing of public lands have profound increasingly science-based. Increased attention to land use impacts. More careful assessment of the sustaining soil fertility is crucial. More careful environmental and social impacts of investment calibration of fertilizer needs-such as the balance projects, together with more careful attention to the between the three main components of fertilizer- economic incentives awaiting those coming in the can lower application rates while improving yields. tracks of infrastructure development, are recom- Integrated agricultural and livestock systems, mended. involving both foraging and use of manure, are promising in some irrigated areas as well as in Technical Approaches to Land rainfed areas with integrated livestock. Improved Resource Management germplasm will contribute to local yields not only The technical objective of land resource manage- in foodcrops, but in specialty cash crops and ment is to try to match actual land use with the agro- perennials. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 130 Improved crop protection combined with re- for water may not be a practical option, it is im- duced pesticides use is important for both finan- portant to move at least toward recovering operat- cial and environmental reasons. This can be ing and maintenance costs as a measure to reduce achieved without sacrificing pest control, given sufficient understanding of local pest "hot-spots" and integrated pest management (IPM) (box 6.5). Box 6.6: Salinity Control and Reclamation However, since conventional pesticides will notbe Projects (SCARPS) in Pakistan eliminated, better safeguards are needed: while Problems of waterlogging and salinity, resulting from exten- countries in Asia generally have pesticide regula- sive canals and irrigation, were identified as crucial environ- tions, implementation is often weak. mental problems in Pakistan as early as the 1950s. Out of the gross conunand area of 41.2 million acres in the Indus Plain, it was estimated that about 6.6 million (16 percent) Controlling Waterlogging and Salinity. In saline were affected by severe surface salinity, and about 13.8 mil- soils, excess salts can be removed from the root lion (33 percent) by moderate surface salinity. About 15 zone by simultaneously leaching with water and million acres were estimated to have water tables less than 10 feet from the surface, much of it with water tables of less lowering the water table (box 6.6). Drainage is an than 5 feet. As the Plain is underlain by a vast highly trans- important component of any reclamation strategy. missive aquifer, vertical drainage by tubewells is the best Prevention of waterlogging and salinity is similar means to lower the groundwater depth. In most of the aqui- to rehabilitation: it is achieved through more fre- fer area, the groundwater is still usable for irrigation directly or by mixing with canal supplies-thus allowing the water quent but light irrigations, higher soil moisture being pumped for drainage to be used beneficially to supple- regimes, and conjunctive use of both surface and ment irrigation supplies. It is only in the saline groundwater groundwater. areas that the disposal of the saline effluents poses problems. Irrigation water is widely subsidized in Asia, In 1961, Pakistan initiated the first large-scale SCARP. amajo eof the inefficient irrigation practices Subsurface and drainage facilities have been completed in amajor cause ofthe mefficlent srrlgahon practlces 14.4 million acres at a cost ofS 1.7 billion (1990 dollars). In- and overuse of water that leads to salinity and vestments in usable groundwater areas had a demonstration waterlogging. While charging the economic price effect, with the result that the installation of private tubewells also increased dramatically since the early 1 960s. Presently there are over 280,000 private tubewells on the Indus Plain, two thirds of which are located in the irrigated areas. While Box 6.5: Elimination of Pesticide Subsidies primarily installed for supplementing irrigation supplies, they in Indonesia also have positive impacts on lowering the water table. Pri- vate tubewells pump out an estimated 24 million acre feet In 1985, the Government of Indonesia was subsidizing pes- of water annually as compared to 11 million acre feet from ticides at 82 percent of theretailprice at atotal cost of $128 the 14,996 public tubewells. million. This encouraged intensive use of pesticides by farm- By 1980, the combined SCARPs andprivate tubewells ers: between 1976 and 1985, use of pesticides increased by have had some impact on salinity, as the severe areas had 76 percent. Pesticide resistance set in. In Sevin, pesticide use fallen by half, to 8 percent of the total area. Some previously wiped out the natural predators of the brown planthopper and affected lands were brought into production. However, as a consequence millions of tons of rice were lost to a pest SCARP performance during the 1 980s has declined due to considered not a serious threat a few years ago. In 1976 alone, poormanagement and reduced pumping. In 1990, there were 364,000 tons of rice valued at $100 million were lost. still about 6 million acres in 1990 with a water table depth In 1986, the Government banned fifty-seven brands of less than 5 feet-an increase over previous years. Although of insecticides, twenty of which were heavily subsidized by the government still encourages private pumping, there is no Government, and restricted use of others. Integrated Pest private incentive to do so in saline areas. Further public in- Management was declared as a national pest control strat- vestments of $340 are currently underway, and still more will egy. Three planting seasons later, FAO reported a 90 per- be required. The waterlogging and salinity problems in Pa- cent reduction in pesticide use, and average yields increased kistan are not yet solved. from 6.1 tons per hectare to 7.4 tons. Sources: Ahmad and Kutcher 1992; ESCAP 1992; Mott Source: ADB 1991b. MacDonald 1992. 131 NATURAL RESOURCES MANAGEMENT the demand for water. Besides efficiency consid- are opportunities for taungya cultivation (crops are erations, this will also ease the pressure for new cultivated between tree plantings, and as the trees water development projects. An integrated ap- grow the farmer is given a new piece of land to proach to water resource management is discussed repeatthe process), fallow period management, in- in chapter 7. tensive mixed cropping and perennial cropping. Marginal Lands The difficulty of this strategy is that such cropping models are highly site-specific, and need to be The emphasis in Asia on agricultural intensifica- tested and adopted locally-preferably as part of tion should be matched by a parallel, and in many a strengthened extension system working with ways more difficult, emphasis on appropriate crop- farmers. They also cannot be considered outside of ping on marginal (upland and rainfed) agricultural available markets and the need to return profits. lands. Priority lands are those that are not yet heavily degraded, but rather still suitable for sus- Soil Moisture and Erosion Control. Lack of veg- tainable use provided that adequate conservation etative cover and cultivation without conservation steps are taken. In the case of marginal lands, as practices is the major reason for soil erosion. Ero- elsewhere, prevention is much cheaper than recla- sion can be checked by controlling either the de- mation. tachment or transportation of soil particles. Detach- For marginal lands remaining in production, ment can be controlled by relatively inexpensive the strategy for more sustainable use should be: (a) agronomic measures such as mulching (assuming encourage productive activities that suit the land's local supplies of excess biomass), cover cropping, potential, are profitable, and are environmentally strip cropping or relay planting. These also benefit sustainable; (b) encourage farners to invest in soil the soil by building up organic matter, which helps conservation, through research and demonstration protect it from erosion by absorbing and binding of low-cost, short-term measures; and (c) protect the soil together. However, in areas where rainfall (and over time, upgrade) forest reserves on mar- is heavy and slopes are steep, run-off is unavoid- ginal lands that have high biodiversity value and/ able and will still carry loose soils away. or little potential for agriculture. Each ofthese top- Structural measures such as bench terraces, ics is addressed below. check dams, gully plugs, and diversion ditches, are widely used in Asia to control runoff, but mainly Appropriate cropping on marginal land. on higher potential land. They are far less cost-ef- Rainfed cropland is not one land type. Rather, there fective on lower potential land, for a variety of rea- are infinite gradations of lands that can be, at one sons: (a) high investments in terms of capital and extreme, profitably cultivated on a sustainable ba- labor are required (the cost for terracing in Indo- sis, to low potential land that should revert to man- nesia is estimated to be about $400- 1000 per hect- aged shrubs, trees, or grassland-or, at a minimum, are); (b) failure to relate soil type, rainfall, and crop a long fallow system. Therefore, it is difficult to characteristics results in structural failure; (c) in- discuss cropping on marginal land in any degree adequate drainage increasing runoff and damage of generality. (farmers are often reluctant to lose the 3-5 percent Nevertheless, various models exist for devel- land that is required for adequate drainage); and (d) oping agriculture on marginal lands, usually in- the construction process usually exposes infertile volving systems of diversified combinations of subsoil, which reduces yields in the early years of shrub, tree and other crops. Perennial crops are the structure and is an additional cost to the farmer. ideally substituted for annuals, given their much On marginal lands, therefore, alternative ap- greater drought tolerance and soil conservation proaches to soil erosion control that are low-cost, characteristics. In degenerated swidden areas, there short-term, and easily adopted by farmers are far TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 132 more attractive. Some of the most promising ap- let without fertilizer increased by 25 percent (and proaches involve vegetative technologies (contour with fertilizer increased by 57 percent). It is likely planting, plant grass and legumes, vegetative crop that a significant proportion of the yield increase cover management, contour hedges and contour attributed to vetiver grass system results from the farming) and forestry investments (afforestation, accompanying practice of contour cultivation. community forestry, wasteland plantations, fuelwood plantations). Several species have been Rehabilitation of degraded forest land. Large- proposed for conservation use, including napier, scale reforestation and afforestation projects are vetiver grass, and the tree species Leucaena. becoming increasingly viable in mildly degraded Vetiver grass seems particularly well suited for this areas of China and India, for reasons relating to application (box 6.7). both financial profits and environmental protection. Vegetative systems have other advantages Higher-yield commercial plantations managed by over structural systems than their low cost. Unlike the private sector reduce the pressure on natural structural measures which require detailed site forests. In India, new policies forced industry to get planning, vegetative measures require relatively supplies of forest raw materials from private farm- less technical input. Individual farmers can proceed ers and through community-based social forestry under their own initiative. Data from Maharashtra, schemes. On private farmlands, dramatic changes India, show that soil loss decreased by 3 8-73 per- have taken place with individuals practicing cent with the use of vetiver grass. Data from agroforestry and block planting. Thus, forestry Karnataka, India, shows that on a contour culti- programs have demonstrated the ability of the ru- vated field with vetiver grass, the soil's wilting ral population to respond privately and collectively point was delayed by 14 days, yields of finger mil- to opportunities and incentives. Box 6.7: Vetiver Grass A plant suitable for use as a vegetative barrier has to possess a variety of morphological characteristics: the root system should be aggressive and deep so as not to spread out of line; the crown should be below the surface for protection against fire and overgrazing; the culms tough and unattractive and tough to animals and pests; and the flowers, if any, essentially sterile so as not to pennit spreading by seed. A plant, in use in India as hedges for nearly two hundred years, meets all of the above criteria. Vetiveria zizanoides (vetiver grass) is a densely tufted, awnless, wiry, glabrous perennial grass that is a "shy breeder" and is considered sterile outside its natural habitat of swampland. It is easily adapted to a wide range of climatic and soil conditions and hence persists for a long time without any maintenance. It is propagated by root slips which the farmer may plant himself in roughly sur- veyed contour lines. Given moderately favorable conditions, the hedge would be complete after three growing seasons, fewer with higher fertility, high rainfall and close planting. Vetiver has been tested in field in many countries with success-Australia, Brazil, China, India, Indonesia, Madagas- car, Nigeria, and the Philippines, to name a few. Soils and climates vary tremendously within this group. For example, in China, vetiver is being grown as hedges on 60 percent slopes to protect tea and citrus crops on low pH (4.1 ) red soils. In India, it is being used successfully on black soils (severely cracked vertisols) on slopes of 2 percent or less. Recently, the King of Thailand expressed his intention to encourage vetiver planting to control erosion in the hills of North East Thailand. Establishing and maintaining the system is low-cost and can be carried out entirely by the farner with very little ex- ternal inputs or cooperation with neighboring farmers. Costs for establishing vetiver grass hedgerows in India are estimated to be about S 1 8 per hectare. Economic returns can be quite high: recent analysis shows that while the economic rate of return from earthen bunds is about 22-28 percent, vetiver grass is in the range of 87-95 percent. Source: World Bank 1990c. 133 NATURAL RESOURCES MANAGEMENT Natural Forests classification; and inadequate capacity to delineate Management and technical issues conceming natu- and manage protected conservation areas. In these ral forests center around the need to balance the countries, the Bank recommends maximizing the wood requirements of industry and society with the area retained as functioning forest cover and pre- urgent need to protect pristine habitats and serving adequate areas for biodiversity, catchment, biodiversity. As previously mentioned, tropical and dwelling sites for indigenous people. Commer- forest wood is significantly underpriced by govem- cial policies, including fees, trade policies, and ments in almost every Asian country with substan- regulation of public lands, need to be put onto a tial forest resources. A more full-cost pricing policy more-sustainable footing, using amore complete would both raise revenues and encourage more accounting of the economic costs of current careful management of remaining natural forests practices. along commercial, environmental, and social grounds. Forest-Deficit Countries. The remaining coun- Within Asia's natural forests, the rights and tries in Asia, including China and India, are forest- concessions of indigenous people need protection. deficit countries. Most of the wood consumed in At the same time, to relieve pressures on natural this group is for fuelwood, paper and building pur- forests, it is imperative to research and demonstrate poses. Large reforestation and afforestation natural forest management approaches among in- projects are expanding in order to meet local mar- digenous and local populations. Such approaches ket requirements, and to avoid potentially far cost- although widely discussed, are not often viable. ier wood import bills. On the basis of recent rates Additional work on local management techniques of deforestation and plantation establishment, it is and/or contractual concessions with outside com- estimated that total investment requirement for mercial interests is required. plantation management in Asia will be about $4 While sector reforms and investment priori- billion per year. Large-scale reforestation is also ties need to be country specific, the World Bank needed in forest deficit areas of some of the forest recommends two modes of strategic interventions, surplus countries, such as peninsular Malaysia and based on whether a country is has (a) a forest-sur- parts of Indonesia. plus or (b) a forest-deficit status (those importing Conserving Biodiversity wood and wood products).' While the emphasis in forest-surplus countries should be on natural for- The most effective way to protect biodiversity in est management, the focus in deficit countries the region is through the provision of secure habi- should be on afforestation and compensatory for- tats. The general strategy to improve biodiversity estation programs. conservation (summarized above) emphasizes the institutional requirements to improve protected Forest-Surplus Countries. Fiji, Indonesia, Lao area management. This section looks more into the P.D.R., Malaysia, Myanmar, Papua New Guinea, selection of protected area sites. and the Solomon Islands have significant areas of Asia has made solid progress in the alloca- tropical rainforests remaining, and are capable of tion of land for protected areas. The number of exporting wood in significant quantities. These protected are sites has increased from 300 (cover- countries demonstrate poor compliance with terms ing 477,000 square kilometers) in 1960, to 873 and conditions of logging concessions; inappropri- (covering 836,000 square kilometers) in 1992.23 ate logging incentives; weak coordination of for- However, as indicated above, the presence of pro- estry, industry and trade policies; pricing and in- tected areas is in no way an indication of stitutional policies that result in poor public land biodiversity protection. Many of these areas are management; unresolved problems of land-use paper parks, and some do not correspond with con- TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 134 centrations of significantbiodiversity. Also, many ure 6.3). Projected lending for fiscal 1993-95 is important habitats such as wetlands and marine nearly double (92 percent higher), divided between areas are not adequately protected. $696 million in East Asia and $286 million in South The selection of protected area sites should Asia. In both regions, lending for forestry and be based on a variety of factors-the importance watershed projects is greater than lending for soil of each resource and degree of threat; availability conservation and sustainable agriculture. of information; institutional strength and absorp- tive capacity; local conditions; ability to mobilize Cropland Management resources; and social and political factors. Also, the In East Asia, prior to China's membership in the use of endowments or trust funds should be ex- Bank, much of the lending was for perennial tree plored for countries where financial resources are crop development, agricultural credit, irrigation limited. Most urgent biodiversity needs in Asia are and drainage, and technology development and being addressed through the preparation of dissemination. In South Asia, the Bank has made Biodiversity Action Plans in China, India, Indone- major investments in irrigation. Long-term support sia, Nepal and Viet Nam. by the Bank has also resulted in significant expan- The highest priority countries for biodiversity sion of extension services in all South Asian coun- interventions are those with the greatest species and tries, as well as some research and training. ecosystem diversity-China, India, Indonesia, However, many of these developments took Malaysia, Papua New Guinea, and the Philippines. place at a time when environmental problems were Countries or areas with large number of endemics not considered and the objective was to exploit also belong to the high priority category-Bhutan, natural resources as rapidly as possible to acceler- Nepal, Sri Lanka and the Pacific Island nations. ate economic development. The Bank, with some Countries in mainland southeast Asia with exceptions, did not fully appreciate the level of modest species richness and endemism- Cambo- depletion taking place. Most investment projects dia, Lao P.D.R., Myanmar, Thailand and Viet were viewed in isolation from wider contextual Nam-have lower priority for international inter- issues. For example, irrigation projects diverted vention in biodiversity. Nevertheless, in this region, water at the expense of other sectors, without ad- there is an important need to study the linkages equate analysis of the impacts. between logging and biodiversity protection among Past approaches were heavily centralized, top these countries. In Bangladesh, another lower-pri- down and generally did not include the participants ority country, attention is needed to manage and in project planning and implementation. Work on protect the Sunderbans mangrove swamps. institutional issues-such as credit allocation and loan recovery; subsidies, particularly for fertilizer; The World Bank's Role in Natural irrigation management; organizational efficiency; Resource Management land tenure; and appropriate roles for public and The Bank has played a key role in natural resource the private sector-was in early stages of develop- management in Asia, through a variety of sectors: ment. As a result, many agricultural development irrigation, agriculture credit, tree crops, social for- projects failed to achieve the environmental, social estry, technology development and dissemination, and economic benefit levels that had been ex- and agricultural and forest sector reform. During pected. 1990-92, the environmental components of agri- During the 1980s, Bank agricultural, forestry culture, forestry, and biodiversity projects were and rural development projects began including $512 million (about 24 percent of the total lending components to deal with environmental problems. in land resources), divided between $334 million Soil erosion, especially in the uplands, was recog- in East Asia and $178 million in South Asia (fig- nized as a serious problem affecting productivity, 135 NATURAL RESOURCES MANAGEMENT Figure 6.3: Bank Lending in Land Resources Box 6.8: Vetiver Network in the Asian Regions, Fiscal 1990-92 and Fiscal 1993-95 The Agricultural Division in the Asia Technical Department has established a Vetiverlnformation Network. The network East Asia publishes the Vetiver Newsletter to disseminate information and experiences with vetiver for soil and moisture conser- MIflion uSS vation puiposes. The network also gives Vetiver Incentive 4,000 3,523 Awards to farners who demonstrate innovative conservation measures with vetiver, and to researchers for work related 32000 - 2,732 to the area. The King of Thailand contributed to the 1993 awards. 2.000- recent watershed and soil conservation efforts have 1,000 6 6 focussed on micro-watershed investments which o4 _are profitable at the local level, rather than larger t990-92 1993.95 vtmer only beneficial when one in- cludes downstreazm benefits. South Asia Irrigation efficiency issues are addressed 2,500 through Irrigation Systems Rehabilitation and other 2,128 Water Management projects. Building on the Pa- 2,000 kistan experience (see above, box 6.6), waterlog- 1,636 ging problems have been addressed in India ,s500 through drainage components in irrigation projects since the mid 1970s. Major components were in- 1,000 cluded in the Narmada Water Delivery and Drain- 5oo age Project (fiscal 1985) and the Punjab Irrigation z 1 1 8 246j and Drainage Project Phase II (fiscal 1990). Ir. re- 0 - _ cent years, some Bank-assisted projects in China 1990-92 1 99395 contained components to deal with irrigation and drainage problems. Bank assistance in IPM has _~W~IPUS been limited-in Asia, the only project carrying an D BEiLEWIl IPM component was the Pakistan Agricultural Research II Project (fiscal 1990). Note: includes irrigation, drainage, agriculture, forestry, biodiversity, and watershed Foresty Management management. Early forestry projects were timber extraction projects, land settlement projects, logging opera- and was addressed through watershed development tions and some technical assistance. Beginning in projects. However, resource transfers and incen- the 1970s, following the energy crisis and with the tives for upland farmers to undertake improved focus on poverty alleviation, the lending focus conservation measures rarely worked. Technical shifted. From 1979 to 1990, nearly 52 percent of and institutional approaches that are low cost and forestry lending was for social forestry. In India and easily adopted by farmers proved most successful Nepal, the focus has been on social forestry to in- (box 6.8). It was also learned that it is important to crease fuelwood, small timber, fodder, and other get the scale of the watershed interventions right: forest products. In Bangladesh and Sri Lanka, the TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 136 emphasis has been on improving the management that would convert wildlands of special concern. of existing forests and plantations, establishing In 1991, the Bank adopted a policy that "the Bank plantations, and training. The focus on plantations will support initiatives to expand forest areas allo- has been strongest in East Asia (China, Indonesia, cated as parks and reserves and to institute effec- Malaysia, and the Philippines). tive management and enforcement in new and ex- The emphasis on forestry as part of an inte- isting areas. "24 The Asia Regional Forestrv grated approach to address rural poverty through Strategy (1992) also supports maximizing the area social forestry components led the Bank to give retained as functioning forest cover, and preserv- lower priorities to other aspects such as intema- ing adequate areas for biodiversity. The tional trade, industrial raw material, rational exploi- biodiversity strategy paper (Braatz 1992) under- tation of existing forests, efficient utilization of scored the Bank's comparative advantage in policy forest revenues, and environmental problems. The analysis and suggested that the Bank can contrib- Bank has worked largely within the institutional ute to biodiversity protection through country stud- structure of the borrowers' forestry sector, and their ies and national biodiversity action plans. The Bank level of technology. Unlike tree crop and agricul- is also well placed to support efforts to reconcile ture projects, the Bank's forestry projects did not the needs of people with those of conservation. place sufficient emphasis on the use of high qual- The Bank's involvement in projects or pro- ity planting material and good nursery practices. grams directly focussed on conserving biodiversity The recent Strategy for Asian Forestry De- dates from the late 1980s. Between 1988 and 1992, velopment (1992) is more systematic. In Asia's there were fourteen Bank projects in Asia with forest-surplus countries, the Bank will not be in- substantial biodiversity components, in volved in direct investment in logging in primary Bangladesh, China, India, Indonesia, Malaysia, moist tropical forests. However, the Bank will as- Nepal, Pakistan, Papua New Guinea, the Philip- sist in the adaptation and management of environ- pines, and Sri Lanka. Recent economic and sector mentally sound harvesting techniques in areas to studies have addressed biodiversitv issues in China, be managed for sustained yields. The Bank will Indonesia, the Philippines and Sri Lanka. also support price and revenue policy reform, in- The single most influential factor for the in- volvement of local communities, and development crease of the Bank's involvement in biodiversity of management techniques to encourage sustain- (together with UNDP's and UNEP 's) has been the able management of forests. establishment of the Global Environmental Facil- In the forest-deficit countries of India and Sri ity (see chapter 2, box 2.7). GEF has increased Lanka, and to a lesser extent Bangladesh, the Bank awareness and provided incremental resources for plans to continue to assist sector reform, institu- biodiversity programs and projects. Most tional development, concession management, and biodiversity project components to date focus on research. In Nepal, lending will focus on forestry wildlife protection and protected areas manage- development in the Terai, where there is encroach- ment as part of agriculture and natural resource ment on forest areas by farmers. In China, the (mostly forestry) projects. Also, in cooperation National Afforestation Project drafted environmen- with the World Wildlife Fund-US, the Bank initi- tal guidelines for plantation management that ad- ated the Human Resource Development for Pro- dress species mix, soil conservation, pest and fire tected Areas Management Program to develop con- control, and biodiversity. servation training programs for countries in the Biodiversity Conservation region. The 1986, the World Bank adopted a Wildlands Notes Policy stating that it would not finance any project 1. WRI, UNEP, and UNDP 1992, p. 290. 137 NATURAL RESOURCES MANAGEMENT 2. ESCAP 1992. modities (Slade 1992b). 3. World Bank 1990a. 16. This argument applies to both the rural poor and 4. Some observers indicate that this estimate is high. the larger landholders who may allow sharecrop- 5. ADB 1991a. ping, but for different reasons. For the rural poor, 6. FAO 1989. the short-time horizon is a consequence of the 7. Pingali 1989. struggle for day-to-day survival. Larger land- 8. HCH is a brand name for the pesticide benzene holders often have well-diversified interests in hexachloride (BHC), which is banned in the other sectors, such as commerce and industry, and United States. the rate of return on investments in natural re- 9. FAO 1989. source conservation falls well below the oppor- 10. FAO 1989. tunity cost of their capital. 11. Braatz 1992. 17. Anderson and Thampapillai 1990, p. 11. 12. World Resources Institute, World Conservation 18. Pingali 1989, p. 253. Union, and UNEP 1992. 19. Crosson and Anderson, 1992, p. 82. 13. See, for example, recent work onthe poverty and 20. Grimshaw and others 1993. environment nexus and the economics of the 21. The broader issues of soil degradation, including "frontier," such as articles by Mink (1993) and erosion, compaction, loss of moisture retention, Schneider (1993). and loss of nutrients, are addressed under "mar- 14. Crosson and Anderson 1992, p. 19. ginal lands." 15. Slade found systematic evidence that environmen- 22. World Bank, 1992b. talexlemalitiesleadtotheunderpricing, andhence 23. Braatz 1992, pg. 14. overproduction and use,. of natural resource com- 24. World Bank 199 la. 7 WATER RESOURCE MANAGEMENT Water resource management is critical to Asia's moderate rainfall and large populations, such as economic growth. More than a third of the crop- south India and north China. The long-term prob- land is irrigated, and produces nearly three quar- lem in India is illustrated in box 7.1, where pro- ters of the region's food. Nearly 20 percent of elec- jected demand for water in 2025 is about 45 per- tricity is generated from hydro-electric sources. cent of total renewable resources-a proportion Domestic consumption and sanitation, industry, that is significantly higher than can realistically be transport, fisheries, and aquaculture all place re- developed without extraordinary investment in quirements on water resources. The quality of infrastructure. available supplies is decreasing, exacerbating the Many large Asian cities such as Beijing, gaps between supply and demand is increasing. Jakarta, Madras and Karachi, have water scarcity Public efforts to close these gaps require large problems that are particularly acute. In the North water resource development projects. While these China Plain, available water resources are simply projects provide economic and social benefits, they inadequate to serve the projected populations and can also have adverse social and environmental industries of Beijing and Tianjin without sacrifice impacts that must be considered. This chapter out- of water supplies to agriculture. Jakarta has long lines the magnitude of water resource and water overdrawn its groundwater-leading to saltwater related environmental problems in Asia, and de- intrusion-and faces the need for large expendi- scribes approaches to environmentally and socially tures to develop distant surface water sources. sound water resource management. Water Supply. The total renewable water re- Water Resource Problems sources (average annual flow of rivers and recharg- The most important problems in the water sector ing of groundwater) in Asia is several times annual are water scarcity caused by increasing demand and withdrawals. However, since rainfall and popula- deteriorating quality, and water allocation between tion are spread unevenly, per capita availability var- sectors. These problems are evidence of the strains ies from 200,000 cubic meters in Papua New placed on Asia's water resources by rapid popula- Guinea to below 3,000 cubic meters in Afghani- tion, urban, and industrial growth. The magnitude stan, China, India, Korea, Pakistan, Sri Lanka and of investment-tens of billions of dollars-pro- Thailand (figure 7. 1). The low per capita availabil- posed to keep abreast ofthese problems is evidence ity in India and China it is due to large populations of their immediate cost on the economies of Asia. more than aridity. Rivers, the most frequently used source of Water Scarcity freshwater supply, have highly variable flows and On average, water resources are relatively abundant need regulation by dams and reservoirs to develop in the Asia, except in Afghanistan, Pakistan, and their full potential. Such regulation often has so- the semi-arid regions of northwest India and north- cial and environmental impacts, and is particularly west China. There are also local scarcities, espe- problematic when the river is, as often the case in cially in the more-developed regions which have Asia, shared by two or more countries. Figure 7.2 139 TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 140 Box 7.1: Water Demand in India The total amount of water available to India is about 2,085 billion cubic meters, 1,850 billion of which is from internal sources and 235 billion from intemational rivers. The amount of runoff in India's various basins vary widely, reflecting the spatial dis- tribution of annual rainfall. Most river flow is during the monsoon. InpeninsularIndia, where there is no snow melt runoff, river flows fall off dramatically toward the end of the dry season. Demand forwater is projected to nearly double by 2025 (see below), rising to 45 percent of total available water. The largest increases in demand are expected in agriculture (a 64 percent increase over 40 years) and industry and urban (a combined in- crease of 135 percent). Agriculture is expected to consume 83 percent of the total. Some conflicts between industry and irriga- tion are already developing, as in the Biharpart of the Subamarekha basin. While the domestic water requirement is not high in relation to India's total water resources, local areas of high demand create problems. The megacities of Bombay, Delhi,, and Madras, and the large cities in peninsular India suffer from water scarcity. In the drought-prone areas of India, the provision of domestic and livestock water supplies are a problem during extended dry seasons. The following chart shows trends in water demand projected through 2025. 1985 Demand 2025 Demand Sector (billion cubic meters) % (billion cubic meters) % Agriculture 470 94% 770 83% Livestock and domestic 17 3% 40 4% Industry and Urban 14 3% 120 13% Total 501 100% 930 100% Total demand as percentage of total availability 24% 45% To meet future demand, there are plans to construct additional dams and water transfer projects. It is estimated that about 160 dams higher than 30 neters are under construction in India. Future large dam construction, however, will encounter increasing problems associated with environmental impacts and high social resettlement costs. Large water-transfer schemes have also been designed to address shortages in peninsular India and the Ganges basin, although implementation is still subject to careful economic, environmental, and social assessment. Transfer schemes also create tensions between political jurisdictions, a factor in the Narmada series of dam, water supply, and irrigation projects. However, at least three smaller water-transferprojects are underway: (a) the Telugu Ganga, to transfer water from the Krishna to the Pennar for irrigation and then to Madras for water supply; and (b) two schemes to transfer water from west-flowing rivers in Kerala to Tamil Nadu. Overall, India's current policies do not fully address the larger supply and demand issues. Projected demand-45 percent of available supplies-is an unrealistic goal given the high cost of resource development that this percentage implies. A broader set of instruments and policies, utilizing pricing, conservation, and integrated resource planning, will be required to reduce both projected demand and the overall cost of increasingly expensive infrastructure investments. shows the drainage area and per capita flows of the Water Quality. Water quality and water scar- major Asia river basins. Lakes are important city issues are closely linked: downstream water sources of irrigation and water supply in some ar- supply scarcities-and costs-are directly affected eas, such as Laguna de Bay in the Philippines, Lake by the pollution generated by upstreamn activities Songkhla in Thailand, and Lake Dongting in China. (box 7.2). (While there is very little surface water Many areas of Asia have high volume groundwa- anywhere in the world that can be consumed with- ter aquifers but these can be over-exploited. For out treatment, the degree of surface water pollution example, it is estimated that Indonesia has an ex- obviously dictates the extent of treatment required, ploitable groundwater potential of over 450 billion or the magnitude of the effort to tap alternative cubic meters per year, yet overexploitation in the sources.) Downstream users can either increase Jakarta region has caused salt water intrusion and their expenditures to avoid or treat the effects of contaminated wells as far inland as 5-10 kilome- upstreamn pollution, orthey can try to limit upstream ters from the coast. pollution. To date, the former is the more common 141 WATER RFSOURCE MANAGEMENT is a more binding constraint than water Figure 7.1: Per Capita Availability of Water in Selected quantity. Box 7.3 illustrates the case of Asian Countries Shenyang, China. In Bangkok, the city Afghanisan _water intake in the Chao Phvra is being Bangladeh h _ moved upstreamn to avoid the industrial China wastes now degrading the present intake. India Although low levels of domestic waste Indonesia Indorea * in the municipal water sources can be Malaysia: removed at reasonable cost, heavy met- Nepal als and other toxins found in industrial Paklstn waste and agricultural runoff can not. Thailand _ Groundwater, the primary alternative to Philippines polluted surface water, is increasingly Papua Now Guinea,_____________._.. contaminated bv human waste. leaching 1 10 100 1000I of chemicals, and saline intrusions Thousands of cubic metres caused by overpumping. Source: WRI, UNEP, and UNDP 1992.casdbovrupg Im-pacts on the Marine Environment. Figure 7.2: Major River Basins in Asia Inpadtion to dire impctonmhuma In addition to direct Impact on human Irrawaddy health, polluted water has deleterious IrrawP^ddy I I i 2 consequences for the water ecology, af- Brabrrapul ra I Ifecting both biodiversity and human ekong I: I I welfare. Asian inland fisheries are eco- 'Iecon _ ////I$ , ,nomically important, but harvests (which YangIze I have increased from 4 million tons in Inidus * aZ//t/l ' '1975 to 8 million tons in 1987) are ap- proaching nonsustainable levels. The Ganges * I coastal marine ecology suffers seriously Hwong He I I . . . I w ' ' ' from urban and industrial pollution, most 12 10 8 6 4 2 0 500 1000 1500 2000 2500 of whichoriginatesfromthehighcon- IThoucaads of cu mper yearl [Tbousaadt ol sq kr4 centration of Asian populations along _ Per capita flow M Drainage area coastal zones (box 7.4). Waste from Source: ESCAP 1992. ships is also is a serious source of ma- rine pollution especially near ports and response. along shipping lanes. Deteriorating water quality is probably the most serious environmental problem in Asia. Pol- Water Demand. The largest demand for water in luted water, in light of the limited coverage of Asia is from irrigated agriculture, which accounts treated water supply in Asia, is a leading cause of for 60-90 percent ofthe annual withdrawal in most morbidity and mortality, particularly among chil- countries in the region (figure 7.3). Only in Bhutan dren (see chapters 1 and 3). While untreated sew- and Malaysia is the share of agricultural use below age is the most significant source of organic pol- 60 percent. Water consumption for domestic pur- lution, industrial pollution contributes a much poses (drinking, cooking, washing, and sanitary wider range of pollutants (chapter 4). purposes) ranges from 20 liters to 200 liters per In several urban areas in Asia, water quality capitaper day, depending on the level of affluence TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 142 Box 7.2: Water Quality Constraints in the Hun-Taizi River Basin The Hun-Taizi River Basin forms the heartland of Liaoning Province in northeast China. It has a population of 12.5 million people and contributes significantly to China's heavy industrial output in iron and steel, coal, power generation, petroleum and petrochemicals, metallurgy and machinery. Most of this activity is based around the six urban centers in the Hun-Taizi Basin: Shenyang, Fushun, Benxi, Laioyang, Anshan and Yingkou. The Basin is also an important agricultural area, with well-devel- oped systems for surface water irrigation. Due to shortages in freshwater supply, irrigation water already includes largeproportions of municipal and industrial waste- water. More than 80 percent of the urban wastewater is returned to the river basin untreated, and 60 percent of the wasteflow consists of industrial effluent. Because of the increasing need to reuse surface water due to the limited availability of freshwater in the basin, and the very high cost of diverting water from other basins, surface water quality was identified as a constraint in a comprehensive water resources study conducted in 1988. The study called for selected investments to provide safe municipal drinking water supply' for these cities, and vastewater schemes for three additional cities. Box 7.3: Increasing Costs of Water Supply in Chinese Cities It is estimated that the cost of water supply to Shenyang will increase from $0.04 to $0.11 per cubic meter between 1988 and 2000, a 200 percent increase. The main reason is that the groundwater from the Hun Valley Alluvium, the current water source, has to be rejected as a source of potable water for reasons of water quality. As a result, water will have to be conveyed to Shenyang by gravity from a surface source 51 kilometers from the city. In another city, Yingkuo, the average incremental cost of water diverted from the nearby Daliao River is about $0.16 per cubic meter. However, because of the heavy pollution, this source cannot be used for domestic purposes. As a result, water is currently being transported into the city from the more distant Bi Liu River at a cost of $0.30 per cubic meter. In Shanghai, water intakes have already been moved upstream more than 40 kilometers at a cost of about $300 million. Box 7.4: Pollution in Hangzhou Bay and Zhousan Fishing Area The Hangzhou Bay and Zhousan Fishing Area are located on the east coast of China, immediately south of Shanghai and the Yangtze River delta. This important riverine and marine environment are experiencing various degrees of waterpollution due to disposal of urban and industrial wastes, contaminated agricultural runoff, and the oils andwastes discharged by marine ves- sels. Eutrophication is evident, together with annual red tides. The pollution is threatening important fishing grounds and other living marine resources in the Bay, and may even cause deterioration of the East China Sea, to Nvhich the bay is connected. of the population. In contrast, a typical farmer may growing urban population, combined with urban af- use up to ten to twenty times that amount to irri- fluence, is demanding more water and better ser- gate crops. Water for industry is used primarily for vices for domestic needs. cleaning and cooling; although most is discharged The ratios of withdrawal to renewable water and not consumed, it is often contaminated. resources in the region are quite low (20 percent The trends in future water demand are clearly or less; see figure 7.4), because the bulk of the upward. In agriculture, irrigation has been one of annual flow occurs within a short monsoon season. the factors responsible forthe success ofthe "Green The exceptions are Pakistan and Afghanistan, Revolution." Given Asia's growing population, and where more than a third of available water resour- given its constraints on further cropland expansion, ces are being utilized. The two largest countries in the likely response will be to increase cropland the region, India and China, have the next highest under irrigation. Similarly, the high pace of indus- withdrawal ratios (24 percent and 16 percent, re- trialization is increasing the industrial sector's de- spectively). In the less-industrialized countries of mand for water, particularly in mining, metal in- Asia-Bhutan, Cambodia, Fiji, Papua New dustries, and chemical industries. Finally, a rapidly Guinea, Solomon Islands and Viet Nam-per 143 WATER RESOURCE MANAGEMENT the Jakarta region and Surabaya are Figure 7.3: Freshwater Withdrawals by Sector in Selected in conflict with irrigation demand in the surrounding basin areas. In the 100% r 1 4,,,,,, < 4,,, .,, g 4,, .,,, g 4,,,, . . g _ Philippines, the water supply and power demands of Manila are begin- 90% . - . . - . - . = .,, . . ning to have an adverse impact on ir- rigation in the Central Luzon region 60% _ during drought years. In addition to serving the agri- 40% _ _ _ _ _ cultural, industrial, and urban sec- ._ . ._ . ._ . _ . . _ . . tors, water serves other important but 20% _ _ _ _ _ potentially conflicting purposes. Given the rapid growth ofthe power 0% bnglh Chins Indb ndonmlaPhillppinz sector (chapter 5), hydropower will remain an important part of energy EAgricuturs OiIndusty 9 Domecsc strategies in the region. An often Source: WRI, UNEP and UNDP 1992. understated service of river water (box 7.5) is to maintain saline bal- Figure 7.4: Annual Withdrawal of Water Resources ances in estuaries, especially during low-flow periods when there are Afghanistan I I competing demands. Reduced down- Bangladesh lI I I stream fiowsinto estuaries and other China _ I, I I , wetlands, decreased sedimentation, _ ,,,,>, , and incursion of saline water into India I i I estuaries lead to changes in the Indonesia I I I coastal ecology with serious impacts on breeding grounds of coastal fish Pakistan and other marine life. In sum, there Philippines * i would be a large social and environ- Mallylil mental cost to any water resource alaysl I I , , l l ldevelopment strategy that withdraws 60% 50% 40% 30% 20% 2 0% az 500 1000 1500 2000 2500 too much surface water for agricul- Percent of water resources Cubic meters per capita tural, industrial, and urban purposes, and leaves too little in the river for capita withdrawals are very low (below 100 cubic these other nonconsumptive and en- meters per year), and supply vastly exceeds vironmental purposes. demand. Government agencies have not been effective at resolving conflicting water demands in face of Conflicting Needs limited supplies and deteriorating quality. Present With development and population growth, there are practices are not effective at meeting needs in terms increasing conflicts between sectors. For example, of both quantity and quality. First, the responsibili- the water supply for the city of Hyderabad (India) ties of government in the area of water resource is now in direct conflict with irrigation during low- management have typically been fragmented be- flow years, and the city water supply has been given tween agencies for irrigation, water supply, power, priority. In Indonesia, municipal water demand for and transportation-with equally fragmented re- TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 144 Box 7.5: Ecological Damage Due to Low Box 7.6: Overdevelopment of Water Water Flows Resources in South India The diversion of part of the Ganges River during the low-flow The Ameravathy River, a tributary of the Cauvery, is one of season has done irreparable ecological damage to the delta in the most disputed major rivers in India. In the absence of ri- Bangladesh. Similar problems exist in the eastem part of the parian agreements, Kamataka, the upstream state, has devel- delta in Bangladesh fed by the Brahmaputra and the Meghna. oped large irrigation schemes, depriving the delta (Tamil In Thailand's Chao Phyra Basin, dry-season river flows must Nadu' s rice bowl) of its water. Meanwhile, Tamil Nadu has be expressly managed so as to maintain the saline front in the also been developing the Ameravathy. In the traditional agri- delta; efforts, to date, are considered successful. cultural downstream areas, water is often pumped by illegal pumps along the river bank. Though new electric connections are banned, little is done to control the proliferation of pumps, sults. Second, pricing has not been used anvwhere with the result that little water now reaches the lowest com- in Asia as an explicit mechanism for allocating mands. Meanwhilenew storage dams are being built on tribu- taries both in Kerala and Tamil Nadu, further depriving not water. (De facto pricing does allocate water, how- only the old lands but also the new lands and the pump areas. ever, in those parts of cities forced to buy from private vendors for lack of access to public sup- tivity and in enabling the rapid growth of indus- plies.) Third, water rights are poorly defined. Prop- trial and urban centers. Given the need for further erty rights problems are further exacerbated by lack growth, major projects are envisaged for the future. of coordination amongjurisdictions sharing water. These include transferring water across river ba- In many cases, this has led to overuse of water re- sins, and creating large, multi-purpose reservoirs. sources with concomitant ecological and economic These projects, while clearly providing economic losses. The overdevelopment of the Ameravathy and social benefits, may also have adverse environ- River in South India illustrates one example of frag- mental and social consequences that require mented planning, in which the conflicting claims attention. have not been resolved (box 7.6). Dams and Reservoirs Environmental Considerations in Given the seasonality of rainfall in the region, dams Water Resource Development and impounded reservoirs are an essential part of Water resource environmental problems can be the water management system that provide for ir- divided into two general categories. First are those rigation, flood control, water supply, and power caused by activities in other sectors, such as urban, generation. Given the rapid growth in demand for industry, energy, and agriculture. These environ- energy in Asia, hydropower is one of the most sus- mental impacts are discussed in the respective tainable modes of power generation, when com- sectoral chapters of this report. Second are those pared to the use of dirty coal or nuclear power. Due caused by direct water resource management inter- to these broad benefits, dams are common across ventions, which are discussed here. Clearly all of Asia, and construction of new dams has hardly these impacts are linked: interventions in one part slowed. It is estimated that Asia has over 20,000 of the water cycle cause impacts on water quality/ large dams with heights over 15 meters, more than quantity in other parts of the cycle. 90 percent of them built after 1950. There are over Over the past several decades, governments 400 dams of over 30 meters in height under con- in Asia have embarked on amnbitious water resource struction in Asia (as of 1986). About 180 of them development programs to meet the growing and are in China, and another 160 are in India diversifying needs of their economies. These (figure 7.5). projects have helped countries in the region make However, dams also have local and down- tremendous achievements in agricultural produc- stream environmental impacts. These include the 145 WATER RESOURCE MANAGEMENT loss of forest, agricultural land, and other natural as the benefits of water supplies in lands that would habitats to inundation. The damming of rivers can otherwise be drought-ridden, or the benefits of adversely affect aquatic life by changing river re- avoided greenhouse gas emissions). Although gimes, migration paths and habitat. Reduced down- small dams may fulfill some needs well with less stream flows impact on estuaries, with changes in environmental cost, other needs-typically water the rate of sedimentation that could lead to coastal storage for dry season use and flood control-can realignment, and saline intrusion into coastal wet- only be secured by large dams. As always, only lands. Some reservoirs have posed localized risks explicit analysis of the relevant costs and benefits to human health. The incidence of some water-re- will determine their overall advisability. lated diseases (schistosomiasis, malaria, Interbasin Transfers. onchocerciasis, and Japanese B encephalitis) may increase unless precautionary measures are taken. Water transfers from surplus- to deficit-basins are Resettlement of populations is a major social prob- being considered in many Asian countries. For lem associated with dams and irrigation systems- example, the needs of the 300 million people liv- and was the basis for much of the controversy sur- ing on the North China Plain could be met by wa- rounding the Sardar Sarovar Project in India. More ter transfers from the Chiang Jiang 1,000 kilome- than I million people could be directly affected by ters to the south; Thailand is considering ways to the Three Gorges Project being planned for the supply Bangkok with water while accommodating Yangtze River, although China has handled re- agriculture in the Chao Phyra basin through water settlement quite well in recent years. imports from the Mekong. In India, the Garland Most environmental effects of dams are pre- Canal Scheme has been on the books for more than ventable, mitigable, or compensable, although with a decade, to link the surplus rivers of North India greater effort than is typically being accorded to- with the deficit rivers in peninsular India. A part day. All dams represent some tradeoffs-includ- of the feasibility analysis of these schemes, the ing tradeoffs between costs that are quite local in environmental and social costs must be considered impact and benefits that may be felt faroffsite (such as well (figure 7.6 and box 7.7). For example, in the exporting basin, reduction of down- stream flow could lead to changes in Figure 7.5: Large Dams in China and India (over 30 the coastal ecology. In the transfer re- meters in height) gion, ecological and public health im- pacts could result, requiring mitigative 3000 - / measures. 260........................................................ Flood Con trol Flooding imparts both benefits and costs to society and the environment. soo0- . ................................... Natural pattems of flooding recharge soil moisture and groundwater, and in .. 0 - ................................... arid areas may be the only source of ir- soo . / //E . rigation and soil enrichment. Unex- o- Z _ g / _ g / pected or large floods may, however, China India cause loss of life and property. Flood- ing and consequent losses are increas- U Numbers In 1 mWI Under PonaUucon ing in Asia because of changed water- Source: WRI, UNEP and UNDP 1992. shed characteristics and increasingly TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 146 flood management efforts are usu- Figure 7.6: Environmental Impacts of Interbasin Transfers ally mor e t economic, so- ally more costly in economic, so- I rrp a c t cial and environmental terms. For I npactI on Environrrent example, flood protection em- bankments in Bangladesh inter- fered with fish migration and groundwater replenishment. The Exporting Trarnsfer I rporting environmental impacts of damns region region region were mentioned above. low grouTidwater solilaizatioD Groundwater Development navigation channel t table Df soil Excessive groundwater pumping seawater drainage hydrological can leadto lowering ofgroundwa- intrusion system regirro coastal aquatic ter tables and consequent land ecology ecosystem subsidence and saline water intru- hydrological waterborne sion. This problem is widespread e g irre diseases downstream in China, India, Korea, Sri Lanka ecology and Thailand. In northem China, where groundwater is critical for irrigation and for meeting the do- greater numbers of people and properties at risk. mestic and industrial demand for Beijing and Human responses to flooding may consist of Tianjin, levels in some places have dropped up to structural measures such as dams, reservoirs and 80 meters. In Tamil Nadu, in India, overpumping drainage works, and nonstructural measures such of groundwater for irrigation has led to a drop in as flood plain zoning, building ordinances, warn- groundwater levels by about 30 meters. In ing systems and watershed protection. Structural Bangkok, increased pumping of groundwater Box 7.7: South to North Water Transfers in China Among the various interbasin transfers under consideration in China, the largest and the most important one involves transfer of surpluses from the Chiang Jiang system to the water-short North China Plain more than 1,000 kilometers away, where two large urban centers, Beijing and Tianjin, are located. The increasing water scarcity in this area reflects the area's modest water re- sources endowment, the highly variable precipitation, and the recent rapid development. The last thirty years has seen a rapid growth in irrigated agriculture in this region, together with rapid industrial and urban growth. The surface water flow to the region has been reduced by interceptions in the upper Hai catchment in the Hebei and Shanxi provinces. Three separate routes-designated the East, Middle, and West routes-have been identified and studied in detail. They present different engineering, social, fiancial, and environmental problems. The planners consider it necessary to implement all the three transfers if the water scarcity problems in the North China Plain are to be addressed in the long run. Some of the possible environmental impacts are discussed below. In thewater exporting region, the main impact of the water transferwill occur at the point of transfer and in the river reaches below it. Reduction of flow in the Chiang Jiang, especially during the dry season, could lead to possible seawater intrusion, with negative effects on industrial, agricultural production and municipal water supply in the Shanghai region. In the transfer region, the canals wouldpass throughmajorwatersheds, significantly disturbing the aquatic ecology. Unless proper lining is provided for the canals, and good drainage systems installed, the transfer could result in secondary salinization of soil. Also, urban or industrial areas along the routes could pollute the water. The water importing area north of the Huang He has soil with high salt content. Increased irrigation with imported water could cause the water table to rise, leading to saliniza- tion. In addition, it is estimated that about 200,000 people will be displaced in the transfer region, largely along the Middle route. 147 WATER RESOURCE MANAGEMENT caused a decline of about 50 meters in groundwa- rates concem and action for environmental prob- ter levels during the period 1955-82 and has led to lems, including protecting water quality and using land subsidence of about 60 centimeters over the water effectively. Also, the desire to minimize al- last twenty-five years, aggravating the flooding terations to natural waterways is implicit in the problem (box 7.8). environmental aspects of water resource manage- ment. The integrated water resource management A Comprehensive Framework for approach adopted in Dublin and by the World Bank Water Resource Management recognizes the complementarities between im- In recognition that past performance has been less proved water resource management and environ- than satisfactory and that demands on limited wa- mental sustainability. ter resources are increasing, developing countries This section discusses development goals and and the intemational support community are focus- how they provide the setting for water resource ing increased attention on how to better manage planning and strategy. The strategy then combines water resources relative to the environment. In these goals with economic, social, environmental, 1992, the United Nations-sponsored International and governance principles to make recommenda- Conference on Water and the Environment at- tions for national level strategies for water resource tracted some 500 representatives from more than management. fifty-five countries, twenty international agencies Economic and Social Goals and thirty NGOs, and produced the Dublin State- ment on water resources and environmental prin- Compatible Goals. Most countries embrace eco- ciples. The World Bank's World Development nomic growth and social equity as central devel- Report 1992 devoted a chapter to water resources opment goals, and look to the productive sectors and the environment, and the central policy group of agriculture, industry and natural resource exploi- and both the East and South Asia Regions are all tation to achieve them. Adequate water resources, working on water policies and strategies. sustainably managed, are fundamental to achiev- The emerging consensus at Dublin, the World ing these goals. Bank, and elsewhere is that improved water re- However, meeting these goals involves con- source management and environmental protection flicts and tradeoffs. For example, increasing agri- of water resources are mutually reinforcing. Sound cultural yields and rural incomes in India requires water resource management inherently incorpo- investment in water resource infrastructure that entails high involuntary resettlement with social costs. Promoting groundwater irrigation in Box 7.8: Land Subsidence in Bangkok Bangladesh raises farm incomes but could threaten groundwater availability and quality. Improving In Bangkok, the high level of groundwater pumping has re- water supply while pursuing cost recovery through sulted in the lowering of ground levels and the development user charges could place essential services beyond of a maj or subsidence bowl. Though the bowl is shallow, with userech ould plAcsntialsservices bnd an average depth of less than 0.5 meters, it covers an exten- the reach of the poor. A country's policies and ac- sive area of the city and its suburbs. For example, the areas tions should be formulated with such interdepen- encompassed by the l0 centimeters per year subsidence con- dencies in mind. Fortunately, other choices invoke tour extends over250 square kilometers in eastern Bangkok. fewer conflicts: sustainable forestry management Assuming that neither groundwater recharge nor the construc- in Indonesia reserves watersheds, sustains water tion of polders is undertaken, predictions are that at current rates of groundwaterextraction, by 2000 parts of this areawill yields and prevents erosion and siltation; and in- be below sea level. dustrial development in China through restructur- ing improves water use efficiency and reduces water demand and water pollution. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 148 source development investments frees financial Water as an Economic Good. In the past, water resources for other developmental activities (such resource development and allocation has been in as environmental protection or improving water an era of abundance. As a result, water develop- services to the poor), postpones negative social ment was supply driven and its allocation was by and environmental impacts of construction, post- administrative or political decision. Wastes were pones conversion of land use, and buystime forthe disposed to abundant water bodies at levels that development of improved technologies. An ex- could be readily assimilated. However, the grow- ample of the advantages of demand management ing scarcity of water, the increased quantities of and conservation over investment is shown in wastes, and the increasing financial and environ- figure 7.7. mental costs for incremental water resource devel- In the United States, studies have shown that opment, have all forced recognition that water and price elasticities for water range from -0.1 to -0.3 its waste assimilation capacity have scarcity val- for domestic consumption, -1.0 to -3.0 for indus- ues and should be treated as economic goods. Rec- trial use, and as high as -3.0 to -6.0 for food pro- ognizing the economic value of water will help cessing firms. Even though urban domestic con- ensure rational development and allocation among sumption is highly inelastic, price reforms often competing uses and promote efficient use within involve doubling or tripling water prices-imply- sectors. ing a 10-30 percent reduction in demand in the The economic cost of water use (including domestic sector alone. Reductions in industry capital, operating, social, and environmental costs would be proportionately much greater. of providing supply and preserving quality) and the Demand management through pricing is ap- benefits derived from water use are the most im- pealing because the user decides how much water portant decision parameters employed in water to use and how to achieve conservation. But pric- resource analysis. For example, cost analysis in ing is not without complications. Pricing in the China revealed that the economic rate of retum to agricultural sector may be difficult for cultural and a unit of water for agriculture is less than 10 per- technical reasons. Pricing in urban settings will cent of the return to municipal and industrial us- meet social resistance, and care must be taken to ers-information that is useful in deciding water insure that the underprivileged are provided basic allocation. Correctly costing both environmental water and sanitation at affordable prices. Ecologic and social attributes will help to ensure that both systems whose users and beneficiaries may be dis- favorable and adverse impacts of pending decisions persed, unorganized, or poor, may not be able or are taken into account. willing to pay for environmental protection. There- fore, cultural constraints, the prospects for techno- Pricing. Charging for water and waste disposal at logic innovation, the feasibility of continued (al- or near cost is not common in developing countries, beit limited) subsidies, and judgements on the although it is done more in the municipal and in- intrinsic value of healthy ecosystems, are consid- dustrial sectors than in agriculture. Water pricing erations that may temper pricing decisions. is fundamental to sectoral efficiency, financial strengthening of water companies, and reduction Institutional Implications. The increasingly ac- of public subsidies. In addition, the imposition of cepted paradigm that efficient, sustainable and charges often reduces demand, thereby conserving socially equitable development is founded upon the resources and postponing the need for investment. participation of the beneficiaries implies reexami- The environment stands to gain as conserved wa- nation oftraditional institutional arrangements. As ter is freed for other uses, including the mainte- governments recognize the advantages of moving nance of ecosystem health. Postponing water re- from centralized to decentralized administration Figure 7.7: Conserving Water as an Alternative to Expanding Supply in Beijing Domestic Uses Industry (total savings: t5 percent of (total savings: 33 percent of current domestic consumptioni current industrial consumptionj 0 Discounted cost (USS per cu. meterj 012 Discounted cost lUSt per cu. meterl - Coat of next watet developing project Cost ot next water developing protect 0.10 . ... ...................................... 0.10. *Improved efficiency tn pubiic fecitites MIncreused tecyciing of cooling water In manufacturing ELeaksga induction programn E Recyciog of cooling water ES] Recycting of cooting water nsed ~~frt yetnr o rcoclingwae O'°-DREtecIcicin diof cooling wtier usiedj''''---- 0.00 .g.......... .P.°w. ..............!.P.I.a.......................... In ma tcoadilti ontngElWsearroyin E3tialtlcs orf water-aelicient t 0.06 _ .... 0.04 . ..........06 0.04 ............. 0,0 0.00 0.02 0 10 20 30 40 50 60 70 0 50 t00 150 200 250 300 Quantity conserved (mil cU. meter/yearl Quantity conserved (mil cu. meter/yearj Source: World Development Peport 1992. N t°i zY TOWARD AN ENVIRONNMENTAL STRATEGY FOR ASIA 150 (and government bureaucracy is reduced), their Box 7.9: Water User Associations commercial orientation may cause neglect of the In Sri Lanka. during the early 1980s, USAID funded the Gal poor and the environment. Therefore, in the com- Oya Water Management Project to rehabilitate the Left Bank. mercialization of the water sector, the public regu- Gaining the trust of the farners, the institutional organizers latory role may have to be strengthened and the began organiizing large farmer groups along the distribution regulators kept separate from those engaged in channels. These groups consulted together and communicated development and operations. An example of this their problems to the government irrigation department offi- cials. This process has helped reduce conflicts between farm- is the water pollution control agency in Indonesia ers and helped them communicate better with the government. that does not develop or operate systems, is inde- The improved system has provided greater water supply to all pendently governed by a board, and which is in- tail enders. In one area, cooperating farmers cleared a canal tended to be self-financing through the use of waste allowing cultivation of 1,000 hectares in the dry season, which had been previously left fallow. This benefitted over 300 fami- discharge tariffs. lies and demonstrated that participation, flexibility, and con- Polic Planning sensus were keys to the project's success. Water resource policies, strategies, and planning are weak in many Asian countries, factors that have and action, the structure of the water resource sec- led not only to financial waste and poor service but tor is affected. Decentralization to the lowest ap- also to environmental damage to watershed land propriate level is desirable because public partici- and water resources. With the exception of some pation and intersectoral coordination is facilitated, strong agencies in China, Korea, and Pakistan, the development and operations are more responsive dominant role of single-purpose public develop- to the needs of users, and a sense of ownership is ment agencies, and their failure to consider sectoral engendered. Participation through water user asso- interdependencies from headwaters to estuaries, ciations can help ensure that design choices and has led to these problems. Investment inefficien- management practices are consistent with local cies have also resulted from the failure to link water requirements, and thus valued and maintained by resource development with land use patterns and the local population (box 7.9). trends, especially in urban areas. While water pric- Under decentralization the important central ing and other financial incentives will be increas- role of providing guidance and setting appropriate ingly featured in providing supply and managing standards must continue. In Indonesia, the environ- demand, sound policies and planning are still cru- mental protection mandate (except for large, cen- cial to shaping how efficiently water resources are trally administered projects) is at the provincial or developed and managed. district level where local conditions are best under- The starting point for better water resource stood and impacts are directly felt. Since decentral- management is for each country to define a national ized entities may not be technically able to evalu- strategy which provides an appropriate legal, regu- ate issues, analyze altematives, or operate systems, latory, and administrative framework and guides capacity building at local levels is essential. water allocation. The strategy should spell out Another facet of decentralization is the move water service priorities, water rights, pricing and towards more commercialized types of institutions cost recovery policies, public investment guide- for building and operating systems. These may be lines, environmental guidelines and regulations, of govemment, private or mixed ownership. Ad- and roles of govemment and non-govemmental vantages are the potential for financial and politi- organizations. cal autonomy, with clear and quantifiable criteria Detailed analysis and planning should not be for evaluating performance. Although such entities limited to political or administrative jurisdictions, are usually more efficient at delivering services but be done on the basis of river basins. The rec- 151 WATER RESOURCE MANAGEMENT Box 7.10: Environmental Impact Assessment of the Pak Mun Hydropower Project in Thailand The Pak Mun hydropower project (World Bank-assisted), situated in the northeastern region of Thailand, is being constructed on the Mum River about 5.5 kilometers upstream from its confluence with the Mekong River. It involves construction of a 17 meter high, 300 meter long concrete dam, creating a reservoir submerging an area of approximately 6,000 hectares. The power plant will comprise four 34-megawatt generator units operating at a gross nominal head of 1 1.5 meters. The project creates the potential for irrigating about 25,000 hectares of land. The original design for the dam was based on maximizing the project's power benefits, and called for a Full Supply Level (FSL) of 112 meters, with the dam located at Kaeng Tana Rapids. An EA was carried out for the proj ect in 1982 based on these parameters. In order to reduce the project's adverse environmental impacts (for example, submergence of rapids that are tourist attractions and displacement of a large number ofpersons), the project parameters were substantially revised, at the expense of power benefits. The dam was relocated to Ban Hua Heo thereby preserving the downstream Kaeng Tana rapids and the operat- ing regime of the power station was redesigned to preserve the upstream Kaen Saphu rapids. The FSL was lowered from 112 meters to 108 meters. The number of people to be resettled was reduced from over 20,000 to 1,500. ommended process is not rigid centralized plan- needs are fulfilled. ning, but an indicative process that is derived from All planning and design is done on the as- national economic and environmental strategies. It sumption that facilities will be operated and main- should be multisectoral (that its, integrating agri- tained to provide services over time. However, cultural, urban, industrial, and ecologic needs), and even in situations where long-term planning is rely upon economic analysis which incorporates adequate, operations and maintenance (O&M) environmental and social benefits and costs. plans and management often fall short. The impor- On a more technical level, planning should tance of O&M planning is often under-estimated, integrate physical systems with non-physical mea- and should be given equal priority to long-term sures such as demand management, zoning, and investment planning. drought management; take into account ground and These policy and physical planning impera- surface water interactions; consider water reuse as tives have favorable environmental effects. The an altemative water source; recognize the stochas- river basin framework will help to ensure that tic nature of water and environmental phenomenon downstream environmental assets are not sacrificed and apply risk and sensitivity analysis to that end; for upstream benefits; the incorporation of environ- phase and prioritize actions, thereby reducing in- mental and social costs in decision analysis will vestment costs, risks and impacts while enabling help to ensure that adverse impacts are minimized; leaming and mid-course corrections; and focus first non-physical measures avoid environmental im- on pivotal issues and actions, especially those pacts of construction; and consultation with af- which may prevent irreversible ecological harm. fected groups would draw upon local knowledge While enviromnental concems should be in- of environmental conditions and strategies for re- tegral to the planning process, there may be a need ducing environmental risks. to conduct a stand-alone EA for projects with ma- A Water Resource Management Strategy jor impacts, or if environmental issues were not adequately addressed beforehand. An EA can go a This section recommends a five-element water re- long way in preventing the wrong investment source management strategy for Asian countries to choice and in many cases can also help develop engage in better and more environmentally sound mitigatory measures to reduce impacts (box 7.10). water resource management. The sequential ele- Finally planning should be done in consultation ments are: take immediate actions to prevent irre- with water users, non-water sectors and impacted versible ecological harm; define water sector groups to help ensure social and environmental policy; adjust legislation and institutions; plan pro- TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 152 grams and projects; and build capacity. and policy; (b) a river basin planning entity for The first element is to take immediate ac- water pricing, allocation, investment planning, and tions-to the extent possible, given financial re- (perhaps) service management; (c) a decentralized sources and technical feasibility-to conserve and agency for water quality enforcement, with the protect untainted environmental assets and to pre- power to impose fines; (d) water service compa- vent further irreversible damage to ecologic sys- nies; and (e) local user organizations. Change will tems. One example is to enforce the protection of meet resistance from affected parties and incentives watershed areas already delineated as parks and may be necessary. protected areas from further encroachment. An- The fourth element is to prepare programs other example is to keep persistent toxic substances and projects which are consistent with policy ob- from entering groundwater (even if investment in jectives, generally in the following sequence: temporary storage is required prior to agreement * Because their relative cost-effectiveness is on longer term policies and treatment facilities). usually superior, identify, promote, and Tens of millions of Asians rely on untreated shal- implement nonphysical measures for achiev- low groundwater as their source of drinking water. ing sustainable water resource management. For now and in the foreseeable future, toxic ground- These include demand management through water decontamination is not possible within rea- water and waste discharge pricing to promote sonable cost. Protection need not be expensive and conservation and efficiencv in water use and could include: removing agrochemical subsidies waste management; land use controls to pre- and educating farmers on use; prohibiting waste- vent deforestation and industrialization of producing industries from locating in recharge ecologically sensitive areas; and farmer edu- zones; and investment in common treatment facili- cation to encourage erosion control and safe ties for groups of industries are relatively low cost, agrochemical usage. appropriate measures for addressing this problem. * Because existing facilities are often not used The second element is to discuss and decide to their full design capacity or efficiency, re- upon water-related policy issues and related man- pair and upgrade existing infrastructure, im- agement strategies. These were outlined earlier in prove maintenance and introduce real-time this chapter. Policies adopted within the water sec- system management. With regards to system tor should be complementary to pollution abate- operation, ensure that ecologic needs are ful- ment policies being adopted in other sectors (es- filled (for example, that adequate flows are pecially in industry, municipalities, and maintained below dams). agriculture). Donors can facilitate this policy for- * From a list of altemative and competing pro- mulation stage through preparation of country and spective development projects, prioritize and sector strategy papers, and, more recently, national select programs and projects in terms of a environmental action plans. Occasionally the pro- complete accounting of economic, social and cess is, as it should be, highly participatory (see the environmental costs and benefits. case of Sri Lanka in chapter 8, box 8.3). Policy Nonquantifiable attributes, such as the main- implementation is easier if stakeholders are con- tenance of water quality for human and eco- sulted and involved. logic health, and base flow quantities suffi- Implementing policy will require some leg- cient for ecologic purposes, should be a part islation and/or institutional change, the third strat- of the selection criteria. egy element. The most difficult institutional issues * Plan and design the selected programs and appear to be the careful definition and empower- projects and prepare operating rules, manage- ment of a balanced cluster of required institutions, ment procedures, and monitoring plans that such as (a) a centralized body for setting standards cover, among other things, environmental 153 WATER RESOURCE MANAGEMENT concerns. Phase the plans to capture early all waterand pollution control entities collect data. benefits during the course of implementation. Improving the system requires an analysis of who Build selected projects while ensuring that is collecting what, how reliable it is, and to what environmental safeguards are part of the use it will be put. A river basin orientation for in- construction process. Examples are ensuring tegrated water resource planning suggests that ex- that erosion is controlled, fish migration paths tensive multi-sectoral data will be required. Data are maintained, and downstream or ground- access should be facilitated through an institutional water quality is not affected by construction context that fosters uniformity, coordination, and activities. efficiency. Countries should explore options for Monitor midpoints and outcomes, including this, one of which is to keep separate sectoral and economic, social, and environmental impacts, agency data banks, but to introduce unified control and adjust activities and operations if neces- and oversight. sary. Prepare future plans, designs and opera- tions to reflect lessons learned. The World Bank's Role in Water The fifth strategic element, capacity building, Resource Development is in recognition that comprehensive water resource management requires well-trained and qualified Past Activities personnel. Institutional reform may necessitate The Bank's role in water resource management in retraining and improved working conditions to Asia has been extensive and diverse. The lending build morale and retain trained personnel. Train- program has supported investment projects in al- ing is required for the regulatory as well as sectoral most all related sectors and subsectors-irrigation planning and operating agencies, and at both and drainage, flood control, fisheries, hydropower, central and local levels of administration and water supply, sanitation, urban drainage, inland management. navigation, and port development. Most projects One important area for capacity building is have been sector specific, with the exception of to improve the ability of staff to carry out analysis some multipurpose dams. Financial intennediary that incorporates full environmental and social operations providing agricultural credit have had costs and benefits. Decision makers are often de- large water-related components for the develop- terred from taking appropriate decisions because ment ofprivate sector irrigation facilities. In recent these more difficult costs may not be included in years, the Bank has increased its emphasis on the the analysis. In the case of protecting watershed operations and maintenance of irrigation systems. areas and water quality, this problem is particularly Finally, Bank assistance in other sectors has clear acute in underestimating the environmental cost of linkages to ensuring water supplies (such as wa- doing nothing. As described in chapter 2, due to tershed management and reforestation programs) valuation problems in quantifying environmental and improving water quality (such as urban water degradation, the cost of "business as usual" has supply and sanitation projects). long been underestimated. In terms of number of projects, irrigation and Another area of priority capacity building drainage projects constituted the bulk of Bank concems data collection and dissemination. Avail- water resource lending, followed by water supply ability of Asian data on water quality and upper and sanitation, and single purpose hydropower watershed land degradation is not adequate. How- projects (table 7. 1). Most water supply and sewer- ever, data collection is costly, and data systems age projects have assisted urban communities, but (collection, storage, analysis and dissemination) projects in China, India and the Philippines have must be designed with cost effectiveness in mind, also targeted rural areas. Bangladesh has been the The problem is not always lack of data-virtually main recipient of Bank support for flood control TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 154 Table 7.1: Bank-supported Water Resources Development Projects by Country and Type (1948-90) Type of Project Multi- Hydro- Inland Inland Courtry purpose I&D FCD WS&S power navigation fisheries TOTAL Bangladesh -- 12 10 5 -- 2 2 31 China -- 2 1 1 3 - 1 8 India 2 42 1 13 6 -- -- 65 Indonesia 1 22 3 7 2 -- - 35 Korea 1 3 - 4 -- - 8 Laos _ _ - I Malaysia -- 4 4 1 9 Myanmar 1 2 3 - -- I -- 7 Nepal -- 10 - 4 4 - -- 18 Pakistan 4 14 3 5 -- -- -- 26 Philippines 3 15 -- 12 3 -- - 33 Sri Lanka 1 8 1 3 1 -- -- 14 Thailand - 10 -- 2 5 1 -- 18 Vietnam - 1 -- - -- -- -- I TOTAL 13 155 22 60 26 4 4 274 I&D Irrigation and Drainage FCD Flood Control and Drainage WS&S Water Supply and Sanitation Source: Compiled from Bank Statements of Development Credits and Loans. and drainage projects. The Bank has also supported dom addressed comprehensive water resource inland navigation projects in Bangladesh, management issues directly, although water issues Myanmar, and Thailand, and inland fisheries are covered along with other sectors in general projects in Bangladesh, China, and India. Although economic and investment reviews. Regionally, the Bank involvement in major dams has been mini- Asia Water Resources Strategy (1993) is the first mal-estimated at about 8 percent of major dams being constructed worldwide in 1992-its loans Figure 7.8: Lending for Water Resources in the East Asia and South Asia Regions (Millions US$) have received a disproportionate 2,500 -_______________________ amount of public attention. In re- ' cent years, the Sardar Sarovar 2,000 project in India, the Kedung 1,705 Ombo project in Indonesia, and 1,s00 _ the Pak Moon project in Thailand 1,214 have each been the subject of 1,000 _ heated publicity. (In March 1993, e e 9 India requested that the Sardar 50 _ Sarovar dam loan be cancelled, and the Bank agreed.) 0 _ The Bank's analytical (eco- East Asia South Asia nomic and sector) work has sel- E 1990-92 * 1993-95 155 WATER RESOURCE MANAGEMENT effort at a broadbased review of water resources. ure 7.8). Four of these were water supply and sani- A few individual country strategy papers-on tation projects; one sewerage project; two irriga- Bangladesh, China, Indonesia, and the Philippines, tion projects; and one fisheries project. During for example-have included separate sections on 1993-95, the East Asia Region is expected to water and land use but contain no explicit exami- nearly triple lending in water resources to about nation of interdependence. In contrast, NEAPs seek $1.7 billion, involving seventeen operations. Three to focus on the relationships between macro and of these will be water supply and sanitation sectoral issues, water and the environment. A projects; twelve irrigation projects; and two sew- spinoff ofthe Sri Lanka NEAP has been a national erage projects. water resource master plan and a clean rivers pro- In South Asia, the Bank supported fifteen gram. operations (totalling $1.2 billion) involving water In East Asia, the Bank lent about $670 mil- resources during 1990-92. Seven were irrigation lion during 1990-92 through eight operations (fig- projects; four water supply and sanitation projects; Box 7.11: World Bank Role in Water Resource Management Strategic Element World Bank Role I . Prevent irreversible damage to the water resource Assist countries in estimating the costs of "business as usual" base, to the extent possible through immediate and low cost interms of health, ecology and economics. Demonstrate ben- actions to prevent further degradation in critical areas. efits of preventing further degradation and reversing current trends. Assist in low-cost designs of mitigative measures. 2. Analyze andput in place improvedpolicies. Develop Promote waterresourcepolicies that are sensitive to social and and integrate waterpolicies with land, industrial, agricultural environmental issues. Ensure that Bank lending and support and environmental policy. Usepricing to signal users, promote of other donors is consistent with country strategy papers, efficiency, reduce pollution, and advance cost recovery. ESW and support to NEAPs. Ensure existence of adequate social safety nets. 3. Review the needfor and implement legislative and Support institutional analysis and reform via technical assis- institutional change. Shift from centralized to decentralized tance and policy-based lending. Demonstrate benefits of de- administration. Strive for financial autonomy of development centralization and local-level participation, in such areas as and operating entities. Rely more on enterprise forms of insti- project efficiency and favorable impact upon government tutions with performance-based accountability. Separateplan- budgets. Provide examples and case studies from other coun- ning and operations from regulatory functions. Strengthen laws tries. Promote incentives for change including civil service and regulations, including water law, water rights, environ- reform. Help ensure uniform donor approach. mental law and enforcement. Review the role of non-govern- mental organizations. 4. Improve program and project preparation. Adopt Assist on planning methodologies, including techniques for a river basin basis for planning, and explicitly address multi- land management, erosion control, demand management, sectoral conflicts and needs. Identify, promote and implement project appraisal, social impact analysis and resettlement. non-physical measures; repair and upgrade existing infrastruc- Condition water resource lending on sound sector policy and ture; improve operations and maintenance. Incorporate full project planning (as is being done in the energy sector). Dem- environmental and social costs in project appraisal, and in- onstrate efficiency gains by simulation and case studies. crease local consultation. 5. Build institutional capacity. Improve analytical ca- Provide assistance through lending, and promote support of pability for planning, management, and regulatory functions, other donors. Assist in design of data management framework especially as the system is decentralized. Improve data col- and cost-effective data systems. lection systems and data sharing arrangements. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 156 two fisheries projects; one dam safety project; and ering the regulatory framework and remedial one inland water transport project. During works in regions with critical environmental 1993-95, the South Asia Region expects a 50 per- stress. cent increase in lending in the water resource sec- * Inter-jurisdictional Development and torto about $1.8 billion, through seventeen opera- Management Projects. The Bank could de- tions. Eleven of these are expected to be irrigation velop projects to facilitate and assist in devel- projects, four water supply and sanitation projects, oping water sharing agreements in inter-pro- and two water supply projects. vincial or intemational river basins in the Future directions region. Multipurpose and Single Purpose Sector Most govemments in Asia are programming high Projects. These projects include the more tra- levels of investments in the water resource sector ditional forms of infrastructure projects, for both small and large projects. Some projects whether single sector (irrigation) or multipur- will be controversial, particularly regarding their pose (dams). They have to be consistent with social and environmental costs and benefits. Through country dialogue, technical assistance, and Box 7.1 2: Future World Bank lending the Bank can be of great value in promot- Research Projects ing the principles and strategy for comprehensive Indonesia. The World Bank has a strong relationship with water resource management. Listed in box 7. 1 1 are Indonesia on water resource issues. The Bank has sponsored specific World Bank points of intervention in the sectoral and institutional analysis, workshops and seminars for water sector strategy outlined in the previous sec- policy formulation and consensus building, and sectoral lend- tion. ing with focus on decentralization, bottom-up planning, op- erations, and cost recovery. Also, the Bank's Indonesia Coun- All ofthe elements In box 7. 1 1 are potentially try Department has a water resources committee which helps important components of the Bank's involvement to ensure that multisectoral interdependencies, including en- with its borrowers in the water sector. Many of the vironmental aspects, are taken into account. Two projects now elements could be incorporated into Bank projects. under preparation are the Indonesia Water Supply and Sani- The Asia Water Resources Strategy (1993) pro- tation Project for Low-Income Communities (fiscal 1994), and theKarnatakaRuralWaterSupplyand SanitationProject (fis- poses that the Bank focus on four types of lending cal 1993). instruments for the water resource sector: India. The proposedIndia WaterResource Consolidation Country Water Resources Sector Projects. Project (fiscal 1994) is a time-slice programmatic operation A country or provincial water resource sec- to strengthen the ability of a state irrigation department to ad- dress policy, institutional, operational and environmental is- tor project would introduce water resources sues, with components for data collection, river basin plan- conditionality with a river-basin focus. The ning, feasibility studies, environmental assessments, conditionality would primarily invoke sector completion of ongoing high priority projects, improved O&M, restructuring and pricing reforms. improved regulatory functions, policy reforms for cost recov- Country Water Resources Sector Suppoirt ery, and institutional reforrns for increased accountability. China. The proposed Shanghai Environment Project (fis- Projects. These projects would provide sup- cal 1994)has apolicy component and aninvestment compo- port to countries to strengthen their water re- nent, some of which address water supply and sanitation. The source management capability. Possible ar- policy component includes initiatives for environmental master eas for support include: (a) data collection, planning, increasedwater supply tariffs, and action programs for strengthening long tenn financial viability and economic processing, and dissemination programs; (b) efficiency of urban services. The investment component in- dam safety programs; (c) O&M issues across cludes a program for Huangpu river water quality protection sectors or in the context of improvements in (the municipal water source for Shanghai), incorporating real-time management of multipurpose catchment pollution control, water quality monitoring, and projects; and (d) environmental control cov- solid waste and nightsoil management. 157 WATER RESOURCE MANAGEMENT overall water resource objectives, and in most complementary with other urban and industrial cases should have components for institu- projects that address water pollution issues more tional strengthening in key areas ofthe over- directly. Examples are given in box 7.12. all strategy. In orderto increase the Bank's effectiveness Several World Bank country programs are in this area, the Bank is training its own staff in the starting to employ a more integrated (multisectoral need and methods for comprehensive water re- and market-oriented) approach to water resource source management, and creating informal inter- management, in place ofmore centralized and gov- sectoral organizational arrangements within the emmnent-centered approaches. This approach will Bank to this end. Also, the Bank can encourage help correct for past excesses in water use and donors to ensure that their water sector interven- watershed neglect. These newer projects are tions are compatible with the above strategy. 8 THE WORLD BANK ENVIRONMENTAL STRATEGY The third objective of this report, after describing public resources. the environmental problems in Asia and discussing To better support the priority-setting process, approaches to solving them, is to recommend pri- the World Bank has stepped up its environment-re- ority areas for World Bank involvement. The envi- lated lending, policy dialogue, and research. The ronmental focus ofthe Bank's lending program and final section of this chapter discusses next steps. analytical work has grown over the last several years, and is expected to grow further. However, Priority Areas for Investment there are areas in which the Bank can target its ef- forts, and there are gaps with potential for the Bank Environmnental Projects to do more. Traditional World Bank lending has not addressed Setting Priorities-an Ongoing Process the full range of environmental problems. This is not surprising, since many enviromnental problems have This report has emphasized a framework for im- become widely recognized only within the last de- proving environmental management in Asia. The cade. In response to these problems, the Bank has first step in that framnework is for countries to es- significantly increased its lending for the environ- tablish priorities-a process that is analytically and ment and redesigned some of its approaches. (sometimes) politically difficult. The World Bank, There are several substantive areas on which through its analytical work and policy dialogue, can the Bank places high priority and in which it is push- help countries setpriorities, acceptthe consequences ing to expand its activities (see box 8.1). In the of policy reform, narrow the terms oftheir environ- "brown" sectors, these areas are urban and indus- mental strategies, and implement selected instru- trial pollution, energy sector efficiency (as an ini- ments. With the help of other donors, the World tial priority within a larger energy sector environ- Bank can also assist in capacity building, investment mental agenda), and urban transit. In the "green" programs, and policy implementation. sectors, these areas are soil protection and rehabili- Although this report emphasizes priorities, it -iation (requiring dramatically different strategies does not advocate that some sectors require atten- depending on local conditions) and improved man- tion while others do not. Priorities across sectors are agement of remaining forest resources. Comprehen- not a "zero-sum" game, in which attention to indus- sive water resource management-which cuts trial pollution implies that reforms in forestry should across the brown and green sectors-is also a high be deferred. It is more important, within the resource World Bank priority, since the approach has only constraints of each sector, to identify sector-specific recently been introduced in Asia. The final area, priorities and to start acting on those. No line min- institutional strengthening, underlies progress in istly should be oblivious to the fundamentals of cost- virtually all sectors. effective policy reform-which may actually cost This general list of priority areas does not very little. In response to sectoral needs and ever- apply to any one Asian country. Rather, they are changing budgetary resources, the central govem- areas in which the World Bank expects to target its ment can and will alter the sectoral allocation of resources in coming years. It is not possible in this 159 TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 160 Box 8.1: World Bank Priorities for the Environment Sector Status and Needs Urban Environmental Bank lending addresses urban pollution in only twelve of the eighty-seven cities in Asia with popu- Management lations over I million. Incremental investment is especially required in India and East Asia. How- ever, activities designed to help improve urban environmental management-and to benefit more cities than those receiving Bank loans-should proceed in tandem with investment. Industrial Pollution Of the twenty-six countries in Asia, eight have serious industrial pollution problems. All need tech- Control nical and financial assistance to address the problems, particularly in the areas of policies, enforce- ment, small scale industry, and hazardous wastes. World Bank analysis may be as important as fund- ing. Energy Pricing and Energy subsidies are still pervasive in Asia and are a barrier to sectoral efficiency and emissions Efficiency reduction. In addition, only three Asian countries are actively promoting energy efficiency strate- gies. Efficiency strategies are underinvested on both the supply and demand sides. Again, World Bank analysis may be as important as funding. Urban Transit Vehicle emissions and urban congestion are growing exponentially across Asia. Only strategies that increase the cost of using private cars andprovide alternatives can address both issues simultaneously. Asian investments in public transit, cleaner fuels, and vehicle standards are all increasing. There is a need for more World Bank involvement in these areas-including in mass transit, where viable. Water Resources Water quality is worsening in Asia generally, with majorpublic and ecologic health costs. Increas- Management ing agricultural., industrial, and urban demands are difficult to meet, given the deteriorating quality. Rising costs force efficiency improvements and policy and institutional reform. Bank support for appropriate policies, multisectoral planning within riverbasins, and decentralized management are a 1 Sustainable Agricul- recommended. ture Agriculture on both irrigated and marginal lands is leading to excessive soil degradation. No coun- try in Asia has the techniques and financing necessary for a concerted effort against soil degrada- tion. Pricing reform and strengthening of land tenure will help but must be combined with strong Forest Management commitment to institutional reform and technical research, demonstration, and extension. The World Bank has defined forest-surplus and forest-deficit countries in Asia, with different strat- egies for each. In forest-surplus countries, pricing and trade policy reform are critical, along with improved management of public lands and research on more sustainable commercial and social for- estry. In forest-deficit countries, management, tenure, pricing, protection of remaining reserves, and National and Local reforestation are important. Institutions Except for Japan and Korea, no Asian country has successfully implemented its approved standards and enabling legislation. Long-term support (five or more years) for policy implementation, moni- toring, and enforcement-using innovative means-are of the highest priority. document to make a more focused statement of resource management; projects that address funda- World Bank priorities, since within these categories, mental resource tenure issues in rural areas; and a they will vawy, to a large extent, with the circum- long-term commitment to strengthening environ- stances of each borrower. ment-related institutions in Asia. Obviously, the The recommended priorities are substantially World Bank cannot adequately cover all of these but not fully represented in the 1993-95 World Bank areas single-handedly, and it can make greater ef- planned lending program. The largest gaps concem forts to work with other donors and in providing definition ofthe fiscal and administrative details of intellectual leadership to its borrower countries. cost-effective approaches to urban and industrial Currently, the World Bank is more active in pollution; investment in energy efficiency and ur- brown-sector issues than green-sector issues. This ban transit (two "win-win" approaches with eco- emphasis arises ftom: (a) the more urgent health nomic as well as environmental benefits); lending costs of brown-sector degradation, which foster a that incorporates integrated approaches to water greater willingness to borrow in developing coun- 161 THE WORLD BANK ENVIRONMENTAL STRATEGY tries; (b) the World Bank's comparative advantage the Global Environment Facility (GEF) is not in- in brown-sector issues, which have better-known cluded in these totals. and more policy-oriented strategies than the more The future project pipeline also shows an em- technical and far more site-specific problems of land phasis on newer types of lending over the more tra- use and forest degradation; and (c) the involvement ditional approaches in infrastructure, energy, indus- of other organizations (such as GEF, FAO, IFAD, try, agriculture, and forestry. Projects with newer CGIAR, and various bilaterals and NGOs) in rural approaches generally have broader activities, are development, field-level agriculture, and biodiver- more systematic and institutional in approach, and sity. are more cross-cutting (see Appendix B for details). Environmental lending in Asia will roughly double between 1990-92 and 1993-95, from Figure 8.1: Amount of Bank Lending for Environment Projects nearly$600millionto$1.2billion and Environmental Components in the Asian Regions by Sector, per year, and from 6-7 percent of Fiscal 1993-95 (Million US$) total lending to 12 percent (see figure 8.1, and Appendix B for de- East Asia tails). The fiscal 1995 estimates (rotal = $2,225) probably understate its eventual Utenh*l., 31% size, since the program will be S8 partly based on analytical work now being done. dn"trnEwW, 3_ Two-thirds of the Bank's a708 Ie0. 8% Asian environmental lending will $127 occur in East Asia (figure 8.2). There, the level of lending in the brown sectors (urban, industry, Agrt ReB. 31% and energy) is more than double se that in the green sectors (agricul- ture and natural resources), al- though both are growing rapidly. In South Asia, brown-sector lend- South Asia ing is also much greater than green-sector lending, and both are (Total = $1,370) expanding at a rate slower than in Ulnhuct., 26X East Asia. The sectors of lending S354 reflect, to a large extent, the de- $447 velopment priorities in the two re- gions. Not included in these esti- mates are areas of Bank lending that help the environment through 21_ such intermediate interventions as A- P_, 21X health and education programs, S288 poverty alleviation, agricultural research, and sector reform. Also, Note: "Others" include population/human resources, SALs, and cross-cutting environmental activities. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 162 for new approaches to institutional Figure 8.2: Amount of Bank Lending for the forengt hen in stitutio- Environment, Fiscal 1990-95 (Millions US$) strgthening-with longertire ho- rizons and more sustained resources. 1,600 Possible approaches to introducing 1,400 _Asla +E. Asla .... A .s / \ more significant incentives into insti- 1/200 .............. .tutional lending are suggested in box 1,200 . . . . > T ~~~~~~~~~~~~8.2. 1,000 ........................................ .... ......... There are several areas of Bank lending that are not within the more 800 ... ............... .... . . / .. s . narrowly defined scope ofthis repoit 600 ...................... ..............-. butthat nevertheless complement en- vironmental lending. Population 400 - . .planning falls into this category and 200 . .. ............. is clearly a priority in Asia. Second, efforts at rural poverty alleviation 90 91 92 93 94 95 and nonfarm employment, which Source: World Bank data. may help reduce agricultural pres- sure on marginal lands, are also complementary to the environment. For example, these cross-cutting aspects are re- Third, sensible economywide and trade policies are flected in brown sector lending by: municipal wa- consistent with sustainability; and structural adjust- ter treatment facilities that are planned in conjunc- ment lending, if and when needed, is complemen- tion with local industry; fuel modification for tary to the Bank's environmental agenda. vehicles and industry; demand side energy manage- ment programs involving industrial, commercial, Beyond Project Lending and residential users; and recycling programs for Much ofthe World Bank's strategy for the environ- solid and liquid waste. Cross-cutting approaches in ment extends beyond project lending. This section the green sector address the explicit tradeoffs and underscores the areas of policy dialogue and Bank local conflicts brought about by attempts to improve procedures that are strategically important. land-use management. The distinction between newer and traditional approaches is of interest as Establishing an Active Policy Dialogue an indicator of how the Bank has responded to the One ofthe Bank's greatest comparative advantages environmental priorities emerging in the past few is its analytical capability. This strength is funda- years. In fiscal 1993-95, the $2.2 billion Bank fi- mental to helping Asian countries analyze and ac- nancing of newer environmental projects is 70 per- cept the consequences of policy reform, model more cent greater than the financing of more traditional sustainable growth scenarios, and refine the eco- approaches. nomic and administrative details of policy instru- Investing in institutions is potentially the most ments. As mentioned above, the World Bank-bet- cost-effective component ofthe Bank's environtmen- ter perhaps than other donors-can help countries tal strategy, since the basic policies and institutional set economywide and sectoral priorities. characteristics of Asia's fledgling environmental agencies will be largely shaped in the next five to Integrating National Environmental eight years. Unfortunately, past experience with tra- Action Plans ditional technical assistance (TA) shows it to be the Most Asian countries are drafting NEAPs, and will weakest part ofthe Bank's portfolio. There is a need complete them in 1993. An important part of this 163 THE WORLD BANK ENVIRONMENTAL STRATEGY Box 8.2: Innovative Institutional Strengthening Projects The traditional approach to institutional strengthening is through technical assistance. However, other ideas involve more hy- brid mechanisms that may provide greater and more sustained incentives for institutional strengthening than simple TA. These approaches would adopt larger incentives than TA and would have to have a longer time horizon as well (five years or more). One approach would be to combine traditional investment lending for environmental institutions (that is, for buildings and equipment) with institutional conditionality linked to targets for environmental enforcement. Such targets could be the moni- toring and management of an agreed-upon number of polluting industries, water systems, or forest areas, or the implementa- tion of an agreed-upon approach to environmental management, such as a system of tradable pollution rights or the establish- ment of a working locally-financed environmental fund. A second approach would require the close participation of bilateral donors. Under this approach, strong institutional per- fonnance or policy reform favoring the environment would be rewarded with increased concessionality on environment-re- lated loans. For example, strong institutional performance on a forestry project would lead to lower interest payments on the investment component of the project. Under this scenario, it is not expected that the World Bankwould be able to offer concessionality on its investments. Rather, financial concessions could be granted by the bilaterals to their own cofinanced portion of the project. The benefits would be: (a) the incentive for strong institutional performance could remain in place as long as the loanwas being repaid, as opposed to disappearing once the disbursements were made; and (b) it would encourage environment-related cofinancing arrangements between the World Bank and bilateral donors. work is to place the environment in a development acted upon by national decision- context. This is a key step, for this links actions on makers. critical environmental issues with broader micro- * Assist countries in periodic review of NEAP and macroeconomic variables. Also, a NEAP can recommendations, against the backdrop of help ensure that a balance between top-down and changing circumstances and priorities. This bottom-up activities is preserved. However, the les- will also require new analytical and planning sons from the first round of NEAPs is not all posi- work in areas that may be more focused (both five: in the future, more targeted planning exercises, geographically and sectorally) than NEAPs. geographically or sectorally, may be less unwieldy Strenghening Envronmental Assessments and less political. The priorities for the World Bank in the con- The basic purpose of the EA is to minimize the en- text of NEAPs are: vironmental impacts of proposed projects through * Assist countries to complete their NEAPs, creative comparisons of alternative project ap- through technical assistance and careful re- proaches and mitigatory measures. While EA prepa- view. Sri Lanka was one of the first Asian ration is the responsibility ofthe borrower, both the countries to complete the exercise (box 8.3). Bank staff and borrower countries should use the * Establish linkages between NEAPs and the EA as a planning tool and as a means of adding to Bank's country assistance strategies, through the value of projects. All too often, an EA is viewed closer collaboration between the Bank's envi- as a necessary bureaucratic obstacle, not as an op- ronmental units and country operation depart- portunity to improve project design. ments. Both within the Bank and in its client To help strengthen the use of EAs, there is a countries there is a need to prevent "environ- need to provide more sector-specific EA training for mental separatism." both Bank task managers and trainers in borrower Assist countries in implementing NEAP rec- countries. Increasing the capacity of key agencies ommendations. The World Bank can help to improve the quality of all EAs-whether tied to countries, building ontheirNEAPs, to analyze World Bank lending or not-is an important long- tradeoffs and recommend priorities that can be term goal. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 164 Box 8.3: The National Environmental Action Plan for Sri Lanka The Sri Lanka NEAP was developed under the guidance of a National Environmental Steering Committee, with World Bank assistance, and was completed in June 1991. It focuses on the eight areas of land degradation and water resources, coastal erosion, gem mining, forestry, biodiversity and wildlife protection, urban and industrial pollution, energy conservation and efficiency, and institutional capacity. The NEAP identifies short- and medium-to-long term issues and actions for the Govern- ment, NGOs, and donor community to consider. These recommendations cover policy reform, institutional strengthening, and investment. The recommendations for immediate action include proposals for strengthening legal frameworks, technical assistance to strengthen environmental institutions, and data collection activities to meet requirements for environmental management. For example, for biodiversity conservation, the proposals include establishing the legal framework of the Wildlife Trust Fund, commissioning a team of tourism specialists to develop nature oriented tourism and compiling a national inventory of wetland resources. Medium- to long-term recommendations deal with policy reform, feasibility studies, and investment. Again, for biodiver- sity conservation, the proposals include preparation and implementation of conservation plans for six protected area clusters, pilot projects to test buffer zone protection models, private-public partnerships for wetland management, and preparation and implementation of an elephant management program. The NEAP also estimates the costs of its recommendations. The estimated cost for studies and technical assistance is $28.8 million, of which $7.4 is for immediate action. The investment capital requirements are estimated to exceed $250 million for the period 1992-2000, an amount that far exceeds the level of donor support for the environment in Sri Lanka during the previous decade. Strengthening Consultation and nical Department plans to embark on a program to Participation develop country-specific procedures and manuals on The quality of project design, EAs, and implementa- conducting consultation and to organize in-country dion can be considerably improved by increased con- training seminars using video tapes and other me- sultation with and participation by those affected by dia. The Department also plans to provide techni- the project. Consultation refers to the process in cal advice to task managers in preparing terms of which interested groups can express their opinions reference, selecting consultants (including NGOs) at discrete points during project design. Participa- and reviewing reports. This work represents just the tion suggests a broader involvement by affected first step in a process of participatory design for parties in both project design and implementation. many projects. (Participation can lead to the sharing of Establishing Appropriate decisionmaking authority, whereas consultation does Environmental Standards not.) The findings of recent post-project evaluations The environmental guidelines applied by the Bank have indicated that project success is highly depen- in the assessment of urban, industry, and energy dent on what project stakeholders do within the sector projects have not been updated in nearly a project context-particularly when a large number decade. The older guidelines are now being re-ex- of people are involved, as in urban, small- and me- amined in order to make them more flexible and dium-scale industries, agricultural, and forestry appropriate to project assessment (box 8.4). There projects. While the current World Bank Operational is a role for the Bank to also assist Asian countries Directive 4.01 makes it mandatory thatthe borrower in adopting new standards, especially in shifting consult with affected groups and NGOs in the pro- from concentration-based standards to load-based cess of preparing an EA, field-oriented guidelines standards in the industry and energy sectors. for task managers and borrower country officials are lacking. Encouraging Private Sector Involvement In response to this, the World Bank Asia Tech- Private sector involvement is essential in advanc- 165 THE WORLD BANK ENVIRONMENTAL STRATEGY sis on loan approval is not matched by equal Box 8.4: Revising Environmental Standards emphasis on implementation. A recent Bank The revised World Bank Industrial Pollution Prevention and report-often called the Wapenhans report Abatement Guidelines, now under preparation, consolidate after the task force chairman (World Bank the standards adopted by the OECD countries, and will 1992)-recommends that the Bank pay much present best practices in each of eighteen industries. As a ref- greater attention to project implementation. erence, the Guidelines should be of equal usefilness to Asian These recommendations are especially impor- country governments considering new standards, and to do- nors appraising projects with environmental impacts. tant with regard to environmental concems. The Guidelines recognize the distinctions between new Without adequate supervision, the policies and and older technologies. Some older technologies, even after conditions imposed by environmental assess- renovation, may not be able to meet the standards of the Best ments may not be enforced and the EA pro- Practicable Technology (BPT), which was the common stan- m dard adopted in the early 1 980s, much less Best Available cess itself will become severely marginalized. Technology, Economically Achievable (BATEA), which cor- Ultimately, the credibility ofthe Bank's envi- responds to the newest technologies. An example of this is ronmental work would be undermined. China. Many village enterprises cannot meet BPT, even af- . Strengthening the Bank's role in policy ter upgrading, but neither can they be simply shut down with- out a well-considered period of transition. Up to the point implementation The Bank should icreas- where polluting plants are closed, efforts should be made to ingly address the "nuts-and-bolts" issues as- improve the monitoring of local impacts, upgrade technolo- sociated with policy implementation-taking gies and processes, and increase industrial efficiency as a cost- into account the compromises necessitated by effective way of reducing existing levels of pollution. institutional weaknesses, coruption, and lack of data. Examples of ways to do this are: help- ing the key elements of an environmental strategy. ing countries calculate optimal levels of pol- A one-sided punitive regulatory approach will be lution taxes, by pollutant; suggesting opera- less effective than a collaborative approach in which tional approaches to improved pollution industry is actively consulted in setting standards monitoring, auditing, and enforcement; and and engaged in self-monitoring. A favorable busi- introducing cost-effective approaches to data ness environment will also help facilitate the mobi- collection and use. As mentioned above, insti- lization of required capital, technologies, and ser- tutional strengthening and policy implemen- vice industries. The World Bank can reinforce this tation go hand-in-hand and must be viewed as in its general policy dialogue with borrower coun- a long-term prospect. tries. New Analytical Work Strengthening Internal Processes The World Bank can do more to improve its inter- Economic and Sector Work (ESW) nal processes, especially on projects with environ- The current ESW program concerning the environ- mental or social impacts. As mentioned, the Bank's ment shows a clear emphasis on the brown sectors project pipeline already reflects many of the prior- (table 8.1). This emphasis is largely appropriate, ity areas for environmental lending. Several topics given the problems, pipeline lending emphasis, and concerning how projects are designed, such as World Bank priorities identified above. strengthening NEAPs, the EA process, consultation, Nevertheless, there remain gaps in the Bank's and technical assistance to public institutions, have knowledge in addressing environmental problems, already been discussed. However, even more needs and additional work is recommended. The most to be done: important areas for additional work are presented Strengthening the Bank's role in project in box 8.5, below. Consistent with the need to com- implementation. Within the Bank, the empha- bine both top-down and bottom-up approaches, the TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 166 Table 8.1: Current and Planned Economic and Sector Work (ESW) with an Environmental Emphasis, 1993-95 Agriculture/Forestry/ Urban/Industry Energy Natural Resources Population Regional Asia regional Asia regional Intl. pollution guidelines Atmospheric emissions Water resources, forestry, biodiversity action plans By country By country By country By country China (env. mgt.) China (energy conservation, Indonesia (Eastern Bangladesh Indonesia (env. mgt.) rural energy, and Islands, forestry) Korea Sichuan energy) Laos Malaysia Indonesia Pacific Islands Philippines Papua New Guinea Thailand VietNam Bangladesh (urban) India India (groundwater, forestry) Bangladesh (water) Pakistan Pakistan India Sri Lanka Nepal (water) Pakistan Sri Lanka recommended research programs addresses needs on strengthening. The last topic, data collection and both levels. It is not assumed that the World Bank indicators, will require a longer-term effort. alone should undertake or manage all ofthe above work. However, the Bank, other donors, and coun- Bete Gui on Address Pollution tries themselves all have an interest in seeing work done in these areas. The World Bank has recently completed strategies Poerin thpse themst for Asian forestry, water resource, watershed man- iProve top-down imaking are teqfirsto agement, and biodiversity projects. Similar work ipoeetha st show ( remains to be completed in the areas of urban envi- items in box 8.5. Detailed case studies that show (as ronmental lending, industrial pollution, and energy. quantitatively as possible) a negative impact on O futue grwth ue t unmnage envronmntal (Of the three, however, work on Asian urban guide- duturegradation todae tousefulgo cnvirncenational lines is most advanced.) These strategies are impor- degradation today are useful to convince national tn eas vnweeteei ra gemn leaders and financial managers ofthe importance of tn er ena whre t her is bodutagremen more aggressive environmental care-takcing. Items on environmental pnonties (such as industnal pol- 2ore andg3 bined environmental c osts Item lution control), there is still often little consensus on better3 compared, withw aenvnmentcot fort thepur- the most cost-effective means to target project ex- better compared with abatement costs for the pur- pedtrs pose of setting investment priorities. From the bot- penditures tom-up perspective, some of the most important Next Steps topics for further work are items 5 through 8. Most of the these topics can have fairly immediate pay- Pursuing environmental sustainability in Asia is off in improving project design and institutional important in light of what is at stake. Local pollu- tion issues affecting Asian cities are approaching 167 THE WORLD BANK ENVIRONMENTAL STRATEGY Box 8.5: Priority Areas For Additional Environment-Related Analytical Work Lessons from Experience Case studies on how other countries have addressed environmental issues. Lessons learned can help Asian countries establish priorities; illustrate that prevention is cheaper than reha- bilitation; draw policy, institutional, and political lessons; and help sequence interventions. Valuation Expanded valuation of environmental degradation should be undertaken in both the brown and green sectors. This work is essential to improving the setting of investment priorities, by improving the comparisons between the cost of degradation and abatement costs. The cost of investing in the More analysis should be done on the financial cost of improved environmental policies and environment investments, to better analyze the financing or funding role of the public sector, private sec- tor, the World Bank, and other donors. Approaches to Regulation Practical guidelines and case studies are needed on the design, implementation, and enforce- and Enforcement ment of environmental regulations (including on very practical concerns such as corruption), particularly in the brown sectors. Approaches to Decentraliza- Guidelines are needed on decentralized environmental management, including local manage- tion ment and monitoring responsibilities, local fiscal authority, and central-local relations between the central and local agencies. Public participation, public Positive examples are needed of the role of the public in setting priorities, assisting in project disclosure, and the role of design, and securing long-term commitments to environmental management from both the NGOs government and the private sector. these case studies can be provided only as experience is gained. Flnancing mechanisms Innovative financing mechanisms for environment-related infrastructure investments should be developed, including ways of sharing costs, risks, benefits. This is particularly important in the case of large sewerage and urban transit investments. Rural land management Research is needed on the difficult problems of rural land management, particularly on mar- ginal lands in the context of shifting agriculture, growing population, and rapid deforestation. Data collection Practical methods for collecting comprehensive data on environmentalproblems are needed, particularly on the magnitude of soil erosion and soil degradation,and the magnitude and types of urban and industrial pollution, including hazardous wastes. thresholds of unacceptably high social and economic closely by the World Bank ($603 million). Together, costs. Degrading lands threaten the ability of mil- these two donors accounted for 92 percent of envi- lions to feed themselves. Also, the future environ- romnental funding. The other 8 percent was made mental balance in Asia is critical for the global en- up of USAID ($62 million), UNDP ($27 million), vironment, particularly for greenhouse gas and ADB ($16 million). While OECF has a major emissions, forestry, and biodiversity. The magnitude program in urban environmental management, the ofthe problem requires the concerted efforts ofgov- smaller donors have focussed on the green sectors ernments, donors, the private sector, comnmunities, (UNDP and USAID) and on cross-sectoral techni- and NGOs. Although economic growth in Asian cal assistance (ADB). countries has given these countries some room to Many donor agencies-including the World address environmental issues, the financial and tech- Bank-are currently laying the foundations of their nical resources required are beyond the capacity of environmental work in Asia for the post-UNCED any individual country or donor. period. For example, UNDP is producing a report Many donors and bilaterals are active in Asia, to depict the linkages between its programs and including UNDP, ADB, ESCAP, the Overseas Eco- Agenda 21 in Asia, and has started a pilot Sustain- nomic Cooperation Fund (OECF) (Japan), USAID, able Development Initiative in Asia. ADB has com- and others. As detailed in Appendix C, OECF was missioned a study to identify funding needs and the largest of the major funders of Asian environ- mechanisms for the environment in Asian countries. mental activities in 1991 ($652 million), followed ESCAP has convened the Inter-Agency Conunittee TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 168 on Environment and De- velopmentforAsia,andis Figure 8.3: Applying the Asia Environmental Strategy beginning work on an en- vironmental report to de- ,u.-i velopstrategiestoaddress Envirnmental Country 1 Asia Environmental regional e~ ~~~nvironmental s susResponses Strategy and other regional environmental_is- Issues (Sector-level) sector policy sues (to be completed by papers 1995). The Japanese gov- a. Reality per emmnent has indicated an - inpolicies, interest in setting up an institutions) Asian Environment Fund, S as well as International (NEAP, ESW, etc.) Environmental Technol- ogy Centers (with UNEP). The World Bank's a. Comparison next step will be to com- b. Gaps pare current circum- Sectors Urban stances in each country Transport with the approaches iden- Industry Responses tified in this and other re- Energy tifid inthisand therre-Natural Resourcesa.WrdBn ports, such as each Water a country'sNEAPorsector bCross-cutting b Other institutions strategies (figure 8.3). The purpose of the com- parison is to identify pos- sible gaps in the responses taken by each country tivities described here, including its analytical work to priority environmental issues. The gaps could be and lending, will help both countries and donors in at the level of actual interventions (for example, in- this important area of donor coordination. vestments, policies, or institutional technical assis- In summary, the World Bank environmental tance), or at the level of necessary further analysis strategy for Asia ties together elements ofthe Bank's (such as improved NEAPs or sector studies). Then, lending pipeline, policy dialogue, technical assis- once gaps have been identified, country govem- tance activities, and intemal procedures. Project ments, the World Bank, and possibly other donors, lending, the traditional yardstick of World Bank in- can consider appropriate responses. Clearly each of volvement, is only one of several equally important these steps is ongoing and iterative. components ofthe strategy. This complexity is due Given the magnitude of the environmental to the cross-sectoral nature of environmental con- problems in Asia, efficiency in all areas-in invest- cerns, and to the multipronged approaches required ments, operations, institutions, and donor interven- within sectors to achieve environmental objectives. tions-is highly desirable. The more the donor com- Successful implementation of the environmental munity can agree on priorities and coordinate their strategy proposed here can only be measured approaches, the more likely their work will be in terms of progress across a wide spectrum of complementary and ultimately useful to Asian coun- policy, institutional, social, technical, and financial tries. It is hoped that the cluster of World Bank ac- indicators. APPENDIX A Statistical Profile of Key Environmental Issues in Asia General 1. Basic Indicators 2. Structure of Production, 1965 and 1990 3. Growth of Production, 1965-80 and 1980-90 4. Total Population and Average Growth Rate, 1960-2025 Urban and Infrastructure 5. Population (1950-2000) of Urban Areas in Asia with 4 Million or More Inhabitants in 1990 6. Urban Population in Asia, 1960-2025 7. Access to Safe Drinking Water and Sanitation in Urban Areas in Asia, 1988 8. Total Motor Vehicles in Use in Selected Asian Countries, 1965-89 Energy 9. Energy Consumption in Asia, 1980-90 10. Fossil Fuel Consumption in Asia, 1990 11. Power Sector: Projected Installed Capacity (1999) and Average Annual Growth Rate (1989-1999) Industry 12. Structure of Manufacturing, 1970 and 1989 13. Share and Growth of Some "Dirty" and "Clean" Industrial Sectors 14. Selected Air and Water Quality Indicators Agriculture 15. Land Use in Asia, 1989 16. Cropland in Asia, 1989 17. Area Expansion and Yield Effects of Cereal Production, 1961-63 and 1988-90 18. Fertilizer Consumption, 1961-63 and 1987-89 Note on Statistical Tables .. not available. Regional division used in these tables correspond with World Bank operational departments: EAI (Cambodia, Korea, Lao P.D.R., Malaysia, Myanmar, Philippines, Thailand, Viet Nam) EA2 (China, Mongolia) EA3 (Fiji, Indonesia, Kiribati, Marshall Islands, Micronesia, Papua New Guinea, Soloman Islands, Tonga, Vanuatu, Western Samoa) SAl (Bangladesh, Bhutan, Nepal) SA2 (India) SA3 (Afghanistan, Maldives, Pakistan, Sri Lanka) 169 TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 170 Table A. 1: Basic Indicators GNP per capita Average Annual Life Growth Average annual expectancy Population Rate rate of inflation at birth (millions) Dollars (percent) (percent) (years) mid- 1990 1990 1965-90 1965-80 1980-90 1990 East Asia 1:,577.2 600 5.3 9.3. 6.0 68 EAl Cambodia 8.5 .. .. .. .. 50 Korea, Rep. 42.8 5,400 7.1 18.4 5.1 70 Lao, P.D.R. 4.1 200 .. .. .. 49 Malaysia 17.9 2,320 4.0 4.9 1.6 70 Myanmar 41.6 1.7 8.6 11.4 61 Philippines 61.5 730 1.3 11.4 14.9 64 Thailand 55.8 1,420 4.4 6.2 3.4 66 Viet Nam 66.3 .. .. .. .. 67 EA2 China 1,133.7 370 5.8 -0.3 5.8 70 Mongolia 2.1 .. .. -1.3 63 EA3 Fiji 0.7 1,780 1.9 10.3 5.4 65 Indonesia 178.2 570 4.5 35.5 8.4 62 Kiribati 0.1 .. Maldives 0.2 450 2.8 .. .. 62 Papua New G. 3.9 860 0.1 8.1 5.3 55 Solomon Is. 0.3 590 .. 7.7 10.0 65 Tonga 0.1 1,010 .. .. .. 67 Vanuatu 0.2 1,100 .. .. 4.9 65 Wn. Samoa 0.2 730 .. * 9.2 66 South Asia 1,147.7 330 .1.9 8.3 8.0 58 SAl Bangladesh 106.7 210 0.7 15.9 9.6 52 Bhutan 1.4 190 .. .. 8.4 49 Nepal 18.9 170 0.5 7.8 9.1 52 SA2 India 849.5 350 1.9 7.5 7.9 59 SA3 Afghanistan .. .. .. .. .. 42 Pakistan 112.4 380 2.5 10.3 6.7 56 Sri Lanka 17.0 470 2.9 9.4 11.1 71 Source: Bank economic and social database. 171 APPENDIX A Table A.2: Structure of Production, 1965 and 1990 Distribution of gross domestic product (percent) GDP (millions of dollars) Agriculture Industry Manufacturing Services, etc. 1965 1990 1965 1990 1965 1990 1965 1990 1965 1990 East Asia 92,540 821,230 37 21 32 45 24 34 30 36 EAI Cambodia 869 .. .. .. .. Korea, Rep. 2,996 236,397 38 9 25 45 18 31 37 46 Lao, P.D. R. .. 870 .. .. .. .. .. Malaysia 3,130 42,398 28 * 25 .. 9 47 Myanmar 1,601 22,197 35 57 13 11 9 8 52 32 Philippines 6,010 43,861 26 22 27 35 20 25 47 43 Thailand 4,389 80,172 32 12 23 39 14 26 45 48 Viet Nam .. 9,072 .. .. .. .. .. EA2 China 67,199 364,903 38 27 35 42 28 38 27 31 Mongolia .. 2,251 .. 17 .. 34 .. .. .. 49 EA3 Fiji 132 1,228 34 20 25 20 17 10 41 59 Indonesia 5,981 107,293 51 22 13 40 8 20 36 38 Kiribati............. Maldives .. 101 .. .. .. .. .. Papua New G. 344 3,288 42 29 18 31 .. 12 41 40 Solomon Is. .. 155 .. .. .. .. .. Tonga .. .. .. .. .. Vanuatu .. 141 19 .. 13 .. 5 68 Wn. Samoa .. .. .. .. .. .. .. South Asia 64,510 345,640 44 33 21 26 15 17 35 41 SAl Bangladesh 4,377 22,884 53 38 11 15 5 9 36 46 Bhutan .. 280 43 .. 27 10 29 Nepal 730 2,890 65 60 11 14 3 5 23 26 SA2 India 50,531 254,543 44 31 22 29 16 19 34 40 SA3 Afghanistan 970 .. .. . .. .. .. . . . Pakistan 5,450 35,500 40 26 20 25 14 17 40 49 SriLanka 1,770 7,250 28 26 21 26 17 15 51 48 Source: Bank economic and social database. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 172 Table A.3: Growth of Production, 1965-80 and 1980-90 Average annual growth (percent) GDP Agriculture Industry I Manufacturing Services. etc. 1965-80 1980-90 1965-80 1980-901 1965-80 1980-901 1965-80 1980-90 I 1965-80 1980-90 East Asia 7.3 7.8 3.2 4.8 10.8 10.2 10.3 12.4 8.9 8.0 EAl Cambodia .. .. .. .. .. .. Korea, Rep. 9.9 9.7 3.0 2.8 16.4 12.2 18.7 12.7 9.6 9.2 Lao, P.D.R. .. .. .. .. .. . .. Malaysia 7.4 5.2 3.8 .. 7.1 .. 8.8 4.2 Myanmar .. .. .. .. .. .. Philippines 5.7 0.9 3.9 1.0 7.7 -0.8 6.8 0.1 5.0 2.6 Thailand 7.3 7.6 4.6 4.1 9.5 9.0 11.2 8.9 7.4 7.8 Viet Nam............... EA2 China 6.8 9.5 2.8 6.1 10.0 12.5 8.9 14.4 11.9 9.1 Mongolia .. 5.6 .. .. .. .. .. EA3 Fiji 6.0 1.6 2.4 1.7 4.2 -1.1 3.7 1.1 9.2 2.6 Indonesia 7.0 5.5 4.3 3.2 11.9 5.6 12.0 12.5 7.3 6.7 Viribati............... Maldives .. .. .. .. .. .. .. Papua New G. 4.1 1.9 3.1 1.7 2.7 .. 1.9 1.4 Solomon Is. . .. .. .. .. Tonga . . .. .. .. Vanuatu 3.1 .. 2.1 .. Wn. Samoa . .. .. .. South Asia 3.6 5.2 2.5 3.0 4.3 6.5 4.5 6.8 4.5 6.3 SAl Bangladesh 1.7 4.3 0.6 2.6 1.5 4.9 2.8 2.8 3.6 5.8 Bhutan .. 7.5 .. 4.8 .. 14.8 .. 15.2 .. 7.4 Nepal 1.9 4.6 1.1 4.8 .. SA2 India 3.6 5.3 2.5 3.1 4.2 6.6 4.5 7.1 4.4 6.5 SA3 Afghanistan .. .. .. .. .. .. .. .. .. Pakistan 5.2 6.3 3.3 4.3 6.4 7.3 5.7 7.7 5.9 6.9 Sri Lanka 4.0 4.0 2.7 2.3 4.7 4.6 3.2 6.3 4.6 4.7 Source: Bank economic and social database. 173 APPENDIX A Table A.4: Total Population and Average Growth Rate, 1960-2025 Average Annual Total Populaton Growth Rate (thousands) (Percent) 1960- 1990- 1960 1990 2000 2010 2025 1990 2025 Asia Region 1,483,305 2,776,491 3,312,721 3,771,015 4,348,027 2.1 1.3 East Asia 908,652 1,630,745 1,886,263 2,068,610 2,300,452 2.0 1.0 South Asia 574,653 1,145,746 1,426,458 1,702,405 2,047,575 2.3 1.7 EAI 151,195 299,552 358,594 414,657 486,866 2.3 1.4 Cantboda 5,433 8,246 10,046 11,539 13,989 1.4 1.5 Korea, Rep. 25,003 42,793 46,403 49,459 51,631 1.8 0.5 Lao, P.D.R. 2,177 4,139 5,463 6,838 8,600 2.2 2.1 Malaysia 8,140 17,891 21,983 25,169 30,116 2.7 1.5 Myanmar 21,746 41,675 51,129 60,567 72,619 2.2 1.6 Philippines 27,561 62,413 77,473 92,095 111,509 2.8 1.7 Thailand 26,392 55,702 63,670 71,594 80,911 2.5 1.1 Viet Nam 34,743 66,693 82,427 97,396 117,491 2.2 1.6 EA2 658,451 1,141,250 1,302,027 1,398,934 1,517,414 1.9 0.8 China 657,492 1,139,060 1,299,180 1,395,328 1,512,585 1.8 0.8 Mongolia 959 2,190 2,847 3,606 4,829 2.8 2.3 EM3 99,006 189,943 225,642 255,019 296,172 2.2 1.3 Fij 394 764 883 994 1,121 2.2 1.1 Indornsia 96,194 184,283 218,661 246,680 285,913 2.2 1.3 Kiibati 41 66 72 78 80 1.6 0.6 Maldives 92 215 283 350 432 2.9 2.0 Papua New Guinea 1,920 3,874 4,845 5,846 7,291 2.4 1.8 Solomon Island 124 320 429 551 743 3.2 2.4 Towga 65 95 92 91 89 1.3 -0.2 Vanuatu 65 158 206 257 331 3.0 2.1 WesternSamoa 111 168 171 172 172 1.4 0.1 SAI 61,690 136,252 176,579 219,484 273,030 2.7 2.0 Bangladesh 51,419 115,593 150,589 188,196 234,987 2.7 2.0 Bhutan 867 1,516 1,9D6 2,388 3,070 1.9 2.0 Nepal 9,404 19,143 24,084 28,900 34,973 2.4 1.7 8A2 Incia 442,344 853,094 1,041,543 1,223,483 1,442,386 2.2 1.5 SM3 70,619 1 56,400 208,336 259,438 332,159 2.7 2.2 Afghanistan 10,775 16,557 26,511 32,422 40,475 1.4 2.6 Pakistan 49,955 122,626 162,409 205,496 267,112 3.0 2.2 SriLanka 9,889 17,217 19,416 21,520 24,572 1.9 1.0 Source: United Nations, 1991, 'World Urbanizaton Prospects 1990.' TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 174 Table A.5: Population 11950-2000) of Urban Areas in Asia with 4 Million or More Inhabitants in 1990 Average Annual Growth Rate (Percent) Country/ (thousands) 1950- 1960- 1970- 1980- 1990- Cities 1950 1960 1970 1980 1990 2000 1960 1970 1980 1990 2000 EAST ASIA: China Beijing 3,913 6,269 8,087 9,029 10,787 14,041 4.8 2.6 1.1 1.8 2.7 Shanghai 5,333 8,839 11,154 11,739 13,422 17,022 5.2 2.4 0.5 1.3 2.4 Shenyang 2,091 2,873 3,493 3,913 4,763 6,308 3.2 2.0 1.1 2.0 2.8 Tianjin 2,374 3,618 5,222 7,268 9,371 12,741 4.3 3.7 3.4 2.6 3.1 Indonesia Jakarta 1,969 2,776 3,916 5,985 9,253 13,739 3.5 3.5 4.3 4.5 4.0 Korea. Rep. Seoul 1,021 2,361 5,312 8,283 10,979 12,692 8.7 8.4 4.5 2.9 1.5 PhiliDpines Metro Manila 1,544 2,274 3,535 5,961 8,475 11,795 3.9 4.5 5.4 3.6 3.4 Thailand Bangkok 1,360 2,151 3,110 4,747 7,156 10,256 4.7 3.8 4.3 4.2 3.7 SOUTH ASIA: Bangladesh Dhaka 420 647 1,503 3,290 6,616 12,162 4.4 8.8 8.1 7.2 6.3 India Bangalore 764 1,173 1,616 2,812 4,993 8,219 4.4 3.3 5.7 5.9 5.1 Bombay 2,901 4,060 5,812 8,067 11,169 15,381 3.4 3.7 3.3 3.3 3.3 Calcutta 4,446 5,500 6,912 9,030 11,835 15,680 2.2 2.3 2.7 2.7 2.9 Delhi 1,391 2,283 3,531 5,559 8,766 13,240 5.1 4.5 4.6 4.7 4.2 Madras 1,397 1,706 3,030 4,203 5,702 7,773 2.0 5.9 3.3 3.1 3.1 Pakistan Karachi 1,028 1,848 3,119 4,946 7,702 11,658 6.0 5.4 4.7 4.5 4.2 Lahore 826 1,264 1,964 2,850 4,092 5,954 4.3 4.5 3.8 3.7 3.8 Source: United Nations, 1991, 'World Urbanization Prospects 1990.' 175 APPENDIX A Table A.6: Urban Population in Asia, 1960-2025 Average Annual Growth Rate Urban Population Urban Population (%) as Percent of (thousands) 1960- 1990- Total Population 1960 1990 2000 2010 2025 1990 2025 1960 1990 2025 Asia Region 266,209 840,865 1,296,156 1,752,929 2,473,201 3.9 3.1 17.9 30.3 56.9 East Asia 170,163 543,723 849,409 1,099,939 1,447,547 3.9 2.8 18.7 33.3 62.9 South Asia 96,046 297,142 446,747 652,990 1,025,654 3.8 3.6 16.7 25.9 50.1 EAl 30,662 104,351 145,236 194,922 276,486 4.2 2.8 20.3 34.8 56.8 Cambodia 559 959 1,460 2,276 4,223 1.8 4.3 10.3 11.6 30.2 Korea, Rep. 6,929 30,794 37,773 42,568 46,067 5.1 1.2 27.7 72.0 89.2 Lao, P.D.R. 173 770 1,372 2,229 3,831 5.1 4.7 7.9 18.6 44.5 Malaysia 2,053 7,701 11,255 14,702 20,394 4.5 2.8 25.2 43.0 67.7 Myanmar 4,189 10,316 14,523 21,422 34,365 3.0 3.5 19.3 24.8 47.3 Philippines 8,350 26,602 37,775 51,201 72,940 3.9 2.9 30.3 42.6 65.4 Thailand 3,302 12,609 18,738 26,669 39,772 4.6 3.3 12.5 22.6 49.2 Viet Nam 5,107 14,600 22,340 33,855 54,894 3.6 3.9 14.7 21.9 46.7 EA2 125,234 381,948 616,083 784,709 998,817 3.8 2.8 19.0 33.5 65.8 China 124,892 380,803 614,514 782,538 995,477 3.8 2.8 19.0 33.4 65.8 Mongolia 342 1,145 1,569 2,171 3,340 4.1 3.1 35.7 52.3 69.2 EA3 14,267 57,424 88,090 120,308 172,244 4.8 3.2 14.4 30.2 58.2 Fiji 117 300 378 484 668 3.2 2.3 29.7 39.3 59.6 Indonesia 14,032 56,293 86,401 117,767 167,979 4.7 3.2 14.6 30.5 58.8 Kiribati 7 24 31 39 49 4.2 2.1 17.1 36.4 61.3 Maldives 10 63 106 160 246 6.3 4.0 10.9 29.3 56.9 Papua New G. 51 613 979 1,560 2,791 8.6 4.4 2.7 15.8 38.3 Solomon Is. 11 34 59 106 220 3.8 5.5 8.9 10.6 29.6 Tonga 12 19 23 29 39 1.5 2.1 18.5 20.0 43.8 Vanuatu 6 41 69 107 176 6.6 4.3 9.2 25.9 53.2 Wn. Samoa 21 37 44 56 76 1.9 2.1 18.9 22.0 44.2 SAl 2,958 20,923 38,143 63,065 110,357 6.7 4.9 4.8 15.4 40.4 Bangladesh 2,644 19,005 34,548 56,999 99,078 6.8 4.8 5.1 16.4 42.2 Bhutan 22 81 149 272 584 4.4 5.8 2.5 5.3 19.0 Nepal 292 1,837 3,446 5,794 10,695 6.3 5.2 3.1 9.6 30.6 SA2 India 79,413 230,269 336,542 480,806 737,155 3.6 3.4 18.0 27.0 51.1 SA3 13,675 45,950 72,062 109,119 178,142 4.1 3.9 19.4 29.4 53.6 Afghanistan 861 3,021 5,884 9,129 16,148 4.3 4.9 8.0 18.2 39.9 Pakistan 11,042 39,250 61,477 93,385 151,529 4.3 3.9 22.1 32.0 56.7 Sri Lanka 1,772 3,679 4,701 6,605 10,465 2.5 3.0 17.9 21.4 42.6 Source: United Nations, 1991, "World Urbanization Prospects 1990." TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 176 Table A.7: Access to Safe Drinking Water and Sanitation in Urban Areas in Asia, 1988 Percentage of PoDulation with Access to: Safe Drinking Water Sanitation Services EAl Cambodia Korea, Rep. 91 99 Lao, P.D.R. 61 Malaysia 92 Myanmar 38 35 Philippines 100 98 Thailand 67 84 Viet Nam 48 48 EA2 China 87 100 Mongolia 78 100 EA3 Fiji 95 90 Indonesia 60 40 Kiribati Maldives Papua New Guinea 93 54 Solomon Island 82 56 Tonga Vanuatu Western Samoa SAl Bangladesh 37 37 Bhutan 100 100 Nepal 66 n/a SA2 India 79 38 SA3 Afghanistan 39 20 Pakistan 99 40 Sri Lanka 87 74 Asia Average 82 77 Source: World Bank data; World Resources Institute, 1992, "World Resources 1992-93: Toward Sustainable Development." 177 APPENDIX A Table A.8: Total Motor Vehicles in Use in Selected Asian Countries, 1965-89 Year China India Korea Thailand 1965 289,373 1966 322,904 787,973 1967 374,446 824,173 1968 384,939 890,965 1969 436,413 969,097 1970 487,557 1,041,600 129,371 1971 542,896 1,118,989 144,337 400,532 1972 642,792 1,203,148 150,035 419,386 1973 717,583 1,111,668 170,714 451,655 1974 825,226 1,195,761 183,544 555,909 1975 946,833 1,215,500 200,521 604,759 1976 1,100,463 1,244,439 226,320 603,179 1977 1,250,827 1,379,642 275,312 704,233 1978 1,429,229 1,445,801 384,536 758,896 1979 1,585,678 1,572,630 494,378 841,727 1980 1,680,960 1,666,843, 527,729 881,860 1981 1,873,049 1,797,066 571,754 959,601 1982 2,053,174 1,957,991 646,996 986,736 1983 2,227,130 2,176,585 785,316 1,124,504 1984 2,433,713 2,253,000 948,319 1,201,819 1985 2,887,126 2,536,952 1,113,430 1986 3,574,463 2,815,836 1,309,434 1,470,417 1987 4,122,939 3,108,495 1,611,375 1988 4,776,352 3,573,725 2,035,448 2,667,832 1989 5,274,663 3,971,154 2,658,598 Sources: Motor Vehicle Manufacturers Association, "World Motor Vehicle Data", 1991; Internabonal Road Federation, "World Road Statistics" various years. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 178 Table A.9: Energy Consumption in Asia, 1980-90 Average Per Capita Eneo Eneroy Annual Enercv Intensity Consumption Growth Rate Consumption (KGOE per ('000 MTOE) (Percent) (Kg per capita) 1987 USSGDP) 1980 1990 1980-90 1980 1990 1980 1990 Asia Region 597,258 1,051,356 5.8 262 383 0.99 0.84 East Asia 483,489 831,744 5.6 350 514 1.26 0.96 South Asia 113,769 219,612 6.8 126 195 0.51 0.57 EAl 73,501 143,441 6.9 301 481 0.44 0.37 Cambodia 99 153 4.4 60 59 .. 0.13 Korea, Rep. 35,998 74,095 7.5 1,050 1,898 0.52 0.44 Lao, P.D.R. 77 104 3.1 33 39 . 0.08 Malaysia 7,914 18,867 9.1 616 974 0.34 0.46 Myanmar 1,415 1,758 2.2 60 82 0.16 0.17 Philippines 11,159 13,135 1.6 258 215 0.34 0.34 Thailand 12,119 28,758 9.0 241 352 0.38 0.42 Viet Nam 4,720 6,571 3.4 92 100 .. 0.11 EA2 383,719 648,268 5.4 390 571 2.40 1.73 China 381,849 645,528 5.4 428 598 2.42 1.74 Mongolia 1,870 2,740 3.9 1,200 1,277 0.88 0.76 EA3 26,269 40,035 4.3 172 218 0.45 0.41 Fiji 242 264 0.9 526 538 0.21 0.19 Indonesia 25,271 38,795 4.4 190 272 0.47 0.42 Kiribati 9 7 -2.5 159 .. 0.35 Maldives 14 32 8.6 92 144 .. 0.35 Papua New Guinea 631 792 2.3 229 .. 0.23 0.26 Solomon Island 34 54 4.7 1,669 .. 0.38 0.32 Tonga 13 25 6.8 142 .. .. 0.35 Vanuatu 21 22 0.5 339 .. 0.22 Western Samoa 34 44 2.6 423 0.33 0.44 SAI 2,952 6,235 7.8 29 49 0.20 0.27 Bangladesh 2,765 5,914 7.9 34 57 0.22 0.30 Bhutan 8 54 21.0 .. 13 0.05 0.18 Nepal 179 267 4.1 15 25 0.09 0.08 SA2 India 97,490 185,444 6.6 161 231 0.54 0.59 SA3 13,327 27,933 7.7 118 186 0.50 0.59 Afghanistan 545 2,544 16.7 56 90 Pakistan 11,637 23,828 7.4 166 233 0.54 0.60 Sri Lanka 1,145 1,561 3.1 126 179 0.23 0.21 Note: .. = no available data. Sources: World Bank data: United Nations, 1992, "1990 Energy Statistics Yearbook." 179 APPENDIX A Table A.10: Fossil Fuel Consumption in Asia, 1990 Coal [ Gas Oil Total Fossil Fuel 1 '000 MTOE Share I '000 MTOE Share '000 MTOE Share '000 MTOE Share EAI 34,131 6.0% 12,089 33.0% 89,444 43.3% 135,664 16.7% Share /a 25.2% 8.9% 65.9% 1 00% Cambodia 0 0 150 150 Korea, Rep. 24,760 3,023 41,217 69,000 Lao, P.D.R. 0 0 77 77 Malaysia 1,341 3,171 13,749 18,261 Myanmar 73 1,002 577 1,652 Philippines 1,476 0 10,666 12,142 Thailand 3,406 4,893 19,977 28,276 Viet Nam 3.075 0 3,031 6,106 EA2 533,567 93.6% 14,187 38.7% 90,874 44.0% 638,628 78.5% Share /a 83.5% 2.2% 14.2% 100% China 531,567 14,187 90,147 635,901 Mongolia 2,000 0 727 2.727 EAS 2,488 0.4% 10,399 28.4% 26,292 12.7% 39,179 4.8% Share/a 6.4% 26.5% 67.1% 100% Fiji 10 0 225 235 Indonesia 2,477 10,396 25.133 38,006 Kiribati 0 0 7 7 Maldives 0 0 32 32 Papua New G. 1 3 752 756 Solomon Is. 0 0 54 54 Tongo 0 0 25 25 Vanuatu 0 0 22 22 Wn. Samoa 0 0 42 42 E. Asia Total 570,186 100% 36,675 100% 206,610 100% 813,471 100% Share /a 70.1% 4.5% 25.4% 100% SAI 316 0.2% 3.679 14.8% 2,085 3.5% 6,080 2.9% Share /a 5.2% 80.5% 34.3% 100% Bangladesh 279 3,679 1.880 5,838 Bhutan 13 0 27 40 Nepal 24 0 178 202 SA2: India 124,285 98.2% 9,267 37.2% 45,808 76.2% 179,160 84.8% Share /a 69.4% 5.2% 25.5% 100% SAS 1,977 1.6% 11,955 48.0% 12,183 20.3% 26,115 12.4% Share /a 7.6% 45.8% 46.7% 100% Afghanistan 100 1,760 619 2,479 Pakistan 1,876 10,195 10,274 22,345 Sri Lanka 1 0 1,290 1,291 S. Asia Total 126,578 100% 24,901 100% 59,876 100% 211,355 100% Share /a 59.9% 11.8% 28.3% 100% /a The share of total fossil fuel use. Source: United Nations, 1992, '1990 Energy Statistics Yearbook.' TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 180 Table A.1 1: Power Sector: Projected Installed Capacity (1999) and Average Annual Growth Rate (1989-99) Totbl Coal on1 Gas HY Gmtrrml Nucebw GrvahGwth Growth Growth rw Oth Groth Growth Rate Rate Rate Rabe Rate Rate Rate (MW) N6 (MM) N% (MW) (% (MM (% (MM (% (MM) (%) (MW) N% 1 999 198-99 19 1989-99 1999 1989-99 1999 198 9-l9 1999 1989-99 lm 1999 I -99 1999 1989-99 AiL Region 490,552 7.7 257.755 7.6 22,104 -1.3 22,476 9.5 143,724 8.2 2,903 11.1 23.530 9.6 Esd Asia 306,798 e.0 160.605 6.8 20,973 -1.5 15,313 8.8 86,744 6.5 2,963 11.1 14,200 6.4 ChWda 220,000 6.6 138,700 6.6 9,000 0.0 0 0.0 70,400 7.3 0 0.0 3.900 - Fji 173 1.6 0 0.0 67 0.0 0 0.0 100 2.9 0 0.0 0 0.0 ItIdon"eS 20,30D 8.9 9,740 18.9 3,537 -1.4 2,972 17.8 3.716 5.5 395 10.9 0 0.0 Kor_. Rep. 31,931 4.1 12,50 12.9 3,331 -3.6 2.300 -1.0 3,500 2.9 0 0.0 10,300 3.1 Lao,P.D.R. 169 0.0 0 0.0 14 0.0 0 0.0 155 0.0 0 o.0 0 0.0 Maysia 8,538 5.0 Go0 0.0 737 -10.5 S.629 19.1 1,572 1.1 0 0.0 0 0.0 Mywanar 1,597 8.4 60 0.0 130 -0.4 61o 9.8 797 11.1 0 0.0 0 0.0 Papun N. Guie 394 6.0 0 0.0 119 2.9 0 0.0 275 7.6 0 0.0 0 0.0 Philppine 9,467 5.0 1.005 14.8 2,621 1.0 0 0.0 2,673 2.3 2,568 11.1 0 0.0 Thnd 14,169 0.6 5,400 -2.9 1,417 -1.3 3,802 5.4 3,550 4.7 0 0.0 0 0.0 SothAia 183,754 11.4 91,150 9.1 1.131 2.9 7,163 11.0 56,980 11.4 0 0.0 9,330 17.9 Bangldeh 4,908 9.6 600 - 436 1.2 3,642 10.5 230 0.0 0 0.0 0 0.0 Idid 158.765 10.4 90,400 9.1 315 6.5 3,521 11.5 58,200 11.9 0 0.0 9,330 17.9 Nepal 445 5.5 0 - 10 -9.1 0 0.0 435 6.4 0 0.0 0 0.0 Pajotln 18.000 7.0 - - - - - - - - - - - - SrLarka 1,635 3.0 150 - 370 3.2 0 0.0 1,115 1.7 0 0.0 0 0.0 Source: E.AL Moor and G. Smt I. 1991.Capbt E pendbtLffor a csEtic Pw inthe Owlgping CoU*"inthe 199W . Energy Swis Paper 21, Worhd Bank Washington, D.C. 181 APPENDIX A Table A. 12: Structure of Manufacturing, 1970 and 1989 Value Added Distribution of manufacturing value added in manufacturing ________(percent:. curren prices) (millions Food, beverages Textiles Machinery and current US$) and tobacco and clothing transport equip. Chemicals 1970 1989 1970 1989 1970 1989 1970 1989 1970 1959 East Asia 34,582 274,680 . . . . . EAl Cambodia . . . . . . . Korea, Rep. 1,880 65,215 26 12 17 14 11 30 1 1 9 Lao, P.D.R. . . . . . . . Malaysia 500 .. 26 18 3 7 8 23 9 14 Myanmar 225 1,546 . . . . . Philippines 1,665 10,728 39 41 8 8 8 9 13 10 Thailand 1,130 17,635 43 29 13 18 9 13 6 7 EA2 China 27,555 145,646 .. 12 .. 14 . 26 .. 12 Mongolia . . . . . . . EA3 Fiji 27 ill 61 .. 2 . 3 .. 3 Indonesia 994 17,272 65 .. 14 . 2 .. 6 Maldives . . . . . . . Papua New G. 35 392 23 1 35 4 Solomon Is... . . . .. . .. . Vanuatu ..8 .. . .. . .. . Wn. Samoa.. . .. . .. . .. . South Asia 10,545 54,788 * SAl Bangladesh 527 1,730 30 23 47 36 3 5 11 15 Bhutan .. 19 . . .. . .. . Nepal 32 151 .. 35 . 25 . 2 .. 8 SA2 India 7,928 44,445 13 1 1 21 12 20 26 14 17 SA3 Afghanistan.. . .. . .. . .. . Pakistan 1,462 5,923 24 30 38 19 6 8 9 16 1Sri Lanka 369 969 1 26 52 1 19 20 1 10 21 11 3 Source: Bank Economic and Social Database Table A13: Share and Growth of Some Dirty and Clean- Industrial Sectors in Selected Countries in Asia 0 (in Constant 1985 Local Currency) engladesh _Chin India hIdonesia Mdea PhiliPppes Thailmd Ke Rep. Peaksm (Mr Td* (Bn. Yuan) (Bn. Rupees) (Bn. RupWis) (Mn RFknggl (Mn. Pesos) (Bn. Bdts) (Bn. Won) (Mn. Rupees) r Growti Grawth Growh Growth Gro*th Growth Growlh Growth Growth Rate Roe Ree Rde Rde Rate Rate Rate RPe Code Vir in ies 1989 1901-69 1969 1960-89 19M 1980-69 1968 0180-88 t989 1960-a9 1989 1960-89 1198 1960-88 1969 19Jo-B0 1968 190-88 323LaaierP.32s S,204 3.7% 7 -7.1% 9 4.7% 83 14.3% 32 2.7% 335 -4.0% 4 14.3% 1,791 17.3% 3,668 0,5% < 341 PapweradPro&jcts 2.228 3.0% 13 -Z1% 23 3.4% 801 22.0% 804 10.8% 10,037 04% 38 4.4% 3.435 11.2% 1.838 8.9% 342Pirga'4LbNisI*ig 604 4.5% 7 ri I 15 56% 683 21.7% 1.312 44% 4,455 -1.3% 7 4.8% 1,947 12.8% 1,498 10.5% > 351 Indusrial Chweeacs 4,642 96% 47 -6.2% 108 59% 2,058 19.3% 4,110 18.9% 14,553 -0.3% 28 9.3% 8,089 ee8% 9,332 11.0% 3520therChrials 5,657 -0.0% 24 -18% 100 53% 1,947 1.2% 1,488 6.3% 25,503 -07% 48 105% 4.442 106% 11,262 10.1% > 371 Iron and Sted 2,706 -59% 32 -9.8% 132 34% 2,122 24.1% 2,407 12.3% 14,281 4.1% 29 -0.3% 9,032 9.5% 1Q806 12Z2% 372Non-Fei,sMetis na ria 14 -9.8% 26 7.2% 0 ra 878 5.9% 8,548 16.1% 22 -1.1% Z320 12.9% 35 -1.0% Subtotl 19,040 1.4% 144 -8.1% 414 4.8% 7,695 19.9% 11,030 11.0% 77,713 1.2% 172 4.6% 20.057 100% 38258 9.3% Shareintotdmxwilacuring 26.9% 23.4% 32.5% 22.0% 15.71% 21.0% 13.4% 23.8% 20.5% 'Cen hxksbies 322 WewsgAppwe. ExceptFotwaw 906 71.7% 18 na 15 13.4% 590 37.5% 1,540 1S1% 13.219 4.5% 90 9.7% 4.015 7.7% 1,623 21.7% 324Fotwe. ExceptPtberorPIatic 621 106% 0 ria 5 14.0% 113 10.9% 35 -87% 658 -1.0% a 6.% 726 12.4% 339 3.8% 382Mawhiny.ExceptEElcbicl 874 12.0% 75 -15.3% 80 4.0% 271 9.7% 1,474 4.e% 3,258 -3.0% 27 9.8% 7,235 21.1% 5,158 14.7% 383Mae1hiayEletric 2.310 63% 6s ne 90 5.4% 1.241 9.2% 14.193 12.9% 25,421 7.4% 40 5.7% 18,030 18.6% 6.112 10.0% 384 Trenspot Equipwent 1,492 2.2% 30 ria 81 49% 2.243 17.0% 2.103 5.9% 8,000 -7.J% 103 83% 10,857 15.8% 5,99S 3% 38SPro.fuldSciewS IEcpqupnt 4 1.8% 11 rn 7 8.8% 22 20.8% 442 11.0% 378 8.8% 5 17.S% 1.254 1Z2% 472 92% Subtoti 6,209 79% 201 -5.4% 278 5.3% 4,480 14.8% 19,788 11.0% 50,944 1.1% 271 8.5% 4Z117 18.% 19,902 9.1% Share in totd mwufaUing 8.8% 32.8% 21.8% 128% 28.2% 13.e% 21.1% 34.5% 10.6% 300Totd M ciuaLig 70,673 1.7% 617 -7.e% 1.273 4.3% 35030 15.8% 70.225 6.a% 370,118 1.2% 1,285 a8% 12Z 131 11.5% 186,964 M2# Sources: Word BS* db; Lhited Nabns. trndiid SWistes Yesbook, vwios yes. 183 APPENDDC A Table A.14: Selected Air and Water Quality Indicators Air Quality Sulfur Dioxide, mg/(cu.m.) Particulate Matter, mg/(cu.m.) 1 20 600 = Sulfur Dioxide m Particulate Matter 100 -- 80 --__ ___-400 60- 40 - - -~---- 200 20---- 0 0 Beijing Shanghai Delhi Kuala Lumpur Bangkok Manila ;:ote I WHO guidolines are that average annual mean levels should not exceed 40-GO mg/(cu.M.). WHO guldolines are thiat average annual mean level shoula not exoeed 60-QO mg/(cu.mi. Water Quality Dissolved Oxygen, mg/liter 12 10 9.8 8.2 8.1 8.3 8 7.5 6.76. 6~~~~~~~~~~~~~~~~~~. 4 2.62. 2 Yangtze Yellow Cagayan Cauverl Godavari Indus Kinta KiangChao Phrya China China Philippines India India PakistanMalaysiaMalayslaThailand Note: * most life cannot aurvive at oxygen leveles 01ow 565 mg/llter (warm water( and a.5 mg/liter (cola waetr). TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 184 Table A.15: Land Use in Asia, 1989 Permanent Forest & Total Arable land cropland Pasture land woodland Other land Land Area Area Share Area Share Area Share Area Share Area Share (km2) (km2) (%) (km2) (%) (km2) (%) (km2) (%) (km2) (%) Asia Region 20,586.4 3,612.8 17.5 270.5 1.3 5,098.0 24.8 4,946.7 24.0 6,658.5 32.3 East.Asta 15,811.6 1,551.0 9.8 214.9 1.4 4,594.5 29.1 4,137.5 26.2 5,313.7 33.6 South Asia 4,774.8 2,061.8 43.2 55.6 1.2 503.5 10.5 809.2 16.9 1,344.7 28.2 EAl 2,626.7 456.0 17.4 120.9 4.6 42.0 1.6 1,187.7 45.2 820.1 31.2 Cambodia 176.5 29.1 16.5 1.5 0.8 5.8 3.3 133.7 75.8 6.4 3.6 Korea, Rep. 98.7 19.8 20.1 1.4 1.4 0.9 0.9 64.9 65.7 11.7 11.9 Lao, P.D.R. 230.8 8.8 3.8 0.2 0.1 8.0 3.5 128.0 55.5 85.8 37.2 Malaysia 328.6 10.4 3.2 38.4 11.7 0.3 0.1 191.0 58.1 88.5 26.9 Myanmar 657.5 95.4 14.5 5.0 0.8 3.6 0.5 324.2 49.3 229.4 34.9 Philippines 298.2 45.5 15.3 34.2 11.5 12.4 4.2 105.5 35.4 100.6 33.7 Thailand 510.9 190.0 37.2 31.3 6.1 7.7 1.5 142.4 27.9 139.5 27.3 Viet Nam 325.5 57.0 17.5 9.0 2.8 3.4 1.0 98.0 30.1 158.1 48.6 EA2 10,857.5 933.7 8.6 32.2 0.3 4,432.4 40.8 1,385.2 12.8 4,074.0 37.5 China 9,291.0 920.0 9.9 32.2 0.3 3,190.8 34.3 1,246.0 13.4 3,902.0 42.0 Mongolia 1,566.5 13.7 0.9 0.0 0.0 1,241.6 79.3 139.2 8.9 172.0 11.0 EA3 2,327.4 161.2 6.9 61.8 2.7 120.1 5.2 1,564.7 67.2 419.6 18.0 Fiji 18.3 1.5 8.3 0.9 4.8 0.6 3.3 11.9 64.9 3.4 18.7 Indonesia 1,811.6 158.0 8.7 54.6 3.0 118.0 6.5 1,134.3 62.6 346.6 19.1 Kiribati 0.7 0.0 0.0 0.4 52.1 0.0 0.0 0.0 2.8 0.3 45.1 Maldives 0.3 0.0 10.0 0.0 0.0 0.0 3.3 0.0 3.3 0.3 83.3 Papua New G. 452.9 0.3 0.1 3.6 0.8 0.8 0.2 382.3 84.4 65.8 14.5 Solomon Is. 28.0 0.4 1.4 0.2 0.6 0.4 1.4 25.6 91.5 1.4 5.1 Tonga 0.7 0.2 23.6 0.3 43.1 0.0 5.6 0.1 11.1 0.1 16.7 Vanuatu 12.2 0.2 1.6 1.2 10.2 0.3 2.1 9.1 75.0 1.4 11.2 Wn. Samoa 2.8 0.6 19.4 0.7 23.7 0.0 0.4 1.3 47.3 0.3 9.2 SAl 314.0 117.4 37.4 3.2 1.0 28.7 9.1 70.4 22.4 94.3 30.0 Bangladesh 130.2 90.2 69.3 2.7 2.1 6.0 4.6 19.5 15.0 11.8 9.0 Bhutan 47.0 1.1 2.4 0.2 0.4 2.7 5.7 26.1 55.4 17.0 36.1 Nepal 136.8 26.1 19.1 0.3 0.2 20.0 14.6 24.8 18.1 65.6 47.9 SA2 India 2,973.2 1,653.2 55.6 36.8 1.2 120.4 4.0 667.4 22.4 495.5 16.7 SA3 1,487.6 291.2 19.6 15.6 1.1 354.4 23.8 71.5 4.8 754.9 50.7 Afghanistan 652.1 79.1 12.1 1.4 0.2 300.0 46.0 19.0 2.9 252.6 38.7 Pakistan 770.9 202.9 26.3 4.5 0.6 50.0 6.5 35.0 4.5 478.6 62.1 Sri Lanka 64.6 9.3 14.3 9.8 15.1 4.4 6.8 17.5 27.0 23.8 36.8 Source: World Bank data. 185 APPENDIX A Table A.16: Cropland in Asia, 1989 Cropland Irrigated Cropland Total to Total Irrigated Land to Per Land Area Cropland Land Land Cropland Capita ('000 ha) ('000 ha) (%) ('000 ha) (%) (ha) Asia Region 2,139,599 389,222 18 129,776 33 0.14 East Asia 1,626,280 177,483 11 63,582 36 0.11 South Asia 513,319 211,739 41 66,194 31 0.18 EAl 266,797 57,694 22 10,605 18 0.19 Cambodia 18,104 3,056 17 92 3 0.37 Korea, Rep. 9,902 2,127 21 1,353 64 0.05 Lao, P.D.R. 23,680 901 4 120 13 0.22 Malaysia 32,975 4,880 15 342 7 0.27 Myanmar 67,655 10,034 15 1,018 10 0.24 Philippines 30,000 7,970 27 1,620 20 0.13 Thailand 51,312 22,126 43 4,230 19 0.40 Viet Nam 33,169 6,600 20 1,830 28 0.10 EA2 1,116,346 97,490 9 45,426 47 0.09 China 959,696 96,115 10 45,349 47 0.08 Mongolia 156,650 1,375 1 77 6 0.63 EA3 243,137 22,299 9 7,551 34 0.12 Fiji 1,827 240 13 1 0 0.34 Indonesia 190,457 21,260 11 7,550 36 0.12 Kiribati 71 37 52 .. .. 0.05 Maldives 30 3 10 .. .. 0.02 Papua New Guinea 46,284 388 1 .. .. 0.10 Solomon Island 2,890 57 2 .. .. 0.19 Tonga 75 48 64 .. .. 0.48 Vanuatu 1,219 144 12 .. .. 0.72 Western Samoa 284 122 43 .. .. 0.61 SAl 33,180 12,064 36 3,715 31 0.09 Bangladesh 14,400 9,292 65 2,738 29 0.08 Bhutan 4,700 131 3 34 26 0.09 Nepal 14,080 2,641 19 943 36 0.14 SA2 India 328,759 168,990 51 43,039 25 0.20 SA3 151,380 30,685 20 19,440 63 0.20 Afghanistan 65,209 8,054 12 2,660 33 0.49 Pakistan 79,610 20,730 26 16,220 78 0.17 Sri Lanka 6,561 1,901 29 560 29 0.11 Sources: World Bank data and 1990 FAO Production Yearbook. TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 186 Table A.17: Area Expansion and Yield Effects of Cereal Production, 1961-63 and 1988-90 Production Harvested Area Yield Contribution to (Million tons) (Million hectares) (Tons per hectare) Growth Output 1961 1988 1961 1988 1961 1988 (Percent to to to to to to Area 1963 1990 1963 1990 1963 1990 Expansion Yield Asia Region 293.69 749.83 239.61 270.56 1.23 2.77 8.3 .91.7 East Asia 179.43 502.69 127.09 139.72 1.41:- 3.60 5.5 94.5 Cambodia 2.52 0.00 2.34 1.52 1.08 0.00 21.9 78.1 China 119.79 367.58 89.66 90.54 1.34 4.06 0.5 99.5 Fiji 0.02 0.03 0.05 0.02 0.45 2.24 -122.2 222.2 Indonesia 14.86 49.97 9.69 13.38 1.53 3.74 16.1 83.9 Korea 5.91 8.65 2.12 1.47 2.78 5.87 -65.8 165.8 Lao, P.D.R. 0.54 1.39 0.61 0.62 0.88 2.25 0.1 99.9 Malaysia 1.15 1.81 0.55 0.67 2.10 2.72 38.3 61.7 Mongolia 0.26 0.72 0.36 0.61 0.71 1.17 38.7 61.3 Myanmar 7.56 13.98 4.92 5.11 1.54 2.74 4.6 95.4 Papua New Guinea 0.00 0.00 0.00 0.00 1.87 1.27 281.9 -181.9 Philippines 5.19 13.78 5.10 7.11 1.02 1.94 23.9 76.1 Thailand 11.90 25.58 6.72 12.03 1.77 2.13 68.7 31.3 Viet Nam 9.74 19.22 4.97 6.35 1.96 3.03 28.4 71.6 South Asia 114.26.- 247.14 112.52 130.84 1.02 - 1.89 14.0 86.0 Bangladesh 14.66 27.88 8.89 11.04 1.65 2.53 26.8 73.2 Bhutan 0.10 0.10 0.07 0.09 1.44 1.02 -689.3 789.3 India 88.34 190.68 93.22 104.27 0.95 1.83 10.2 89.8 Nepal 3.17 5.53 1.72 2.98 1.84 1.86 98.3 1.7 Pakistan 6.96 20.67 8.05 11.66 0.86 1.77 22.7 77.3 Sri Lanka 1.03 2.29 0.56 0.80 1.83 2.88 33.8 66.2 Source: World Bank data. 187 APPENDI A Table A.18: Fertilizer Consumption, 1961-63 and 1987-89 Averaae Consumption per annual Average consumption hectare of croDland growth (thousand metric tons) (kilograms) rate 1961-63 1987-89 1961-63 1987-89 (Percent) Asia Region 1,152 43,791 3.1 112.7 14.8 East Asia 583 30,395 3.5 172.2 16.2 Cambodia 1 0 0.3 0.1 -3.4 China .. 24,479 0.0 255.7 Fiji 2 1 9.0 4.2 -2.9 Indonesia 109 2,409 6.4 113.5 11.7 Korea, Rep. 304 874 146.4 409.3 4.0 Malaysia 42 734 10.3 150.3 10.8 Mongolia .. 21 0.0 15.2 Myanmar 5 106 0.5 10.6 12.2 Papua New Guinea .. 15 0.0 38.8 Philippines 80 509 11.8 63.9 6.7 Thailand 17 725 1.5 33.5 12.8 Viet Nam 23 522 3.8 79.1 12.3 South Asia 569 13,396 2.9 63.2 12.6 Afghanistan .. 63 0.0 7.9 Bangladesh .. 800 0.0 86.3 India 419 10,502 2.6 62.0 13.0 Nepal .. 60 0.0 22.9 Pakistan 84 1,768 4.9 85.1 12.0 Sri Lanka 67 203 40.7 107.0 4.2 n/a = no available data. Source: FAO Fertilizer Yearbook. APPENDIX B ANALYSIS OF THE WORLD BANK PROJECT PIPELINE (FISCAL 1993-95) This appendix contains the results of a detailed tally-oriented activities in the policy, institutional, analysis of the Bank's environmental program in population, education, and health sectors. Asia, covering the past three years and planned Using this definition, estimates were then activities for the next three years. First a careful made of the level of project expenditures being definition was drawn up of what is meant by envi- targeted to environmental activities. Forall past and ronmental projects. This definition (box B. 1) in- present projects with Staff Appraisal Reports, ex- cludes pollution reduction efforts in the urban, in- penditures were assigned to environmental activi- dustry, and energy sectors; soil, forestry, ties on the basis of specific project components. For watershed, and biodiversity conservation in the future projects, in which project design is incom- natural resource sectors; and other environmen- plete, estimates were made using whatever project Box B. 1: What are Environment Projects? In this report, the World Bank's environmental activities are divided into the following categories: (a) Urban and infrastructure projects: project components addressing sewerage and sanitation; solid waste management; pol- lution monitoring, regulation, and enforcement; urbaninstitutions and strategies forpollution control; and transport-re- lated environmental issues (vehicle standards, fuel efficiency and modification, marine pollution). (b) Industry and energy projects: project components addressing all forms of industrial pollution abatement, waste reduc- tion, recycling, control of hazardous wastes, reduced energy sector emissions, energy efficiency, demand-side manage- ment, and institutional strengthening (standards setting, regulation, monitoring and enforcement). (c) Agricultural and natural resource projects: project components addressing soil conservation and restoration, forest con- servation, watershed areas, and conservation of biodiversity. (d) Other projects: populationprograms; environmental health and education; environment-related policy reform; and cross- cutting activities, such as environmental assessment capacity-building, NEAPs, natural resource accounting; and envi- ronmental institutional strengthening in general. Notably absent from this narrow definition of "environmental projects" is lending for urban and municipal water supply, disaster relief/reconstruction, resettlement, and hydro-power. These activities are not considered to be environmental for the following reasons: (a) Water supply projects, while beneficial for people, do not have unambiguous impacts on the environment (i.e. large water supply systems such as dams, canals, groundwater andtransfer schemes may have some adverse environmental impacts). On the other hand, urban and industrial sewage, sanitation, and wastewater treatment projects are included here as envi- ronmental, inthat they lead to less pollution of surface, ground, and coastal waters. (b) Disaster relief and reconstructionprojects may mitigatethe negative effect of the environment on people, but they do not generally mitigate the negative effect of people on the environment. Disaster "prevention" projects, such as the Bangladesh Flood Protection Scheme, similarly are not classified as environmental, since they may have environmentally negative impacts on natural ecological systems. (c) Resettlement activities are designed to minimize the negative social impacts ofcertain developmentprojects, but have no direct environmental benefits. The exception to this rule is the case of resettlement activities associated with biodiversity projects. (d) Hydroelectric projects may have local negative environmental impacts in spite of their regional and global clean energy benefits. 189 TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 190 documentation existed and in consultation with all, however, the differences were minor. Task Managers. Two examples show how project expendi- Asia-wide Trends tures for the environment were estimated. Planned Bank expenditures on the environment in (a) The Second Jabotabek Urban Development Asia over the next three years are more than double project in the greater Jakarta area, Indonesia, those of the past three years. The data shows a ris- has nine components listed in the staff ap- ing trend from the fiscal 1990-92 period, at $500 praisal report. Three ofthese components deal million-$600 million per year (7 percent of total directly with drainage, sanitation, and sew- lending), to $0.8 billion-$1.6 billion for fiscal erage; three deal with water supply; and three 1993-95 (12 percent of total lending) (see figure deal with management review, miscellaneous B.l and figures 8.1 and 8.2 in chapter 8, which use studies, and overall project coordination. The lending data as of November 1, 1993). In East Asia, expenditure allocations for this project were: projected environmental lending peaks in fiscal 100 percent of the drainage, sanitation, and 1994 and drops in fiscal 1995. This may be partially sewerage activities were classified as environ- explained by the fact that environmental projects mental; the water supply components were for fiscal 1995 and beyond will depend on the re- not classified as environmental; and half of sults of analytical work now underway. If so, the the review, study, and coordination activities lending amounts should increase in fiscal 1995 were considered to be environmental. above current projected levels. (b) The West Bengal Forestry project in India has The analysis also distinguished between what eleven components, divided into eight that may be considered as "traditional" projects with support commercial agricultumal, pastoral, and positive environmental impacts, and newer ap- forestry activities (such as farT forestry, fod- proaches dating from the late 1980s (see box B.2). dnforestry, and This distinction was made in order to track how the support to extension), and three that address Bank has responded to the newer environmental environmental degradation (mangrove protec- in the past few years. Projects with tion, rehabilitation of degraded forests, and !nentwes inrthes few ye brojectith support to wildlife and protected areas). Only newer" approaches generally have broader activi- the latter three components were considered ties than traditional projects; are more systematic to enai en.omna wok as narwl.e and institutional in approach; and are more broadly fined in box B .1. cross-cutting in nature. The increase in the "newer" Another issue that arose during this exercise type project approaches is particularly marked in wanothersissu that anrgotase duiingk-fis rcsed the urban and industry sectors (see figure B.2). In was that of analyzing total vs. Bank-financed fiscal 1993-95, the $2.5 billion of Bank finance of project expenditures. Forpast and present projects, newer" environmental projects is more than it was found that regardless of whether total envi- double that of the traditional approaches. romnental expenditures were expressed as a per- Environmental lending for fiscal 1993-95 in cent of total project costs, or only Bank-financed g environmental expenditures as a percent of total East Asia is expected to be $2.23 billion or 60 Bank financing, the results were quite similar. In percent greater than expected environmental lend- some cases, the Bank share was slightly greater ing in South Asia ($1.39 billion). In East Asia in indi cating tha iask the lad on .envro particular, the project pipeline has already shifted mental investments, institutional building, andor sgficantly from pastends to reflect many ofthe studies. In other cases, the Bank share was slightly newer environmental prorties less, due to (in most cases) co-financing arrange- Sectoral Trends ments for environmental components, often on more concessionary terms for the borrower. Over- One third ofthe $3.6 billion planned fiscal 1993-95 191 APPENDIX B mental lending is double that Environmental ComponLentding th ank Finance of for the green-type, although EvoeaC p Ents inthe Asian Regions both are growing rapidly. In East Asia South Asia, lending for the __,nS brown sector is also much o.w- greater than for the green .6A8 sector. These areas of lend- 6.00- 6.46 5.46 6.80 ing growth reflect, to a cer- 4.55 tain extent, the development 4.00- 3.73 priorities in the two regions (figures B.3 and B.4). When 2.0D- contrasting the sectoral O.S 0 0.9 L a0. 0.4 L lending in East and South 90 D 1 S2 S3 s4 Ie5 Asia during fiscal 1993-95, FiwW Ww several points are apparent: Infrastructure/urban envi- South Asia ronment work in East Asia i use appears to peak in fiscal 6.00 1994 and is double that in South Asia, where the trend 6.0o is stable, except in water sec- 4.62 tor projects. 3.07 * Industry/energy environ- 4.00 - 3.5. 3.81 3.42 l ] mental lending in East Asia _I _ _is nearly double that in South 2.00 H Asia. The trend is upwards in 0.1A 0.2 02 0.3 0 j48 j both regions. 0.00 * = I ..I i Agriculture/natural re- s0 el 62 92 94 us sources environment work doubled in East Asia be- ft* "W_mm a uWWt*oseehe tween fiscal 1990-92 and 1993-95, but showed more mild growth in South Asia. Lending in East Asia is much greater than in South Asia. environmental expenditures is expected to be allo- * Population/human resources environmental cated to the industry/energy sector ($1.2 billion), lending in South Asia is 2.2 times greater than and another 28 percent to the agriculture/natural East Asia. resource sector ($1 billion). Urban and infrastruc- In East Asian countries, both industrialization ture projects will receive approximately $800 mil- and urbanization have been more rapid and concen- lion (22 percent), and the remaining $546 million trated than in South Asia, and hence have created (15 percent) will be allocated to population and relatively more urgent environmental priorities. human resources projects. The growing "brown" sector environmental lend- In East Asia, the level of brown-type environ- ing prograrn in East Asia miffors this need. Even TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 192 Figure B.2: Amount of Bank Finance for Traditional and New Environmental Projects in Asia by Sector, Fiscal 1990-92 and Fiscal 1993-95 Million US$ 1200 | Traditional 1235 E2New 900 i ao 9 0 0 -50 0 90 -92 93 -95 90-92 93-95 90-92 93-95 Urban Industry Agriculture Other Infrastructure Energy Natural Resource though the impacts of rapid urbanization and in- less than that for EA2 (China). In South Asia, SA l dustrialization may be severe in India and Pakistan, (Bangladesh, Nepal, and Bhutan) lags behind in its the environmental lending program does not fully level of environmental lending, and is only 10 per- reflect this. cent of environmental lending in India. As a share In neither region do the lending levels in ag- of total lending, China and India account for 62 riculture filly address the environmental pressures percent of the total. brought by a steadily intensifying agriculture sec- The following trends are noted for each CD tor trying to feed rapidly growing populations on in Asia: a degrading resource base. Nevertheless, there * EAl: environmental lending is heavily domi- is growth in lending in the green sector in both nated by the "brown" sectors-infrastructure/ regions. urban and industry/energy. Theinfrastructure/ Trends by IndiWdual Country Departnwnts urban sector and industry/energy sector are Trends by Individual Country Departmentsprgamdtreiv23ecntnd6 programmed to receive 23 percent and 61 Not surprisingly, the environmental lending pro- percent, respectively, of the CD's environ- gram in East Asia is dominated by China, and in mental lending. The green sector is budgeted South Asia by India. The combined environmen- for only 6 percent of the total, which is low. tal lending ofEAl (East and Southeast Asian coun- Total environmental funding for fiscal tries) and EA3 (Indonesia and the Pacific) is slightly 1993-95 is $675 million. 193 APPENDIX B Box B.2: Traditional Versus Newer Approaches to World Bank Environmental Lending Project Sector Traditional Projects with Newer Project Approaches to Environmental Lending Urban Infrastructure Sewerage; wastewater collection Strengthened municipal planning, regulation and (Urbanprojects, water and disposal; solid waste enforcement; air and waterpollution, including supply and sanitation, management. wastewater treatment monitoring. and transport) Mass transit; vehicle fuel efficiency and fuel Traffic management and low-cost switching; incentives for higher occupancy urban transport options. vehicles. Regional and multisectoral water quality management; conservation incentives; emphasis on pricing and institutions. Industry & Energy End-of-pipe pollution control; Higher plant efficiency and waste reduction; clean (Industrial development, project-related pollution technology; recycling; standards setting, regulation power generation and control. and enforcement; reduced ozone depleting substances distribution) and greenhouse gases; hazardous waste disposal; supply-side energy efficiency; demand side management; renewable energy technologies; support to financial intermediaries to conduct EAs; lending for pollution abatement. Agriculture and Natural Soil conservation and drainage; Land restoration and reclamation; surface and ground- Resources (Agriculture, applied agricultural research water pollution control; multi-sectoral water allocation; forestry, and watershed for reduced water needs; forest non-commercial afforestation; watershed management for management; conservation management and reforestation; biodiversity; zoning for environmental purposes; and biodiversity) watershed management for biodiversity projects. agricultural or water resource purposes. Other (Population and Population planning. Environmental health components and awareness human resources, policy- campaigns; environmental sector reform lending; based lending, other) national environmental action plans (NEAPs); environmental assessments; natural resource accounting; strengthening of national environmental institutions. * EA2: the infrastructure/urban and agriculture/ natural resources overthe next three years has natural resources sectors dominate environ- the largest share (75 percent) of environmen- mental lending, with 38 percent and 34 per- tal lending, followed by infrastructure/urban cent respectively of the total environmental (19 percent). The upcoming Industrial Effi- lending for the CD. The apparent gap in the ciency and Pollution Project is not reflected pipeline, therefore, is in the industrial/energy in these numbers, and is scheduled for either sector, which may be addressed through stud- fiscal 1995 or 1996. Total environmental ies now underway (also, several recent urban funding for fiscal 1993-95 is $303 million. projects address industrial issues). Total en- * SAl: has very low levels of environmental vironmental funding for fiscal 1993-95 is work. Lending in the population/human re- $1.25 billion. sources sector is the highest ($63 million over * EA3: Environmental lending for agriculture/ three years), followed by agriculture/natural TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 194 Figure B.3: Bank Lending in the Brown Sector Asian Regions, Fiscal 1990-92 and Fiscal 1993-95 East Asia MEan UGS 460 4=0 ama sm zo_ _3 1an ~~~~~~a iso 1413 low SW[ 610 281 428 19 92 14267 Urb. nfr. TaMnspot W&Atr/Snt. Indus" Enrw South Asia MUn us$ 460 4000IM14' low -hO urnh ___ 2970~0 W 2S7I 138 i2Mm k o rArrww anv1407 1000 ~ ~ =SW ..k 195 APPENDIX B Figure B.4: Bank Lending in the Green (Natural Resources) Sector Asian Regions, Fiscal 1 990-92 and Fiscal 1 993-95 East Asia IIEm U# lowll -}2s 9 0Q939 soess9 gm-O 03-06 0Om 03-o - uo o- 3e '-t OM & - South Asia hIbn Us$ Iwo -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ laow | EBank Fhane of Environment Componwent | g 3arBk Lendingl TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 196 resources ($38 million). No environmental percent). The brown sector is projected to lending has been planned for the brown sec- receive 8 percent. Total environmental fund- tor. Total environmental funding for fiscal ing for fiscal 1993-95 is $264 million. 1993-95 is $101 million. Economic and Sector Work Ppeline (Fiscal SA2: this is the only CD in Asia where envi- 1993 95) ronniental lending is dominated (44 percent) by industry/energy, due to a large industrial Economic and Sector Work (ESW) is the World pollution prevention project in FY95. Other Bank terminology for analytical studies. The East important environmental projects are in ur- and South Asia Regions have proposed 206 ESW ban/infrastructure (34 percent) and popula- programs for fiscal 1993-95. Ofthese, 21 have the tion/human resources (13 percent). Lending environment as a major focus and 22 more have an gaps in agriculture and natural resources are indirect or small relation to environmental issues. apparent. Total environmental funding for The environmental concerns covered by the two fiscal 1993-95 is $1005 million. Regions during the nextthree years will be heavily SA3: environmental lending is dominated by concentrated in the "brown" sector (urban/infra- the agriculture/natural resources sector (58 structure and industry/energy). A partial list is in- percent) and population/human resources (34 cluded in chapter 8 (box 8.5). APPENDIX C ENVIRONMENTAL ACTIVITIES BY VARIOUS DONORS IN ASIA Other donors active in the environment in Asia Japan have major environmental programs in the include the ADB, UNDP, USAID, and Japan's urban/infrastructure sector. OECF. A review of environmental activities in The focus of each donor's environmental in- Asia for fiscal 1991 shows that total environmen- volvement in Asia differs by sector and country- tal lending was about $1.4 billion. Japan is the larg- and even by year. For example, in fiscal 1991, al- est donor, followed by the World Bank. The other most all of Japan's environmental loans were in the three are have much smaller programs (see figure agriculture/natural resources sector and the urban/ 8.3 in chapter 8 and table C. 1). infrastructure sector (53 percent and 46 percent of During fiscal 1991, Japan's OECF commit- the total, respectively). In fiscal 1990, OECF lend- ment to the environment totaled $652 million, ing in the urban/infrastructure sector ($200 million) making up 48 percent of the total lending across was double that ofthe agriculture/natural resources. all five donors. The World Bank lent $603 million There were no loans to the industry/energy sector (44 percent). USAID, UNDP, and ADB provided in either year. In both years, East Asian countries $62 million, $27 million, and $16 million respec- received over half of OECF lending. tively, and their combined lending amounted to 8 The environmental activities of USAID have percent ofthe total. The definition of "environmen- been mainly in the agricultural/natural resource tal" projects applied in this analysis is the definition used in Appendix B, which may be Figure C.1: Amount of Combined Donor Environmental Funding more narrow than that used by in Asia, 1991 (by sector) some of these donors. (Millions US$ per year) The combined allocation Total = $1.4 billion of donor resources, including the World Bank's, is fairly well distributed across sectors (see Induslry/Energy 14% figure C. I and table C. I for a U193rn/Inlraslrucure 26% $349 more detailed breakdown). These aggregate numbers are, however, heavily dominated by . the World Bank and Japan. The , liesl 27 smaller donors have focussed $362 on the green sectors (UNDP and \ur USAID) and on cross-sectoral technical assistance (ADB). gricullurejNal Res. 34% Only the World Bank is active 461 in the industrial/energy sector, Note: 'Others" includes population and human resources projects, technical and only the World Bank and assistance projects, and projects with cross-cutting environmental activities. 197 TOWARD AN ENVIRONMENTAL STRATEGY FOR ASIA 198 Table C. 1: Environmental Activities in Asia by Different Donors, 1991 (Millions US$) Sector East Asia South Asia Regional Asia Total The World Bank Urban/Infrastructure 29.18 13.35 42.59 Industry/Energy 12.60 156.90 169.50 Agriculture/Nat. Resources 8.58 46.30 54.88 Others 336.40 336.40 TOTAL 386.76 216.55 0.00 603.31 Overseas Economic Cooperation Fund (Japan) Urban/Infrastructure 165.44 133.52 298.96 Industry/Energy 0.00 Agriculture/Nat. Resources 223.43 121.19 344.61 Others 8.17 8.17 TOTAL 397.05 254.70 0.00 651.75 U.S. Agencyfor International Development (USAID) Urbani/Infrastructure 0.90 0.90 Industry/Energy 5.00 0.60 0.60 6.20 Agriculture/Nat. Resources 37.52 7.11 0.13 44.76 Others 6.71 3.60 10.31 TOTAL 49.23 11.31 1.63 62.17 UnitedNationsDevelopmentProgramme (UNDP) Urban/Infrastructure 0.98 1.41 2.39 Industry/Energy 0.00 Agriculture/Nat. Resources 0.34 8.06 6.06 14.46 Others 1.88 0.39 2.56 4.83 TOTAL 3.20 8.45 10.03 21.68 Asian Development Bank (ADB) Urban/hnfrastructure 0.47 0.47 Industry/Energy 0.12 0.12 Agriculture/Nat. Resources 0.38 0.13 0.51 Others 3.92 1.45 8.95 14.31 TOTAL 4.89 1.58 8.95 15.41 sector: this sector received 70 percent ($45 million) either regional in scope or in South Asia, although in fiscal 1990 and 97 percent ($60 million)in fis- in the previous year they were primarily in East cal 1991. The bulk of the funding went to the East Asia. Asia Region. Approximately 95 percent ofADB's environ- Similarly, UNDP has focused on the green mental activities have been in the form of techni- sector. It allocated about 70 percent ($15 million) cal assistance (primarily institution building and in fiscal 1991 and 100 percent ($27 million) in fis- human resources development). Unlike the other cal 1990 of its environmental funding to the agri- donors, ADB activities were primarily in region- cultural/natural resource sector. During those years, wide activities. In terms of country-specific activi- no funding was directed toward the industry/energy ties, ADB has been more involved in East Asia than sector. hi fiscal 1991 most of UNDP's projects were in South Asia. 199 APPENDIX C In summary, the total level of donor lending, total amounts. 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