38006 M A T T E R S A T T H E W O R L D B A N K weiveRlaunnA6002·tnempolevedelbaniatsusdrawot Good Governance and Environmental Management REPORTING ON ENVIRONMENTAL SUSTAINABILITY A Ten-Year History 1996 2001 · The first edition of Environment Matters Annual · The World Bank adopted a new Environment Strategy Review took note of the growing number of client that aims to further integrate environmental concerns country national environmental action plans, many into the Bank's projects and programs. supported by the World Bank. It also highlighted the strong growth in environmental lending in the · The World Bank announced that it would join with preceding decade. The active environmental portfolio Asian cities to launch a Regional Clean Air Initiative to stood at almost $12 billion in financing for 153 projects manage urban air quality. in 62 countries. 1997 2002 · At the UN Earth Summit in New York, 5 years after Rio, · The year of the World Summit on Sustainable President Wolfensohn reaffirms the Bank's commitment Development, Environment Matters reported on a joint to addressing environmental concerns such as climate imitative by a group of major donors to articulate how change, biodiversity, ozone depletion, desertification, poverty reduction and environmental management are and clean water. linked. It argued that environmental degradation is not inevitable as a result of economic growth. · World Bank and World Wide Fund for Nature (World Wildlife Fund) announced the WWF/WB Global Forest · $100 million each from the Community Development Alliance, a partnership for forest conservation and Carbon Fund (CDCF) and the BioCarbon Fund are to sustainable use. provide financing to reduce greenhouse gas emissions. 1998 2003 · The World Commission on Dams, sponsored by the · If current trends continue, 4 billion people will live World Bank and the World Conservation Union (IUCN), under conditions of severe water stress by 2025, is launched. particularly in Africa, the Middle East, and South Asia. Financing the needs of the water sector will require no · The World Bank launched a Marine Market Transfor- less than $100 billion per year over the next 20 years, mation Initiative to support more environmentally the 2003 issue reported. and socially sustainable practices in the production of marine goods and services. · The World Bank Group announced its formal endorse- ment of the Extractive Industries Transparency Initiative. 1999 2004 · President Wolfensohn puts strengthening governance · Faster economic growth is key to meeting the MDGs by at the center of the development agenda. 2015, but integrating environment into this growth is crucial for making the dream of a world free of poverty · The new Pollution Prevention and Abatement sustainable. Environment Matters brought together a Handbook was presented. Designed for Bank staff, wide variety of external and internal voices on how to it also became an international point of reference for achieve this. investors, other development agencies, commercial banks, and insurance companies. oupGr ankB 2000 2005 orldW · The World Bank launched the Prototype Carbon · Close to one-fifth of the burden of disease in develop- Fund (PCF), a mechanism for lowering emissions of ing countries can be attributed to environmental risks. heT greenhouse gases. The PCF was the first market-based Environment Matters reported on the Bank's multitude -- mechanism to address climate change and promote the of activities to counter these risks. transfer of finance and climate-friendly technology to 2006 developing countries. · The Millennium Ecosystem Assessment (MA) was ersttaMt completed. The World Bank co-chaired and contributed A $150 million Critical Ecosystem Partnership Fund in many ways to this quite comprehensive study. (CEPF) was launched in August to help safeguard the A major finding of the MA was that 15 out of 24 world's most endangered biodiversity"hotspots." ecosystem services examined are being degraded or onmenvirnE used unsustainably, but the MA also points to ways of reducing degradation. L e t t e r f r o m K at h e r i n e S i e r r a V i c e P r e S i d e n t , S u S t a i n a b L e d e V e L o P m e n t T he world's population is increasing rapidly, mostly in developing countries. With growing numbers of people comes an expanding need for basic goods and services such as water, food, energy, sanitation, housing, and transport. Meeting these needs depends on our ability to govern our use of resources and ecosystems in a sustainable way. In the World Bank, we believe that environment must be intrinsically linked to our key development activities. This year we have reorganized our work to assure this comprehensive approach by forming the new Sustainable Development Network. In it, we are fully integrating units responsible for meeting basic human needs and infrastructure services with environmental and social units that guide our actions. This reorganization will enable a more dynamic assimilation of sustainability analysis into our core development activities. Development and conservation are often considered trade-offs, but the time has come to set aside the myth that economic growth must lead to environmental degradation, or that sustaining the environment harms people's options for growth and development. The poor are fundamentally dependent on the health of their environment, and managing natural resources well is vital to fighting poverty in developing countries. A major challenge is in recognizing--and accounting for--these environmental benefits and costs, including resource depletion and population growth. Factors such as climate change, invasive species, and water scarcity will increase the challenges. Because some of these factors are difficult to control, we must seek to manage those factors that are most tied to human behavior. As well, confronting poor governance and corruption is a certain way of delivering greater benefits to the poor and a healthier environment for all. In support of good governance, the World Bank is: · Workingwithourcountrypartnerstoimprovepublicgovernancecapacityoverenvironmentalresources, and enhance their tools for accountability and transparency · Strengthening demand for better governance through institutions such as a free media, vibrant civil society, and a flourishing, competitive, and responsible private sector · Tightening controls for corruption in World Bank projects to ensure that resources are used for the intended purposes · Developingstrongercollectiveandcollaborativeactionwithdevelopedanddevelopingcountrypartners, the private sector, and civil society Poor countries face difficult trade-offs. Our role as responsible global partners is to support countries as they work to solve these challenges in a sustainable way. From forests and fisheries to agricultural lands and water supply, the survival of human societies depends upon healthy systems and the sustainable use of these resources. Otherwise, our efforts to reduce poverty, hunger, and child mortality will not be enduring. The World Bank is committed to working closely with all of our development partners not just to protect but also to enhance our planet for future generations. Katherine Sierra Environment Matters 2006 -- The World Bank Group © 2006 The International Bank for Reconstruction and Development / THE WORLD BANK 1818 H Street, NW Washington, DC 20433 Welcome All rights reserved. to Environment Matters is a magazine of the World Bank Group. You may also find the magazine on the Bank's website -- http:// www.worldbank.org/environmentmatters Sustainable Development Network matters. Vice President . . Katherine Sierra T Environment Director James Warren Evans his edition of Environment Matters kicks off the start of the magazine's second decade, Environment Matters is produced by the and returns to central themes of sustainable development--institutions, policies, following World Bank Environment staff: and governance. While we can describe the kinds of policies that foster sustainable Publisher: Laura Tlaiye development, such policies will be fruitless without governments that act transparently and Technical Editor: Judith E. Moore fairly, and without people--citizens, the private sector, and nongovernmental organiza- Story Editor: Robert T. Livernash Managing Editor: Jim Cantrell tions--willing to hold governments accountable. Designer and Photo Editor: Jim Cantrell Associate Editor: William L. Davies Editorial Assistant: Diane Flex As many of this edition's articles describe, the Bank is engaged in these efforts in a variety of ways. Our program of technical assistance and analytical and advisory work is growing and is Special Contributors Andrey V. Kushlin increasingly addressing questions of institutional capacity, performance, and coordination. Jan Bojö Sergio Jellinek Roger Morier This year's edition has also benefited from the results of a reader survey that was part of Eri Tsutsui the tenth anniversary 2005 edition of Environment Matters. The survey results provided information about who reads Environment Matters, where they live, their professions, how they use and what they expect from the magazine, and much more. For example, the bulk of Notes: the respondents work in academia and the government sector. Nearly three quarters of those The source of all the environmental portfolio pie charts in the Regional secton is World affiliated with academia reside in client countries of the Bank, and over half of the respondents Bank Business Warehouse, 2006. working for NGOs are located in the Africa and South Asia Regions. Twenty-five percent of All $ = U.S. dollars except where noted. All tons = metric tons. respondents in client countries are affiliated with the government sector. IBRD maps numbered 31562 through 31567 contained in the Regional section of the magazine were produced by the Map More than half of the respondents also provided write-in comments and suggestions about Design Unit of the World Bank. The bound- aries, colors, denominations, and any other Environment Matters. For instance, a sizeable number of readers requested more individual information shown on these maps do not case studies and examples of best practice. Many also mentioned a desire for the magazine imply, on the part of the World Bank Group, any judgment on the legal status of any ter- to contain more statistics, graphs, and sources of information. ritory, or any endorsement or acceptance of such boundaries. The countries identified by name on these maps are countries to which the Bank provides development assistance The survey confirmed that Environment Matters is a World Bank publication with a varied, in the form of loans or advisory services, and for which the Bank has a designated worldwide, and avid readership. We are grateful to those who took the time to respond, and official responsible for the country. both the survey data and their comments have helped shape the magazine as we begin the Regional pie charts on the Bank's envi- ronmental portfolio: Objectives relating next decade of Environment Matters with this 2006 Annual Review. to environment and natural resources management (ENRM) issues are captured within theme codes. Task team leaders can assign up to 5 theme codes with either C O V E R I M A G E S a primary (P) or secondary (S) ranking. ENRM portfolio refers to active projects with Hands holding Earth: © CORBIS any of the seven ENRM theme-codes: viz. biodiversity, climate change, environmental Circular images from left to right: policies and institutions, land management, pollution management and environmental Forester: Patricia Hord Graphic Design health, water resources management, and other environment and natural resources Puku, Kafue National Park, Zambia: Kirk Hamilton, World Bank management. Carrying fish to market, Madagascar: © Gideon Mendel/CORBIS Brazilian urucun fruit: Igor Castro da Silva Braga, World Bank World Bank Publications Information: Harvesting sugar cane, Brazil: World Bank Photo Library 202-473-1155 General Inquiries: 202-473-3641 Department Fax: 202-477-0565 Web address: www.worldbank.org/environ- ment Printed with soy ink on recycled, chlorine-free paper. The World Bank Group Dear Readers: Please help us continue to update our subscriber database by sending 1818 H Street, N.W. Washington, D.C. 20433 your current email address to ematters@worldbank.org. We will use it to notify you electronically about future issues and keep you informed about the new on-line data on our website. Thank you! Contents Annual Review · 2006 A Letter from Our Vice President, Katherine Sierra 1 Director's Overview 4 Environment Department Director James Warren Evans explains how strengthening governance is now an integral component of the World Bank's approach to development assistance. Viewpoints Tackling Governance in the Forest Sector -- 6 Current Challenges in Russia and the Way Forward Valery P. Roshchupkin on how the Russian government is combatting the illegal logging and timber trade. How Much Have We Advanced? Access to 8 Information and Participation in Environmental From Curse to Blessing -- Natural Resources 24 Issues in Chile and Institutional Quality Andrea Sanhueza describes shortcomings in Chile's support Good governance is crucial to transform natural resource for access to environmental information and participation in wealth into good economic performance, according to Kirk environmental decision making. Hamilton and Giovanni Ruta. Seafood Certification and Sustainability 10 John White outlines the role of the Marine Stewardship Coun- Regional Articles cil in certifying sustainable fisheries around the world. Reviews of work in the Bank's six Regions focus on this year's theme of governance and environment. Feature Articles Africa ­ Sub-Saharan (AFR) 28 East Asia and the Pacific (EAP) 32 Combating Illegal Logging and Corruption in 12 Europe and Central Asia (ECA) 36 the Forestry Sector -- Strengthening Forest Latin America and the Caribbean (LAC) 40 Law Enforcement and Governance Middle East and North Africa (MNA) 44 Nalin Kishor and Tapani Oksanen argue that the widespread South Asia (SAR) 48 failure of forest governance directly undermines sustainable economic growth, equitable development, and environmental Institutional Articles conservation. Governance in the Environmental and Natural 16 IFC -- The Role of the Private Sector in 52 Resource Sector -- Combating Illegal Fishing Natural Resource Management: A Focus on Forests Charles di Leva, Lidvard Gronnevet, and Patrice Talla Takou- The International Finance Corporation increasingly provides kam write about the illegal, unreported, and unregulated fish- assistance to improve the capacity of the private sector and ing that is a serious global problem and a major governance of communities to develop innovative and more sustainable challenge for developing nations. models for governance of shared natural resources. Good Governance for Good Water Management 20 News Updates 56 Julia Bucknall, Richard Damania, and Harshadeep Rao report that Governance is an essential aspect of effective water re- source management and one that often receives less attention Environmental Publications (inside cover and back cover) than it merits. Governance and Environmental Management D I R E C T O R ' S O V E R V I E W Sanders Klas -- James Warren evans S EnvironmEntDEpartmEnt trengthening governance is now an found that in poor countries (excluding oil ability in natural resource management, integral component of the World states) natural resources make up 25 percent such as the recent development policy Bank's approach to development of total wealth, compared to 16 percent for loans in Gabon and Cambodia. assistance. Symptoms of weak produced goods and services. 3. Scaled up community-based natural governance include problems with the resource management in investment distribution of revenues, non-payment of The central focus of the World Bank's lending to support greater community taxes, restricted entry and competition in Environment Strategy and program is to control and decision making, decentral- markets, questionable quality of the regula- promote poverty reduction while managing ization of service delivery, and protection tory framework, poor control of corruption this natural wealth for current and future of rights of communities living near or graft, questionable attention to civil generations. This past year, the World Bank forests, such as the Mexico Community liberties, transparency and accountability, launched, in collaboration with donors, Forest Project. and instability or violence and crime. It is NGO partners, and other international or- 4. Supported strengthened disclosure and impossible to determine the developmental ganizations, a global program on sustainable dissemination of environmental manage- cost of poor governance, but world-wide fisheries--PROFISH. This initiative focuses ment indicators through the Country bribery alone is estimated to exceed $1 on facilitating stakeholder dialogue, provid- Performance and Institutional Assess- trillion dollars annually. ing technical assistance and policy advice, ments, which assess countries' current and enhancing fisheries sector capacity and policies and institutional frameworks. The management of water, forests, fisheries, skills (see page 16). In addition, the World 5. Collaborated with IFC to scale up wildlife, and other natural resources is too Bank's forest program is supporting regional public-private partnerships for improved often subject to poor governance, which forest governance activities to curb illegal corporate governance, focusing on contributes to degradation--such as depleted logging and support the development of a natural resource certification schemes soils, insufficient and polluted water, rapidly more level playing field among legitimate (particularly in forestry), voluntary codes disappearing forests, and collapsed fisher- forest operators (see page 12). of conduct, and corporate transparency ies--and threatens the health and livelihoods initiatives. of millions of people. These problems are We have also: particularly acute in poorer countries, in 1. Promoted mainstreaming of environ- which people are most dependent on their mental analysis into development plan- Our Portfolio of Projects in natural resource base. In many developing ning through country and sectoral countries, the costs of environmental degra- environmental analyses, such as the Fiscal 2006 dation have been estimated at 4 to 8 percent Ghana and Guatemala studies. of GDP annually. Yet such resources are a 2. Incorporated explicit policy reforms and While placing greater emphasis on environ- vital part of these countries' overall wealth. monitoring indicators in new operations mental governance, the Environment family The World Bank's recent Wealth of Nations that support transparency and account- has remained committed to our core business EnvironmEnt mattErs · 2006 Environment Matters 2006 -- The World Bank Group Overview of supporting poverty reduction, protecting diverse and productive systems. Some of the Active environmentAl And nAturAl resource human health, protecting water resources, environmental benefits that have been gained mAnAgement Portfolio, end fY06 strengthening forest management, and through these changes include biodiversity supporting innovative environmental policy conservation, water retention, prevention Other environmental Biodiversity tools. The program of analytical and advisory of landslides and erosion, improved soil management 3% ($287) 3% ($335) work is growing and is increasingly focusing productivity, reduction of deforestation, and Climate change 10% ($936) on questions of institutional performance, enhanced carbon sequestration. The project Water resource management Environmental coordination, and helping institutions also focuses on enhancing the ability of the 26% ($2,481) policy and institutions improve their capacity. project partners and farmers to monitor 10% ($1,010) land use changes, calculate the incremental In fiscal 2006, the World Bank approved environmental services gained (or lost) Pollution Land management 73 projects with environment and natural against their baseline, and reward producers management and 13% ($1,306) resources management content in 48 coun- who have made positive changes. environmental health 35% ($3,336) tries, amounting to $1.4 billion in new commitments. Twenty-four of these new Our carbon finance business is demonstrat- Percentages based on commitment amounts. Figures in $ millions. Percentages based on commitment amounts. Figures in $ millions. projects have objectives specifically targeting ing how greenhouse gas emissions can be strengthening environmental policies and reduced, while also providing local benefits, Active environment And nAturAl resource institutions. The total active portfolio with such as switching to cleaner fuels and cheaper mAnAgement Portfolio ­ regionAl distribution, environment and natural resources manage- energy sources. These initiatives include end fY06 ment components was $9.7 billion at the end investments in more efficient transportation of fiscal year 2006 (see Figures, right). and industrial processes, and improved waste SAR AFR 11% ($1,044) and land management. Capacity building, 15% ($1,421) Throughout our portfolio, we are strategically business development support services, and MNA seeking projects that demonstrate multiple facilitation of dialogue at the community 8% ($729) benefits. In Senegal, for example, a World level are frequently key components of these LAC EAP Bank-GEF project on Sustainable and projects. 12% ($1,140) 37% ($3,699) Participatory Energy Management intro- duced sustainable forest management and ECA successfully promoted the manufacture and The Challenge 17% ($1,658) sale of 250,000 improved wood stoves. This Percentages based on commitment amounts. Figures in $ millions. project helped improve the air that millions In this issue of Environment Matters, the Percentages based on commitment amounts. Figures in $ millions. of poor women and children breathe, reduced emphasis on good governance underscores poverty, stemmed the rate of deforestation, our commitment to work with clients and behavior by the private sector, including col- and lowered carbon dioxide emissions. Par- partners on building stronger institutions laborating with IFC in the implementation ticipatory activities were funded to develop and systems for greater transparency and of its environmental and social performance detailed community-based forest and natural accountability. We focus our efforts on (a) standards. resource management plans. changing bad policies, such as those that permit high levels of discretion in economi- The World Bank's work with partners and In Colombia, Costa Rica, and Nicaragua, cally important sectors; (b) promoting and clients on governance and the broader en- the Integrated Silvopastoral Approaches building institutional capacity that enables vironmental agenda is enormously exciting. to Ecosystem Management Project seeks agencies to disclose to the public more in- Working with all sectors of society, we will to compensate livestock producers who formation about environmental quality and strive to make more accountable the institu- implement environmentally sound forest associated decisions; (c) devolving aspects tions that serve the public's daily needs and and pastoral systems. The project promotes of resource management to communities, guide our resource decisions. This is one of land use change from systems character- with mechanisms for checks and balances; the most daunting development challenges. ized by low vegetation cover and minimal and (d) promoting public policies that sup- environmental attributes to more biologically port responsible environmental and social annual rEviEw · July 2005­JunE 2006 (Fy06) Tackling governance in The ForesT secTor Current Challenges Valery P. Roshchupkin Chief in Russia and the Federal Forestry Agency Russian Federation Way Forward Access to information, stakeholder participation, and accountability are key elements of good governance that protect not only the rights of people and communities, but also their natural environment. The Russian Federation, as the custodian of 22 percent of the world's forests, has recently emerged as one of the major contributors to international efforts to improve forest governance and combat illegal logging and associated trade and corruption. Since 2004, the Government of the Russian Federation and the World Bank have worked closely on developing and launching the Europe and North Asia Forest Law Enforcement and Governance Ministerial Process. This process has already secured high-level political commitments from 44 participating governments and the European Commission for practical actions at national, regional, and international levels, among both producers and consumers. With the explicit endorsement of President Putin, the Government of the Russian Federation is poised to implement its own comprehensive National Action Plan to Combat Illegal Logging and Illegal Timber Trade. -- Kristalina Georgieva, Country Director, Russian Federation I llegal turnover of timber and, in particular, illegal logging would still be safe to assume that the actual level of forest infractions are on the list of the hottest issues in the forest sector of the is substantially higher than the officially documented level. Russian Federation. The official 2005 statistics show documented illegal logging at the level of 0.89 million cubic meters. In the The bulk of illegal logging takes place in the near-border regions of same year, the results of remote-sensor monitoring of forest Russia: the Far East, the Northwest, and Siberia. Hence, it is directly utilization in the seven largest forest regions of Russia identified linked to the export of illegally harvested timber to international an additional 1.16 million cubic meters of timber harvested with legal infractions. This makes a total of at least 2 million cubic meters of markets. timber from documented illegal logging operations. In and of itself, this figure is disturbing. The analysis of the root causes of illegal logging and related trade and corruption shows that it is only possible to address and combat them Indirect estimates by international experts indicate that the real through a comprehensive set of measures. These include proactive use volume of illegally harvested timber may now be at the level of 10 oftheEuropeandNorthAsiaForestLawEnforcementandGovernance percent of total annual wood harvest in Russia, reaching up to 18­20 (ENA-FLEG) process to garner international cooperation, as well as million cubic meters. Even if these estimates are overly alarmist, it engagement on the part of the federal executive branch (including Environment Matters 2006 -- The World Bank Group EnvironmEnt mattErs · 2006 V I E W P O I NT s fiscal and law-enforcement agencies), regional administrations, the processing capacity; creating new jobs in the regions with current business community, environmental NGOs, and civil society. concentrations of illegal logging; promoting vertical integration in the forest industry; and saturating the market with wood products Russia began implementing an interagency plan for combating of legal origin. the illegal logging and timber trade in 2002. The November 2005 Ministerial Conference on Forest Law Enforcement and Governance The program of social policy measures is also essential. It includes in Europe and North Asia, which was held in St. Petersburg, has specific steps aimed at developing a public image of respectable recommended that participating countries develop a higher-level entrepreneurial behavior in the forest industry, setting up mechanisms document--a national action plan. for its promotion, and engaging civil society in the system of forest relations and environmental awareness-raising within the population At a high-level meeting in April 2006 on the country's forest sector development, President Putin instructed the Government of the at large. Russian Federation to develop and approve a set of measures aimed at resolving these issues. In terms of cooperative international actions, we assign particular importance to our participation in the international working group on The work is about to be finalized. The proposed actions can be grouped (a) developing a common understanding of FLEG-related concepts, into six main building blocks: definitions, and terms; (b) development of a common system of timber measurements and accounting; (c) development and implementation · Improvements in the legal and regulatory framework of agreements on the exchange of electronic information on timber · Improvements in public management systems product movements and customs clearance; and (d) collaboration · Improvements in workflow organization of forest use within the framework of the United Nations Convention Against · Development of social and economic mechanisms Transnational Organized Crime. · International cooperation · Administrative support We expect that full implementation of the proposed plan of action will yield the following results: The new Forest Code of the Russian Federation, which is pending, will guide the substance of the first four of these blocks. Under this code, · A reduction in the volume of illegal logging by 20 to 30 percent in 2007, Russia's forest management system will enter a fundamentally in the first two years new phase, based on decentralization of forest management, which · An increase in the rate of detection of illegally harvested wood means delegating to the regional administrations the full set of rights by up to 50 percent of the estimated volume and responsibilities in forest use, regeneration, and protection. · An increase in budgetary revenues by 2 billion rubles ($75 million) a year Special attention is being paid to the development of a federal system · An improvement in ecological conditions and forest vitality in of remote sensing (aerial and satellite) to monitor forest utilization the affected regions status. In 2005, this monitoring system covered 53 million hectares of forests; in 2006, it was expanded to cover over 100 million ha. · An improvement in the international image of Russia in the area Within the next two years, the system will be expanded to about 300 of forest management and forest utilization million ha, which represents almost the entire area of intensive forest use in Russia. Work is also under way to develop a unified system of In conclusion, I want to reiterate that our commitment to improved interagency information exchange regarding forest inventory, forest governance in the Russian forest sector has received strong support use, turnover of forest resources and wood products, price and tax both domestically and internationally. By offering a candid assessment monitoring, and legal infraction statistics. of the problem and starting an open and inclusive process to define ways to address it, we have been able to bring together foresters and Expansion of certified forests through the development of a national forest-dependent communities, the private sector and civil society system of voluntary forest certification will also contribute to a wider organizations inside Russia, as well as our key trading partners and confirmation of the legality of timber. consumers of our timber products abroad. This gives hope that the alarming trends in illegal logging can and will be reversed, for the The expected FederalTargeted Program on forest sector development benefit of Russia's forests, the Russian people, and the world as a should become an effective tool for increasing value-added wood whole. annual rEviEw · July 2005­JunE 2006 (Fy06) how much have we advanced? Access to Information Andrea Sanhueza and Participation in Executive Director Corporación, PARTICIPA Environmental Issues Chile in Chile I nspired by the Rio Summit and Principle 10 of the Rio Declara- To face the major deficiencies in guaranteeing access to public informa- tion, in 2000 a group of nongovernmental organizations from tion and participation, both at the legal and practical levels, utmost various parts of the world created The Access Initiative (TAI). importance should be given to the following areas. TAI is intended to drive the implementation of commitments related to access to information, participation, and justice in Chile, unlike the majority of the other countries being studied, does environmental decision making. TAI has grown significantly; not guarantee in its Constitution either the right of access to public it currently has 32 member organizations in Latin America. information or the right to participate. An important legal improve- ment occurred in August 2005, however, when a constitutional TAI developed a methodology to evaluate the extent to which national reform was promulgated establishing the principle of public disclosure governments have fulfilled their commitments to develop or improve of "the acts and resolutions of agencies of the State, as well as their the legal framework that protects access to public information, access grounds and their procedures." Furthermore, the reform established to justice, and public participation in decision-making processes that the reasons to declare information secret or confidential must involving public policies. be stipulated by law. During 2004­05, the evaluation was carried out simultaneously in This advance is not yet fully reflected in the daily practices and behavior seven Latin American countries: Bolivia, Costa Rica, Chile, Ecuador, of Chilean public administration, which still shows its cultural fond- Peru, El Salvador, and Mexico. ness for secretive practices. Recently, for example, the Inter-American Court on Human Rights ruled against the Government of Chile for Chile is recognized for its high standards of social, political, and refusing to release environmental information in 1998. The Court economic stability, which constitute an important achievement urged the government to improve the existing norms and to train in widening the scope of democratic governance. In issues like public officials on procedures to release information. access to public information and citizen participation, however, the country encounters problematic situations that need to be urgently In the context of the TAI, some of the practical exercises carried addressed. out in Chile show some important weaknesses that deserve to be mentioned: Environment Matters 2006 -- The World Bank Group EnvironmEnt mattErs · 2006 V I E W P O I NT s · The majority of public officials involved in the cases being Compared to other countries, the legal conditions in Chile linked studied were unaware of the regulations regarding access to to civil society capacity building also pose a major obstacle. For civil public information. society organizations to be recognized by law, they have to be registered · There is no public policy designed to guarantee that, in case a as either foundations or corporations and they need the approval of request of information is filed in the incorrect department or the president of the Republic. institution, it is redirected to the appropriate one. As a result, many information requests are left unanswered. Some of the main recommendations of the 2004­05 evaluation for · Generally, public information is presented in a way that is not easy Chile include the following: to understand for the general public, especially in rural areas. · Access to information is usually concentrated in cities and is Access to information more difficult for communities or areas that are far from urban · Guarantee that the current legislation on issues of access to centers. information is fulfilled by the public services in a manner that · There is a lack of information on certain areas, such as the ensures effective access to public information. economic and environmental priorities of the region. · Train public officials on procedures for releasing information. · Make efforts to provide information in a comprehensible way Regarding the right to participate in environmental issues, the only for all the people. legislation that exists in Chile regulates participation in the Envi- ronmental Impact Assessment System (SEIA). This system provides Access to participation a time frame of 60 days to participate, during which the proponent · Increase the level of citizen participation in the formulation, has to implement a consultation process to determine public opinion execution, and evaluation of plans and policies. about a project. This legal obligation implied significant progress on · Institutionalize the participation processes, which cannot depend this issue, although in many instances the procedure is merely formal exclusively on the interest and discretion of the authorities. For and doesn't incorporate the most important observations and proposals example, the evaluation proposed the creation of an instruction that are formulated by the participants. manual about basic aspects of citizen participation. This would make it possible to avoid the excessive pressure that now falls There is no other regulation in Chile that refers to citizen participation on the SEIA. in public policies or programs. In general, participation depends on · Increase the time periods for formulating observations in envi- the interest of the authorities in charge, the capacities of their teams ronmental impact studies, thus generating citizen participation or advisors, and the resources available. in early stages of the project cycle as well as in its later phases. Although this is promoted by CONAMA, the Chilean Ministry The cases about the right to participate that have been evaluated of Environment, its implementation should not remain subject provide interesting examples of how, little by little, the state is begin- to political willingness to comply. ning to open itself up to citizens. One case that stands out is that of the creation of the National Policy of Fish Farmers. This established a In sum, based on the facts described above, it is not possible to national commission for implementation and follow-up on the policy. conclude that effective access to information and participation exists The members of this commission, who had also supported the revision in Chile. With the constitutional reform of 2005 on our side, we of the policy, expressed a high level of satisfaction with the process, plan to continue striving to give the public the tools and means to which provided an opportunity for them to have a real influence on take part in state affairs. decision making. They also recognized that it is a unique initiative that should be repeated in the future and in other fields. annual rEviEw · July 2005­JunE 2006 (Fy06) seaFood cerTiFicaTion and susTainaBilTY John White Director for Development Marine Stewardship Council W hat happens on, in, and under the sea matters. As these products are from well-managed fisheries. They are probably consumers of seafood, as producers, retailers, processors, not overly interested in stories about complex supply chains. They and as restaurateurs, we all want to know if there will want a simple, consistent, visible signal that they can trust what they be fish on our plates tomorrow. There will not be if are buying. And retailers want to be sure that claims for sustainability things go on the way they have been. Fish is the basic made by suppliers are credible, easy to explain to customers, and source of protein for many millions of people. It is verified by independent parties. increasingly sought by health-conscious people worldwide. Demand is rising inexorably, having doubled over the last 30 years. But most These challenges can be met and market forces can be harnessed to consumers either do not know, or ignore, the facts: that (a) fish bring about changes in behavior that will promote the sustainability are not in inexhaustible supply (half of world fish stocks are fully of marine resources. The Marine Stewardship Council (MSC), an exploited and another quarter are overexploited or depleted); (b) independent international charity, provides a mechanism to do this marine conservation issues are too often played down; and (c) the through an eco-labeling and certification program. ever more technologically advanced fishing industry is in some cases spreading the problems of overfishing and environmental degradation Under the MSC program, fisheries voluntarily apply to be assessed worldwide. The collapse of some major fisheries has shown how, in by independent third-party certification bodies against the MSC's a short time, marine ecological disaster can become a reality and not Environmental Standard. If a fishery passes, then products from that just a prediction. fishery can carry the MSC eco-label with the following declaration: The seafood industry is complex. But tackling the problems it faces "This product comes from a fishery which is not insuperable; far from it. Transformation of the industry so that has been certified to the Marine Stewardship it operates on a sustainable basis is possible. Both consumers and Council's environmental standard for a well- producers, and all those in the industry up and down the supply chain, managed and sustainable fishery." can play a part in reform. This is a case in which individual actions can influence corporate behavior. Governments and regulatory authori- Appraisal under the MSC standard involves investigation of the ties have opportunities to help promote sustainability and marine health of relevant fish stocks, of the impact of the fishery on the conservation while achieving social and economic objectives. ecosystem in which it operates, and of the effectiveness of the fishery management system in place. Certification is the strongest signal There is increasing evidence from retailers that consumers want to available that a fishery is run responsibly and that it has the capability know where seafood products come from. They want assurances that to contribute to maintaining fish supplies in the long run and in a 10 Environment Matters 2006 -- The World Bank Group EnvironmEnt mattErs · 2006 V I E W P O I NT s ies to enter the program and so increase the proportion of sustainably Cockerhan caught seafood available. Michael The certification program offers fisheries a way of proving that they operate in a way that consumers and retailers increasingly see as desirable. Product differentiation is real. But beyond short-term gain, fishers in certified fisheries know they have also established the foundations for securing their long-term livelihood through embracing sustainable measures and practices. For governments, reversing the decline in fish stocks, improving conservation of the marine resource, and securing livelihoods can help stimulate economic development and regeneration. Promoting and achieving sustainability confers multiple benefits, both private and social. Governments can take a number of actions that will encourage fisheries to seek and achieve certification successfully. They make and enforce regulations that can help fisheries meet the requirements of the MSC Standard. For example, governments can ensure that allowable catch limits are set on the basis of the best scientific advice and then enforced. They can take and implement measures to combat illegal and unregulated fishing. They can set strong, wide-coverage, ecosystem- based management standards for fisheries that include minimizing by-catch and discard problems. Positive actions by the public sector that promote sustainability are feasible, desirable, and necessary. manner that will safeguard the marine environment. The program is The MSC program is open to fisheries worldwide and on any scale.To the only marine certification and labeling program in the world to help more fisheries join, we will improve the quality and consistency be fully consistent with the UN Food and Agriculture Organization's of the certification process. We want to see more fisheries from Voluntary Guidelines for the Eco-labeling of Fish. developing countries enter the program and will ensure the continued relevance and application of the MSC standard to them. We will also There are now 21 fisheries around the world that have been certified continue to work in partnership with developing world stakeholders to the MSC standard. A further 16 are under full assessment and some to help them benefit from the program. Certification can offer the 20 other fisheries are in the pre-assessment process. These fisheries potential for premium prices, access to new markets, preferred supplier represent about 3.5 million tons of seafood. This total masks significant status, and the potential for attracting new investment. It will help presence in certain key species groups--for example, 32 percent of longer-term food security, as more fisheries operate on a sustainable the global prime white fish catch and 42 percent of the global wild basis. Marine eco-labeling and certification is already contributing to salmon catch are now either certified or under assessment. the achievement of the Millennium Development Goals by addressing hunger and poverty and the need for a sustainable environment. Equally important, major retailers--particularly in the United States, Germany, and the United Kingdom--are increasingly interested in the possibility of a sustainable approach to the seafood industry. WalMart, John White, Director for Development Marine Stewardship Council (MSC) for example, has committed itself to sourcing all its fresh and frozen 3rd Floor Mountbarrow House seafood from MSC-certified sources over the next 3 to 5 years. This 6-20 Elizabeth Street encourages suppliers to these retailers to become certified under the London, SW1W 9RB United Kingdom program. By empowering consumers to make informed choices when www.msc.org buying seafood, labeling provides incentives to encourage more fisher- annual rEviEw · July 2005­JunE 2006 (Fy06) 11 Combating Illegal Logging and Corruption in the Forestry Sector Strengthening Forest Law Enforcement and Governance T he widespread failure of forest form of bribes, extortion, kick- Corruption and Illegal Forest Activity Over 20% Over 50% governance--characterized by backs, protection money, and, 0 Other Asia West and Russia illegal logging, associated illegal most sinister of all, the erosion of Central Africa trade, and corruption--directly institutions beyond the sector and Brazil TI)( undermines sustainable economic growth, across the economy. More often Acceding Indonesia China equitable development, and environmental than not, it will facilitate the oc- EU ruption 5 conservation. It puts at risk poor and for- currence of illegal acts, especially orC Japan Other Latin America est-dependent populations, which rely on large-scale illegal logging (see ighH Malaysia timber and non-timber forest products; Figure, right, indicating a high USA Eu-15 undermines responsible forest enterprises by correlation between illegal log- Canada distorting timber markets and reducing prof- ging and corruption). About $5 10 ­10 0 10 20 30 40 50 60 70 80 itability; and results in a loss of government billion per year is estimated to be High Percent Suspicious Log Supply revenue that could be invested in sustainable lost due to uncollected taxes and Note: Bubble size represents the volume of suspect roundwood, including imports. forest management or general economic royalties on legally sanctioned Source: Seneca Creek Associates 2004. development. timber harvests due to corruption tection); and they provide private benefits (World Bank 2002 estimate). (such as timber rents) principally when they Illegal logging and other forest crimes of are harvested. So there is a need for high various kinds are common in many parts of levels of intervention to assure optimal and the world and often involve players in both sustainable levels of harvesting, while at the producer and consumer countries. TheWorld Fundamental Causes same time ensuring adequate protection of Bank estimates the market value of global the public benefits. annual losses from illegal cutting of forests in A combination of high scarcity rents, discre- public lands at over $10 billion--more than tionary powers, and low accountability are Typically, state forest management agencies eight times the total official development the fundamental drivers of illegal logging and are entrusted with managing the conflicting assistance flows for the sustainable manage- corruption in the forest sector. Unlike other objectives of conserving global assets and ment of forests. resources, forests provide a wide range of generating resource rents. These agencies public benefits only when they are preserved are underfunded, and their officials work Corruption--another symptom of weak (for example, through watershed protection, for meager salaries. But since timber is scarce forest sector governance--is evident in the carbon sequestration, and biodiversity pro- relative to demand (and harvesting costs are Environment Matters 2006 -- The World Bank Group 12 EnvironmEnt mattErs · 2006 Feature Articles Voluntary Corporate Codes of Conduct to Promote Legal and Sustainable Forestry Corporate codes of conduct are voluntary initiatives by which corporations, either indepen- dently or as members of associations, commit themselves to follow self-defined principles of social and environmental responsibility. IKEA's long-term goal is to source all wood in the IKEA range from forests certified as being well-managed. Recognizing that conditions to support responsible forestry must be in place before certification can be achieved, IKEA works with a "staircase model" to promote legal and sustainable forestry among its suppliers. This model has four levels to establish minimum requirements on wood material, and uses a step-by-step approach to place higher demands on suppliers. Requirements include the legal sourcing of wood products. IKEA, in partnership with WWF, has developed a wood tracking system to ensure that there are no leakages along the chain of custody. The partnership has also established producer groups committed to extracting only legally sanctioned harvests. Stora Enso, a European timber and paper company, actively works to combat illegal logging and related illegal activities where it operates. The company's strategy to ensure the legal origin of its wood purchased in Russia includes: · Recognizing and analyzing the risks related to legality and sustainability issues · Focusing on long-term partnerships and investments low), the rents from depleting forests remain · Having local representative networks high, and there are strong incentives to sub- · Increasing its own logging operations vert regulations and pay bribes to capture a · Keeping the supply chain as short as possible · Offering training and cooperation to promote supplier's awareness of sustainability greater share of the resource. In addition, issues forestry officials usually operate in remote · Having active stakeholder dialogue and development projects areas, far from public scrutiny, and with broad discretionary powers. Forest officers While it is too early to assess the impact of such initiatives, they are likely to become increas- may have a great deal of latitude to certify ingly important instruments in the fight against illegal logging and forest corruption. compliance with the law, or collude in illegal Sources: World Bank 2006, IKEA 2006. acts. The propensity for malfeasance and the incentive to accept bribes in these circum- to follow self-defined principles key step in addressing the prob- stances is clearly high. With limited over- of social and environmental lem. Developing green sight, abundant rents, and poor incentives, responsibility. IKEA's consumerism holds the opportunities for corruption abound. "staircase model" potential to stream- Neither production areas nor protected ar- (see Box, above), line demand once eas are immune from corrupt practices and which raises the "green" timber illegal logging. standards ex- can command pected of their a r e a s o n - wood suppli- a b l e p r i c e ers in a step- premium. A Search for Solutions wise manner, is a promising Increasing tim- Demand-side interventions. Controlling scar- approach in this ber supplies. The city rents by reducing demand for timber regard. Strong multistakeholder requires implementing environmentally and alignment of public Global Vision for socially responsible procurement policies at procurement policies-- Forest 2050 Project all levels.In the case of corporate codes of con- in countries such as the estimated that plantation duct, corporations, either independently or as United Kingdom, Denmark, and forests--managed exclusively for members of associations, commit themselves Japan--with legally sourced timber is also a wood and fiber on just 4 percent of forest annual rEviEw · julY 2005­junE 2006 (fY06) 13 lands--could meet 50 to 60 percent of world demand in 2050. Clearly, investing in indus- Strengthening ForeSt MangeMent trial plantations is a feasible approach to the and governance indoneSia in elimination of scarcity rents. The Bank has Indonesia's forests are among the most extensive, diverse, and valuable in the world. Covering been actively supporting plantation develop- over 70 percent of the total land area, the Indonesian forest estate generates income and jobs, ment in countries such as China and India. and provides livelihoods for millions of people, as well as nearly 10 percent of non-petroleum Forest certification is another approach to export revenues. increasing the supply of timber from well- managed forests, and can help control illegal Indonesian President Susilo Bambang Yudhoyono has made improving forest governance and curbing corruption top priorities and has directed relevant government agencies to accelerate logging and other forest crimes. Currently, efforts to curb il- legal logging, one of the main problems in forest about 140 million hectares of forests are sector man- agement. Poor governance, corruption, and under various types of certification schemes. w e a k law enforcement have hampered There is huge potential for expansion, espe- t h e Indonesian government's ability to cially for tropical forests. effectively manage forests, collect forest revenue, attract forest in- Monitoring, increasing transparency, and ac- vestment needed to revitalize countability. The remoteness of forests offers Indonesia's timber industry, promote Indonesia's timber rich opportunities for illegal logging and products in international corruption. Detection, monitoring, and markets where demand surveillance are important tools in combating for legal timber is grow- these problems. The use of satellite data of- yrabiLotohPknaBdlroWehT ing, and thus ensure that fers a cost-effective method to monitor forest Indonesia's forests make cover. It also provides the option for a variety an important contribution of stakeholders to use this information for to the economic and social effective surveillance and detection of forest development of Indonesia. crimes. Innovative approaches are being suc- Indonesia's good forest gover- cessfully implemented in Brazil, Cameroon, nance initiative is built upon two India, Indonesia, and Russia. Where local pillars: transparency and the rule of law. In con- capacity is inadequate, hiring an indepen- s u l t a t i o n s with civil society, donor agencies and the dent forest monitor can make a positive private sector, the Ministry of Forestry and other relevant institutions have begun, with the support of theWorld Bank, two parallel, complementary initiatives designed contribution to increasing transparency and to improve the fundamental pillars of forest governance: accountability, as has been done in Cambo- dia, Cameroon, and Ghana, for example. In Promoting Transparency Bolivia and Ecuador, systems of independent The initiative's goal is to make accurate and up-to-date forest sector information continuously surveillance and monitoring by the public available to decision makers.This includes: a) improving the informationmanagementprocessthat have brought forest operations into open generates and archives information on Indonesia's forest and timber resources; b) establishing a scrutiny and promoted improved account- comprehensivedisclosurepolicythat clearly articulates what information can be publicly disclosed ability on the part of public officials. and what is confidential; c) developing effective disclosure mechanisms that allow multiple stake- holders to access accurate and up-to-date information on Indonesia's timber and forest resources; and d) encouraging an improved decision-making process able to use the information. As indicated above, making headway in this difficult and complex area requires action on Promoting Law Enforcement several fronts. The government is implementing and supporting a comprehensive framework of measures, de- signed in extensive multistakeholder consultations, to prevent, detect and suppress forest crimes As part of its wider effort to promote sound and improve law enforcement in Indonesia. This framework includes the following: a) support forest management, the Bank currently fi- for the establishment of a forest crime case tracking system that will allow multiple stakeholders nances more than $300 million in forest law to monitor and hold the government to account for its law enforcement operations and judicial enforcement and governance activities in its processes; b) assistance with the implementation of Indonesia's anti-moneylaunderinglegislation, portfolio of forest projects. See Box, right, as it relates to forest crimes; c) continued support for an interagency forest law enforcement strike for a description of forest governance work force; and d) support for participation by the Indonesian government in the Asia FLEG process. 14 EnvironmEnt mattErs · 2006 Feature Articles supported in Indonesia. Some of the specific areas addressed in Bank projects are: the regional ForeSt law enForceMent and governance (Fleg) MiniSterial ProceSSeS Development of forest policies, regula- Three Regional FLEG ministerial processes have been initiated so far--in East Asia (2001), Africa tions, and management plans (2003), and Europe and North Asia (2005). All three FLEG processes have been remarkably suc- Capacity development for public agen- cessful in eliciting high-level political commitment and fostering a spirit of shared responsibility. cies to better address forest crimes Strong partnerships have been formed among various producer and consumer governments, Support for public awareness activities development agencies, civil-society organizations, and forest industry companies and their Supportfornaturalresourceinventories, associations sharing a common concern with improving forest governance. The ministerial transparency in concession allocation, processes have also been successful in drawing the attention of policy makers to new and in- forest certification, and chain-of- novative tools--such as customs collaboration and anti-money-laundering laws--to combat custody verification illegal logging and forest corruption. Development of forest monitoring and On the demand side, FLEG recognizes the responsibility of"consumer nations"(through control- law enforcement reporting systems ling demand-side pressure) and has built on initiatives such as the G-8 Forest Action Program Provision of equipment and capacity on illegal logging. On the supply side, the FLEG process addresses the underlying causes of development for staff responsible for corruption and illegal logging. The FLEG umbrella includes a joint approach by producer and management of protected areas consumer countries, including technical meetings where experiences with FLEG issues are shared, intergovernmental negotiations for the drafting of a declaration and/or action plan, and stakeholder dialogues supporting these negotiations. The processes seek to create the political In addition to financing investment projects commitment and analytic foundations at the national and regional levels to effectively address and related technical assistance, an essential these complex and politically sensitive issues. and increasingly important part of the Bank's contribution is t h e analytical a n d and verifying and monitoring the chain ging and other forest crime in partnership of custody and legal compliance in the with governments and other major stake- timber industry. holders from civil society and the private sector. Since 2001, the Bank has also been srednaSsalK,segamihtoB actively involved in catalyzing a high-profile Forest Law Enforce- ment and Governance (FLEG) Key References process (see Box, above), which is strongly World Bank. 2006. Strengthening Forest Law Enforcement and Governance: Strengthening a supported by Systemic Constraint to Sustainable Development. development Report No. 36638-GLB. Washington, DC: The partnersand World Bank. advi- key coun- Kishor, Nalin, and Richard Damania. 2006. sory activ- try gov- "Crime and Justice in the Garden of Eden: Im- ities carried out ernments proving Governance and Reducing Corruption in for client countries. In recent alike. The the Forestry Sector." In J. Edgardo Campos and years the Bank has produced r e g i o n a l Sanjay Pradhan, eds. The Many Faces of Corrup- tion: Tracking Vulnerabilities at the Sector Level. several important publications FLEG pro- Washington, DC: The World Bank. that include discussion of forest cesses have law enforcement and governance aimed to create This article was prepared by Nalin Kishor, issues ranging from country-level the high-level po- (202) 473-8672, nkishor@worldbank.org, and assessments of illegal logging and other litical commitment and Tapani Oksanen, (202) 473-1497, toksanen@ forest crime to thematic assessments on is- the political space at national and regional worldbank.org, both of the Agriculture and sues such as reforming forest fiscal systems, levels to address issues related to illegal log- Rural Development Department. annual rEviEw · julY 2005­junE 2006 (fY06) 15 Governance in the Environmental and Natural Resource Sector Combating Illegal Fishing T he successful development and in turn, also lead to uncontrolled, devastating is a serious global problem, one of the main implementation of environmen- depletion of natural resources. constraints to the achievement of sustainable tal laws is a particular challenge fisheries. For the implementation of the 1995 in many developing countries, In recent years, some of the worst armed con- Code of Conduct for Responsible Fisheries, whether it is in the forest, fisheries, or min- flicts within World Bank member countries an International Plan of Action to Prevent, ing sectors. Deficiency in the rule of law in have been connected to efforts by one group Deter and Eliminate Illegal, Unreported almost any sector encourages corruption to control dwindling environmental re- and Unregulated Fishing (IPOA-IUU) was and prevents sound growth. The Bank has sources at the expense of another group. Post- adopted by the FAO Committee on Fisheries demonstrated that countries with better gov- conflict countries often suffer from damaged in 2001. IUU fishing represents a major loss ernance tend to experience faster economic physical infrastructure, scarce employment of revenue, particularly to some of the poor- growth than those with poor governance, opportunities, reduced foreign investment, est countries in the world, which are highly and thus have more resources to invest in increased capital flight, and weakened gov- dependent on fisheries for food, livelihoods, education, social safety nets, and sound en- erning institutions that can lead to further and revenues. It proliferates mostly where vironmental management, all of which are damage to environmental capital. This is governance is weak and where countries fail critical for sustainable development. especially true where displaced populations to meet their international responsibilities. are often forced to live in ecologically fragile areas. The resulting depletion of the host's How extensive is IUU fishing? A recent study forest and water resources can instigate new (MRAG 2005) used empirical information Resources and Conflict conflicts between displaced populations and available from the literature and examined the local community. ten developing countries around Africa and Governance failures in natural resources can in Oceania that are suffering from differing lead to conflict and ultimately to violence. levels of IUU fishing. The estimated loss Many governments in Latin America, for to illegal or pirate fishing is shown in the example, have faced difficulties in reconciling IUU Fishing Figure, right. indigenous rights to natural resources with those of other groups, including commercial The governance challenges in the fisheries sec- By extrapolating the average percentage of interests, which has often led to conflict. tor are a good illustration of the complexities IUU fishing from the case studies to the Sustained conflict and political violence can, faced by many developing nations. Illegal, whole world, the study estimates the total unreported, and unregulated ("IUU") fishing value of the IUU catch at $9.5 billion. This Environment Matters 2006 -- The World Bank Group 16 EnvironmEnt mattErs · 2006 Feature Articles ernance was the strongest Potential Increase in GNP with Elimination of IUU Fishing factor in explaining the level of IUU fishing. The study also found that compliance increases with increasing monitoring, control, and surveillance activity--for instance, the number of in- spections--but at a decreas- ing level as full compliance is approached. IUU fishing is not only a problem in developing countries, but can also be a seriouschallengeforfisheries hokniMyeriseDin northern waters. For ex- Source: MRAG 2005. ample, the northeast Arctic cod stock in the Barents Sea is jointly managed by Russia and Norway. regional colleagues--has helped member estimate should only be used for illustrative Over the last 10 to 15 years, the spawning states develop environment-related legisla- purposes; more case studies are needed to stock biomass has been rebuilt to well above tion that is legally and economically sound, develop a better global estimate. the "precautionary level." Since 2002, how- as well as enforceable. ever, there has been a sharp increase in IUU The basis for extrapolation to the whole of catches; estimates of the yearly quantity of The World Summit on Sustainable Devel- sub-Saharan Africa is much stronger because such catches range from 70,000 to 166,000 opment (WSSD) in Johannesburg in 2002 the study includes cases in all representative tons. Based on 70,000 tons of illegal catch, took the long-term sustainability of global areas and for all fishery and country gover- the yearly economic loss to Norway alone fish resources very seriously and called on nance types in this region. The estimate for has been estimated at $245 to $260 million the total value of all IUU fishing across sub- (1.6 to 1.7 billion NOK). The loss to Russia Saharan Africa is about $900 million. is probably in the same range (Vassdal 2005, hokniMyeriseD Misund 2006, ICES 2006). The potential for gain to the national econo- mies in African countries is illustrated in the Figure at top right. The Bank's Role Using the World Bank's governance indica- tors, another study (Kaufmann, Kraay, and The United Nations Conference on Envi- Mastruzzi 2004) found that the level of gov- ronment and Development, held in Rio de Janeiro in June 1992, made clear in its Estimated Cost of IUU Fishing in 10 Agenda 21 report that international financial Selected Countries (millions of dollars) institutions should help developing countries ) m$(gnihsfietarip/lagelliotssoL Guinea implement their multilateral environmental Somalia Angola treaty obligations, and that implementation Mozambique Papua NewGuinea should include adopting and implementing Sierra Leone Liberia sound environmental and natural resources Seychelles Kenya legislation. Since that time, the Bank's Legal Namibia Department--working closely with mem- 0 20 40 60 80 100 120 Source: MRAG 2005. bers of the Environment Department and annual rEviEw · julY 2005­junE 2006 (fY06) 17 Summarized Goals of the WSSD Plan of Implementation on Fisheries and Aquatic Resources There are myriad Bank efforts to address failed governance in the natural resource WSSD Plan Year Goals Reference sector. In the fisheries sector, the Bank's port- No time frame Assist developing countries in coordinating policies and programs at the 30(g) folio includes (a) analytical work, including regional and subregional level aimed at the conservation and sustainable economic and sector work on sustainable management of fishery resources. fisheries (Mauritania, Senegal, Guinea-Bis- No time frame Strengthen donor coordination and partnerships among international 31(g) sau, Cape Verde, Sierra Leone, Ghana); (b) financial institutions, bilateral agencies, and other relevant stakeholders to en- able developing countries to develop their national, regional, and subregional coastal and marine biodiversity management capacities for infrastructure and integrated management and the sustainable projects (The Gambia, Guinea-Bissau, Guin- use of fisheries. ea); (c) support for marketing, processing, 2004 Deter and eliminate illegal, unreported, and unregulated fishing through 31(d) small-scale fisheries, and job creation; and implementation of the international plan of action. Establish a regular process under the United Nations for global reporting and 36 (b) (d) activities to strengthen sector governance, assessment of the marine environment. Implement the Global Program of Action for the Protection of the Marine 58 (e) build capacity, and promote alternative liveli- Environment. hoods to fishing. 2005 Assist in implementing FAO international plan of action for the 31(d) management of fishing capacity. Several Bank projects seek to address illegal 2006 Achieve substantial progress (by the next Global Plan of Action 33 (d) fishing and the depletion of marine resources Conference) to protect the marine environment from land-based through the promotion of co-management activities. and enforcement of marine protected areas. 2010 Encourage the application of the ecosystem approach. 30(d) 2012 Develop and facilitate the use of diverse approaches and tools, including 32 (c ) In Senegal, the objective of the Integrated the ecosystem approach, the elimination of destructive fishing practices, the Marine and Coastal Resources Management establishment of marine protected areas consistent with international law and based on scientific information, and the integration of marine and coastal Project is to increase the sustainable manage- areas management into key sectors. ment of marine resources through a system Not later Maintain or restore (fisheries) stocks to levels that can support the 31 (a) of co-management. The system involves than 2015 maximum sustainable yield with the aim of achieving these goals for depleted stocks on an urgent basis. two local institutions: (1) the local artisanal fisheries councils, and (2) the local fishers' Source: United Nations 2003. committees. In the project pilot areas, the the international community to take specific terms of access to resources, distribution of committees have initiated and elaborated actions to meet specific targets, including de- benefits, and human welfare). specific projects for the management of local terring and eliminating IUU fishing through fisheries, with co-management agreements implementation of the international plan of A successful management regime must also between the Ministry of Fisheries and the action and the maintenance and restoration reflect a realistic political consensus among local fishers' committees. The implementa- of the world's fish stocks to sustainable levels key stakeholders, and have the institutional tion of the co-management system requires on an urgent basis and not later than 2015 capacity to define an appropriate balance that the government provide support services (see Table, above). among these contending domains and objec- such as (a) vessel registration; (b) assessment tives. In addition, successful management of fish resources and allowable catches; (c) a TheWorld Bank, with its capacity to combine must adapt itself to changes in the fishery. system of monitoring, control, and surveil- policy dialogue at the highest level with spe- lance of industrial vessels; and (d) effective cific investments, is well placed to work with The challenge is to maintain economic enforcement. international agencies and analytically with growth and development, but to avoid governments in key fishing nations to assist overfishing and the ecological problems of In Tanzania, the Marine and Coastal Envi- in reaching the goals of effective sustainable today, and to establish institutions, values, ronment Management Project is intended to fisheries management. Successful fisheries and practices that will safeguard fish resources strengthen the sustainable management of management systems need to meet objectives for tomorrow. Improved governance of fish- the Exclusive Economic Zone, territorial seas, in at least three domains: (1) biological (con- eries at the local, national, and international and coastal resources with the participation servation and sustainable use objectives); (2) level is a prerequisite for sustainable use of of coastal communities. The project seeks to economic (wealth and efficiency objectives); fish resources. establish and support a network of marine and (3) social (meeting equity objectives, in protected areas built on integrated coastal 18 EnvironmEnt mattErs · 2006 Feature Articles management strategies that empower coastal communities. The Fisheries Act (2003) hokniMyeriseD provides a framework for community-man- aged areas with the establishment of Beach Management Units, defined in the act as "a group of devoted stakeholders in a fishing community whose main function is manage- ment, conservation, and protection of fish in their locality with the government." The Bank has also established a new Global Program on Fisheries (PROFISH), a pro- gramming and funding partnership between key fishery sector donors, international financial institutions, developing countries, stakeholder organizations, and international agencies. The partnership seeks to establish a national consensus on the design and imple- mentation of sector strategies and plans for sustainable fisheries, and to mainstream these United Nations. 2003. Johannesburg Declaration policies and plans into national economic a key way of delivering greater benefits to the on Sustainable Development and Plan of Imple- planning frameworks. Good governance is poor and a healthier environment for all. mentation of the World Summit on Sustainable at the heart of the PROFISH agenda, which Development. Final text of agreements negotiated by Governments at the WSSD, August 26 ­ Sep- addresses issues of illegal fishing, corruption, tember 4, 2002, Johannesburg, South Africa. and equitable access to fisheries resources. References Vassdal,Terje. 2005. "Uregistrert fiske ­ hva koster det norsk fiskerinæring?" ("Unregistered Fish- FAO. 2001. International Action to Prevent, Deter ery--What is the Cost to the Norwegian Fishing Industry?") Presentation at "Kvitfiskkonferansen," Governance and and Eliminate Illegal, Unreported and Unregulated Fishing (IPOA-IUU). Rome: FAO. Tromsø, Norway. Anticorruption HSTF. 2006. Closing the Net: Stopping Illegal World Bank. 2004. Saving Fish and Fishers: To- ward Sustainable and Equitable Governance of the Governance and anticorruption have been Fishing on the High Seas. Final report of the Magisterially-led Task Force on IUU Fishing on Global Fishing Sector. Report No. 29090-GLB. prominent themes in the work of the World the High Seas. Washington, DC: The World Bank. Bank for nearly a decade. The Bank has adopted a comprehensive approach to gov- ICES. 2006. Report of the ICES Advisory Com- World Bank. 2005. Turning the Tide. Saving Fish and Fishers: Building Sustainable and Equitable ernance that emphasizes work at the country mittee on Fishery Management (ACFM). 3.4.1 Northeast Arctic cod. Fisheries and Governance. Washington, DC: The level (in the Country Assistance Strategy World Bank. (CAS), country dialogue, diagnostic work, Kaufmann, Daniel, Aart Kraay, and Massimo and Bank-financed operations), at the level of Mastruzzi. 2004. "Governance Matters III: Gover- World Bank. 2006. "Strengthening Bank Group Work in Governance and Anticorruption." Draft Bank operations, and at the global level. nance Indicators for 1996, 1998, 2000, and 2002." World Bank Economic Review 18:253-287. Paper. Washington, DC: The World Bank. When preparing a CAS, for example, the Misund, Ole Arve. 2006. "Ecosystem Approach This article was prepared by Charles di Leva, strategy is to give explicit consideration to to Fisheries Management: Fishing policies need to (202) 458-1745, cdileva@worldbank.org, and the implications of corruption and weak look at the big picture." Presentation at The World Bank, Washington DC, October 5, 2006. Patrice Talla Takoukam, (202) 458-9249, governance on the overall objective of poverty ptallatakoukam@worldbank.org, both of the reduction and the nature of risks posed to the MRAG. 2005. Review of Impacts of Illegal, Un- ESSD and International Law Department; Bank. Addressing noncompliance and extra- reported and Unregulated Fishing on Developing and Lidvard Gronnevet, (202) 473-5672, legal activities in the natural resource sector is Countries. Final Report. London: MRAG (Marine Resources Assessment Group Ltd). lgronnevet@worldbank.org, of the Environ- ment Department. annual rEviEw · julY 2005­junE 2006 (fY06) 19 Good Governance for Good Water Management E ffective management of water resourc- uses, including allocations to maintain basic agriculture versus instream flows to protect es is vital to sustainable development. environmental services (see Box, below). the environment). This results in overextrac- Governments across the world have tion of aquifers and overuse of surface waters. spent considerable effort and resources Water resource management faces specific Scarcity also concentrates pollution loads. to move toward that goal. This article argues challenges in water-scarce areas, where there While advocating changes in governance that good governance is an essential aspect is intense competition among users and arrangements, we recognize that this type of effective water resource management and among different types of use (agriculture of reform is politically challenging, and that one that often receives less attention than versus tourist development, for example, or reform efforts often end in stalemate. In this it merits. What exactly is water governance? It usu- what MakeS water governance ally refers to "the range of political, social, Particularly challenging economic and administrative systems that Governance is a challenge for any corporation or public service. Water has several characteristics, are in place to develop and manage water however, that present additional complications for governance structures: resources, and the delivery of water services, at different levels of society" (Global Water · Water has an emotional and often spiritual dimension for many users. Partnership, 2003). The literature states · Rivers, lakes, coastlines, aquifers, and infrastructure are often common-pool resources; that is, that governance rests on two core values: when one member of a group uses the resource it is not available for others in that group and it is possible for members of the group to stop others getting access to it. inclusiveness (ensuring that all members of · There is significant uncertainty about the amount and quality of water available from year to the group receive equal treatment) and ac- year, in terms of both stocks and flows. countability (ensuring that those in authority · Investments in water infrastructure provide a mix of public and private benefits. A dam, for answer to the group they serve if things go example, provides public benefits such as flood protection, but also stores water for individual wrong, and are credited when things go well). households or businesses to use. For water resource management, governance · Water management often requires large investments of public funds that are difficult for the processes determine decision making about general public to evaluate at the planning stage and are vulnerable to capture by special water storage, types of water use, regulation interests. · Water resources usually must be managed across different time-frames and at different scales of extraction from aquifers, regulation of dis- (local, regional, national, international). charges, and allocation between competing Environment Matters 2006 -- The World Bank Group 20 EnvironmEnt mattErs · 2006 Feature Articles to expensive rehabilitation or replacement. ment of irrigation systems to farmers to Lack of effective stakeholder involvement and improve decentralized service delivery per- a coordinated approach across organizations formance and empower stakeholders. The also limits the benefits of such investments. state of Maharashtra has promulgated an In addition, repeated droughts have often ambitious water regulatory act that seeks thwarted these attempts, forcing authorities to clarify entitlement frameworks. But to cut supplies unexpectedly from farmers political instability and the tendency of that depend on irrigation and to ship or governments--especially those formed from truck water into major cities at great cost disparate coalitions--to undertake regressive because they have insufficient water to serve populist measures often undermines efforts. the urban systems. Many aquifers in MNA Several MNA countries have made efforts and SAR are severely depleted or degraded to rationalize the regulatory frameworks (see Figure, below). Climate change is pre- governing water, including Morocco with its dicted to worsen this situation in many parts comprehensive water law in 1995. yrarbiLotohPknaBdlroWehTof the world. Percentage of Total Renewable Water Resources Withdrawn, by Region Improved Effectiveness Middle East & North Africa of Institutions South Asia article, we provide examples of communities Western Europe and public authorities that have improved East Asia & Pacific (incl. Japan & Koreas) Over the past decade or so, many MNA North America water governance even within the prevailing Europe & Central Asia countries have sought to consolidate institu- political economic realities, and that could Australia & New Zealand tional responsibilities for water management, provide models for use elsewhere. We take Sub-Saharan Africa clarify roles, eliminate overlapping functions, Latin America & Caribbean examples from very different water-scarce and establish mechanisms to coordinate 0 10 20 30 40 50 60 70 80 areas of the Middle East and North Africa Percentage across water-related sectors such as energy, (MNA) and South Asia (SAR). Source: Bucknall (forthcoming). agriculture, planning, and environment. Good water governance depends on a num- These efforts have certainly not resolved the Countries in both regions have made consid- ber of factors, including strong policy, legal, institutional problems, which remain daunt- erable investments to buffer themselves from and regulatory frameworks; more effective ing, but do represent an improvement on the irregular rainfall, either within their borders implementing organizations; a civic deter- previous situation. or closer to the source of the river in the case mination to improve water governance; and of rivers that flow across national borders appropriate investments. Each of these fac- In addition, some countries have begun de- (see Figure, below). Often, these investments tors is elusive, particularly in developing and centralizing institutional responsibility. For receive little maintenance, however, leading middle-income countries, but several coun- example, Morocco has established agencies tries are beginning to address these issues. to plan water allocation at the level of the Proportion of Freshwater Resources river basin, and other MNA countries are Stored in Reservoirs, by Region developing similar institutions. 100 90 Strong Policy, Legal, Several countries in the region are experi- 80 and Regulatory tage 70 menting, albeit in a limited way, with release enc 60 erP50 of data to the public and inviting community 40 30 groups into the planning processes. TheTam- 20 Frameworks 10 il Nadu Water Supply and Drainage Board 0 LatinAmerica &CaribbeaSouEast Asia &WestEurope nth Asia Pacific ern Eur&Centra-Saharan Africa ope lAsia Aus/NZthAmeriNorth AfricalAverage ca a Many states in India (including Andhra has successfully demonstrated fundamental Sub MiddleEast & Nor Glob Pradesh, Madhya Pradesh, Karnataka,Tamil changes related to attitudinal transforma- Nadu, and Gujarat) have implemented laws tion, perspective change, and institutional Source: Bucknall (forthcoming). transferring responsibility for the manage- reorientation to improve its service delivery. annual rEviEw · julY 2005­junE 2006 (fY06) 21 Reform of irrigation and drainage institu- Desire to Improve to information, and the level of development tions in South Asia is much more difficult, Water Governance of different stakeholder groups. For example, but many states and provinces are initiating studies show that water user associations are efforts to improve water productivity through more effective where there is more equity in institutional capacity building. Many South Asian systems could see sig- land ownership among the group members. nificant progress if irrigation departments Opportunities for improving water gover- Moves to decentralize responsibility for man- realized their core business is that of a reli- nance may be greatest in those areas emerg- aging infrastructure to users are under way in able irrigation service provider and farmers ing in both regions where these underlying India and some MNA countries. These efforts realized they were the clients, and not recipi- circumstances are in the process of changing, have improved irrigation services and cost ents of the largesse of departments and the that is, where economic growth is rapid, recovery, and have often had positive impacts vagaries of nature. Leaders need to commit education has become more widespread on the empowerment of local communities. to increasing transparency and improving (especially for girls), and where urbanization These efforts to decentralize control of water internal and external accountability. Some is accelerating. infrastructure are particularly noteworthy in underlying problems contribute to (and the highly centralized context of most MNA result from) poor governance, such as asym- Political will is crucial, but it does not arise countries. metry in socioeconomic conditions, access on its own. It depends on changes in political diverSe water inStitutionS need cuStoMized actionS to MProve i governance Water institutions come in different forms. One typology could be as follows: BY MANDATE Water Resources Management Institutions. The core function of these bodies is to determine the best set of policies and investments to manage wa- ter resources (storage, extraction, quality, flood protection, transfers) and to manage the process of allocation among sectors. Some focus only on planning; others have implementation roles. They often multi-task; in South Asia and some MNA countries, water agencies also manage irrigation, sometimes leading to intractable conflicts of interest. Service Delivery Institutions. These are responsible for providing consumers with water supply, sanitation, irrigation, or hydropower services. Recently, Nepal and India, Morocco, Tunisia, Yemen, Jordan, Egypt, and other countries have improved governance structures for these types of institutions, with positive results in terms of services. The specific models vary, but most of the reforms have included measures to help users communicate with service providers to make their preferences clear, informing them about service problems. The governance improvements also include processes to ensure that service providers respond to reasonable requests from the public. BY STAKEHOLDER TYPE Government. Critical government agencies include those (1) at the national level, such as ministries of water resources/irrigation/water supply; (2) the provincial/state level, such as irrigation departments/provincial irrigation and drainage authorities, rural water supply departments, and state water and drainage boards; and (3) other levels, such as district administration and other sectoral agencies. Multistakeholder/BasinOrganizations.Stakeholder organizations are important forums for structured discussions, whether for a small watershed, intrastate basin, interstate basin, or international basins. The Palar andThambiraparani basin boards inTamil Nadu were the first broad-based basin organizations set up in South Asia, and have provided useful forums for discussion and gradual increase in responsibilities. Many more are now under development. The Nile Basin Initiative is leading to increasing international cooperation on information and investments under difficult circumstances. Community-Based Organizations. These include decentralized governance structures such as local governments or water user associations, which are intended to help improve interaction and accountability between service providers and the client. Private Sector. Private service providers may well be one important stakeholder in the water governance equation in the future. Morocco and Jordan have some private involvement in water supply services, and Morocco and Egypt have embarked on public-private partnerships for irrigation. It will be important to align their incentive structures to provide effective services while safeguarding social goals. Civil Society. Civil society organizations have played an important role in keeping social and environmental issues on the radar of investment discus- sions, particularly in South Asia. Some NGOs have also started providing water services. 22 EnvironmEnt mattErs · 2006 Feature Articles peedahsraHoaRajaragaN hcsoBehpotsirhC circumstances, demands from stakeholders, ties to generate broad-based consensus on Addressing water governance at any scale can and leadership. Many factors can drive deci- water governance. help address the aspirations and frustrations sions for reform. At the national level, the of the developing world and allow water most sweeping reforms have often arisen in resources and related services to meet the the wake of some major crisis. This can be challenges of the next century. an economic or fiscal crisis that stimulates Is It Time for Real countries to increase cost recovery for public investments in irrigation, water storage, and Change in Water water supply. Or it can be an environmental Governance? References disaster such as a series of droughts or floods. It is important to move toward systematic ap- Problems of water governance have often Bucknall, Julia. Forthcoming (Jan. 2007). Making the Most of Scarcity--Accountability for BetterWater proaches to addressing these problems rather been neglected by governments, the public, Management Results in the Middle East and North than "band-aid" approaches to each crisis. donors, and development agencies as being Africa. Washington, DC: The World Bank. too intractable to deal with. In any country, however, a range of technical solutions for Global Water Partnership. 2003. Effective Water Governance: Learning from the Dialogues. GWP water problems could work if governance Making Appropriate Secretariat. Stockholm, Sweden. arrangements are good and could fail if they Investments are poor. Clearly water governance is influenced by It is not enough to invest only in water infra- the overall governance circumstances of the structure. If government agencies are to play particular country or local area. There is a an important role in good water resources need to address often-overlooked difficult regulation and effective service delivery, it issues of institutional objectives, incentives is crucial they invest in their staff, as well. and motivation; skills, tools and partnerships; This includes job training; taking advantage staff performance management; corruption of the IT revolution to develop effective and political interference; financial au- information systems for management and tonomy; accountability; and benchmarking This article was prepared by Julia Bucknall, communication, including GIS-based tools; in a systematic manner, to complement the (202) 473-5323, jbucknall@worldbank. and improving office infrastructure, such focus on investments. Yet water managers org, of the Rural Development, Water and as generators, filing systems, and furniture. need not wait helplessly until the governance Environment Group of the Middle East and Many of these sound trivial, but many in- environment improves. On the contrary, lo- North Africa Region; Richard Damania, (202) stitutional reforms have withered for lack of cal, small-scale initiatives have led to valuable 473-3844, rdamania@worldbank.org, and such investments. Of particular importance improvements, even when the broader envi- Harshadeep Rao, (202) 473-9173, harsh@ is to use these improvements to strengthen ronment is not conducive to such changes. worldbank.org, both of the Environment and communication and outreach to communi- Social Unit of the South Asia Region. annual rEviEw · julY 2005­junE 2006 (fY06) 23 From Curse to Blessing Natural Resources and Institutional Quality C an a country have plenty of natu- Long-run declines in primary product have provided positive linkages to growth. ral resources and yet fail to grow prices, which deprive countries of im- In every case, there seems to be a key factor and develop? The resource curse portant financial resources over time that escapes measurement: the interaction paradox is more than a "worst- "Dutchdisease,"whereaboomingnatu- between government behavior and natural case scenario." There is robust empirical ral resource sector leads to exchange rate resource wealth. Natural resources are gifts evidence for a negative relationship between inflation, decreasing the competitiveness that require proper management to provide natural resource wealth and economic growth of the industrial sector sustained growth. The ability to do so is what (see Figure, below). Composition of the natural resource we call good environmental governance. export base, where capital-intensive While Gelb (1988) coined the expression, production processes--such as sugar, many economists have analyzed the resource cotton, or mining--are characterized curse hypothesis and attempted to explain it. by weaker growth linkages compared Where Is the Wealth Explanations for the phenomenon include: to labor-intensive production processes, of Nations? The Resource Curse--Natural Resource such as food grains or tree crops Endowment and Real GDP Growth Government complacency linked to 6500 the "easy rents" generated by natural Good governance is crucial to transform resource booms, which reduce incentives natural resource wealth into good economic 6000 for economic reform and diversification. performance. This is especially true in devel- 5500 Easy rents often lead to high public con- oping countries, where natural resources play atipacrep$SU0002 Resource poor Land rich Oil rich 5000 sumption rather than investments a major role in the composition of wealth. In low-income countries, according to esti- 4500 No comprehensive theory exists: some ex- mates prepared by the World Bank (2006), 4000 planations fit the performance of a subset the natural capital share (26 percent) of total 3500 of countries, but are unable to explain a wealth is much greater than the share of pro- number of exceptions. For example, initial duced capital (16 percent) (see Figure, above 3000 3791 5791 7791 9791 1891 3891 5891 7891 9891 1991 3991 5991 7991 9991 1002 3002 dependence on staple-crop cultivation has right). The composition of natural wealth in Note: Oil-rich countries are those that in 1973 ranked among the top 15 percent been blamed for the poor performance of poor countries emphasizes the major role of in terms of energy and mineral rents as a percent of GDP. Land-rich countries are those that in 1973 ranked among the top 25 percent in terms of agricultural land the Caribbean states. Yet, in the western agricultural land (70 percent), followed by per person. Countries from Eastern Europe are excluded. United States, staple crops are thought to subsoil assets (17 percent) and timber and Source: WDI 2006. Environment Matters 2006 -- The World Bank Group 24 EnvironmEnt mattErs · 2006 Feature Articles tal--an amalgam including human capital rents tend to create mechanisms to control and the quality of formal and informal in- economic and political power. Rents are stitutions. The share of intangible capital in deployed through indirect means such as total wealth rises with income. Oil-exporting trade protection, unproductive job creation, countries are the exception, with a very low and overextended public expenditure. This share of intangible capital (10 percent) ­ this results in lower investment efficiency and is another manifestation of the resource curse, finally slower economic growth. indicative of very low rates of return to all assets in these economies. So much for the theory, but do the numbers confirm the hypothesis that natural resource What does this all mean? Achieving sustained riches are associated with poor government growth entails managing a complex portfolio performance? Each year, the World Bank of assets, in which the elements are not just prepares the Country Policy and Institutional buildings and machines, but natural and Assessment (CPIA), which evaluates the human resources as well. Natural resources quality of a country's present policy and insti- are special economic goods because they are tutional framework. In addition, Kaufmann, notlimaHkriKnot produced. If properly managed, they will Kraay, and Mastruzzi (2005) aggregate data yield rents that can be an important source on six dimensions of governance: (1) voice of development finance. Resource policy, fis- and accountability; (2) political instability Composition of Wealth by Income cal policy, political factors, institutions, and and violence; (3) government effectiveness; Group governance structure all have a role to play in (4) regulatory quality; (5) rule of law, and transforming them into sustained growth. (6) control of corruption. The Table at the 100 10 90 top of page 26 provides average values of 80 70 59 eight governance measures for three groups tnecreP 68 60 80 55 50 of countries: resource-poor, land-rich, and 40 Natural Resources and oil-rich International Development Asso- 30 26 13 2 Governance 20 35 ciation (IDA­eligible countries. In all cases, 10 16 19 17 0 resource-poor countries perform better than Low income Middle High income High oil income OECD exporting their resource-rich peers. Oil-rich countries Produced capital Natural capital Intangible capital Auty and Gelb (2001) argue that natural re- tend to have very low performance in po- Note: High oil exporters are treated separately. source wealth partially determines the devel- litical stability and rule of law. Land-rich Source: World Bank 2006. opment paths of countries, while increasing countries tend to underperform on the CPIA Composition of Natural Wealth in Low- the likelihood of political failure. Resource- score and government effectiveness. Income Countries poor countries engage earlier in labor-inten- sive competitive manufacturing. The result is Sub-soil assets 17% faster diversification, higher saving rates, and Non-timber resources 2% faster accumulation of produced, human, Timber resources and social capital. "This sequence requires a Breaking the Curse 6% Crop land 59% political state that has sufficient autonomy Protected areas 6% to sustain a coherent economic policy and The negative relationship between natural the objective of raising economic welfare," resource dependence and governance need Pasture land 10% according to Auty and Gelb. not be deterministic. Is there a recipe that a Note: Oil countries excluded. government can pursue to escape the curse? Source: World Bank 2006. Resource-rich countries may also pursue this While guessing the intentions of government non-timber forest resources (8 percent) (see virtuous circle of competitive industrializa- officials is not easy, judging their policies is Figure, above). tion, but their reliance on the primary sector much more straightforward. After all, govern- tends to dampen industrialization. Moreover, ments' key task is to administer a country's Another important fact: the preponderant natural resource rents favor the creation of wealth. Using our expanded measure of form of wealth worldwide is intangible capi- factional states in which those managing the wealth (expanded to include natural resources annual rEviEw · julY 2005­junE 2006 (fY06) 25 Natural Resource Abundance and Governance Indicators (IDA Countries) vest. Forests and fisheries are two cases in Resource point. Efforts to address overfishing in Mau- poor in Land rich Oil rich 2003 in 2003 in 2003 ritania constitute an example of successful IDA Resource Allocation Index (CPIA) (Scale: 1­6) 2005 3.5 3.1 3.2 management--to the ultimate benefit of the Environment CPIA (Scale: 1­6) 2005 3.2 3.0 3.0 country's economy (see Box, right). Voice and Accountability (Scale: 0­100) 2004 41 33 24 Political Stability (Scale: 0­100) 2004 38 33 18 Sustainable management of renewable Government Effectiveness (Scale: 0­100) 2004 32 24 26 natural resources requires clear and enforced Regulatory Quality (Scale: 0­100) 2004 35 30 24 property rights (individual or communal) to Rule of Law (Scale: 0­100) 2004 34 28 19 provide incentives for investment and long- Control of Corruption (Scale: 0­100) 2004 35 28 20 Note:This table refers to IDA countries only. Oil-rich countries are those that in 2003 ranked among the IDA top 25 percent in terms of energy and mineral term management of the resources. A crucial rents as a percent of GDP. Land-rich countries are those that in 2003 ranked among the IDA top 25 percent in terms of agricultural land per person. aspect in natural resources governance is the Source: WDI 2006; Kaufmann, Kraay, and Mastruzzi 2005. involvement of the relevant actors. and intangible capital), it is possible to link rents. Exhaustible resources, once discovered, performance to the actual changes in value can only be depleted. The key policy issues Local communities are simultaneously the of the portfolio. are investing resource rents effectively and problem and the solution to local-level envi- maintaining fiscal stability. A successful ronmental threats. Community-based natural Substitution between types of assets (for ex- recipe includes avoidance of external debt, resource management can trigger a virtuous ample, oil on the ground versus factories and diversification of the economy, and the use cycle of conservation and poverty reduction. PhDs) is possible most of the time. Atkinson of public expenditures to counter the boom- Shyamsundar, Araral, andWeeraratne (2005) and Hamilton (2003) find that countries and-bust effect of the natural resource mar- show that increased local control of natural that escaped the resource curse used resource ket. For example, by keeping a sharp focus resources motivates long-term investments rents as a source of investment rather than a on the fiscal aspects of natural resources, and favors management accountability and source of public expenditure. Such countries Botswana has achieved remarkable economic performance. Putting local communities in have been transforming natural capital into performance (Sarraf and Jiwanji 2001) (see charge also allows a reduction in the fiscal produced capital. The sustainability rule of Box, below). burden of central governments, maximizes thumb is a simple one: invest the rents from revenues, and avoids inefficient expendi- the exploitation of natural resources. Unlike sub-soil assets, living resources are tures. For example, the CAMPFIRE project a potentially sustainable source of resource in Zimbabwe allows state authorities to The policy rule is particularly useful when it rents--truly a gift of nature. The key policy share the benefits of ecotourism with the comes to managing nonrenewable resource issue is to achieve a sustainable level of har- local communities. The state retains nearly 50 percent of revenues. The remaining 50 BotSwana -- there are no SuStainaBle MineS, But percent is redistributed to wards and in turn there can Be SuStainaBle Mining countrieS to households. Since its first diamond mine was discovered in 1967, Botswana experienced strong and sustained Whatever the level of government, good growth that led it from being one of the poorest economies in Africa to one of the rare success management is a precondition for good cases in the continent, avoiding the problems experienced by other resource-rich countries. performance. Natural resources are "gov- The recipe for this success has been a set of policy rules grounded in avoiding fiscal deficits. The ernance-intensive" assets. In low-income government uses a Sustainable Budget Index (SBI) in order to ensure sustainability.This measures countries, natural resources make up a very the ratio between consumption expenditures and non-resource revenues. As long as the SBI is less than one, the government can be sure that natural-resource capital is not being consumed. significant share of the total wealth, one that This achievement has not been easy. Public investment has often gone into low-growth sectors is substantially larger than the share of pro- such as defense and agriculture, while it has crowded out private investment, slowing economic duced capital. Sound management of these diversification. However, the overall fiscal strategy has worked. The government has avoided natural resources can support and sustain the excessive spending in the good times and drastic spending cuts when diamond prices have welfare of poor countries, and poor people in fallen, as in the early 1980s and 1991. poor countries, as they move up the develop- Source: World Bank 2005. ment ladder. 26 EnvironmEnt mattErs · 2006 Feature Articles Mauritania -- FiShing For growth notlimaHkriK Mauritanian fishing grew remarkably in the early 1980s and was expected to be a major source of growth in the next two decades, generating jobs, foreign exchange earnings, and budget revenues. By mid-decade however, heavy overfishing and other problems led to a collapse in fish revenues, with sharply lower catches, threatening to undermine the country's growth prospects. As part of an International Monetary Fund­supported adjustment strategy, a series of reforms were introduced in the 1990s to improve management and surveillance of fishing activities. The Mauritanian government brought in ambitious tax reforms to improve competitiveness, eliminate trade distortions (including a new fishing agreement with the European Union), and make taxation more transparent. These measures proved successful. By 2002, the fishing catch had increased again, contributing to an improvement in the overall economic performance of the Mauritanian economy. 100,000 90,000 80,000 )t 70,000 m(hctachsfilatoT60,000 50,000 40,000 30,000 20,000 10,000 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 Source:World Bank 2005. References Sachs, Jeffrey D., and Andrew M. Warner. 1995. "Natural resource abundance and economic Atkinson, G., and K. Hamilton. 2003. "Savings, growth." National Bureau of Economic Research Growth and the Resource Curse Hypothesis." Working Paper 5398. World Development 31(11): 1793­1807. Sarraf M., and M. Jiwanji. 2001. "Beating the Auty, Richard M. 1993. Sustaining Development Resource Curse: The Case of Botswana." Environ- in Mineral Economies: The Resource Curse Thesis. ment Department Paper, No. 83. Washington, London: Routledge. DC: The World Bank. Auty, Richard M., and Alan H. Gelb. 2001. Shyamsundar P., E. Araral, and S. Weeraratne. "Political Economy of Resource-Abundant 2005. "Devolution of Resource Rights, Poverty, States." In Auty, R. M., ed. Resource Abundance and Natural Resource Management: A Review." and Economic Development. New York: Oxford Environment Department Paper, No. 104. Wash- University Press. ington, DC: The World Bank. Gelb, A. 1988. Oil Windfalls: Blessing or Curse? World Bank. 2005. Ensuring Environmental New York: Oxford University. Sustainability: Measuring Progress Toward the 7th Kaufmann D., A. Kraay, and M. Mastruzzi. 2005. Millennium Development Goal. Washington, DC: Governance Matters IV: Governance Indicators for The World Bank. This article was prepared by Kirk Hamilton, 1996­2004. (Draft, May 9, 2005.) Washington, World Bank. 2006. Where is theWealth of Nations: DC: The World Bank. Measuring Capital for the 21st Century. Washing- (202) 473-2053, khamilton@worldbank. ton, DC: The World Bank. org, and Giovanni Ruta, (202) 473-9388, gruta@worldbank.org, both of the Environ- ment Department. annual rEviEw · julY 2005­junE 2006 (fY06) 27 Sub-Saharan Africa Region Cape Verde Mauritania Mali Niger Senegal Chad Eritrea Burkina Sudan Guinea Faso Nigeria Benin Sierra Togo Ethiopia Leone C.A.R. Cameroon Liberia Somalia Guinea-Bissau Congo Uganda The Gambia Rwanda Côte d'Ivoire Ghana Burundi Kenya Equatorial Guinea D.R. of Tanzania São Tomé and Congo Seychelles Príncipe Gabon Angola Comoros Zambia Malawi Mauritius Namibia Zimbabwe Botswana Madagascar South Mozambique Africa Swaziland IBRD 31567R SEPTEMBER 2006 Lesotho srednaSsalK Madagascar I mproved governance is widely acknowledged to be absolutely f Linking local and global environmental objectives vital for development in Africa. Further, poor access and man- agement of natural resources--in short, the governance of There are 143 active Bank-supported projects in the Africa Region natural resources--has been a significant factor in the region's with an environmental theme in their classification. Of these proj- history of conflict. The World Bank's Africa Action Plan identi- ects, about 70 percent identify and address key policy, regulatory, fies improved governance and strengthened institutional capacity and governance issues (see Figure, top of next page). as essential to building capable states. Improving the governance of environmental resources is an integral part of the broader gov- The World Bank Africa Region uses four broad tools to address the ernance issues affecting each country. The Africa Region's Environ- critical environmental governance problems facing Sub-Saharan ment Strategy elaborates on this commitment to reduce poverty Africa: through better environmental management and governance. The 1. Developing regional partnerships--such as TerrAfrica, ALive, key elements include: the Congo Basin Forest Partnership (CBFP), and the Strategic f Integratingenvironmentintodevelopmentandpovertyreduc- Partnership for Fisheries in Africa--to scale up and intensify tion strategies efforts to improve governance f Building an enabling environment and the institutional and 2. Strengthening the analytical base through country environ- human capacity for sustainable and equitable private sec- mental assessments and economic and sector work tor­led economic development 3. Highlighting forestry and governance issues in the national f Encouraging decentralization and community-driven devel- development agendas--through investment projects, develop- opment ment policy loans, and partnerships 28 EnvironmEnt mattErs · 2006 Environment Matters 2006 -- The World Bank Group sub-saharan africa region eral organizations, and donors together on UN agencies, and NGOs from throughout The AFR Regional a regional level, promoting cross-sectoral Africa. The intended output of the partner- Environment Portofolio coordination, harmonization of efforts, and ship will be a portfolio of 10 to 12 projects, Other environmental Biodiversity knowledge/best practice dissemination. The co-financed by IDA and/or other donors at a management 7% Climate change 9% 13% World Bank hosts the TerrAfrica Secretariat. ratio of 3 to 1, so the $60 million will lever- The GEF Strategic Investment Program will age an additional $180 million. Water resource management Environmental serve as an investment vehicle to support 16% policy and institutions Sub-Saharan Africa countries in their efforts Congo Basin Forest Partnership. The CBFP, 18% to rapidly scale up sustainable land manage- established in September 2002, brings Pollution management and Land ment on the ground. together some 30 governmental and non- environmental health management governmental organizations, including the 25% 12% African Livestock Development (ALive). World Bank, to enhance communication and Percentages based on commitment amounts. Livestock is a pillar of the African rural coordination among activities to improve At the end of June 2006 the active portfolio of World economy, representing about 27 percent the sustainable management of the Congo Bank environmental lending in the AFR Region was of total GDP for agriculture and providing $1.044 billion. Basin forests and the standard of living of its livelihoods for around 160 million rural and dependents. CBFP is aiding the harmoniza- peri-urban poor (67 percent of the region's tion of forest policies, regional consultations, 4. Supporting good environment and nat- rural population). ALive is a World Bank creation of transboundary protected areas, ural resources management (ENRM) initiated multistakeholder platform that ratification of international conventions and governance at the local and grass-roots seeks to remove the constraints to a sustain- other collaborative frameworks, and genera- levels, with tools such as community- able livestock sector. tion of innovative financing. driven development and producer- organization projects Building a Sound Regional Partnerships Analytical Base for The World Bank has supported several re- yrarbiLotohPknaBdlroW Rwanda Governance gional partnerships, including TerrAfrica Environmental governance issues in the re- to promote sustainable land management, gion are increasingly being tackled through ALive to support sustainable livestock de- country-specific approaches that emphasize velopment, the Strategic Partnership for broader dialogue with governments. The Fisheries in Africa to improve fisheries World Bank is supporting activities that management, and the Congo Basin Forest strengthen the knowledge base for govern- Partnership. ments in several client countries, including Nigeria, Ghana, Ethiopia, and Senegal. TerrAfrica. Launched in 2005, TerrAfrica is a partnership among Sub-Saharan African For example, in Nigeria, a country envi- countries, donor countries and agencies, civ- Strategic Partnership for Fisheries in Afri- ronmental analysis (CEA) estimated that il society, and the research community, de- ca. The GEF-supported Strategic Partnership the costs of environmental degradation signedtoaddressthelanddegradationagenda for Fisheries in Africa, which is implemented were about 9 percent of national GDP, sig- in support of the implementation of the by the World Bank, includes a $60 million nificantly higher than most other developing United Nations Convention to Combat De- GEF grant fund over the next 10 years for countries, and judged that there was limited sertification (UNCCD) and of the NEPAD co-financing projects aimed at strengthening capacity to deal with the problems. Some of Comprehensive African Agricultural Devel- fisheries governance and the sustainability the governance problems identified included opment Program (Pillar 1), by promotion of of fisheries in Africa. It also includes a GEF (a) the lack of clarity regarding the overall a new framework for scaling up harmonized medium-sized project grant to support a regulatory and enforcement functions of the support for country-driven SLM approaches regional advisory committee (chaired and Ministry of Environment, and the mandates in sub-Saharan Africa. It provides technical managed by the African Union) that includes of federal, state, and local governments; assistance to bring governments, multilat- regional fisheries management bodies, the (b) ambiguities in formal rules; (c) diver- annual rEviEw · julY 2005­junE 2006 (fY06) 29 gence between formal and informal rules management functions for both government and behaviors; (d) poor disclosure of infor- and development assistance programs. mation, and thus poor accountability; and (e) exclusion of local governments in state- oisihcraMoettaM level decision making. The study pointed out Forestry and that these weaknesses related to broad pub- Governance lic sector governance issues, such as lack of transparency and predictability of budgets, The Africa Region has supported efforts frequent changes in leadership, corruption, to improve governance in the forest sector and unclear mandates for delegating respon- through regional partnerships such as Africa sibilities between federal and state levels. Forest Law Enforcement and Governance (AFLEG), policy lending in countries such Similarly, in Ghana the Bank partnered with as Gabon, environment investment projects, DFID, the British aid agency, to examine trust-fund financed projects, and economic the impacts of environmental degradation. and sector work in countries such as Liberia The study estimated the cost of environ- and the Democratic Republic of Congo. mental degradation at about 10 percent of GDP annually, representing a loss of about Africa Forest Law Enforcement and Gov- one point of growth, through unsustainable ernance. The AFLEG project is a regional management of the country's forests, land initiative coordinated by the World Bank resources, wildlife, and fisheries, as well as to strengthen forest governance. It seeks to through health costs related to water supply decrease illegal logging and deforestation by and sanitation and indoor and outdoor air providing incentives for forest-dependent pollution. communities to reduce illegal activities. Subsequently, the World Bank-funded Gha- Gabon and Cameroon--Forest/Natural Resources Development Policy Lending na Country Environment Analysis helped (DPL). In Gabon and Cameroon, forests, the Government of Ghana assess its key biodiversity, and other natural resources are Deforestation control environmental priorities, the environmen- critical for rural livelihoods and economic -- Ghana tal implications of key economic and sec- development and are globally significant. tor policies, and the country's institutional These resources have been dominated by capacity to address these issues. The CEA oped sector-wide multi-donor programs. patronage and vested interests and managed reaffirmed the need to develop oversight and The World Bank has supported these pro- unsustainably. In recent years, both countries governance mechanisms for environmental grams with DPLs focusing on transparency embarked on promising reforms and devel- and civil society participation, law enforce- ment, empowerment of local communities skoorBneraK in managing their resources, and protection of the ecosystems. The DPL program builds on previous experience and emphasizes building of political will and government commitment over provision of physical in- puts, by linking results to disbursements and integrating sector dialogue within the coun- tries' PRSP and overall reform agenda. The program has contributed to the strengthen- ing of the countries' financial management systems with fiduciary safeguards such as Land management challenges the use of dedicated accounts, audits, and -- Eritrea technical assistance. Full socio-environmen- tal assessments were conducted, and imple- 30 EnvironmEnt mattErs · 2006 sub-saharan africa region mentation of the socio-environmental plan was an important trigger. It is expected that Nigeria and Community-Driven Development (CDD) -- the institutional and policy strengthening The National Fadama Development Project will contribute to better governance and eq- uitable management of natural resources in In Nigeria,the National Fadama Development Project is supported by a grant from the Global Environment Facility to address land degradation issues in the Fadama floodplain Gabon and Cameroon. ecosystems. The project supports direct investments in human and physical capital, building the capacity of community organizations and local government,strengthening Liberia Forestry Governance Program. income generation opportunities,and promoting socially harmonious and environmen- After the imposition of UN sanctions on tally sustainable management of natural resources. Liberian timber helped shut down Liberia's highly corrupt timber sector and bring an The key lessons learned thus far include: (a) CDD approaches are effective tools for end to its long civil war in 2003, the World moving resources directly to organized and legally constituted community groups; (b) Bank turned to the Liberia Trust Fund and sociallyinclusivedevelopmentplanningenhancesgroupcohesionandreducesresource conflicts; (c) good quality facilitation support is essential for real empowerment of a grants program for Low-Income Countries community organizations and for successful implementation of the CDD approach;(d) under Stress (LICUS) to promote a more a robust monitoring and evaluation system--indispensable for impact measurement transparent and accountable forestry sector and performance monitoring--is critical for success;and (e) a mechanism to ensure the in Liberia. As part of its overall effort to sup- integrity of funds disbursed at the community level is essential for accountability and port reforms and reconstruction in Liberia, to avoid potential elite capture and/or abuse of funds. the Bank works with a coalition of donors-- called the Liberia Forestry Initiative--to Cross-border NRM governance issues in local government, and community-based build transparency, sustainability, and good Post Conflict Cote d'Ivoire, Liberia, and civil society organizations such as producers' governance in the management of Liberia's Guinea. In the aftermath of the conflict in organizations. The key principles of these commercial, conservation, and community Cote d'Ivoire and Liberia, the Bank has initi- approaches include empowerment of the forests. In February 2006, a presidential de- ated analytical work to examine effects of the poor and other marginalized groups, respon- cree canceled all forestry concessions after conflict on natural resources management. siveness to beneficiary demand, autonomy a thorough Forest Concession Review that It will identify a set of simple and feasible of local institutions associated with greater was highly praised internationally and by the opportunities for improved natural resource downward accountability, and enhance- UN Panel of Experts on Forestry. A LICUS management that will benefit the poor, ex- ment of local capacities. Programs have been grant funded a new institutional design for combatants and their families, and displaced implemented in Nigeria (see Box, above), the Forest Development Authority, a forestry people to maximize sustainable use of natu- Niger, Burundi, Cameroon, Kenya, and inventory, a log-tracking system, a legal advi- ral resources as well as governance. Ghana, among others. sor for the concession review, the tax policy reform, and the preparation of the recently approved forestry law. Strengthening Local Further Reading McAlpine, J.L., et al. 2006. "Liberia: Forests as a Democratic Republic of Congo--Forest in Governance challenge and an opportunity." International Forestry Post Conflict. Since 2002, the World Bank, A number of community-driven develop- Review 8 (1). together with other development partners, ment projects are strengthening local gover- Nigeria Second Fadama National Development and has worked with the government to ad- nance capacity in the area of environmental Critical Ecosystem Management Project (Nigeria). dress major policy issues in this post-conflict and natural resources management by sup- 2006. World Bank. country. The DRC has the largest forest re- porting decentralized sectoral structures, http://www.terrafrica.org -- Strategy Note, source in Africa, and the second largest trop- Business Planning Framework and additional ical forest worldwide. Significant steps have information been taken, such as the return of 25.5 mil- http://www.cbfp.org -- http://webapps01.un.org/ lion hectares of noncompliant logging titles dsd/partnerships/public/partnerships/14.html to the public domain, the establishment of a moratorium on new allocations, a gradual This article was prepared by Paolo Agostini, (+39 increase in annual forest rental fees, and the yrarbiLotohPknaBdlroWehT Municipal sanitation workers 6) 570-54325, pagostini@worldbank.org, of the approval of a new Forest Code. -- Senegal Environmentally and Socially Sustainable Develop- ment Sector Unit of the Africa Region. AFR website: . annual rEviEw · julY 2005­junE 2006 (fY06) 31 East Asia and Pacific Region Mongolia China Rep. of Korea Lao P.D.R. Myanmar Vietnam Cambodia Thailand Philippines Marshall Islands Malaysia Palau Fed. States of Micronesia Kiribati Indonesia Papua New Solomon Guinea Is. Timor-Leste Samoa Vanuatu Fiji Tonga IBRD 31562R SEPTEMBER 2006 yrarbiLotohPknaBdlroW IndonesIa N early a decade ago, the simultaneous occurrence of the monitoring, improved decision making and accountability; and (c) East Asian financial crisis of 1997 and a regional environ- law enforcement and compliance with environmental regulations, mental crisis manifested by raging forest fires illuminated frameworks, and conventions at the national and international basic weaknesses in policy and institutional frameworks levels. in the financial and environmental areas that jeopardize the region's development. The economic downturn that followed the crisis cre- The East Asia and Pacific Region lending portfolio has focused on ated an opportunity to reexamine the relationship between eco- projects that address pollution management and environmental nomic growth and the environment and to increase the emphasis health and water resource management. At least 11 percent of the on issues such as corruption, illegal practices, and lack of account- portfolio supports strengthening environmental policies and insti- ability--all of which are crucial in promoting sustainable economic tutions (see Figure, top of next page). growth. Most of all, it reinforced the importance of poverty reduc- tion for poor communities that depend on natural assets for their livelihood. Community Involvement and Public Participation Over the past year, the Bank has been working with client countries to strengthen environment and natural resources governance, focus- At the end of the 1990s, East Asian countries began, to varying ing on (a) voice and participation of stakeholders and developing degrees, a transition to a more participatory society. The Philippines the demand and constituency for good environmental governance; has a vibrant community of some 60,000 environmental NGOs and (b) transparency and information disclosure to enable sectoral civic groups, which have been active in establishing partnerships 32 EnvironmEnt mattErs · 2006 Environment Matters 2006 -- The World Bank Group east asia and pacific region mation available to decision makers through The EAP Regional Transparency and the development of a sectoral disclosure Environment Portfolio Accountability policy; and (b) the Forest Law Enforcement Other environmental and Governance initiative to implement and management Biodiversity Improved transparency about environment 3% 2%Climate change and natural resource management by gov- support a systematic, comprehensive frame- Water resource 13% ernments and corporations could contribute work of measures of prevention, detection, management Environmental to better governance and support long-term and suppression of forest crime. 24% policy and institutions poverty reduction. The Asia Forest Law En- 11% forcement and Governance (FLEG) initia- Launched in Johannesburg in 2002, the Land Pollution tive brings timber-producing countries in Extractive Industry Transparency Initiative management management and 10% the Asia-Pacific region together with various (EITI) is a global multistakeholder process environmental health timber-consuming countries such as the involving governments, business, and civil 37% United States, United Kingdom, Japan, Chi- society that specifically aims at promoting Percentages based on commitment amounts. na, and Canada to combat illegal logging as- transparency in the extractives industries. At the end of June 2006 the active portfolio of World sociated with trade and corruption through East Timor joined EITI in 2003 to create Bank environmental lending in the EAP Region was a systemic governance and law enforcement $3.699 billion. a Petroleum Fund and ensure a transpar- approach. Indonesia is spearheading unprec- edented forest governance and transparency ent and equitable administration of future with business and the government to raise initiatives to manage forests, collect forest revenues from oil and gas activities. Given awareness about environmental stewardship. revenue, attract forest investment needed to the importance of mining resources for the In Thailand, the government is gradually revitalize the timber industry, and promote country's economy, Mongolia entered EITI increasing its support to community-based Indonesia's timber products in international in 2005. The National Forum for Min- initiatives thanks to Article 290 of the new markets. In consultations with civil soci- ing, Regulation, and Environment, held in Constitution, which advocates a stronger ety, development agencies, and the private Ulaanbaatar in May 2006, attracted 380 role for civil society in environmental man- sector, the Ministry of Forestry and other participants and provided the opportunity agement. In Vietnam, the latest five-year en- relevant institutions have launched (a) the for a forward-looking discussion on how to vironmental action plan recognizes a limited Forest Transparency Initiative, which aims at move toward sustainability in the mining role for communities in implementation and in environmental monitoring. making reliable and up-to-date forest infor- sector. Since 2000, the Bank's pioneering program on Faiths and Environment has been helping counterparts in Cambodia, Indonesia, and Mongolia strengthen social accountability and civic engagement in forest and biodiver- sity conservation and protection. Through yrarbiLotohPknaBdlroWehT the multiyear Poverty-Environment Nexus Program, the Bank has been exploring de- mand-driven environmentally sustainable approaches to poverty reduction in Cam- bodia, Lao PDR, and Vietnam. Finally, the Environment Monitor series continues to be a successful tool to help disseminate informa- tion about environmental indicators and to engage and inform stakeholders on key en- vironmental trends at regional and country levels. The two latest issues focused on coast- al resources management for the Philippines Integrated Watershed Management -- Jiuhuagou, and biodiversity conservation in Vietnam. China annual rEviEw · julY 2005­junE 2006 (fY06) 33 Public Information Illegal Wildlife Trade in the East Asia and Pacific Region Disclosure A recent World Bank discussion paper--Going,Going,Gone...The IllegalTrade inWildlife Over the past decade, public information in East and Southeast Asia (2005)--looks at the key driving forces behind the growing disclosure programs have been emerging as illegal wildlife trade and provides some suggestions on how theWorld Bank,through its one of the most effective policy tools for im- lending and non-lending activities, can contribute to curbing this negative trend. As a result of rapid economic growth,regional demand for illegally traded species has been proving environmental management as well increasing rapidly, particularly in China, where the growing popularity of traditional as the reputation of firms in the region. medicine has raised demand for many endangered species products, such as tiger bone, which is used for treating arthritis and other joint ailments, and rhino horn used Since 1995, the Government of Indonesia for the treatment of fever. Another study--Silent Steppe: The Illegal Wildlife Trade Crisis has been implementing the Program for in Mongolia--found that the trade in wildlife is a major contributor to the Mongolian Pollution Control, Evaluation, and Rating economy.The trade in fur, for example, is estimated to be about $100 million, making (PROPER) to inform the public about the it possibly the third largest contributor to the country's economy behind mining and environmental performance of the country's tourism.This contribution,however,is not sustainable and has led to significant popula- tion declines in many species. industrial sector and to improve Indonesia's weak legal system for enforcing environmen- tal regulations. Participating companies get gram would rate beaches according to suit- tion, a technical assistance grant in Mongo- a performance rating, which is disclosed to ability for recreation and water quality, and lia is facilitating increased public access to the public through a formal press conference help raise awareness of the need for adequate information (see Box, below). and publication in newspapers. Starting in sanitation and sewerage in coastal areas for 2001, PROPER targeted not only water sustainable tourism. Compliance pollution, but also air pollution, hazardous waste treatment, and community relations, The Bank's technical and analytical work pro- Compliance with national and international and its ranking coverage has expanded from motes greater public information disclosure conventions and agreements is a key com- 85 factories in 2002 to 466 in 2005. In by raising awareness about the magnitude of ponent of good environmental governance. 2002, PROPER was complemented by the environmental challenges in the region. An Under the Global Environment Facility Good Environmental Governance program, ongoing economic sector work quantifies the (GEF), two demonstration projects dealing which monitors and ranks the environmen- physical (including health) and economic with persistent organic pollutants (POPs)-- tal performance of cities to encourage lo- burden of air and water pollution in China, PCB Management and Disposal Demonstra- cal government responsiveness to citizens' further underscoring the urgent need for ad- tion and Demonstration of Alternatives to environmental concerns, as well as citizens' dressing these issues. Two studies found that Chlordane and Mirex in Termite Control-- participation in local environmental gover- wildlife trade in the region is significant, but have been approved by the Bank's Board of nance. By its third year, some 133 local gov- is not sustainable (see Box, above). In addi- Directors. In the context of the post-Kyoto ernments had signed on to the program. Mongolia Governance Assistance Project Modeled on PROPER, China's GreenWatch Program represents the most ambitious ap- InMongolia,lawsandregulationsprotectthepublic'srighttoenvironmentalinformation, proach to public information disclosure to but this right is severely constrained by bureaucratic hurdles, an absence of venues to obtain such information, and low public awareness. Even when agencies would like to date in the region. Launched in 1998, the disclose information, they often lack the budget and the capacity to do so. As a result, program is unique in breadth; it covers all the lack of information sharing adds to a general lack of trust in officials and a public major air, water, and toxic pollutants for perception that political wrongdoing is common and acceptable. more than 5,000 industrial enterprises. In the Philippines, the Department of Envi- Under a five-year technical assistance grant, the Governance Assistance Project (GAP) ronment and Natural Resources (DENR) includes a public information disclosure program targeting the number and quality of is considering adopting an information dis- environmentalimpactassessments,andacountry-wideawarenesscampaigntobroaden closure program for beach water quality to access to information about environment and natural resources management. GAP is promote better environmental management meant to strengthen efforts by the Ministry of Nature and Environment and the State Inspection Agency toward sustainable environmental management. at the local level. The Beach Eco-Watch Pro- 34 EnvironmEnt mattErs · 2006 east asia and pacific region framework on climate change, the East Asia and Pacific Region worked with the Gov- -- World Bank Institute -- ernment of China to establish the China Strengthening Environmental Governance in China Clean Development Mechanism Fund and successfully completed the China HFC-23 The World Bank Institute's recent work on the environment in China has been geared Emission Reduction Project for 129 million toward promoting good environmental governance and institutional capacity build- ing through multistakeholder participation. Current China learning programs identify tons of emission reductions. strong cases of local proactive governance that have significantly improved environ- mental actions at local and regional levels, as well as "bottlenecks" that hinder good EAP has also been working with client coun- governance actions. In the process, the China program has gained deeper knowledge tries to strengthen their safeguards systems. on the drivers and links of good practices on the ground,and used the new knowledge In Vietnam, a joint donors' review of envi- and lessons learned to strengthen governance for environmentally sustainable actions ronmental assessment policies and practices and investments. has been finished and an action plan for nar- rowing the gap with respect to international WBI has worked with the China State Environmental Protection Administration (SEPA) to train their directors across the country to support China's environmental regulation, standards is under discussion with the gov- policy, and law enforcement. Reflecting serious water challenges in China, WBI has ernment. In the Philippines, the assessment worked closely with Ministry of Construction, SEPA, and Ministry of Water Resources of the country safeguards systems generated on technical assistance and training on water and wastewater regulation.WBI has also interesting discussion among NGOs, civil assisted the government to mainstream and upstream environmental concerns in the society, DENR, and the donor community. policy and planning process, through its Strategic Environmental Assessment Training In Indonesia, the Bank is supporting the Program. strengthening of the environmental impact assessment process in the context of the government's decentralization policy. In the coming year, EAP will continue to Corporate Environmental and move toward a more consistent and results- Looking Forward Social Responsibility oriented approach to governance. Among the key initiatives to be developed are the and Key Upcoming Voluntary improvements in environ- Forest Transparency Summit in Indonesia, mental performance by the private which will launch a comprehensive set of Challenges sector have considerable potential to increase environmental compli- disclosure policies for the sector; the Asia ance in the EAP region. Corporate Ministerial Meeting on Forest Law Enforce- Increasing attention to governance as the Environmental and Social Responsi- ment and Governance to scale up existing enabling condition for poverty reduction bility activities in EAP countries are commitments toward transparency, enforce- and economic growth, and the ensuing pres- on the rise.Over 6,700 organizations ment, and control of illegal logging and sure to "raise the bar," require moving from in the region, most of them in China, trade of illegal timber products; the launch general discussions to tackling specific sec- have obtained ISO 14001 certifi- of the second round of activities financed by toral governance issues. The region is well- cates. About 190 participate in the the Mongolia--Netherlands Trust Fund for positioned for (a) scaling up public-private Global Compact, which promotes Environmental Governance; and the scale up partnerships for improved natural resource commitments to environmental and labor-related principles. Some large of the PROPER and Good Environmental governance, with a focus on certification companies are also members of Governance programs in Indonesia, as well and tracking schemes for commodities (such the Global Reporting Initiative (GRI) as country-specific policy action to respond as timber), and voluntary industry codes and follow the GRI's environmental to the disclosure of the CPIA ratings. of conduct for sustainable resource man- reporting guidelines. In addition, agement, including increased emphasis on eco-labeling programs have been corporate social responsibility initiatives (see established in China andTaiwan,Ma- This article was prepared by Giovanna Dore, (202) Box, at bottom right); and (b) given the pace laysia, the Philippines, and Thailand. 473-2934, gdore@worldbank.org; Mario Boccucci, of decentralization, pioneering innovative The Philippines,Taiwan,andThailand (202) 473-8476, mboccucci@worldbank.org, and are also members of the Global Eco- ways to tackle natural resource management Marija Kuzmanovic, (202) 473-7031, mkuz- labeling Network, which promotes and environmental governance issues at the manovic@worldbank.org, all of the Environment cooperation, information exchange, Sector Unit of the East Asia and Pacific Region. sub-national level. and harmonization of eco-labels. EAP website: . annual rEviEw · julY 2005­junE 2006 (fY06) 35 Europe and Central Asia Region Estonia Russian Federation Latvia Russian Fed. Lithuania Poland Belarus Czech Rep.Slovak Ukraine Rep. Kazakhstan Slovenia Hungary Moldova Romania Croatia Bosnia and Serbia Herzegovina Kos. Bulgaria Georgia Uzbekistan Kyrgyz Rep. FYR Montenegro Macedonia Armenia Azerbaijan Turkey Turkmenistan Tajikistan Albania Cyprus IBRD 35099 OCTOBER 2006 revlaMfalO georgIa I n the Europe and Central Asia (ECA) region, many countries ing these reforms, while other countries, such as Kazakhstan and are still in a process of completing a transition away from the Belarus, have retained more of the Soviet-era institutions. top-down institutional structures characteristic of centrally planned economies. In their place are emerging new systems of The Bank is supporting improved environmental governance in governance that are more in line with regional trends toward decen- ECA countries through a variety of approaches, including invest- tralization, democratization, greater emphasis on citizen responsi- ments accompanied by measures to increase public disclosure and bility, reliance on the private sector, and regional cooperation. participation; strengthening regulatory capacity; promoting devel- opment of corporate environmental and social responsibility; creat- New institutional structures and new attitudes take time to develop, ing economic incentives for public and private sector investment in however. Where socialist-era institutions collapsed without effective improved environmental practices and technologies; and harmoni- alternatives in place, dangerous vacuums were sometimes created, zation and compliance with the EU acquis communitaire--the Eu- which opened the door to inefficiency, abuse of power, anarchy, and ropean Union's body of law--and other regional and international criminal activity. The environment is especially vulnerable to this commitments and conventions. These principles are applied across vacuum, particularly as many countries are struggling with legacies a wide range of sectors and objectives, including reversing and re- of large-scale past pollution while trying to introduce better prac- ducing industrial pollution; promoting clean energy and efficient tices in a new economic and political context. All ECA countries wastewater and solid waste management; allocating and managing are adopting policies to improve environmental management and valuable natural resources such as land, water resources, and forests; governance. Some of those pursuing democratization most rapidly, and supporting development planning based on ecological units such as Albania and Georgia, are having challenges in implement- such as river basins and coastal zones. 36 EnvironmEnt mattErs · 2006 Environment Matters 2006 -- The World Bank Group europe and central asia region tization. At the same time, they support the ssiKigA creation of a regulatory framework that pro- motes responsible investment and operation (see Kosovo examples in Box, below left). Likewise, in the energy sector innovative projects are mobilizing both public and pri- vate finance, with a growing focus on stimu- lating investments in energy efficiency and renewable energy. The Bank is assisting ECA countries through a variety of approaches, ranging from upgrading district heating in- frastructure and public facilities to reducing heat losses and air pollution and promoting power generation from renewable energy sources. Some projects use traditional public sector Oil fields -- Azerbaijan financing. The Belarus Social Infrastructure Retrofitting Project is helping the Belarus government install new high-efficiency boil- Mining, Industry, and moting public discussion and participation ers and heating substations, renovate interior in order to close down obsolete mines and lighting, and refurbish windows and other Energy industrial plants in a way that minimizes infrastructure in 600 schools, kindergar- environmental and social impacts, or to tens, orphanages, hospitals, and other public Several Bank-financed projects are mobiliz- rehabilitate them and update production buildings. Obsolete district heating systems ing public and private investment and pro- technologies, often in the context of priva- are a target, requiring investment in both strengthening local regulatory capacity and Closing and Rehabilitation of Obsolete Mines upgrading infrastructure. Examples include One of the great challenges facing post-socialist governments in the ECA region is the the district heating projects in Croatia, Bul- legacy of obsolete, inefficient, and highly polluting mines, power plants, and industrial garia, and the Kyrgyz Republic. (See lending facilities, many of which continue to operate and serve as an important source of jobs portfolio in Figure, below). and income. In Kosovo, the production of lignite coal and coal-produced electricity is considered an important source of economic growth, provided that the existing infra- The ECA Regional structure is rehabilitated and expanded, and the industry is aligned with the regional Environment Portfolio electricity market. Private sector investment is a key to reaching these goals.The Bank is supporting Kosovo's Lignite Power Initiative,which seeks to create an enabling envi- Other environmental management Biodiversity ronment for reputable investors to develop Kosovo's lignite resources in a transparent, 3% competitive, fiscally responsible, and environmentally and socially sound way. The 1%Climate change Water resource 11% Clean-up and Land Reclamation Project will help the Kosovo Energy Corporation (KEK) management Environmental remediate ash dumps and reclaim about 650 ha of land around the existing Kosovo 19% policy and A thermal power plant. The project will ensure proper disposal of the material, build institutions capacity within KEK to continue clean-up operations, implement good mining prac- 8% tices, and rehabilitate land that can be used for community development purposes Land Pollution management and for agriculture. At the same time, the Lignite Power Technical Assistance Project management and 22% will support government institutions to manage and regulate new investments in the environmental health 36% sector. This includes development of new environmental legislation and a framework Percentages based on commitment amounts. for resettlement,since future mining and power generation development could have a At the end of June 2006 the active portfolio of World major impact on ambient air quality,the local landscape and groundwater system,and Bank environmental lending in the ECA Region was could also require some resettlement. $1.658 billion. annual rEviEw · julY 2005­junE 2006 (fY06) 37 Increasingly, however, the emphasis is on region, however. The Bank is helping coun- stimulating private sector investment in en- tries put the necessary elements in place. For ergy efficiency and renewables by creating example, the Kazakhstan Ust-Kamenogorsk an enabling policy environment, improv- Environmental Remediation (Industrial ing access to financing sources, and provid- Waste Treatment) Project will build institu- avonaimaDanairdA ing incentives, including access to global tional mechanisms for monitoring and con- carbon markets. For example, the Croatia trol of ongoing groundwater pollution from Energy Efficiency Project will establish a historic industrial waste disposal sites. In utility-based energy service to develop and Bosnia-Herzegovina and Tajikistan, World Armenia aggregate capital for energy efficiency proj- Bank projects are strengthening the capac- ects and build up the local knowledge and ity of municipal governments to manage mechanisms needed for financiers to invest infrastructure and services, including water able resource management. Here also, estab- in such projects. Energy efficiency projects supply and wastewater management. In Uz- lishment and strengthening of user groups in Bulgaria and Romania aim to develop self- bekistan, the Bank is facilitating the intro- is an important strategy, as exemplified by sustaining, market-based financing mechanisms duction of solid waste composting to help Bank projects in Albania, the Kyrgyz Repub- to increase investment in energy efficiency Tashkent increase the efficiency of its landfill lic, Armenia, and Tajikistan. Another key enterprises. operations and sell methane emission re- is improving the government agencies and ductions in the carbon market. Projects in systems involved by making them more effi- In Turkey and Armenia, renewable energy Moldova and Tajikistan are supporting the cient and accountable; projects to strengthen projects seek to stimulate production of development of water users' associations in and increase the transparency of land alloca- privately owned and distributed power from rural areas. tion and registration systems are ongoing in renewable sources by developing sustainable, Albania, Azerbaijan, Bosnia-Herzegovina, market-based financial mechanisms (for ex- Croatia, Macedonia, Romania, Tajikistan, ample, a Renewable Resource Fund) and by Natural Resources and Ukraine. providing technical assistance to local inves- Management tors, financial institutions, and state agencies Forests are a critical economic and environ- to create an enabling regulatory and market Many ECA countries are in the process of mental resource in ECA. For example, Rus- environment. Among projects involving the transferring land and other natural assets sia contains over 20 percent of the world's carbon market, the Georgia Methane Leak from state or collective ownership to private forests and is the largest producer of boreal Reduction in Gas Pipeline Project will po- ownership or management. This presents softwood products. Forestry is also a sector tentially capture 24 million tons of carbon challenges in ensuring transparency and eq- with a history of mismanagement in many and pioneer a new methodology for estimat- uity in the transfers, as well as in coordinat- countries. The Bank has been providing ing volumes of methane leakage from large ing among the property owners and holders technical assistance to support Russia's ef- pipe networks. of use rights where this is needed for sustain- forts to reform forest policy and institutions, Environment and ssiKigA Public Services Many ECA countries are working toward structural reforms to modernize the delivery of environmental services such as solid waste and wastewater management. The objective is to shift the sector away from the obsolete, vertically integrated public monopolies of the socialist era toward more decentralized, responsive, financially efficient approaches. Progress in laying the appropriate legal and regulatory environment and building imple- The Lim River Valley mentation capacity is uneven across the 38 EnvironmEnt mattErs · 2006 europe and central asia region and guidelines, secondary legislation and Russia Forest Policy Dialogue Technical Assistance Program implementation capacity are lacking. The In early 2003, a strong reform climate in Russia created a window of opportunity for World Bank is helping the newest member deep policy, legal, and institutional change. Building upon previous sector work, the states of the EU, as well as accession and pre- RussiaForestPolicyDialogueTechnicalAssistanceProgram(2003­06)waslaunchedwith accession countries, to fill these gaps. the goal of instituting more sustainable forest management and creating a favorable investment climate for responsible forest industry operations. In the agriculture sector, a number of Bank projects are helping to equip farmers and The program has supported studies, regional workshops, and training on a range of processors with the information, technol- related topics, including forest certification (in collaboration with World Wildlife Fund), forest auctions/leases and information management systems,and management of high ogy, regulatory framework, and capital they conservation value forests. It has promoted participation by stakeholders such as NGOs, need to understand and meet strict EU stan- academic institutions,and the private sector. For example,the new Russian Forest Code, dards for both food quality and production expected to be approved in 2006, incorporates many inputs from public discussions processes. In Romania, projects are helping supported by the program. The new code is expected to greatly increase the efficiency build the government's capacity to imple- and transparency of forest auctions and allocation of forest leases,including providing ment new food safety regulations, for exam- greater security,which should attract more responsible,long-term investment. ple the Nitrate Directive, through support to farmers in better manure management, The technical assistance program also helped to introduce the Russian forestry com- munity, which had been relatively isolated, to international best practices. It created and the Natura 2000 program, whose focus an environment of trust and political commitment in the country, resulting in Russia is biodiversity conservation and landscape taking the lead in launching the Europe and North Asia Forest Law Enforcement and management. Governance ministerial process in 2005. Meeting environmental (and other) EU In April 2006,President Putin endorsed the concept of the National Action Plan against standards is a key goal of programs in other Illegal Logging and Associated Trade. This is expected to have a profound impact on sectors as well. The Energy Community of forest sector policies in Russia. Southeast Europe Program seeks to create an efficient regional energy market closely with the aim of making a transition to sus- are under way in Albania, Tajikistan, Ka- linked to the EU's internal energy market; tainable and transparent forest management zakhstan, and Uzbekistan. the Romania Municipal Services Project within the context of broader economic and provides technical assistance to help agencies administrative reforms (see Box, above). The apply for EU grants to upgrade public infra- Bank is also serving as catalyst, convener, and Role of the European structure and services; and a Bank-supported secretariat for the Europe and North Asia Union study is helping Kazakhstan apply EU pro- Forest Law Enforcement and Governance cedures to its petrochemical industry. The (ENA-FLEG) process, and is supporting the The European Union (EU) exerts a strong Bank is also helping countries develop the preparation of action plans to combat illegal influence in the ECA region, serving as a capacity to adopt complex, multisectoral EU logging in Bosnia, Albania, Romania, Geor- model for policies, legislation, and stan- instruments such as the Water Framework gia, and the Russian Federation. dards and as a major source of financial and Directive (which calls for ecosystem-based technical support for implementing policy management of rivers and lake basins) and The management of economically important reforms. It also provides a strong incentive the Strategic Environmental Assessment natural resources such as land, fish, forests, for reform in the form of access to a large (SEA) Directive, as in the project funded by and water is increasingly being addressed and lucrative market for products that meet the Bank/Netherlands Partnership Program throughanintegratedapproachcoveringeco- its stringent requirements. The experience in Albania and Montenegro. logical systems such as river basins and coast- of the first Central and European acces- al zones. Often this involves transboundary sion countries shows that meeting environ- resources and issues, which require bilateral mental and health standards presents one or multilateral institutional structures for of the greatest challenges to those aspiring This article was prepared by Agi Kiss, (202) 458- cooperative planning, implementation, and to join or trade with the EU. While many 7180, akiss@worldbank.org, of the Environment monitoring. For example, Bank-supported have made significant progress in harmo- and Social Development Sector Unit of the Europe and Central Asia Region. ECA website: . annual rEviEw · julY 2005­junE 2006 (fY06) 39 Latin America and Caribbean Region The Bahamas Haiti Jamaica Dominican Rep. Mexico St. Kitts and Nevis Antigua and Barbuda Belize Dominica Guatemala Honduras St. Lucia Barbados El Salvador R.B. de St. Vincent and the Grenadines Nicaragua Venezuela Grenada Trinidad and Tobago Costa Rica Panama Colombia Guyana Ecuador Suriname Peru Brazil Bolivia Paraguay Chile Uruguay Argentina Falkland Islands (Islas Malvinas) A dispute concerning sovereignty over the islands exists between Argentina which claims this sovereignty and the U.K. which IBRD 31564R SEPTEMBER 2006 administers the islands. exaSnyrB Peru A lmost 30 years have passed since countries in the Latin These achievements notwithstanding, the first generation of en- America and Caribbean region began to systematically ad- vironmental policy was criticized on various fronts. Business and dress environmental problems. Most of the policy inter- industry organizations as well as economists criticized these policy ventions adopted in the mid-1970s, the 1980s, and early interventions as inefficient and inflexible. Others said that stan- 1990s were command-and-control regulations based on national dards did not consider the local social, political, economic, and standards that were sometimes too ambitious or that did not re- environmental conditions. Furthermore, some critics argued that flect the domestic environmental, social, and economic conditions. various stakeholders, average citizens, and minority groups were The first generation of environmental policies achieved valuable excluded from the process of building a regulatory framework. political goals and eventually helped improve environmental qual- ity in many countries and urban areas in the region (for example, Starting in the second half of the 1990s, more recent interventions Mexico City). Moreover, these policies led to the establishment of incorporated reforms designed to make implementation more flexible. Some countries introduced economic instruments in an organizations (ministries and specialized agencies) and governance attempt to increase the efficiency and cost-effectiveness of environ- approaches to environmental and natural resource management. At mental regulation. Similarly, in some countries, authorities began the same time, civil society became more aware of environmental to consult regularly with stakeholders. In the absence of other op- and natural resource problems and lively and diverse environmen- portunities to discuss development projects, the environmental talist movements (composed of nongovernmental organizations, arena frequently became the forum for debating projects, policies, academics, and business organizations) flourished in most coun- and programs linked to energy, transport, mining, urban develop- tries in the region. ment, and other sectors. As a consequence, citizens and commu- 40 EnvironmEnt mattErs · 2006 Environment Matters 2006 -- The World Bank Group latin america and caribbean region nity representatives are more involved in the policy. Some of the most difficult policy development and implementation of envi- issues facing Guatemala may involve trade- The LAC Region ronmental and natural resource programs offs between preserving natural systems and Environment Portfolio such as watershed management. pressing forward with economic growth, Other environmental including developing oil and gas fields and management Biodiversity 5% 8% The World Bank is using a wide range of expanding the road network and agricultural Climate change Water resource lending and non-lending instruments to frontier. This is especially relevant because 2% management Environmental improve environmental governance. For adoption of the Dominican Republic­ 24% policy and example: Central America FreeTrade Agreement (DR- institutions CAFTA) is expected to accelerate economic 12% Land f Country environmental analyses--such growth and expand infrastructure, which Pollution management as Guatemala's--are helping illuminate should promote investment and expand management and 23% environmental health difficult issues involving trade-offs exports. 26% between preservation and growth. At the end of June 2006 the active portfolio of World Percentages based on commitment amounts. f Development policy loans are support- Based on the best regional and international Bank environmental lending in the LAC Region was ing reforms to improve environmental practices, the Guatemala CEA concluded $1.14 billion. governance in Colombia, Mexico, and that mainstreaming environmental consider- Brazil. ations into sectoral policies was the best way f In Brazil, the Bank is supporting an to enhance the effectiveness of environmen- Bank provides to help the borrowing country innovative collaboration among a broad tal policy. The report also stressed the need to address actual or anticipated development fi- range of stakeholders for managing eco- improve the quality of regulations, especially nancing requirements and to support policy logical corridors. those that could complement an overloaded reforms in key sectors (see Figure, above). f In Mexico, the Bank is supporting an environmental impact assessment (EIA) sys- The Colombia Sustainable Development/ innovative endowment fund for the tem; the importance of engaging civil society Development Policy Lending Program is management of protected areas, as well by improving information and participation supporting a number of reforms to improve as efforts to improve local forest man- mechanisms; and the need to provide the environmental governance. It is developing a agement by strengthening community right incentives by promoting compliance results-based framework to monitor progress governance structures. through achievable requirements combined toward goals directly linked to the Mille- f In Argentina, the Bank is supporting with credible sanctions to violators, rather nium Development Goals (MDGs), as well efforts to strengthen governance prac- as supporting improvements in inter-institu- tices in the solid waste management than by trying to change behavior by threat- tional coordination and public participation sector. ening violators with criminal charges that are ultimately not enforced. in environmental decision making. Country CEAs guide environmental assistance and The program's first phase led to a presiden- tial decree that made regional environmental Environmental capacity building supported by the Bank. The governments of Guatemala and El Sal- authorities accountable for achieving MDG- Analyses vador have asked for technical assistance to linked indicators. Through commitments implement some recommendations of their to these specific results, the program fosters A country environmental analysis (CEA) respective CEAs, mainly to introduce stra- better alignment between national and re- helps to systematically evaluate a country's tegic environmental assessments. In the case gional priorities. At the regional level, this environmental priorities, the environmental of Colombia, the CEA led to a development results-based approach helps authorities to implications of key policies, and the coun- policy loan (DPL) that supports environ- be more strategic in reaching the MDGs, im- try's capacity to address its environmental mental governance improvements. proves inter-sectoral coordination, and cre- priorities. Country Environmental Analyses ates greater transparency in monitoring the have been conducted in Colombia, El Salva- effectiveness and efficiency of environmen- dor, Dominican Republic, Guatemala, and Development Policy tal management. The DPL program is also Peru. Loans helping the Environment Ministry adapt its Technical Advisory Council on environmen- Guatemala's CEA illustrates clearly the chal- Development policy lending is rapidly dis- tal policy and regulation to become a better lenges involved in shaping environmental bursed policy-based financing, which the forum for cross-sectoral coordination and annual rEviEw · julY 2005­junE 2006 (fY06) 41 to give marginalized groups a greater voice in environmental decision making. The first -- World Bank Institute -- operation of the Colombian DPL amounted The National Capacity Development Program in Brazil to $150 million. In 2005,theWorld Bank Institute and Brazil Country Officelaunched theNational Capac- There are two additional environment-based ity Development Program. This multiyear technical assistance program supports the Government of Brazil's effort to establish the National Environment System in Brazil's DPLs in Mexico and Brazil. In Mexico, the 5,600 municipalities. DPL is being used to support the govern- ment's efforts to mainstream environmental The Bank's program will help strengthen the ability of environmental practitioners, issues in key sectors (energy, forestry, water, technical staff, and advisers who work for the Brazilian Government to effectively and tourism) through the establishment of implement NES across all levels of government. The program includes a monthly coordination mechanisms. In the case of seminar series delivered via Global Distance Learning Network (GDLN) and affiliate Brazil, the DPL is supporting the country's networks; short face-to-face and distance learning courses and workshops; and direct goal of balancing economic growth with technical assistance to key stakeholders at the federal and state levels. It is supported social development and the improvement of by the Ministry of Environment,the Ministry of Cities,the Ministry of Mines and Energy, Petrobras, Caixa Economica, National Confederation of Industry, Banco da Amazonia, environmental quality. The Mexican and the Banco do Nordeste,GDLN,and the Brazilian Institute for the Environment and Renew- Brazilian DPLs total $600 million and $1.2 able Natural Resources (IBAMA). billion, respectively. Brazil -- Governance in operational plans for the project, collaborate areas and conservation programs supported in monitoring efforts, participate in field by the fund's endowment; the World Bank, Ecological Corridors workshops, and disseminate information on which acts as the implementing agency for In the Ecological Corridors Project in Bra- the corridor to the stakeholders they rep- the Global Environment Facility, the fund's zil, a truly innovative collaboration among resent. Because the interests of these stake- initial and main donor; and FMCN, a pri- a broad range of government institutions, holders are incorporated into the design and vate organization that is responsible for civil society, and the private sector has led implementation of corridor management managing the fund's endowment and for to the development of a structure for man- activities, and because each stakeholder raising additional financial support. aging ecological corridors that responds group has representation in the management to the needs of all stakeholders and enjoys structure, there is a high level of ownership FANP's endowment has grown from $16.48 a high degree of ownership and support. of the CCMA and support for the cutting- million--provided by GEF for 10 protected For example, in the Central Atlantic For- edge concept of ecological corridors. Each areas in 1997--to $50 million in 2006, est Corridor (CCMA in Portuguese), which stakeholder group also contributes unique involving 12 donors and supporting 21 includes parts of the states of Espiritu resources and perspectives, which have protected areas. One of the elements of its Santo and Bahia, nearly 100 institutions greatly improved corridor management. The success is the participation of many sectors participate in state and corridor-level man- role the state and corridor committees have of society. The project relies on participatory agement committees that provide strategic played in the CCMA is now considered a arrangements at different levels: the advisory direction for the CCMA. These committees model for participatory governance in Brazil councils in the protected areas; the FANP have representatives ranging from the state and beyond. Technical Committee at the project level; Secretariat of the Environment, Agrofor- and CONANP at the national scale. estry Department, and military service to Mexico -- Participatory the National Environmental Institute (IB- Decision Making through the The advisory councils have two important AMA), representatives of indigenous groups, Fund for Protected Areas tasks: (1) reaching consensus with regard to quilombolas (settlements founded originally the use of natural resources; and (2) allocat- by escaped slaves), agricultural associations, The Mexican Fund for Protected Areas ing investments to sustainable activities. The and environmental NGOs. Members elect (FANP) is an innovative collaboration in- FANP technical committee is charged with committee leadership directly. volving the National Council for Protected Areas (CONANP), a public organization-- defining budgets, solving operational prob- lems, and seizing funding opportunities. Its The work of the committees has been key comprised of representatives of conservation members are named by CONANP and rati- in building the wide base of support for organizations, the academic community, the fied by the FMCN Board, which reflects the the CCMA that exists today in Bahia and business sector, and local communities--that Espiritu Santo. Committee members review is responsible for managing federal protected private-public nature of the program. 42 EnvironmEnt mattErs · 2006 latin america and caribbean region sues arising from the construction and op- zeuqirdoRotrebireH eration of the new landfills, including site location and environmental impacts of both construction and operation, are clarified and addressed. Moreover, participating munici- palities are obliged to establish a legal and regulatory framework and minimum cost recovery standards. In most cases, to take advantage of scale effects, municipalities will have to agree on rights and responsibilities Oaxaco community-managed forestry project as well as on monitoring and enforcement -- Mexico methods. Such measures will improve gov- ernment effectiveness in Argentina's solid waste management sector. Finally, to mini- mize the risk of corruption, municipalities will apply the Bank's procurement guide- lines. Each process will be reviewed by the Bank procurement specialists and project team. Challenges Ahead The region has made progress in reducing Mexico -- tions. There is a strong focus on creating emissions and protecting natural resources, Community Forestry and strengthening community governance but questions persist about whether existing structures at different levels. After almost 10 institutions are capable of fully addressing In Mexico, 80 percent of forest lands are years of operation, PROCYMAF is widely the pollution and natural resource problems formally owned by indigenous communities recognized (nationally and internationally) that LAC countries will face as a result of and ejidos. These forms of collective owner- as a model of government intervention that increased economic activity in a context of ship resulted from the agrarian reform that supports rural development in forested areas increasing global competition. Solid gover- began after the 1910 revolution and did with a strong participatory approach. nance mechanisms are especially needed to not conclude until the late 1980s. Recently, manage natural resources and the environ- emerging community-managed forests in Argentina -- Better ment effectively because effective manage- Mexico represent a unique model where ment requires both the coordination of communities are managing their forest for Governance for Solid Waste numerous groups of people with diverse commercial timber production, thus gener- Management interests and taking a long-term perspective. ating important economic, social, and envi- The Argentina National Urban Solid Waste The recognition of the importance of gov- ronmental benefits in poor indigenous and Management Project aims to promote high ernance presents an opportunity to re-think non-indigenous rural areas. With technical governance standards in solid waste manage- the purposes and priorities of environmental and financial support, community forestry ment. With 80 percent of the loan directed policy and to develop pragmatic approaches enterprises have been able to manage their to investment in new sanitary landfill fa- to promote sustainable development in the forests and learn complex processes of indus- cilities, the project is uniquely positioned region. trial production. to foster use of best governance practices in the sector. Three governance dimensions are The Bank-supported Mexico Commu- essential for the project: voice and account- This article was prepared by Juan C. Belausteguigoi- nity Forestry Project (PROCYMAF) works tia, (202) 473-8809, jbelausteguigoit@worldbank. ability, government effectiveness, and con- org, along with Angela Armstrong, Adriana Moreira, with indigenous communities and ejidos trol of corruption. Gerardo Segura, and Horacio Terraza, all of the to improve natural resources management Environment and Social Sustainable Development and conservation and increase the range Comprehensive stakeholder consultation Sector Unit of the Latin America and Caribbean of forestry-based income generating op- region. LCR website: . annual rEviEw · julY 2005­junE 2006 (fY06) 43 Middle East and North Africa Region Syrian Lebanon A.R. Malta Morocco Tunisia I.R. West Bank and Gaza Iraq of Iran Jordan Algeria Libya Arab Kuwait Rep. of Bahrain Egypt Qatar U.A.E. Saudi Arabia Oman Rep. of Yemen Djibouti IBRD 31565R SEPTEMBER 2006 atA-ubAeilahtaN egyPt A lthough mainstreaming environmental issues into devel- es and growing solid waste management problems to the mix. Most opment is progressing, most countries in the Middle East MNA countries are making significant progress in developing the and North Africa (MNA) region still face several challenges legal frameworks necessary to address these issues, but providing in enacting and enforcing environmental regulations. enforcement mechanisms through functioning regulatory bodies The World Bank remains committed to helping MNA countries still remains several years away. continue the significant strides they have made over the past ten years. In response to these challenges, the World Bank's MNA environ- ment strategy focuses on three key areas to mainstream environment Recently, MNA's economic situation has improved dramatically, via measures that improve both the quality of life and promote the buoyed by record high oil prices. Over the past three years, eco- sustainability of economic growth: nomic growth in the region has averaged 6.1 percent per year, up from 3.7 percent annually during the 1990s. This economic 1. Better public sector efficiency and environmental governance windfall is far from evenly distributed, however, with the poorer through the strengthening of institutions responsible for over- economies benefiting less than in previous oil booms and suffering seeing environmental laws and engaging the participation of more from increased energy prices. civil society in decision-making processes. In the past year, MNA has continued to work with Iran to strengthen its Min- At the same time, the major environmental issues, such as water istry of Environment through the Environment Management scarcity and land degradation, persist and, in some cases, are wors- and Support Project; conducted region-wide training on the ening. Major urban centers add increasing pollution-related illness- cost of environmental degradation; and approved the second 44 EnvironmEnt mattErs · 2006 Environment Matters 2006 -- The World Bank Group middle east and north africa region Egypt Pollution Abatement Project Partnerships The Africa Stockpiles Program is a World ($20 million IBRD). Bank­Global Environment Facility-financed 2. A more efficient safeguard system based Regional partnerships are instrumental to initiative to safely dispose of several thou- on better informed policy, program, implementing the goals of the MNA en- sand tons of obsolete pesticides that have and project planning, and on predict- vironment strategy. Active World Bank accumulated throughout the African conti- able environmental guidelines for devel- partnerships include the Mediterranean En- nent over the last four decades. These dan- opment projects financed by both the vironmental Technical Assistance Program, gerous chemicals threaten particularly the public and private sectors. This requires the MNA Regional Water Initiative, the Nile poorest and most vulnerable communities development of environmental protec- Basin Initiative, and the Africa Stockpiles through the contamination of food, water, tion laws based on incentives and eco- Program. soil, and air. The objectives of the program nomic instruments, a workable system are to clean up all obsolete pesticide stocks in of environmental assessments, a well- The Mediterranean Environmental Tech- Africa and to establish preventive measures structuredlearningprogram,andtheuse nical Assistance Program is a multi-donor to avoid future accumulation. of strategic environmental assessments partnership providing technical assistance (SEA) as a tool for the decision-making to two-thirds of the MNA countries. It process. In 2006, the Yemen Second has active programs to improve solid waste Sector Work and Rural Access Project ($40 million IDA) management, train public and private sec- Lending Programs prepared an SEA that can be used as a tor practitioners in better preparation and guideline for all rural roads, whatever management of environmental impact as- Sector work focuses on issues like water the source of financing. In addition, the sessments, and institute sound integrated resources management, land degradation, Mediterranean Environmental Tech- coastal zone management practices for more and the economic costs of environmental nical Assistance Program (METAP) sustainable coastal development. It serves 15 degradation. The major focus of MNA's continued its work training national countries, including Algeria, Egypt, Jordan, regional sector work for 2006 is the MNA experts on environmental impact assess- Lebanon, Libya, Morocco, Syria, Tunisia, Development Report on Water. Several new ment preparation and expanded the and the West Bank and Gaza. approaches to governing water use are being program to include private consultants tried. The Box at the top of page 46 illus- from MNA countries. The MNA Regional Water Initiative brings trates work to get greater participation by 3. Lowered environmental health risks more than 20 countries together to promote women in sustainable development. Other through the development of health- sustainable practices in the water sector, as sector work in 2006 includes a water assis- and poverty-related prevention and water scarcity is the major environmental tance strategy for Iraq; water sector reform mitigation measures in MNA's projects. threat facing the region. The initiative pro- and a rural water and sanitation strategy for Progress here can be made by including motes innovation and knowledge sharing on an environmental health component in best practices in water policy reforms, water water supply, sanitation, and municipal resources management, and sustainable wa- waste projects, and enhancing local ter supply services. National, regional, and communities' knowledge of the nega- global experiences are highlighted and infor- enahrBmerekseM tive impacts of poor hygiene practices. mation is shared through the development In fiscal 2006, projects included the of national water assistance strategies. Tunisia Urban Water Supply ($38 mil- lion IBRD), Morocco Urban Water The Nile Basin Initiative includes all of the Supply and Sanitation ($60 million Nile riparian countries in a regional partner- IBRD), and Yemen Fisheries Resource ship guided by a shared vision "to achieve Management and Conservation ($25 sustainable socioeconomic development million IDA). through the equitable utilization of, and benefit from, the common Nile basin water The World Bank helps countries mainstream resources." The Initiative is working with environmental issues through three major the Bank on the implementation of sectoral avenues: regional partnerships, specific sec- regional capacity building projects, includ- Djibouti tor work at the regional and national levels, ing one on transboundary environmental and lending programs. action. annual rEviEw · julY 2005­junE 2006 (fY06) 45 Promoting the Role of Rural Women The MNA Regional in Sustainable Water Management in Egypt Environment Portfolio Other environmental AnewactivityentitledtheCatalyticRoleofWomeninEffectingSustainableDevelopment management Environmental policy and aims to promote sustainable water management among local communities,particularly 1% institutions rural women.In connection with ongoing rural development and agriculture projects in 11% Egypt like the Sohag Rural Development and Third Integrated Irrigation Improvement Water resource Land Management projects,the Bank is financing this activity through an Egyptian NGO,the management management Center for Development Services. Training is provided to rural women in improving 44% 4% water quality and hygiene.The program is particularly important in rural Egypt, where illiteracyratesamongwomenareashighas62percent.Thisinnovativeprogramprovides Pollution necessary tools and approaches for better hygiene, develops effective messages for management and environmental health local media,and promotes stronger networks between rural communities and leaders. 40% By focusing on gender issues in a rural setting,the activity specifically and intentionally Percentages based on commitment amounts. addresses the limited participation of women as a basic cause of the failure in attaining better results in the high priority areas of governance,water scarcity,and empowering At the end of June 2006 the active portfolio of World Bank environmental lending in the MNA Region was women.Since women are most often the users,providers,and managers of water in rural $729 million. households and the guardians of household hygiene, they have a strong incentive to acquire and maintain safe water facilities. support is specifically for strengthening envi- Iran; work on strategic environmental assess- the past several years through studies on the ronmental policies and institutions (see Fig- ments in Yemen and Djibouti; developing costs of environmental degradation for Alge- ure, above). In the past year, environmental the use of country systems for environmen- ria, Egypt, Iran, Lebanon, Morocco, Syria, mainstreaming in MNA has benefited from tal safeguards in Tunisia; agriculture reviews and Tunisia. increased awareness and access to carbon fi- for Morocco,Tunisia, and Iraq; coordination nancing mechanisms and credits as they are of environment and health interventions in In fiscal 2006, the Bank committed $1.7 applied to planned investments in areas like Djibouti; work on environment and health billion in IBRD and IDA loans for the re- energy, solid waste management, sanitation, in Yemen; and a study of nongovernmental gion, including $726 million for activities and transportation. organizations for the West Bank and Gaza. with designated environmental and natural resource management components that are Carbon Market-- MNA also organized a regional conference expected to have significant positive environ- in Kuwait to share knowledge gained over mental impacts. At least 11 percent of this MNA on Board In fiscal year 2006, the situation regarding adeVurotaS carbon finance operations improved dramat- ically through greater awareness of financing opportunities, building national and local understanding of the requirements for proj- ect development, and helping to identify and develop potential projects. To date, MNA has signed three emissions re- duction purchase agreements (ERPAs)--two in Tunisia and one in Egypt--that would purchase more than 4.5 million tons of CO2 equivalent. All these reductions will be gener- atedthroughBanklendingoperationscoupled with carbon finance projects in the solid waste sector. Additionally, MNA has seven carbon Iran finance projects identified in the pipeline and is discussing several more. 46 EnvironmEnt mattErs · 2006 middle east and north africa region Integrated Land and Water Combining Lending with Carbon Finance Management in Iran for Pollution Reduction in Egypt The Alborz Integrated Land and Wa- Egypt's ambitious development and industrialization policies, coupled with a rapidly ter Management Project is located in expanding population (estimated to reach 86 million by 2020), is putting heavy pres- Mazandarin Province on the shores sure on the country's environment, as elaborated in the 2005 Country Environmental of the Caspian Sea.The project seeks Analysis and the 2002 study on the cost of environmental degradation.Building on the to achieve integrated land and wa- success of the first project,the Second Pollution Abatement Project aims to demonstrate, ter management by (a) increasing in the Egyptian context,the applicability of market-based approaches toward achieving agriculture productivity through significant pollution abatement in selected hot spots in the Alexandria and greater Cairo improved irrigation and drainage regions.The goal is at least 75 percent reduction of pollutants emitted by companies in systems and participatory manage- each of the selected hot spot areas.The Second Pollution Abatement Project will man- ment mechanisms; (b) reducing soil age a line of credit specifically for industrial pollution abatement,and provide technical erosionandsedimentyieldsthrough assistance to strengthen the capacity of the Egyptian Environmental Affairs Agency. better upper watershed manage- ment; and (c) protecting the water AninnovativecomponentoftheprojecthelpsEgypttotakeadvantageoftheopportuni- environment downstream through ties offered by the emerging carbon market.This sub-program will set up a sustainable improvedhydrological/waterquality pollution abatement program with the revenues from the sale of emission reductions monitoring,reservoir operation,and generated under the Kyoto Protocol's Clean Development Mechanism.The project also pest management. contributes to Egypt's efforts to address climate change. The first carbon finance op- eration covers two landfill sites (Borj El Arab and Al Hammam in Alexandria),which are The project is piloting a new ap- expected to generate emission reductions equivalent 3.3 million tons of CO2, of which proach to governing water use in theWorld Bank will purchase 1.1 million tons of verified emission reductions until 2015. thewatershedbyestablishingaRiver A share of the revenues generated will be used to support the Egyptian Environmental Basin Water and Soil Committee Protection Fund,which will be used to finance Egypt's sustainable development agenda. that will address basin-level water Itishopedthatlessonswillbelearnedfromthisprojectthatcanbetransferredelsewhere allocation and water quality prob- in Egypt and other MNA countries to reduce emissions in the coming years. lems, leading eventually to better natural resource management and conservation. The committee will In 2006, the Second Pollution Abatement coordinate between the two major agencies--the Mazandaran Jihad-e Project in Egypt (see Box, above) included Agriculture Organization and the a carbon finance sub-program that facili- Mazandaran Regional Water Com- tates verified emissions reductions under the tevennorGdravdiL pany--andthevariouswaterusersin Clean Development Mechanism. In Tunisia, the river basin,including representa- the two carbon finance operations--the Jeb- tives from agriculture, forestry and el Chekir Landfill Gas Recovery and Flaring wildlife, fisheries, and urban users. and the Nine Landfill Gas Recovery and Flar- In total, through the various user ing projects--are the first fully blended car- communities participating in the committee,over 1 million people will bon finance operations in the region. These have influence over management of operations are coupled to a Bank lending their local water resources. operation in the municipal solid waste sector Red Sea Coast planned for fiscal 2007. They constitute the -- Yemen The World Bank Institute has been first attempt to capture and flare landfill gas assisting in capacity building for at the Greater Tunis Landfill (Jebel Chekir this project through consultation site) and nine other landfills distributed over workshops, south-south learning, Tunisia. Emission reductions to be gener- and formation of water-user asso- This article was prepared by John Bryant Collier, ciations. The longer-term goal is to ated are estimated at 4.9 million tons of CO2 (202) 473-8551, jcollier@worldbank.org, of the scale up this new model of water emitted, with the bank agreeing to purchase Rural Development, Water and Environment Group governancethroughoutIraninorder 3.05 million tons of verified emission reduc- of the Middle East and North Africa Region. MNA to better balance all of the compet- tions up to 2015. website: . ing demands and interests for water use within other watersheds. annual rEviEw · julY 2005­junE 2006 (fY06) 47 South Asia Region Afghanistan Nepal Bhutan Pakistan Bangladesh India Sri Lanka Maldives IBRD 31566R SEPTEMBER 2006 avonaimaDanairdA Bangladesh S outh Asia has achieved impressive macroeconomic results The environmental problems in the region are enormous and grow- over the last five years and remains the fastest growing re- ing. High population growth, rapid urbanization, and the growth of gion in the world. Ambitious economic reforms have paid pollution-intensive industries have created a host of economic and dividends, resulting in record growth rates exceeding 5 per- environmental risks emerging from poorly managed externalities cent in most countries, buoyant levels of private sector investment, such as municipal, industrial, and hazardous wastes and deteriorat- and manageable fiscal balances. Economic growth has created ing air quality. The rapid expansion of small- and medium-sized both environmental pressures and opportunities, however. The industrial units has created additional challenges for regulators. World Bank estimates that economic losses from environmental Environmentally related health risks account for about one-fifth of degradation amount to as much as 5 to 6 percent of GDP across the region. Environmental issues are therefore a serious economic the total burden of disease. This is comparable to malnutrition and concern, and addressing these issues can yield a substantial devel- is larger than all other preventable disease factors. opment dividend. This message is reinforced by other assessments of environmental performance such as the Environmental Sustain- About 80 percent of South Asia's poor live in rural villages and ability Index, which show that natural resources are under consid- depend on natural resources. Declining productivity due to over- erable stress. Air and water pollution have emerged as major health grazed pastures, soil erosion, and watershed and forest degradation hazards, water scarcity is a problem through much of the region, has accentuated rural poverty and threatened livelihoods. The envi- the productivity of rangelands has declined, much of the region's ronmental impacts of forest degradation are of heightened interna- natural forest cover has been degraded, and its biodiversity is in tional concern where globally significant biodiversity is threatened. danger. Most of South Asia's endemic mammals--and all of its charismatic 48 EnvironmEnt mattErs · 2006 Environment Matters 2006 -- The World Bank Group south asia region species, such as the tiger, Asian elephant, and ingly, vulnerability due to poverty is also on the service sector. Globalization has created Asiatic rhinoceros--are classified as either the increase in the urban environment. further incentives to harness environmental threatened or endangered. Recognizing the gains. The reputational risks associated with linkages between natural resource manage- Climate variability and climate change are environmental problems, coupled with the ment and rural livelihoods, most countries predicted to increase the frequency and need for exporters to comply with interna- have introduced policies to improve the sus- severity of droughts, floods, and cyclones. tional environmental norms, have highlight- tainability of natural resource use, though There is growing recognition that, no matter ed the importance of environmental issues policy implementation remains uneven. how robust mitigation measures are, some to policy makers. climate change is inevitable and therefore it Environmental is vital for these countries to begin adaptation measures. The region's problems are some- Environmental Degradation--Threat what unique: while aggregate greenhouse Governance-- to Growth and gas emissions are large and growing rapidly, emissions are still among the lowest in the Challenge to Poverty Reduction world on a per capita basis. An important objective of the Bank's engagement is to help Sustainability Growth has changed the nature of environ- lower the carbon intensity of development. An over-arching theme across the region is mental pressures. Urban degradation and in- the need to improve environmental gov- dustrial pollution are growing in importance Simultaneously, there are emerging pressures ernance and strengthen incentives for be- relative to other categories of environmental for improvement and change throughout the havioral changes and investments that lead damage. Rapid urbanization is a major chal- region. Economic growth has provided the to better environmental quality. The most lenge in the region, calling for cost-effective region with the resources and opportunity important governance issues are access to and sustainable approaches to provide safe to address environmental concerns. Rising environmental information, transparency water and sanitation for its burgeoning urban prosperity has been accompanied by greater and consultation for accountable decision- population. In the coming decade, Mumbai public awareness of environmental issues making, adequate institutional capacity for and Dhaka are predicted to join the club of and a growing demand for improved envi- credible enforcement, and economic poli- "mega-cities" with a population in excess of ronmental management. Growth in many cies that promote improved environmental 20 million inhabitants. Already there are regions has been accompanied by a shift performance. more slum dwellers in Mumbai than there from pollution-intensive forms of economic are inhabitants in all of Norway. Accord- activity to cleaner and more environmentally Greater access to environmental information benign forms of production, particularly in at all levels and understanding of the impacts of environmental degradation will create de- avonaimaDanairdA mand for environmental services. Equally, greater awareness of the health risks of in- door air pollution could significantly reduce exposure and change household patterns. Public investments in capital infrastructure to protect water quality in mega cities will require strong civil society support, based on an understanding of the costs of inac- tion. Private investment to control pollution will require public pressure for compliance, based on information regarding sources of pollution and its impacts. India has passed the Right of Information Act (RIA), which provides an opportunity for businesses and regulators to improve public access to infor- Bangladesh mation and develop programs for improving environmental management. A recently cre- annual rEviEw · julY 2005­junE 2006 (fY06) 49 ated Information and Facilitation Center at and public perceptions of these risks, the Ministry of Environment and Forests is The SAR Regional Environment particularly in the context of growing an excellent vehicle to make environmental Portfolio environmental awareness in the region. information easily available to the public. Biodiversity 2% Climate change Increasing the effectiveness of risk man- In the Notification for Re-Engineering of Other environmental 9% management agement requires a focused and strategic the EIA Process (2006) in India, the "pub- 2% Environmental policy and approach to project-level safeguards lic hearing" has been replaced with "public institutions complemented by a broader engage- Water resource consultation," reflecting a paradigm shift in 6% management Land ment and dialogue on environmental the process. 36% management policy and management systems. 11% This has resulted in a highly proactive At the same time, across the region there is Pollution management and approach to address systemic institu- a considerable scope for more effective envi- environmental health tional and capacity weaknesses using a ronmental decision making, institutional ac- 34% range of instruments for deepening cli- countability and transparency, and enhanced Percentages based on commitment amounts. ent dialogue and providing assistance to credibility through broadened public con- At the end of June 2006 the active portfolio of World sector agencies. Bank environmental lending in the SAR Region was sultations. Empowering local governments $1.421 billion. f Providing knowledge support to gov- to address emerging priorities such as ur- ernments in managing environmental ban air quality, and pollution from small issues. The Bank supports mainstream- and medium industries, will require greater a rapidly growing economy, particularly in ing the environment by strengthening integration among various levels of govern- vulnerable ecological settings. analytical and empirical work to fill ment. Municipal and local governments ap- critical knowledge gaps in subregions pear to be best positioned to address local Toward Strengthening and sectors of significant Bank inter- environmental concerns. India is a pioneer vention. The Bank has completed ana- in devolving more powers to, and building Environmental lytical work (Country Environmental the capacity of, local governments--a pro- Analyses) in India, Pakistan, and Ban- cess that was set in motion by the 73rd and Management gladesh and a number of subregional 74th Constitutional amendments aimed at The Bank recognizes the need to support assessments, including the Andhra improving environmental quality with broad growth by enhancing its environmental Pradesh Adaptation to Drought and the citizen and sector participation. sustainability and addressing the poverty­ Orissa Growth and Environment stud- natural resource degradation links. The Bank ies, as well as country water resources As the credible threat of regulatory enforce- is increasingly using core operations in the assistance strategies in Bangladesh, ment remains central to environmental infrastructure and rural development sectors India, and Pakistan. Work is ongoing in governance, so too is the establishment of to support and mainstream sustainable de- Nepal, Sri Lanka, Pakistan, Bangladesh, the institutional capacity to deliver effective velopment through planning and assessment and India. regulation. The lack of effective mechanisms f Focus on institutional capacity build- tools that help balance natural resource use for inter-agency coordination is too often ing. The Bank is supporting efforts by and optimize benefits to people through at the root of environmental management countries in the region to strengthen improved project designs and improved problems in the region, including difficul- the capacity of their environmental and environmental management practices. The ties with enforcing compliance. Policies that sectoral agencies to address the new lending portfolio reflects the importance of promote economic incentives can comple- challenges and provide incentives for water resource management, pollution man- ment regulatory approaches to addressing compliance by expanding the policy agement, and environmental health (see Fig- the environmental challenges of rapid urban toolkit. The India Capacity Building for ure, above). Focused interventions have been growth, industrialization, and infrastructure Pollution Management Project builds developed in the following areas: development. on lessons from considerable past expe- f Strengthening the risk management rience in India and internationally for Most South Asian countries have established framework to support development designing more effective area-based legislative and institutional frameworks assistance. With high levels of popu- pollution management programs, to address their environmental problems. lation density, there is a heightened particularly for such new priorities as Despite these structures, regulatory capac- need to manage environmental risks industrial effluents and hazardous waste ity does not match the changing needs of management. 50 EnvironmEnt mattErs · 2006 south asia region f Addressingenvironmentalhealthrisks. TheBankisworkingcloselywithnation- al and provincial governments to devel- op strategic programs that strengthen the capacity of environmental agencies to identify and reduce ambient indoor yrarbiLotohPknaBdlroWehT and outdoor pollution levels. There is an expanding Air Quality Management Program in Bangladesh and a deepening engagement on air quality in India and Pakistan. The Bank has also developed programs to address indoor air pollu- tion in India, Bangladesh, and Nepal. An innovative project in India aims to improve the capacity of environmental institutions to manage pollution on industrial estates and in the small and medium industry sectors. It promises to identify cost-effective ways to tackle Pakistan complex issues such as waste manage- ment and site contamination. f Tackling environmental impacts of f Global commons agenda. A significant siderations; and (d) core operations in urban growth. The Bank is addressing global commons agenda has been devel- the energy, infrastructure, environment, the environmental challenges of rapid oped to (a) help countries in the region and rural sectors to support sustain- and unplanned urban growth of the implement the Montreal Protocol and able development and climate change mega and soon-to-be mega cities of (b) improve the sustainability of the management objectives, including the South Asia. The Dhaka Environment internationally shared fisheries in the development and application of renew- Management Project under prepara- Bay of Bengal. able technologies throughout the region tion seeks to demonstrate the benefits f Climate change. Low-carbon develop- (ranging from large-scale hydro projects of sound environmental management ment will ultimately require significant with proper environmental and social principles. shifts in energy policy and regulation, safeguards to small-scale renewables in f Improvingthesustainabilityofnatural modes of investment planning, and Bangladesh, India, Nepal, and Sri Lan- resource management. A Sustainable openness to energy trade. In this con- ka), forestry and agriculture projects, Land Management Country Partner- text, the World Bank Group is actively and support to low-carbon and more ship Program in India will help promote engaged in (a) providing and expanding energy-efficient industrial processes. mainstreaming of environmental issues support to energy sector governance, To maximize the impact of available in rural projects. A land management combined with strategic investments global environmental financing instru- project in Bhutan aims at optimizing in generation, transmission, distribu- ments, the Bank is helping the region benefits and enhancing the sustain- tion, and end-use efficiency that will shift to greater use of programmatic ability of shifting agriculture. Further, help create an enabling environment approaches in providing carbon finance the Bank is investing in managing for reforms; (b) analytical support and and GEF assistance to improve access ground and surface water and in insti- dialogue that focuses on an enhanced to low-carbon opportunities in the core tutional capacity building programs for understanding of the potential for operations. improved basin management across the energy trade within and beyond the rural/urban interface and across sectors. region, potentially including support This article was prepared by Richard Damania, (202) The Bank is also investing in the conser- for specific bilateral trade initiatives; 473-3844, rdamania@worldbank.org, and Adri- vation of protected areas using Global (c) analytical work and dialogue on ana Damianova, (202) 473-2159, adamianova@ worldbank.org, both of the Environment and Social Environment Facility (GEF) resources long-term energy security that will also Unit of the South Asia Region. SAR website: . annual rEviEw · julY 2005­junE 2006 (fY06) 51 L arge parts of the global private sector For companies, this can mean a more effi- continue to rely on natural resources cient and reliable supply of wood or other either as part of companies' core busi- resources, as well as the potential for added ness or in their supply chains. One value, such as processing before the product such resource is natural forests. The esti- reaches them. For communities, this can mated total value of forest products world- mean an opportunity to develop skills, create wide is approximately $1 trillion per year, more local employment, earn a higher pre- and demand is growing as population and mium for processed products, and channel income levels rise--particularly in develop- higher returns into benefits such as educa- ing countries. tion and infrastructure. Communities can The Role of the also enjoy more secure land rights through Firewood and charcoal currently represent as formalized contracts and greater access to much as 90 percent of the total forest harvest international markets as a result of interna- Private Sector in regions such as Africa and South East Asia. tional industry certifications. Natural forests are the source of 75 percent of these removals, including firewood. As in Natural living standards increase, so too do demands IFC's Role for other forestry products such paper, hous- The International Finance Corporation ing, furniture, and packaging. An increasing (IFC), the World Bank Group's private sec- Resource portion of the demand will have to be met tor arm, is committed to good corporate gov- by relying on new plantations on previously ernance as well as social and environmental Management de-forested or other suitable lands, and by sustainability in all its investments. IFC en- otherwise sustainably managing natural courages its clients to operate in an environ- forests. mentally and socially responsible fashion. In the forest products sector--where IFC's A Focus on Forests Protecting or expanding existing forest cover investments have averaged $250 million per globally is necessary to preserve biodiversity, year over the last four years--this is dem- maintain water quantity and quality, provide onstrated through the adoption, by clients, a carbon sink, provide goods such as food of environmental and social management and medicine, and to protect it as a potential systems, the use of independent certification source of future benefits. Shrinking natural to attest to sustainable forest management forests and huge losses in biodiversity, com- where appropriate, and the application of laznoGoileruAocraM bined with increased public scrutiny and sustainability throughout the supply chain. growingpressurefrominvestors,aretherefore driving a change in the way companies view Relying on certification schemes and indus- and manage these resources. Market demand try voluntary codes of conduct are just some for more sustainable forestry and nature- of the ways that companies can ensure that based products is also creating commercial their products are sourced sustainably, and incentives for better forest management. thereby gain greater market and consumer confidence. At the same time, there is growing recogni- tion of the rights of communities that live Proactive approaches to the governance of in forests. Many governments have enacted natural resources--such as collaboration reforms in recent years around concessions with governments and other stakeholders, for commercial use of national forests. This fair compensation to stakeholders for loss of is creating opportunities for communities to traditional access to resources, and conflict Nicaragua own the forests that they have traditionally resolution relating to distribution and shared lived in and to engage in sustainable business use of resources--can also significantly re- partnerships with the private sector. duce reputational and business risks and 52 EnvironmEnt mattErs · 2006 Environment Matters 2006 -- The World Bank Group IFC yuLassiraL ability with the interests of people and pro- tection of the environment. Creating Sustainable Wood Supply Chains in Indonesia In Indonesia, home of one of the planet's richest ecosystems, forest area the size of 300 football fields is estimated to be cut down ev- ery hour--70 percent or more of it illegally. Sustainable wood is responsibly sourced tim- Huilacollo ber that can be traced back to a forest that has -- Peru been verified as well managed or is part of an ongoing certification process. A Sustainable Wood Program, managed by IFC through increase the long-term positive impacts of tial of those resources to meet the reasonably its Program for Eastern Indonesia Small and private sector development. foreseeable needs of future generations, and Medium Enterprise Assistance (PENSA) safeguarding the life-supporting capacity of is linking saw mills, furniture manufactur- New Standards air, water, and soil ecosystems. ers, and buyers to help them gain business advantage from using responsibly sourced for Private Sector When developing appropriate certification timber. Through training and technical assis- Investment and management systems, the standard tance, the program is providing market op- therefore emphasizes engagement with rel- portunities to producers who use sustainable In February 2006, IFC adopted a new set evant stakeholders, such as local communi- wood, and providing on-the-ground support of performance standards on social and envi- ties, indigenous peoples, and civil society to international buyers who want to procure ronmental sustainability, which provide clear organizations representing consumer, pro- materials responsibly in Indonesia. The pro- requirements for client companies when IFC ducer, and conservation interests. gram enables forest product buyers to track undertakes a new project or finances an ex- where their timber comes from and shows isting enterprise. They include a new stan- Promoting Change in how better inventory management can im- dard that replaces IFC's previous policies on prove manufacturing margins. Assistance in natural habitats and forests, and establishes the Marketplace improving production processes further in- a more integrated approach to sustainable creases wood recovery and reduces waste. IFC's standards for private sector invest- natural resource management. ment are some of the highest in the world In May 2006, IFC-PENSA successfully as- and provide a global benchmark. They have The new standard on Biodiversity Conserva- sisted the first Acacia plantation in Indone- been adopted by commercial banks as the tion and Sustainable Natural Resource Man- sia to gain membership in WWF's Global basis for the Equator Principles, which now agement applies to projects in all habitats, Forest and Trade Network (GFTN). The cover more than 80 percent of global project whether or not those habitats have been pre- 50,000 hectare plantation is owned by PT finance. The Principles provide a significant viously disturbed and whether or not they Inhutani II, a Kalamantan-based, state- incentive for emerging market companies to are legally protected. Among other things, it owned enterprise. The GFTN endorses re- improve the way they manage risk and iden- requires companies seeking IFC investment sponsible forestry enterprises and links them tify opportunities. to assess potential impacts on the various with international buyers seeking sustainable habitats and communities concerned, avoid timber products. This recognition is a major IFC also increasingly provides technical as- or minimize negative impacts, and enhance milestone for plantation forestry in Indone- sistance to improve the capacity of the pri- positive ones. Overall, clients are to manage sia and shows international confidence in vate sector and of communities to develop natural resources in a way or at a rate that en- the Indonesian market to deliver sustainable innovative and more sustainable models for ables people and communities to provide for wood products. IFC has also been assisting governance of shared natural resources. The their present social, economic, and cultural small- and medium-sized furniture manu- following examples show various approaches well-being while also sustaining the poten- facturers to capitalize upon this opportunity, that have sought to combine commercial vi- by training them to dry Acacia timber prop- annual rEviEw · julY 2005­junE 2006 (fY06) 53 erly, stain the wood, and create products for market information on certified lumber. It to examine opportunities and constraints in the international market. also worked with local firms to target high- Gabon and Ghana for the development of a end international markets sourcing certified community-level, sustainable forestry sector. Improving International wood. The studies revealed several key challenges. Market Access via Better They found that the difficulty of securing Sales to international buyers quickly exceed- tenure and resource rights was a significant Forestry in Nicaragua ed targets. The SMEs increased their exports disincentive to businesses wishing to acquire Nicaragua's wood sector has great potential by $59,000. The project showed that forest concessions or logging permits. Moreover, to contribute to the economic and social communities can benefit from selling sawn as concessions or permits are often of short- development of the country. Demand for lumber, which commands a much higher term tenure, they don't provide a good basis wood products is high due to a global boom price than raw timber. Prices rose by a fac- for the medium- and long-term planning in the housing and construction market, tor of 12 and forest communities reported and management needed for good forest which in turn has attracted the interest of in- increased sales by $120,000. Moreover, the management, including achieving formal ternational investors. International demand project contributed to the certification of certification. for products made with environmentally 4,662 hectares of a community forest under certified wood has also grown. Over 78 per- the Forest Stewardship Council (FSC) certi- In Gabon, community forestry enterprises cent of Nicaragua is covered by forests. An- fication system ­ the largest NGO providing were found to be ill-equipped to comply nual exports total $11.6 million, of which 99 environmental and social certificates for re- with the requirements of a recently intro- percent is raw timber. These conditions pro- sponsible forestry management. This repre- duced forest law, particularly with regard vide interesting opportunities for local firms sents a 27 percent increase in total certified to preparing and implementing a forest to engage in higher, value-added activities, forest in Nicaragua. management plan. In Ghana, constraints while addressing global consumer concerns were linked to the process and legal basis of about deforestation and the environment. The facility plans to expand the pilot to in- concessions' allocation. Many suppliers also clude more forest communities and small lacked adequate financing needed for bid- IFC's Project Development Facility in Latin businesses. It will provide training in firm- ding and competing for the concessions. America and the Caribbean designed a pilot level business management and production project drawing on the World Bank's Pro- techniques, and sustainable forestry man- Capacity constraints presented challenges gram on Forests (PROFOR), a multi-donor agement advice by creating a Forest Man- in both countries. These included lack of partnership, as well as on the increasing agement Company that will offer technical sufficient understanding and demand for international interest in the sector. Analysis assistance to forest communities. It will also sustainable logging, and lack of knowledge showed that timber resources in Nicaragua explore the possibility of setting up a capital regarding regeneration capacity of the for- are owned by local communities, and local fund to provide local firms and communities est and its biodiversity status. The study also firms in the sector are almost exclusively with working capital. highlighted the importance of being able to small businesses. The project helps link local demonstrate to other parties (buyers and suppliers with international buyers, poten- The strength of the pilot results has en- investors) that forestry practices are sustain- tially making the wood sector an important couraged replication of the model in other able, equitable, and transparent. pillar of the Nicaraguan economy. countries. WWF is now supporting a simi- lar project in Panama. The facility is using Companies seeking to operate sustainably in In February 2004, the facility began a small the experience to develop projects in Bolivia these markets can address some of these issues and medium enterprise (SME) supplier and Peru, and the IFC PEP Africa Facility through effective sourcing and purchasing project, linking Exchange, a high-end fur- is also using the model to develop in other policies, by providing training and capacity niture designer to approximately ten SME countries. building for suppliers, and by encouraging outsourcing companies. In March 2005, the best practice by harvesting companies. facility partnered with the World Wildlife Identifying Barriers to Fund (WWF) in a complementary pilot Sustainable Community- For more information on IFC's sustainability project to provide technical assistance to five initiatives, visit www.ifc.org/sustainability carpentry businesses and two forest com- Based Forestry in Africa munities. The pilot promoted environmen- In 2004, IFC's Social Responsibility Practice This article was prepared by Louise Gardiner, (202) tally sound lumber harvesting and provided Area commissioned two feasibility studies 458-0596, lgardiner@ifc.org, of IFC's Sustainability, Knowledge and Communications Department. 54 EnvironmEnt mattErs · 2006 IFC SHARING THE BENEFITS THE FuTuRE oF oREST F MANAGEMENT ANd THE RolE oF THE PRIvATE SEcToR There is no doubt that environmental change, investor pressure, and a new attitude by many companies is changing private sector approaches to the management of natural resources. This is evidenced by two clear trends: more proactive assessment of risks and identification of new business opportunities through the diversification of ecosystem services. Where companies used to respond in a reactive,ad hoc manner to risks when their operations utilize or impact natural resources,they are gradually taking a more rigorous approach to risk assessment,preparing corporate strategies and taking steps to manage impacts responsibly.In so doing,they are protecting their license to operate and continued access to resources. A case in point is ForestTrends'Business and Biodiversity Offset Program,in which leading mining,oil and gas,and construction compa- nies are undertaking voluntary biodiversity offsets to ensure their new infrastructure projects bring about"no net loss"of biodiversity. This strengthens their relationships with regulators and communities--which are increasingly financially material--and helps them access capital. Banks and asset management companies are also playing an important role in the process. Loan conditions, such as the IFC's Perfor- mance Standard 6,require biodiversity offsets for capital projects in certain circumstances and are part of the revised Equator Principles, which are based on IFC standards and used by leading commercial banks to assess risk in their investments.To find out if engaging with companies on this issue works, Insight Investment, a London asset manager, teamed up with Fauna and Flora International in 2003 to compare quality of management on biodiversity in 36 mining, oil and gas, and utility companies. Insight then engaged with the com- panies to encourage them to improve their performance.When the team repeated the"Biodiversity benchmark"in 2005,the scores in each sector had improved substantially. At the same time,the private sector is becoming more imaginative in identifying new business opportunities through better governance of natural resources. In the forestry sector, investors and companies are starting to see ecosystem services as valuable commodities. A "multiple-asset approach" to forestry has been developed by Forest Trends' Business Development Facility with funding from the In- ternational Finance Corporation.It helps forest operators move from a single-asset approach,where cut timber is seen as the only real value of forests, to a business model that diversifies revenue streams for companies and communities by capitalizing on non-timber products and services that generate higher real returns on the forest asset. This diversified approach benefits the business as well as local communities. Companies can increase their profits and improve their relationshipswithstakeholders.Communitiesgainnewopportunitiestoparticipateinthevaluechainforforestryproducts.Thesuccessof initial ventures in this area is helping to set new standards for sustainable forest management,particularly in developing economies. A partnership with Forest Trends and the International Finance Corporation this year led to a successful diversification of operations by Precious Woods,a pioneer in sustainable forestry operating in the Amazon.In June 2005,the company acquired an 80 percent stake in a local renewable energy biomass plant,to which it has started supplying waste woods from its forest operations.Energy sales from the renewable energy plant as well as sales of carbon credits under the Kyoto Protocol--resulting from the plant's switch from diesel to biomass,the reduction of stockpiled waste wood,and avoiding transportation of diesel into the Amazon--will provide PreciousWoods with additional revenue of $10 million in 2006.It will also secure a reliable source of electricity to a nearby town of 70,000 inhabitants. The project is expected to offset more than 1.4 million tons of CO2over a ten-year period.It shows that alternative revenue streams from forest ecosystems can benefit local communities and the environment and make good business sense. This article was written by Michael Jenkins, president of Forest Trends, and Kerry ten Kate, director of the Business and Bio- diversity Offset Program at Forest Trends. Forest Trends is a Washington, DC, non-profit group that supports initiatives such as company-community forestry partnerships, independent forest certification, and increasing investor awareness of the benefits of an integrated approach to governance and natural resource management. For more information, visit www. forest-trends.org. annual rEviEw · julY 2005­junE 2006 (fY06) 55 World Bank Group Goes Carbon Neutral Over the past several years, tives together into a single online the World Bank has made avail- environment database. This setadpU I n June 2006, The World Bank Group be- able a wide range of indica- one-stop source provides access came "carbon neutral" in its Washington, to the most widely used, offi- D.C. offices, its spring and annual meet- NEW Online cial-source environmental data ings, staff commuting, and all operational available from the World Bank travel from headquarters. environment and other international agencies. Database This small but symbolic contribution means Whether for state-of-the-envi- that the emissions from these activities have ronment reporting, measuring been offset through investments in renewable tors--including the Little Green environmental performance, or energy and energy efficiency, and through the Data Book and Country Environ- reporting on progress toward purchase of verified emissions reductions from mental Factsheets--to help the sustainable development, the projects in developing countries. More specifi- development community track new database is a valuable tool cally, carbon neutrality was achieved through: progress on a series of develop- for policy makers and research- · The purchase of green power for 100 per- ment issues. This year the World ers alike. To access the data- cent of electricity consumption (107 million Bank has brought all of these base, go to www.worldbank. kilowatt-hours) through renewable energy environmental indicator initia- org/environment/data. certificates, which pay for the incremental cost of using clean energy instead of tradi- tional fossil fuel energy · The voluntary purchase of 59,400 tons of carbon dioxide equivalent in verified emis- sions reductions from projects in developing countries Airline travel accounts for around 40 percent of the World Bank Group's carbon dioxide emissions. Emissions from the spring meeting in Washington and annual meeting in Singa- sweN pore were included in the calculations. CHINA'S BIG STEP FORWARD IN CARBON EMISSIONS TRADING T he largest emissions oromethane), one of the most of the sale of emission reductions reduction project on potent greenhouse gases, with a will be used to support sustain- record was agreed to The World global warming potential that is able development activities. last year when two Bank Carbon 11,700 times that of carbon di- Chinese companies signed two Finance Unit oxide. It is generated as a waste "With this project, China will emission reductions purchase gas in the manufacturing process move to the forefront of countries agreements worth $998.8 mil- lion. The contract between the multiple sources of funding, in- of HCFC-22, which is used as a making contributions to glob- World Bank's Umbrella Car- cluding the Bank's existing car- refrigerant and a raw material for al efforts to mitigate the effects bon Facility and the two private bon funds, to purchase large other products. HFCs are among of climate change," noted Teresa chemical companies--Jiangsu volumes of carbon emissions the six greenhouse gases covered Serra, the World Bank's East Asia Meilan Chemical Co. Ltd. and under the Kyoto Protocol. Sector Director for Environment from pre-identified projects on Changshu 3F Zhonghao New and Social Development. "The Chemicals Material Co. Ltd., behalf of governments and pri- The World Bank also signed a creation by the Government of both from Jiangsu Province-- vate firms. More than 75 percent Memorandum of Understand- China of a Clean Development is equivalent to a reduction of of the money in the facility repre-ing with the Chinese Ministry of Fund from the government's about 129.3 million tons of car- sents private capital. Finance to collaborate in the de- share of revenues also provides a bon dioxide annually. sign and development of a Clean unique opportunity to redirect The contract signed with the two Development Fund (CDF), in carbon finance toward capacity The Umbrella Carbon Facili- Chinese companies will result in which revenues accruing to the building and sustainable devel- ty was established to draw from reductions of HFC-23 (triflu- Government of China as a result opment activities in China." 56 EnvironmEnt mattErs · 2006 Environment Matters 2006 -- The World Bank Group A Selection of World Bank Group Environmental Publications The following publications may be obtained by sending an email to ematters@worldbank.org, or by phoning the Environment Department Publications Unit at (202) 473-3641. Stand Alone Publications Environment Strategy Papers Mountains to Coral Reefs -- The World Bank and A Selective Review of SEA Legislation -- Results from Biodiversity 1988-2005 a Nine-Country Review February 2006 ESP No. 13 Kulsum Ahmed and Yvonne Fiadjoe PUBLICATIO Climate Variability and Water Resource Degradation in Kenya October 2006 N -- Improving Water Resources Development and Management S World Bank Working Paper No. 69 Environmental Health Issues in Poverty Reduction Strategies February 2006 ESP No. 12 Sunanda Kishore External Monitoring of the Chad-Cameroon Pipeline Project September 2006 -- Lessons of Experience IFC CEA and Institutional Assessment -- A Review of October 2006 International and World Bank Tools ESP No. 11 The Little Green Data Book 2006 Poonam Pillai and Leiv Lunde April 2006 February 2006 ISBN 0-8213-6476-6 $15.00 Environment Department Papers Environment in 2005 Country Assistance Strategies World Bank GEF Energy Efficiency -- Portfolio Review Environment Department Paper No. 110 and Practitioners'Handbook September 2006 September 2005 National and Regional Legislation for Promotion and Support Capitalizing on the Bio-Economic Value of Multi-Purpose to the Prevention, Control, and Eradication of Invasive Species Medicinal Plants for the Rehabilitation of Drylands in Sub- Environment Department Paper No. 108 Saharan Africa Tomme Rosanne Young September 2005 March 2006 Operational Framework for Using Multi-Purpose Medicinal Plan de Vida: Propuesta para la Supervivencia Cultural, Plants as Entry-Points in Land Rehabilitation and Natural Territorial y Ambiental de los Pueblos Indigenas Resource Management Projects Environment Department Paper No. 107 September 2005 January 2006 Economic and Sector Work Estimating the Cost of Environmental Degradation -- Measuring Coral Reef Ecosystem Health -- Integrating A Training Manual in English, French, and Arabic Societal Dimensions Environment Department Paper No. 106 June 2006 Katherine Bolt, Giovanna Ruta, and Maria Sarraf October 2005 Environment Strategy Notes Getting the Most for the Money -- How Public Environment and Social Development, Discussion Papers Series Environmental Expenditure Reviews Can Help Corporate Environmental and Social Responsibility in the East ESN No. 16 Asia and Pacific Region -- Review of Emerging Practice Kirk Hamilton, Anil Markandya, and Ernesto Sanchez- March 2006 Triana World Bank East Asia and Pacifi c Region September 2006 China: Water Quality Management -- Using Strategic Environmental Assessments for Environmen- Policy and Institutional Considerations tal Mainstreaming in the Water and Sanitation Sector -- September 2006 The Cases of Argentina and Columbia World Bank East Asia and Pacifi c Region ESN No. 15 Ernesto Sanchez-Triana and Santiago Enriquez May 2006 Environment Matters 2006 -- The World Bank Group S Faiths and the Where is the Wealth of N Environment -- World Nations? -- Measuring OITACILBUP Bank Support 2000­05 Capital for the 21st June 2006 Century 56 pages January 2006 188 pages ISBN 0-8213-6354-9 $25.00 wne Strengthening Forest Lessons for Managing Lake Law Enforcement and Basins for Sustainable Use Governance -- Addressing December 2005 a Systemic Constraint to 114 pages Sustainable Development August 2006 77 pages Scaling up Marine Potential for Biofuels for Management -- The Role Transport in Developing of Marine Protected Areas Countries August 2006 UNDP/World Bank Energy 100 pages Sector Management Assistance Program (ESMAP) October 2005 146 pages Poverty Environment Forest Certi cation Overcoming Drought Nexus -- Sustainable Assessment Guide -- Adaptation Approaches to (FCAG) -- A Framework Strategies for Andhra Poverty Reduction in for Assessing Credible Pradesh, India Cambodia, Lao PDR, Forest Certi cation August 2006 and Vietnam Systems / Schemes 136 pages June 2006 WWF/World Bank Global ISBN: 0-8213-6664-5 189 pages Forestry Alliance $20.00 July 2006 57 pages For information on how to obtain these publications, please call the World Bank EnvironmentDepartmentat202-473-3641,ore-mailusatematters@worldbank.org Environment Matters 2006 -- The World Bank Group