The World Bank LB-Environmental Pollution Abatement Project (P143594) REPORT NO.: RES32218 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF LB-ENVIRONMENTAL POLLUTION ABATEMENT PROJECT APPROVED ON AUGUST 1, 2014 TO REPUBLIC OF LEBANON June 28, 2018 ENVIRONMENT & NATURAL RESOURCES GLOBAL PRACTICE MIDDLE EAST AND NORTH AFRICA Regional Vice President: Hafez M. H. Ghanem Country Director: Saroj Kumar Jha Senior Global Practice Director: Karin Erika Kemper Practice Manager/Manager: Lia Carol Sieghart Task Team Leader: Sameer Akbar i The World Bank LB-Environmental Pollution Abatement Project (P143594) ABBREVIATIONS AND ACRONYMS AICS Italian Cooperation BdL Bank of Lebanon BOD Bio-Oxygen Demand CAP Compliance Action Plan COD Chemical Oxygen Demand CPF Country Partnership Framework EIA Environmental Impact Assessment EMP Environmental Management Plan LEPAP Lebanon Environmental Pollution Abatement Project MOE Ministry of Environment MOI Ministry of Industry MTR Mid-Term Review PDO Project Development Objective PM Particulate Matter PMU Project Management Unit RF Results Framework ii The World Bank LB-Environmental Pollution Abatement Project (P143594) BASIC DATA Product Information Project ID Financing Instrument P143594 Investment Project Financing Original EA Category Current EA Category Financial Intermediary Assessment (F) Financial Intermediary Assessment (F) Approval Date Current Closing Date 01-Aug-2014 31-Mar-2021 Organizations Borrower Responsible Agency Ministry of Finance Ministry of Environment,Central Bank Project Development Objective (PDO) Original PDO The development objectives of the project are to assist the Borrower in: (a) reducing industrial pollution in targeted Industrial Enterprises; and (b) strengthening the monitoring and enforcement capabilities of the MOE. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-84100 01-Aug-2014 24-Oct-2014 28-Jan-2016 31-Mar-2021 15.00 3.47 11.53 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No iii The World Bank LB-Environmental Pollution Abatement Project (P143594) The World Bank LB-Environmental Pollution Abatement Project (P143594) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status (i) The Lebanon Environmental Pollution Abatement Project is a financial intermediary loan of US$ 15 million with a parallel grant in the amount of €2.3 million (equivalent to US$ 3.0 million at Board approval) financed by the Italian Cooperation (AICS). The project development objectives are to assist the Borrower in: (a) reducing industrial pollution in targeted Industrial Enterprises; and (b) strengthening the monitoring and enforcement capabilities of the MOE. (ii) The project aims to achieve its objectives through two components: (i) Component A (US$ 3 million) with an objective to strengthen the capacity of the Ministry of Environment (MOE) through technical support and training, the banking sector and the industrial associations for environmental performance and compliance and provide project management support; and (ii) Component B (US$ 15 million) will provide concessional loans through the banking sector for pollution control to enterprises in order to bring their air emissions, effluent discharges and industrial waste generation towards compliance with national environmental standards in a cost-effective manner. (iii) Project effectiveness was delayed due to the political deadlock that prevented Parliament to vote on the World Bank loan. Furthermore, delays in disbursement were due to finalizing the contract between BdL and the participating banks; changes in the loan terms stipulated in Circulars issued by Bank of Lebanon (BdL); and World Bank requirements of a fixed term loan disbursement threshold of at least US$ 3 million which meant that the Project Management Unit (PMU) needed to mobilize a number of clients to achieve the threshold. It took until January 12, 2018 to overcome the hurdles and retroactively disburse US$ 3.44 million. (iv) A Mid-Term Review (MTR) mission was carried out in April 2018 to: i) review the project’s implementation progress for each component and progress against the development objectives and indicators as per the results framework; ii) review institutional arrangements for project management, implementation, and monitoring and evaluation; iii) review the status of environmental and social safeguards, procurement, financial management, and disbursement; and iv) assess the need for project restructuring in order to improve project performance and ensure project outcomes. The World Bank LB-Environmental Pollution Abatement Project (P143594) Progress Towards Achievement of Project Development Objectives (PDO) (v) The MTR confirmed the project objectives remain highly relevant to the priorities of Lebanon and the Country Partnership Framework (CPF) Objective 1b: Reduced industrial, hazardous and wastewater pollution. The first part of the PDO on ‘reducing industrial pollution in targeted industrial enterprises’ is mainly on track and expected to be achieved. In terms of results and progress of indicator targets: 2 of the 3 enterprises that have received sub-loans have reduced their air pollutants by more than 50% (40% of target); 3 of the 15 targeted enterprises are borrowing for pollution reduction and working towards compliance (25% of target); 8 guidelines for sector Environmental Impact Assessments (EIAs) for industries have been developed (89% of target); 55 people have been trained on environmental monitoring and compliance (92% of target); 11, 200 microgram/m3 of particulate matter (PM) has been reduced under the project and 62,000 people have reduced exposure to PM10 as a result of this (1240% of target). However, the second part of the PDO on ‘strengthening the monitoring and enforcement capabilities of the MOE is lagging behind, and activities related to this objective (Component A) will be accelerated in order to ensure the objective is achieved. (vi) The MTR concluded that the Results Framework (RF) needs to be fine-tuned and clarified to adequately reflect project activities and targets revised in line with the implementation progress and expected results at the end of the project, with targets that were not defined at approval set. The need to have additional indicators to capture the second PDO on strengthening monitoring and enforcement capabilities of MOE was also identified. There will be no changes to the PDO as it is still relevant and achievable. The changes to the Result Framework will be the only change to the project and there is no change in project scope or activities. (vii) To improve project performance, a six-month action plan with key actions were agreed with the client following the MTR:  Firming the sub-project pipeline with investment subprojects to be financed by the undisbursed IBRD funds  Making MOE funds available for the Technical Assistance (TA) activities and to support PMU operations till end of project  Strengthening Monitoring and Enforcement Capacity of MOE by the creation of a consolidated database, training of different stakeholders, communications to create awareness, and development of guidelines in industrial sectors and MOE administrative procedures for environmental monitoring and enforcement  Disbursement planning for the IBRD funded project component by quarter till end December 2018  Monthly Updates on Action Plan (viii) These actions are being monitored monthly with the PMU sharing a monthly report on the status of progress with respect to all agreed actions, along with a plan to ensure that the agreed actions materialize in a timely manner. B. Rationale for Restructuring The restructuring is necessary to adequately capture the achievement of the objectives and ensure there are indicators at the appropriate level to measure each aspect of the PDO, with realistic targets set in line with project activities that can be achieved in the project life. The changes to the indicators will set clear targets and clarify the definition of indicators. This is necessary to be able to demonstrate project results at the end of the project and achieve the development objectives. The World Bank LB-Environmental Pollution Abatement Project (P143594) II. DESCRIPTION OF PROPOSED CHANGES (i) The proposed level two restructuring will involve changes to the indicators in the Results Framework (RF). PDO level and intermediate indicators need to be fine-tuned and clarified to adequately reflect project activities and targets revised in line with the implementation progress and expected results at the end of the project. Targets of some indicators were not defined at approval, while some are unrealistic and unlikely to be achieved as there will not be enough financing to provide sub loans to the targeted number of enterprises. Also, absolute numbers for targets of some current indicators cannot be determined at this time as the full pipeline is unknown. (ii) Some Intermediate level indicators need to be moved to the PDO level as they are outcome indicators and some output oriented indicators moved to the intermediate level. Additional indicators to capture the second PDO on strengthening monitoring and enforcement capabilities of MOE are needed. The proposed changes to the RF and reasons are outlined below: Proposed Changes to the Results Framework Indicator (PAD annex 1) Targ Proposed Proposed Indicator Target Reason et Action PDO Indicators Enterprises financed through 15 Revise Enterprises financed 10 The wording of the indicator the project that conform to through the project aiming needs to be clarified to indicate the environmental towards the environmental that these are enterprises that compliance Decree no. 8471- compliance Decree no. are working towards complying 2012 8471-2012 with the decree and may not necessarily receive the Description: Any industrial Description: Any industrial Environmental Compliance enterprise that would borrow enterprise that would Certificate (ECC). Target is funds through the LEPAP borrow funds through the also revised to a more realistic mechanism to develop and LEPAP mechanism to number. implement a CAP that is in develop and begin the conformity with MOE’s implementation of a CAP. Environmental Compliance The CAP is therefore a Decree no. 8471-2012. The condition for accessing CAP is therefore a condition LEPAP funds for one sub- for accessing project but it is not a LEPAP funds for one sub- requirement for project but it is not a implementing all the sub- requirement for implementing projects included in the all the sub-projects included CAP. in the CAP. Enterprises that would reduce 10 Revise BOD/COD reduction 50% This indicator will be refined to their BOD discharges (t) by achieved under the project make it outcome oriented to more than 50% in the targeted enterprises measure pollution reduction impact. Since the pipeline is Enterprises that would reduce 5 Revise Particulate Matter reduction 50% not fully defined at this time, a their air pollutants (PM10) by achieved under the project 50% overall pollution reduction more than 50% in the targeted enterprises is proposed for the target instead of absolute number of tons. The World Bank LB-Environmental Pollution Abatement Project (P143594) Indicator (PAD annex 1) Target Propose Proposed Indicator Targ Reason d Action et PDO Indicators Industrial or municipal solid Revise Industrial waste reduced 50% Moved from intermediate waste reduced under the project in the level to PDO level to or recycled under the project targeted enterprises measure industrial waste reduction outcomes and wording modified to remove ‘municipal’. Since the pipeline is not fully defined at this time, a 50% overall pollution reduction is proposed for the target instead of absolute number of tons. Add Increase in number of non- 50% This will measure the compliant operational increase in the number of enterprises addressed in non-compliant operational letters from MOE to MOI/ enterprises addressed in Ministry of Interior and letters from MOE to MOI/ municipalities, governors- Ministry of Interior and municipalities and municipalities, governors- environmental prosecutors municipalities, environmental prosecutors to measure strengthened capacity for enforcement. These letters will have specific recommendations on actions and deadlines to bring enterprises into compliance with EMP, permitting or compliance decree. Since MOE actually does not impose penalties, fines, closure etc. they can only make recommendations to the environmental prosecutors, Governor, or MOI. A baseline will be taken now of the number of action letters sent in a year. Participating Banks 3 Revise Participating banks lending 4 Clarifying indicator to to enterprises include “lending to enterprises”. Target increased to 4 since the original target of 3 was already achieved. Enterprises borrowing 15 Drop This overlaps with PDO indicator 1 The World Bank LB-Environmental Pollution Abatement Project (P143594) Indicator (PAD annex 1) Target Propose Proposed Indicator Targ Reason d Action et Intermediate Indicators Sub-loans (#) 20 Drop This target cannot be achieved nor determined at this time as the pipeline is not fully defined and some enterprises may borrow more than the minimum US$100K which means actual number will be less than 15 for the US$15m total financing Sub loans (US$) 15 Revise Sub-loans issued to $14.9 Clarifying indicator to enterprises for pollution 6M include “issued to enterprises reduction for pollution reduction” to link to PDO1 Establishment of Guidelines 9 Revise Guidelines and tools for 9 Clarifying indicator to for Sector EIA environmental include tools and other monitoring/compliance for guidelines that are needed for specific industrial sectors strengthened capacity and developed demonstrate link to the PDO2. Indicator will measure outputs under LEPAP and not previous projects. The guidelines will be available in English and Arabic and made available on the MOE database. A perception survey will be done at end of project to track the use of these guidelines and how it has strengthened capacity as well as downloads (if on web). Regularly published 5 Revise Industrial database Yes Indicator was renamed and monitoring reports covering including monitoring, moved from PDO to environmental compliance permitting, and enforcement intermediate level. Original of participating enterprises data operational (Yes/No) indicator does not adequately by MOE measure monitoring and enforcement capacity as this Description of Indicator is only reporting on the from PAD: MOE will participating industries. upload the monitoring of Enforcement is currently not pollution reduction measured as not all industries information of the that need to comply are participating enterprises on reported on. The database for its website when the monitoring, permitting, equipment is up and compliance and enforcement running. Website to be will have the electronic updated as soon as a new information required for enterprise is in conformity carrying out and tracking these functions. This The World Bank LB-Environmental Pollution Abatement Project (P143594) Indicator (PAD annex 1) Target Propose Proposed Indicator Targ Reason d Action et with the Environmental database can be linked to Compliance Decree. MOI database and expanded in phases with additional features and functions added in future. Add Enterprises that benefit from 40 This indicator is added to LEPAP environmental capture the industries that services benefitted from LEPAP TA, for example those that has environmental audits prepared or a CAP but did not go on to receive loans. This will exclude the enterprises that receive sub loans to avoid double counting. People trained 60 Revise People trained on 100 Clarifying indicator to environmental compliance/ include what the people will monitoring/enforcement and be trained on and to awareness demonstrate link to the PDO2. Also increased target as this needs to include the banking sector, MOI, prosecutors etc. Assessments of the training will be done with a survey taken by participants on how useful it was in addressing the knowledge gaps and how it has strengthened their capacity. Direct project beneficiaries 5000 Drop No longer a mandatory Core (including female) Sector Indicator and a low level indicator. Target cannot be determined at this time as the pipeline is not fully defined and the number of people living around the project interventions is not known. Particulate Matter reduction TBD Drop Overlaps with PDO indicator (PM10) achieved under the project Number of people with TBD Drop This is no longer a mandatory exposure to PM10 in the Core Sector Indicator, and area of the project target cannot be determined at this time as the pipeline is not fully defined and the number of people living around the project interventions is not known. The World Bank LB-Environmental Pollution Abatement Project (P143594) Indicator (PAD annex 1) Target Propose Proposed Indicator Targ Reason d Action et Volume (mass) of COD TBD Drop Overlaps with PDO indicator pollution load Reduction achieved under the project III. SUMMARY OF CHANGES Changed Not Changed Change in Results Framework ✔ Change in Implementing Agency ✔ Change in DDO Status ✔ Change in Project's Development Objectives ✔ Change in Components and Cost ✔ Change in Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Change in Disbursements Arrangements ✔ Change in Disbursement Estimates ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ Change in Procurement ✔ Change in Implementation Schedule ✔ Other Change(s) ✔ Change in Economic and Financial Analysis ✔ Change in Technical Analysis ✔ Change in Social Analysis ✔ The World Bank LB-Environmental Pollution Abatement Project (P143594) Change in Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE Enterprises financed through the project aiming towards the environmental compliance Decree no. 8471-2012 Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 3.00 10.00 Revised Date 01-Aug-2014 15-May-2018 31-Mar-2021 BOD/COD reduction achieved under the project in the targeted enterprises Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 50.00 Revised Date 01-Aug-2014 15-May-2018 31-Mar-2021 Particulate Matter reduction achieved under the project in the targeted enterprises Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 50.00 Revised Date 01-Aug-2014 15-May-2018 31-Mar-2021 Regularly published monitoring reports covering environmental compliance of participating Enterprises by MOE Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 5.00 Marked for Deletion Date 01-Aug-2014 20-Dec-2017 30-Sep-2020 Industrial waste reduced under the project in the targeted enterprises Unit of Measure: Percentage The World Bank LB-Environmental Pollution Abatement Project (P143594) Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 50.00 New Date 01-Aug-2014 15-May-2018 31-Mar-2021 Increase in number of non-compliant operational enterprises addressed in letters from MOE to MOI/ Ministry of interior and municipalities, governors-municipalities and environmental prosecutors Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 50.00 New Date 01-Aug-2014 15-May-2018 31-Mar-2021 Intermediate Indicators IO_IND_TABLE Participating banks lending to enterprises Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 3.00 4.00 Revised Date 01-Aug-2014 15-May-2018 31-Mar-2021 Enterprises borrowing Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 15.00 Marked for Deletion Date 01-Aug-2014 20-Dec-2017 30-Sep-2020 Sub-loans Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 20.00 Marked for Deletion The World Bank LB-Environmental Pollution Abatement Project (P143594) Date 01-Aug-2014 20-Dec-2017 30-Sep-2020 Sub-loans issued to enterprises for pollution reduction Unit of Measure: Amount(USD) Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 3.43 14.96 Revised Date 01-Aug-2014 15-May-2018 31-Mar-2021 Guidelines and tools for environmental monitoring/compliance for specific industrial sectors developed Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 8.00 9.00 Revised Date 01-Aug-2014 15-May-2018 31-Mar-2021 People trained on environmental compliance/ monitoring/ enforcement and awareness Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 55.00 100.00 Revised Date 01-Aug-2014 15-May-2018 31-Mar-2021 Direct project beneficiaries Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 5000.00 Marked for Deletion Date 01-Aug-2014 20-Dec-2017 30-Sep-2020 Female beneficiaries Unit of Measure: Percentage Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 51.00 Marked for Deletion The World Bank LB-Environmental Pollution Abatement Project (P143594) Particulate matter reduction achieved under the project Unit of Measure: Microgram/m3 Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 Marked for Deletion Date 01-Aug-2014 20-Dec-2017 30-Sep-2020 Number of people with exposure to PM10 in the area of the project Unit of Measure: Number Indicator Type: Custom Supplement Baseline Actual (Current) End Target Action Value 0.00 0.00 Marked for Deletion Voume(mass) of COD pollution load reduction achieved under the project Unit of Measure: Tones/year Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 Marked for Deletion Date 01-Aug-2014 20-Dec-2017 30-Sep-2020 Industrial or municipal solid waste reduced or recycled under the project Unit of Measure: Tones/year Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 Marked for Deletion Date 01-Aug-2014 20-Dec-2017 30-Sep-2020 Industrial database including monitoring, permitting, and enforcement data operational Unit of Measure: Yes/No Indicator Type: Custom Baseline Actual (Current) End Target Action Value No No Yes New The World Bank LB-Environmental Pollution Abatement Project (P143594) Date 01-Aug-2014 15-May-2018 31-Mar-2021 Enterprises that benefit from LEPAP environmental services Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 40.00 New Date 01-Aug-2014 15-May-2018 31-Mar-2021