Document of The World Bank Report No 16357-SE STAFF APPRAISAL REPORT REPUBLIC OF SENEGAL SUSTAINABLE AND PARTICIPATORY ENERGY MANAGEMENT PROJECT May 23, 1997 Urban, Water and Energy 2 Africa Region CURRENCY EQUIVALENTS Currency Unit I CFA Franc (FCFA)' USS I FCFA 500 (March 1997) ENERGY CONVERSION FACTORS AND MEASURES I ton of air-dried wood 0.41 toe I ton of charcoal 0.69 toe I ton of liquefied petroleum gas 1,095 toe I ton of kerosene 1.04 toe 1,000 kWh of electricity (ther-mal ,@L33% efficiency) 0.2606 toe Wood-to-charcoai conversion efficiency (traditional) 18% Wood-to-charcoal conversion efficiency (improved kiln) 25% Useful energy efficiency from carbonization (traditional) 30% Useful energy efficiency from carbonization (improved kiln) 43%'0 Efficiency of traditional wood stoves 15% Efficiency of improved wood stoves 23% Efficiency of traditional charcoal stoves 20% Efficiency of improved charcoal stoves 27% i cubic meter of firewood (solid) 0.8 tons I stacked cubic meter of firewood 0.4 tons I Hectare 2.47 acres I kilometer 0.625 miles ABBREVIATIONS AND ACRONYMS ATI Appropriate Technology Intemational CERER Center for Study and Research on Renewable Energy CILSS Permanent Inter-State Committee for Drought Control in the Sahel CNE National Energy Committee CSE Center for Ecological Monitoring DE Department of Energy DEFCCS Department of Water, Forests, Hunting and Soil Conservation ENDA Environment and Development in the Third World MEFP Ministry of the Economy, Finance and Planning MEMI Ministry of Energy, Mining and Industry MEPN Ministry of the Environment and Protection of Nature PAFS Senegal Forestry Action Plan PETROSEN Senegal Petroleum Company PRG Regional Gas Program RENES Senegal Energy Redeployment Program RPTES Review of Policies in the Traditional Energy Sector SAR African Refining Company SENELEC National Electricity Company FISCAL YEAR Govemment of Senegal January 1- December 31 The CFA Franc is pegged to the French Franc at the exchange rate of FF I = FCFA o00 Vice President: Jean-Louis Sarbib, AFRVP Country Director: Mahmood Ayub, AFC 14 Technical Manager: Max Pulgar-Vidal, AFTU2 Task Team Leader: Boris Utria, AFTU2 REPUBLIC OF SENEGAL SUSTAINABLE AND PARTICIPATORY ENERGY MANAGEMENT PROJECT TABLE OF CONTENTS TABLE OF CONTENTS ...................................................................................................................... i CREDIT AND PROJECT SUMMARY ............................................................................................ iii I. BACKGROUND ..................................................................1 A. Geography and Climate ................................................................. 1 B. Demographics ..................................................................1 C. The Economy ................................................................. 1 IL. THE SECTORAL CONTEXT ..................................................................3 A. Energy Sources and Consumption ........................ .......................................... 3 B. Energy Sector Institutions and Policies ................................... ............................... 6 III. THE HOUSEHOLD ENERGY SECTOR ..................................................................9 A. Energy Consumption in the Household Sector ................................................................. 9 B. Structure and Functioning of the Traditional Energy Markets ................ ...................... 12 C. Expected Future Trends: The Charcoal Problem ............................................................ 16 D. Sectoral Issues ................................................................. 17 E. Government Strategy ................................................................. 19 IV. BANK GROUP/GEF ROLE IN THE TRADITIONAL ENERGY SECTOR ........... ................ 25 A. History and Lessons Learned from Previous Bank/IDA/GEF involvement .......... ......... 25 B. Rationale for Bank/GEF financing and Consistency with the CAS ............ ................ 25 V. THE PROJECT ................................................................. 29 A. Project Objectives ................................................................. 29 B. Project Description ................................................................. 30 C. Project Costs and Financing Plan ...................... ........................................... 32 D. Beneficiary Consultation and Participation ................................................................. 33 E. Project Implementation ................................................................. 33 F. Procurement and Disbursement .................... ............................................. 39 G. Accounting, Auditing and Reporting ............................. .................................... 42 H. Performance Indicators, Monitoring and Supervision Plan .................... ......................... 45 ii SUSTAINABLE AND PARTICIPATORY ENERGY MANAGEMENT PROJECT TABLE OF CONTENTS (Continued) VI. PROJECT IMPACT ................................................ 47 A. Economic Analysis ............................................... 47 B. Social and Environmental Impacts ................................................ 49 C. Project Sustainability ............................................... 50 D. Project Risks ................................................ 51 VII. AGREEMENTS REACHED AND RECOMMENDATION ................................................ 53 Annexes: i. Summary on the Niokolo-Koba National Park 2. Monitoring and Evaluation of GEF Activities 3. Incremental Costs and Global Environmental Benefits 4. Project Participation Action Plan (PAP) 5. Expenditure Accounts by Category and Components 6. Disbursement by Category and Components 7. Perfornance Indicators, Monitoring and Supervision Plan 8. Economic Analysis 9. Energy Sector Policy Letter (Original French text) 10. Selected Documents and Data Available in the Project Files Map: IBRD 28722 This report is based on the ESW undertaken in Senegal through the Africa Regional Program "Review of Policies in the Traditional Energy Sector - RPTES" between 1993 and 1996. A draft Project Implementation Document prepared by the Government of Senegal was pre-appraised in November 1996, and appraised in March 1997. The ESW and project teams comprised Messrs./Mmes. Boris Utria (Economist and Task Team Leader), Max Wilton (Senior Energy Economist), Ignatius Menezes (Senior Economist), Demba Balde (Participation Specialist/NGO Liaison Officer), Mathieu Koumoin (Energy Economist), Azedine Ouerghi (Energy Economist), Kishor Uprety (Lawyer), Amadou Toure (Procurement Specialist), Ellery Stokes (Participation Specialist), Suzanne Roddis (Program Assistant), Susana Hristodoulakis (Operations Analyst), and Salimna Haddour (Project Assistant). Catherine Cassagne and Simon Rietbergen were the peer reviewers of the project. iii REPUBLIC OF SENEGAL SUSTAINABLE AND PARTICIPATORY ENERGY MANAGEMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Senegal Beneficiaries: Ministry of Environment and Protection of Nature Ministry of Energy, Mines and Industry Poverty Category: Program of Targeted Intervention Credit Amount: SDR 3.8 million (US $5.2 million equivalent) Terms: Standard IDA, with 40 years maturity Commitment fee: Standard Grant Amount: SDR 3.4 million (US $4.7 million equivalent) Terms: Grant Financing Plan: See Estimated Financing Plan (p. v) Project Objectives and Description: The objective of the project is to meet an important part of the rapidly growing urban demand for household fuels, without the loss of forest cover and the ecosystem's carbon sequestration potential and biodiversity. This objective would be met through: (a) the implementation and monitoring of 300,000 hectares of environmentally sustainable community-managed forest resource systems in the Tambacounda and Kolda regions of Senegal, creating a protection zone around the Niokolo-Koba National Park (Biosphere Reserve); (b) the promotion of inter-fuel substitution and improved stoves initiatives; and (c) the strengthening of the institutions involved in the management of the sector, and the promotion of the participation of the civil society (private sector, academic institutions, and NGOs community) in the operation of the sector. The project would finance: (a) an assessment of vegetation cover, an assessment of availability of dead wood and other preparatory activities; (b) community-based forest management activities in 300,000 ha; (c) promotion of rural-based micro- enterprises and private sector and NGO-based inter-fuel substitution activities; (d) consultant services for supervision work, delivery of services and various technical studies; (e) technical assistance; and (d) materials, equipment and goods. Project Benefits: The project would: (a) sustainably produce some 860,000 tons of fuelwood (equivalent to 155,000 tons of charcoal) during the implementation period and iv would thereafter establish a permanent system capable of producing more than 300,000 tons of fuelwood (equivalent to 55,000 tons of charcoal or half of the annual consumption of the city of Dakar) per year on a sustainable basis; (b) reduce woodfuels-related deforestation in the Tambacounda and Kolda regions by some 10,000 ha/year, reduce net C02 emissions by 510,000 tons/year and reduce the loss of biodiversity by the establishment of sustainable forest systems and the establishment of a protective buffer zone around the Niokolo-Koba National Park (international "Biosphere reserve"); (c) generate employment and economic development opportunities in 250 rural villages in the Tambacounda and Kolda regions, paying special attention to gender equity; (d) generate a total of more than US $10.0 million in direct revenues to 250 villages from the trade of woodfuels, and generate additional revenues to the communities from related natural resource management and exploitation activities (agriculture, pastoralism, herding, agro-forestry, etc.); (e) on a sustainable annual basis after the end of the project, generate direct revenues in excess of US $3.0 million to the participating villages from the trade of woodfuels, and generate additional revenues from related natural resource management and exploitation activities; (f) reduce C02 emissions by 42,000 tons/year by the distribution of 225,000 improved charcoal stoves; (g) increase the availability and access of low income households to more reliable and efficient charcoal stoves and to modern fuels; and (h) strengthen the planning, policy making and implementation supervision capacity of the traditional energy sector institutions, while increasing the participation of the civil society (private sector, academic institutions, and NGOs community) in the management and operation of the sector. Project Risks: There is a moderate risk that existing charcoal traders and laborers would resist transferring part of the industry's activity to the rural communities. To mitigate that risk, the project includes two sub-components to support the adjustment of existing traders and several monitoring and evaluation mechanisms to track possible implementation interference. There is also the possibility that traditional traders could switch charcoal production to other areas of the country but this risk is considered negligible. The risk that the rural populations might not be able to achieve full sustainable management of the forest resources cannot be ruled out. Nevertheless, even a partial achievement of the objectives would still result in an important transfer of welfare to the rural communities with unquestionable economic development opportunities and social benefits and significant national and global environmental benefits. There would be no involuntary resettlement as a result of the project. Economic Rate of Return: 37.3% Program Objectives Category: Environmentally Sustainable Development Environmental Category: C Project ID: 46768 and 42056 Map: No. IBRD 28722 v Estimated Project Costs Summary (by category) (US$ '000 equivalent) Categories Foreign Local Total I. Investment Costs A. Goods and Services 1,179.05 474.95 1,654.00 B. Civil Works 554.40 369.60 924.00 C. Vehicles/Equipement 2,146.10 16.80 2,162.90 D. Materials 710.60 480.40 1,191.00 E. Studies 390.79 281.57 672.36 F. Fonds d'appui (Matching Funds) 542.60 1,239.40 1,782.00 G. Training 605.30 657.30 1,262.60 H. Campaigns 297.20 470.80 768.00 I. Consultants 378.38 252.26 630.64 Total Investment Costs 6,804.43 4,243.07 11,047.50 II. Recurrent Costs A. Gasoil/Gasoline 264.00 396.00 660.00 B. Office rental / local contracts 394.40 394.40 C. Transportation 785.00 785.00 D. Vehicle maintenance 570.76 856.14 1,426.90 E. Salaries X 3,261.76 3,261.76 Total Recurrent Costs 834.76 5,693.30 6,528.06 Total BASELINE COSTS 7,639.19 9,936.37 17,575.56 Physical Contingencies 722.94 927.87 1,650.81 Price Contingencies 704.88 - 704.88 TOTAL PROJECT COSTS 9,067.01 10,864.24 19,931.25 Financing Plan' (US $ million equivalent) Source of Funds Foreign Local Taxes 2 Total Government 1.1 0.02 1.2 IDA 2.1 3.1 5.2 GEF 2.4 2.3 4.7 Dutch Cooperation 4.4 4.4 8.8 Total Project Costs 9.0 10.9 0.02 19.9 Estimated Disbursements of the IDA Credit (US Million Equivalent) IDA FY FY97 FY98 FY99 FYO FY01 FY02 FY03 Annual 1.1 0.9 0.8 0.8 0.6 0.5 0.4 Cummulative 1.1 2.0 2.8 3.6 4.3 4.8 5.2 1 Costs are net of taxes and duties. Slight differences in amounts might occur due to rounding of figures. 2 US $ 190,000 equivalent included in the contribution of the Govemment. REPUBLIC OF SENEGAL SUSTAINABLE AND PARTICIPATORY ENERGY MANAGEMENT PROJECT I. BACKGROUND A. GEOGRAPHY AND CLIMATE 1.1. Senegal's topography is generally flat, and altitude is less than 50 meters above sea level over 75 percent of the territory. Senegal has a semi-arid tropical Sudano-Sahelian climate, with a relatively narrow temperature span. The rainy season is limited to a single summer monsoon and rainfall has declined significantly in the last 40 years. It fluctuates widely from one region to another, ranging from 1,000 mm/year in the south to less than 300 mm/year in the north. Vegetation runs from bushy steppes in the north to forest stands in the south and southeast. The central regions consist of Sudano-Sahelian and Sudano Savannah. Senegal's soils are dry and sandy in the north, ferrous in the central regions and lateritic in the south. In general, fertility is very poor and the soil is extremely vulnerable to wind and erosion from rain. B. DEMOGRAPHICS 1.2 In 1988, Senegal's population was 6.9 million. Of which 39 percent was living in urban, making Senegal the most highly urbanized country in the Sahel region. Women make up 51.4 percent of the total population and children under age 15, 30 percent. National demographic growth is estimated at 2.9 percent per year (3.8% in urban areas and 2.1% in the countryside). If current demographic trends remain unchanged, total population will rise to some 12.6 million by the year 2010, of which 6.1 million will be urban (48%), with 3.4 million people clustered in the Dakar region alone. Urban growth will increase demand for food, fuel, timber and other natural goods and services. If the productivity of natural resources does not increase and they are not managed sustainably, it will be necessary to increase imports of food, energy, construction material, etc. C. THE ECONOMY 1.3 At independence Senegal had one of the most developed economies in West Africa. Its economy deteriorated, however, due to a gradual loss of regional markets, prolonged drought and weak management. In 1994, Senegal's gross national product (GNP) was estimated at US $3,710 million and its per capita GNP was US $611. 1.4. Senegal's adjustment efforts date back to 1980 and were supported by four Bank macroeconomic adjustment operations (SALs) in 1980, 1986, 1987, and 1990, and two sector adjustment operations (SECALs), including one in the financial sector in 1989 and another in the transport sector in 1991. These adjustment operations contributed towards stabilizing macroeconomic conditions and achieved a partial liberalization of the economy. A fourth SAL was introduced in 1990 which focused on the removal of labor market rigidities, the reduction of 2 government subsidies, and the implementation of a more aggressive privatization program. Since the beginning of the 1990s, however, the economy experienced a serious decline with a contraction of output in key sector. Low economic activity resulted in a shrinking tax base which forced the government to reverse import tariff reduction and to increase the taxation of petroleum products. In 1992-93, the economy declined even further as the difficulties of pursuing an adjustment strategy based on internal deflationary policies became more acute. The fiscal deficit and the balance of payment positions worsened; the fiscal balance (excluding grants) declined from a 0.2 percent surplus in 1991 to a 3.9 percent deficit in 1993. During the period 1988-1993, Senegal's economic growth stagnated at an average of 1.7 percent per annum. 1.5 In an attempt to reverse this economic deterioration, in mid 1993 the government adopted a series of internal adjustment measures including cuts in public sector wages. However, these measures were not sufficient to restore the competitiveness of the economy and its growth prospects. The decline in investments and exports, widespread smuggling and custom fraud, and increasing macroeconomic imbalances made inevitable the January 1994 devaluation of the FCFA. With the devaluation, Senegal has now gained a unique opportunity to restore competitiveness and export-led growth, taking advantage of its strategic location and its sizable human resource base. Increasing GDP growth, reducing inflation and stabilizing prices, and reducing the current account and budget deficits are the principal macroeconomic challenges facing Senegal for the foreseeable future. Generating a strong supply-response by the private sector, increasing labor productivity, improving natural resource management patterns to reduce environmental degradation and loss of productive capacity, revitalizing urban enclaves and promoting rural development opportunities will all have to be actively pursued if those challenges are to be met. 3 II. THE SECTORAL CONTEXT A. ENERGY SOURCES AND CONSUMPTION 2.1. Senegal has a modest but relatively diversified energy resource base. Under present conditions, however, its use is associated with either major environmental risks (forest-based fuels - fuelwood and charcoal) or substantial investment outlays for exploration (hydrocarbons, lignite) and mobilization (hydroelectricity, solar and wind power). 1. Fossil Fuels 2.2 Senegal is largely dependent on expensive imported petroleum products. Fossil fuels in the form of heavy petroleum was discovered in the 1950s at the Dome Flore in Casamance (100 million tons) and natural gas and light petroleum in the 1960s at Diam Nadio Kabor near Dakar. Between 1987 and 1992 these reserved produced 61,000 barrels of crude and 31 million m3 of natural gas. In 1991 a deposit of 400 million m3 of gas was discovered at Diam Nadio and is being used for power generation. An additional gas deposit estimated at 10 million m3 was discovered at at the same location in 1996, but it will take some time before it can be economically mobilized. Since there is no residential piped gas infrastructure in Senegal the new natural gas discovery will not be a factor in foreseeable household interfuel substitution schemes. There is a reserve of peat of some 39 million m3 along the Dakar coast at St. Louis. 2. Hydro 2.3 The country's hydroelectric potential, based on the Senegal and Gambia rivers, is estimated at about 1,000 MW capable of producing 280 Gwh in an average year. The development of the Senegal River under the OMVS should make it possible to have a supply of hydroelectric power generated by facilities at the Manantali site in Mali. It is expected that this could provide Senegal with 280 GWh/year (out of total domestic consumption of some 900 GWh) and would save SENELEC (National Electricity Company) some 150,000 tons of fuel per year of the current consumption of 300,000 tons. 3. Traditional Fuels (Fuelwood and Charcoal) 2.4 The potential supply of energy wood is not well known. In 1980, forest land was estimated at 12 million ha (60% of the country's area), with very variable types of stands: closed and open forest represent 20 percent of the woodlands and Savannah and steppe 80 percent. Depending on the source and assumptions used, annual total productivity was estimated for that same year to be between 13.4 million m3 (1991 PASF/terroir management studies) and 8.6 million m3 (1981 PDDF). Availability was estimated in 1980 at 7.3 million m3/year (PDDF) and accessible reserves at 3.1 million m3/year (PAFS, World Bank). Table 2.1 presents 1980 estimates of Senegal's forestry potential. It is estimated that some 80,000 ha of forest stands disappear each year due to land clearing for agriculture, bush fires, the production of charcoal, overgrazing and scarce rainfall. Annual deforestation for charcoal production alone is estimated at more than 30,000 ha per year. In the last ten years, an average of 190,000 ha/year was lost to forest fires throughout the national territory. 4 2.5 A recent study conducted by the government of Senegal with World Bank support concluded that the availability of woody biomass in Senegal may have been previously underestimated both in terms of volume of stocks and yield potential.2 Available forest stock information (estimated on the basis of primary data collected prior to 1980) indicates that there are some 44,000 km2 of woodlands and forests, 29,000 km2 of savanna woodlands, 43,000 km2 of savannas and 32,000 km2 of Sahelian steppe grasslands. Yields are now estimated to be between 1 ton/ha/yr and 2 ton/ha/yr, depending on the geographic location and specific stock composition. Under improved rainfall condition, natural stocks growth could be even higher. Pending confirmation by a comprehensive assessment of vegetation cover in the Tambacounda and Kolda regions (included in the proposed project), it is now estimated that Senegal should still have sufficient forest resources to meet most -- if not all -- of the demand for woodfuels for at least the next two decades under sustainable forest management schemes. Implementing sustainable management would imply exploiting the existing forest stocks at or below the annual growth (yield) level and would therefore result in maintaining the original stocks over time. Table 2.1: Forestry potential in 1980 Area d(1 Stocks (2) Production' potential from:i ('000 m3/year) Region :t00 0'OOOha ff00# wm Nat. stndsu Degradation: PltIanations Total Aessble$ West 142 500 28 42 6 76 57 Louga 1,180 1,400 131 130 2 263 62 Fleuve 2.098 3,000 253 300 1 554 X 119 Sine 527 5,200 282 175 7 464 311 Saloum East. Senegal 5,206 68,200 3,470 735 4 4,209 1,176 Casamance 1,732 60,600 2,673 400 5 3,078 1,395 Total - ii::10884 138, 00 6,837 1,782 25 86 44E 3i:: (1) Productive woodland area, i.e., not including fallow woodlands, mangroves and national parks. (2) Standing volume for trees > 10 cm overbark, diamater at breat height. Source: PDDF and World Bank. 4. Other Potential Resources 2.6. There is a relatively large availability of agricultural residues, but their energy use has not yet prove to be more attractive than their use as fertilizers and/or cattle supplements. On the other hand, byproducts from agro-industrial processing such as groundnut shells and bagasse offer more attractive prospects and have been used by the industries that produce them (SONACOS and CSS) to generate electricity for some time. With an average daily radiation of some 5.4 kWh/mi2 Senegal has a considerable solar energy potential for applications such as small scale electricity production (PV), water pumping and heating and drying of fish and agricultural products. 2 Jensen, Axel M., Elements d'economie spatiale des energies traditionnelles, RPTES Discussion Paper Series, World Bank, October 1994. 5 2.7. Figure 2.1 present Senegal's energy flows matrix. Figure 2.1: Energy Flows Matrix of Senegal ORIGINE TRANSFORMATION DESTINATION Importation Impoltation Exportation Trsport 44% PRODUIITS PTRiOERS Industrie 36% Tertiaire 20% Diam Nadio - Industrie 45% GAZ NATUREL entrales ~~~~~~~ELECTRICITE Mdnages 23% Diam Nadio : Autre 35% Arachide, DECHETS VECETAUX canne i sucre ;ndustrie \ BOIS ,> M6nages Forets et BOIS savanes M6nages Restaurafion CharbonniCres snow\ Pes s de asformatw,on 5. Energy Consumption 2.8. Total final energy consumption in Senegal for 1992 was estimated at some 1.5 million tons of oil equivalent (TOE), and a per capita energy consumption of 195 kilograms of oil equivalent (KOE), which is relatively high compared to most West African countries. Out of the estimated total energy consumption, forest-based traditional fuels (firewood and charcoal) -- mostly used for household cooking purposes -- represented 53 percent, petroleum fuels 34 percent, electricity 12 percent and agricultural residues I percent. The household sector is the principal energy consumer (58%) followed by transport (20%), industry (17%) and the tertiary sector (5%). Total charcoal consumption in 1992 was estimated at 330,000 tons (equivalent to 1.8 million tons of fuelwood), of which 76 percent is consumed in the principal urban areas. The city of Dakar alone has an estimated consumption of almost 150,000 tons of charcoal per year. Total consumption of fuelwood was estimated at some 1.5 million tons in 1992, 86 percent of which is consumed in the rural areas. Tables 2.2 and 2.3 present final energy consumption by energy resource and by economic sectors, respectively. 6 Table 2.2: Final Energy Consumption ('000 toe) ~198. 1989 1990 199 192 AvA"ge Fuelwood 569 580 591 602 613 .19%. Charcoal 181 194 207 221 234 14% Agricultural Residues 17 18 18 19 22 : % Electricity 180 176 190 192 213 12% Petroleum Products 511 526 552 541 566 34% .. - I- . 3 1430 1 446 1. 5..5 -.1.00 Sourc Revised from Directorate of Energy Table 2.3: Final Energy Consumption by Sectors ('000 toe) Industry and Fisheries 191 231 243 236 264 17%/1 Transport 304 313 323 315 310 21% Households 802 832 864 895 931 62 Total 1337 1 3161 1 430 . 146 .10 .0% Source: Directorate of Energy B. ENERGY SECTOR INSTITUTIONS AND POLICIES 1. Sectoral Institutions 2.9. Institutional structure and actors. Energy policy choices, directions and coordination are overseen by the National Energy Commission, an inter-ministerial entity chaired by the Prime Minister. The National Energy Committee headed by the Minister of Energy implements the directives formulated by the Commission. Administrative and technical oversight of the sector falls under the Ministry of Energy, Mining and Industry (MEMI) with the exception of the supply of woodfuels, which is the responsibility of the Ministry of the Environment and Protection of Nature (MEPN). MEMI oversees certain parastatal companies and mixed-capital enterprises: SENELEC, in charge of electric power production, transmission and distribution; SAR (African Refining Company), responsible for imports and production of petroleum products; GPP (Petroleum Trade Group), responsible for the distribution of petroleum products; PETROSEN (Senegal Petroleum Company), responsible for oil exploration; and CTS (Senegal Peat Company), responsible for the development of peat reserves. Other ministries are key players, including the Ministry of the Economy, Finance and Planning; the Ministry of Infrastructure and Land Transportation, responsible for oversight of hydrocarbon transportation; the Ministry of Modernization and Technology and the Ministry of Water Resources, both of which are involved in solar energy programs; the Ministry of National Education, which has oversight of the CERER (Center for Study and Research on Renewable Energy); ENSUT (National School for Advanced Studies in Technology); and the "Cellule de Combustibles Domestiques", which is an inter-ministerial body 7 created in 1993 to serve as a formal link between the different governmental institutions and operators in the sector. 2.10. From the different ministries that play an operational role in the household and traditional energy sectors, MEPN is by far the best organized and endowed in human and material resources and is technically capable of fulfilling its assigned responsibilities. Currently MEPN is managing some 300 projects through out the country, most of which are donor- supported and which include capacity building and institutional development components. The Water and Forest Directorate (DEF/MEPN) has implemented a gradual reorganization process over the last two years, giving special priority to the strengthening of its regional structures. That process was implemented as part of the ongoing process of administrative decentralization to increase the Forestry Service's supervision and field extension services. While the forestry service, including the several technical support units (forestry operations, planning, cartography, monitoring and evaluation, etc.) has sufficient and technically qualified staff to undertake complex projects, the multi-sectoral nature of participatory forest management systems will require the mobilization of additional expertise from other governmental agencies (agriculture extension, rural development, women affairs, rural infrastructure, etc.) and the NGO community. 2.11 MEMI, on the other hand, has serious limitations in its ability to effectively discharge its assigned responsibilities as it lacks the necessary staff and resources to do so and has little control over the operation of the enterprises it is supposed to oversee. With institutional development support from the World Bank and the Dutch and German Cooperations the Energy Directorate has recently managed to improve its situation, but the strengthening of its planning and policy making and supervision functions are still badly needed. This will imply moving away from actual field implementation of projects -- which has been the traditional means of securing resources -- and focusing on more on analytical and planning functions and sector monitoring and supervision. 2.12 Coordination and institutional problems in the power sector are similar to those encountered in the petroleum sectors. In addition to that, poor management of SENELEC has led to a growing deficit of power generation capacity, deterioration of facilities, low level of access to electricity, and high costs. SAR's refinery is uneconomic and has led to high prices of petroleum products. 2. Sectoral Policies 2.13 The national energy policy is set forth in the RENES program formulated in 1980 and revised in 1991 and in the document issued by the Inter-ministerial Energy Council (1993). The global objectives of the GoS energy policy are: (a) to limit consumption of imported energy; (b) to rehabilitate the electric power production and transmission infrastructure; (c) to shift production and consumption toward local energy sources; and (d) to reduce consumption of environmentally destructive energy sources (wood and charcoal). 2.14 Official forestry policy, establishing new post-colonial guidelines for exploitation of woodfuels, was initially addressed by the Master Forestry Development Plan (1981). The Master Plan was then revised during the formulation of the Forestry Action Plan (1993) and is now framed within the new forestry code of April 1995 (Decret 95-357). This new code introduced major changes to the previous regulatory framework, including the recognition of the rights of the local communities to exploit state-owned forest land and to capture revenues directly from their regulated exploitation. In addition to those significant changes, the legislative 8 decrees sanctioning the administrative decentralization have already been signed, with which local communities are, inter alia, further insulated from centralized decisions on forest and natural resource issue. 2.15 The GoS has now articulated its energy policy around the following points: * the stabilization of the potential supply of woodfuels through the transfer of responsibility for the management of natural forests from the Forestry Service to the local community and the implementation of sustainable community-based forest management systems; * the sustainable exploitation of existing natural forests and the rationalization of forestry operations through the implementation of a national participatory natural resource management program; * the diversification of fuels available to consumers, by developing the use of butane, introducing peat-based charcoal briquettes to the market and studying the possibilities for using kerosene for cooking; * savings in consumption (improved stoves) and in the transformation of wood into charcoal (better carbonization methods); and - a shift towards full cost pricing of energy products so that the market prices reflect the real economic costs. 9 III. THE HOUSEHOLD ENERGY SECTOR A. ENERGY CONSUMPTION IN THE HOUSEHOLD SECTOR 3.1. There were an estimated 1.3 million households in Senegal in 1992 with an average size of 6 persons. In Dakar alone there were an estimated 156 thousand households, with an average household size of 12 persons. The consumption of energy by the household sector was estimated in 1992 at about 0.9 million toe. That total was made of 1.5 million tons of wood, 330,000 tons of charcoal (equivalent to more than 3.3 million tons or 4.2 million m3 of wood), 40,000 tons of gas butane and some 10,000 tons of kerosene.3 Figure 3.1 presents a breakdown of energy consumption by the household sector for 1992. Table 3.1 presents a breakdown of household energy consumption by fuel and by region for 1987 and 1992. Table 3.2 presents a breakdown of traditional fuels consumption in the household sector in terms of toe and wood equivalence (m3). Table 3.1 Household Energy Consumption by fuel and Region (1987-92) ('000 toe) --- 1 1987 1992 REGION Fielwood Charcoal Gas Total Fnelwood Charcoal Gas Total Dakar 2 92 10 104 3 103 27 133 Thies 5 11 1 17 5 10 3 18 Kaolack 6 7 0 13 7 11 1 Ziguinchor 2 8 1 II 6 11 1 18 SaintLouis 4 9 1 14 3 13 1 17 Other Cities 27 15 1 43 70 41 5 116 Total urban 46 142 14 202 94 188 38 320 Rural 501 14 2 517 520 46 7 373 Total 547 156 16 719 614 234 45 893 Source: DNEF 3.2. Household energy demand patterns are determined by a combination of factors including but not limited to geographical location (urban/rural and distance/accessibility to supply sources), family size, relation between level of household incomes and fuel prices (purchasing capacity), market availability of fuels, and cultural habits (fuel choices and method of fuel use). An analysis of the tables 3.1 and 3.2 and of various studies in the sector reveals the following key trends: 3 Kerosene is used for lighting (sometimes for starting fires) and hence does not compete with the others. 10 Figure 3.1: Senegal: Household Energy Consumption Patterns (1992) Senegal Household Energy Consumption Patterns (1992) Rural Ch.0 ___ 1ll i 0 *Woodfuel 0) Urban LPG Charcoal 0 Charcoal o : Ii | t :t j t : : - s t OLPG : Kerosene National Charcoal a E__ectricity , I 91 _ _ _ _ _ | ] "~~~~~~~ Electricity 0% 20% 40% 60% 80% 100% Percentage of Total Energy Consumption Source: Energy Directorate Table 3.2: Household Consumption of Traditional Fuels (1987-92) ('000 tons) 1987 1992: REGION To1 Wood T odtal: Wood __________0 ;S0:i:t Fuelwood;; :0Charcoal: Equivalent Fuelwood Charcoal tEquivalent Dakar 6 132 737 8 147 825; Thies 1 1 16 1.02 12 14 209 Kaolack 15 1 1 74: 18 15 122 Ziguinchor 9 12 76 14 15 119 Saint Louis 4 1 3 75 6 1 8 1 50 Autres villes 66 22 1186 172 59 5022 Total urbain 11 1 206 I 2%; 230 268 1927. Rural 1,111 20 1,225 1,267 65 1,600 Total 1,222 22~~6 2,475: 1,497 333 ~ 3,527 Source: World Bank and Energy Directorate * The consumption of fuelwood dominates in the rural areas, gas tends to replace charcoal as the primary household fuel in Dakar and Thies (given end-use efficiency differences charcoal consumption is still higher than LPG on nominal terms), and charcoal is still the main household fuel in the other secondary cities; 11 * Gas is making substantial inroads in the principal cities, but charcoal is still consumed in large quantities because urban consumers tend to use several fuels, often concomitantly; * The consumption of charcoal is concentrated in the Cap Vert peninsula and in the Thies region, which is home to most of the country's urban dwellers; and * Charcoal represents about 27 percent of final consumption of traditional fuels but accounts for 55 percent of the out-take of forest resources for energy use. Most of the wood collected by rural dwellers comes from dead wood, whereas charcoal is produced most of the time from the cutting of live trees. This highlights the high proportion of forestry resources extracted for charcoal. 3.3. Consumption of LPG has gone from 3,500 tons in 1974 to 16,000 tons in 1987 and then to approximately 65,000 tons in 1996. The penetration of LPG in Senegal has been promoted by an aggressive program of cross-fuel subsidies, which is currently estimated at 5 billion FCFA per year. The promotion of LPG in Senegal has been primarily supported by the subsidy policy of the government since 1974 and by the CILSS/FED Regional Gas Program (1990-93). Consumption of LPG has increased by some 12 percent per year for the last five years (well over population growth) and by now more than 70 percent of urban households and 25 percent of rural families utilize LPG on a regular basis. Nation wide it is estimated that close to 45 percent of households have purchased LPG stoves. Furthermore, in 58 percent of households in Dakar and 43 percent of households in Thies LPG have replaced charcoal as the primary cooking fuel. Figure 3.2 present the evolution of LPG sales by bottle Size between 1974 and 1996. Figure 3.2: Senegal: Evolution of LPG Sales by Bottle Size (1974-96) 70,000 1 I I I 1I 11111111 gm~~~~~~~Ul 6f- . kg ° ' ' - i - --++ -U-T6 T f - - Ai- 12.5 & 38 KG 0 I 74S75o76u77r78ce: {10 81 8283 84 85 86 87 88 89 90 91 92 93 94 96 96 Source: Energy Directorate 12 3.4. Kerosene is used in the household and informal sector essentially for lighting purposes only. A couple of pilot activities were done in the mid 1980s by CERER and the World Bank's Energy Management Assistance Program to test the feasibility of introducing kerosene as a cooking fuel. Although small consumer trials showed that kerosene could be utilized for cooking purposes, a stove fully suited to the local cooking needs was never found. At that time the kerosene research was oriented towards finding the most energy efficient stove possible, rather than the most "marketable" one, as defined by consumer acceptance. 3.5. The consumption of wood energy in the informal and industrial (artisanal) sectors has not been studied extensively and therefore is not well known. However, it is thought to be very low (5%) in relation to the household sector and very frequently directly associated to it (informal household-based enterprises). Small restaurants are the leading commercial energy consumer in the cities. A survey conducted in 1991 showed that there were some 3,000 restaurants with an estimated annual consumption of 4,200 tons of wood (half of Dakar's fuelwood consumption), 3,600 tons of charcoal (3% of household consumption) and 700 tons of gas (2% of household consumption). Other urban users of woodfuels include tailors (ironing), cloth-dyers, pot makers and blacksmiths. Bakeries are permitted to operate wood-fired ovens only in the rural areas. B. STRUCTURE AND FUNCTIONING OF THE TRADITIONAL ENERGY MARKETS 1. Urban Traditional Energy Markets 3.6 The supply of woodfuels to the urban and peri-urban areas is based on geographically concentrated and non-sustainable forest resource management practices (clear cutting). Given the relatively low efficiency of wood-to-charcoal conversion (18%) due to inefficient carbonization, total charcoal consumption in terms of wood is equivalent to 1.2 times the total consumption of fuelwood. Charcoal for Dakar and Thies and the surrounding peri-urban areas is essentially produced in the Kolda and Tambacounda regions, some 400 km away. Some charcoal is also produced in Kaolack but it is destined for local consumption. In some cases charcoal production is also authorized on an ad hoc basis in different areas of the country where land clearing for agricultural production has taken place. 3.7. Until April 1995, when a new Forestry Code was approved (Decret 95-357), the forestry legislation gave the Forest Service the exclusive prerogative to assign commercial exploitation rights over forest resources nationwide. These rights were historically given only to urban-based traders resulting in the creation of a vertically integrated and oligopolistic industry with widespread corruption problems. Among other issues, original annual charcoal exploitation quotas were frequently surpassed with the Forestry Service lacking the manpower or monitoring mechanisms to adequately supervise and enforce them. It is estimated that out of the some 1,800 legally registered "exploitantsforestiers" only some 20 traders actually work in and control the production of charcoal. The remainder registered traders buy charcoal production licenses ("quota charbon") and resell them afterwards to the traders that produce charcoal. That secondary -- and illegal -- transaction of those quotas takes place in a well organized black market environment that resembles a well functioning stock or futures market. As even the laborers "surghas" (Peuls from Guinea) employed in the cutting of the wood and the production of the charcoal are brought in to the rural areas by the urban traders, it is estimated that less than 5 percent of the estimated FCFA 30 billion (US $60 million) annual turnover of the charcoal trade 13 remains in the rural areas. Charcoal is transported to the cities in 15-ton trucks belonging either to the same charcoal trader or to private transporters who use the charcoal as return freight. At the gateway to the cities, "coxeurs" (wholesalers) regulate the inflows of charcoal by directing shipments to retailers. The coxeurs, which are not an officially recognized or regulated group in the industry hold a strategic position as they control all distribution in the cities. It is estimated that as few as 10 coxeurs control the charcoal flows into the urban markets. The "coxeurs" purchase the load from the trader and then sell it on credit to the retailer. A large number of the retailers are also Guinean Peuls and are salaried (non-commission) employees of the coxeurs, whereby they only derive a small salary from the activity. The points of sale are called "diallo kerin. " Figure 3.3 presents the structure of the charcoal labor chain in Senegal. Figure 3.4 present a typical 15-ton truck used in the transport of charcoal to the urban market. Approximately 25 15-ton trucks come into Dakar each day carrying some 375,000 tons of charcoal, equivalent to some 2,060 tons of wood. Figure 3.3: Diagram of Charcoal Subsector Labor Chain (Official Registers) Production Rural-based , Urban-based (wood cutting + carbonization) Surghs (1labor.) K ilxoe rs -e t Lm~~~~~( ., E u~~~~~~. L Forustiers* Tranporteun) Transport 4 .I1,;u)-0 1 . Distribution .--TI Consumer Source: RPTES 14 Figure 3.4 Typical Senegalese 15-ton Charcoal Truck 3.8. The commercial extraction of wood products is regulated by a ministerial decree that determines the logging season (generally December to August) and the production quotas for each region. The charcoal production quotas are based on charcoal outputs and not on wood inputs and thus provides no incentive for wood conservation in the carbonization process. The regional quotas are distributed among the 'exploilantsforestiers " that have a extraction licenses (before the 1993 season, the official order also set reserve quotas allocated at the end of the season on the basis of the needs of the urban areas). Based on the quotas, forestry inspection officials delineate the authorized logging areas and assign the felling sites to the companies, which must register the '"surghas" (employee certification), logging permits contingent upon the payment of a forestry tax that are required for all operations, and lastly, transport permits that are checked at the control posts on the main highways. Independent of the quotas set by ministerial order, additional quantities of wood or charcoal can be sold. These come from operations at private plantations or seizures of illegal charcoal made by forestry officials. While considerable progress has been made in the last two years in the enforcement of the existing regulations, it is necessary to improve the system further. 3.9. In general terms the organization of the urban and pern-urban fuelwood trade (520,000 tons/year) resembles that of the charcoal trade but poses considerably smaller environmental and social conflicts as it is based on the collection of dead wood over a much broader geographic area. Registered "exploitant foretiers "obtain permits from the forestry Service to collect the dead wood in situ and to transport it to the peri-urban and urban markets. Fuelwood is 15 transported in a combination of 15 and 30 tons trucks, where the latter are always used for the transportation of loads coming in to the markets from distances over 250 kilometers. 2. Traditional Energy Prices 3.10. Prior to the FCFA devaluation of January 1994, the regulated price of charcoal in the urban areas was FCFA 40 per kilogram, however, in practice retailers adjusted the weights and sold the charcoal for close to FCFA 60/kg. This situation was tolerated by the Commerce authorities because the official price had not changed since February 1986. The price of both fuelwood and charcoal were maintained stable by the government for such a long time essentially because of the fear that increasing them would generate civil disturbances and political unrest. However, after the FCFA devaluation, and the ensuing price increase of most basic commodities, made it possible to raise the price of charcoal without encountering major consumer resistance. Paradoxically, while average commodity prices increased by 30 percent, the price of charcoal was increased from FCFA 40/Kg to FCFA 95/Kg (US $190/ton), equivalent to a 130 percent increase with respect to the previous official price or then 60 percent compared to the real market prices. It is important to note that since the revaluation of the charcoal prices, the government has made a point of enforcing the requirement that retailers use scales to weigh charcoal sold to customers. As a result of that, the incidence of price/quantity distortions has apparently diminished somewhat. 3.11. The price increase after the FCFA devaluation has had no positive impact on the rural communities. The price increase was expected to be accompanied by a rise in the logging fee (forestry tax). However, this measure was only recently adopted and until now the surcharge paid by consumers paid after devaluation had disproportionately increased the income of the exploitants forestiers and coxeurs vis-a-vis the other actors in the industry. Table 3.3 presents and estimation of the structure of the price of charcoal before and after the January 1994 CFA franc devaluation. From this table it is possible to observe that after the FCFA devaluation, the profit margin of the exploitantsforestiers went up from 6 percent to 25.6 while the share of labor costs decreased from 21.7 percent to 12.7 percent. In addition to that, while there appears to have been a significant increase in the share of the retailers' profit margin (from 8.5% to 19.4%) it is necessary to keep in mind that the large majority of the charcoal retailers (diallo kirin) work for coxeurs at a fixed salary, hence their real margin is far smaller than the one suggested by the figures in Table 3.3. It is estimated that the real margin of the retailers is less than 6 percent, whereby the real margin of the wholesalers (coxeurs) is of the order of 17 percent and not 3.5 percent. 3.12 Current regulated market price of fuelwood is FCFA 40/kg (US $80/ton). Prior to the FCFA devaluation the price was FCFA 30/kg. Since the FCFA devaluation and the stricter application by authorities of the price/quantity regulations, there is little distortion in real prices other that the normal seasonal price variation reflecting relative higher collection and transportation costs during the rainy season. The principal component of the fuelwood cost structure is transportation (50%), followed by exploitants/wholesalers margins (35%). The remainder 15 percent is divided between labor costs, taxation and handling costs. As a large proportion of the laborers in the fuelwood trade are also temporary expatriate workers, the fuelwood trade currently leaves little or no income in the rural areas. 16 Table 3.3: Estimated Structure of Actual Charcoal Prices (FCFA/bag) :1993 1994 Structure.Items FCA ____ FOFA _FA __% Stumpage fee: 250 10.6 250 5.8 Production Stage: Labor cost 510 21.7 550 12.7 Other production related costs 305 13.0 340 7.9 Margin of"Exploitant" 140 6.0 1,095 25.3 Transport Stage: Loading/unloading cost 60 2.6 115 2.7 Transport cost 680 29.0 900 20.8 Marketing Stage: _ _ MarginoftheWholesaler 145 6.3 150 3.5 Operating cost 55 2.3 80 1.9 Margin of the retailer 200 8.5 840 19.4 *,Retail price: ;l :0i j00200jX j :)0 k2,3450 0100% 4,320. 100%: Note: Real prices are calculated on the basis of a bag weighing 42 kg, while the official price structure used a base weight of 50 kg in 1993 and 45 kg in 1994. Source: Energy Directorate (Modified). 3. Rural Subsistence Supply Systems 3.13. The consumption of fuelwood in the rural areas (1.5 million tons/year) is largely satisfied through geographically dispersed and sustainable subsistence practices (cutting of branches, selective felling of small trees and collection of dead branches). Women and children play a significant role in the collection of fuelwood. Rural consumption of charcoal is mostly limited to the areas where it is produced and is normally traded by the producers for food and lodging at the local communities. While rural consumption of woodfuels does not present significant environmental or energy supply-demand problems in the immediate future, it is necessary to assess the availability and accessibility of dead wood vis-a-vis the spatial dispersion of rural populations on a national basis to identify geographic areas of potential future conflict and develop pro-active medium-to-long term action programs to prevent them. C. EXPECTED FUTURE TRENDS: THE CHARCOAL PROBLEM 3.14. A recent survey (June 1994) conducted in Dakar after the FCFA devaluation showed that the disproportionate increase in the regulated price of charcoal (100%) with respect to LPG (30%) stimulated the substitution of woodfuels by LPG and a general trend toward increased fuel savings. As a result, it is estimated that charcoal consumption in Dakar dropped from 150,000 tons in 1993 17 to 130,000 tons in 1994. However, as consumers in secondary cities are rapidly switching from wood to charcoal, total charcoal consumption is still on the rise, albeit at an apparently slower rate than before. 3.15. Charcoal consumption in the cities is growing at just over half the rate of urban demographic growth. That trend is expected to continue relatively stable resulting in that total urban charcoal consumption would continue to rise at approximately 2% per year, potentially reaching some 385,000 tons per year (equivalent to 2.1 million tons of wood) by the year 2000 and 470,000 tons (or 2.5 million tons of wood) by the year 2010. Under the current non-sustainable forest resource exploitation practices these figures would represent an approximate charcoal-related deforestation of 35,000 ha in 2000 and of 42,000 in 2010. For the city of Dakar alone, charcoal consumption would reach some 150,000 tons in the year 2000 (equivalent to 13,800 ha) and 185,000 tons in the year 2010 (equivalent to 16,800 ha). 3.16. On the other hand, if as a result of rapid economic growth and/or lower than expected petroleum prices, the vast majority of urban households were to switch to LPG or kerosene as a primary fuel and utilize charcoal as a secondary fuel, charcoal consumption would come down to about half the expected level at 2 percent annual growth. In such a case, expected total charcoal consumption would come down to some 190,000 tons in the year 2000 and to 230,000 in the year 2010. Similarly, charcoal consumption in Dakar alone would be some 75,000 tons in 2000 and 90,000 in 2010, respectively equivalent to a deforestation of approximately 7,000 ha and 8,400 ha. 3.17. In simplified terms (assuming non-sustainable exploitation with zero to 40 percent natural regrowth), the implication of the above figures is that under the most realistic scenario (2% annual growth), is that between now (1997) and the year 2000 total charcoal consumption in Senegal will result in an accumulated loss of anywhere from 60,000 ha to 100,000 ha of forest lands, and between now and the year 2010 a loss of anywhere from 270,000 ha to 450,000 ha, the later being equivalent to one half to two thirds of the total Tambacounda and Kolda forest lands. D. SECTORAL ISSUES 3.18. Senegal's present and foreseeable macroeconomic and socio-economic conditions clearly suggest that the country will continue to depend on forest-based traditional fuels to meet the lion's share of its urban and rural energy needs well into the next century. While ongoing demand management (improved stoves programs and consumer education campaigns) and inter- fuel substitution (LPG and kerosene) efforts need to be continued incorporating the lessons learned to date, large increases of petroleum products imports cannot be sustained because of budgetary constraints and because current and expected low household income levels severely limit the potential for widespread inter-fuel substitution at non-subsidized market prices. Large cross-fuel subsidy programs among fuels (like the current LPG subsidy) would imply increased production costs and lower competitiveness of Senegal's economy, with wider macroeconomic impacts. Within that context, and until widespread economic growth allows for large scale substitution to take place, the principal challenge of the energy sector in Senegal will be to transform the existing non-sustainable commercial woodfuels supply system into one capable of supplying woodfuels -- particularly charcoal -- to the rapidly growing urban population in an sustainable manner. 18 3.19. Recent World Bank research work in Senegal has concluded that the availability of woody biomass in Senegal may have been previously underestimated both in terms of volume of stocks and yield potential. Pending confirmation by a proper vegetation cover inventory, it is now estimated that, under proper forest management schemes, the existing natural forest stocks should be able to sustainably meet most -- if not all -- of the demand for woodfuels for at least the next two decades. Implementing sustainable management would imply exploiting the existing forest stocks at or below the annual growth (yield) level and would therefore result in maintaining the original stocks over time. Yet, as both the government and the private sector lack the financial and human resources that would be necessary to adequately manage the country's forest resources, sustainable management could only be achieved through the aciv involvement of the rural population. Under the new forestry code, the right regulatory framework and the necessary technical assistance and supervision from the Forestry Service (MEPN) and other relevant government agencies and NGOs with competencies on land-use and rural development issues, the rural population should be able to assume the responsibility for the sustainable management of their forest resources. The participation of the rural communities in the commercial exploitation of the forest resources for the supply of woodfuels -- particularly charcoal -- to the urban markets would result in the creation of significant employment and economic development opportunities in the rural areas, with a considerable developmental impact for rural women. 3.20. The operation of the commercial woodfuels industry (particularly charcoal) has had overtime a number of negative environmental and social impacts, such as: the gradual loss of forest cover (approx. 30,000 ha/year) and thus of the ecosystem's carbon sequestration capacity and biodiversity; the degradation of the rural environment (particularly of the soils); the impoverishment of the rural areas; an acceleration of the rural exodus; and a massive transfer of wealth from the rural areas to the urban areas. In addition to those negative impacts, it is anticipated that within the near-to-medium future the Niokolo-Koba National Park (9,130 km2), which is an "International Biosphere Reserve Patrimony and Biosphere reserve" located in the south-eastern corner of the Tambacounda and Kolda regions, will come under threat of encroachment by charcoal exploitation practices. Should this be allowed to happen it would have irreparable biodiversity and ecological consequences at the national and global levels. As in the case of the management of forest stock, the government lacks the necessary resources -- and the private sector the interest -- to implement the required environmental protection mechanism to safeguard the Niokolo-Koba National Park from that potential encroachment. Here again, the responsibilization of the rural communities around the park area could lead to the implementation of effective and sustainable biodiverstity protection measures. The combination of the community-based forest management activities with the protection of the Niokolo-Koba park could be achieved by implementing sustainable and participatory forest management units forming a buffer zone around the park area. 19 E. GOVERNMENT STRATEGY 1. Main Past and Ongoing Programs LPG Promotion 3.21. In 1974 the Government launched an LPG promotion program intended to curtail the rapidly growing consumption of charcoal in the cities. Relatively low single-burner LPG stoves were introduced, and the controlled fuel price was set below cost. Under that program, annual LPG consumption increased from about 3,500 tons in 1974 to 16,000 tons in 1987, implying an average growth rate of 12% per year. In 1987 the Government added further stimulus to consumption by reducing the LPG price by about 40%; the result was an acceleration of sales, to reach over 50,000 tons in 1994. The annual growth rate in the period 1987-1994 averaged 18% per year. 3.22. The European Union (EU) provided further support to the government's butanization program through a regional butane program (Programme Regional de Gaz - PRG) to the CILSS member countries. The financial assistance to Senegal comprised investment in storage facilities and money for promotion and consumer education. The funds were channeled through the private distributors but, since the retail price was controlled anyway, the end use consumers did not benefit and the incremental impact on charcoal use was nil. For various reasons, the PRG was no success in other CILSS countries either, and in 1995 the EU formally discontinued the Program. 3.23 Meanwhile, the countries of the CFA zone had to adjust their pricing policies for the effect of the 100% currency devaluation in January 1994. The Government of Senegal protected LPG consumers by increasing the controlled price by only 30% whereas it allowed an effective price increase of domestically produced charcoal by 60%. 3.24. Although the different LPG promotion programs have displaced an estimated 90,000 tons of charcoal per year and, as a result, stabilized charcoal consumption in Dakar at around 130,000 tons per year, the overall effectiveness has been mixed. The benefit of subsidies has been captured only by higher-income urban households and small commercial establishments. The annual level of the subsidies reached FCFA 5 billion (or $ 10 million) in 1995. It is argued that the subsidy is not a burden on the national treasury because it is financed out of petroleum product revenues. However, that implies in inequitable income transfers within the economy and, since users of other petroleum products pay for the cross subsidy, it further has promoted a distortion of the entire framework of energy prices. Dissemination of Improved Stoves 3.25. The dissemination of improved fuelwood and charcoal stoves in Senegal began in 1980 under the responsibility of the CERER, which developed two improved stoves (Ban ak Suuf and Sakkanal) with reasonable performance and consumer acceptance. However, by 1987, CERER had only been able to disseminate some 30,000 Ban ak Suuf fuelwood stoves in the rural areas and less than 10,000 Sakkanal charcoal stoves in the urban areas. Between 1988 and 1994 little progress was registered in the promotion of improved stoves. Currently, there are only few improved stove projects in operation and they are mostly focused on charcoal. These projects, 20 however, are still too small to make a visible impact and/or are largely dependent on donor support. It is estimated that only between 5 and 12 percent of Senegalese households have improved stoves. 3.26. Based on available information, the best program in operation today is the USAID- funded Appropriate Technology International (ATI) Diambar charcoal stove program. This program supports the production of stoves in Dakar and Thies. The Diambar stove, which consists of a ceramic interior covered in sheet metal, is proving to be very efficient (30-40%) under normal household use conditions and has a high consumer acceptability. A wider dissemination of this promising stove, however, has been limited by availability of investment credit to the small artisans who produce the ceramic and the metal shell. Current sales of Diambar stoves are reported at 20,000 per year at prices that vary from 2,000 FCFA to 4,500 FCFA depending on the size. At the estimated 30-40 percent efficiency range, a wider dissemination of the Diambar stove could result in a significant reduction in charcoal consumption and expeditures at the household level. 3.27. Other urban-based improved charcoal stove projects include the PAMEC project (metal and leather artisans project) from MEMI's Directorate of Artisanat which support artisans in Thies, Kaolack, Saint Louis and Louga; the ENDA-Graf which assists metal artisans in Dakar and Rufisque; and different small stove-related women's groups support activities by the Ministry of Women, Children and the Family. 3.28. While many reasons have been offered for the limited success of most improved stoves program in West Africa, recent work suggests that too much emphasis was given to technical performance (energy efficiency) and too little to consumer acceptability. The majority of the sociological field work undertaken did not have research objectives but rather was intended to convince consumers to utilize improved stoves through "sensibilization campaigns". With few exceptions consumers consistently were unable to perceive the benefit of improved stoves and penetration remained a function of direct donor-financed promotion efforts. As soon as donor financing was cut penetration stopped and households did not replace stoves when the time came to do so. The sociological studies were used to influence the technical design of stoves (pot size capability, type of food cooked, etc.) but not necessarily to design the stove's social marketability. As a result even highly performing stoves under laboratory conditions lacked the necessary consumer attractiveness (quality of material, presentation, marketing approach, etc.) to generate commercial success stories. At the same time, while it was expected that consumers would perceived the economic advantage of utilizing improved stoves, market price/quantity distortions and speculation (the practice to sell presumable kilogram units with as little as 700 grams of actual weight) rapidly eroded the expected saving because fuelwood and charcoal are not traded on the basis of standardized units but of money (i.e., 50 FCFA or 10 FCFA of charcoal). As the non-regulated fuel units shrank through time by up to 30% there went with it the possibility for consumers to perceive any concrete saving. Forestry Projects 3.29. Many aforestation projects have been carried out in Senegal the course of the last decade to increase forest resources. At present, 30 programs are under way. The approach of these projects was long dominated by reforestation on force account. This had only a limited impact because of the high cost (US $500 - US $750 per hectare) relative to the benefits, the difficulty of protecting the forestry stands against over-exploitation and the lack of participation of the 21 rural communities. Recent years have seen a gradual shift from reforestation operations on force account to a more communitarian approach and with the integration of agro-sylvo-pastoral activities. Today, a large number of those projects focus on rural forestry and half of them include some training, information dissemination and education activities. By now some 150,000 ha. have been replanted since 1970. Despite the importance of the progress made, the current reforestation rate (close to 20,000 ha/year) is still well below that of deforestation and over the short-to-medium term the new plantations will not to play a significant role in the supply of wood products (charcoal included). Improvement of Carbonization Techniques 3.30. A program to train charcoal makers in the use of improved kilns (the "Casamance" kiln) was undertaken between 1980 and 1986. The program trained more than 7,500 charcoal workers. For a relatively small investment (about FCFA 20,000), the kiln boosts the carbonization yield by 20%. Nevertheless, the program was discontinued because successive evaluations showed that the charcoal laborers ("surghas ") continued to use their traditional carbonization methods in stead of the improved kilns. The principal reasons for this was the "surghas" complete dependence on the commercial charcoal traders ("exploitants forestiers"), who had no incentive to investment in kilns or to pay the additional cost to transport them into the charcoal production sites. As charcoal production quotas were set on the basis of charcoal quantities and not on the basis of areas or wood volumes, any additional production cost would only reduced the trader's profit margins. 3.31. As the new wood volume-based charcoal quota system comes into effect in 1997, it is expected that traders will have a clear incentive to utilize improved kilns, as doing so would maximize their revenues for the same level of effort and forest resources. While the traders could be expected to upgrade their carbonization practices within the next 2 to 3 years, all community-based charcoal production promoted by the proposed project will based on improved technology. The use of improved carbonization methods will be monitored throughout the proposed project and the economic and financial information obtained in the first three years of the project will be used for the elaboration of a new woodfuels pricing and fiscal policy due to be enacted by the government by December 2000 (para. 6.9.iii). The operation, monitoring and enforcement mechanisms for the production of charcoal by the rural communities will be stipulated within the "contract plans" (para.5.4.vii) that will be established between the government and the participating communities. The overall enforcement of the charcoal related regulatory and policy changes will be the responsibility of the Forestry Service. The Forestry Service will act on the basis of the monitoring and supervision systems that will be implemented by the project (forest resources exploitation, woodfuels trade flows and community participation). 2. Future Strategy 3.32. In order to address the existing problems and contribute towards the effective development of the traditional and household energy sectors in Senegal it will be necessary to undertake a well focused set of priority actions. It is obvious that numerous other things can and perhaps should be done to some degree, however, the limitation of human and investment resources imposes the need to retain focus over a small core group of complementary priority actions: 22 Institutional Issues and Options * to strengthen the existing sectoral institutions (primarily the Direction des Eaux et Forets and Direction de l'Energie) and to upgrade their staff and means to plan, coordinate, monitor and evaluate sectoral activities and measures; and * to elaborate and implement a sound communication strategy capable of maintaining the entire population (government agencies and civil society at large) informed of the developments in the sector, to lay the ground for necessary policy reform work (changes in pricing, charcoal quotas, taxation, forestry codes, forestry application decrees, land and tree tenure, etc.) and to effectively promote the different demand management measures and inter-fuel substitution fuels or equipment (improved stoves, gas, kerosene, etc.). Traditional Energy Markets * implement large scale community-based sustainable forest management systems capable of spatially fixing production of woodfuels for the rapidly growing urban markets (particularly charcoal) and promoting integrated natural resource management and biodiversity protection. In order to do this the following activities would have to be undertaken: a comprehensive inventory of forestry and other biomass resources, in conjunction with a survey of land use; participatory rural appraisals in target communities to ensure their participation in the proposed sustainable management plans; and make the necessary adjustments in the regulatory framework so as to create the right regulatory environment (land and tree tenure, taxation, revenues, etc.); - promote the implementation of rural community-run improved charcoal kilns (Casamance kilns) at concentrated fixed locations in order to increase the efficiency of the charcoal carbonization and spatially organize its production; and - support the economic diversification (including commercial timber plantations, urban and rural retail activities, LPG distribution, etc.) of the existing exploitants forestiers to reduce the potential conflicts of the gradual transfer of an important part of the industry and revenues to the rural communities. Regulatory and Policy Issues and Options * enact the necessary legislation to replace charcoal quotas in the areas under community management by sustainable annual production ceilings fixed by the management plan agreed between the government and the communities and, as a transitional measures, to ensure that the immediate vicinity of the villages in non- managed zones should be protected from indiscriminate cutting by an exclusion zone (e.g. a radius of several km); * enact the application decree for setting-up of the Niokolo-Koba protection buffer zone; 23 * change the charcoal royalty system from its present charcoal output base to a wood input base in order to promote increase carbonization efficiency. * review and simplify the current woodfuels regulatory systems to reduce its enforcement burden and to reduce the opportunities for process corruption; and * establish a modem and strengthened system for monitoring and controlling forestry exploitation and flows of woodfuels, in order to ensure compliance with the forestry management plans, provide reliable data on a regular basis, increase forestry revenue and ensure the protection of the forest stocks and of biodiversity. Energy Demand Management * introduce standard weights and measures and improved charcoal handling (including the introduction of standardized bagging of charcoal at the retail level) in order to protect consumers from price/quantity speculation by retailers and to reduction of urban pollution; - remove all controls on charcoal retail prices as soon as enforceable standard weights have been established and more competition has been introduced; - promote the production and marketing of improved charcoal stoves in the urban center by the private sector and/or NGO community at non-subsidized market prices; and * promote the use of improved stoves in the urban households through appropriate sensibilization and consumer information campaigns; Inter-fuel Substitution Options * review the procurement, storage and handling systems of the LPG and Kerosene in Senegal, with a view to identify the areas and issues which can be improve (cost, efficiency, transparency, and performance) in order to reduce either the need for governmental subsidies or their final retail prices; * continue to support the dissemination of LPG by the private sector nationwide, through the standardization of retail prices ("perequation"), limited financial support to private sector entrepreneurs for the construction of decentralized depots and suitable promotion operations; and * explore the potential of kerosene as a substitute fuel for the secondary cities of the country where the consumption of charcoal is increasing rapidly. 25 IV. BANK GROUP/GEF ROLE IN THE TRADITIONAL ENERGY SECTOR A. HISTORY AND LESSONS LEARNED FROM PREvIOuS BANK/IDA/GEF INVOLVEMENT 4.1. The proposed project incorporates the principal lessons learned over the past two decades in "household" energy and participatory natural resource management interventions in West Africa, including projects in Burkina Faso, Gambia, Mali and Niger. The lessons incorporated include but are not limited to the need to: (i) focus the priority for action in the traditional energy/household energy sector on the establishment of sustainable woodfuels supply systems capable of satisfying the growing and concentrated urban markets; (ii) enact a legal and regulatory framework that provides for the effective transfer of the control over natural resources from the Government to the rural populations; (iii) implement a simplified traditional and household fuels fiscal and pricing regulatory framework which avoids loopholes and opportunities for market distortions and "corruption"; (iv) follow a natural resource and rural development approach to the implementation of community managed woodfuels supply schemes to ensure the materialization and sustainability of social and economic development under the project; (v) re-orient the role of governmental agencies towards policy formulation activities and away from actual project execution, and promote an increased participation of civil society (community, NGOs and private sector) in the implementation of non- subsidized project activities (inter-fuel substitution, improved stoves, etc.); and (vi) promote and maintain ample consultation/ participation of all the "stakeholders" throughout the entire policy-project cycle, and implement a sound communication strategy. B. RATIONALE FOR BANK/GEF FINANCING AND CONSISTENCY WITH THE COUNTRY ASSISTANCE STRATEGY 4.2. The project is a logical progression of the new traditional energy sector development strategy developed with the Bank's assistance (RPTES Program) and is fully consistent with the agreed Country Assistance Strategy (CAS) of February 16, 1995. Its implementation would result in advancements in key areas of the Bank's development assistance agenda for Senegal, including -- but not limited to -- the rationalization and stabilization of the energy sector, promotion of sustainable forest and natural resource management practices, creation of participatory and gender-balanced rural development opportunities, private sector development, NGO community participation and reduction of environmental degradation. Further, the project would be fully consistent with the principles and recommendations of Agenda 21, the 26 Convention to Combat Desertification (CCD), the United Nations Framework Convention on Climate Change (UNFCCC), and the Beijing Declaration. 4.3. While the current institutional and policy environments of the forestry and energy sectors in Senegal justify Bank involvement and support, up until recently both sectors were plagued by serious problems, the least of which was a strong interference by political and economic interest groups in policy and institutional matters and even in daily operational issues within in the sector. Those problems, exacerbated by serious incidents like the clear-cutting of the Mbegue forest in 1992, led to the suspension of a Bank forestry sector project in 1992 (PICOGERNA) and to the refusal by the Bank and other donors to finance investment proposals presented by the GoS at an Energy Donors Round Table in 1992. Nevertheless, as in other Africa countries, Senegal has experienced a considerable process of political and institutional change in the last three years as a direct result of the ongoing push towards democratization and administrative decentralization. Whereas some time will still be required for Senegal to put that negative past behind, there is today a clear awareness in government that a repetition of incidents such as the clear-cutting of the Mbegue forest would result on seriously destabilizing internal and external political and economic repercussions. 4.4. Clearly marking the changes that have taken place in Senegal in the recent past, the new forestry code expressly provides for the transfer of responsibility from the Government to the rural communities for the sustainable management and exploitation of the existing natural forest resources, and establishes that all forest resources exploitation activities must now be consulted with and approved by the affected rural communities. This fundamental regulatory change -- which would have been unthinkable a decade ago -- is fully consistent with the overall trend toward administrative decentralization and has the full commitment of the Government at the ministerial and technical levels. Nevertheless, the still powerful -- although rapidly diminishing -- charcoal oligopoly that exists cannot and should not be dismantled overnight. An organized process of gradual transition and increasing participation of the rural populations in the woodfuels industry trade will be necessary in order to avoid sudden woodfuels market ruptures, and the negative energy, social and political consequences that would result from them. Such a gradual process is also necessary from environmental and energy efficiency points of view, as the rural population will need some time to assimilate both sustainable forest management and efficient carbonization practices and methods. Not allowing for such a gradual transition would result in low natural resource sustainability, decreased carbonization efficiencies and potential social and economic conflicts from the redistribution of part of the industry's income to the rural communities. 4.5. The sustainable woodfuels supply management component qualifies for GEF support under the short term projects window of the operational strategy for climate change. The component is a country sustainable development and global environment priority, likely to succeed. It is also highly cost effective in the short term (US $ 4.30/t CO2 after 7 years and US $ 1.04/t CO2 after 15 years). Its objective is carbon sequestration, which the strategy flags as a possible future operational program and on which early experience is sought. The participation of GEF in the project is necessary in order to assist the GoS in the financing of community- participatory activities ("mesures incitatives ") and monitoring and evaluation systems designed to generate and/or guarantee the materialization of incremental global environmental benefits (climate change and biodiversity agendas). Through the implementation of sustainable forest resources management systems, the project will provide -- within the project area and dimension - for the production of 300,000 tons/year of fuelwood with a zero net emission effect, thus 27 significantly reducing ongoing CO2 emissions. In addition, the project would establish a buffer zone around the Niokolo-Koba National Park, increasing the protection to biodiversity. Without GEF financing the GoS will lack the necessary funding to cover the proposed activities and thus the global environmental benefits would not be realized. In addition to the above, a highly cost effective improved charcoal stoves program activity (unit abatement cost of US $0.34/t CO2 after 7 years) will be included within project's Demand Management component. While this activity will n= be financed by GEF its implementation is fully consistent with GEF's operational program for removing barriers to energy conservation and energy efficiency. The barriers in this case are shortage of up-front capital and lack of knowledge. Annex 1 presents a descriptive summary of the Niokolo-Koba National Park and its national and global biodiversity significance. Annex 2 presents a summary of the monitoring and evaluation activities of the GEF components. Annex 3 presents a detailed discussion and calculations of the project's GEF incremental cost and expected global environmental benefits. 29 V. THE PROJECT 5.1. Background. The proposed project was prepared by the GoS with assistance from the Bank's Africa Regional Program "Review of Policies in the Traditional Energy Sector - RPTES". Through the RPTES a national inter-ministerial team conducted between mid 1993 and late 1994, a comprehensive review of the traditional energy sector in Senegal, including the evaluation of the principal inter-fuel substitution issues and options (kerosene and LPG). Within that review, the regulatory, legal, pricing and fiscal frameworks of the sector and the evolution of its structure and functioning were studied in detail. The inter-ministerial RPTES team was led by the Directorate of Energy of the Ministry of Energy, Mining, and Industry (MEMI) and was integrated by other senior staff from the Directorate for Water and Forests of the Ministry of the Environment and Protection of Nature (MEPN), Ministry of Commerce, Ministry of Women Affairs, Ministry of Finance and Plan, and inter alia, the National CILSS Commission (CONACILSS), which are all members of the "Cellule de Combustibles Domestiques". By May 1995 the five RPTES participating countries presented their respective policy conclusions and recommendations and a draft of investment project at the "RPTES Donor Experts' Conference" at Maastricht, The Netherlands. After the Maastricht conference, the Senegal RPTES team went to work on the polishing of their proposed sectoral investment program based on the comments received from the several donor present. The basic project draft design was extensively discussed among different government agencies, the NGO community and several beneficiary consultation and participation activities have and will be done through- out project implementation (see section Beneficiary Participation and Consultation). A. PROJECT OBJECTIVES 5.2. Project Objectives. The objective of the project is to meet an important part of the rapidly growing urban demand for household fuels, without the loss of forest cover and the ecosystem's carbon sequestration potential and biodiversity. This objective would be met through: (i) the implementation and monitoring of 300,000 hectares of environmentally sustainable community-managed forest resource systems in the Tambacounda and Kolda regions of Senegal, creating a protection zone around the Niokolo-Koba National Park (Biosphere Reserve); (ii) the promotion of private sector inter-fuel substitution and private sector and NGO- based improved stoves initiatives; and (iii) the strengthening of the institutions involved in the management of the sector, and the promotion of the participation of the civil society (private sector, academic institutions, and NGOs community) in the operation of the sector. 30 B. PROJECT DESCRIPTION 5.3. Project Description. The project consists of three components: (i) Preparatory and Support Activities component; (ii) Sustainable Woodfuels Supply Management component; and, (iii) Demand Management and Inter-fuel Substitution Options component. The project design includes a series of activities to ensure an effective participation of the rural population ("measures incitatives") and thus guarantee the full achievement of the environmental sustainability objective of the project. The project also includes specific monitoring and evaluation activities (forest exploitation and wildlife) designed to evaluate the achievement of its global environmental objectives (maintenance of carbon sequestration capacity, CO2 emission abatement and biodiversity conservation: 5.4. Component I: The Preparatory and Support Activities component would have an approximate duration of one calendar year and would finance technical assistance, equipment and operational costs to carry out: (i) A comprehensive assessment of vegetation cover in the Tambacounda and Kolda regions to generate the technical data necessary to design sound community-level sustainable forest management plans and to select the specific geographical areas to be covered by the project; (ii) A series of participatorv rural appraisals to obtain the demographic, socio- economic, and cultural information necessary to prepare, with the local communities, the specific management plans. These Parse would pay special attention to the identification of relevant women's development issues, specific training and capacity building needs; (iii) The design of monitoring and evaluation systems including: (a) a forest resources exploitation monitoring system for the Tambacounda and Kolda regions to evaluate the sustainability achieved by the community-managed systems and to supervise the operation of the non-community based woodfuels traders and their compliance with authorized exploitation plans; (b) a forest fire monitoring and response system for the community-managed areas to assist in the reduction of forest resource losses within the project area; (c) a rural community-based wildlife monitoring system to evaluate the compliance with and achievement of the project's biodiversity objective; (d) a national woodfuels trade flows monitoring system to enable the correct quantification of the market requirements and the preparation of long-term woodfuels supply strategies at the national level; (e) kerosene and LPG penetration monitoring systems; and (f) urban improved stoves penetration monitoring system. (iv) The elaboration of capacity building and training programs, with special emphasis on the training and extension needs of the regional Forest Services offices, community groups and NGOs; (v) Institutional development and capacity building support to the different govemmental agencies, community associations and NGOs that will participate in the implementation of the project, with special emphasis in the training and "recycling" of the Forest Service staff who will be directly responsible for the 31 implementation of the Sustainable Woodfuels Supply Management component and the staff of the Energy Directorate (MEMI); (vi) Elaboration of technical studies and assessments on demand management and interfuel substitution issues (kerosene stoves and penetrations strategies, improved charcoal stoves, energy pricing, etc.); (vii) The preparation of a detailed implementation plan for the annual participatory forest management modules, including the preparation of standard Government- rural community "Contract Plans"; (viii) The preparation of a detailed implementation plan for the Demand Management and Inter-fuel Substitution Options Component, including the selection of the private sector and NGO initiatives to be supported by the project; and (ix) The design of a comprehensive project implementation communication strategy to promote increased participation of civil society (community, NGOs and private sector) in the management and operation of the sector. 5.5. Component II: The Sustainable Woodfuels Supply Management component would finance technical assistance, small tools and field equipment for the rural communities, vehicles and office and field equipment for the Forest Service (regional offices), forest fire control equipment, and community projects (carbonization units, agro-forestry enterprises, etc. (micro- realisations communitaires) to carry out: (i) The implementation of sustainable community-managed forest management systems over and area of 300,000 ha within a total period of six years, from which woodfuels would be produced. The project would seek to reinforce the buffer zone around the Niokolo-Koba National Park (international "Biosphere Reserve"). This component would implement annually increasing "forest/natural resource management modules", starting at 15,000 ha in the second year up to 100,000 ha in the seventh year; (ii) An assessment of the availability of and access to woodfuels for rural subsistence consumption at the national scale, paying particular attention to the availability of dead wood vis-a-vis the geographic dispersion of the rural population; (iii) Technical support and extension services to the participating rural communities and NGOs for the implementation of the participatory management modules and for the exploitation/production and marketing of woodfuels and other potential wood and non-wood products; (iv) Support for the establishment of rural-based micro-enterprises, such as community-operated carbonization units, agro-forestry processing units, etc.; and (v) The implementation of a comprehensive communication strategy in support of the implementation of the Sustainable Woodfuels Supply Management component. 32 5.6. Component III: The Demand Management and Inter-fuel Substitution Options component would finance technical assistance, vehicles and office equipment for the Direction de I 'Energie, purchase of 1,000 kerosene stoves for a pilot program; purchase of LPG bottles and burners to carry out: (i) Support for the re-organization and modernization of the urban charcoal trade to establish long-term supply agreements (contracts) between rural communities and urban traders -- to guarantee the unconstrained entry of community-produced woodfuels to the urban markets -- and to permit the standardization of the marketing units and the cleaning of the urban environment (charcoal bagging); (ii) Providing technical assistance and limited financial support for the economic diversification of existing urban charcoal traders ("exploitants forestiers"). Proposal received include enterprise diversification into LPG retail, gas service stations, foodstuffs retail and light transport activities. The financial support to be provided by the project would be limited to organizational and training activities; (iii) The execution of specific technical and market-feasibility studies to support the further promotion of LPG and Kerosene as substitute household fuels (the kerosene study will complement a proposed GTZ-funded study within the recently launched German-Senegalese Household Energy Assistance Project); and (iv) Providing support for the continuation of inter-fuel substitution options (kerosene and LPG) and dissemination of improved stoves by the private sector and NGOs. C. PROJECT COSTS AND FINANCING PLAN 5.7. Project Cost and Financing. The total project cost is estimated at US $19.9 million, with a foreign exchange component of about US $18.7 million (94%). The financing plan includes US $1.2 million from GoS (para. 7.1.iii), US $5.2 million from IDA, US $4.7 million from GEF, and US $8.8 million to cofinanced by the Dutch Government. The GEF Council has already approved the request for funding for the project (US $4.7 million) (para. 7.2.i). The GEF funding includes US $500,000 from the Danish Environmental Program. It is important to note that, as outlined above, the financing plan does not include the large in-kind financing from the rural communities (sustainable forest management) and NGOs (community support and improved stoves activities), nor the investments that are expected from the promotion of private sector activities (modernization of the charcoal filiere and inter-fuel substitution). 5.8. GEF Incremental Costs. The incremental cost of the "GEF Alternative scenario" is US $4.66 million. This represents the cost for the implementation of activities within the Preparatory and Support Activities and the Sustainable Woodfuels Supply Management components related to community-participation, integrated natural resources management, institutional development and the monitoring and evaluation of global environmental benefits. 5.9. It is estimated that over the project duration of 7 years the GEF Alternative Scenario would achieve a total CO2 emission abatement of 1.1 million tons at an incremental cost of US $4.30/ t C02- Over 15 years, the GEF Alternative scenario would result in a C02 emission 33 abatement of 4.5 million tons at an incremental cost of US $1.041t CO2 (see Annex 3 for a detailed calculation of the project's Incremental Cost and Global Benefits). D. BENEFICIARY CONSULTATION AND PARTICIPATION 5.10. The sectoral development strategy and investment proposals prepared by the GoS were widely discussed at all levels of Government and with the civil society, including the private and academic sectors and the NGO community, during national participatory seminars and workshops. A special national workshop for "exploitants forestiers" was held in 1994 and periodic consultations were sustained since with key sector entrepreneurs to ensure their support for the implementation of the envisaged policies and investments. Three regional workshops (including delegations from Burkina Faso, Gambia, Niger, Mali & Senegal) were held to promote a regional discussion of country policy findings and investment proposals and cross- country comparisons and to allow for a direct exchange of experiences. Table 5.1 presents a summary of the participation plan for the proposed project (para. 7.1.iii). Annex 4 presents a descriptive summary of the project's participation action plan. 5.11. In December 1995 three "Project Design Workshops" (Government agencies, NGOs & private sector and donor community) were held in Dakar to further review the proposed project's design concept. A large NGO community consultation meeting was held in Dakar in late March, 1996 to prepare a series of direct beneficiary (rural community) consultation workshops which took place in April 1996. 5.12. Because of the nature of the proposed project, its participation and beneficiary consultation aspects are of critical importance. The participation activities that would be undertaken within the project have as main objective assuring that the implementation of the project will be based on beneficiary representative participation (para. 7.1 .ii). E. PROJECT IMPLEMENTATION 5.13. The Ministry of Environment and Protection of Nature (MEPT) and the Ministry of Energy, Mines and Industry (MEMI) through the appointment of a National Project Director (NPD) and the establishment of a Project Coordination Unit (PCU) would be jointly responsible for the overall implementation of the project (para. 7.2.ii). The implementation of the Preparatory and Support Activities component would be under the joint responsibility of MEPT and MEMI as this component includes preparatory activities related to areas of competence of both ministries. The National Water and Forest Directorate (NWFD/MEPT) alone would be responsible for the implementation of the Sustainable Woodfuels Supply Management component of the project. The Energy Directorate (DE/MIME) would be responsible for the implementation of the Demand Management and Inter-fuel Substitution Options component. The existing "Cellule de combustibles domestiques" would serve as a "consultative group" for the project and would provide the institutional conduit for multi-agency coordination. Moreover, a small formal high-level "Steering Committee" for the project will be set-up to oversee the implementation of the project and provide guidance on important issue that arise. This Steering Committee will be formed by senior representatives of the Borrower, the project's donor agencies and, possibly, representatives of the civil society. 34 Table 5.1: Summary of proposed Participation Action Plan (PAP) Key Elements of the Plan * Based on a Consultative and Participatory Process: The design of this plan resulted from a consultative process of Policy Formulation and Project Identification involving several key stakeholders. In addition, a series of National and Regional Participatory Project Preparation Workshops were conducted by the Government of Senegal between December 1995 and April 1996 to obtain feedback and suggestions from representatives of civil society on the overall project strategy. * NGO Oversight: The Government of Senegal will choose an NGO to be responsible for the monitoring of the SPEMP-PAP. This "lead" NGO will be responsible for promoting, monitoring and reporting on all participatory activities during the project implementation phase. * Phase of Preparatory and Support Activities: The first 12-18 months of the project will be dedicated to participatory preparation activities, as well as other support activities. The participatory preparation activities will allow communities to design their own community management plans as well as for the project team to obtain additional social, economic, ecological, and functional information necessary for project implementation. Once the actual implementation of the sustainable woodfuels management systems begins, additional PRAs will be conducted in the rural communities that are expected to join the project in the subsequent year. * Role of Women, Youth and NGOs4: Due to their critical role in resource management and development, women, youth and NGOs have been identified as key participants and will play a fundamental role throughout the life cycle of the project. * Participatory Methodology Training for Government Officials: General sensitizing of government decision makers on participatory approaches and their impact on development is planned as a key component of capacity building and institutional development activities for the Government of Senegal. 5.14 The project includes a Preparatory and Support Activities components which entails the detailed design and preparation of all major project investment components. As such, the Preparatory and Support Activities component is intended to serve like a "project preparation facility (PPF)". A PPF was not considered for this project because of the relatively small size of the overall operation did not warrant the establishment of a PPF. Rather, an initial component through which design issues would be finalized and which would constitute _ condition of disbursement for the investment activities of the two additional components (supply and Demand) (para. 7.3). Table 5.2 presents an implementation calendar for the SPEMP project. The implementation of the project -- and in particular the preparatory and support services component -- will make full use of the accumulated Bank and non-Bank experience accumulated thus far in the sub-region in similar forest/natural resources management projects. Among Bank projects, the SPEMP activities will closely review: (i) Burkina Faso: Programme National de Gestion Terroir (PNGT); (ii) Niger: Energy II; (iii) Mali: Household Energy Project (HEP); and Mali: Programme de Gestion des Resources Naturelles (PGRN). Other non-Bank projects to be 4Non-Governmental Organizations here also refers to Community Based Organizations (CBOs) 35 studies, include: (i) Burkina Faso (UNDP/FAO): Programme National de Amenagement Forestiers (PNAF); (ii) Senegal (Dutch Cooperation): Previnova; and (iii) Gambia (GTZ): Forestry Project. 1. Component I: The Preparatory and Support Activities 5.15 The assessment of vegetation cover in the Tambacounda and Kolda regions will be undertaken by the Inventory and Cartography Division of the Forestry Service with support from the Centre de Suivi Ecologique (CSE) and of specialized consultant assistance. An initial review of the different methodologies that have already been used in Senegal to undertake forest and vegetation cover inventories will be made. On the basis of that, one methodology will be chosen or design to undertake the intended vegetation cover assessment. It is envisaged that the chosen methodology will be later adopted as the standardized methodology for subsequent forest/vegetation cover inventories and assessments in Senegal. The reason for conducting a vegetatimn assessment as opposed to a narrower forest resource assessment is to obtain the information necessary to design the community-based natural resource management strategies and plans envisaged by the project (forest, agriculture, herding, extraction, etc.). 5.16 The participatorv rural appraisals constitute the principal participatory activity of the preparatory and Support Activities Component and are expected to provide the basis for the identification and selection of the rural communities to be included in the project. The execution of the PRAs will be done by locally active NGO groups under the supervision of the regional Forestry Service agencies. The base methodology for the PRAs will be prepared by the Forestry Service of the PCU with assistance of specialized consultants as required (individuals and/or NGOs). The resulting methodology will be subject to specific IDA approval. The first batch of PRAs should be completed by the end of the first year of project implementation. As conditions in the rural communities are expected to change over time, only a limited number of PRAs will be conducted during the Preparatory and Support Activities Component (approximately 40 PRAs). The remaining PRAs will be undertaken in years 2, 3, 4, 5 and 6 of the project implementation schedule. The initial 40 PRAs however are expected to provide the necessary input to design "standard" participatory and sustainable forest management modules. 5.17 The design of monitoring and evaluation systems (forest resources exploitation; forest fire; wildlife; national woodfuels trade flows, kerosene and LPG penetration; and improved stoves) will be done by specialized consultants (individuals, private firms and/or NGO) under the supervision of the PCU. This activity should be completed by the end of the first year of project implementation. 5.18 The elaboration of capacity building and training programs and the preparation of a detailed implementation plan for the annual participatory forest management modules (including the Government-rural community "Contract Plans") will be done by the Forestry Service with support from specialized consultants and technical assistance groups. Among other, it is envisaged that FAO will play a role in the development and implementation of the intended capacity development and training programs as a cooperation agency. This activity should be completed within the first 18 months of project implementation. Table 5.2: Senegal SPEMP: Project Implementation Plan ________ MONTHS | Project components & Sub-components 1-12 (18) 13(19)- 24 25 - 36 37 - 48 49 - 60 61 - 72 73 - 84 Component I: Preparatory and Support Activities 1. Vegetation cover assessment (Tamba/Kolda). j--003 030 00 00 _3 2. Preparatory Participatory rural appraisals. ________I I _ 3. Design of monitoring and evaluation systems: Monitoring & Evaluation Schedule During Implementation Forest Resources exploitation (FRE) EmEmE 00 003 O 00 00 300 Forest Fire (FF) & Wildlife (W) Noun 0 0 0 0 03 0 Woodfuels Trade Flows (WTF) *NN u 000000 30000003 000000 00033000 000000 000000 Particiaption (P) & Developmental impacts (Dl) * ommuum 00 00 00 00 00 00 Kerosene & LPG Penetration (IF) & Improved Stoves (IS) mmumuu 0 0 0 0 0 03 4. Elaboration of capacity building program/field extension guides. son 5. Institutional development and capacity building (DEF & DE). Eom.__ _ 6. Preparation of implementation plan for participatory forest management modules (Component II). MEMO 7. Preparation of implementation plan for Component IlIl. MEN 8. Design project communication strategy (components 11 & Ill). *u-o Component II: Sustainable Woodfuels Supply Management 1. Implementation of sustainable forest management systems. Annual participatory rural appraisals (modules 2 - 6) _ __ *- moo *oo Module 1: 15,000 ha _ ___ _ Module 2: 25,000 ha _ _ __ __ Module 3: 40,000 ha ______ Module 4: 50,000 ha _ _ __ __ Module 5: 70,000 ha _ ___ __ Module 6: 100,000 ha _ __ _ _. 2. Undertake national dead wood assessment. _ _ _ _ __ 3. Support & extension services participating villages and NGOs. MONSOO No .. *ooo *... ... *ooooo. .s.o. 4. Support for establishment of rural micro-enterprises. _____ _ EmEEHEE KEKEEHE EEEEEEE EEEEEEE Em..... 5. Implement woodfuels component communication strategy. .* u uu u NEMESES . o.. oo MONSOON *o.o. Component Ill: Demand Management & Interfuel Substitution 1. Support to re-organization/modernization of charcoal trade. **E * *EEEU Eo .oo 2. Support for economic diversification of charcoal traders. * oo___ ..o. . * oo.. . ... ... ONENESS 3. LPG and kerosene technical/ market-feasibility studies. _______ E E EE 4. Support promotion of LPG/kerosene and improved stoves. EEEEEEEEoEE E oU oooo E-EEoE 37 5.19 The preparation of a detailed implementation plan for the annual participatory and sustainable forest management modules (including the preparation of standard Govemment-rural community "Contract Plans ") will be done by the Forestry Service with support from specialized consultants and technical assistance groups. The implementation plan would be designed with the direct participation of the rural populations taking into account the multifunctionality of the existing agro-ecosystems and thus the socio-economic parameters and interests of the local community. This activity should be completed by the first year of project implementation. 5.20 The preparation of a detailed implementation plan for the Demand Management and Inter-fuel Substitution Options Component will be done by the Energy Directorate with specialized consultant support as needed, and should be completed by the first year of project implementation. 5.21 The design of a comprehensive project implementation communication strategy for the entire project will be done by specialized consultants under the supervision of the PCU. This activity should be completed by the first year of project implementation. 2. Component II: Sustainable Woodfuels Supply Management 5.22 The implementation of sustainable community-managed forest management systems will be based on the legal transfer of the responsibility for the management and exploitation of the forest resources to the rural communities. The expected implementation cycle of the community-based participatory system in any given area/community is expected to last a total of three years, going from full project involvement during the first year to gradual disengagement staring on the second year until the third year, when mostly project funded monitoring and evaluation systems would remain in place. As of the end of the first year of field implementation the participating communities will be expected to assume an increasing responsibility over all implementation aspects, including the funding from local revenue of follow-up technical assistance. This sub-component will cover a total area of 300,000 ha -- reinforcing the protective buffer zone that has been established around the Niokolo-Koba National Park -- within the six years of field implementation period (year 2-7) in accordance with the approximate incremental schedule presented in Table 5.3. 5.23 The national dead wood assessment will be executed by the Forestry Service with specialized support from the Centre de Suivi Ecologique (CSE). The field work of the assessment will be combined with the regular field activities of the regional Forestry Service agents. This activity should be completed by the end of the second year of project implementation. 5.24 The activities of technical support and extension for the implementation of the participatory forest management modules and for the exploitation/production and marketing of woodfuels (the introduction of improved carbonization technologies and other potential wood and non-wood products) will be executed under different operational arrangement including, as needed, a combination of Forestry Service agents, technical assistance support (FAO) and selected specialized NGOs. In the case of carbonization activities, special attention will be given to the monitoring and enforcement of the agreed improved methods and production standards. 38 Table 5.3: Incremental Implementation Schedule of Community-based Sustainable Woodfuels Supply Management Systems Actual Accumulated Year | (ha) (ha) 12-18 months (Prep. Phase) 0 0 2 15,000 15,000 3 25,000 40,000 4 40,000 80,000 5 50,000 130,000 6 70,000 200,000 7 100,000 300,000 5.25 The support for the establishment of rural-based micro-enterprises (community-operated carbonization units, agro-forestry processing units, etc.) will be done by the PCU under supervision of the two ministries (MEPT and MEMI). Micro-enterprise proposals will be identified by the participating communities and or NGOs and elaborated by them with/without specialized consultant support (individuals/NGOs). These proposals will be evaluated by the PCU and decided upon on the basis of their individual merit. The size of the individual proposal will vary but will be limited to a maximum equivalent of US $4,000 per village at any point in time. The support for micro-enterprise development would be mobilize only when there is a clear and tangible cofinancing of the local community in cash and/or kind (labor, natural resources, tools, etc.). In the case of improved charcoal production, decision on support will be further subject to the identification of monitoring and enforcement mechanisms for ensuring the compliance at the community level with the charcoal related regulatory and policy framework. The specific evaluation criteria, mechanisms and modalities for the mobilization of the micro- enterprise development support will be finalized (satisfactory to IDA) during the Preparatory and Support Activities Component. This sub-component will be executed throughout the full project implementation year 1-7) by specialized consultants (individual and/or firm) under the supervision of the PCU. 5.26 The implementation of the communication strategy for the Sustainable Woodfuels Supply Management component. This sub-component will be executed throughout the entire project field implementation cycle (year 2-7) by specialized consultants (individual and/or firms) under the supervision of the PCU. 3. Component III: Demand Management and Interfuel Substitution Options 5.27 The support for the re-organization and modernization of the urban charcoal trade to establish long-term supply agreements (contracts) between rural communities and urban traders (to guarantee the unconstrained entry of community-produced woodfuels to the urban markets) and to permit the standardization of the marketing units and the cleaning of the urban environment (charcoal bagging); 5.28 The provision of technical assistance and limited financial support for the economic diversification of existing urban charcoal traders ("exploitants forestiers ") will be based on the proposal generated directly by charcoal traders. Thus far the proposals received include 39 enterprise diversification into LPG retail, gas service stations, foodstuffs retail and light transport activities. The financial support to be provided by the project would be limited to organizational and training activities and it would be executed by the Energy Directorate through specialized private sector and enterprise development consultants and/or firms. 5.29 The execution of specific technical and market-feasibility studies to support the further promotion of LPG and Kerosene as substitute household fuels will complement a GTZ-funded study within the recently launched German-Senegalese Household Energy Assistance Project. The main activity envisaged under this sub-component is limited to technical and market feasibility research on kerosene stoves (including pilot testing of 1,000 stoves). This sub- component would be executed by specialized consultants under the supervision of the Directorate of Energy and should be completed within the third year of project implementation. 5.30 The provision of support for the continuation of inter-fuel substitution (kerosene and LPG) and dissemination of improved stoves by the private sector and the NGO community will be undertaken by the Directorate of Energy. Although it is expected that the private sector will take charge of the implementation and funding of LPG and kerosene activities beyond the proposed limited support activities (kerosene stove promotion and LPG decentralized depots), it is possible that additional funding might be mobilized through GTZ or other sources to support the expansion of kerosene as a least cost household fuel. All further LPG expansion activities should be financed by the private sector. The support to the dissemination of improved stoves is intended to provide limited investment funds to expand the market-based production capacity of existing competitive stove manufacturer. No funding will be provided for stove scientific research activities. Investment funding support will be approved only for stove options that prove to be feasible on a non-subsidized production/full cost recovery basis. Based on the proposals identified thus far, it is anticipated that the ATI DIAMBAR stove would qualify for the intended investment funding support. F. PROCUREMENT AND DISBURSEMENT 5.31 Cofinancing Arrangements. Cofinancing by GEF (US $4.7 million) and the Dutch Cooperation (US $8.8 million) will be administered by the Bank, as agreed during negotiations. All procurement under the project will follow Bank procurement guidelines. 5.32 Table 5.4 summarizes the project cost by disbursement category and proposed procurement method. A detailed procurement plan and timetable are given in Annex 5. Senegal's procurement laws and regulations are consistent with IDA procurement guidelines. No special exemptions, permits or licenses need to be specified in Credit documents for international competitive bidding (ICB), as Senegal's procurement regulations allow IDA procedures to take precedence over any contrary provisions in local regulations. 5.33 Civil Works. The civil works program (US $1.0 million) includes a large number of very small contracts for the implementation of supporting community projects such as well diggings, construction of rural health centers and other civil work components of income generating activities within the implementation of the Integrated Natural Resource Management Modules (over an area of 300,000 ha) under the Sustainable woodfuel component (II). Civil works contracts financed under the credit will be awarded through NCB procedures. Due to 40 Table 5.4: Summary of Proposed Procurement Arrangements (in US $ million equivalent) net of taxes and duties International National TOTAL Project Element Compettive Competitive Others N.B.F. COST Biddine Bidding a. CbE;0Sivil0 woks - if i X 1.04 a/ - 1.04 'S0y000v000: : : :D - 0 :(0.1:1) - (0.11) ;b. Equipment, vehicles 2.56 a/ - - 2.56 (0.33) - (0.33) c. Goods & services 0.56 a/ - 4.91 a/ 5.47 (0.31) - (1.13) (1.44) d. Consultant services - 3.57 a/ 3.57 *i;f;0 ; ;- (0.55) @-SS(0.55) e. Reiktret costs - 6.07 a! 1.20 7.27 - - (2.~~~ ~ ~~76) (.6 3.12 1.04 14.5M 1.20 19.20 (0.64) (0.11)(44) - 5.9 Note: The figures in parentheses are the amounts to be financed by IDA. N.B.F.: Not Bank financed. a/ Total amounts financed including GEF and the Dutch Cooperation. spread and high transportation costs, these civil works contracts are unlikely to attract foreign or large firms that use modem equipment. Foreign bidders, however, would not be precluded from submitting bids. Civil works contract management for the supporting community projects will be delegated to NGOs or other private entities as appropriate. 5.34 Equipment. Equipment requirements (US $2.5 million) include vehicles under the Preparatory and Support Activities Component (I), vehicles (4X4s and motorcycles) and fire control trucks for the implementation of Integrated Natural Resource Management modules under the Sustainable woodfuel component (II), and vehicles under the Demand Management and Interfuel Substitution Options Component (III). Provided that the aggregate amount does not exceed US $150,000 equivalent purchase through the United Nations Development Program's Inter-Agency Procurement Services will be permitted for office equipment and vehicles. 5.35 Goods. Goods (US $5.4 million) include under the Sustainable Woodfuels Supply Management Component, small tools and field equipment for the rural communities, office and field equipment for the Forest Service (regional offices), small forest fire control equipment and purchase of equipment for the implementation of supporting community projects. Under the Demand Management and Inter-fuel Substitution options component, office equipment for the DE, purchase of 1,000 kerosene stoves for the pilot program; purchase LPG bottles and burners. Goods will be grouped into packages of at least US $100,000 each and procured through ICB in 41 accordance with the Bank's Guidelines for Procurement under IBRD Loans and IDA Credits (January 1995, revised January and August 1996). Standard bidding documents developed by the Bank will be used. A preferential margin of 15 percent or the applicable customs duty, whichever is less, over the c.i.f. prices of competing goods for all ICB procurement will be given to domestic firms in accordance with the Bank's guidelines. Small quantities of goods such as office supplies, consumable materials, and small tools and field equipment for the rural communities, which are available off-the-shelf and cannot be grouped into bidding packages of at least US $25,000, because of the decentralized planning and implementation functions that will be carried out by the implementation agents (regional project offices, NGOs, community groups, etc.), may be procured through local shopping, based on price quotations of at least three reliable suppliers. All bids will be submitted on a c.i.f. basis for imported goods and on ex- factory basis for locally manufactured goods. 5.36 Consultant services. Consultant services (US $3.5 million) include long-term resident technical assistance in the form of TA personnel for the DE (US $0.3 million) and consultant services for training activities and execution of studies (vegetation cover assessment, design of monitoring and supervision systems, energy demand, etc.). In particular, the training activities for consulting services will be required include all the capacity building, institutional development (governmental institutions, civil society and NGOs), and participatory activities of the Project. Within the Preparatory and Support Activities Component (I) the main training activities will entail capacity building and institutional development of the Forestry Service and Energy Directorate staff and participatory rural appraisals work. Within the Sustainable woodfuel component (II) key training activities will be focused on the rural communities and NGOs that will be responsible for the direct implementation of the sustainable forest management modules. Within the Demand Management Component (III) the main training activities will include the staff of the Energy Directorate and support services to the Charcoal Traders (economic reconversion sub-component). International and local consultants providing specialist services would be selected through Quality-and Cost-based and Least Cost procedures, in accordance with the Bank's Guidelines for the Use of Consultants (February 1997). The standard Letter of Invitation and Form of Contract as developed by the Bank will be used for appointment of consultants. Simplified contracts will be used for short-term assignments, i.e. those not exceeding six months, carried out by individual consultants. Individual consultants will be recruited on the basis of comparison of at least three (3) CVs taken from a roster organized by specialties. Single-source hiring of individual consultants, if any, is subject to Bank prior review. The NGOs or other private entities who are delegated Construction management for the implementation of community-support projects will recruit the necessary consultant services in accordance with the above-stated procedures. 5.37 Review by IDA. Contracts for works and goods above the threshold value of US $100,000 equivalent will be subject to IDA prior review procedures. The review process would cover 70 percent of the total value of the amount contracted for goods and 56 percent of the amount contracted for civil works. Selective post-review of contracts awarded below the threshold levels will apply to about one in three contracts. Draft standard bidding documents for NCB will be reviewed by and agreed upon with IDA. Prior IDA review will not apply to contracts for the recruitment of consulting firms and individuals estimated to cost less than US $75,000 and US $35,000 equivalent respectively. However, the exception to prior IDA review will not apply to the Terms of Reference of such contracts, regardless of value, to single-source hiring of firms, to assignments of a critical nature as determined by IDA or to amendments of contracts raising the contract value above the prior review threshold. 42 5.38 Proposed Procurement Arrangements. During negotiations agreement was reached on monitoring of procurement as well as the Bank's Standard Bidding Documents for ICB and the standard procurement documents for NCB to be developed, reviewed by, and agreed upon with IDA. The Government will submit to IDA for review: (a) a draft procurement plan; (b) a draft Procedural Manual for Management and procurement; and (c) a draft bidding document for the construction program and major equipment, as well as draft letters of invitation for consultants services, related to activities financed by IDA during the first project year. The Government will submit to IDA the final versions of these documents and gave assurances at negotiations that it will apply the procurement procedures and arrangements outlined in the above documents. 5.39 Disbursements. The project is expected to be completed over a seven-year period, with the IDA Credit disbursed over 8 years, according to the categories shown in Table 5.5, below. The estimated disbursement profile is shown in Annex 6. Disbursement of the Credit will be fully documented except for expenditures which would be made against Statements of Expenditure (SOEs) valued at less than US $100,000 equivalent for firms and US $50,000 equivalent for individual consultants. Documentation for withdrawals under SOEs would be retained by the PCU for review by IDA supervision missions and for semi-annual audits. Table 5.5: Allocation and Disbursement of the IDA Credit (US $ 000) net of taxes and duties tisbutsement Category Total 0: % of Expenditures Firnanced i: 1. Civil Works 109.9 100 of foreign expenditures and 90 of local 2. Equipment, vehicles 329.6 100 of foreign expenditures and 90 of local 3. Goods and Services 1,441.3 100 of local expenditures Part B.4 of the project 5. Consultant Services 547.7 100 6. Recurrent Costs 2.761.6 90 Total: 5,190.10 5.40 Specific disbursement conditions would assure that the project components were fully funded (by IDA, Government and other cofinanciers) before contracts were awarded. The satisfactory completion of component I will be a pre-condition of disbursement for components II and III. Table 5.6 gives the estimated disbursement schedule for IDA credit. The closing date of the credit would be December 31, 2004. G. ACCOUNTING, AUDITING AND REPORTING 5.41 Special Account. To facilitate disbursements, the Government will open a Special Account (SA) in a commercial bank in Dakar to cover IDA's share of eligible expenditures, managed by the Project Coordinating Unit (PCU). The authorized allocation for the SA would be US $450,000 equivalent. IDA will make an initial deposit of US $250,000 equivalent into the SA upon credit effectiveness and will replenish the SA upon receipt of satisfactory proof of incurred eligible expenditures. Replenishment will be accompanied by up-to-date bank statements and reconciliation of the SA. To expedite the implementation of day-to-day activities and effect small payments for local training programs involving frequent expenditures in local 43 Table 5.6: Estimated Disbursement Schedule for the IDA Credit (in US $' 000) (by Categories- including Contingencies) Disbursrement Category 1997 1998 1999 2000 2001 2002 2003 Total 1. Civil Works 37.07 32.77 40.06 109.90 2. Equipment, vehicles 73.26 32.13 55.96 97.76 35.11 28.11 7.28 329.60 3. Goods and Services 312.82 301.38 240.78 205.88 142.82 135.24 102.37 1,441.30 5. Consultant Services 100.97 79.62 74.07 185.35 96.21 11.48 547.70 6. Recurrent Costs 570.12 423.50 429.13 346.35 342.59 326.15 323.76 2,761.60 Total: 1,094.23 869.40 840.01 835.34 616.73 500.98 433.40 5,190.10 currency at the district level, a SGSA (Second Generation Special Account) will be opened at each of the Kolda and Tambacounda regions. Each district Forestry officer will be responsible for establishing a yearly budget for the activities to be carried out, and necessary funds would be regularly provided on the basis of justification. Accounts of the SGSA will be reconciled every quarter with the PCU accountant, and funds made against eligible expenditures will be replenished through the project account. Justifications of expenditure eligibility will be handed over to the project accountant and kept as supporting documents for the use of the Statement of Expenditures procedure. 5.42 The PCU would establish and maintain its accounts in accordance with International Accounting Standards, and would conserve all the documentation related to project expenditures. A detailed proposal on the accounting system and procedures to be followed and a profile of personnel needed and equipment required would be prepared by consultants. The conditions for the establishment of a financial management and accounting system for the project, acceptable to IDA, were agreed during negotiations. The PCU will at all times keep financial records in accordance with sound accounting practices to reflect its operations and financial position. These records would be made available to visiting Bank missions and independent auditors. The project accounts, including the SA and the SGSA, will be audited annually, in accordance with International Standard of Auditing, by independent external auditors acceptable to IDA. In order to facilitate the post review of procurement decisions not subject to IDA prior review, the auditor's TOR would include a provision for a separate opinion on the consistency of such procurement decisions with Bank Procurement Guidelines and provisions. The audited accounts and the auditor's report, including the Management Letter (Long Form) and a statement as to whether or not IDA funds had been used for their intended purpose and a separate opinion with respect to statement of expenditures and the Special Account, as well as the SGSAs, would be submitted to IDA within six months of the end of the fiscal year for the Project. Assurances to this effect were reached at negotiations. Agreement was reached at negotiations on the selection procedures for the awarding of a multi-year contract for the auditing the Project accounts (para. 7.1.iii). 5.43 Overall implementation of the project would be supervised on an annual basis by IDA and disbursements would be contingent on the satisfactory compliance with all project conditions. In addition to annual supervision, the project would be evaluated in accordance with established IDA procedures at mid-implementation (first semester of the fourth year) and at its completion. Three specific monitoring systems have been included in the project to 44 systematically evaluate the implementation process of key components and the realization of the expected national and global benefits. These are: (i) a forest resources exploitation monitoring system for the Tambacounda and Kolda regions, to supervise compliance with established exploitation plans and to evaluate the achievement of resource sustainability and to assess the impact of the project activities in the adjacent areas (Niokolo-Koba National Park and other open forests); (ii) a wildlife monitoring system, to evaluate the realization of the intended biodiversity objectives and benefits, with particular emphasis on the monitoring of endemic and threatened species; and (iii) a national woodfuels trade flows monitoring system, to evaluate compliance with established woodfuels transport and market quota regulations (source, volume and destination). In addition to these activities, the project would include a systematic monitoring and evaluation of the: (i) promotion and penetration of kerosene and LPG as substitute household fuels; (ii) dissemination and cooking performance of improved stoves; (iii) participation of civil society (with emphasis on women) in design, decision making and implementation activities within the project; (iv) developmental impacts on women; and (v) realization of institutional development and capacity building objectives. All monitoring and evaluation activities will be based on an ex-ante assessment, will be carried out through implementation to allow for necessary design adjustments, and will be followed-up after completion to evaluate the long-term sustainability of the project's national developmental and global environmental achievements. 45 H. PERFORMANCE INDICATORS, MONITORING AND SUPERVISION PLAN 5.44 Table 5.7 present a summary of the project's key performance indicators and monitoring and supervision plan. Annex 7 presents a detailed matrix of key performance indicators, monitoring arrangements and supervision plan. Table 5.7: Performance Indicators, Monitoring and Supervision Plan Narrative Summary Key Performance Indicators Monitoring and Supervision CAS Objectives: A. Facilitate the supply response a.l. Creation of a supply of woodfuels a.1. Annual evaluation of woodfuels trade flows. from the rural sector. from community-based sustainable a.2. Annual evaluation of participation. forest management system. a.3. Annual evaluation of developmental impacts. a.2. Increased supply of other agricultural products from community systems. B. Addressing environmental issues. b.l. Increased sustainability of land use. b.l.Annual evaluation of forest resource exploitation. b.2. Increased sustainability of wildlife. b.2.Annual wildlife impact evaluation. C. Internalization and consensus c. Increased participation of civil society c.I.Annual evaluation of participation. building. project design and implementation. Project Development Objectives: A. Reduce woodfuel-related a. Reduce deforestation by: a.1. Annual evaluation of forest resource exploitation. deforestation and loss of 12at Ha. yr. a.2. Annual wildlife impact evaluation. biodiversity. B-line: 1,000 M-term: 5,200 Full imp.: 20,000 B. Reduce net CO2 emissions b. Reduce net CO2 emissions by: b.l. Annual climate change assessment. IfTons/yr B-line: 25,000 M-term: 130,000 Full imp.: 510,000 C. Increase income generation for c. Generate revenues in partic. villages: c.l. Annual evaluation of development impacts. rural population, with special Date US$Syr c.2. Annual evaluation of participation. attention to women. B-line: 150,000 M-term: 780,000 Full imp.: 3,000,000 Project Outputs: A. Sustainably produce fuelwood. a. Annual sustainable production of a.l. Bi-annual progress report. fuelwood: a.2. Bi-annual field supervision. 1Dae Tons/yr. B-line: 15,000 M-tenn: 80,000 Full imp.: 300,000 B. Increase urban use of improved b. Marketing of improved charcoal stoves b.l. Bi-annual progress report. charcoal stoves. (cummul.) b.2. Bi-annual evaluation of stove penetration. 12aL Stoves b.3. Bi-annual field supervision. B-line: 20,000 M-term: 100,000 Full imp.: 255,000 C. Increase inter-fuel substitution. c.1. Incremental penetration of kerosene. c.l. Bi-annual progress report & field supervision. c.2. Incremental penetration of LPG in c.2. Annual LPG and Kerosene penetration evaluation. urban markets. 47 VI. PROJECT IMPACT A. ECONOMIC ANALYSIS 6.1. The economic analysis of the natural resource management activities in developing countries has been the subject of much work and controversy. Different methodologies have been elaborated for individual cases making use of available data (resource stocks, depletion and regeneration rates, real prices, economic value, etc.) and relative social values (environmental conservation, resource sustainability, social preferences, etc.). 6.2 In the absence of a clear methodological consensus (Bank or elsewhere), a simplified economic analysis methodology was developed for the evaluation of the proposed project. The methodology and evaluation results are presented in detail in Annex 8. The approach adopted is based on the following basic guidelines: Project components. All three components of the project (Preparatory and support Activities Component; Sustainable Supply Management Component; and Demand Management and Inter-fuel Substitution Options Component) where included in the economic analysis as they are judged to be necessary and integral elements of the proposed investment. Within that context, no differential valuation treatment was given to investments for productive (forest management, improved kilns, improved stoves, inter-fuel substitution options, etc.) or non-productive sub-components (data generation and gathering, institutional development, capacity building, social support services, communication strategy, etc.). Time horizon and Discount rate. Given the long-term nature of the expected project impacts, a minimum 20-year horizon was adopted for the evaluation of the project. A discount rate of 12 percent was applied to all project components and sub-components. Pject costs. All budgeted costs during project implementation (7 years) were included in the economic analysis of the project. From years 8 to 20 continued implementation costs where assessed at approximately 10 percent of year 7, gradually decreasing at a relative rate of 10 percent per year until year 20. Project benefits. While the proposed project is expected to result in a large number of quantifiable and non-quantifiable benefits, the economic analysis undertaken limited the valuation to the following benefits: (i) value of "sustainable" wood production from the implementation of the sustainable and participatory forest/natural resource management systems; (ii) value of incremental charcoal production from the promotion of improved kilns; (iii) value of global environmental impacts (CO2 abatement and biodiversity conservation) from the implementation of the sustainable and participatory forest/natural resource management systems; (iv) value of rural income generation and transfer from the direct sales of fuelwood by the participating rural communities; (v) value of "other" rural revenues from the development of parallel agro-forestry production activities in the participating communities; and (vi) value of charcoal saying due to the promotion of improved charcoal stoves. As the full elaboration and quantification of other project activities (promotion of inter-fuel substitution options, economic reconversion of charcoal traders, modernization of the charcoal industry, etc.) will be done during the 48 Preparatory and Support Activities component (Component I) it was judged premature to make estimates on their respective possible benefits (the full cost of those activities was however included in the project cost). 6.3 The 20-year horizon evaluation of the project resulted in an Economic Rate of Return (ERR) of 37.3% and a net present value (NPV) at 12 percent discount rate of US $ 34.2 million. According to these economic evaluation results, the proposed project would be a fully justifiable and competitive developmental investment for Senegal. 6.4 Sensitivity analyses were done for five key parameters: (i) level of sustainable forest yields (0.5 - 2.0 ton/ha/yr); (ii) fuelwood producer prices (US$ 10 - 30/ton); (iii) carbonization efficiency of improved kilns (18% - 30%); (iv) level of "other" realizable rural income (15% - 40% of expected fuelwood sales); (v) Charcoal market prices (US$ 190 - 360/ton). Table 5.7 presents a summary of the sensitivity analysis of the five key parameter, including the main value variations considered ("base", low and high) and the respective switching value. Table 5.7: Results of the Sensitivity Analysis .NPV JERR Switching PARAME.TER Values (US million) (% Value BASE RESULTS: 43.2 37.3 Sustainable Forest Yield B: 1.00ton/ha/yr 0.15 ton/ha/yr low: 0.5 ton/ha/yr 8.4 20.1 High: 2.Oton/ha./yr 96.2 64.1 Fuelwood Producer Price B: US$15/ton I n.a. low: US$10/ton 24.1 31.3 High: US$30/ton 64.6 52.7 Carbonization Efficiency B: 25% 6.7% low: 18% 17.3 26.1 High: 30% 46.3 44.5 Other Rural Income B: 20% _ -200% low: 15% 33.2 36.7 High: 40% 38_2 39_ 8 Charcoal Market Price B: US$190/ton (*) __ *_.___n.a. low: US$190/ton (*) 34.2 37.3 High: US$360/ton 49.7 46.4 Note: (*) Current market price. 6.5 On the basis of the results of the sensitivity analyses conducted, the proposed project would continue to be a fully justifiable and competitive developmental investment for Senegal. 49 B. SOCIAL AND ENVIRONMENTAL IMPACTS 6.6 The project would: (i) sustainably produce some 860,000 tons of fuelwood (equivalent to 258,000 tons of efficiently produced charcoal) over a six year period and would establish a permanent system capable of producing more than 300,000 tons of fuelwood (equivalent to 90,000 tons of efficiently produced charcoal or 27% of total consumption) per year on a sustainable basis; (ii) reduce woodfuels-related deforestation in the Tambacounda and Kolda regions by some 20,000 ha/year, and as a consequence reduce net CO2 emissions by 510,000 tons/yr and reduce the loss of biodiversity by the establishment of sustainable forest systems and of a protective buffer zone around the Niokolo-Koba National Park; (iii) generate employment and economic development opportunities in 250 rural villages in the Tambacounda and Kolda regions and including women in the management and marketing of woodfuels and other related income generating activities; (iv) generate during the implementation period more than US $10 million in direct revenues to 250 villages from the trade of woodfuels, and generate additional revenues to the communities from related natural resource management and exploitation activities (agro-forestry, livestock keeping, non-fuelwood forest products, etc.); (v) on a sustainable annual basis after the end of the project, generate direct revenues in excess of US $3 million to the participating villages from the trade of woodfuels, and generate additional revenues from related natural resource management and exploitation activities; (vi) reduce CO2 emissions by 420,000 tons/yr. by the distribution of 225,000 improved charcoal stoves; (vii) increase the availability and access of low income households to more reliable and efficient charcoal stoves and to modem fuels; and (viii) strengthen the planning, policy making and implementation supervision capacity of the traditional energy sector institutions, while increasing the participation of the civil society (private sector, academic institutions, and NGO's community) in the management and operation of the sector. 6.7 Environmental Aspects (Category C). The project is expected to: (i) reduce deforestation and soil degradation through the implementation of sustainable forest management practices on a large scale; (ii) contribute to reducing the loss of carbon sequestration capacity and of biodiversity that results from the prevailing non-sustainable exploitation of woodfuels and from forest fires and, over time, increase carbon sequestration capacity and stabilize biodiversity through the extension of sustainable natural resource management practices nationwide; (iii) reduce CO2 emissions through the promotion of better carbonization techniques and the promotion of more fuel efficient household stoves; (iv) reduce urban charcoal pollution and contamination (soil and water) and reduce incidence of respiratory diseases (continuous exposure to charcoal dust) among charcoal handlers and retailers (which are mostly women) through the modernization of the charcoal marketing standards (sealed bags); and (v) reduce indoor air pollution and reduce health risks to women through the promotion of improved woodfuel stoves. 6.8 The project is not expected to have negative environmental impacts. The relocation of production sites to other areas is not likely to happen because: (i) there are no other geographic areas in Senegal with forest resources (volume and density) which can be economically exploited to supply the large woodfuels urban markets; (ii) areas with sufficient forest resources -- and not necessarily more fragile -- in (Casamance) and outside Senegal (Guinea) are 350 to 500 km further away from 50 the urban markets than what Kolda and Tambacounda. Their exploitation would imply dramatically increase transportation costs (up to 50%); (iii) the existing charcoal production control system, albeit cumbersome and inequitable, has been historically effective in controlling spatial production of charcoal and there is no basis to believe that it would be any less effective under the project, particularly given that there is stated government commitment for project implementation; and (iv) the willingness of individuals to engage in illegal charcoal production would be determined by the profitability of doing so. As illegal charcoal production would happen over and above the officially approved production quota, illegal production would result on product surpluses. Illegal charcoal would then be transacted at below official wholesale prices rendering its profit margin much lower than the legal trade. The larger the surplus, the lower the parallel wholesale price would be. The probability of this actually happening is near to zero because potential illegal producers would be discouraged by the prospects of reduced market prices, increased transportation costs and high probability of being caught and of receiving stiff fines in the process. In any event, the project includes monitoring and evaluation systems (forest exploitation and transport flows) designed to capture any illegal production and/or movement of woodfuels. The monitoring of woodfuel transport flows in the Senegalese case are far simpler than in other West African countries (e.g. Mali) because there is only one access route from the production sites (south- west and south of the country) to the urban markets capable of handling the 15 and 30 ton trucks a day that are used in the trade. Illegal charcoal flows from Ziguinchor to Dakar through the Gambia river ferry would be subject to far easier control mechanism at the ferry docks and the respective national border check-points; C. PROJECT SUSTAINABILITY 6.9 The sustainability of the project would be achieved by the following key design factors: (i) the effective transfer of responsibility for the management of the forest resources from the Government to the rural communities; (ii) the effective opening-up of the woodfuels trading system; (iii) a gradual change in woodfuels fiscal and pricing policies and mechanisms -- which will be designed on the basis of project's field experience and the findings of several studies and enacted by December 31, 2000 -- to inter alia: promote sustainable management of forest resources by rural communities; discourage the exploitation of woodfuels from non-managed forest areas; promote the use of improved carbonization technologies; maximize direct woodfuel-related revenues at the producer level; and, optimize the economic efficiency of the sector taking into account the real economic value of woodfuels (para. 7.1 .iv); and 51 (iv) the strengthening of the long-term capacity of the rural communities to manage their forest resources sustainably. 6.10 Specific activities and monitoring systems have been included in the project design to address all these issues. D. PROJECT RISKS 6.11 While it is expected that in the process of transferring part of the industry's activity to the rural communities the project will affect a small portion (27%) of charcoal traders and of expatriate charcoal laborers ("surghas"), that impact cannot be seen in isolation from the ongoing Africa-wide process towards democratization and local community enpowerment. Senegal is no different than other countries in the region, and numerous instances of major structural change are already underway throughout the economy. Nevertheless, recognizing that the reaction of the traditional traders and "surghas" pose a moderate risk to the project, special attention was paid to including them in the preparation of the project. Furthermore, two project activities were specifically designed to support the existing traders to adjust to the new situation (see "Project Description" section). Also, other activities were designed to monitor and prevent possible implementation interference (see "Monitoring and Evaluation" section). Also, the project would be only one of numerous government-lead developmental activities which would be supported by official regulatory and legal measures. 6.12 Since the project will limit the exploitation of woodfuels in the project area to the participating rural communities, the possibility that charcoal production by traditional traders could switch to other areas of the country has been raised. This, however, is not expected to occur as charcoal production is regulated by government and is now subjected to the new provisions of local community approval. Should traditional traders attempt to relocate their activities, the affected local communities would be legally empowered to stop them and -- contrary to the past -- the Government would be obliged to protect the communities' interests. Should this happen, however, the project includes a forest resource monitoring system which, operated independently from the Government and with international donor supervision, would be responsible for reporting non-regulated forest exploitation. 6.13 The risk of an illegal relocation of charcoal production happening and resulting in increased environmental degradation of more ecologically fragile areas has been raised but considered negligible after further examination. A detailed Environmental Impact Discussion Note that was prepared for internal discussion early on in the project preparation phase is available in the project files. 6.14 Finally, the risk that the rural populations might not be able to achieve full sustainable management of the forest resources cannot be entirely ruled out. Nevertheless, even in that case, the project would result in a considerable transfer of welfare to the rural communities with unquestionable economic development opportunities and social benefits and significant national and global environmental benefits. 53 VII. AGREEMENTS REACHED AND RECOMMENDATION Agreements Reached 7.1 During negotiations, the following agreements were reached with the Government of Senegal: (i) Government's counterpart funding of a total amount of US $1.2 million (para. 5.7); (ii) Selection of a suitable NGO to supervise the implementation of the project's Participation Action Plan - (PAP) (para. 5.10, 5.12 and Table 5.1); (iii) Issuing of a multi-year contract to an independent auditing firm, acceptable to IDA, for the auditing of the Project accounts (para. 5.42); and (iv) Preparing and adopting, no later than December 31, 2000, a revised woodfuels fiscal and pricing policy acceptable to IDA which shall include, inter alia mechanisms to: promote sustainable management of forest resources by rural communities; discourage the exploitation of woodfuels from non-managed forest areas; maximize direct woodfuel-related revenues at the producer level; and, optimize the economic efficiency of the sector taking into account the real economic value of woodfuels (para. 6.9). Conditions of Effectiveness 7.2 The following will be conditions of effectiveness: (i) The signature of the Global Environmental Facility (GEF) Grant Agreement for US $4.7 million related to the project (para 5.7); and (ii) The recruitment, mobilization and or assignation of the staff for the Project Coordination Unit (PCU), and make all other necessary institutional and staffing arrangements for the implementation of the project (para. 5.13). Condition of Disbursement 7.3 The following will be condition of disbursement: The implementation satisfactory to IDA of Component I: Preparatory and Support Activities will be a condition of disbursement of the funds for the implementation of Component II: Sustainable Woodfuels Supply Management and Component III: Demand Management and Inter-fuel Substitution Options of the project (para. 5.14). 54 Recommendation 7.4 With the above agreements and actions, the proposed project would be suitable for an IDA credit of SDR 3,800,000 (US $5.2 million equivalent) on standard terms and of a GEF Trust Fund Grant of SDR 3,400,000 (US $4.7 million equivalent) to the Republic of Senegal. Annex I Page 1 of 1 THE NIOKOLO-KOBA NATIONAL PARK DESCRIPTIVE SUMMARY (Extract from: Monogphie National sur la Diversite Biologique: Chapitre 3: "Les Modes de Gestion des Ressources Naturelles Au Senegal et leur Evolution" IUCN-Senega1, (1995) (Working level translation from original French text) The Niokolo-Koba National Park is located on the border of the administrative regions of Tambacounda and Kolda, on the Gambia River, near the Guinnean border on the South-East of Senegal. It is located inside a slightly undulating region with chains of hills reaching an altitude of about 200 meters, separated by vast areas of lower situated floodplains that are covered by water during the rainy season. The Gambia river and its two main tributaries, the Niokolo-Koba and the Koulountou, pass through the park. The vegetation is constituted of mainly dry forests, wooded savannas, Sudanian trees and shrubs with principal species such as Pterocarpus erinaceous, Bombax costatum, Erythrophleum africanum, Sterculia setigera and a number of Combretum species. According to FAOIUNEP (1981), 78% of the country's "foret galeries" are located inside this park. About 1,500 plant species have been registered inside this park. An example of the region's valuable flora can be found in the laterite zones. Here several species reside at their most western limit of distribution, for example Eragrostis popeguini, Adelostigma perrottetii, Andropogon felicis, Cyathula pobeguini and several species of Lepidagathis. Around 80 mammal species, 330 bird species, 36 reptile species, 2 amphibious species and 60 fish species are found in the Park, along with numerous invertebrates. Carnivores include the panther Panthere pardus, the lion P. leo and the African wolf Lycaon picturs. The Park's three main water streams are the habitat for the buffalo Syncerus caffer, the antelope Hippotragus equinus, the eland of Derby Taurotrogus derbianus (some 1,000), the Colobus badius temmincki, the three African crocodiles: the Nile crocodile Crocodylus niloticus, C cataphractus and Osteolaeomus tetraspis, four turtle species and the hippopotamus Hippopotamus amphibiuA The park is the last refuge in Senegal for the elephant Loxodonta africana. About 150 chimpanzees Pan troglodytes live in the forest galeries of the park and vicinity of Mount Assirik (the North-West limit of their distribution). Among the birds, we find the bustard of Denham Neotis cafra denhami, the Bucorvus abyssinicus, the Dendrocygna viduata and the eagles Polemaetus bellicouss and Terathopius ecaviatus. Annex-2 Page 1 of 4 MONITORING AND EVALUATION OF THE GEF ACTIVITIES 1. The monitoring and evaluation of GEF activities included in the project are: (i) the forest resources exploitation, (ii) the wildlife distribution, (iii) the socio-economic situation of the target group and (iv) the community-participation and institutional involvement. 2. The actors involved in these monitoring and evaluation activities will be the Centre de Suivi Ecologique, the Forest Service, the villagers, some technical assistance and NGO's (yet to be identified) which are involved in natural resources management. Although the final evaluation of the impact of this component of the project will be a joint effort of the different actors, not all monitoring activities will always be undertaken by all actors. The exact role of each actor within the different activities will be discussed in the field. 3. Before the project interventions start, actual trends in land use in the districts of Kolda and Tambacounda will be investigated through satellite remote sensing, statistics and field trips. The focus will be on the: - location of villages, roads, water streams, watershed areas, arable land, forest land, grazing land, fallow land cultivated land and severely degraded land, - human population densities, - composition and densities of wildlife and livestock, - composition and productivity of crops, - identification of forest types and their condition (maturing state, clear-out, burnt etc.), - identification of grazing land types and their condition (perennial, overgrazed, burnt etc.). 4. Participatory Rural Appraisal's (PRA) will be undertaken to verify the above obtained data and to gather more specific information on the present situation of: - delimitation of village territory borders - land tenure practices and conflicts (e.g. who decides where and when forest land will be cleared for agricultural expansion), - village community structures, - NGO's active in natural resources management, - collaboration between village-communities, the Forest Service, Centre de Suivi- Ecologique, and NGO's, - variety of income resources, - composing elements of the agro-ecosystems (e.g. is hunting an important source of income, and so yes for whom?), - identity of important non-fuelwood products present in the forests. - identity of various stakeholders (with gender specification) involved in different components of the agro-ecosystems with special attention for the forest component (both fuelwood and non-fuelwood products) - location and practice of subsistence fuelwood collection - interest of different villages in collaborating with the project. Annex-2 Page 2 of 4 5. From these data a "baseline situation on a regional level" (not to be confuse with the "GEF Baseline Scenario" mentioned before) will be described. This document will (i) represent an improved comprehension of the interaction of the different components of the agro-ecosystems, (ii) facilitate the selection of villages that will take part in the project and (iii) enable evaluation of the projects impact during project implementation and at its completion. 6. Once the participating villages are selected, a more detailed description of the baseline situation of these villages will be prepared. That information will be particularly detailed on the condition of the forest with regard of both flora and fauna species which are highly valued either by local and/or global standards. (e.g. the tree Pterocarpus erinaceus is of interest for timber, fuelwood and fodder production but is threatened in the region). 7. "Monitoring in the field at the regional level" will continue annually throughout the project cycle and will be concentrated on forest exploitation and wildlife and livestock (distribution and density). 8. Concerning forest exploitation, the monitoring will include the location and size of the deforested areas, the type of forest concerned and the apparent cause for deforestation (agricultural expansion, charcoal production, forest fire or other). If the cause was "clear-cut for charcoal production" the logging technique practised will be recorded (species harvested, height of cutting, etc.). If the cause was forest fires, the damage will be described. Subsequently, the villages where forest cutting took place - excluding those which are selected within the project and therefore will have special treatment - will be visited to verify the apparent cause and to inquire whether the villages were in control and if so why, how and by whom the decision was made. 9. The forest exploitation monitoring will primarily be undertaken by the "Centre the Suivi Ecologique - CSE" in collaboration with the Forest Service. The visits to the villages will strengthen the collaboration between these services and the local communities while creating environmental awareness. Also the villages will be instructed to contact these services in case they are confronted with illegal intrusion and/or tree cutting by outsiders. 10. Regarding wildlife and livestock distribution and density the monitoring will be undertaken seasonally as to cover the movements of the animals. This activity will most likely be executed by NGO's (e.g. IUCN) in collaboration with the Centre the Suivi Ecologique and the villagers. This again will strengthen the collaboration between services, NGO's and villagers while creating environmental awareness and discouraging illegal hunting. 11. "Monitoring in the field at the village level" in the selected villages will continue annually after the implementation of sustainable forest management practices. The monitoring will again be focused on forest exploitation and distribution and density of wildlife and livestock. 12. During forest exploitation monitoring, the parameters to be investigated are: - location, size and condition of severely degraded parcels which are put aside and receive regeneration treatment - location and size of deforested area for agricultural expansion - location and timing of forest fires - location and timing of forest grazing Annex 2 Page 3 of 4 - location and amounts of wood harvested for charcoal production - harvesting techniques practised (clear-cut, or selective logging) - height of logging, diameter and identity of species harvested - forest damage caused by other reasons such as natural disasters 13. Within the village community, the results will be compared with the original sustainable forest management plan and if necessary the management plan for the next year will be adjusted. If, based on the results, the new forest management appears to create a need for adjustment in other areas of the agro-ecosystem, assistance in these areas will be provided by the project (e.g. intensification of agriculture). This process of regular adjustment of forest management planning will be a learning process for both the forest agencies and the villagers, while strengthening their collaboration and making them independent of technical assistance after project implementation. 14. Regarding the monitoring of wildlife and livestock density and distribution, the number per species (with distinction of common, endemic or threatened species if it concems wildlife) and the location and the vegetation type where they were encountered will be recorded seasonally. As in the regional monitoring, this activity will strengthen collaboration between services, NGO's and villagers while creating environmental awareness and discouraging illegal hunting. 15. At the end of the project, the compilation of data from the annual monitoring and evaluation activities on both regional and selected villages level, will be used to evaluate the impact of the project on forest resources exploitation, biodiversity conservation, socio-economic situation, community-participatory and institutional strengthening within the region. Demand Management and Inter-fuel Substitution Options (Non-GEF funded activities) 16. Within the Demand Management and Inter-fuel Substitution component the improved woodfuel stoves sub-component will be subject to periodic monitoring and evaluation. 17. The monitoring and evaluation will be a joint action between the producers, the retailers, the users, technical assistance and NGO's (yet to be identified) with particular interest for issues related to women and either health or environment. The exact organisation of the monitoring and evaluation will be designed by the actors in the field during the Preparatory and Support Activities component. 18. Before the implementation of the improved stoves sub-component, monitoring of potential users will focus on: - number of people per household - number and type of woodfuel stoves used - daily cooking tasks of these stoves - daily amount of woodfuels used per household - how and from where woodfuels are obtained - woodfuel prices and mode of payment (how, who) - average lifetime of traditional woodfuel stoves - price paid for woodfuel stoves and mode of payment ( how, who) - where is being cooked, indoors or outdoors - symptoms of respiratory problems within the household related to the smoke of cooking Annex 2 Page 4 of 4 - complaints about traditional woodfuel stoves - interest in improved woodfuel stoves 19. These data will be used for the description of the baseline situation and for the selection of potential users interested in participating in the monitoring procedures. 20. When a traditional woodfuel stove is to be replaced by an improved woodfuel stove the user will be asked to record: (i) the daily woodfuel use since using the improved woodfuel stove, (ii) whether the situation in regard to respiratory problems has been improved in case there were such problems prior to the use of improved stoves, (iii) the appreciation of the improved stove in general and (iv) suggestions for modification of the improved stove if considered important. 21. The results will be used to (i) verify the combustion efficiency of the improved stoves (ii) to verify its supposed mitigation power related to respiratory problems and (iii) to consider users comments in the production of new stoves. AnneX 3 Page 1 of 16 INCREMENTAL COSTS AND GLOBAL ENVIRONMENTAL BENEFITS A. Broad Development Goals 1. Senegal's traditional energy sector policy is directed towards meeting the rapidly growing urban demands of traditional forest-based fuels by the development of community based sustainable forest management, by the introduction of efficient carbonization of fuelwood, by the promotion of improved woodfuel stoves -- essentially charcoal -- and by promoting inter- fuel substitution. This strategy is expected to minimize further environmental degradation and to foster rural development. I. Business-as-Usual Scenario 2. At this point in time, the Tambacounda and Kolda regions (located in the southeastern part of the country, Figure 1) are the only regions of the country which have sufficient resources to be able to supply non-local demand (urban) for woodfuels, estimated in 1992 at some 520,000 tons of fuelwood and 330,000 to is of charcoal (equivalent to some 1.8 million tons of fuelwood). Within these regions some 30,000 ha of forested land is annually clear-cut for the commercial production of urban woodfuels while no measures are undertaken to allow regeneration. This non-sustainable deforestation takes place in addition to continuous destruction of forest by uncontrolled forest fires and relentless agricultural expansion. Due to inefficient carbonization of fuelwood toward charcoal (18% vs. 30%), the exploitation pressure on forests is unnecessary high. Presently, the charcoal business is effectively in the hands of some 20 urban families with little participation in the production activities or the sharing of the profits by the rural communities. Although specific governmental regulations exists to orient and monitor the exploitation of the forest resources and the Forestry Service (Ministry of Environment and Protection of Nature) is responsible for the conservation of the country's forest patrimony, the Government does not have the financial resources or manpower capacity to control the situation on the ground let alone to implement government-run sustainable forest resource management in the country. 3. In the absence of any form of integrated land-use planning and/or strategies, the forest areas that are clear-cut are not allowed to regenerate because after the forest is removed the land is immediately used either for agriculture, grazing or subsistence fuelwood collection. The situation of Senegal follows the same destructive land-use pattern consistently observed throughout other developing countries. The continued non-sustainable (clear-cut) commercial exploitation of forest for the supply of woodfuels and particularly of charcoal, results in a continuous loss of carbon sequestration capacity (decrease of forest stocks) and hence an increase in net CO2 emissions. In addition to the resulting generalized environmental degradation, the current geographic location and the expected exploitation expansion path poses a considerable risk to the Niokolo-Koba National Park, which is located in the intersection of the Tambacounda and Kolda regions, and which has been classified as a national and international "Biosphere Reserve". Anex 3 Page 2 of 16 FIGURE 1: Senegal: Woodfuels exploitation Zones Senegal: Zones d'exploitation pour bois-6nergie Vallee et du delta du fleuve senegal. E 150 krn2 (6%) Saint ; i : Zone sylvo-pastorale du ferlo Louis } .,},ji 'l * his-, \ 56,269 km2 (29%) y t 77_~ . S ii x;¢g: -;: - \ /Zone du littoral et des Niayes 30 km2 (1%) Zone agrncole du bassin arachidier 47.61 km2 (24%) Zone agro-sylvo-pastorale du Centre etdu Sud-EstSI.210 km2(26%) it ii :';" :'"21..s':' _ Zoneforestieredu Sud Dakar _ ~~~~~~~~~~~~~~~~~ ~28.000 km2 (14%) TI'ambacounda & Kolda II. Baseline scenario 4. The Forestry Service would implement a traditional free standing forestry management project. Very little collaboration would take place with the population residing in the project area. Sustainable forest management would be mostly undertaken by the Forestry Service. Ideally, they would partially clear-cut the forest based on the regeneration cycle of the forest ecosystem and allowing for fallow periods, prevent forest fires and protect the area against other uses such as agricultural and grazing activities. However, because of the Government's limited manpower, they would only be able to achieve these goals partially (50%). Only Forestry Service agents would receive training in sustainable forest management. The project would cover a non-contiguous and dispersed target area of 300,000 ha within the Tambacounda and Kolda regions, most likely close to existing roads to facilitate the access. As the rural population would have a minimal involvement in the implementation of the project and in the sharing of the resulting economic benefits, the project - being mostly dependent on continuous and direct governmental management, would only have a limited effect within the specific target area and for the duration of the project. No improved charcoal production would be introduced because this has been tried earlier by the Government through the promotion of the "Cassamance kiln" and did not work due to poor program design and implementation. On the other hand, an improved stove dissemination program by the private sector and NGO community would be supported to reduce woodfuels demand. At the end of the implementation of the free-standing forestry management project -- and in the absence of a follow-up project -- the sustainable management practices introduced in the target area would not be self-sustainable, the area's Annex 3 Page 3 of 16 forest stock would be prey to the traditional non-sustainable exploitation and land-use patterns and, thus, the accrual of global environmental benefits would end. Furthermore, as carbon sequestration capacity, CO2 emissions and biodiversity are directly related to the state of conservation of the forest stocks, in the long-term, the Baseline Scenario would equal the Business-as-Usual Scenario in terms of global environmental benefits. Global Environmental Objective 5. The global environmental objective of the proposed GEF financing would be to bring the net CO2 emission associated to the production of charcoal in the project area to zero, to maintain and expand the existing carbon sequestration capacity, and to protect and maintain the biodiversity in the Niokolo-Koba National Park which would be endangered by both the Business-as-Usual and the Baseline scenarios. MII. GEF Alternative Scenario 6. Under the GEF Alternative Scenario, sustainable forest management, by selective logging, would be implemented by transferring the responsibility for the management and exploitation of the forest resources to the rural communities, and the project area would be specifically established to form a protective buffer zone around the Niokolo-Koba National Park (Figure 2). Sustainable forest management plans would be designed together with the rural populations taking into account the multifunctionality of the existing agro-ecosystems and thus the socio-economic parameters and interests of the local community. Integrated forest fire strategies would be developed instead of total forest fire prevention by exclusion. Rural and community development activities would be undertaken and support for the establishment of rural micro-enterprises would be provided in order to motivate the local populations to adequately manage and develop the rural environment. Improved carbonization, reaching 30% efficiency, would be introduced. All these actions together would reduce losse in carbon sequestration capacity and in biodiversity and would result in zero net CO2 emission from the woodfuels-related activities in the project area. Institutional development of and capacity building at the governmental agencies and community structures would also be included to support sustainability and proliferation of the project's achievements after the completion of its implementation. Monitoring activities would be implemented to evaluate the effects and, if necessary, to adjust management strategies. Costs 7. The difference in cost of the project between the Baseline and GEF Alternative scenarios is US $4.66 million for the implementation of activities related to community-participatory activities, integrated natural resources management, improved carbonization and monitoring and evaluation of global environmental benefits of the project. Table 1 presents a summary of the cost of project under the Baseline and GEF Alternative scenarios. Annex 3 Page 4 of 16 FIGURE 2: Senegal: National Niokolo-Koba Park S6n6gal: Pars National du Niokolo-Koba j] Vallee et du delta du fleuve senegal. g 5 5 000 X 1L1 ~~~~~~~~~~~~~11.500bln2 (6%/) saint EJfl Zone,sylvo-pastorale du faio Lais L 56.269 kn2 (29%) Zone* du lttoral etdesNiayes Zone agricole dubassin aracHldier Zme agrm-sylvo-pastoaeduCft etdu Sud-Est51.2l10 n2(26%) *Zone foresdere du Sud Dakar 28_000_(14%) Parc National Niokolo-Koba Costs Effectiveness 8. It is estimated that over the project duration of 7 years the GEF Alternative Scenario would achieve a total CO2 emission abatement of 1.1 million tons at a unit abatement cost of US $4.30/ t CO2. Over 15 years, the GEF Alternative scenario would result in a CO2 emission abatement of 4.5 million tons at a unit abatement cost of US $1.04/t CO2. Additional Domestic Benefits 9. In addition to a direct transfer of welfare to the rural communities resulting from the management and commercial exploitation of woodfuels, it is expected that the rural population will be able to obtain additional benefits and revenues from other activities such as Agroforestry, livestock keeping and exploitation of non-fuelwood forest products. While quantification in monetary terms is not possible, the protection and maintenance of the Niokolo-Koba National Park would enhance the country's and the project area eco-tourism prospects. Annex 3 Page 5 of 16 GEF Ir1rerurtal Cost CalcUation Suuna Senegal: Sustairnble and Partdpatory Energy M at Project - SPEP Totw BaeireSnario CSao (0/4 Vft&fais Sup* mrt sbcmgonwes n 11,540,000 86 ErwW D Nmteub- Z700,000 19 TTAL PFE= cosr 140, 1 lcai GIncentalCost SGEFAltenaeSenatlo Cost (C/o .4,660,w 100 EnmW LDflud MIigermit -Lprf Z7000 04 TH bPFO-ICST 1890I0 I O VW&f Suppl Mtsegmv SLq (axrpone l. 4, 660,000 1W0 TIrAL G6 PRD1BJCT COST A 4660,000~ 100 (') inrLW~ sul5borr~ciport in m-qect (XTonrtres I and 1I. Aennx Page 6 of 16 B. Methodology and Analyses of the Incremental Cost of the GEF-Financed Supply Management Sub-components (Sub-components included within the Preparatory and Support Activities and the Sustainable & Participatory Woodfuels Management Components) CO2 emission abatement 10. Under the Business-as-Usual Scenario (clear-cut followed by grazing, crop growing and/or continuous subsistence wood collection) no forest re-growth would occur. Therefore, the net emission of CO2 would equal the total amount emitted by the burning of wood harvested (100% of CO2 emission level). The Baseline Scenario (sustainable forest management achieving only 50% of sustainability) would result in a net CO2 emission level of 50% during the life of the project.1 The GEF Alternative Scenario (achieving 100% forest regeneration during and after project implementation) would result in a zero net CO2 emission level. 11. The productivity of the savanna woodlands in the area is estimated at 30 m3 of fresh wood per ha equaling 15 ton of fuelwood.2 Under effectively sustainable forest management, I ton of fuelwood/ha/year can be harvested.3 This is the harvest intensity simulated under the GEF Alternative Scenario. For the Business-as-Usual Scenario and the Baseline Scenario an annual harvest intensity of 1.7 t/ha is simulated in order to arrive at an equal amount of charcoal production in each of the different scenarios, given a carbonization efficiency of 30% 4 in the GEF Alternative Scenario and of 18% s in the other scenarios. Thus, the comparison of the Although it is expected that at the end of the project (year 7) it would gradually revert to the 100% non-sustainability, a sustainability level of 50% was maintained throughout the 15 year period to avoid complicating the analysis with additional assumption on the rate of reversal from 50% sustainability to 100% non-sustainability. Factoring a gradual reversal to non-sustainability would result in higher benefits for the GEF Alternative Scenario. 2 Jensen, A.M. (1995), Exarnen des Politiques, Strategies et Programmes du Secteur des Energies Traditionnelles. Evaluation des donees sur les resources ligneous: Burkina Faso, Gambia, Mali, Niger et Senegal. World Bank, Africa Region (Consultant Report). 3 Jensen, A. M. (1995). op cit. Floor, W. and Van der Plas, R. (1992). CO2 Emissions by the Residential Sector: Environmental Implications of the Inter-fuel Substitution. Industry and Energy Department Workirg Paper. Energy Series, Paper 51. World Bank, Industry and Energy Department. PRE. Feinstein, C. and Van der Plas (1991), Improving Charcoaling Efficiency in the Traditional Rural Sector. Industry and Energy Department Working Paper. Energy Series, Paper 38. World Bank, Industry and Energy Departnent. PRE. Annex 3 Page 7 of 16 scenarios is based on differences in amounts of fuelwood harvested and the corresponding net CO2 emissions resulting from varying degrees of forest management sustainability. The amount of carbon sequestered in 1 ton of harvested fuelwood equals 1.7 t of CO2 The impact of possible natural hazards such as drought, windstorms or diseases was not taken into account. 12. The total area managed during the implementation of the project increases as follows: year 1: none (detailed studies and preparation of management plans) year 2: 15 000 ha year 3: 40 000 ha year 4: 80 000 ha year 5: 130 000 ha year 6: 200 000 ha year 7: 300 000 ha 13. A comparison was made between these scenarios during the 7 year project - starting wood harvest in the second year- and over 15 years. The 15 year time period was chosen because it equals the period after which any fixed area in the region under an exploitation of I t of fuelwood/ha harvested by clear-cutting without regrowth, would be totally clear-cut. 14. For the sake of simplicity, this approach ignores the influence of the different scenarios on the sequestration capacity of the forest ecosystem as a whole by not taking into account the varying influences of selective logging and clear-cutting on aspects such as forest age, species composition, underground biomass, soil condition, herbaceous vegetation, fauna and alternative land use. However, since under both the Business as Usual Scenario and the Baseline Scenario all forested land will finally be converted in either pasture or agricultural land, the GEF- alternative Scenario would appear even more favorable on the long term in regard of CO2 emission abatement because the carbon sequestration capacity of forest land is generally much higher than that of pasture or agricultural land. 15. In summary, the approach has been very conservative for several reasons since (i) the sustainable fuelwood harvest intensity of 1 ton per ha in the GEF-Alternative Scenario represents the lowest limit within a range of 1 to 3 ton per ha., (ii) the Baseline Scenario is maintained at 50% sustainability throughout the 15 years, while a gradual drop is expected after the 7 years, (iii) the positive influence of controlled forest fires is not included, (iv) conversion of forest land to pasture or agricultural has not been included and (v) no multipliers were applied to account for expected positive influence on forest management in the whole districts of Kolda and Tambacounda. 16. Figure 3 presents the cumulative amounts of fuelwood harvested to produce equal amounts of charcoal under the carbonization efficiencies of the different scenarios over the 15- year period. The carbonization efficiency under the GEF Alternative Scenario is 30% and under the Baseline Scenario and the Business as Usual Scenario is 18%. 6 Floor, W. and Van der Plas, R. (1992). op.cit. Annex 3 Page 8 of 16 17. Figure 4 presents the cumulative amounts of nWI CO2 emission under the different degrees of harvest sustainability of the different scenarios over the 1 5-year period. The harvest sustainability is zero in the Business as Usual Scenario, 50% in the Baseline Scenario and 100% in the GEF Alternative Scenario. FIGURE 3 Senegal SPEMP: Cumulative Harvested Fuelwood From Altemative Forest Management Scenarios 6E000 T ! - 5,000 4,000 -- 0 U.. 3,000 "A _ CC C,1 1,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 ....GE6 A Baseline -G..- B-A-U Cost 18. The difference in cost of the supply management sub-components (included within the project's Components I and II) between the Baseline and GEF Alternative scenarios is US $4,660,000. This difference results from the implementation of: (i) technical activities design to enlarge the project from a simple free standing forestry project to a natural resource management project and to include monitoring and evaluation systems and mechanism for the Annex 3 Page 9 of 16 activities designed to increase the participation of the rural community in the strict enforcement of sustainable forest management and, thus, expected to result in the achievement of the global environmental benefits. Tables 2 and 3 respectively present a detailed descriptive cost structure of the Baseline and GEF Alternative scenarios for the project's Supply Management sub- components. FIGURE 4 Senegal SPEMP: Cumulative Net CO2 Emissions from Alternative Forest Management Scenarios 9,000 ___ 2,000 7,000 600 500 c 0 4,000- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Years 3 Scenarios: GEF A Baseline -X- B-A-U Cost effectiveness 19. The unit abatement cost of the project's Component I under the GEF Alternative Scenario is US $4.30/t C02 after 7 years and US $1.04/t C02 after 15 years. Annex 3 Page 10 of 16 TABLE 2: BASELINE SCENARIO COST Woodfuels Supply Management Sub-components Cost Total (includes sub-components within the Project's Components I and ii) Breakdown Cost I. COLLECTION OF DATA & ELABORATION OF PLANS 1. Selection & prioritization of areas for intervention (300,000 ha) 1.1 Forest inventory in Tambacounda & Kolda (600,000ha.) 800,000 1.2 Implementation plan (selection & priortization) 30,000 830,000 2. National dead wood availability assessment 100,000 100,000 3. Elaboration of participatory integrated natural resources management plan 3.1 Natural forest management plan 100,000 3.2 Program for forest fire prevention 50,000 3.3 Evaluation of infrastructure improvement needs (road, rur.serv. centres etc.) 50,000 200,000 4. Elaboration of legislative framework 4.1 Evaluation of wood fuel pricing and fiscal policies 50,000 4.2 "Contract-plans" between Govemment and rural communities 60,000 4.3 Regulation of charcoal flow stabilization framework 20,000 130,000 II. ELABORATION OF MONITORING SYSTEMS 1. Elaboratlon of wood fuels trade flow monitoring system 20,000 20,000 Ill. IMPLEMENTATION OF MONITORING SYSTEMS 1. Woodfuels trade flow monitoring 90,000 2. Charcoal market flows monitoring and stabilization (Dakar) 750,000 840,000 IV. IMPLEMENTATION OF INT. NAT. RESOURCE MANAGEMENT MODULES 1. Module 1: (not applicable) Percent 1,000,00D 2. Module 2: 15,000 ha 5 300,W0 300,000 3. Module 3: 25,000 ha 8 500,000 500,000 4. Module 4: 40,000 ha 13 800,000 800,000 5. Module 5: 50,000 ha 17 1,000,000 1,000,000 6. Module 6: 70,000 ha 23 1,400,000 1,400,000 7. Module 7: 100,000 ha 33 2,000,000 2,000,000 6,000,000 V. INSTITUTIONAL STRENGTHENING AND CAPACITY BUILDING 1. Training of govemment Staff and field monitors 415,000 415,000 2. Equipment 2.1 Vehicles (2 and 4 wheel drive) 700,000 2.2 Trucks 400,000 2.3 Computers and mapping materials 50,000 2.4 Forest prevention equipment 200,000 2.5 Forest fire control tools 300,000 1,650,000 3. uperation 3.1 Vehicules (fuel, oil, spare parts) 920,000 3.2 Office supplies 140,000 3.3 Communication (telephone, fax etc.,) 140,000 1,200,000 V]. COMMUNICATION STRATEGY 155,000 155,000 TOTAL COST Supply Management Sub-components 11,540,000 11,540,000 Annex 3 Page 11 of 16 TABLE 3: GEF ALTERNATIVE SCENARIO COST Woodfuels Supply Management Sub-components Cost Total (Include sub-components wlthin the PvoJecra Components I and Ii) Breakdown Cost I COLLECTION OF DATA & ELABORATION OF PLANS 1. Selection and prioritization of areas for intervention (300,000ha) 1.1 Vegetation cover inventory in Tambacounda and Kolda (600,000 ha) 950,000 1.2 Participatory Rural Appraisal (socio-economic assessment) 100,000 1.3 Elaboration of priontized implementation plan 50,000 1,100,000 2. National dead wood availability assessment 100,000 100,000 3. Elaboration of participatory Integrated natural resources management plan 3.1 Natural forest management plan 100,000 3.2 Village teritory management plan ( gestion tsnoir") 100,000 3.3 Program for regeneration of ecologically degraded lands 70,000 3.4 Program for forest fire management 50,000 3.5 Program for training and capacity building of rural population 30,000 3.6 Evaluation of infrastructure improvement needs (road, rural service centres etc.) 50,000 3.7 Integrated natural resources management plan 100,000 550,000 4. Elaboration of legislative framework 4.1 Evaluation of wood fuel pridng and fiscal policies 50,000 4.2 'Contract-plans between Government and rural communities 90,000 4.3 Regulation of charcoal flow stabilization framework 20,000 160,000 iI. ELABORATION OF MONITORiNG SYSTEMS 1. Elaboration of vegetatlon and fuewood exploitation monitoring system 30,000 2. Elaboration of wood fuels trade flow monitoring system 20,000 3. Elaboration of wildlife monitoring system 20,000 4. Elaboration of community-participation monitoring system 20,000 90,000 Ill. IMPLEMENTATION OF MONITORiNG SYSTEMS 1. Vegetation and fueiwood exploitaUon monitoring 120,000 2. Woodfuels trade flow monitoring 90,000 3. Wildlife monitoring 120,000 4. Community-participation monitoring 120,000 5. Charcoal market flows monitoring and stabilization (Dakar) 750,000 1,200,000 IV. IMPLEMENTATION OF INT. NAT. RESOURCE MANAGEMENT MODULES (indudinginputs: 1.3.11-1.3.7. &.4.1-1.4.4.) 1. Module 1: (not applicable) Perc % J./,00D,oW 2. Module 2: 15,000 ha ----00[ 350,000 3. Module 3: 25,000 ha 8 583,3333 S3,333 4. module 4: 40,000 ha 13 933,333 933,333 S. Module 5: 50,000 ha 17 1,168,667 1,166,667 6. Module 6: 70,000 ha 23j1,63333 1,633,333 7. Module 7: 1DO,DOO ha 33 2,333,333 2,333,333 7,000,000 iW F S700aw V. SUPPORT TO RURAL MICRO-ENTREPPISES 1,000,000 1,000,000 (investment funds for activities on IMPROVED CARBONIZATION, agro-forestry, etc.) VI. INSTITUTIONAL STRENGTHENiNG AND CAPACITY BUILDING 1. Training of govemment staff snd monitoring agents 600,000 (particpatory discussing technics, training and extension of forestry management) 2. Training of rural communities (forest management, IMPROVED CARBONIZATION, agriculture, pastorallsm, 1,000,000 1,600,000 cooperatives management, etc.) 3. Equipment 3.1 Vehicles (2 and 4 wheel drive) 700,000 3.2 Trucks 400,000 3.3 Computers and mapping materials 100,000 3.4 Forest management tools 200,000 3.5 Forest fire control tools 300,000 1,700,000 3.5 Forest fire control tools 300,00t 1,700,000 4. operauon 4.1 Vehicules (fuel, oll, spare parts) 920,000 4.2 Office supplies 140,000 4 .3 Communication (telephone, fax etc.,) 140,000 1,200,000 VII. COMMUNICATION STRATEGIES i00,000 500,000 TOTAL COST Supply Management Sub-components 16,200,000 16,200,000 Annx 3 Page 12 of 16 C. Incremental Cost of Demand Management Activities With Global Environmental Benefit Not Financed by GEF CO2 emission abatement 1. The Government of Senegal has long sought to promote the use of improved stoves. However, it has been unable to make the use of improved stoves either operational or sustainable. This is so because most stove programs implemented until now were run as Donor- Government managed activities, which invariably collapse as soon as donor financing and technical supervision ran out. As a rule, these projects worked on the basis of large consumer price subsidies, whereby there was little long-term incentive for the private sector to produce stoves outside direct donor financed pilot programs. When the cost of the expatriate technical assistance is considered, it is estimated that the cost per disseminated stove elevates well beyond the US $100 level. On the other hand, during recent policy analysis work (RPTES Program), the Government reached the conclusion that a new generation of consumer-accepted improved charcoal stoves (Sakanal, Diambar, etc.) exists and is already being successfully produced and marketed at full cost by several NGO's in the principal urban centers of the country. Those new initiatives are severely constrained in volume of operation (10,000 to 20,000 stoves/year) by a lack of investment and working capital. Thus, lack of access to credit or other financial instruments is the principal constraint to the successful market-based dissemination of the promising new generation of improved charcoal stoves by small scale and micro-enterprises and NGO's. GEF financing of this activity would contribute to the elimination of market barriers. 2. Within that context, the Baseline Scenario would be limited to the promotion by Government of the improved stove concept within its general consumer education activities and campaigns. No other investment or technical assistance activities would be carried out. 3. Within an "Environmentally enhanced" scenario - parallel to the GEF Alternative scenario -- the project would promote for a period of five years (shorter than the life of the project) the production and marketing of improved stoves by the private sector (small and micro- enterprises) and/or NGO's at full factor cost by establishing a rotatory working capital fund (US $ 300,000) for small and micro-enterprises and NGO's which have market-proven stoves but lack the necessary resources to invest in the expansion of their production capacities. Additionally the project would undertake basic monitoring and evaluation of the improved stove programs and would set up a professional improved stove promotion campaign. 4. Within the GEF Alternative scenario, a total of 225,000 improved charcoal stoves would be produced and sold through the market during the first five years of the project. Stove production and sales would reach the following cumulative schedule: year 1: 2,700 year 2: 8,300 year 3: 25,000 year 4: 75,000 year 5: 225,000 Annex 3 Page 13 of 16 5. The CO2 emission abatement of this activity was calculated for the project period of seven (7) years and for over a 15-year period (following the same standard used for the GEF funded activities). The underlying assumption for extending that calculation to the 7 and 15 year periods is that once the project manages to "kick-start" the private sector/NGO based production of improved stoves and the consumers have had a five year cycle of stove usage, there would be a continuously increasing market demand for stoves, without the need for continued governmental support. Based on the results of the evaluation of the 5-year program, the Government will either continue to use the rotatory fund as such or will apply the funds towards consumer energy education and awareness programs. 6. The new generation of improved charcoal stoves reduces the consumption of charcoal by 1.6 kg per day per household. Burning 1 kg of charcoal equals the emission of 3.2 kg CO2. In line with those assumptions, the implementation of the improved charcoal stove activity within the GEF alternative Scenario would result in a n=t total CO2 emission abatement of 1.5 million tons over 7 years and of 4.8 million tons over 15 years. Figure 5 presents the cumulative n= CO2 emission abatement expected to result over a 15-year period from the implementation of 225, 000 improved stoves. It was assumed that a permanent park of 225,000 improved stoves would remain in use by households through continuous reposition after the project target is met at the seventh year of implementation. If the improved charcoal stoves result to be less efficient than what has been estimated (and documented) thus far, the CO2 abatement benefit of this activity may be slightly lower thar. anticipated. FIGURE 5 Senegal SPEMP: Cumulative Net CO2 Emission Abatement From Improved Charcoal Stoves 5,000 -- 4,500- 4,000- 3,500~ 0 M (.0 3,000 s 4 5 6 7 8 ~0 a 6_2,5000- - ,00 a2,000- -- 1500 --_ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Years 7 AT International (1996). Reducing Charcoal Use in Senegal. (Draft proposal presented to the World Bank). Washington DC. USA. Annex-3 Page 14 of 16 Cost 7. The total cost of the proposed 5-year improved stoves activities is US $500,000. This cost would be divided between: (i) a research and analysis funds to review and evaluate private sector and NGO investment proposals; (ii) a rotatory investment fund (US $300,000) to support selected private sector/NGO initiatives; (iii) support to pilot sales and promotion campaigns (US $100,000); and (iv) monitoring and evaluation of the impact of the improved stoves (US $50,000). 8. The difference in cost of the proposed demand management sub-components between the Baseline and the enhanced scenario (US $500,000) is exclusively attributed to the implementation of the improved stoves activities. Tables 4 and 5 respectively present a descriptive cost structure of the Baseline and the Environmentally Enhanced scenarios for the non-GEF funded demand management sub-components of the project. Cost effectiveness 9. The unit abatement cost of the project's Component HI under the Environmentally Enhanced Scenario is US $0.34/t CO2 after 7 years and US $0.10Jt after 15 years. Annex 3 Page 15 of 16 TABLE 4: BASELINE SCENARIO COSTS (Non-GEF Sub-components) Energy Demand Management Sub-components Cost Total (Includes sub-components In the ProJect's Components I and Ill) Breakdown Cost I. SUPPORT FOR THE MODERNISATION OF THE CHARCOAL INDUSTRY 1. Identification of entrepreneurs & analysis of proposals 50,000 2. Mobilisation of support funds 100,000 3. Monitoring and evaluation 30,000 180,000 II. SUPPORT FOR 1. Identification of entrepreneurs & analysis of proposals 50,000 2. Mobilisaton of support funds 250,000 3. Monitoring and evaluation 30,000 330,000 Ill. KEROSENE: SUPPORT FOR INTER-FUEL SUBSTITUTION 1. Complementary studies to GTZ-GoS Energy program 30,000 2. Research on appropriate stoves 30,000 3. Import of pilot stoves 20,000 4. Marketing and support for sales of pilot stoves 50,000 130,000 IV. BUTANE GAS (LPG): SUPPORT FOR INTER-FUEL SUBSTITUTION 1. LPG procurement and distribution study 50,000 2. Identification of entrepreneurs & analysis of proposals 50,000 3. Mobilisation of support funds and monitoring 200,000 300,000 V. COMMUNICATION AND STOVE MARKETING STRATEGY 1. Technical seminar and workshops 50,000 2. Publication of technical documents and general information 100,000 3. Public information and consumer campaigns 150,000 4. Publicity campaigns 200,000 500,000 Vl. INSTITUTIONAL STRENGTHENING AND CAPACITY BUILDING 1. Implementation of TA team at the Energy Directorate 1.1 Long-term personnels 200,000 1.2 Temporary personnel 50,000 1.3 Transport and field work costs 50,000 300,000 2. Training of Energy Directorate staff 100,000 100,000 3. Implementation of energy information system- SIEP 100,000 100,000 4. Equipment 4.1 Vehicles (2 wheel drive) 40,000 4.2 Computers and communication 60,000 100,000 5. Operation 5.1 Vehicles (fuel, oil & spare parts) 60,000 5.2 Office supplies 60,000 5.3 Communication (telephone, fax etc.) 40,000 160,000 u i RL L.VT energy Demand Management Suo-components 2,200,00 AnneX 3 Page 16 of 16 TABLE 5: ENVIRONMENTALLY ENHANCED SCENARIO COSTS (Non-GEFI Energy Demand Management Sub-components Cost Total (Includes sub-components In the Project's Components I and 111) Breakdown Cost I. SUPPORT FOR THE MODERNISATION OF THE CHARCOAL INDUSTRY 1. Identification of entrepreneurs & analysis of proposals 50,000 2. Mobilisation of support funds 100,000 3. Monitoring and evaluation 30,000 180,000 II. SUPPORT FOR 1. Identification of entrepreneurs & analysis of proposals 50,000 2. Mobillsaton of support funds 250,000 3. Monitoring and evaluaton 30,000 330,000 IIl. KEROSENE: SUPPORT FOR INTER-FUEL SUBSTITUTION 1. Complementary studies to GTZ-GoS Energy program 30,000 2. Research on appropriate stoves 30,000 3. Import of pilot stoves 20,000 4. Marketing and support for sales of pilot stoves 50,000 130,000 IV. BUTANE GAS (LPG): SUPPORT FOR INTER-FUEL SUBSTITUTION 1. LPG procurement and distribuUon study 50,000 2. Identification of entrepreneurm & analysis of proposals 50,000 3. Mobllisation of support funds and monitoring 200,000 300,000 V. SUPPORT FOR PRODUCTION & DISTRIBUTION OF IMPROVED STOVES 1. Identification of entrepreneurs & analysis of proposals 50,000 2. Moblilsatlon of support funds 300,000 3. Support for pilot sales and marketing 100,000 4. Monitoring and evaluation of Impact of Improved stoves - 50,000 500,000 VI. COMMUNICATION AND INFORMATION STRATEGY 1. Technical seminar and workshops 50,000 2. Publication of technical documents and general infonnation 100,000 3. Public Information and consumer campaigns 150,000 4. Publicity campaigns 200,000 500,000 VIl. INSTITUTIONAL STRENGTHENING AND CAPACITY BUILDING 1. Implementation of TA team at the Energy Directorate 1.1 Long-term personnels 200,000 1.2 Temporary personnel 50,000 1.3 Transport and field work costs 50,000 2. Training of Energy Directorat staff 100,000 400,000 3. Implementation of energy information system- SIEP 100,000 100,000 4. Equipment 4.1 Vehicles (2 wheel drive) 40,000 4.2 Computers and communication 60,000 100,000 5. Operaton 5.1 Vehicles (fuel, oil & spare parts) 60,000 5.2 Office supplies 60,000 5.3 Communication (telephone, fax etc.) 40,000 160,000 IU IAL uva I uemano management au-componenrs %Tuu,uuT £,ruu,uuu Annex-4 Page 1 of 7 PROJECT PARTICIPATION ACTION PLAN Introduction 1. For the past three years, the Government of Senegal, with the support of the World Bank, has been in the process of formulating a traditional energy policy as well as identifying a project to address its critical problem of rapidly decreasing traditional household fuel sources. The process of both Policy Formulation and Project Identification has been participatory, relying upon multi-disciplinary and inter-ministerial teams working on a consensus basis. Further, a series of consultations with NGOs and the private sector representatives were held to obtain comments. These significant activities have led to the development of the Senegal's "Sustainable and Participatory Energy Management Project" (SPEMP) where participation will play a vital role in attaining project objectives. To clarify the role of participation as well as the participatory process and methodology to be utilized in the project, the following Participation Action Plan (SPEMP- PAP) has been developed. KEY ELEMENTS OF THE PLAN * Based on a Consultative and Participatory Process: The foundation for the design of this plan results from a consultative process of Policy Formulation and Project Identification involving several key stakeholders. In addition, a series of National and Regional Participatory Project Preparation Workshops were conducted by the Government of Senegal between December 1995 and April 1996 to obtain feedback and suggestions from representatives of civil society on the overall project strategy. * NGO Oversight: The Government of Senegal will choose an NGO to be responsible for the implementation and monitoring of the SPEMP-PAP. This "lead" NGO will be responsible for promoting, monitoring and reporting on all participatory activities during the project implementation phase. * Phase of Preparatory and Support Activities: The entire first year of the project will be dedicated to participatory preparation activities, as well as other support activities. The participatory preparation activities will allow communities to design their own community management plans as well as for the project team to obtain additional social, economic, ecological, and functional information necessary for project implementation. * Role of Women, Youth and NGOsi: Due to their critical role in resource management and development, women, youth and NGOs have been identified as key participants and will play a fundamental role throughout the lifecycle of the project. * Participatory Methodology Training for Government Officials: General sensitizing of government decision makers on participatory approaches and their impact on development is planned as a key component of capacity building and institutional development activities for the Government of Senegal. INon-Governmental Organizations here also refers to Community Based Organizations (CBOs) Annex 4 Page 2 of 7 Background 2. The SPEMP "Executive Project Summary" notes that "the government and the private sector lack the financial and human resources that would be necessary to adequately manage the country's forest resources". Consequently, to obtain the project's objective (to meet an important part of the rapidly growing urban demand for household fuels), it is necessary to have 2 the active involvement of the rural populations . For successful implementation of the project, community involvement must be systematic and representative of all stakeholders. In an effort to ensure systematic participation (participation that occurs in all stages of the project cycle, influences design and implementation, and is appropriately institutionalized), the following SPEMP - PAP has been developed. This plan, formulated in collaboration with the Government of Senegal, is based on, in addition to other activities, a series of National and Regional Participatory Project Preparation Workshops conducted by the Government of Senegal. These workshops, involving over 60 community representatives and NGOs and conducted between December 1995 and April 1996, gathered critical social, economic, and environmental data which has improved the overall project strategy and enhanced the knowledge base of the project team.3 Participants 3. The recent Participatory Project Preparation Workshops identified women, youth, and NGOs as key participants in the project. Special attention will be given to these groups, however, not at the exclusion or marginalization of others. For example, Senegal's new decentralization regulations identifies rural community councils as the statutory natural resource managers at the local level. As a result, rural community leaders will also play a critical role in the project. Other essential participants will include charcoal producers, the private sector, pastoralists, herders, bee-keepers, the government, and anyone else identified during the first year of preparation activities. Contact with representatives of some of these key groups has already taken place through the Project Preparation Workshops. Table 2 is an initial listing of some of these contacts which will be built upon during the cycle of the project. Process 4. In general, the participatory process to be followed during the project's lifecycle is expected to be fluid and iterative, continuously adjusting to meet the needs of the project and its participants. A "lead NGO" will be selected by the Government of Senegal to promote and monitor this process. 2 "Rural populations" here refers to community populations, NGOs, and CBOs. The National Participatory Project Preparation Workshops, held in Dakar December 1995 and March 1996, obtained advice and lessons learned from over 40 representatives of NGOs, the private sector, and CBOs working in the Traditional Energy Sector throughout Senegal. The Regional Participatory Project Preparation Workshops, held April 1996 in Tambacounda and Kolda, presented the project proposal to its principal stakeholders - local populations. Comments and suggestions were solicited regarding the proposed strategy from more than 80 representatives of NGOs, CBOs, community leaders, the private sector, and local govermnment officials. Annex 4 Page 3 of 7 TABLE 2 NGOs, CBOs And Rural Communities Represented At The SPEMP Beneficiary Consultation Workshops NGOs CBOs RURAL COMMUNITIES 1. UICN 1. Groupement Feminin de Bakel I. Presidents du conseils regionaux 2. Winrock International 2. Groupement Feminin de Tamnba Kolda et Tamba 3. Association des Jeunes pour I'Education et le 3. GIE Sare 2. President Communaute Rurale de Developpement(AJED) 4. Groupement Promotion Feminine Kounkane 4. Plan International Koussanar 3. Conseiller communaute rurale de 5. Reseau Africain pour le Developpemnt 5. Groupement Feminin Kedougou Sinthiang Koundara Integre(RADI) 6. Union Nationale des cooperatives 4. Conseiller communaute rurale de 6. Organisation Communautaire de Forestieres de Kolda Nianga Regroupement Villageois(OCRV) 7. Union des cooperatives d'Eleveurs 5. Conseiller communaute rurale de 7. CARITAS de Kolda Mampatim 8. Organisation Senegalaise pour le 8. Union des Groupements Feminins 6. President communaute rurale de Developpement des Initiatives Locales de Kolda Bounkiling (RADI) 9. FENOFOR 7. Pr6sident communaute rurale de 9. Conseil des ONG d'Appui au 10. President Comite de Lutte contre Ndoma Developpement (CONGAD) les feux de brousse 8. President communaute rurale de 10. ACRA 11. Union des Parents d'elves de Dioulacolon 11. AFRICARE Kolda 9. President communaute rurale de 12. Association Fran,aise des Volontaires du Pata Progres (AFVP) 10. Conseiller communaute rurale de 13. Christian Children's Fund (CCF) Dioulacolon 14. ASREAD 11. Conseiller communaute rurale de 15. "7a" Medina Elhadj 16. Centre d'Etudes Canadien Iintematioanal 12. Conseiller communaute rurale de (CECI) Medina Yoro Foula 17. FID 13. Conseiller communaute rurale de 18. GADEC Maka 19. Federation des Associations Feminines du 14. President communaute rurale de Senegal(FAFS) Dialacoto 20. Concertation Nationale des Ruraux(CNCR) 15. President communaute rurale de 21. APCR Missira 22. ENDA 16. President communautd rurale de 23. Federation des ONG du Senegal(FONGS) Bele 24. Appropriate Technology International(ATI) 25. RODALE 26. Aide et Action 27. Ile de Paix 28. CSIVAD 29. HOPE 87 30. Maisons Famniliales Rurales(MFR) 31. Association des Jeunes Agriculteurs de Casamance(AJAC) 32. KORA 33. Veterinaires sans frontire 34. ARSAP 35. Federation des Associations et Groupements Villageois du departement de Sedhiou(AFGVS) 5. A series of participatory approaches consisting mostly of Participatory Rural Appraisals, consultative workshops, and social assessments will serve as the basis from which all else will evolve. From the participation point of view, there will be three phases in this project: Annex 4 Page 4 of 7 Participatory Planning and Preparation Phase (Year 1), Participatory Implementation Phase (Year 2-7), and Evaluation Phase. The following provides greater details on the anticipated participatory activities during these phases. Participatory Planning and Preparation Phase: Year 1 6. The first year of the project will serve as a foundation for the six years to follow. During this critical year, a Project Implementation Plan will be defined in conjunction with the principal participants, notably women, youth, rural populations, NGOs, CBOs, charcoal producers, the private sector and the government. The following participatory activities, monitored by the lead NGO, will result in the development of the Project Implementation Plan: * Regional NGO Assessments: Studies will be conducted of NGOs working in the two targeted regions, Tambacounda and Kolda, by an independent consultant or agency. The results of these studies will illustrate the capacity of NGOs working in the regions to participate in and promote and support participatory project implementation. : Organization of and Initial Implementation of Participatory Rural Appraisals: Participatory Rural Appraisals (PRAs), conducted by NGOs or individual consultants, will serve as the backbone for the Project Implementation Plan. The PRAs, in addition to collecting necessary social and economic data, will allow communities to prepare their own community management plans based on indigenous knowledge, culture, and the existing resource base. At the end of the first year, this information will be synthesized with technical findings obtained by the Government to formulate technically, socially and economically sound community management plans. Together, the Government of Senegal and the lead NGO will then consolidate these community management plans into a detailed implementation plan for annual participatory forestry management modules as well as for inter-fuel substitution activities. 7. Information collected from the PRAs will highlight themes and subjects which could be useful in future PRAs or in other studies being conducted by the project. This information will also be incorporated into the design of the following programs: * capacity building programsforfield agents and institutions; * a monitoring and evaluation system; and * a comprehensive communication strategy. 8. During the first year, PRA facilitators will be selected. In addition, zones of intervention for initial exploratory PRAs will be identified based on ecological, socio-demographic, socio- professional, and administrative criteria. By the end of the first year initial exploratory PRAs will have been conducted in each "arrondissement", covering approximately 15 communities. This number will expand over the seven years, as illustrated in a later section of this plan, with the increasing number of community managed hectares. 9. Some of the participatory tools to be used in the appraisals may include semi-structured interviewing, focus group discussions, preference ranking, mapping and modeling, and seasonal and historical diagramming. These tools will reveal along with other information the following: Annex 4 Page 5 of 7 - soil and land conditions - land tenure practices and issues - ecological, environmental and agricultural history, culture, and practices - village community structures - roles of community members (i.e. gender roles) - livelihood analysis and variety of income resources - wealth ranking - important institutions and individuals in the community - NGOs and CBOs active in the community - NGOs and CBOs active in the community in the domain of natural resource management - important non-fuelwood products present in the forest - location and practice of subsistence fuelwood collection - community interest in natural resource management - community interest in the project - Community "Restitution" Workshops: Once the results of the PRAs have been analyzed, "restitution" workshops to present and validate the findings will be held with communities which participated in PRA. * Regional Implementation Plan Workshops: At the end of the first year, Regional Workshops will be held to brief community representatives and local administrative officials on the Project Implementation Plan. Participatory Inplementation Phase: Years 2-7 10. As noted above, the six years of project implementation will see a gradual increase in community participation as the number of community managed forests increases. Support structures for participation will be established as well as the implementation of training and capacity building programs. 11. Participation: PRAs will continue to be the building block in designing community management plans as well as evaluating existing activities and systems. The number of PRAs to be conducted for planning purposes over the six year period is based on the number of communities to be enrolled on a yearly basis. Table 3 is an estimation of yearly increase in "planning PRAs" which will total 250 by the seventh year:4 4 ThiS table may change based on the demand by communities or other changes to the project design. Annex-4 Page 6 of 7 Table 3 Estimation Of Yearly Increase In PRAs YEAR # of PRAs Year 1 15 Year 2 21 Year 3 27 Year 4 3 5 Year 5 39 Year 6 49 Year 7 64 TOTAL 250 Additionally, "evaluative PRAs" will be conducted annually in selected communities. 12. Issues raised in the first year of PRAs needing a more detailed assessment will serve as the basis for a Socio -Economic Assessment to be conducted during the second year of the project. This study will provide a more in-depth analysis of the targeted issues. Findings will be incorporated where appropriate into the project and PRA design to reinforce activities. 13. At the mid-point of the project, a Beneficiary Assessment will occur to assess views on the project's implementation process and services being provided. This assessment will involve various beneficiaries in urban and rural areas as well as service providers such as charcoal producers, transporters, and the government to assess the initial impact of the project. This information will feed into an overall mid-term evaluation report. 14. Support Structures: To support the participatory process and ensure its representativity, several structures will be established early on in the implementation phase. Some of these structures will include: * establishing or reinforcing communication mechanisms and collaboration systems in the zones of intervention, * establishing consultative groups which will foster dialogue between village participants and the project team, * establishing alternative mechanisms for conflict resolution and management among stakeholders, and * establishing a mechanism for monitoring and evaluating participation by local populations 15. Training and Capacity Building: Continuous training and capacity building of local organizations and individuals will occur to further ensure sustainability. These activities will take place in technical domains as well as in the areas of financial management, strategic planning, monitoring and reporting, and participatory planning and management. In addition, particular attention will be given to the training and sensitizing of government officials in participatory approaches and their impact on development. Annex-4 Page 7 of 7 Evaluation Phase: Year 7 16. At the end of the project, a final independent evaluation will be conducted to assess the impact of the project, its sustainability, and its participatory approach. Participating and non- participating communities will be targeted in rural as well as urban zones. Within these zones, representatives of all stakeholders (e.g. women, youth, NGOs, local elected officials, pastoralists, herders, bee-keepers, charcoal producers, the private sector, the Government, and donors) will be surveyed for their views on the process and impact of the project. The evaluation team will be multi-disciplinary and its members independent, having had no previous involvement with the project. The team will be comprised of an NGO and Participation Specialist, an Environmentalist, an Energy Specialist, a Sociologist or Anthropologist with a focus on gender issues, an Institutional Development Specialist, and Economist. With this diverse group it is anticipated to obtain a broad as well as in-depth view of the project's results and impact. Upon its completion, a french version of the evaluation report will distributed to all the project's partners and made available at the Resident Mission. SENEGAL SUSTAINABLE AND PARTICIPATORY ENERGY MANAGEMENT PROJECT Expenditure Accounts Project Cost Summary % % Total (FCFA '000) (US$ '000) Foreign Base Local Foreign Total Local Foreign Total Exchange Costs 1. Investment Costs A. Goods and Services 237,475.00 589,525.00 827,000.00 474.95 1,179.05 1,654.00 71 9 B. Civil Works 184,800.00 277,200.00 462,000.00 369.60 554.40 924.00 60 5 C. Vehicles/Equipement 8,400.00 1,073,050.00 1,081,450.00 16.80 2,146.10 2,162.90 99 12 D. Materials 240,200.00 355,300.00 595,500.00 480.40 710.60 1,191.00 60 7 E. Studies 140,784.00 195,396.00 336,180.00 281.57 390.79 672.36 58 4 F. Fonds d'appui (Matching Funds) 619,700.00 271,300.00 891,000.00 1,239.40 542.60 1,782.00 30 10 G. Training 328,650.00 302,650.00 631,300.00 657.30 605.30 1,262.60 48 7 H. Campaigns 235,400.00 148,600.00 384,000.00 470.80 297.20 768.00 39 4 1. Consultants 126,128.00 189,192.00 315,320.00 252.26 378.38 630.64 60 4 Total Investment Costs 2,121,537.00 3,402,213.00 5,523,750.00 4,243.07 6,804.43 11,047.50 62 63 11. Recurrent Costs A. Gasoil/Gasoline 198,000.00 132,000,00 330,000.00 396.00 264.00 660.00 40 4 B. Office rental / local contracts 197,200.00 - 197,200.00 394.40 - 394.40 - 2 C. Trarnsportation 392,500.00 - 392,500.00 785.00 - 785.00 * 4 D. Vehicle maintenance 428,070.00 285,380.00 713,450.00 856.14 570.76 1,426.90 40 8 E. Salaries 1,630,880.00 1,630,880.00 3,261.76 - 3,261.76 - 19 TotalRecurrentCosts 2,846,650.00 417,380.00 3,264,030.00 5,693.30 834.76 6,528.06 13 37 Total BASELINE COSTS 4,968,187.00 3,819,593.00 8,787,780.00 9,936.37 7,639.19 17,575.56 43 100 Physical Contingencies 463,935.20 361,470.30 825,405.50 927.87 722.94 1,650.81 44 9 Price Contingencies - 352,440.13 352,440.13 - 704.88 704.88 100 4 TOTAL PROJECT COSTS 5,432,122.20 4,533,503.43 9,965,625.63 10,864.24 9,067.01 19,931.25 45 113 m N SENEGAL SUSTAINABLE AND PARTICIPATORY ENERGY MANAGEMENT PROJECT Econditti Accounts by Con.po.ts. Bu. BeCons (US$'000O Preparatory and Support Activities | Sustuinuble Woodfues Supply Mangeenm-t D Demand MagX. & Inter-Fuel Subat. Options Physical Conttngancies Vegetation lb fFonda Dead Wod Econom.ic C P-etiiputory 1tnkr-ted loa.tittionat P,epnratioo ositot noa Mlcro-trpriae dc i ti Global sffn rV Mod-h.ti.n LPG: i.wr Ch.rcosl Other Invetry R di-eiopmeot *nd pro tion . D of Carcoal fuel Improved privt Total % Amount Inventory Appruisls Resouree and Eqoipm.et Modules uctivtico rorulpmiro- c5ettoo Id Traders sobstitutioo sacatititio. Stovs initisives (Fart I) Systems eate,rpiae, "t uvealo.riesd.ty T,I I. lnvodbnnntCosts A. Goods and ServieS 425.0 - 1,229.0 - - - -164.0 10.0 166.4 B.CivilWorks . 3340 - 5900 - 924. 100 92.4 C. Vehicbs/Equipement 5 - 016.9 698.0 529.0 - - 132.0 - - 2,162.9 10.0 216.3 0. Matenals 650.0 - - 100.0 - 376.0 .- 0 1,1916o 10.0 1191 E. Studies - - - 31.0 4980 23.3 - 240 36.0 12.0 24.0 24.0 - 6724 10.0 67.2 F. Fondsd'appui(MatChin - - - 52.0 - - - 920.0 - - - 40.0 2000 60.0 10.0 t40.0 120.0 1,782.0 M00 178.2 G. Training 201.6 9370 - 240 t- - - 1,26 10.0 t26.3 H. Campaigns - - - 600 - - - - 168.0 - 20.0 - - - - 76.0 10.0 76.8 i, Consutants 6bO. 540 42.4 - 62 - 470.0 - - - - 6306 100 63. Totalnv*otnnt C.ns 7100 540 1,457.9 425.0 3010.0 2,161.6 920.0 168.0 470.0 641.0 64.0 236.0 72.0 174.0 1640 120.0 11,047.5 10.0 .104.6 II. Rhonu-t Casb A GasoiVGasotine . - - - - - 660.0 -66.6 0.0 330 a Office rental I local cont - . - 34.4 394.4 10.0 39.4 C. Tranlsportaton 1t0.0 - 10.0 630 40.0 - - - . 785.0 9. 740 D. Vehtice maintenance . - - 226.0 - 1,000.4 - - - - 200.5 - - - 1,4269 5.1 73.2 E. Salaries 1332 66.0 31.8 164.9 1057 5648 1412.3 - 7632 - - - - 3261.8 100 3259 Tobl RaeonontCosts 236.2 660 31.6 420.9 105.7 2,225.2 1.412.3 - - 1,393.2 6349 - 6,5281 64 46.1 ToIlBASEUNECOSTS 9462 660 85.6 1,676.6 53037 ,2352 3.5738 920.0 166.0 1,663.2 1475.9 64.0 236.0 72.0 174.0 1640 120.0 17,57566 9.4 1t60.8 Phy*oCodngladao, 948 6.6 8.6 178.5 02.8 440.5 357.4 92.0 16.8 1563 133.6 64 236 72 17.4 16.4 12.0 1,650.6 Pr6oContisganci 70 0.5 166 053 337.0 195.3 41.3 3.1 29.6 08.0 21 6.0 1.7 4.0 36 3.1 704.9 8.0 59.8 TotalPROJECTCOSTS 1,0S00 72.6 94.9 2,074.1 586.7 6,012.7 4,116.6 1,0533 187.9 2,0791 1,667.9 72.5 205.6 909 1954 164.0 135.1 19,9313 8.6 1,710.6 T-' Foo,cEhso" 476.6 36.2 1d1381 355.9 3351.3 1,97909 344.9 306.8 339.6 680.6 311 9598 29.4 693 65.6 42.7 9,067.0 86 7927 (I U1S90.000 equivalonl dudod o6thi G -ovomm, ooensbution. ::1 Uli C) SENEGAL SUSTAINABLE AND PARTICIPATORY ENERGY MANAGEMENT PROJECT Expenditure Accounts by Years - Base Costs (US$ '000) Foreign Exchange 1997 1998 1999 2000 2001 2002 2003 Total % Amount I. Investment Costs A. Goods and Services 425.0 236.0 250.0 260.0 169.5 169.5 144.0 1,654.0 71.3 1,179.1 B. Civil Works 334.0 290.0 300.0 - - - 924.0 60 554.4 C. Vehicles/Equipement 516.9 220.0 372.0 620.0 220.0 171.0 43.0 2,162.9 99.2 2,146.1 D. Materials 750.0 260.0 75.0 39.0 39.0 20.0 8.0 1,191.0 59.7 710.6 E. Studies 31.0 196.3 81.0 132.0 58.0 119.0 55.0 672.4 58.1 390.8 F. Fonds d'appui (Matching Funds) 152.0 490.0 430.0 190.0 150.0 200.0 170.0 1,782.0 30.4 542.6 G. Training 201.6 224.0 239.0 235.0 137.0 114.0 112.0 1,262.6 47.9 605.3 H. Campaigns 80.0 152.0 153.0 174.0 174.0 35.0 - 768.0 38.7 297.2 I. Consultants 156.4 124.2 120.0 120.0 70.0 40.0 - 630.6 60.0 378.4 Total lnvestment Costs 2,646.9 2,192.6 2,020.0 1,770.0 1,017.5 868.5 532.0 11,047.5 61.6 6,804.4 II. Recurrent Costs A. Gasoil/Gasoline - 110.0 110.0 110.0 110.0 110.0 110.0 660.0 40 264.0 B. Office rental / local contracts - 98.6 98.6 98.6 98.6 - - 394.4 0 - C. Transportation 115.0 115.0 115.0 115.0 115.0 105.0 105.0 785.0 0 - D. Vehicle maintenance 226.0 186.5 210.0 217.4 225.0 181.0 181.0 1,426.9 40 570.8 E. Salaries 521.5 461.8 456.1 456.1 456.1 456.1 454.1 3,261.8 - - Total Recurrent Costs 862.5 971.9 989.7 997.1 1,004.7 852.1 850.1 6,528.1 12.8 834.8 Total BASELINE COSTS 3,509.5 3,164.5 3,009.7 2,767.1 2,022.2 1,720.6 1,382.1 17,575.6 43.5 7,639.2 Physical Contingencies 341.2 300.6 284.0 259.3 184.5 157.5 123.7 1,650.8 43.8 722.9 Price Contingencies 29.6 67.2 112.1 162.1 118.2 122.5 93.2 704.9 100.0 704.9 Total PROJECT COSTS 3,880.3 3,532.3 3,405.8 3,188.5 2,324.8 2,000.6 1,598.9 19,931.3 45.5 9,067.0 Taxes* - - - - - - - - - - Foreign Exchange 2,005.8 1,545.1 1,572.1 1,647.3 948.0 816.0 532.9 9,067.0 (1 US$190,000 equivalent within Government's contribution. SENEGAL SUSTAINABLE AND PARTICIPATORY ENERGY MANAGEMENT PROJECT Project Components by Year - Base Costs (US$ '000) 1997 1998 1999 2001 2002 2003 Total A Preparatory and Support Activities 1. Vegetation Cover Inventory (Part 1) 948.2 - - - - - 948.2 2. Participatory Rural Appraisals 66.0 - - - - - 66.0 3. Elaboration of Integrated Natural Resource Systems 85.8 - - - - - 85.8 4. Institutional Development and Equipment 1,878.8 - - - - - 1,878.8 5. Preparation Management Modules 530.7 - - - - - 530.7 Subtotal: 3,509.5 - - - - - 3,509.5 B Sustainable Woodfuels Supply Managemert 1. Institutional Development - 937.5 1,160.5 710.5 731.5 550.5 5,235.2 2. Micro-enterprise and promotion activities - 943.7 654.4 487.9 479.9 429.4 3,573.8 3. Fonds dinvestissement rural micro-enterprises - 100.0 150.0 150.0 200.0 170.0 920.0 4. Global communication strategy - 32.0 33.0 34.0 35.0 - 168.0 5. Dead Wood Assessment/Vegetation Inventories - 352.2 352.2 302.2 272.2 232.2 1,863.2 Subtotal: - 2,365.4 2,350.1 1,684.6 1,718.6 1,382.1 11,760.2 C Demand Management and Inter-Fuel Substitution Options 1. Institutional Development - 351.1 353.6 319.6 2.0 - 1,475.9 2. Modemization of Charcoal Industry - 46.0 6.0 6.0 - - 64.0 3. Economic Diversification of Charcoal Traders - 112.0 112.0 6.0 - - 236.0 4. Kerosene: substitution - 30.0 42.0 - - - 72.0 5. LPG: inter-fuel substitution - 74.0 100.0 - - - 174.0 6. Charcoal Improved Stoves - 146.0 6.0 6.0 - - 164.0 7. Other private initiatives - 40.0 40.0 - - - 120.0 Subtotal: - 799.1 659.6 337.6 2.0 - 2,305.9 Total BASELINE COSTS 3,509.5 3,164.5 3,009.7 2,022.2 1,720.6 1,382.1 17,575.6 Physical Contingencies 341.2 300.6 284.0 184.5 157.5 123.7 1,650.8 Price Contingencies 29.6 67.2 112.1 118.2 122.5 93.2 704.9 Total PROJECT COSTS 3,880.3 3,532.3 3,405.8 2,324.8 2,000.6 1,598.9 19,931.3 Taxes - - - - - - - Foreign Exchange 2,005.8 1,545.1 1,572.1 948.0 816.0 532.9 9,067.0 0 ()US$190,000 equivalent within Government's contribution. Annex 7 Page 1 of 2 PERFORMANCE INDICATORS, MONITORING AND SUPERVISION PLAN Narrative Summary Key Performance Indicators Monitoring and Critical Assumptions and Supervision Risks Project Development Objectives 1. Reduce woodfuel-related 1. Reduce deforestation by: 1. Annual evaluation of forest 1. Effective participation of rural deforestation and loss of Date Ha./vr. resource exploitation. community on sustainable biodiversity. B-line: 1,000 forest management M-term: 5,200 systems. Full imp.: 20,000 2. Reduce net CO2 emissions 2. Reduce net CO2 emissions 2. Annual climate change 2.1mplementation of: sustainable by: assessment. forest management systems; Date Tons/yr. improved carbonization; and B-line: 25,000 improved stoves. M-term: 130,000 Full imp.: 510,000 3. Increase income of 3. Generate revenues in 3. Annual evaluation of 3.Project capable of providing participating villages, with participating villages: development impacts. effective rural development special attention to women. Date US $1yr. support to participating B-line: 150,000 villages. M-term: 780,000 Full imp.: 3,000,000 Project Implementation and Outputs by Component PART A: 1. Undertake Forest Resources 1. FRA completed by month 14 1.1. Quarterly progress report 1. Technical capacity of project Assessment (Tamba/Kolda). of implementation. and annual supervision. team and contracted consultants/NGOs. 2. Undertake participatory rural 2. PRAs for first 20 villages 2. IDEM 2. IDEM appraisals. completed by month 12. (PRAs continued through year 6). 3. Design of monitoring and 3. M&E systems designed by 3. IDEM 3. IDEM evaluation systems month 12. 4. Institutional development and 4. Institutions and field 4. IDEM 4. IDEM capacity building. implementation teams ready by month 14. 5. Prepare implementation plan for PART B. 5. Implementation plan ready by 5. IDEM 5. IDEM month 11. 6. Prepare implementation plan 6. Implementation plan ready and 6. IDEM 6. IDEM for project PART C and studies launched by month launch demand management 14. studies. 7. Design project 7. Comm. strategy design by 7. IDEM 7. IDEM communication strategy. month 8. Baseline and targeted values should be shown, with the latter divided into values expected at mid-term, end of project and full impact. Annexl7 Page 2 of 2 PARTB. 1. Implement sustainable 1. Area under management: 1.1. Bi-annual progress report 1. I.Effective participation of community-based forest Date Hectares and field supervision. rural community and of management systems. B-line: 15,000 provision of TA and M-term: 80,000 support to rural Full imp.: 300,000 communities. 2. Sustainably produce fuelwood 2. Annual sustainable fuelwood 2. IDEM 2. IDEM. production: Date Tons/yr. B-line: 15,000 M-term: 80,000 Full imp.: 300,000 3. Support for establishment of 3. Minimum villages assisted 3. Quarterly progress report 3. 1. Effective participation of rural micro-enterprises. (50% of villages covered): and bi-annual supervision. rural community and DI=X Villayes existence of enterprise B-line: 5 potential. M-term: 35 3.2. Effective provision of TA Full imp.: 125 and support to micro- enterprises. 4. Implement communicat. 4. Publication of monthly 4. Bi-annual progress report. 4. None. strategy of PART B. newspaper article and quarterly newsletter. PART C: 1. Modernization of urban 1. Marketing of bagged charcoal: 1. Bi-annual progress report. 1.1. Effective participation of charcoal trade. 12S Tons charcoal traders. B-line: 2,000 1.2. Technical competence of Mterm: 14,000 TA and support teams. Full imp.: 50,000 2. Technical assistance and 2. Number of traders assisted. 2. IDEM 2. IDEM limited financial support for (no preset targets) economic diversification of charcoal traders. 3. Support promotion of LPG 3.1. Incremental penetration of 3.1. Annual evaluation of 3.1. Stable petroleum product and kerosene (private sector) kerosene (no preset Kerosene penetration. prices. and improved stoves (NGO) target). 3.2. Annual evaluation of 3.2. Good supply response by 3.2. Incremental penetration of LPG penetration. private sector operators. LPG (no preset target). 4. Increase urban use of 4. Marketing of improved 4. Bi-annual evaluation of 4. Good supply response of improved charcoal stoves. charcoal stoves (cummul.): stove penetration. NGO/private sector stove Date Stoves producers. B-line: 20,000 M-term: 100,000 Full imp.: 255,000 Annex 8 Page 1 of 36 ECONOMIC ANALYSIS General Context 1. The economic evaluation of natural resource management activities and investments in developing countries has been the subject of continued discussion during the last three decades. The lack of consensus among economists on the subject stems primarily from the difficulties in arriving at a proper valuation of the natural resources in question, delimiting the frontiers of the systems and activities under analysis, and defining the objective function of the problem under analysis. 2. Unlike most post-industrialized countries, where there a well established market systems and regulatory, public consultation and arbitrage mechanisms, developing economies are generally characterized by imperfect markets (information, access, etc.), regulated pricing schemes, and inter alia lack of public participation and consultation in natural resource allocation decisions.1 The specific case of the forest resources in Senegal is a good example of that situation. As a direct legacy of the colonial period all land and forest resources "belong" to the national government. The government through less than transparent mechanisms has historically assigned the rights to commercial forest exploitation to a limited number of individual in detriment of the vast rural populations, which have until recently lost their surrounding forest resources and related habitats without receiving any compensation for it nor being able to participate in the decision process. Forest lands have been systematically denuded for different purposes, such as, for the expansion of the agriculture frontier, the extraction of precious woods, construction materials, woodfuels and medicines. Operating under the assumption that those resources had no inherent economic value other than as processed inputs or products and that belonging to the state there was no need to compensate rural populations for their loss, forest resources have historically been valued at their direct cost of extraction, processing and handling. Under that scenario, the ecological value of the standing forest stocks, their social value and the value of their multiple economic linkages have been systematically disregarded. Government agencies and individuals have operated under that scenario driven by narrow political and financial interests, and have been able to do so for a long time because of the lack of political representativity of the rural populations. Economic analysts, on their part, constrained by lack of adequate information and quantifiable parameters, being pegged down to 1 A good illustration of the practical differences in economic valuation between post-industrialized and developing countries is the comparison between the long standing discussion in the United States and Canada concerning the logging industry and its implications on the habitat of the endangered Spotted Owl and the forest logging industry in West African countries and their impact on the "endangered" rural communities. In the case of the Spotted Owl, the direct financial interests of the logging industry (included owners, labors, related business, etc.) have been successfully challenged over the years by the environmental and bio-diversity conservation interests of a much wider social constituency across the two countries. In the case of Senegal, large scale clear- cutting of forests by a handful of urban-based individuals (for the expansion of export agriculture, for construction materials, extraction of precious woods and woodfuels, etc.) has taken place since the colonial period with zero or near to zero consultation and or compensation to the affected rural indigenous populations. Annex 8 Page 2 of 36 classical evaluation techniques, and/or by being forced to define the frontiers and objective functions of the problems under analysis in a very narrow sectorial basis, have frequently been unable to contribute to the proper valuation of the resources. 3. If an "economic" analysis of a forest resource investment has to be undertaken, it stands to reason that the analysis must attempt to capture the society's value and not that of a small interest group. In an economy where the market functions in a relatively open manner and where all segments of society have representative participation in the process of making economic decisions (through the price mechanism or through other regulatory and/or consultative mechanisms) there would be little room to question classical welfare economics assumptions. On the other hand, in an economy plagued with market failures and where the actual distribution of welfare is extremely skewed, it is extremely difficult to agreed that the economic value of standing forest stocks would be zero or anywhere near to it, as it has been frequently proposed. When examples of such zero valuation are examined in more detail, however, one readily realizes that more often that not that valuation was the result of the way in which the frontier and objective function of the analysis where defined. 4. If an economic analysis focuses strictly on the supply of woodfuels to urban markets and either assumes that the forest resources are "stock resources"2 or that the prevailing woodfuels price structures already account for resource conservation through "stumpage fees" or other mechanism, then it would be possible to conclude that the financial costs of generating the intended supply of woodfuels (extraction, transportation and marketing) are the central parameters to account and that the real social value of the forest (not just to a few individuals) is already included as a production cost. Under that approach, an analysis could further focus on the cost of supplying a given volume of final useful energy (measured in terms of tons of oil equivalent or other calorific unit) and, on that basis, compare the economics of woodfuels supplies with other potential altemative energy sources. Such an analysis would not be appropriate for evaluating the proposed "Sustainable and Participatory Energy Management Project" in Senegal because of the following principal reasons: (i) the supply of woodfuels to urban markets is the desired energy outcome of the project, but doing so in an environmentally sustainable and socially equitable manner is an equally important objective; (ii) there is undisputed evidence that the prevailing forest resource exploitation schemes in Senegal are both ecologically and socially detrimental and non- sustainable; (iii) there is equally undisputed evidence that, at the scale at which forest resource are being exploited in Senegal for obtaining woodfuels (mainly charcoal), the resulting ecosystems degradation greatly affects other economic sectors like 2 Natural "stock resources" are defned as resources which are finite within a human realizable timeframe. Fossil fuels are considered "stock resources" because although they have a natural generation process their natural production function runs in the millions of years and hence any unit consumed in the present would be irreversibly discounted from the existing stock. The economic implication of that is that their valuation would only need to account for the societal preference of consumption in time period ta vis-&-vis time period to+,,. Annx 8 Page 3 of 36 agriculture, and that as rural ecosystems degrade rural poverty increases, there is a loss of rural employment, and among many other impacts, an acceleration of rural exodus (with the consequent exacerbation of urban social and economic conflicts and costs); (iv) given the current a foreseeable level of woodfuel consumption, the economy can not possibly sustain large scale inter-fuel substitution programs based on expensive imported fuels; (v) under the present system of exploitation resource costs and prices do not account for resource regeneration nor for compensation to the rural populations. Defined in that way, the proposed project can not possibly be evaluated either in its own merits or compared to the alternative supply of energy from a narrow direct factor cost perspective. Furthermore, if the now well accepted postulate that urban development holds the key to future aggregate economic growth in the African countries (and elsewhere) is factored into the analysis, establishing sustainable rural woodfuel supply systems for the urban energy markets would provide a stable and mutually beneficial rural-urban interaction market mechanism; and (vi) forest resources in Senegal are "flow resources with a critical zone'"3 and are already being used above their natural inflow rate resulting in an implicit loss a continued stream of quantifiable benefits (good and services) through time. The Project Rationale 5. The supply of woodfuels to the urban and peri-urban energy market in Senegal is based on geographically concentrated and non-sustainable forest resource management practices (clear cutting). Given the relatively low efficiency of wood-to-charcoal conversion (18%) due to inefficient carbonization, total charcoal consumption is equivalent to 1.2 times the total consumption of fuelwood. Charcoal is currently produced in the Kolda and Tambacounda regions, some 400 km away from the principal urban (Dakar and Thies) and peri-urban markets. 6. Until recently forestry legislation gave the Forest Service the exclusive prerogative to assign commercial exploitation rights over forest resources nationwide. These rights were historically given only to urban-based traders resulting in the creation of a vertically integrated and oligopolistic industry with widespread corruption problems. Among other issues, original annual charcoal exploitation quotas were frequently surpassed with the Forestry Service lacking the manpower or monitoring mechanisms to adequately supervise and enforce them. It is 3 Natural "flow resources with a critical zone" are defined as natural resources which have a natural regeneration function within a realizable human timeframe, but if their use rate is grater that their natural regeneration rate (inflow rate) their become finite (stock resources) for practical purposes. The economic implication of that is that when used within the critical zone (net depletion) their valuation must include the forgone value of the lost regeneration and the resulting non-availability for continued use through time. Compared to stock resources -- say woodfuels vis-a-vis LPG -- either the valuation of the woodfuel (flow resources) has to be higher or the discount rate that it is applied to them needs to be lower in order to reflect the loss of the continued stream of benefits through time. Annex 8 Page 4 of 36 estimated that out of the some 1800 legally registered "Exploitant Forestiers" only some 2Q traders actually work and control the urban charcoal trade. The remainder registered traders buy charcoal production licenses ("quota charbon") and resell them afterwards to the traders that actually produce charcoal. As even the temporary expatriate laborers (Guinnean Fulbes, "sourghas") employed in the cutting of the wood and the production of the charcoal are brought in to the rural areas by the urban traders, it is estimated that much less than 5% of the annual turnover of the charcoal trade (US $ 60 million) remains in the rural areas. The transport of the charcoal, which represents close to 20% of the final cost structure of the charcoal, is provided by independent trucking companies on a cash payment basis. Over the years, the operation of the charcoal industry has resulted in: (i) the gradual loss of forest cover (approx. 30,000 ha/year) and thus of the ecosystem's carbon sequestration capacity and biodiversity; (ii) the degradation of the rural environment (particularly of the soils); (iii) the impoverishment of the rural areas; (iv) an acceleration of the rural exodus; and (v) a massive transfer of wealth from the rural areas to the urban areas. In addition to these negative impacts, it is anticipated that the Niokolo-Koba National Park ("International Biosphere Reserve Patrimony", 9,130 kmi2), which is located in the south-eastern corner of the Tambacounda and Kolda regions and which is a declared national and international biodiversity patrimony and "Biosphere Reserve", will come under threat of encroachment within the next decade, with irreparable biodiversity and ecological consequences at the national and global levels. 7. The organization of the urban and peri-urban fuelwood trade (520,000 tons/year) resembles that of the charcoal trade but poses considerable smaller environmental and social conflicts. The consumption of fuelwood in the rural areas (1.5 million tons/year) is largely satisfied through sustainable subsistence practices (cutting of branches, selective felling of small trees and collection of dead branches). Women and children play a significant role in the collection of fuelwood. Rural consumption of charcoal is mostly limited to the areas where it is produced and is normally traded by the producers for food and lodging at the local communities. 8. Prect Objectives. The objective of the project is to meet an important part of the rapidly growing urban demand for household fuels, without the loss of forest cover and the ecosystem's carbon sequestration potential and biodiversity. This objective would be met through: (i) the implementation and monitoring of 300,000 hectares of environmentally sustainable community-managed forest resource systems in the Tambacounda and Kolda regions of Senegal, creating a protection zone around the Niokolo-Koba National Park (Biosphere Reserve); (ii) the promotion of private sector inter-fuel substitution and private sector and NGO- based improved stoves initiatives; and (iii) the strengthening of the institutions involved in the management of the sector, and the promotion of the participation of the civil society (private sector, academic institutions, and NGOs community) in the operation of the sector. 9. Project Description. The project consists of three components: Preparatory and Support Activities, Sustainable Woodfuels Supply Management and Demand Management and Inter-fuel Substitution Options. The project design includes a series of activities to ensure an effective participation of the rural population ("measures incitatives") and thus guarantee the full achievement of the environmental sustainability objective of the project. The project also includes specific monitoring and evaluation activities (forest exploitation and wildlife) designed to evaluate the achievement of its global environmental objectives (maintenance of carbon sequestration capacity, CO2 emission abatement and biodiversity conservation Annex 8 Page 5 of 36 10. Project Benefits. The project is expected to: (i) sustainably produce some 860,000 tons of fuelwood (equivalent to 258,000 tons of efficiently produced charcoal) over a six year period and would establish a permanent system capable of producing more than 300,000 tons of fuelwood (equivalent to 90,000 tons of efficiently produced charcoal or 27 percent of total consumption) per year on a sustainable basis; (ii) reduce woodfuels-related deforestation in the Tambacounda and Kolda regions by some 16,000 to 20,000 ha/year, and as a consequence reduce net CO2 emissions by about 510,000 tons/yr and reduce the loss of biodiversity by the establishment of sustainable forest systems and of a protective buffer zone around the Niokolo- Koba National Park; (iii) generate employment and economic development opportunities in 250 rural villages in the Tambacounda and Kolda regions and including women in the management and marketing of woodfuels and other related income generating activities; (iv) generate during the implementation period more than US $10 million in direct revenues to 250 villages from the trade of woodfuels, and generate additional revenues to the communities from related natural resource management and exploitation activities (agro-forestry, livestock keeping, non-fuelwood forest products, etc.); (v) on a sustainable annual basis after the end of the project, generate direct revenues in excess of US $3 million to the participating villages from the trade of woodfuels, and generate additional revenues from related natural resource management and exploitation activities; (vi) reduce CO2 emissions by 420,000 tons/yr. by the distribution of 225,000 improved charcoal stoves in urban areas; (vii) increase the availability and access of low income households to more reliable and efficient charcoal stoves and to modem fuels; and (viii) strengthen the planning, policy making and implementation supervision capacity of the traditional energy sector institutions, while increasing the participation of the civil society (private sector, academic institutions, and NGO's community) in the management and operation of the sector. Other Project Options 11. With assistance of the Bank's Africa Regional Program "Review of Policies in the Traditional Energy Sector - RPTES", a national inter-ministerial team conducted a 2-year comprehensive review of the traditional energy sector in Senegal (fuelwood and charcoal), including the evaluation of the principal inter-fuel substitution issues and options (kerosene and LPG). Within that review, the regulatory, legal, pricing and fiscal frameworks of the sector and the evolution of its structure and functioning were studied in detail. The RPTES review concluded that given the country's present and foreseeable macroeconomic and socio-economic conditions, Senegal will continue to depend on forest-based traditional fuels to meet the lion's share of the country's urban and rural energy needs well into the next century. While ongoing demand management (improved stoves programs and consumer education campaigns) and inter- fuel substitution (LPG and kerosene) efforts need to be continued and improved to incorporate the lessons learned to date, large increases of petroleum products imports cannot be sustained because of budgetary constraints and because current low household income levels severely limit the potential for widespread inter-fuel substitution at non-subsidized market prices. Within that context, and until economic growth allows for such substitution to take place, the principal challenge of the energy sector in Senegal will be to transform the existing non-sustainable commercial woodfuels supply system into one capable of supplying woodfuels -- particularly charcoal -- to the rapidly growing urban population in an sustainable manner. Annex 8 Page 6 of 36 12. Previous Government run efforts at demand management (improved stoves programs and consumer education campaigns) and inter-fuel substitution (LPG and kerosene) have had mixed results. Without a significant shift in policy to promote an active involvement of the private sector in the expansion of interfuel substitution and demand management efforts at the massive level required would be neither fiscally sustainable nor sufficient. At close to US $ 750 per ha4 forest plantation schemes have proven to be economically unfeasible though-out West Africa. The possibility to open additional forest areas for commercial exploitation of woodfuels has been evaluated and determined unfeasible due to the fragility of the forest stocks and the economic cost of extraction. The proposed project will therefore concentrate on introducing sustainable forest/natural resource management systems in the Kolda and Tambacounda regions for the supply of charcoal and will support a shift towards private sector-based promotion of improved charcoal stoves and least-cost interfuel substitution options. 13. Within that context, there is clear agreement between the borrower and the project participating donors that there are no other economically or technically feasible project alternatives capable of delivering the intended outputs, benefits and developmental impacts that the proposed is expected to deliver. The Evaluation Methodology 14. Within the general and country-specific framework defined above, a deliberate effort was made to elaborate a simplified economic evaluation methodology yet capable of including the inter-temporal social valuation of the forest resources, the distributional effects of their exploitation, and the value of the benefits saved thought the introduction of sustainable resource management practices and improved end-use energy technology and the principal measurable global environmental benefits. 15. Methodological disclaimer. As the only feasible alternative to the project is to do nothing, i.e., to continue to exploit forest resources in an environmentally unsustainable and socially inequitable manner in the exact same areas where the project would be implemented (Tambacounda and Kolda regions), considerations of transportation or other marketing costs were purposely excluded from the analysis. Fiscal impacts were also excluded from the analysis because they are estimated to be negligible, if not further supportive of the proposed project. Under the current woodfuels taxation system, actual collection of "stumpage fees" is less than 40%. The proposed project includes the strengthening of the control of woodfuel flows and is thus expected to increase the actual tax collection rates. On the other hand, the project will also introduce a differential taxation (50 percent reduction) favoring the proposed community-based sustainable forest management systems. Hence, it estimated that the project will be either neutral or will have only a modest positive impact on fiscal revenues. The option of maintaining flat taxation rates to increase fiscal revenues was ruled out from the start as: (i) differential taxation Data from plantation projects through-out Africa indicate a total cost range of US $ 450 to US $750 per hectare, where the higher end corresponds to projects within Sahelian edafoclimatic conditions and the lower end to projects in East and Southern Africa. Annex 8 Page 7 of 36 is required to provide a price protection from non-managed woodfuel exploitation5; and (ii) government collected "stumpage fees" are justified under the assumption that the tax collected will be reinvested in the regeneration of the forest stocks. Since this is n=t the case in Senegal, and through the implementation of the project the rural communities will be responsible for assuring the sustainability of the resource, there is no rational economic justification to maintain the same level of taxation for community managed and non-managed areas. Project Components 16. All three components of the project (Preparatory and support Activities Component; Sustainable Supply Management Component; and Demand Management and Inter-fuel Substitution Options Component) where included in the economic analysis as they are judged to be necessary and integral elements of the proposed investment. No differential valuation treatment was given to investments for productive (forest management, improved kilns, improved stoves, inter-fuel substitution options, etc.) or non-productive sub-components (data generation and gathering, institutional development, capacity building, social support services, communication strategy, etc.).6 Evaluation Horizon and Project costs 17. Because of the long-term nature of the proposed project objectives and expected impacts, a project evaluation horizon of 20 years was adopted. All budgeted costs during project implementation (7 years) where included in the economic analysis of the project. From years 8 to 20 realistic continued implementation costs where assumed at approximately 10 percent of year 7 costs, gradually decreasing at a relative rate of 10 percent per year until year 20. That continued but phasing-out cost structure between years 8 and 20 was discussed and agreed upon with the borrower. Table 1 presents the budgeted project costs by component and main sub- components per year for the 20-year project evaluation horizon. Figure 1 presents the profile of project costs by component. 18. The implication of that cost structure is that the borrower recognizes that the subsequent cost of maintaining the system that will be put in place will be much smaller than that of its original introduction. The importance of that is that once the large up-front costs of institutional development and capacity building (both of governmental and civil society) are met, subsequent This has been widely agreed upon and implemented in several forestry/natural resource/energy related Bank projects such as "Niger Energie II" and " Mali Energie Domestique". 6 Although it is normal practice to exclude non-productive components from economic analyses -- as it is difficult to calculate specific economic returns on things such as institutional development, capacity building, etc. -- in the case of the proposed project it was judged that those investments could not be dissociated from the expected project outcomes. If such investments are made and the project does not achieve its proposed objectives, they would amounted to an unequivocal misallocation of scarce investment resources. In practical terrns, the impact of including all project cost represent an added burden of proof for the overall merits of the project. SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 1: SPEMP: PROJECT COSTS BY COMPONENT (000'USDOLLARS) YEARS 1 2 3 4 5 6 7 8 9 10 11 PROJECT COMPONENTS/SUBCOMPONENTS 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 A. Component : Preparaty & Support Actives t 1. Vegetation Cover Inventory (part 1) 1003 O 0 0 0 0 0 0 0 2, Participty Rural Apprtalsi ___ 70 O_ O O O O O O ( 3. Eaboration of Integrated Nat Res. Managl Sysbteims 660 O 0 a 0 0 0 O 4 Elaboaton of Legislative Fran work _ IS 16 _ _ O O O o 0 5. EaboratIon of Montoring Systms 90 O O O _ C O ( _ O O 6. InutIonal development Equipment (DE + DEF) 1_986 O___ _ O O_ _ t O__OO Subt4otal Componerit l: 3J8581 0 0 0 __0 0 O ( 0_____ B Component 9: Sust & Part Supply Management 1. tudloenal Development + Equlpment DEF 0 1,014 1,280 1,289 821 864 669 100 90 81 73 2. FlddImplementation 0 1,011 707 631 535 531 477 So 45 41 36 3. Mcro-enterprIte Development Promotion 0 10_ 165 168 171 232 201 0 0 0 0 4 Comnmuntcatton Strategy O 32 33 34 34 35 O 0 0 0 O 5. Deed Wood Assessiveget Cover Inventories (Part 2) __ 0 376 380 384 297 300 258 0 0 0 0 Sub-total Component II: 0 2,642 2,566 2,_ 2506 1,889 1,962 1,603 150 135 122 109 C. Component 11: Demand Management & Subsitutlon Options _ __ 1. Institutional Development + Equipment D 0 _ 310 380 315 140 130 130 40 36 32 29 2. Modemlzatlon of Charcoal Industr 0so I___ 10 10 _____1 ____0 ____ _____ _____ _____ 3. EconomIc Divenficatnd of Carcoal Tradema 0 100 100 10 __ 10 10 10 0 0 0 0 4. Kerosene Inter-fuel Substition 0 3E 45 0 ( _ ( o O ( S. LPG Inter-fuel Substitudon 0 85 115 10 10 0 | O o 0 O 8. Charcoal Improved Stoves 0 30__ 10 10 10 10 10 0 _ 0 0 0 7. CommunIcatton Strategy Oc140 140 160 100 60 40 0 0 _0 0 Subt4otal Component It: 0 1,053 800 815 280 200 190 40 36 32 29 TOTAL PROJECT COSTS 3,858 3,594 3,366 - 3,021 __ 2,139 2,162 1,793 190 171 154 139 CUMMULATIVE PROJECT COSTS 3,858 7,452 -o0,818 13,839 15,978 18,140 19,933 20,123 20,294 20,44 20,586 U ( ON 0 SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Tablei: SPEMP: PROJECT COSTS BY COMPONENT (000'USDOLL (Continuation) YEARS 12 13 14 1S 16 17 18 19 20 TOTAL PROJECT COMPONENTS/SUBCOMPONENTS 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total A. Component l: Preparatory & Support Activities _ 1. Vegetation Cover Inventory (part 1) 0 _ 1003_ 2 ParticIpatory Rural Appraisals _ a 0 3 Elaboration of Integrated Nat Re%. Manstagt Systems O a O_ _ 0 0 0 _550 4. Elaborion of Legislative Framework 0 0 0 0 1S0 S. Elaboration of Monitoring Systemn 0 0 _ _ 0 _ 0 90 6. Institutional developnent + EquIpment (DE 8DEF) 0 0 _ 0 0 O0 0 0 1,985 Sub-totb Comnponent l: 0 0 0 0 0 ______ 0 3,858 i3 Conponent II: Sust. & Part Suppfy Management ____ _ _ 1. Institutional Developnment t Equipnent DEF 66 9_ 53 48 43 9 35 31 28 6,684 2. Field lnrpemntaftion 33 30 27 24 22 191714 16 4.266 3. MIcr-enterprIse Development Promoton _ __ O_ _ O_ _ O O ____ 0 1 045 4. Communication Strategy _ 00 0 0 0 0 O 0 0 168 S. Dead Wood Assessiveget Cover Inventories (Part 2) a 04,-- - a 0 0 0 0 1,994 Sub-totai Component II: - - S8o89 80 72 ; 65 58 52 47 42 14,156 C. Component IlIl: Demnand Management & Subsitution Options _ 1. Institutional Development + Equipment DE 221 1' 17 _ 1 1 11 1,70 2. Modtemizadon of Charcoal Industry 0 0 0 0 0 __ 3. Economnic Diveraification of Charcoal Traders ___ _ __ _ -___ 240 4. Kerosene Inter-fuei Substitution _O 0 0 0 0 0 _83 Si S. LPG Inter-fuel Substitution O_C 0 0 0 0 0 0 0 220 A. Charcoal Impmoved Stoves 0 000 0 0 380 7. Communication Strategy o 0 0 0 0 0 0 C 0 630 Sub-total Component 8I: 26 24 21 19 17 14 13 TOTAL PROJECT COSTS 125 112 101 S1 82 74 66 60 54 21,350 CUMMULATIVE PROJECT COSTS 20,711 20,823 20,924 21,015 21,097 21,170 21,237 21,296 21,36t CD > t'D FIGURE 1 SPEMP: Profile of Project Costs by Components (20-Years Horizon) 4,000 ~ 2,00 _ ___ ___ ___ <- _ - 1,500 . ___M N NT (DEMA ) _ .. . _ _ . ..... 1s000 _ - _ v_ :i_ ECM.NN _ (SPPY . __. : 1,000~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. . . .... .. .. .. .. . .. . . .. . .....OEN 1 SPPY ... v ... ... .vS ....; .: ..S: ..... { : I l 3,5i : (. 0:0 . .... . .. ..U.... COMPONENT I (PREPARATION) | 500 ~~~~~~~~~. ...:.. . ... . .. .....~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Years eQ o oo . .... .. ..... ..... ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ... .. .. .... ..... ...~~~~ Annex 8 Page 11 of 36 investment (follow-up projects) to further expand the total area under community management should be much lower on a unit basis (per hectare cost) than what they are for this first project. The unit cost of the proposed project is of the order of US $66.6 per hectare (including all project costs).7 Subsequent investments should not amount to more than US $30 per hectare at current price equivalence. Project Benefits and Valuation 19. While the proposed project is expected to result in a large number of quantifiable and non-quantifiable impacts the methodology adopted conservatively limited the valuation to the following expected project benefits: (i) "sustainable" wood production: the benefit of the "sustainable" wood production expected to result from the implementation of the sustainable and participatory forest/natural resource management systems was defined as the net reduction in deforestation (loss of forest standing stocks) in a comparison between an area under sustainable management and an equivalent area under non-sustainable exploitation. A concept of area equivalence was introduced to avoid an overvaluation of benefits as the amount of wood output that would be extracted from a sustainably managed area (1 ton/ha) is not the same as from an area that is clear-cut (15 ton/ha). The equivalence was thus calculated on the basis of the total expected wood output of the area that will be placed under sustainable management at every year of the project and that wood volume was converted to hectare under clear-cut rates. As the areas under management increase from year 2 to 7 the equivalent non-sustainable areas were increased. For the areas under non-sustainable management a realistic 20 percent natural regeneration rate was assumed. The calculation of the net deforestation impact was computed as being the total deforestation minus the natural regeneration in a area non-sustainably exploited equivalent in wood output to the total area under sustainable management within the project. The effect of that model was that as the total area under management within the project scenario stabilized at 300,000 ha (sustainably producing an output of 300,000 tons of wood per year) an net deforestation of 16,000 hectares per year was accrued to the non-project scenario. That 16,000 ha was the result of a total of 20,000 ha deforested minus a 4,000 ha natural regrowth allowance. Over the 20-year project cycle the non- project scenario resulted in a net total deforestation of 248,800 ha. By making that area./output equivalence it meant that during the period of analysis both scenarios (managed and non-sustainable) resulted in the same amount of wood production but the whereas 248,800 ha of forest were lost in the non-sustainable scenario, the sustainably managed scenario have conserved intact the original 300,000 hectares of forests. Table 2.1, 2.2 and 2.3 presents the detailed calculation of the benefit of the ''sustainable" wood production including parametric variations ranging from sustainable 7 If only the costs of the supply side management sub-components are taken into account cost of the implementation of community-based sustainable forest management systems would be of the order of US $ 53/hectare. If only the direct field investment costs are taken into account the cost per hectare would come down to US $ 35/hectare. SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 2.1: NET DEFORESTATION REDUCTION IMPACT FROM SUSTAINABLE & PARTICIPATORY FOREST MANAGEMENT TOTAL HECTARES UNDER MANAGEMENT 0 10,0 40.000 _00000 130000 200000 300,000 300,000 300.000 300,000 300,000 SUSTAINABLE FOREST YIELDS: 1 2 3 4 6 6 7 8 9 10 11 1.00 tonihoctarelyear 15.000 40,000 S0,000 130Cm 30,000 300,000 300.000 300,000 300,000 300,000 1.50 ton/hectare/year 2,000 N0,000 120,00 190,000 300,000 460,000 40,000 40,000 40,000 4S0,000 2.00 ton/hectareh ear 3o,ooo 6,OO om0,000 260,000 400,000 C0,00 0 600mm0o,mmm sm00,0 m0m0 NON-SUSTAINABLE EQUIVALENCE CALCULATION: NA CLEAR-CUT TO MATCH SUSTAINABtLE PRODUCTION 1,000 2,067 5,333 8,667 13,333 0,00000 20,000 20,000 ___ _20,000 __________________________ _ 1,600 4,000 0,000 13,000 20,000 30,000 -0.m 30m000 30,000 0 30,000 2,000 5,333 10,007 17,333 2.,607 40,000 40,000 40,000 40,000 40,000 REGROWTH PERCENTAGE PER LEVEL OF CLEAR-CUT 200 033 1,067 1,733 2,007 4,000 4,000 4,000 4,000 4,000 300 000 1,600 2,000 4,000 * 0,000 __ .m .m *,000 400 1,007 2,133 3,007 5,333 *,00m ,000 0,000 _ 0, _ ,000 NET DEFO RESTATION REDUCTION (-CLEAR-CUT REGROWTH) 1.00 ton hectarelyear Soo 2,133 4,2S7 6,933 10,667 16,000 1C,000 _ _ 16,00 _ 10,000 12,000 1. A0 ton/hN ctareNOear 1,2000 22000 40,000 00,000070,000 24o000 24,000 2.00 Aton/hectare Oear 1,6000 4,207 0,633 _ 13,067 21333 32,000 32,000 33.000 32,000 32,000 -ANA INREEN ::vw T__tO ARA6,000ANGEEN. 2 6 o,000 40,000 60,000 70,0 0 I 1 00,01 0 0 _ NETCCUMULAR FOARDAS:tHA)UNDER EXL N 13.4000 340,13 N.W00 101.733 100,400 210,4001 100,00 104,400t 130,00 300,00 Table 2.2: SENSITIVITY OF EXPECTED DEFORESTATION WITHOUT SUSTAINABLE FOREST MANAGEMENT = | ~~~~~~~~~~~~~ ~ ~ ~ ~~~~~~~~~1 | 2 | 3 | 4 5 6 | 7 | 8 | 9 10 | 11 1.0ton/hectareheoar_1 E w 5oAt u wi wa rrDM (T-1)~~~~~~~~~~~~~~~~~~~~~~~ 14,200 37,0C7t 72,N140 116,S67 175.200 259,200 243 200 227,200 211,200 ANNUAL INCREMENT OF AREA ON YEAR T 16,000 26,000 _ 4a'0,W 60,000 70,0W 10000 , ,o TOTAL AREA UNDER EXPLOITATION: 16,000 3b,200 77,0C7 122 00 _ 1856,l7 276 200 269,200 23,200 22,g0 211,20d _NET ANNUAL DEFORESTATION: - - 011 2,133 4,261 .......10,6C73_ 16,00&1 600 ~ 16.W 16 W_ $00 NET CARRY FORWARD: 14,200 37,067 72,900 115,867 175,200 -259,-200 243,26-0 227,200 211,200 95.200 1.50ftonihectare/year IPREVIOUS AREA UNDER FXPLOITATION (T 1) 0 13,800 _ zco 69,200 103,i0-0 _ 162,504 23S,800 214,800 ~ 190,800 1ss,go ANNUAL INCREMENT OF AREA ON YEAR T _ 16000 2,0 4,W 60,000 70,000 100,001 O O 0 __TOTAL AREA UNDEREFXPLOITATION: 15,000 3S,N0 756 1,0 1700 262,800 238,8N0 .... 14,400 _ 190,00 ___1_6C,80 NET ANNUAL DEFORESTATION:_ 1,200 3,200 .,X 0400 la 0000 24,000 24,W0 24,W0 24,000 24,00 NET CARRY FORWARD: 13,800 356,00 S9,200 108l,N0 162,800 238,300 214,800 190,900 166806 142,80 2.00 tonthectarehfyear 1 PFREVIOUS AREA UNDER EXPLOITATtON (T 1) _ 0 13,4W1 34,133 66,600 101,733 160,400 2`18,400 146,400 164,-400 -122,400& ANNUAL INCREMENT OF AREA ON YEAR T _i600 25,0001 40,000 S0,000 70,000 100 000 O _S TOTAL AREA UNDER EXPLOITATION:_ _ SW 340 _ 716 160 17 T1 640 _ 2i30 _ 400so 164 40 2 4 NETTANNUAL DEFORETATION: 11s 0 0 4 2-CC 101333 1 00 320::1S40s4012240 320 , iso, 164,400J 90,400~ ~ ~~~~~., SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 2.1: NET DEFORESTATION REDUCTION IMPACT FROM SUST.& PART.FOREST MGMNT. (Continuation) TOTAL HECTARES UNDER MANAGEMENT 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 SUSTAINABLE FOREST YIELDS: 12 13 14 18 16 17 18 19 20 TOTAL 1.00 tonlhectarelyear 3oo,ooo 300.000 300,000 300,000 200,000 300,000 300,000 300,000 3000000 4,665,001 1.50 ton/hectarolyear 450o,0 400,000 440,060 040,000 440,000 440,000 400,000 440,000 6,027,0 2.00 tonlhectare/year 600,000 600,060 00,.000 00o,000 6o,000 60,00 0,000 6o,000 600,060 6,330,002 NONSUT ATAINABLE:EQUIVALENCE 4CALCULA0TION0 CLEARNCUT TORMATCHSUSTAINABLEPRODUCION 20,000 20,000 2000 23,00,0 04,000 2066 20,600 20,W0 20.660 373,20 30N0ET A F A,00 400 30,000 30,000 0,6001 -1,00 6360 -,00 70 .,600 __ AR_A UNDER EXPLOTAION T 60,00 40.000 00.400 .0.000 47,000 40,000.40,000 -36 - W 622,000 REGROWTH PERCENTAGE PER LEVEL OF CLEAR-CUT 4,000 4,00C 4,600 4.000 4,7000 4000 4,000 4,000 -10,600 2,20 N,000 *,e00o 3,000 6,000 3,000 0,000 2wo ,000 3,000 43,300 NET CAeRY FORWARO: 60oos ,ooe,000 30.00 ,000 7000 0 16,600 . 60- 124,400 NET DEFOREsTATIoN REDUCTIGN ( CLEAR CUTREGROWTH) 1.00 ton/hoctarlwyear 16.000 1---s.oo 16,oo0 16,00 _ 16,000 16.Me _ w,0 4,000 1cboe U8a81 1.50 to/otr/ ar2,e 2,W 2,e ,w 24,000 24,000 24,ew , 24,0ee3n2e 2.00 tonlhectard/year 32.0ee8,w 2,o 32,000 32,000 32,000 z,D 32,0el01ee 01,e ANNUAL INCREMN TO AREA UNDER MANAGEMENT: o o o o o o AccuMuLAnE AREAs (HA) UNDER XPLofTA noN - w,e 300,0oo 3e,eo 011,000 300,0e 0 30w,00 3w0,000 3ee0e.00,eo Table 2.2: SENSITMTY OF EXPECTED DEFORESTA:TION WITHOUT SUSTAINABLE FORtEST MANAGEMENT (Continuation) 12 1 3 -14 1 5 is 17 18 19 20 TOTAL 1.00 ton/hoct ro/ear_ _ PREVIOUS AREA UNDER XLIAO T1 _15,O 179,200 13s32ft 147s260 131,200 115P2e 0200 83,nd 67,2ee N A ANNUAL INCREMENT OF ARAO YEAR T O O O O O O O O O 3ee,000 TOTAL AREA UNDER EXPLOITATION 1ff200 179.200 153 ,200 147,200 131,N00 lis.200 n,w 5,e 7,20 NA. NIETAN L DEFoREsTATIoN 16,000 1scee 16,eo0 16 oo 1 ee---10o 16,0 ooo 0 eo 16 oee 2a8 w0 NET CRYFuRINARDo 17Xw2eO 1a,200 447,200 131,200 115 2ee 1n1 210 93 200 *7 200 51,200 511200 1.60,ton/hoctaro/yar I IFREVIOUSAREA tNDERExLlAiN 1 1142,1ee00 F ee'" 94 ,80e 70so ',e 22,W0 41700 LM2W .49200 NA. ANNUAL NCREMENT OF AREA ON YEAR T O e a a o 0e,e TOTAL AREA UNDER EXPLOiTATiON: 142, ee 118s,o W 400 u,se ZIA0 s,0 "e .17e ,W,211 MNs NET ANNLuAL DEFoREsTATIoN: - 2 000 24,00e 24.00e 74,W0 74ee Xeo be 24,eee 24.0ee 373,011 _ ET CARRYFORUWARD: 118,i5o 94mSec Nos"e 4a, w 22,~ 4W1,001 !e00 -e73,N -73,110 2.00 ton/hoctaro/year ; PREVMO AREA UNDER WALIAIOI-)N,0 ss,400 23,4ee 4M -37,go ,4eo0 -1e1qe 4133,6 ee 1 us NA. a ANNUAL lNcRErziNT OF AREAO YEAR T _ O O a o o o o 301,000 ITOTALAREA NEEXPLOITATION: 90.4e0 ss,4w0 "A"o -64, e -3 4 4,s -" o0 41,09 -133,W10 15.:e Ns _ INETANNUALWR TA N 3201 32,000 32,000 32,000 32toe 32.00o 12,W0 2,WO 32,10 4 7,40oW E _ NETCARRY FORWARD: 5l~~~~~~~~~~~~~~~~~~~~11,4001 26,400, J4@ 4740 9,00 -M,e .1,W .1546SIMQ70 -157,51t SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 2.3: ECONOMIC VALUE OF AVOIDED NET DEFORESTATION DUE TO SUSTAINABLE FOREST MANAGEMENT ACCUMULATED NET DEFORESTATION (HA) 1 2 3 4 5 6 7 8 9 10 11 i.00 tonihetare/year D800 2,933 7,200 14,133 24,800 40,800 66,800 72,800 88,800 104.800 1.50 tonthectare/year 1,200 4,400 10,800 21,200 37,200 61,200 85,200 109,260 133,200 167,26 2.00 ton/hectaretyear 1,600 6,867 14,400 28,267 49,600 81,600 113,600 148,600 177,600 209.600 LOSS OF SUSTAINABLE OUTPUT (TONiSNIR) ._ 1.00 ton/hectaretyear o00 2.923 7,200 14,133 24,800 40,800 "6,80 72,800 68,80 104,800 1.50 ton/hectarelyear 1,800 6,600 16,200 31,600 66,600 91,860 127,80 163,800 199,60 231,800 2.00 ton/hectaretyear 3,200 11,733 28,800 66,633 99,200 163,200 227,200 21,200 365,200 41.,200 VALUE OF AVIODED FUELWOOD OUTPUT LOSSES () 1 2 3 4 5 6 7 8 9 10 11 1.00 ton/hectare/year @ US$ 20/ton 12,000 U,000 106,000 212,000 372,000 612,00 662.00 1,092,000 1,332,000 1,572,000 1.50 ton/hectare/year @ USS 201ton 27,000 ",000 243,000 477,000 837,000 1,377,000 1,617,000 2,467,000 2,997.,W 3,537,000 2.00 ton/hectarelyear @ USS 201ton 48,000 176,000 432,000 648,000 1,488,000 2,448,000 3,408,000 4,366.000 56.28,000 6,268,0 1.00 ton/hectare/year @ USS 30/ton 24,000 88,000 216,000 424,000 744.000 1,224,000 1.704,000 2,164,000 2,664,000 3,144,000 1.50 tonlhectare/year @ USS 30/ton 64,000 198,000 486,000 964,000 1,674,000 2,764,000 3,834,000 4,914,000 5,994,000 7,074,000 2.00 ton/hectare/year @ US$ 30/ton 96,000 352,000 664,000 1,696,000 2,976,000 4,896,000 6,816,0W 6,736,000 10,666,000 12,676,000 1.00 ton/hectarelyear @ USS 40/ton 32,000 117,333 266,000 666,333 992,000 1,632,000 2,272,000 2,912,000 3,662,000 4,162,000 1.50 ton/hectare/year @ USS 40nton 72,000 264,000 648,000 1,272,000 2,232,000 3,672,000 6,112,000 6,552,000 7,662,000 9,432,000 2.00 ton/hectare/year @ USS 40/ton 126,000 469,333 1,152,000 2,261,333 3,968,000 6,628,000 9,088,000 11,648,00 14,206,00 16,76,000 (1 INCORPORATES ALLOWANCE FOR 20% NATURAL REGROWTH AND COUNTS ONLY ACTUAL LOSSES (.CLEARCUT REGROWM).4 _ _ CD _J -8 00 SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 2.3: ECONOMIC VALUE OF AVOIDED NET DEFORESTATION DUE TO SUST. FOREST MGMNT. (Continuation) ACCUMULATED NET DEFORESTATION (HA) 12 13 14 15 16 17 18 19 20 TOTAL 1.00 ton/hectare/year 120,8O0 136,800 152,800 108,800 184,800 200,800 218,00 23,800 248,800 248.800 1.50 tonihectarehyear 181,200 208,200 229,200 253,200 277,200 301,200 325,200 349,200 373,200 373,200 2.00 ton/hectareyear o241,800 273,600 305,600 337,600 369,600 401.600 433,600 485,600 487,600 497,600 LOSS O F SUSTAiNABLE OUTPUT (TONS/YR) 1.00 Itonihectarehyear 120,800 136,800 182,80 168.80 184,800 200,00 216,800 232,800 248,80 1.50 Itonihectaretyear 271,800 307,800 343,800 379,800 415,800 451,800 487,800 523,800 559.800 2.00 Itonihectarehyear 4483200 647,200 611,200 675.200 739,200 803,200 867,200 931.200 905,200 VALUE OF AVIODED FUELWOOD OUTPUT LOSSES() 12 13 14 15 16 17 18 19 20 TOTAL 1.00 ton/hecbare/year @ US 20/ton 1,812,000 2,052,000 2,292,000 2,532,000 2X772,000 3,012,000 3,252,000 3,492,000 3,732,00 31,156,001 1.50 ton/hectare/year @ USS 20/ton - 4.077,000 4,617,000 5,157,000 56697.000 6.237.000 6,777,000 7,317,000 7,870000 H8,397,000 70,101.002 2.00 ton/hectaretyear @ USS 20tton 7,248,000 8,208,000 9,168.000 10,128,000 11,088,000 12,048,000 13,008,000 13,968.000 14,928,000 124,624,002 1.00 ton/hectaretyear @ USS 30/ton 3,624,000 4,104,000 4.584,000 6,064,000 5.544.000 6.024.000 6,504.000 6,984,000 7,464,000 6Z312.001 1.50 tonlhectarelyear _ US$ 30/ton 8,154,000 9,234,000 10,314,000 11,394,000 12,474,000 13,554,000 14,634,000 15,714,000 16,794,000 140,202.002 2.00 ton/hectarelyear @ USS 30/ton 14,496,000 16,416,000 18,336,000 20,256,000 22,176,000 24,096,000 26,016,000 27,936,000 29,858,000 2498248,002 1.00 ton/hoetare/year @ USS 40/ton 4,832,0oo 5,472,000 8,11Z000 6,752,000 7,302,000 8,032,000 8,672,00 9,31Z000 9,95Z000 $3,08266 1.50 ton/hectare/year @ USS 40tton 10,872,000 12,312,000 13,752,000 15,19Z,00 16,632,000 18,072,000 19,512,000 20,952,000 22,39,000 186,936,002 2.00 ton/hectarelyear @ USS 40/ton 19,328,000 21,88,000 24,448,000 27.008,000 29,568,000 32,128.000 34,688,000 37,248,000 39,808,000 33Z330,669 _______ .) INCORPORATES ALLOWANCE FOR 20% NATURAL REGROWTH AND CO7UNTS ONLY ACTUAL LOSSES (-CLEARCUTRGRWTH). t~~~~~~~~~~~~~~~~~~~~t 00 I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C Annex 8 Page 16 of 36 forest yields of 1.00 tons/ha to 2.00 tons/ha and producer price ranging from US $15/ton to US $40/ton. Since at the end of the 20-year horizon the total area under management still had a full stock of 15 tons/ha (300,000 ha @ 15 ton/ha = 4.5 million tons of wood) which could be maintained for continued sustainable exploitation or could be clear cut (or otherwise). The benefit of the sustainable wood production was then valued at the current producer price of wood of US $15/ton (base scenario). The producer price as opposed to the current market price of wood was used because the final market price incorporates the value added of transportation and marketing. It is extremely important to note that the main driving parameter of the calculation of the sustainable wood benefits -- and thereto of most other project benefits -- is expected sustainable forest yield. Based on the most recent studies 8 it is expected that the average sustainable forest yield in the Tambacounda and Kolda regions of Senegal will be between I and 2.5 tons per hectare with a high provability of it being closer to 2.00 tons hectare than to the lower limit. In order to avoid any risk of overestimation of project benefits all base calculation of the evaluation models were done using the lower limit (1.00 ton/ha) as the valid parameter. The implication of this is that if the sustainable yields prove to be higher, all project benefits which are directly related to or pegged to the sustainable wood output will be automatically increased. If the actual sustainable yield is confirm on the field at 2.00 tons/hectare, nearly all project benefits will double ( see Tables 2.1, 2.2. and 2.3). (ii) incremental charcoal production: the benefit of the incremental charcoal production expected to result from the promotion of improved kilns was defined as the additional charcoal that is expected to result from the a given amount of wood if that was produced with the existing traditional carbonization technology (18%). The improved charcoal kilns that have already been developed and tested in Senegal -- but which were unsuccessfully disseminated in the past for accounted reasons -- is estimated to have a carbonization efficiency of 30 percent. In order to avoid overvaluation of the expected benefits the base calculations were made utilizing a 25 percent efficiency rate. The economic value of the incremental production was calculated at the current market price of charcoal of US $190/ton. It is expected that charcoal prices will rice through time, thus resulting in higher a higher level of economic benefits for the same level of incremental charcoal production. In order to avoid any risk of overvaluation of the expected benefits, the base calculations were done at the current market price of charcoal and the effect of higher charcoal prices were assessed during the subsequent sensitivity analysis. Table 3 presents the detailed calculation of the benefit of incremental charcoal production for sustainable forest yields of 1.00 tons/ha to 2.00 tons/ha and charcoal market prices ranging from US $190/ton to US $285/ton. Jensen, Axel M., Elements d'economie spatiale des energies traditionnelles, RPTES Discussion Paper Series, World Bank, October 1994. SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 3: VALUE OF INCREMENTAL CHARCOAL PRODUCTION I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ INCREMENTAL CHARCOAL PRODUCTION (IMPROVED KILNS) 1 2 3 4 5 6 7 8 9 10 11 Total Wood Output 0 15,000 40,000 80,C00 130,000 200,000 300,000 300,000 300,000 300,000 300,000 Charcoal Production @Tradftional Convertion Efficiency 2,700 7,200 14,400 23,400 36,000 54,000 U4.000 _ 4,.000 64.000 54,000 Charcoal Producton Gimproved Convertion Efficiency 3,750 10,000 20,000 32,500 00,000 75,000 75,000 75,000 75,000 75,000 Incremental Charcoal Production due to Imoroved Kilns 1,050 2,800 5,600 9,100 14,000 21,000 21,000 21,000 21000 21,000 VALUE OF INCREMENTAL CHARCOAL PRODUCTION $190 USS/ton 199,500 532,000 1,064,000 1,729,000 2,660,000 3,990,000 3,990,000 3,990,000 3,990,000i 3,990,00 $237 USS/ton 248,850 653,500 1,327,200 2,156,7001 3,318,000 4,977.000 4,977,000 4,977,000 4,977,000 4,977,000 $285 UPSS/tonl __________________________________________ 299,250 798,000 1,596,000 2,593,500 3.990,000 5,98S,000 5,989,000 5,989,000 5,985,000 5,9S5,000 Table 3: VALUE OF INCREMENTAL CHARCOAL PRODUCTION (Continuation) INCREMENTAL CHARCOAL PRODUCTION (IMPROVED KILNS) 12 13 14 15 16 17 18 19 20 TOTAL Total Wood Output 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 1,965,000 Charcoal ProductIon @Tradltional Convertlon Efficiency 54,000 54,000 54,000 54,000 _4,000 54,000 54,000 54,000 54.000 353,700 Charcoal Production Gimproved Convertion Efficiency 75,000 78,000 78,000 75,000 75,000 75,000 75,000 75,000 75,000 491,200 Incremental Charcoal Production due to mproved KIlns 21,000 21,000 21,000 21,000 21,000 21,00 21,000 21,000 21,000 137,550 VALUE OF INCREMENTAL CHARC;)AL PRODUCTION $190 1US$/ton 3,990,000 3,990,000 3,990,000 3,990,000 3,990,000 3,990,0W0 3,990,000 3,990,000 3,990,000 26,134,500 $237 1US$/ton 4,977,000 4,977,000 4,977,000 4,977,000 4,977,000 4,977,000 4,977,000 4,977,000 4,977,000 32,599,390 $285 jUS$/ton 5,958,000 5,985,000 5,985,000 5,985,000 5,98,5000 5,985,000 5,985,000 5,985,W0 5,98S,000 39,201,760 '-2 0I 00 Annex 8 Page 18 of 36 (iii) global environmental impacts: the benefit of the global environmental impacts expected to result from the implementation of the sustainable and participatory forest/natural resource management systems was defined as the expected net abatement of C02 (in tons) and the conservation of bio-diversity in and around the project areas (particularly in the Niokolo-Koba National Park and "international biosphere reserve) and was valued at the US $ 1.01/ton per ton of net CO2 abated. The rational for that was the value estimated for the CO2 abatement utilizing the GEF global environmental benefits methodology and it corresponds to the grant funding provided by GEF for the proposed project. That price is estimated to reflect the global social value of CO2 abatement. No specific valuation was given to the bio-diversity benefits but their value is assumed to be included in the CO2 calculations. Table 4 presents the detailed calculation of the global environmental benefits. (iv) rural income generation and transfer: the benefit of rural income generation and transfer expected to result from the direct sales of fuelwood by the participating rural communities was valued at US $15/ton, which is the current estimated "road side" laborer price of woodfuel in Senegal. While that current price does not include any valuation for the resource, the economic value of the wood was already accounted for within model by the "sustainable wood production" benefit (item i above). Also, while it is expected that when the rural communities take over the "production" of the wood the new producer prices will be higher, the current price was purposely maintained as the base figure to avoid any possible over estimation of the expected benefits. Several higher producer price scenarios were evaluated under the sensitivity analysis. Although it is frequently done in projects of social interest, no additional income transfer multiplier was added to the baseline calculations. Bank projects that compute income transfers benefits to poor income groups estimate that multiplier value at between 30 to 50 percent. Furthermore, it is important to note that as the community managed systems mature it is expected that the communities will be able to engage in the direct production of charcoal as opposed to limiting their activity to the cutting of the wood, whereby the potential producer price to be applied would be that of the charcoal and not that of the wood. The current producer price of charcoal is of approximately US $45/ton. At that point, rural revenues will increase considerably. Table 5 presents the detailed calculation of the rural income generation and transfer benefits for sustainable forest yields of 1.00 tons/ha to 2.00 tons/ha, producer prices ranging from US $15/ton to US $40/ton. (v) "other" rural revenues: the benefit of "other" rural revenues expected to result from the development of parallel agro-forestry production activities in the participating communities was valued as a linear function of the total revenues expected to result from the total sales of woodfuels by the rural communities. The rational for that was that as the rural communities perceive an income from the sale of woodfuels they will have income to invest in other productive activities. The project includes support mechanisms and resources to assist communities which are prepare to invest their own resources in other economic activities. As revenues from woodfuels increase through time (or under SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 4: GLOBAL ENVIRONMENTAL BENEFITS iGLOBAL ENVIRONMENTAL BENEFITS * I ' S - _ 8 _ __ _ ' YEAFS 1 2 t f t~~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~ 4 66 _ _ _ 8 | 9 t io1 WOOD ED (TONS) _ _ 2,933 7 200 14,133 24,800 40, 800 72.800 88,800 104,800 AC02 EQUIVALENT 4 i 360 i,9B, 12 240t 24027- 42 i60 69.360 96.560 123 760> 150.960 1-8,1B0 - 4EC:NO: VALE OF C02 ABATEMENT - _ t - ,837437 2 12,36i 24,287 42,52 _70,084 - =1, ___ 62,4-1842 . ~ ~ ~ ~ ~- .-'- --- .- , , ,-_-_ Table 4: GLOBAL ENVIRONMENTAL BENEFITS (Continuation) _IGLOBAL ENVIRONMENTAL BENEFITS ;[__ __ _ GLOBAIENVIRONMENTAL BENEFITS YEARSJ 12 13 t 14 7 15 16 17 18 19 1 20 TOTAL WOODSAVED(TONS) _ 120,800 136 800 152,800 18800 184,800 200,800 216,800 232,800 248,800 413,867 C0 EOUIVALENT _== 2G5~O ___ 232.56 259,760 . -_286,960 314=_i 6 341 ,360 368,5609 395.760 __ 422,960 703,573 ECONOMIC VALUE OF C02 ABATEMENT 207,414 234888 262,3581 288,830 317,302i 344,774 372,246 399,718 427,180 710,609 - _- - __ ____ t--~ - ---+--t-- --- - ___ -t -C (0 ONOC SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 5: VALUE OF INCOME TRANSFER TO RURAL COMMUNITIES ECONOMIC VALUE OF INCOME TRANSFER z 2 3 4 6 6 I 8 910 11 1.00 ton/hectarelyear WOOD SALES FROM COMMUNITY PRODUCERS (TONS) `15,000 40,000 80,000 130,000 200,000 300,000 300,000 300,000 300,000 300,000 VALUE OF WOOD SALES AT MARKET PRICE 1,200,000 3,200,000 6,400,000 10,400,000 16,000,000 000,000 24,000,000 24,000,000 24,000,000 24,000,000 INCOME TRANSFER TO RURAL COMMUNmES 225,000 600,000 1,200,000 1,9S0,000 3,000,000 4,600,000 4,600,000 4,600,000 4,600,000 4,500,000 ECONOMIC VALUE OF INCOME TRANSFER 236,260 630,000 1,260,000 2,047,600 3,150,000 4,725,000 4,720,000 4,726,000 4,725,000 4,725,000 VALUE OF 'OTHER" EXPECTED REVENUES _ 47,250 126,000 252,000 409,500 630,000 945,000 945,000 500 946,000 946,000 1.50 ton/hectare/year ____ WOOD SALES FROM COMMUNITY PRODUCERS (TONS) _2__2___ 22,500 60,000 120,000 195,000 300,000 450,000 450,000 450,000 450,000 400,000 VALUE OF WOOD SALES AT MARKET PRICE 1,800,000 4,800,000 9,600,000 15,600,000 24,000,000 36,000,000 36,000,000 36,000,000 36,000,000 36,000,000 INCOME TRANSFER T RURAL COMMUNIES _ 337,500 900,000 1,800,000 2,92S,000 4,500,000 6,750,000 6,750,000 6,760,000 6,760,000 6,750,000 ECONOMIC VALUE OF INCOME TRANSFER 354,375 945,000 1,690,000 3,071,250 4,76,0500 7,087,000 7,087,500 7,087,500 7.097,500 VALUE OF -OTHER" EXPECTED REVENUES 70,875 189,000 378,000 614,250 945,000 1,417,000 1,417,500 1,417,500 1,417,500 1,417,600 2.00 ton/hectare/year _ _ _ WOOD SALES FROM COMMUNITY PRODUCERS (TONS)_ 30,000 80,000 -- 160,000 260,000 400,000 600,000 600,000 600,000 600,000 600,000 VALUE OF WOOD SALES AT MARKET PRICE 2,400,000 6,400,000 12,800,000 20,800,000 32,000,000 48,000,000 48,000,000 48,000,000 48,000,000 48,000,000 INCOME TRANSFER TO RURAL COMMUNITES 450,000 1,200,000 2,400,000 3,900,000 6,000,000 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 ECONOMIC VALUE OF INCOME TRANSFER 472,600 1,250,000 2,520,000 4,099,000 6,300,000 9,450,000 9,450,000 9,450,000 9,450,000 9,460,000 VALUE OF 'OTHER' EXPECTED REVENUES 94,600 252,000 504,000 619,000 1,260,000 1,990, 000 1,9000 1,690,000 1,890,000 1,90,000 SD aq 00 SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 5: VALUE OF INCOME TRANSFER TO RURAL COMMUNITIES (Continuation) _____ ECONOMIC VALUE OF INCOME TRANSFER 12 --- 14 Is 17 18 19 20 TOTAL 1.00 tonlhectarelyear WOOD SALES FROM COMMUNITY PRODUCERS (TONS) 300,000 300,0001 300,000 300,000 300,000 300,000 300,000 300,000 300.000 4,665,000 VALUE OF WOOD SALES AT MARKET PRICE 24,000,000 24,000,000 24,000,000 24,000,000 24,000,000 24,000,000 24,000,000 24,000,000 24,000,000 373,200,000 INCOME TRANSFER TO RURAL COMMUNITIES 4,500,000 4.500.000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 69,975,000 ECONOMIC VALUE OF INCOME TRANSFER 4,725s000 4,725,000 4,725,000 4,725,000 4,725,000 4,725,000 4,72s,000 4,725,000 4,725,000 73,473,750 VALUE OF 'OTHER' EXPECTED REVENUES 945,000 45,000 4945,000 945,000 945,000 9454,000 45,000 14,694,750 1.50 ton/hectare/year _ _ _ = = _____= _ __ _____ -_ wooD SALES FROM COMMUNITY PRODUCERS(TONS) - 450,000 i450,0001 40.000 450,0s,000 45,00 450,000 6,s97,500 VALUE OF WOOD SALES AT MARKET PRICE 36,000,000 36,000,000 36,000,000 36,0 36,000,000 36,000,000 36,000,000 36,000,000 36,000,000 5S9,800,000 INCOME TRANSFER TO RURAL COMMUNITIES 6,750,000 6,750,000 6,750,000 6,750,000 6,750,000 6,750,000 6_ ,750,000 6,750,000 6,750,000 104,962,500 ECONOMIC VALUE OF INCOME TRANSFER 7,087,500 7,087,500 7,087,500 7,067,500 7,087,o00 7,087,500 7,067,500 7,067,500 7,0a7,s0 110,210,825 VALUE OF "OTHER" EXPECTED REVENUES 1,417,500 1,417,500 1,417,500 1,417,500 1,417,500 1,417,500 1,417,500 1,417,500 1,417,500 22,042,125 2.00 tonlhectarelyear __ ________ WOOD SALES FROM COMMUNITY PRODUCERS (TONS) _ 600,000 600,000 600,00 600,0 - 600,000 600,000 - 600,000 600,000 600,000 9,330,000 VALUE OF WOOD SALES AT MARKET PRICE 48,000000,040,000,000 45,000,000 48,000,000 48,000,000| 45,000,000 45,000,000 48,000,000 48,000,000 744,400,000 INCOME TRANSFER TO RURAL COMMUNITIES ______ 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 9,000,00' 9, 000 139,550,000 ECONOMIC VALUE OF INCOME TRANSFER 9,450,000 9,45 9,450.000 9,450,000 9,450,000 9,450,000 9,450,000 9,450,000 9,450,000 146,947,500 VALUE OF "OTHER" EXPECTED REVENUES 1,890,000 1,890,000| 1,890,000| 1,850,000 _ 1,890,o0o 1,850,000 1,890,000 ooo 1,890,000 1.890.000 29,389,soo t_-----_-__ __-_____________________________ ! r-- -- - - - I_ _ '_ _ ' _ I _ ' I _ . -- t -t-- 1 - 1 - I t I _~~~~~~~~~ 0 I.q ODO Annex 8 Page 22 of 36 the different parametric scenarios tested) the availability of community investment funds for other activities will also increase resulting in increased revenues from those activities. The relation between woodfuel revenues and "other" revenues where left constant at 20 percent for the base scenario of the evaluation exercise but different scenarios where tested. The detailed calculation of the benefit from "other" expected rural revenues is included in Table 5 (see item iv above). (vi) charcoal saving: the benefit of charcoal saving expected to result from the promotion of 225,000 improved charcoal stoves in the principal urban areas was defined as the net saving expected to result from the use of improved charcoal stoves and was calculated on the basis of the improved stoves produced by the project and expected to be in actual use at each year during the project. The incremental energy efficiency differential between the traditional and the improve stoves was estimated at 40 percent. Based on the use of improved charcoal stove a family that today consumes 5 kilograms of charcoal per day would need to consume only 3 kilograms. for the same final useful energy service. That calculation took into account the annual rate of stove production and a 3-year stove life cycle. The actual economic value of the charcoal saved was computed at the current market price of charcoal of US $190/ton. As in the case of the valuation of the improved charcoal kilns it is expected that as charcoal prices rise so will the level of economic benefits from the use of improved charcoal stoves. The same altemative price scenarios used for the charcoal kilns was used the charcoal stoves benefits. Table 6 presents the detailed calculation of the expected charcoal saving taking into account expected annual stove production and dissemination patterns and stove life cycles and valuates the benefits at charcoal market prices ranging from US $190/ton to US $285/ton. 20. As the full elaboration and quantification of other project activities (promotion of inter- fuel substitution options, economic "reconversion" of charcoal traders, modernization of the charcoal industry, etc.) will be done during the Preparatory and Support Activities component (Component I) it was judged premature to make estimates on their respective possible benefits (the full cost of those activities was however included in the project cost). Discount Rate 21. A flat discount rate of 12 percent was applied to all project components and sub- components. SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 6: VALUE OF CHARCOAL SAVING DUE TO. IMPROVED STOVES USE Charcoal savings due to Improved Stove Use 1 2 3 4 5 6 7 8 9 10 11 Stoves Life cycle (@ 3 years per Stove) 10,WWo 10.000 10.000 70,000 70.000 70,000 20.000 20,000 20.000 70.000 70.000 70.600 30,00 30,000 30,000 70,000 70.ODO 40,000 40,000 40,000 70,000 58,000 55.000 55,000 __________ 70,000 70,000 70.000 TOTAL NEW STOVES DISSEMINATED 10,000 20,004 30,000 40,000 65,000 70,00W 70,000 70,000 70,000 70,000 TOTAL OF STOVES IN OPERATION PER YEAR 10,lW 30,004 60,000 90,0 126,KW 160,00 _ 9 6,wo 210,000 210,000 i 21I0 TONS of Charcoal conSumption with Traditional Stove (20% efficency) 50 150 300 450 625 825 975 1,050 1 ,050 1,050 TONS of Charcoal consumption with Improved Stove (40% efficiency) 30 90 180 270 375 495 585 630 030 030 = Estimated Charcoal savings (TONS) due to Improved Stoves use: 20 s0 120 10 250 330 390 420 420 420 Economic Value of Charcoal Savings at: US S19ro on 3,sw0 11,400 22,Sw 34,200 47,800 62,700 74,100 79,800 7,800 79t,80 SUS 12371ton _ 4,740 14.220 2s,40 42,6S0 9,260 78,210 S 2,430 99,640 9,8"40 99840 =____ US $2885ton 5,700 17,100 34,200 81,30 71,260 94,060 111,160 119,700 119,700 119,7K oOo WZ 0 SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 6: VALUE OF CHARCOAL SAVING DUE TO IMPROVED STOVES USE (Continuation) Charcoal savings due to Improved Stove Use 12 13 14 15 16 17 18 19 20 TOTAL Stoves Life cycle (@ 3 years per Stove) 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70 000 70000 70o000 70,000 70000 70,000 , 70000 70,000 70,000 70 000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 TOTAL NEW STOVES DISSEMINATED 70,000 70,000 70,W0 70,000 70,000 70,000 70,000 70.000 70,000 1,135,000 TOTAL OF STOVES IN OPERATION PER YEAR 210,0W 210,000 210,000 210,000 210,00 210,000 210,000 210,00 210,000 3,195,000 TONS of Charcoal consumption with Traditional Stove (20% efficiency) 1,050 1,050 1,050 1,050 1i0o0 1,050 1,oso 1,050 1,050 15,975 TONS of Charcoal consumption with Improved Stove (40% efficiency) 630 630 630 630 630 630 630 630 630 9,535 Estimated Charcoal savings (TONS) due to Improved Stoves use: 420 420 420 420 420 420 420 420 420 6,390 Economic Value of Charcoal Savings at: US $190/ton 79,800 79,800 79,800 79,800 79,800 79,800 79,800 79.800 79,80 1,214,100 US 5237/ton 99,540 99,540 99,540 99,940 99,540 99,540 9,540 99,540 1,514,430 US $2855ton 119,709, 700 119, 700,70D 11119,700 119.700 1,821,150 CQ Annex 8 Page 25 of 36 Evaluation Results 22. The 20-year horizon evaluation of the project resulted in an Economic Rate of Return (ERR) of 37.35% and a net present value (NPV) at 12 percent discount rate of US $ 34,235 million. Tables 7 and 8 present the summary of project costs and benefits flow and the economic evaluation of the project. According to these economic evaluation results, the proposed project would be a fully justifiable and competitive developmental investment for Senegal. 23. From Table 7 it can be observed that over the 20-year evaluation horizon the project has a total flow of US $21.3 million of costs and US $ 186.1 million of expected benefits, for a net non-discounted positive cost/benefit flow of US $164.6 million. Figures 2 and 3 present the project's expected cost and benefits flow and the net cost-benefit flow for the entire 20-year evaluation horizon. Sensitivity Analysis 24. The selection of the key parameters for the sensitivity analysis of the project was made on the basis of their relative weight within the total expected benefits and on the sensitivity observed during the limited parametric variations included during the baseline evaluation of the project's benefits (included Tables 2.1 to 6, above). 25. From the total expected benefits calculated for the project the generation and transfer of rural income accounted for 39.4 percent, incremental charcoal production for 33.5 percent, sustainable wood production for 16.7 percent. "other" rural income for 7.9 percent and global environmental benefits and charcoal consumption savings combined for 2.5 percent. Figure 4 presents a breakdown of the project benefits by type of expected benefit for the 20-year evaluation horizon. 26. From the above 5 key parameters were selected for the sensitivity analysis of the project: (i) level of sustainable forest yields (0.5 - 2.0 ton/ha/yr); (ii) fuelwood producer prices (US $ 10 - 30/ton); (iii) carbonization efficiency of improved kilns (18% - 30%); (iv) level of "other" realizable rural income (15% - 40% of expected fuelwood sales); and (v) charcoal market prices (US $ 190 - 360/ton). Tables 9.1 and 9.2 present the detailed calculation of the sensitivity analysis for the five key parameter selected. Attachment A presents Figures A.1 through A.5 with the results of the sensitivity analysis for the five key parameter selected. (i) sustainable forest yields: (0.5 - 2.0 ton/ha/yr): The most important parametric variable of the project is the average sustainable forest yields. This is so because the economic output of the sustainable forest management systems will depend on the realizable sustainable forest yield. Expected rural incomes will depend firstly on forest yields and then on wood producer prices. As the real forest yields are still based on estimates a higher degree of uncertainty exists with respect to the forest yields than to wood prices. Incremental charcoal production, "other" rural income and global environmental benefits are all positively (and herein assumed linearly) correlated to the SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 7: SUMMARY OF PROJECT COSTS AND BENEFITS FLOWS PROJECT COSTS & BENEFITS FLOWS YEARS 1 2 3 4 6 I 7 a 9 10 11 A. PROJECT COSTS COMPONENT I (PREPARATION) 38666 COMPONENTII (SUPPLY) ,2,466 2,606 169 1,962 1,603 10 135 122 109 COMPONENT HI DEMAND) 1053 600 515 280 200 190 40 36 32 29 TOTAL COSTS 3,858 3,594 3,366 3,021 2,139 2,162 1,793 190 171 154 139 B. PROJECT BENEFITS _ VsALuIOF USTAIN41LEWOOD 12 4 108 212 372 612 852 1092 1,332 1,572 T ALL7 E OF7AU MALY ORCOAL PRO TCSAND 2BE N2 1,064 1,72S 2,6F0 3,9n0 3,nu0 3,o0 3,90 3,) VALLUE OF GLOBAL ENV IMPACTS100S 1 2 3 1411 16 1 2 24 43 70 O 12 A 162L CALUE OF M NCME N ENERATION MIANSFER 236 620 2 6 4,726 4,7 4,725 41726 4,72 VALLUE OF 'OTHER CaPECTED REVEUES I47 126 252 410 630 946 946 S45 S16 S = VALUE OF CHARCOAL SAVIIII#STOVES) 4 I11 231 3 48 so so W So TOTAL QUANTIFIABLE BENEFITS 00 125 11 2,719 4,456 6,902 10,4056 10,6840 10,957 11324 1140 Table 7 sUMMARY o? PROJ.ECT COSTS AND aENEFITS FLOWS (Continuation) |POECT COSTS & BENEFITS FLOWS | ~~~~~~~~ ~ ~~~YEARS 12 13 14 16 16 17 Is IS 20 TOTAL A. PROJECT COSTS COMPONENT I (PREPARATION) 3,U58 COMPONENTII (SUPPLY) 6S S0 72 es 68 52 47 42 14,15S COMPONENT111 (DEMAND) 28 24 21 19 17 is 14 13 11 3J338 TOTAL COSTS 1261 112 101 91 82 74 S6 60 54 21,360 B. PROJIECT BENEFITS= = VALUE Or SUSTANABLEWOOD 1,812 2,052 2,292 2,532 2,772 3,012 3,262 3,492 3,732 31.15S VALUE OF INCREMENTAL CHARCOAL PRODUCTION 3,990 3,990 3,990 3,990 3,S90 3,990 3,990 3,990 3,990 62,046 VALUE OF GLOBAL ENV. IMPACTS (C02. B10) 207 235 262 290 317 348 372 400 427 3,566 VALUE OF INCOME GENERATION ITRANSIER 4,726 4,725 4,725 4,726 4,726 4,726 4.725 4,725 4,725 73,474 VALUE OF 'OTHER- EXPECTED REVENUES 946 948 S94 945 94 946 946 946 94 14,696 VALUE OF CHARCOAL SAVINOS (STOVES) 80 60 80 so so 80 60 so 80 1.214 I~~~~~~~~~~~~~~~~~~~~~~~~ I I C _ TOTAL QUANTIFIABLE BENEFITS 11,759 12,027 12,294 12,5S62 12,829 13,097 13,364 13,632 13,899 156,1451 I___ _____ O , t SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 8: ECONOMIC ANALYSIS OF PROJECT (20-YEAR HORIZON) PRIMARY PARAMETIRC VARIABLE Base Value Alt -1I Alt - 2 Forest Yield (ton/halyear): 1.00 1.50 2.00 |___ Fuelwood Sustainable Producer Price (US$/ton): 15.00 30.00 40.00 Improved charcoal kilns efficiency: 0.26 l Ratio of "Other" Income (% of Woodfuel revenue): 0.20 l ____ Market Price of Charcoal (US$Iton): ' 190.00 237.00 285.00 SECONDARY PARAMETIRC VARIABLE Base Value Alt - 1 Alt -2 Clear-cut Yield (tonlha): 15.00 lo Natural Regrowth function (annual %): 0.20 Value of C02 Abatement+Bio Conserv. (US$Iton): 1.01 l . Market Price of Fuelwood (US$Iton): 80.00 120.00 140.00 Economic Value of Income Transfer: 1.05 Incremental Efficiency of Charcoal Stoves: OA40 PROJECT COMPONENTS: I + 11 + III _ _ YEARS 1 2 3 4 5 6 7 8 . 9 10 11 TOTAL COSTS -3,858 -3,594 -3,366 -3,021 -2,139 -2,162 -1,793 -190 -171 -154 -139 TOTAL BENEFITS 0 500 1,348 2,719 4,456 6,902 10,405 10,684 10,957 11,224 11,492 NETCOST-BENEFITFLOW -3,858 -3,094 -2,017 -302 2,318 4,740 8,612 10,494 10,786 11,070 11,353 COSTIBENEFITS FLOW: -3,858 -3,094 -2,017 -302 2,318 4,740 8,612 10,494 10,786 11,070 11,353 =___ YEARS 12 13 14 15 16 17 18 19 20 TOTAL TOTAL COSTS -125 -112 -101 -91 42 -74 -66 -60 -54 -21,350 _ TOTAL BENEFITS 11,759 12,027 12,294 12,562 12,829 13,097 13,364 13,632 13,899 186,149 NET COST-BENEFIT FLOW 11,35 11,1 4 1Z,3 1,71 12,77 1323 13,298 13,72 13,845 1648 COST/BENEFITS FLOW: Ti6& 11, 1Z19 1 ,71 1Z747 13,23 1 1357Z 13= Internal Rate of Return: ERR 37-35% CD Net Present value (12%): NPV 34,235§ _ CY 0 FIGURE 2 SPEMP: PROJECT COSTS & BENEFITS (20-Years Horizon) 12,000 - j__ 10,000 4: 1----'--- - - - 1 - _ _ - .. I0 S., . jl't dilU. . I~~~~ -.00 -; .k, - - -. 8 6,000 __ .. . ...... " _. _ : | _ _ _ _ _ . _ _ _-_ . 0. I__ _0 lflS0 40,000 2,000 0 8 9 10 11 12 13 14 15 16 17 18 19 20 -2,000 __ -L OTOTAL COSTS ETOTAL QUANTIFIABLE BENEFITS -4,000 - 1: _ _I_1i 1: I I _I Years O~00 fU)t; | E . t- iL::: tV :WI iV:-I * }tS04 01:d I4t i01 (i; | I * ~ ~ ~ O 0 tSSTSt Sk .f.S 50S, - I 0, :, , l I I t : : .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C ft00000fft tAt : t00 ftt Q; 0 1 'L :t04 C?l1.iX I .fI X [ : * I~~~~~~~~c~ 0 FIGURE 3 SPEMP: NET COSTS-BENEFITS FLOW (20-Year Horizon) 14,000 - 12,000 - I 10,000 _ .-*i*Il fl h hlil 1111 8,000__ -I Iii iii iii ii i o _ _ n lL l,,lI,,,,c1;11111 _ liii 11 1111l IS II XI _ U,6,000- -- IIII li 2,000 1 . 2 131 4 5 8 7 8 9 10 11 12 13 14 15 16 17 .18 19 20 -2,000 - _ _ - _ _ -4,000… Years Po co X~ ce FIGURE 4 SPEMP: Quantifiable Project Benefits (20 -Year Horizon) 14,000 SCharcoal savings (Stoves) 0DOther' Revenues 12,000 -. Income GenerationfTransfer OGlobal Environ.Benefits (C02 +Biodiv.) U Incremental Charcoal Production U Sustainable Wood _____ 10,000 -7 7- 40 8,000- 0 4,000 2,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Years o J o~o SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 9.1: SUMMARY OF SENSITiVITY ANALYSIS OF BASIC PROJECT PARAMETERS SUSTAINABLE FOREST YIELDS 1 2 3 4 5 S 7 | 9 10 11 0.5 ton/halyear: -3,858 -3,346 -2,698 -1,680 47 1,209 3,271 4,951 5,043 5,127 5,209 .75 tonlha.year: -3,858 -3,221 -2,361 -998 1,168 2,948 5,899 7,663 7,838 8,006 8,172 BASE: 1.00 tonihalyear: -3,858 -3,094 -2,017 -302 2,318 4,740 8,612 10,494 10,786 11,070 11,353 `1.25 tonlha.year: -3,858 -2,966 -1,668 410 3,497 6,583 11,411 13,43 13,885 14,320 14,754 1.50 tonslyear: -3,858 -2,836 -1,312 1,137 4,706 8,478 14,295 16,511 17,137 17,756 18,373 1.75 tonslyear: -3,858 -2,704 -950 1,878 5,944 10,425 17,264 19,697 20,541 21,377 22,212 =___ 2.00 tonslyear: -3,858 -2,571 -582 2,635 7,212 12,423 20,318 23,002 24,097 25,184 26,269 NPV=0 @F.Yield=0.14 tonihalyr FUELWOOD SUSTAINABLE PRODUCER PRICE 1 2 3 4 5 a 7 a 5 10 11 US$ 1_01ton -3,858 -3,193 -2,284 -842 1,428 3,356 6,518 8,320 8,532 8,736 8,939 BASE: US$ 151ton: -3,858 -3,094 -2,017 -302 2,318 4,740 8,612 10,494 10,786 11,070 11,353 US$ 20Iton: -3,858 -2,996 -1,751 238 3,207 6,124 10,706 12,668 13,040 13,404 13,767 US$ 251ton: -3,858 -2,897 -1,484 778 4,097 7,508 12,800 14,842 15,294 15,738 16,181 USS 301ton: -3,858 -2,799 1,217 1,318 4,987 8,892 14,894 17,016 17,548 18,072 18,595 NPVO D producer price USS0.00tton IMPROVED KILNS EFFICIENCY 1 2 1 4 5 a 7 a * * 10 11 18% Carbonizaton Efficiency: -3,858 -3294 -2,549 -1,366 589 2,080 4,622 6,504 6,796 7,080 7,363 22% Carbonizaton Efficiency: -3,858 -3,180 -2,245 -758 1,577 3,600 6,902 8,784 9,076 9,360 9,643 BASE: 25% Carbonizaton Efficiency: -3,858 -3,094 -2,017 -302 2,318 4,740 8,612 10,494 10,786 11,070 11,353 28% Carbonizaton Efficiency: -3,858 -3,009 -1,789 154 3,059 5,880 10,322 12,204 12,496 12,780 13,063 ____ ~~~~~30%/ Carbonizaton Efriciency: -3,858 -2,952 -1,637 458 3,553 6,640 11,462 13,3441 13,636 13,920 14,203 NPV=0 @ Carbonization Efficiency= 6.7% _ _ I _ _ _ __I____ Pz %cc CD3 CD (ON 0 SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 9.1: SUMMARY OF SENSITMTY ANALYSIS OF BASIC PROJECT PARAMETERS (Continuation) SUSTAINABLE FOREST YIELDS 12 1S 14 15 1i 17 1i 19 20 ERR NPV 0.5 ton/halyear: 5,290 5,369 5,447 5,524 5,600 5,675 5,750 5,823 5,896 20.12% 8,473 .75 ton/ha.year: 8,336 8,499 8,661 8,821 8,981 9,139 9,297 9,464 9,611 29.33% 20,916 BASE: 1.00 ton/ha/year: 11,635 11,914 12,193 12,471 12,747 13,023 13,298 13,572 13,845 37.35% 34,235 1.25 ton/ha.year: 15,185 15,616 16,045 16,473 16,900 17,326 17,751 18,176 18,600 44.65% 48,430 1.60 tons/year: 18,989 19,603 20,216 20,828 21,439 22,049 22,658 23,267 23,874 51.46% 63,501 1.75 tons/year: 23,045 23,876 24,707 25,536 26,364 27,191 28,018 28,844 29,669 57.92% 79,448 2.00 tons/year: 27,353 28,435 29,516 30,596 31,675 32,753 33,831 34,907 35,983 64.11% # 96,270 NPV=0 @F.Yield=0.14 ton/ha/yr I______ FUELWOOD SUSTAINABLE PRODUCER PRICE 12 13 14 15 16 17 1 19 20 ERR NPV __ USS 10/ton: 9,141 9,340 9,539 9,737 9,933 10,129 10,324 10,518 10,7111 31.32% 24,115 BASE: US$ 15/ton: 11,635 11,914 12,193 12,471 12,747 13,023 13,298 13,572 13,8451 37.35% 34,235 USS 20/ton: 14,129 14,488 14,847 15,205 15,561 15,917 16,272 16,626 16,979 42.83% 44,356 US$ 25/ton: 16,623 17,062 17,501 17,939 18,375 18,811 19,246 19,680 20,1131 47.92% 54,476 USS 30/ton: 19,117 19 636 20 155 20 673 21,189 21 705 22 220 22,734 23 247| 52.70% 64,597 NPV>0 @ producer price US$0.00/ton __ _ I I IMPROVED iILNS EFFICIENCY 12 1, 14 15 la 17 is 19 20 ERR I NPV 18% Carbonizaton Efficiency:. 7,646 7,924 8,203 8,481 8,577 9,033 9,308 9,582 9,855 26.08% 17,294 22% Carbonizaton Efficiency: 9,925 10,204 10,483 10,761 11,037 11,313 11,588 11,8622 12,135 32.72% 26,975 EASE: 25% Carbonizaton Efficiency: 11,635 11,914 12,193 12,471 12,747 13,023 13,298 13,572 13,845 37.35% 34,235 ______ 28% Carbonizaton Efficiency: 13,345 13,624 13,903 14,181 14,457 14,733 15,008 15,282 15,555 41.73% 41,496 1_____ 30% Carbonizaton Efficiency: 14,485 14,764 15,043 15,321 15,597 15,873 16,148 16,422 16,695 44.53% 46,336 NPV=0 @ Carbonization Efficiency= 6.7% _ _ _ _ _ _ _ _ _ 1 _ _ _ 0%00 SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 9.2: SUMMARY OF SENSITIVITY ANALYSIS OF BASIC PROJECT PARAMETERS "OTHER" RURAL INCOME 1 2 3 4 5 6 7 S 10 11 1 5% Ratio "Other" Income: -3,858 -310 I 2049 -365 2215 I 4,582 8,3761 10,257 10,550 184 11,117 BASE: 20% Ratio "Other' income: -3,858 -3,094 -2,017 -302 2,318 4,740 8,612[ 10 4941 10,786 11,070 11,353 25% Ratio "Other" income: -3,858 -3,082 -1,986 -239 2,420 4,897 8,848 10,730 11,022 11,307 11,589 30% Ratio "Other" income: -3,858 -3,070 -1,954 -176 2,522 5,055 9,085 10,966 11,258 11,826 35% Ratio "Other" income: -3,858 -3,059 -1,923 -113 _ 2,625 5,212 9,321 11,202 11,495 11,779 12,062 40% Ratio "Other" income: -3,858 -3,047 -1,891 -50 2,727 5,370 9,557 11,439 11,731 12,015 12,298 NPV=0 @ Other rural income = -200% - [ __ CHARCOAL MARKET PRICES 1 2 3 4 6 6 7 f 8 9 10 11 '''--'1- '~C- -- C_ - - BASE: US$ 190/ton: -3,858 -3,094 -2,017 -302 2,318 4,740 8,612[ 10,494 10,786 11,070 11,353 _ _______________________ USS 240/ton: -3,858 -3,041 -1,874 -16 2,782 5,452 9,679 11,563 11,857 12,141 12,424 USS 285/ton: -3,858 -2,992 -1,745 242 3,199 6,093 10,639 12,526 12,821 13,105 13,388 US$ 310/ton: -3,858 -2,966 -1,674 385 3,431 6,450 11,172 13,060 13,356 13,641 13,924 US$ 360/ton: -3,858 -2,912 -1,531 671 3,895 7,162 12,238 14,130 14,427 14,712 14,995 NPV>O D@ Charcoal Price = US$0.00 _ uq CD 00 SENEGAL SPEMP: ECONOMIC ANALYSIS CALCULATIONS Table 9.2: SUMMARY OF SENSITIVITY ANALYSIS OF BASIC PROJECT PARAMETERS (Continuation) "OTHER" RURAL INCOME 12 13 14 1 1s 17 1S IS 2 ERR NPV 15% Ratio "Other" income: 11,398 11,678 11,957 12,235 12,511 12,787 13,062 13,336 13,609 36.72% 33,232 BASE: | 20% Ratio "Other" income: 11,635 11,914 12,193 12,471 12,747 13,023 13,298 13,572 13,845 37.35% 34,235 _____ 25% Ratio "Other' income: 11,871 12,151 12,429 12,707 12,984 13,259 13,534 13,808 14,082 37.97% 35,238 30% Ratio "Other" income: 12,107 12,387 12,666 12,943 13,220 13,495 13,770 14,04 14,318 38.58% 36,242 35% Ratio "Other' income: 12,343 12,623 12,902 13,180 13,456 13,732 14,007 14,281 14,554 39.19% 37,245 40% Ratio "Other" income: 12,580 12,859 13,138 13,416 13,692 13,968 14,243 14,517 14,790 39.80% 38,248 NPV=0 § Other rural income = -200% CHARCOAL MARKET PRICES [ 12 - 13 14 - 16 1S 17 18 19 20 ERR NPV EBASE. { USS 190/ton:t 11,635 11,914 12,193 12,471 12,747 13,023 13,298 13,572 13,8451 37.35% 34,235 US$ 240/ton: 12,706 12,985 13,264 13,542 13,818 14,094 14,369 14,643 14,916 40.11% 38,780 USS 285/ton: 13,669 13,949 14,228 14,506 14,782 15,058 15,333 15,607 15,880 42.53% 42,870 _ US$ 310/ton: 14,205 14,485 14,764 15,041 15,318 15,593 15,868 16,142 16,416 43.85% 45,142 USS 360/ton: 15,276 15,556 15,835 16,112 16,389 16,664, 16,939 17,213 17,487 46.43% 49,686 NPV>O @ Charcoal Price = US$0.00 Cs o\OO Annex 8 Page 35 of 36 actual sustainable wood output of the project, which in turn will be a direct function of realizable average sustainable forest yields. Current information indicates that average forest yields should be between 1 ton /ha/yr and 2.5 tons/ha/yr in the Tambacounda and Kolda regions. While 1.0 ton/ha/yr was used as the baseline value for the forest yields, the sensitivity analysis done accepted a yield range from 0.5 ton/ha/yr to the lowest expected yield. Yields of below 1.0 ton/ha/year, however, are considered to be unrealistic. (ii) fuelwood producer prices: (US $10 - 30/ton). Fuelwood producer prices were allowed to vary from US $10/ton up to US $30/ton. Scenarios for US $15/ton, US $30/ton and US $40/ton were calculated as part of the baseline evaluation and are presented in Table 5 (above). Because of that the sensitivity analysis was used to fine tune the price range between the current US $15/ton and US $30/ton. Although a lower producer price than the current US $15/ton is not expected to happen, a US $10/ton scenario was also developed under a theoretical scenario that due to an unanticipated sudden acceleration of inter-fuel substitution of woodfuels, their demand would drop and thus potential future market-determined prices would come down.. (iii) carbonization efficiency of improved kilns: (18% - 30%). The carbonization efficiency of the traditional charcoal kilns is rated at 18 percent. Because of that it is expected that the lowest conversion efficiency of the improved kilns would be 18%. Below that level of efficiency their use would be immediately and justifiably discontinued in favor of the traditional charcoaling methods. Starting a 18 percent the sensitivity analysis covered gradual efficiency variation until the 30 percent mark. Efficiencies higher that 30 percent are considered unlikely under the expected field operation conditions in the project areas. Higher efficiencies would be possible but a much larger scales of operation than the one envisaged for the project. (iv) "other" realizable rural income: (15% - 40% of expected fuelwood sales). This parameter is a function of the income generated from the direct sale of wood by the rural communities. While there is no empirical data in Senegal to substantiate a specific level of relation between one and the other, the level used for the baseline calculation (20 %) was chosen on the basis of estimates from project examples in Burkina Faso (Programme National de Amenagement Forestier - PNAF and Programme National de Gestion Terroir). Because of that lack of empirical data to back-up the estimation, the level of the parameter was allowed to come down as low as 15 percent and go as far a 40 percent. Given the project preparatory work done directly in the field with the beneficiary communities, it is expected that revenues from "other" economic activities will play a significant role in the economic development of the project areas. In all communities visited there are several initiatives for such parallel productive activities and the communities intent to mobilize the project support mechanism for that purpose. As the total share of this expected benefit over the overall benefits of the project is less than 10 percent, even if the ratio between wood income to other income were to be lower than the 15 percent allowed within the sensitivity analysis, it would not constitute a decisive factor in the project overall evaluation rating. (v) Charcoal market prices: Based on the production and marketing track record of the improved stove that the project intend to support, there is no reason to believe that the Annex 8 Page 36 of 36 stove dissemination targets of the project would not be met. On the contrary, it is expected that the demonstration effect of the additional 225,000 that the project will support will further motivate the development and/or expansion of additional parallel private sector-based stove supplies at full factor cost. Also, while the long-term testing done by Appropriate Technology International (ATI) has established that the DIAMBAR stove has an incremental energy efficiency of 50% in order to avoid overestimation of benefits the stove's incremental efficiency gain over traditional stoves was fixes at 40 percent. Hence, there being no expected negative variations in either the rate of stove dissemination or the stove's energy efficiency, the sensitivity analysis of the improved stove component was limited to variations in the market price of charcoal from US $190/ton to US $360/ton. As the price of charcoal is only expected to rise over time, no negative price variation were modeled. 27. Table 10 presents a summary of the results of the sensitivity analyses conducted, including the main value variations considered ("base", low and high) and the respective switching value. Table 10: Results from the Sensitivity Analysis NP V ERR Switehiing AIARAM ETER Valules ((JS lmillion) (lYe) Value BASE RESULTS: 43.2 37.3 Sustainable Forest Yield B: 1.00ton/halyr 0.15 ton/ha/yr low: 0.5 ton/ha/yr 8.4 20.1 High: 2.Oton/ha./yr 96.2 64.1 Fuelwood Producer Price B: US$15/ton 1 ' n.a. low US$10/ton 24.1 31.3 High: US$30/ton 1 64.6 52.7 Carbonization Efficiency B. 25% . __ 6.7% low 18% 17.3 26.1 High: 30% 46.3 44.5 Other Rural Income B: 20% ___. -200% low: 15% 33.2 36.7 High: 40% 38.2 39.8 Charcoal Market Price B: US$190/ton (*) n.a. low: US$190/ton (*) 34.2 37.3 High: US$360/ton 49.7 46.4 Note: (*) Current market price. 28. On the basis of the results of the sensitivity analyses conducted, the proposed project would continue to be a fully justifiable and competitive developmental investment for Senegal. ATTACHMENT A FIGURE A.1 ERR SENSITIVITY: FOREST YIELDS 70 60 50 140 30 20 _ _ _ _ _ 10 0.5 .75 1.00 1.25 1.50 1.75 2.00 FOREST YIELDS (Ton/HaNYear) ATTACHMENT A FIGURE A.2 ERR SENSITIVITY: WOODFUEL PRODUCER PRICES 55 , SO- ;,C,, ;f.ft li] iE i - . _ _ . _~~~~~~~~~~~~~~~~... .... ._. .._ 50 . .... 40 : t :: .5 : . ._ ..__ _. __..._.. 45 40 ____._ __-___0 __ .___ _ 30 25 20 10 15 20 25 30 FUELWOOD PRODUCER PRICE (USS/TON) ATTACHMENT A FIGURE A.3 ERR SENSITIVITY: CARBONIZATION EFFICIENCY 45- 40 - . 35 ___ _ _ __ ___ __ 30 25 20 18 22 25 28 30 CARBONIZATION EFFICIENCY (%) ATTACHMENT A FIGURE A.4 ERR SENSITIVITY: OTHER INCOME 40- 39.5 39 38.5 -.00 38 -37.5 37 36.5 36- 35.5 35 15% 20% 25% 30% 35% 40% VARIATION OF "OTHER" INCOME ATTACHMENT A FIGURE A.5 ERR SENSITIVITY: CHARCOAL PRICES 48 46 44 42 40 38- 36- 34 32 _ 30 190 240 285 310 360 CHARCOAL MARKET PRICES (US$Iton) Annex 9 Page 1 of 13 ENERGY SECTOR POLICY LETTER Original French Text Signed by the Minister of Economy, Finance and Plan and the Minister of Energy, Mines and Industry "LETTRE DE POLITIQUE DE DEVELOPPEMENT DU SECTEUR DE L'ENERGIE" Annex 9 Page 3 of 13 LETTRE DE POLITIQUE DE DEVELOPPEMENT DU SECTEUR DE L'ENERGIE 30 janvier 1997 A- Obiectifs 1. Le Gouvernement du Senegal a mene de 1987 a 1992, avec le soutien de ses partenaires au developpement, le premier projet sectoriel sur l'energie. Ce programme a permis de mobiliser les financements necessaires aux rehabilitations les plus urgentes et pour le renforcement des infrastructures. II a egalement contribue a ameliorer la capacite de gestion du secteur. Depuis quelques annees, un nouvel environnement economique se met en place caracterise par la mise en oeuvre d'un programme d'ajustement global de l'economie et de recentrage du r6le de l'Etat vers les fonctions de planification / regulation / contr6le. 2. Dans ce contexte, un projet Energie II, reposant sur un programme de reformes importantes dans le secteur de l'energie, est en preparation. L'objet de la presente" Lettre de Politique de Developpement du Secteur de l'Energie " ( LPDSE) est de preciser les decisions prises par le Gouvernement ainsi que le calendrier des actions pour leur mise en oeuvre. Elle s'inscrit dans le cadre macro-economique defini par le Gouvernement, dont l'objectif est d'atteindre un degre de croissance economique substantiel, tout en preservant la stabilite financiere et fiscale a moyen terme. 3. Ce cadre a ete en particulier enonce dans le contexte des accords signes par le Gouvernement avec les bailleurs de fonds internationaux. II est detaille, d'une part, dans le document-cadre de politique economique et financiere (PFP) a moyen terme ( 1994-1997) et, d'autre part, dans la lettre de politique de developpement du secteur prive, conclus en 1994 et soutenus par le Fonds monetaire international et la Banque mondiale. Le PFP, remis a jour en 1995 et 1996 a defini les actions generales que le Gouvernement a decide de mettre en oeuvre dans le secteur de l'energie. Elles sont detaillees dans la presente lettre. B-Cadre macro-economique 4. En termes d'objectifs macro-economiques, la politique d'ajustement global vise a atteindre une croissance du PIB de 4,5% a 5% par an a partir de 1995 permettant chaque annee une augmentation du revenu par tete de 2% au moins et la creation de 20 000 emplois nouveaux. Elle doit en plus assurer, a partir de 1996, un retour du taux d'inflation, defini en terme de deflateur du PIB, a son faible niveau de 2 - 3% par an. Elle doit permettre une reduction progressive du deficit du compte courant exterieur (hors dons), de 9,8 % du PIB en 1994 a 6,8 % en 1997. 5. Le Gouvernement a mis en place un dispositif d'incitations et de securisation de l'investissement prive qui comporte en particulier le Code des Investissements, l'autorisation de rapatriements des capitaux et benefices, la legislation fiscale, la couverture des risques de convertibilite des monnaies et de variation de taux de change. * ~~~~~~~~~~~~~~~~~~~~~~. ,.. . Annex 9 Page 4 of 13 C-SITUATION ET CONTRAINTES DU SECTEUR 6. Le Gouvernement a procede a l'analyse de l'ensemble des contraintes et obstacles auxquels est confronte le secteur, a formule des orientations et des strategies adequates et a decide de conduire des actions specifiques dans chaque sous-secteur energetique en vue d'atteindre les objectifs globaux qu'il s'est assignes. Cl-Constats d'ordre gin6ral 7. Le bilan energetique du Senegal fait apparaitre, au niveau de l1'nergie primaire, la preponderance du bois (61%) provenant de l'exploitation des forets naturelles, suivi du petrole (37%), celui-ci etant presque totalement importe. 8. Le niveau des prix est repute elev6 au S6n6gal en raison de contraintes objectives notamment 1'absence de rente hydraulique ou petroliere, la taille du systeme (liee a celle du marche) limnitant les possibilites d'exploitation des economies d'echelle ou de recours a certaines technologies, et les ressources forestieres limitees. 9. L'acces des populations aux formes d'energies commerciales est faible. C2- Contraintes par sous-secteur C2.1-Le sous-secteur petrolier 10. L'approvisionnement en hydrocarbures repose exclusivement sur les importations de la SAR (Societe Africaine de Raffinage) qui s'elevent environ a 900 000 tonnes par an, representant un cout d'environ en devises 75 milliards de F CFA en 1995, et 92 milliards en 1996. La SAR est egalement la seule societe de raffinage de petrole brut. Elle est confrontee a deux problemes majeurs: d'une part, la taille limitee du marche et, d'autre part, la vetuste des installations qui tardent a 8tre renouvelees, ce malgre le "supplement" de 2,3 $/bbl qui lui est octroye au titre de la remuneration de ses activites. 11. La production nationale est assuree par PETROSEN et represente moins de 1000 tonnes de p6trole brut en 1995, vendu a la SAR et 55 millions de m3 de gaz qui alimentent des turbines a gaz de la SENELEC. La principale contrainte de PETROSEN reste le financement de ses activites dans le domaine de l'exploration, en particulier avec les difficultes de mobilisation de fonds publics. 12. La distribution des produits petroliers est realisee par quatre grandes societes qui se partagent le marche sans grande concurrence tandis que le transport des produits petroliers est assure depuis 1972 par un cartel de transporteurs affectes de fa,on reglementaire aux differentes societes. 3 Annex 9 Page 5 of 13 13. La fixation trimestrielle des prix des produits petroliers basee sur la parite importation a represente la premiCre etape de la reforme recommandee par l'etude du cabinet ADL de 1987. Certains volets de la reforme tels que la repercussion du prix du marche sur le prix de vente au consommateur n'ont pas encore ete entierement appliques. Par ailleurs, le poids de la fiscalite sur le prix des produits petroliers, notamment ceux utilises par les industriels et le gas-oil, obere lourdement le cout des facteurs de production compromettant ainsi la competitivite de l'economie et la relance de la croissance. C2.2-Le sous-secteur electricite 14. L'e1ectricite est uniquement d'origine thermique. La SENELEC a le monopole de la distribution et dispose d'un parc de production de 280 MW. Elle consomme 300 000 tonnes de produits petroliers pour une production de 1 000 GWh par an. Elle rachete en plus une part des excedents d'energie (4 GWh en 1994) des quelques auto-producteurs existants (ICS, la CSS et la SONACOS qui, avec un parc de 90 MW, produisent 100 GWh par an). 15. Le taux d'electrification au niveau national est de 25 % ; il est de 50% en zone urbaine et seulement de 5% en zone rurale. La population n'ayant pas accbs a 1'electricite reste tres en dessous du niveau mondial ( 75 % contre 40%) 16. En outre, le ralentissement a partir de 1990 des investissements de la SENELEC (dfi essentiellement au gel des financements des bailleurs) a eu pour consequence la degradation des outils de production et la deterioration des resultats economiques et financiers. Malgre le redressement note recemment, les principaux problemes (deficit important de puissance, relations financieres difficiles entre l'Etat et la SENELEC, faiblesse du taux d'electrification) persistent toujours et leur resolution conditionne le succes durable des efforts d'assainissement engages. C2.3-L'eIectrification rurale 17. L'electrification rurale est encore tres peu developpee- puisqu'on compte en 1994 environ 250 villages electrifies sur un total de pres de 14.000- a cause principalement de l'absence de ressources adequates pour assurer le financement des coits tres eleves d'investissement et d'exploitation dans un contexte de non-rentabilite financiere des operations d'electrification rurale. Si la tendance actuelle se poursuit, le pourcentage de la population rurale ayant acces a l'lectricit6 ira en diminuant, dans la mesure ou le taux de raccordement (2% an) est inferieur a celui de la croissance de la population (environ 3% an). 18. Le service de l'electricite en milieu rural est cependant source de progres social important; il facilite notamment l'acces aux services de sante et a l'education, permet la realisation d'activites productives generatrices de revenus et, d'une maniere generale, favorise le developpement economique et social du monde rural. Ainsi, il contribue a freiner l'exode rural en fixant les populations sur leur terroir, et donc limite le developpement incontr6le des villes. L'electrification rurale represente, de ce fait, un enjeu considerable pour le Senegal. II apparait donc fondamental de definir un cadre strategique global qui permette la mise en place d'une veritable dynamique d'electrification rurale. Annex 9 Page 6 of 13 C2.4-Le sous-secteur des combustibles domestiques 19. La consommation nationale est estimee a 330.000 tonnes de charbon de bois et a 1.500.000 tonnes de bois, ce qui represente l'equivalent de plus de 4 millions de m3 de bois. La demande en charbon de bois, satisfaite par un prelevement concentre sur des ressources forestieres fragiles, est a l'origine d'un d6frichement annuel de 30.000 ha de forets naturelles. 20. Les modes d'exploitation actuelles pour la fourniture du bois energie et du charbon de bois conduisent a une degradation rapide du couvert forestier. Egalement, le front de 1'exploitation forestiere recule d'annee en annee, pour atteindre aujourd'hui des zones situees a plus de 400 km de la capitale. Enfin, la non-responsabilisation des populations locales ne permet pas une gestion efficace des ressources forestieres de leurs terroirs. 21. La butanisation, menee depuis 1974 grace a un systeme de subvention sur le prix du gaz butane et a des investissements prives importants en matiere d'equipement et d'infrastructures de stockage, d'emplissage et de distribution, a aujourd'hui des effets visibles. Mais cette politique s'est revelee etre d'un cout eleve pour l'Etat, atteignant actuellement 6 milliards de F CFA sous forme de subvention sur le prix du produit sans compter l'exon6ration des taxes sur les equipements gaz. 22. Enfin, les campagnes de promotion de foyers ameliores et de substitution de la tourbe au charbon de bois ont ete sans grands resultats a ce jour. D- Politique Energetiaue 23. Malgre les contraintes precedentes, le secteur energetique du Senegal presente des atouts serieux pour son developpement, entre autres: - une industrie petroliere complete fonctionnant selon des standards de classe intemationale; - un sous-secteur electrique organise de maniere rationnelle et recelant des ressources humaines competentes, et; - un sous-secteur des combustibles domestiques qui mise clairement sur une gestion durable des ressources forestieres. 24. Dans ce contexte, la politique energetique mettra l'accent sur trois dimensions fondamentales: economique: rationaliser les conditions d'approvisionnement, de production, de distribution et de consommation d'energie, dans le respect des inter&s a long terme du pays; . environnementale : respecter les equilibres ecologiques fondamentaux et encourager une gestion rationnelle des espaces ruraux dans les zones d'exploitation forestiere a usage energetique; ....... 5 Annex 9 Page 7 of 13 . sociale: elargir l'acces des populations aux formes modernes d'energie, condition sine qua non de reussite de la lutte contre la pauvrete, de l'amelioration de la sante des populations, de succes dans les efforts de reduction de l'analphabetisme, du developpement de l'agriculture, de la promotion de la femme, etc. 25. La strategie comporte des actions dans le domaine des sous-secteurs petrolier et electrique ainsi que dans celui des combustibles domestiques. Celles-ci- incluent en particulier: - la liberalisation des importations, du transport et de la distribution des produits petroliers ainsi que l'abolition de la convention speciale de la SAR et son remplacement par une surtaxe temporaire et degressive sur les importations de produits finis; - l'ajustement trimestriel automatique des prix des produits petroliers en liaison avec l'evolution des cours internationaux; - la modification du cadre legal et reglementaire afin de permettre un niveau eleve de concurrence et d'encourager l'implication du secteur prive dans l'investissement et la gestion du secteur de l'e1ectricite; - la privatisation et la restructuration de SENELEC; et, - le transfert aux collectivites locales de la gestion et de l'exploitation des ressources ligneuses. 26. Pour mettre en oeuvre cette strategie et les actions correspondantes, le Gouvernement a decide de s'appuyer sur deux nouvelles entites, a savoir: (a) un Comite Interministeriel de Pilotage des Reformes du Secteur de l'Energie, comprenant l'ensemble des departements ministeriels concernes et ayant la responsabilite de coordonner et de diriger la mise en oeuvre des reformes; et (b) une Cellule Technique, composee de specialistes requis, qui sera chargee de mener tous les travaux necessaires pour la conduite de ces reformes ainsi que de la preparation et 1'execution du Projet Energie II. E-Sous-secteur des produits petroliers 27. Les activites de ce sous-secteur sont deja exercees pour l'essentiel par des operateurs prives, mais sous un mode monopolistique. Les r6formes ont pour but de diminuer le couit des produits en liberalisant totalement ces activites et en stimulant la concurrence. Annex 9 Page 8 of 13 6 28. Tous les segments de l'activite seront liberalises d'ici fin decembre 1997, par abolition de tous les monopoles existants (importation, raflinage, transport et distribution). L'encouragement a plus de concurrence se fera sur la base de regles applicables de la meme facon a tous les acteurs de la filiere, et en ayant le souci de securite d'approvisionnement, de surete et d'environnement. Les barrieres a 1'entree dans l'activite (capacites physique et financiere aussi bien pour l'importation, le transport que la distribution) seront fixees et contr6lees par la puissance publique. Elles devront etre fixees a des niveaux permettant la satisfaction des exigences en matiere de securite, de surete, de transparence avec le souci de ne pas decourager de nouveaux acteurs potentiels. Les importateurs auront la possibilite de regrouper leurs achats sur le marche international, a travers des mecanismes specifiques a mettre au point, en vue de realiser les economies d'echelle propres a la taille du marche senegalais. 29. Le Gouvernement adoptera, avant fin 1997, apres concertation avec les operateurs concernes, les modifications legales et reglementaires permettant l'acces des tiers aux installations existantes de stockage et de transport par conduites des produits petroliers. Cela concerne en particulier: les statuts de la SAR; la publication des specifications des produits pouvant etre consideres pour l'acces a ces installations et des conditions techniques a respecter pour cet acces; la fixation, I'homologation et la publication par les proprietaires des installations de leur prix pour le service rendu (utilisation par des tiers de leurs installations). 30. Avant la fin du mois de decembre 1997, la convention liant la SAR et l'Etat sera abolie et le supplement de 2.3 US$/bbl accorde sur les prix ex-SAR sera supprime. Une taxe sur l'importation des produits petroliers raffines sera instauree a partir du mois de decembre 1997. Le gouvernement adoptera avant la fin du mois de juin 1997, en accord avec la Banque Mondiale,un plan indiquant la duree de cette surtaxe qui sera degressive et limitee dans le temps. 31. Fiscalite et prix: Le but general des reformes dans ce domaine est que les prix refletent les couits economiques. A plus long terme, lorsque l'ouverture du marche sera plus importante (nombre plus grand et taille relative plus faible des acteurs), les prix seront completement liberalises. Dans la periode intermediaire, ils continueront neanmoins a etre regules. La definition et la mise en place d'une nouvelle structure des prix petroliers se feront d'ici la fin de decembre 1997, en tenant compte d'un certain nombre de principes et d'objectifs de calendrier: (i) I'ajustement des prix ex-SAR et des prix aux consommateurs en liaison avec les variations des couts, en particulier celui des produits a l'importation; cet ajustement se fera trimestriellement jusqu'a la fin de 1998, puis mensuellement; (ii) les prix actuels seront immediatement transformes en prix plafonds; (iii) les marges seront exprimees en valeur (et non en pourcentage) aux differents niveaux de la filiere (importation, distribution, detaillant), et tiendront compte des caracteristiques techniques et des coat propres a chaque produit; *.** ...* Annex 9 Page 9 of 13 7 (iv) le systeme actuel de perequation du transport sera revu, en raison du nouveau contexte de liberalisation, pour prot6ger les interets des consommateurs excentres et assurer la couverture du territoire. (v) la fiscalite sur les produits sera simplifiee et l'objectif de neutralite fiscale (par produit, par type d'usage) sera recherchee; (vi) les subventions concernant les combustibles pour la production d'electricite et pour la consommation d'electricite de la Compagnie des Phosphates de Taiba seront elirninees. 32. En ce qui conceme l'exploration petroliere, la politique du Gouvernement vise a intensifier la recherche d'hydrocarbures, pour augmenter les chances de decouverte de gisements exploitables. Dans ce contexte, le Gouvernement et la Societe publique PETROSEN devront concentrer seulement leurs activites sur la promotion du bassin sedimentaire s6n6galais; a cet effet, les textes regissant la soci6t6 seront modifies et adoptes avant le 30 juin 1997. F-Electricite 33. Le sous-secteur de l'electricite fait face a des enjeux considerables qui conditionnent, dans une large mesure, le succes du programme d'ajustement. C'est la raison pour laquelle, le gouvernement attache une grande importance au developpement de celui-ci. 34. Les objectifs principaux de la politique du gouvernement pour le sous-secteur de l'electricite sont: (i) d'assurer la garantie de l'approvisionnement en electricite de la population et des autres consommateurs dans les meilleures conditions de surete et de prix, compatibles avec la situation &conomique du pays; et (ii) d'accelerer l'dlectrification urbaine (60% en l'an 2000) et rurale (15% a l'an 2000). 35. Le Gouvernement a conscience que I'atteinte de ces objectifs ne pourra &re realisee sans, d'une part, trouver les voies et moyens de perenniser les resultats encourageants obtenus ces trois dernieres annees au niveau de l'amelioration de la gestion et des resultats d'exploitation, et d'autre part, ameliorer de maniere substantielle l'efficacite et la productivite du sous secteur par une large implication des operateurs prives. Cela necessitera une restructuration importante du sous-secteur dont l'objectif est de: (i) confier au secteur prive la production et la distribution de l'electricite; et (ii) promouvoir la concurrence a tous les niveaux possibles et compatibles avec les caracteristiques du systeme electrique senegalais. Fl- Cadre 2Cneral 36. Il est retenu d'introduire d'importants changements dans la structure de l'industrie electrique et dans la propriete des moyens de production et de distribution de l'electricite. A cet effet, le Gouvernement a decide la privatisation ci court ternie de la SENELEC. Par ailleurs, le Gouvernement ne souhaite pas creer de monopole prive durable ce qui, el moyeni ternie, implique d'introduire le plus possible de concurrence dans le secteur. 8 Annex 9 Page 10 of 13 Dans ce cadre, il a ete decide de mettre en place un processus progressif de decouplage vertical de la structure de l'industrie electrique. Les implications et les adaptations que ce processus necessitera sur les lois existantes seront examinees et les modifications requises seront effectuees. Le Gouvernement envisage egalement la creation d'une part, d'une Structure publique legere chargee de l'lectrification rurale et d'autre part d'une Agence de maitrise de l'Energie. 37. L'introduction de la concurrence dans le secteur sera neanmoins limitee par certaines contraintes, specifiques au secteur electrique senegalais (cf supra) et liees plus particulierement: (i) a sa taille actuelle relativement reduite; et (ii) au faible taux de penetration de 1'electricite, particulierement en zones rurales. Ces contraintes ont et considerees dans le processus des reformes qui seront mises en place. F2- Les reformes de la structure et de la propriete du sous-secteur electrigue 38. Pour atteindre l'objectif de moyen-terme qui est de creer les bases pour un cadre competitif dans le sous-secteur, le Gouvernement a decide d'ouvrir toute nouvelle production au secteur prive, notamment selon la formule BOO (Build, Own and Operate). Dans les localites deja electrifiees, et A l'expiration des concessions pour la distribution, leur octroi fera l'objet d'une procedure d'appel d'offres a des operateurs prives, des collectivites locales ou a des cooperatives. Dans le cas des localites non electrifiees ce processus sera, autant que possible, egalement retenu. 39. Par rapport A l'objectif de court terme qui est d'ameliorer l'efficience de la societe, le Gouvemement procedera a la privatisation immediate de la SENELEC, sur la base d'un appel d'offres structure, en procedant au transfert d'une majorite des actions A un partenaire strategique, au secteur prive senegalais et au personnel. Le partenaire strategique proposera dans son offre, le niveau de participation qu'il souhaite detenir. Les responsabilites du partenaire strategique en matiere de gestion de la societe ainsi que ses engagements en matiere de developpement de 'electrification seront definis au travers notamment d'un nouveau cahier de charges, et d'une nouvelle convention de concession. 40. Des son entree en fonction, le Partenaire Strategique devra introduire une comptabilite distincte pour les trois segments de son activite a savoir: production-P, transport-T, et distribution-D. Toute nouvelle capacite de production jugee necessaire se fera par appel d'offres aupres d'investisseurs prives: la SENELEC n'etant plus autorisee A developper son parc de production. F3- Cadre lezal 41. Le Gouvernement preparera avant la fin de I'annee 1997, une Loi sur l'electricite mettant en place le cadre structurel et juridique dans lequel le sous-secteur devra dorenavant operer. Ce cadre legal comprendra : (1) la structure et le mode de fonctionnement du secteur permettant d'assurer le maximun de competition au niveau de la production et de la distribution. 9 Annex 9 Page 11 of 13 De plus la loi sur l'electricite explicitera les relations entre les differents acteurs; (2) le role de l'Etat concernant la politique electrique, la planification et la regulation, en particulier en ce qui conceme les principes de tarification; et (3) les modalites de fonctionnement de l'organisme de regulation. Enfin, cette loi devra tenir compte de la politique de decentralisation, mise en vigueur en 1997, et du cadre futur de la cooperation regionale en matiere de production et de transport d'energie electrique notamment au sein des pays membres de l'Organisation pour la Mise en Valeur du Fleuve Senegal, de l'Organisation pour la Mise en Valeur du Fleuve Gambie et de l'Union Economique et Monetaire Ouest Africaine. 42. La mise en oeuvre de la Loi sur l'Electricite sera assuree par un organisme de regulation qui devra etre cree et qui aura pour taches essentielles: (1) d'accorder (et de retirer le cas echeant) les differentes licences d'exploitation (production independante, concessions); (2) d'interpreter et d'appliquer les principes de tarification definis dans la Loi; et enfin (3) de definir les standards et normes de fonctionnement du secteur electrique. Ce sera dans un premier temps, un organisme gouvernemental situe au sein du Ministere charge de l'Energie. Sa fonction operationnelle de reglementation sera effectuee par une petite unite specialisee et comprenant un nombre tres limite de cadres. Dans un premier temps, elle sera chargee de controler et d'approuver les processus d'appel d'offres competitifs lances pour obtenir des capacites additionnelles en production d'electricite. F4- Maitrise de V'Enerfie 43. Le Gouvernement du Senegal entend poursuivre et developper les efforts en matiere de maitrise de l'energie avec pour objectif de reduire la facture vis a vis des produits importes, de dimimuer les couits des facteurs de production et de contribuer a la protection de 1'environnement global. 44. A cet effet, I'Agence pour la maitrise de I'Energie dont la creation est envisagee plus haut aura pour taches d'identifier les potentiels d'economie d'energie et de realiser les actions d'information, d'appui et de conseil aupres des differents operateurs. Elle etudiera d'autre part, les mesures fiscales et reglementaires a mettre en place pour encourager la maitrise de l'energie. F5- Electrification rurale et Oeriurbaine 45. Le developpement de 1'electricite dans les zones rurales et dans certaines zones peri-urbaines, que cela soit par developpement des reseaux ou par moyens decentralises, est couteux et le produit peut s'averer trop cher pour les populations concernees. Le Gouvernement envisage d'appuyer ces extensions par l'octroi de subventions dans le cadre de sa politique sociale. Leurs realisation et exploitation pourront etre confiees aux firmes de distribution privees les plus proches des zones concernmes, selon des procedures d'adjudication reglementees. 10 Annex 9 Page 12 of 13 46. Cet aspect devra faire l'objet d'analyses compl6mentaires et de propositions plus detaillees, en particulier pour ce qui concerne la programmation des investissements, les sources et les modalites de financement. Il est neanmoins attendu que la restructuration du secteur, telle qu'elle est decrite ci-dessus, facilitera le developpement d'entites capables et interessees a d6velopper ces activites. G. Combustibles domesticiues 47. Le but general recherche est de: (i) valoriser de maniere durable les ressources energetiques issues de formations forestieres nationales; (ii) faire beneficier les collectivites locales de ressources tirees de l'exploitation forestiere, et (iii) promouvoir des combustibles de substitution adaptes au modele de cuisson senegalais pour autant que leur faisabilite technique et economique est assuree. 48. En vue de la realisation de ces objectifs, le code forestier, adopte en 1993 pour sa partie legislative et en 1995 pour sa partie reglementaire, vise a introduire les reformes importantes suivantes: - le charbon de bois sera produit A partir de la vente de bois sur pied en consideration de la capacite de regeneration des for8ts. C'est dans ce sens qu'un decret presidentiel pris en 1996, vient de relever la redevance foresti&e et introduit un systeme de taxation differencie suivant que le bois provienne d'une zone amenagee ou de formations fortieres naturelles. - les collectivites locales concernees seront les gestionnaires legaux des for8ts de leur terroir et les beneficiaires des revenus issus de leur exploitation. A cet effet, les decrets d'application de la regionalisation, dejA signes en janvier 1997, consacrent entre autres, le transfert de la gestion des ressources forestieres aux collectivites locales. 49. Dans ce contexte, les dispositions legislatives et reglementaires du nouveau Code Forestier seront revisees, avant le 30 juin 1997, pour tenir compte de la politique de regionalisation et pour offrir des garanties en matiere de gestion de for8ts et de transfert des ressources issues de l'exploitation forestiere vers les populations rurales. 50. Dans le cadre de cette revision, les mesures suivantes seront precisees: 1) les gestionnaires legaux des ressources concernees seront les beneficiaires des revenus issus de la vente du bois des for8ts; 2) les quotas seront des quantites A prelever annuellement, fixees en terme de volume de bois sur pied ou de stere, en tenant compte de la capacite de regeneration des for8ts 3) les services forestiers mettront en place avant le 30 juin 1998, les mesures necessaires pour la realisation d'une exploitation forestiere raisonnee et contr6lee (quotas annuels) qui devront couvrir l'ensemble des superficies forestieres du pays a l'horizon 2005. A l'an 2000, ces mesures devront couvrir les regions de Tambacounda et de Kolda. .1. . /* Annex 9 Page 13 of 13 51. En outre, le prix de charbon de bois sera liberalise au plus tard le 31 decembre 1999. Un systbme de regulation de la filiere sera cependant mis en place pour eviter des risques en matiere d'approvisionnement et pour assurer une situation de reelle competitivite dans le sous secteur. 52. Un plan de suppression de la subvention sur le gaz butane sera adopte par le Gouvernement au plus tard le 31 decembre 1997, pour tenir compte des contraintes financieres de l'Etat. L'elimination de cette subvention se fera de facon progressive par tranches semestrielles et devra 8tre complete le 31 decembre 1999. 53. Enfin, le Gouvernement envisage la mise en aeuvre de mesures adequates en vue de diversifier les combustibles de cuisson proposes aux menages. Il s'agira en particulier de promouvoir le kerosene -- dont l'introduction comme combustible domestique sera entreprise avant la fin de juin 1998 -- et valoriser d'autres ressources potentielles nationales. H - Approche et movens a mettre en oeuvre 54. Le Gouvernement du Senegal a conscience que la mise en oeuvre de l'ambitieux programme decrit ci-dessus demandera un effort substantiel, du temps et des ressources financieres. Le soutien de la Banque Mondiale et d'autres bailleurs de fonds sera recherche. Le Ministre de l'Econornie, - stre de l'Energie, des Finances et du Plan et de 1'Industrie Annex 10 Page 1 of 2 SELECTED DOCUMENTS AND DATA AVAILABLE IN THE PROJECT FILES 1. MANUEL DE PROCEDURES pour le Programme Pour la Gestion Durable et Participative des Energies Traditionnelles et de Substitution. (Draft), Gouvemement du Senegal, Mars 1997. 2. "Programme Pour la Gestion Durable et Participative des Energies Traditionnelles et de Substitution" (SPEMP DRAFT Project Implementation Document), Government of Senegal, Ministry of Environment and Protection of Nature and Ministry of Energy, Mines and Industry. November 1996. 3. Senegal Sustainable and Participatory Energy Management Project: Environmental Discussion Note, Boris Utria (AF5IE), 1996 4 Evaluation des systemes d'information du secteur de l'energie traditionnelle: Burkina Faso. Niger, Mali et Senegal, Bahjat Achikbache, AFTHR/The World Bank, Fevrier 1995. 5. Local Forest Control in Burkina Faso. Mali, Niger. Snegal and The Gambia: A Review and Critique of New Participatory Policies, Jesse C. Ribot, Center for Population and Development Studies, Harvard University, January 1995. 6. Local Forest Access Control in S6ndgal: Towards Participatory Forestry Policies, Jesse C. Ribot, Center for Population and Development Studies, Harvard University, January 1995. 7. Le Secteur des Energies Traditionnelles: Document Principal: Analyse. Strat6gie et Programme d'Actions; Gouvernement du Senegal, Equipe Nationale RPTES, Mars 1995. 8. Evaluation des donnees sur les ressources ligneuses: Burkina Faso, Gambie. Mali. Niger et Senegal, Axel Martin Jensen, Danagro Adviser A/S, Janvier 1995. 9. Institutions et capacites de mise en oeuvre des politiques dans le secteur des energies traditionnelles (Burkina Faso. Mali. Niger. Senegal and The Gambia), Souleymane Diallo, ENDA-TM, Dakar, Janvier 1995. 10. L'Observatoire des Combustibles Domestiques. No. 1. No. 2. No. 3. No. 4 & No. 5. Direction de l'Energie, Direction des Eaux, Forets, Chasse et Conservation des Sols. Juillet 1992 - Spetembre 1995. 11. The Traditional Energy Sector and the Economy: The Case of Mali. Burkina Faso. The Gambia, Niger and Senegal, Isaac Castillo, September 1994. 12. Elements d'economie spatiale des energies traditionnelles: Application au cas de cing pays saheliens: Burkina Faso, Gambie, Mali. Niger, Senegal, Benoit Ninnin, Octobre 1994. Annex 10 Page 2 of 2 13. Review of Improved Stove and Fuel Substitution Projects (Burkina Faso, Mali, Niger, Sdnegal and The Gambia), Biomass Technology Group (BGT), October 1994. 14. Les Combustibles Domestiques a Dakar: Evolution des Pratiques et des Consommations Cellules des Combustibles Domestiques, Direction de l'Energie. Novembre 1994. 15. Programme Regional Gaz: Activite de Suivi-Evaluation du Programme Regional Gaz. Ministere de l'Energie, des Mines et de l'Industrie. Juillet 1994. 16. S6negal: Issues and Options in the Energy Sector. ESMAP Report NO. 4182-SE, July 1983. 17. Comite Interministeriel sur l'Energie. rapport de presentation. Direction de l'Energie. Aouit 1993. 18. Evaluation a Mi-parcours du Programme Regional de Promotion du Gaz Butane, Rapport Provisoire. FED, CILSS, SEED. Juillet 1993. 19. Evaluation Economique du secteur Forestier, PAFS. Ministere du Developpement Rural et de l'Hydraulique/FAO, Janvier 1993. 20. Code Forestier: Loi No. 93.06 du 4 Fevrier 1993. Minstere du Developpement Rural-et de I'Hydraulique. 21. Code Interrninisteriel sur l'Energie du 12 Aout 1993. Direction de l'Energie, Minstere de l'Energie, des Mines et de l'Industrie. 22. Evaluation Economique du secteur Forestier. PAFS. Direction des Eaux, Forets, Chasse et Conservation des Sols, NEI, 1992. 23. Les Combustibles Domestiques au Senegal: Pratiques et Consommations des Menages. Direction de l'Energie, ABF. Decembre 1992. 24. Plan d'Action Forestier du Senegal (PAFS). Direction des Eaux, Forets, Chasse et Conservation des Sols. Decembre 1992. 25. Document Preparatoire A la Reunion des Bailleurs de Fonds sur le Secteur de l'Energie. Direction de l'Energie. Octobre 1991. 26. Etude sur les Prix du Bois et du Charbon de Bois A Dakar. Direction de l'Energie, ABF. 1991. 27. Evaluation des Ressources Forrestieres et Gestion des Terroirs Villageois, PAFS. Direction des Eaux, Forets, Chasse et Conservation des Sols, 1991. 28. S6negal: Strat6gie des Combustibles Domestiques. Direction de l'Energie. 1991. 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