39100 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Project Name ID: Pontianak Landfill Gas Flaring Region East Asia and Pacific Sector Solid waste management Project ID P104482 Borrower N/A Implementing Agency PT Gikoko Kogyo Indonesia Environment Category B Date PID Prepared March 9, 2007 Date of Appraisal June, 2007 Authorization Date of Board Not applicable. Approval 1. Key development issues and rationale for Bank involvement Urban areas in Indonesia have grown rapidly in recent years, but revenues for landfill management have not kept pace with increasing amounts of urban waste. As a result, most landfills in Indonesia follow the practice of controlled open dumping which contributes to environmental degradation in urban areas as well as air pollution, water pollution, and fires from the emission of methane, a powerful greenhouse gas (GHG) that has 21 times the global warming potential of carbon dioxide (measured in tons of Carbon Dioxide equivalent, or tCO2e). At present, no facilities exist in Indonesia to collect and combust methane and awareness of the technology and its development are limited. The proposed project will construct the first landfill gas (LFG) facility in the country and provide a demonstration of the technology that takes into consideration Indonesia’s tropical environment and other local conditions. Successful implementation of this project will encourage replication at other municipal landfills in Indonesia. The World Bank, as trustee of various Carbon Funds, aims to mitigate climate change via market-based emission reduction (ER) purchase transactions through the Kyoto Protocol’s Clean Development Mechanism (CDM), which opens up a significant source of revenue for financing projects in developing countries. With the prior experience of developing other carbon finance projects in the East Asia and Pacific Region (EAP), the Bank is well positioned to facilitate the transaction for the Pontianak Methane Gas Flaring Project. The World Bank has undertaken a pioneering role in developing the CDM market in Indonesia, including capacity building workshops and the first Emissions Reduction Purchase Agreement (ERPA) signed in EAP with INDOCEMENT in 2004. 1 2. Proposed Objectives The project development objective is to reduce LFG emissions from solid waste disposed in the City of Pontianak’s landfill, TPA Batu Layang, through a carbon finance transaction. The key indicator for this objective will be the annual delivery of ERs. In addition to the global benefits of GHG reductions, the agreement between the project sponsor and the municipality will provide funds from the ER revenue to improve landfill management and waste collection, as well as social benefits for the surrounding communities. 3. Preliminary Description This CDM project will be implemented under a Build Own and Operate (BOO) commercial agreement between PT Gikoko Kogyo Indonesia and the Municipal Government of Pontianak that will cover the LFG collection and flaring systems as well as the required budgetary requirements for landfill management and waste collection improvements. This private sector approach to investment in municipal solid waste management (MSWM) will be a first for Indonesia, demonstrating the potential for removing commercial barriers that have restricted private sector investment into sustainable MSWM and the associated environmental and social improvements. The LFG extraction and flaring facility will include the following components: (i) a collection system consisting of horizontal and vertical wells and collection pipes that will be installed in the area containing waste (and expanded over time as additional areas are filled); (ii) LFG pumping equipment including a pipeline and blowers; (iii) LFG treatment and flare system which will remove moisture and combust the gas; (iv) a monitoring and control system; and, (v) a 60kW generator for on-site electricity needs.1 The World Bank-managed Netherlands CDM Facility will finance the purchase of greenhouse gas emission reduction credits resulting from the flaring of the landfill gas. The purchase will be a performance-based contract under which payments are triggered by successful verification of the reduction of methane emissions by an independent, accredited international entity (Designated Operational Entity under the rules of the Kyoto Protocol). The quantity of emission reductions to be contracted, the length of time over which the purchase will be made, and the price paid will be agreed between the World Bank and PT Gikoko Kogyo Indonesia. 4. Safeguards policies that might apply 1 A percentage of the LFG captured will be used to produce the electricity from the 60kW generator that will supply the site’s electricity requirements, but no emission reductions will be claimed from the displacement of electricity from the grid. 2 Environmental Assessment: The project is proposed to be Category B as the potential environmental impacts are well defined and site-specific. The net environmental impacts are expected to be positive as LFG will be captured and flared, reducing GHG emissions, local air pollution (e.g., odor and volatile organic compounds), and the risk of fires and explosions at the landfill. During a World Bank safeguards review for another carbon finance project, Indonesia Bekasi Landfill Gas Flaring (P099679), it was agreed that traditional EIAs and RAPs were not needed for these types of carbon finance projects as they involve pre-existing landfills. However, a consulting firm should be engaged to conduct an environmental and social audit as a due diligence exercise. Since this project is almost identical to the project in Bekasi, this precedence is being applied to Pontianak as well. Resettlement: There are no communities living on the landfill. It is therefore not anticipated that the project will displace persons or economic activities and will not require land acquisition. Tentative Financing There is no World Bank lending involved in this carbon finance transaction. The CDM project will be implemented under a BOO commercial agreement between PT Gikoko Kogyo Indonesia and the Municipal Government of Pontianak that will cover the landfill gas collection and flaring systems. The project sponsor will be self-financing the project. 5. Contact Point: James Orehmie Monday Senior Environmental Engineer World Bank, 1818 H Street, NW, Washington D.C., 20433 Tel: 202-473-1565, Fax 202-522-1666 email:jmonday@worldbank.org Location: Washington, DC., USA 3