PROJECT PREPARATION COMMITTEE REPORT TO THE SIXTH ...€¦ · Acronyms ADB Asian Development Bank...

ECE/BELGRADE.CONF/2007/INF/24

SIXTH MINISTERIAL CONFERENCE

“ENVIRONMENT FOR EUROPE”

BELGRADE, SERBIA 10-12 October 2007

PROJECT PREPARATION COMMITTEE REPORT TO THE SIXTH MINISTERIAL CONFERENCE “ENVIRONMENT FOR EUROPE”

submitted by

the Project Preparation Committee

through the Ad Hoc Working Group of Senior Officials

BACKGROUND DOCUMENT

UNITED NATIONS

PPC Report

to the Sixth Ministerial Conference “Environment for Europe” in Belgrade

10 -- 12 October 2007

AcronymsADB AsianDevelopmentBank

BSIF BlackSeaInvestmentSupportFacility

CDM CleanDevelopmentMechanism

CER Certifiedemissionreduction

CIS-7 Thesevenlow-incomecountriesoftheCommonwealthofIndependentStates

DABLAS DanubeandBlackSeaInitiative

DISF DanubeInvestmentSupportFacility

EAP EnvironmentalActionProgrammeforCentralandEasternEurope,CaucasusandCentralAsia

EAR EuropeanAgencyforReconstruction

EBRD EuropeanBankforReconstructionandDevelopment

ECNC EuropeanCentreforNatureConservation

EECCA EasternEurope,CaucasusandCentralAsia

EfE EnvironmentforEurope

EIB EuropeanInvestmentBank

EMS EnvironmentalManagementSystem

ENPI EuropeanNeighbourhoodPartnershipInstrument

EPPF EnvironmentalProjectPreparationFacility

ETC Earlytransitioncountries

ETCI EarlyTransitionCountriesInitiative

EUWI EUWaterInitiative

GDP Grossdomesticproduct

GEF GlobalEnvironmentFacility

IFC InternationalFinanceCorporation

IFI Internationalfinancialinstitution

IPA InstrumentforPre-Accession

ISF Investmentsupportfacility

KIDSF KozloduyInternationalDecommissioningSupportFund

MCCF MultilateralCarbonCreditFund

MDG MillenniumDevelopmentGoal

MCG MillenniumChallengeGeorgiaFund

NDEP NorthernDimensionEnvironmentalPartnership

NGO Non-governmentalorganisation

NIB NordicInvestmentBank

OECD OrganisationforEconomicCo-operationandDevelopment

PEIP PriorityEnvironmentalInvestmentProgrammeforSouthEasternEurope

PPC ProjectPreparationCommittee

PPP Public-privatepartnership

REC RegionalEnvironmentalCentre

SEE South-easternEurope

SEI SustainableEnergyInitiative

TA Technicalassistance

UNECE UnitedNationsEconomicCommissionforEurope

WB WorldBank

WISF WaterInvestmentSupportFacility

InthesixyearssincetheUnitedKingdomtookonthechairmanshipoftheProjectPreparationCommittee(PPC)therehavebeensignificantchangesintheregioninwhichthePPCoperates,andtheemergenceofanewsetofchallenges.ExpansionoftheEuropeanUnion,accompaniedbyashiftinfocusofthemajorinternationalfinancialinstitutionstotheeastandsouth,havemovedthePPC’soperationsintoareaswithgreaterinvestmentneeds,butalsotoareaswithmorelimitedcapacitytopromoteandpayforimprovedenvironmentalservices.Thishasbeenaccompaniedbyaprogressivedeclineinthescaleofdonorbilateralsupportforenvironmentalprogrammes.

ThePPCresponsetothesechallengeshasbeenthreefold.First,wehaveendeavouredtogetclosertoprimarybeneficiariesbyappointingPPCOfficerswhoareresidentinthecountriesofoperation.Secondly,wehaveincreasedoureffortstostrengthenlocalcapacityforprojectidentification,prioritisationandpreparation.Thirdly,wehavedeepenedourpartnershipswithparallelinitiativesandaccessednewfundingopportunities.Allofthishasonlybeenachievedthroughthecontinuinggeneroussupportofacoregroupofdonors.

Wewillcontinuetofocusoureffortsondevelopingeffectivepartnershipsandbuildinglocalcapacityinwaysthatareresponsivetotheevolvingneedsofbeneficiarycountries,donorsandinternationalfinancialinstitutions.Subjecttoarenewedmandate,weaimtoestablishmoresecureinstitutionalandfinancialarrangementstoenabletheseactivitiestocontinueduringtheperiodfollowingtheBelgradeconference.

RodneyMatthewsUK Chairman

Preface

Executive Summary 1

Introduction 5Background 5

Mandate 6

Organisation 6

PPC strategy 2004--07 7

Achievements since the Kiev conference 9Supporting environmental investment projects 11

Environmental technical assistance projects 16

Project preparation facilities 17

PPC activities since Kiev 23Project identification, preparation and financing 23

Coordination, matchmaking and networking 25

Sharing good practice and capacity building 30

Options for the PPC after Belgrade 35The evolving context for environmental investments in EECCA and SEE 35

Implications of the evolving context for the PPC 37

Findings of the 2006 PPC review 37

The PPC after the Belgrade Ministerial Conference 38

Annexes Annex 1: IFI Board approved investment projects 40

Annex 2: IFI investment pipeline and TA projects 42

Contents

Investing in the environment

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FollowingtherenewalofitsmandateattheKievMinisterialConferencein2003,thePPChascontinuedtomobilisefinancialresourcesforenvironmentimprovements,withastrengthenedfocusonthecountriesofEasternEurope,CaucasusandCentralAsia(EECCA)andSouth-easternEurope(SEE).DonorshaveprovidedsignificantamountsoffundingforPPCactivities,includingstaff,projectpreparationfacilitiesandcapacitybuildingactivities.TheplacementofPPCOfficersincountriesofoperationhasenabledthePPCtoworkmorecloselywithitscountrypartners.ThroughoutthisperiodthePPC’sactivitieshavebeenguidedbyits2004-07strategywhichcomprisesthreepillars:

projectidentification,preparationandfinancing

coordination,matchmakingandnetworking

sharinggoodpracticeandcapacitybuilding.

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Achievements since the Kiev conference

SinceKievthePPChasassistedwiththepreparationof37environmentalprojects.Fifteenofthesehavebeeninternationalfinancialinstitution(IFI)Boardapproved,atatotalprojectcostof€443million,including12projectsinEECCAandSEE(€277million).ThesectorssupportedbythePPCincludemunicipalandenvironmentalinfrastructure,energyefficiency,renewableenergyandemissionstrading,environmentalmainstreamingandbiodiversity.

PPCinvolvementintheseprojectshastakendifferentforms.DonorfundedPPCOfficers,focusingonspecificsectoralthemesandgeographicalregions,haveprovidedsignificantsupportintheidentificationandpreparationofprojects.PPCstaffhavealsohelpedtosetupanumberofdedicatedtechnicalassistance(TA)facilitiesattheEuropeanBankforReconstructionandDevelopment(EBRD)forprojectpreparation.Throughitsnetworkingeventsanddirectcontactwithdonors,thePPChascontinuedtohelpinthemobilisationofdonorfundsandmatchgrantfinancewithpriorityIFIprojects.

ThePPChascollaboratedcloselywithotherenvironmentalinitiatives,includingtheTaskForcefortheImplementationoftheEnvironmentalActionProgrammeforCentralandEasternEurope,

Executive summary

PPC supported projects in the region 2003--07

Croatia 1 Board approved

Serbia 1 Board approved 2 Pipeline 1 TA

Bulgaria 2 Board approved1 Pipeline

FYR Macedonia 2 Pipeline 1 TA

Georgia 3 Board approved6 Pipeline

Uzbekistan 1 Board approved

Kyrgyz Republic 1 TA

Armenia 1 Board approved

Azerbaijan 1 Pipeline

Romania 1 Board approved

Russia 4 Board approved 3 Pipeline

Bosnia and Herzegovina 1 Pipeline

Tajikistan 1 Board approved1 Pipeline

Slovak Republic 1 Pipeline

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CaucasusandCentralAsia(EAPTaskForce),theDanubeandBlackSeaInitiative(DABLAS),theNorthernDimensionEnvironmentalPartnership(NDEP)andtheEUWaterInitiative(EUWI).CapacitybuildingforenvironmentalprojectidentificationandpreparationhasbeenamajornewareaofactivityforthePPC,withthedeliveryofaprogrammeofprojectfinancingworkshopstargetingmunicipalitiesandpublicutilitiesinEECCAandSEE.

The future of the PPC after Belgrade

ThecontextinwhichthePPCoperateshasevolvedconsiderablysincetheKievMinisterialConference.Theshiftinfocustowardstheeastandsouthhasraisedanewsetofchallenges,especiallyinthelower-incomecountriesoftheCaucasusandCentralAsia,andtheWesternBalkans.Bilateraldonorassistancefortheenvironmentisprogressivelydecreasing,andtheEUisassumingamoreprominentroleastheleadingdonorintheregion.DonorsandIFIshavedevelopedarangeofpartnerships,suchasDABLASandtheEarlyTransitionCountriesInitiative(ETCI),tocoordinatetheirassistanceprogrammes,whichdidnotexistwhenthePPCwasfirstestablished.

AreviewofthePPCcarriedoutinsummer2006demonstratedthatwhileEECCAandSEEcountrieshaveaclearrequirementforcontinuingassistancewithenvironmentalprojectpreparation,thisneedmustbeaddressedinawaythatrecognisesthechangingcontextintheregion.InternalisationofthePPC’sfunctionswithintheEBRDmaybethebestwayofensuringthatitsactivitiescancontinueonamoresustainablebasisthanispossiblewithad hocdonorsupport.

E X E C U T I V E S U M M A R Y �

Meeting new challenges

Environmental finance: commitments made at Kiev At the Kiev conference, Ministers agreed a number of goals for the future

of the EfE process, including:

“To mobilize financial resources from all sources, inter alia, from governments,

IFIs, donors and the private sector, to support the implementation of regional

environmental instruments and sub-regional initiatives including capacity building”.

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Background

ThePPCwasestablishedin1993followingdecisionstakenbyMinistersattheSecondMinisterialConference“EnvironmentforEurope”(EfE)inLucerne,Switzerland.IthasservedasamechanismfordialogueandcoordinationbetweenIFIs,donorsandbeneficiarycountries.Ithasworkedtosupporttheidentificationanddevelopmentofenvironmentalinvestmentprojectsacrosstheregion,inarangeofdifferentenvironmentalsub-sectors,playingacomplementaryroletoitssisterorganisationundertheEfEprocess,theEAPTaskForce.

ThePPCmandatewasrenewedattheEfEconferencesinSofia(1995),Århus(1998)and,mostrecently,inKiev(2003).

AttheKievMinisterialConferencethePPCreportedthat219projectshadbeensubjecttothePPCmechanismbetween1998and2003.Sixty-nineoftheseprojects,atanaccumulatedprojectcostof€3,853million,hadbeenBoardapprovedbyIFIsatthetimeoftheKievconference.Theseprojectshadbenefitedfromfinancialsupportequalto€1,895millioninIFIloansand€904millionindonorgrants.

Following the renewal of its mandate at the Kiev Ministerial Conference

in 2003, the PPC has continued to support environmental projects,

with a strengthened focus on the countries of EECCA and SEE. Close

cooperation with the EAP Task Force has been achieved through

joint annual meetings and a joint governing Bureau. Continued donor

support has enabled the PPC to place more PPC Officers in countries

of operation. During the period 2004--07, the PPC’s activities have

been guided by a strategy organised under three pillars: (i) project

identification, preparation and financing; (ii) coordination, matchmaking

and networking; and (iii) sharing good practice and capacity building.

Introduction

Mandate

MinistersattheKievconferencerecognisedtheneedforacontinuationofthePPC’sactivitiesandrequestedthatitconcentrateitssupportinthecountriesofEECCAandthenon-accessioncountriesofSEE,andphaseoutitsworkinCentralEuropeby2004.MinistersalsoaskedthePPCtocoordinatemorecloselywiththeEAPTaskForcebyholdingjointannualmeetingsandestablishingacommonBureau.ItwasalsoagreedthatparticipationinboththePPCandtheEAPTaskForceshouldbeopentoawiderrangeofstakeholdersincludingnon-governmentalorganisations(NGOs)andtheprivatesector.Furthermore,theEBRDandtheOrganisationforEconomicCo-operationandDevelopment(OECD)shouldcontinuetoprovidesupportfortheSecretariatsofthePPCandEAPTaskForcerespectively.

Organisation

SinceKievthePPChasoperatedasanetworkopentodonorgovernments,IFIs,UnitedNationsEconomicCommissionforEurope(UNECE)countries,internationalenvironmentalprogrammes,theprivatesector,NGOsandotherstakeholders.AsagreedatKiev,thePPCandEAPTaskForcehavereceivedoverallguidancefromacommonBureau.ThisconsistsofrepresentativesofdonorandEECCAgovernments,andisco-chairedbytheEuropeanCommission.TheUnitedKingdomhascontinuedtoprovidethePPCChair,andtheEBRDhascontinuedtohostthePPCSecretariat.DonorshavesupportedsixnewPPCOfficer/Consultantpositionssince2003andthetwoPPCSecretariatstaff(seepage24forfulldetailsofdonorcontributionstoPPCstaffing).TheorganisationalarrangementsofthePPCanditsstakeholdersareillustratedabove.

InlinewiththerecommendationsofMinisters,thePPChasstrengtheneditsstaffpresenceinitscountriesofoperationbycreatingPPCOfficerpositionsbasedinEECCAandSEEcountriesaswellasinIFIheadquarters.OverthelastfouryearsPPCOfficershavebeenlocatedinEBRDResidentOfficesinBelgrade,St.Petersburg,TbilisiandZagreb.ThePPChasalsoexploredalternativestaffingarrangementsincludingtherecruitmentofaPPCConsultantandlocallyhiredPPCOfficers.

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PPC organisational arrangements since the Kiev conference

PPC stakeholders PPC staff and management

Bureau

PPC Chair

PPC SecretariatPPC Officers

Donor governments

IFIs

NGOs

Other stakeholders

UNECE countries

International environmental programmes

Private sector

PPC strategy 2004--07

In2004anewfour-yearstrategywasdevelopedtoputintopracticethecommitmentsmadeatKiev.Thiswasguidedbythreekeydocuments:

theDeclarationbytheEnvironmentMinistersoftheregionoftheUnitedNationsEconomicCommissionforEuropeinKiev,May2003

theEnvironmentStrategyforCountriesofEasternEurope,CaucasusandCentralAsia(StrategicFramework)

theMillenniumDevelopmentGoals(MDGs),especiallythewaterandsanitationtargetsencompassedwithinMDGVII.

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ThestrategywasdevelopedthroughaconsultativeprocessinvolvingawiderangeofPPCstakeholdersandwasapprovedatthe2ndJointMeetingoftheEAPTaskForceandPPCinTbilisi,GeorgiainOctober2004.Itiscomposedofthreepillars:

Pillar I: Project identification, preparation and financing

WorkingwithIFIstoidentifyandprepareenvironmentalinvestmentprojects.

Mobilisingfundstosupportthepreparationandimplementationofprojects.

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Pillar II: Coordination, matchmaking and networking

Workingwithstakeholderstoenhancecoordinationandfacilitateinvestmentactivities.

Providinginformationonsourcesoffinanceanddisseminatingdetailsofprojectfinancingneeds.

Pillar III: Sharing good practice and capacity building

Providinggoodpracticematerialsandad hocadvice.

Helpingtobuildcapacityinprojectidentification,preparationandfinance.

AbrochuresummarisingthestrategywaspreparedinbothEnglishandRussianandwaswidelydisseminatedtoPPCstakeholdersandotherinterestedparties.

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I N T R O D U C T I O N �

PPC mechanisms and the project cycle

PPC/EAP Task Force meetings

Sector scoping

Project concept

Monitoring and evaluation

Project implementation

Project preparation

Inclusion in an IFI pipeline

Pre-feasibility

Development of local consultancy capacity

Support for IFI-managed project preparation

Support to municipalities for

project management

Information hub

PPC project financing workshops

Mobilising finance sessions

at PPC meetings

Supporting environmental projects

Achievements since the Kiev conference

ThemainfocusofthePPC’sworkhasbeentopromoteactivecoordinationbetweenitsstakeholderstosupportthefinancingofenvironmentalinvestmentprojects.Thissupporthasbeendeliveredthroughanumberofdifferentapproaches.

DonorfundedPPCOfficershavecontinuedtoenhanceIFIprojectpipelinesbyassistingintheidentification,preparationandfinancingofenvironmentalinvestmentprojects.

ThePPCSecretariathashelpedtosetupanumberofdonorfundedprojectpreparationfacilitiestoprovideTAtoenableprojectdevelopmenttoproceedmorequickly.

PPCnetworkingevents,includingtheannualjointmeetingsheldwiththeEAPTaskForce,haveprovidedopportunitiesfordonorfundstobematchedwithpriorityIFIinvestmentprojects.

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TheprojectssupportedbythePPChavebeenintheareasofmunicipalandenvironmentalinfrastructure(watersupplyandsanitation,solidwastemanagement,districtheatingsystemsandmunicipaltransport),energyefficiency,renewableenergyandemissionstrading,andnatureconservationandbiodiversity.

ThisreportassessesthePPC’sachievementsbyexaminingitssupportfor:(i)theidentificationandpreparationofenvironmentalinvestmentprojects;(ii)stand-aloneTAprojects;and(iii)assistanceinsettingupdonorfundedprojectpreparationfacilities.

SinceKievatotalof37investment/TAprojectshavebeensubjecttothePPCmechanism.ThisiseitherthroughthedirectinvolvementofaPPCOfficerinthedevelopmentoftheproject,orbyreceivingPPCfacilitatedsupportfromadonororIFI,orbeingpresentedtodonorsataPPCmeeting.Fifteenofthese,atatotalprojectcostof€443million,havebeenBoard

Since Kiev the PPC has assisted with the preparation of

37 environmental projects, 15 of which have been IFI Board

approved at a total project cost of e443 million. In line with

Kiev commitments, most of these projects are in EECCA and

SEE countries. In addition to its traditional focus area of municipal

and environmental infrastructure, the PPC has expanded its

activities in the area of energy efficiency, renewable energy and

emissions trading, and biodiversity. A range of project support

mechanisms has been used, including direct support for investment

project development, facilitation of stand-alone TA projects, and

the establishment of TA facilities for project preparation and

credit lines.

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approvedbyanIFI(seeAnnexI,page40).Theseprojectshavebenefitedfromfinancialsupportequivalentto€260millioninIFIloansand€127millionindonorgrants,givingaloantograntfinancingratioof2:1.

ThePPChasshiftedthemainfocusofitsoperationstowardsEECCAandthenon-accessioncountriesofSEE,inlinewiththecommitmentsmadeattheKievMinisterialConference.TenoftheBoardapprovedPPCfacilitatedprojectswereintheEECCAregion(totalprojectcost€227million)and,ofthese,sixwereinETCs(totalprojectcost€58million).Afurthertwoprojectswereinthenon-accessioncountriesofSEE(totalprojectcost€50million)andtheremainingthreeinEUaccessioncountries,specificallyBulgariaandRomania(totalprojectcost€167million).

Inaddition,22PPCsupportedprojectshaveenteredintoIFIpipelines(specificallyEBRD)sinceKiev,atatotalprojectcostof€549million(seeAnnexII,page42).ThirteenofthesewereinEECCA(totalprojectcost€219million),including10inETCs(totalprojectcost€101million).Afurthersevenwereinthenon-accessioncountriesofSEE(totalprojectcost€65million)andtwoinEUaccessioncountries(totalprojectcost€265million).ItisimportanttoemphasiseherethatthisreportonlycoversprojectswheretherehasbeenPPCinvolvementanddoesnotincludethesignificantprojectactivitybeingundertakenbyIFIsanddonorsoutsidethePPCframework.

FewerPPCsupportedprojectshavereachedBoardapprovalstageoverthelastfouryearsascomparedtopreviousreportingperiodsatSofia,ÅrhusandKiev(seetableonpage11).ThisistheresultoftheshifttowardsthemoredifficultenvironmentsoftheEECCAregion–especiallythelower-incomecountriesoftheCaucasusandCentralAsia–andnon-accessioncountriesofSEE.Itisalsoaresultofthereductionintheamountofpre-accessionaidmadeavailabletoEUaccessioncountries,whichwasespeciallyhighduringtheperiod1998-2003.

Total cost of Board approved investment projects by region

Total cost of Board approved investment projects by sector

e million

500

400

300

200

100

9.8%

3.3%

38.1%

11.3%

37.6%

100%

Caucasus Central Other Non- Accession Total Asia EECCA accession countries (Russia) SEE

4 projects 2 projects 4 projects 2 projects 3 projects 15 projects

29.1%

1.4%

69.5%

Energy/ Transport Water supply/ heating sanitation

2 projects 1 project 12 projects

e million

350

300

250

200

150

100

50

Supporting environmental investment projects

Municipal and environmental infrastructure

MunicipalandenvironmentalinfrastructurehascontinuedtobeamajorfocusofthePPC’swork.Themostdominantsectorhasbeenwatersupplyandsanitationwhere21projects,including12Boardapproved,havereceivedPPCassistance.ThreetransportprojectshavereceivedPPCsupport,withonealreadyBoardapproved,andasmallnumberofsolidwastemanagementprojectsarealsobeingdeveloped.

Water supply and sanitation

AccesstosafewatersuppliesandsanitationcontinuestobeamajorchallengeinthePPC’scountriesofoperation,especiallyinthelower-incomecountriesoftheCaucasusandCentralAsiawhereservicecoverage,qualityandregularityarecontinuallydecreasing,inpartduetothedeteriorationofoutdatedwaterandsanitationinfrastructure.Theseproblemsareespeciallysevereinsmallertownsandinruralareas.SustainedandsignificantinvestmentinwaterinfrastructureisnecessaryforsatisfactoryprogresstobemadetowardstheMDGtargetofreducingbyhalftheproportionofpeoplewithoutsustainableaccesstosafedrinkingwaterandbasicsanitation

by2015.ThePPChascontributedtowardstacklingthesechallengesbysupporting12IFIBoardapprovedwaterandsanitationprojectsineightcountries,atatotalprojectcostof€308million.

Keychallengesinthewaterandsanitationsectorincludetheidentificationofsufficientgrantco-financingforcapitalexpendituretoenabletheinvestmenttogoaheadwhilemaintainingtheaffordabilityofthewatersupplytothepopulation.Thisisaparticularchallengeinlower-incomecountriesandinsmallertownsandruralareaswheresmallerinvestmentsareneededandwheretheabilitytoraiserevenuesthroughtariffsislimited.

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Summary of IFI Board approved environmental projects with PPC involvement Other(e.g. Totalno. Water Nature agriculture, ofBoard TotalMinisterial supply/ Waste Energy/ conservation/ transport, approved project IFI Donor Conference sanitation management heating biodiversity industry) projects cost loans grants Perregion (€million) (€million) (€million)

Sofia 1995 8 12 4 2 7 26 1,200 n/a 80 EECCA 12% SEE 11% EU Accession 77%

Århus 1998 9 12 2 3 14 33 2,300 1,200 245 EECCA 30% SEE 24% EU Accession 46%

Kiev 2003 37 8 13 4 11 69 3,853 1,895 904 EECCA 42% SEE 26% EU Accession 32%

Belgrade 2007 12 0 2 0 1 15 443 260 127 EECCA 51% SEE 11% EU Accession 38%

Total �� 4� �,�� ,�� ,�� EECCA �4% SEE ��% EU Accession 4�%

A C H I E V E M E N T S S I N C E T H E K I E V C O N F E R E N C E ��

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Through the work of a PPC Consultant, the PPC played

a direct role in identifying and developing the Lake Sevan

Environmental Project. This project is making a significant

contribution to addressing the acute waste-water treatment

problems in Armenia.

Lake Sevan is the country’s primary water resource and an

important tourist and recreational attraction. A relatively

large number of settlements are located around the

lake. In the past, industrial and household waste water

from these settlements was treated in small waste-water

treatment plants before being discharged into rivers

flowing into Lake Sevan. Over the past few decades most

of this infrastructure has significantly deteriorated and

a number of new waste-water treatment plants remain

unfinished. Consequently, the lake suffers from significant

water pollution that damages its ecological balance and

natural beauty.

Through the active cooperation of the PPC, EBRD,

Armenian State Committee for Water Systems, Armenian

Water and Sewerage Company and other national bodies,

an action plan to address these problems was developed.

A number of waste-water treatment plants in need of

urgent rehabilitation were identified. Since all these plants

were relatively small, additional work was carried out

to bundle them into a single project. Detailed project

preparation work was undertaken, including a feasibility

assessment and affordability analysis. The financing package

developed for the project was tailored to reflect the

concessionality requirement and affordability constraints.

As a result, the €7.5 million EBRD loan was complemented

with a significant capital investment grant contribution

(€5 million) from the EU, together with a €1.2 million

TA grant from the multi-donor ETC Fund. The loan

agreement was signed with the Government of Armenia in

April 2007.

Lake Sevan Environmental Project Armenia

A C H I E V E M E N T S S I N C E T H E K I E V C O N F E R E N C E � �

Archangelsk Municipal Water Services Project Russia

The White, Kara and Barents seas surround the Russian

region of Archangelsk and the region’s almost 70,000 rivers

and streams carry waters into the Barents Sea basin.

Despite its rich natural resources and its diversified

industrial base, the region’s infrastructure has suffered from

underinvestment, which has contributed to environmental

and health concerns.

One of the region’s priorities is improving its capital city’s

water and waste-water infrastructure. The Archangelsk

Municipal Water Services Project is the region’s first step

towards reaching Russian and EU environmental standards

in the water and waste-water sector. The project includes

an upgrade of the municipal water treatment facilities,

rehabilitation of the water distribution networks, and the

modernisation and extension of the waste-water network

and collectors. In addition to improvements to the quality

of potable water, the project will help to reduce water

losses and energy consumption, and minimise the discharge

of untreated sewage into local rivers and the Barents Sea

basin. It will also improve service standards and strengthen

the operational and financial performance of the municipal

water and waste-water services in Archangelsk.

The €25.3 million project is financed through an EBRD loan

of €10 million and is a priority project of the NDEP, which

has contributed a grant of €8.2 million. In addition, the EU,

Finland, Luxembourg, Sweden and the United Kingdom have

provided funding for TA activities including the technical

feasibility study, creditworthiness enhancement programme,

environmental action plan, project implementation unit

training and support, international project engineer and

corporate development programme. PPC Officers located

in St. Petersburg have been instrumental in developing this

project and in mobilising donor finance.


Khujand Water Supply Improvement Project Tajikistan

PPC staff were involved in the design and structuring

of a €3.98 million project to improve the water supply

infrastructure and distribution network in Khujand,

Tajikistan’s second largest city. Signed in July 2004, this

project, which included a loan of €0.93 million, was the

EBRD’s first municipal loan in Tajikistan, and the first under

its ETCI, created to tackle poverty in the low-income

countries of the Caucasus and Central Asia. The project

aims to improve Khujand’s drinking water by installing new

pumps and other equipment that should reduce water

leakages and generally make the water supply more reliable.

Key elements of the project were supported by a grant

from the Swiss government for capital investments and

the provision of a stakeholder participation programme

to encourage greater public participation and ensure that

poverty and subsistence issues are reflected in tariff reforms.

The Government of Norway funded a performance

improvement programme for the Khujand Water Company

and TA from the Government of Belgium supported the

feasibility study during the preparatory phase.

Transport

ThePPChassupportedasmallnumberofmunicipaltransportprojects.Improvementsinthissectorcanresultinsignificantenvironmentalbenefitsaswellasreducingcongestionandimprovingenergyefficiency.

GrantassistancefromtheEBRD’sETCFundandtheNetherlandswascriticalinenablingaPPCsupportedmunicipaltransportprojectinTbilisi,Georgia,togoahead(seeabove).


City of Tbilisi Public Transport Project Georgia

The PPC has supported a €6.4 million project to enable the

Tbilisi Bus Company to restore basic municipal bus services

in the Georgian capital and give the residents of Tbilisi

access to affordable transport. Georgia’s transport networks

were disrupted by the conflicts and underinvestment that

followed independence in 1991. At that time the Tbilisi Bus

Company had 1,200 buses for the city’s 1.4 million people.

By 2004 the fleet was down to 80 buses, with only half

working on an average day.

The project, signed in 2005, included an EBRD loan of

€3.1 million, which enabled the city authorities to buy

182 second-hand buses, costing €15,000 each, one-tenth

of their value when new. People have low incomes in Tbilisi

and these savings enabled the company to offer good

services with affordable fares. The company was also able to

expand the number of routes from 42 to 80, allowing buses

to carry 18 per cent of Tbilisi’s passengers by 2007 against

just 10 per cent in 2005. As the official bus service improves,

fewer informal minibuses will be needed, thereby improving

safety, traffic conditions and service quality.

Environmental technical assistance projects

Biodiversity and environmental mainstreaming

Inadditiontoinvestmentprojects,thePPChasalsohelpedtodevelopanumberofstand-aloneenvironmentalTAprojects,withdonorsupport.SomeofthesewerelinkedtoEBRDinvestmentprojectsinsectorssuchaspowerandenergyandnaturalresources,as‘addon’environmentalmanagementcomponents.Forexample,CanadiansupportwasusedtoimplementanEnvironmentalManagementSystem(EMS)attheelectricityutilityElektrostopanstvonaMakedonijainFYRMacedonia,complementinganongoingEBRD

investmentproject.AsimilarTAprojectwascarriedoutwithElektroPrivredaSrbijeinSerbia,thistimewithsupportfromtheEuropeanAgencyforReconstruction(EAR).

ThePPChasalsofacilitatedanumberofstand-aloneTAprojectsintheareaofbiodiversityandnatureconservationthroughtheworkoftheLuxembourgPPCOfficerresponsibleforthissector.TheseincludeaTAprojectintheKyrgyzRepublic,fundedbytheUnitedKingdomandInternationalFinanceCorporation(IFC),topromoteprivatesectorinvolvementinbiodiversityconservationactivitiesandimprovelocallivelihoods.TheprojectislinkedtoanEBRDinvestmentprojectintheadjacentKumtorGoldMine.


Apilotprojectonpro-biodiversitybusinessinthesteppezoneoftheEurasiaregionwasagreedin2006betweentheEBRDandtheEU.Thisprojectwasdesignedtoencouragemicroandsmallbusinessestosupportbiodiversity.TheprojectreceivedsupportfromtheTacisregionalprogrammebiodiversitycomponent,whichfocusesonthesteppeecosystemscoveringpartsofKazakhstan,Moldova,RussiaandUkraine.Theprojectaimedtoestablishanoperatingstructureandproceduresforidentifyingcountries,regionsandcompaniesthatshowpotentialfor,andinterestin,creatingpro-biodiversitybusinesses.Thenext

stagewastheprovisionofTAtoselectedmicro,smallandmedium-sizedenterprisesthatusebiodiversityresourcesandarewillingtoworktowardscreatingpro-biodiversitybusinesses.TAwasalsousedtodevelopabiodiversitymonitoringsystemwithkeyindicatorsandotherbenchmarkstoevaluatethepositiveimpactofinvestmentsonspecifichabitatsandspecies.

Project preparation facilities

Inadditiontoprovidingdirectsupportforprojectdevelopment,thePPChasindirectlysupportednumerousenvironmentalinvestmentprojectsbyhelpingtosetupanumberofdonorfundedprojectpreparationfacilitieswithintheEBRD.TheseTAfacilitieshavebeendesignedspecificallytodealwithparticulardifficultiesrelatedtotheidentification,preparationandimplementationofenvironmentalinvestmentprojectsorgroupsofprojects.Anadditionalaimofthesefacilitieswastosupportthedevelopmentoflocalconsultancycapacity,wherepossible.


PPC support for launching biodiversity-related initiatives within the EBRD

In 2004 the Government of Luxembourg provided

funding for a PPC Officer to work on biodiversity related

issues within the EBRD’s Environment and Sustainability

Department. Preserving and protecting biodiversity is an

important aspect of good environmental management.

All EBRD financed projects are expected to include

measures to safeguard and, where possible, enhance

natural habitats and the biodiversity they support. The

EBRD is also committed to supporting investments that

specifically promote biodiversity.

The PPC support enabled the EBRD to work with the

European Centre for Nature Conservation (ECNC) on

biodiversity issues in its countries of operation. Together

with other organisations, including the European Investment

Bank (EIB) and Rabobank, the EBRD participated in the

European Task Force on Banking, Business and Biodiversity,

through which potential biodiversity financing mechanisms

and the establishment of a European Biodiversity Finance

Facility were explored.


Municipal and environmental infrastructure facilities

Twoprojectpreparationfacilitieshaveprovidedrapidtechnicalsupporttoassistthedevelopmentofarangeofmunicipalandenvironmentalinfrastructureprojects.A€133,000DistrictHeatingSupportFacility,financedbytheUnitedKingdom,hasbeenusedtosupportfeasibilitystudiesandspecialisedadvisoryinputsforEBRDdistrictheatinginvestment

projectsinanumberofcountriesincludingRussiaandUzbekistan.Similarly,a€600,000MunicipalandEnvironmentalInfrastructureTechnicalCooperationFacilitywassetupin2004withAustrianfunding,tosupportmunicipalinfrastructureprojectsinRussiaandSEE.


Energy efficiency, renewable energy and emissions trading

Energyefficiency,renewableenergyandemissionstradinghavebeenamajorfocusofthePPC’sworksinceKiev,withaspeciallydedicatedPPCOfficer,fundedbyLuxembourgandtheNetherlands,workinginthisarea.Thisreflectsthegrowinginternationalinterestinenergyefficiency,drivenbyconcernsoverclimatechangeandenergysecurityintheEuropeanneighbourhoodregion.ThemainwayinwhichthePPChassupportedinvestmentsintheseareashasbeenthroughtheestablishmentofdonorfundedTAfacilitiesandcreditlinestosupportEBRDenergyefficiencyinvestments,andtoenablesuchinvestmentstobenefitfromcarbonfinancingopportunities.

TheKyotoProtocolsetsbindingtargetsonindustrialisedcountriesforthereductionofgreenhousegasemissions.UndertheProtocol,specificmechanismswerecreatedtotradeproject–basedcarboncredits.Thecarboncreditideaissimple:aprojectinvestmentleadstogreenhousegasemissionreductionscomparedtoabaseline.Thatemissionreductionperformance,havingbeenmonitoredandcertified,canthenbesoldtocountriesandcompanies

withashortageofrightstoemitgreenhousegases.Sponsorsofenergysavingprojectsareabletoselltheproject’scertifiedemissionreductions(CER),commonlyreferredtoascarboncredits.OnecarboncreditisequivalenttoonetonneofCO2emissionreductions.

Thereisalargepotentialmarketforproject-basedcreditsoriginatingfromthecountriescoveredbythePPC.GiventhatmostEU-15states,plusCanadaandJapan,willneedtobuycarboncreditstomeettheirKyototargets,thismarketisexpectedtogrow.Theeligiblecountrieshaveahighpotentialforgeneratingcarboncreditsforthefollowingreasons.

Severalofthesecountrieshaveasurplusofcarboncredits.ThisisbecausetheKyotoProtocolreferenceyearfortheemissionreductiontargetsis1990.SincethenemissionshavedroppedsharplyincountriessuchasRussiaandUkraine,asaresultofthesubstantialcontractionoftheirgrossdomesticproduct(GDP)causedbytheclosureofstateindustriesafter1990.Thesecountriesarethereforelikelytobesellersofcarboncredits.

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Highcarbonandenergyintensitiesincountriesintransitionalsocreatesignificantopportunitiesforlow-costemissionreductions.ThisisbecausethecostofachievinganemissionreductioninsuchcountriesislowrelativetoWesterncountrieswhoseeconomiesaremuchmoreenergyefficientandgenerallylesscarbonintensive,andarethuscharacterisedbyahigherrelativecarbonabatementcost.

TheemergingcarboncreditmarketfitswellwiththePPC’smandate.ThishaspotentialbenefitsforPPCstakeholders:

usingtheadditionalrevenuefromsellingcarboncreditstofinancemoreand/ormorerisky“climate-friendly”projects,suchasenergyefficiency,renewableenergy,fuelswitching,landfillandbiogas(wastewater),etc.

assistingwiththedevelopmentinitscountriesofoperationofsuchmarket-basedmechanismsforenvironmentalprotectionandtransition.

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The PPC has been instrumental in helping to set up a number of donor funded TA facilities

at the EBRD to support municipal and environmental infrastructure projects and energy

efficiency investments.

Clean Development Mechanism facilities

OneofthefinancingmechanismsestablishedundertheKyotoProtocolistheCleanDevelopmentMechanism(CDM).Thisallowsindustrialisedcountriestoinvestinemissionreducingprojectsindevelopingcountriesasanalternativetowhatisgenerallyconsideredmorecostlyemissionreductionsintheirowncountries.

ThroughfundingprovidedbytheDutchgovernment(€90,000)andtheETCFund(€350,000),twoTAfacilitiesweresetupattheEBRDtoenableenergysavingprojectstobenefitfromCDMfinancing.TheCDMinCaucasusandCentralAsiaFacilityandtheCDMProjectSupportFacilityforEarlyTransitionCountrieshavebeenusedtoreducebarrierstothedevelopmentandimplementationofCDMprojectsanddevelopcarbonfinancingcomponentsinEBRDinvestmentprojectsintheareasofpowerandenergy,andindustry(seetableabove).

EBRD investment projects supported by CDM facilities in the Caucasus and Central Asia

Total ProjectProject Location projectcost status Projectsummary (€million)

Bazenc Mini-Hydro Armenia 1.18 Board This mini-hydro project in Armenia was identified during a survey for Power Plant approved CDM projects. The Netherlands provided support for the CDM baseline and validation studies, and the project is expected to have a strong demonstration

effect for further mini-hydro projects. The loan is being provided through the EBRD’s Direct Lending Facility, which is designed to provide small loans.

Armenia Renewable Armenia 11.15 Board Loan to a financial intermediary which will invest in renewable energy projects, Energy Programme approved primarily mini-hydros. A PPC Officer contributed to a TA component that will (Cascade Credit) enable the monetisation of carbon emissions in individual projects.

Rehabilitation Azerbaijan 95.51 Board Investment into the rehabilitation of the major generation station and selected of AzDRES approved transmission facilities with the aim of improving the reliability and efficiency of Power Plant the power system. PPC staff assisted in the development of the energy efficiency

and fuel-switch project as a CDM project.


Energy efficiency and renewable energy credit lines

PPCstaffhaveassistedtheEBRDinestablishingacreditlinefacilityof€105millionforsixBulgarianfinancialintermediariestoprovideloanstosub-borrowersforindustrialenergyefficiencyandrenewableenergyprojects.Thiscreditlinehasbeensupplementedwitha€34milliongrantfromtheKozloduyInternationalDecommissioningSupportFund(KIDSF).Over98projectsarecurrentlybeingfinancedunderthefacility,ofwhich50arefullyoperational,andthereisastrongpipelineofover100projects.ThePPChasalsoplayedapivotalroleininitiatingasimilarcreditlineintheSlovakRepublic,whichiscurrentlyunderdevelopment.

Other carbon financing mechanisms

ThePPChasplayedakeyroleinhelpingtosetupthe€165millionMultilateralCarbonCreditFund(MCCF).TheEBRDandtheEIBestablishedtheMCCFasakeyinstrumentintheirstrategyforcombatingclimatechange.ItisdesignedtodevelopthecarbonmarketincountriesintransitiontomarketeconomiesbyhelpingEBRDandEIBshareholdersandotherpartiestomeettheirmandatoryorvoluntarygreenhousegasemissionreductiontargets.TheFundsourcesandpurchasescarboncreditsfromprojectsfinancedbytheEBRDand/orEIBincountriesintransitioneligibleforEBRDoperations.

Examplesofprojectsthatgeneratecarboncreditsinclude:

switchingfuelfromcoal/mazut(ahighlypollutingenergysource)tonaturalgas

renewableenergy

energyefficiency

wastetoenergy

avoidanceofgasflaring/venting

forestry.

TheMCCFalsofacilitatesGreenInvestmentSchemesinwhichtheproceedsofstate-to-statetradingofcarboncreditsareusedtofinanceclimatefriendlyprojectsinthesellingcountry.Italsoaimstostimulateandcomplementtheparticipationoftheprivatesectorinthecarbonmarket.

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PPC support for the Sustainable Energy Initiative

The work of the PPC on energy efficiency, renewable

energy and carbon trading has contributed to the

development of the EBRD’s Sustainable Energy Initiative

(SEI), which was launched in May 2006 and is intended to

help the EBRD to:

scale up its sustainable energy investments by more than

doubling those in energy efficiency and cleaner energy

to €1.5 billion between 2006 and 2008

strengthen its capacity to deliver, through internal

organisational changes that mainstream energy efficiency

objectives throughout the EBRD with team-by-team

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targets and enhanced specialised support from a cross-

cutting energy efficiency and climate change team

work with other multilateral development banks,

international organisations and local bodies to enhance

the impact of its policy dialogue and share best practice

establish a new partnership with donors to access the

grant funds required to scale up structured financing

packages of commercial finance combined with grant

funds for capacity building and incentives.

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Building partnerships for the environment

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Under the framework of its 2004--07 strategy, the PPC has supported

project preparation and financing through the deployment of donor

funded PPC Officers inside EBRD banking teams, focusing on specific

sectoral themes and geographical regions. Coordination with donors

has facilitated the matching of donor grants with priority IFI projects.

The PPC has also worked closely with other environmental initiatives,

including the EAP Task Force, DABLAS, NDEP and the EUWI. A

major new area of work has been providing assistance to develop local

capacity for project identification and preparation. This has included

the delivery of a programme of project financing workshops targeting

municipalities and public utilities in EECCA and SEE.

Since 2004 the work of the PPC has been organised under three pillars:

l project identification, preparation and financing

l coordination, matchmaking and networking

l sharing good practice and capacity building.

Project identification, preparation and financing

PPC Officers working inside IFI teams

ThroughthePPCmechanism,donorshaveprovidedfundingforsixnewPPCOfficerpositionsattheEBRDsince2003(seetableonpage24).TheseofficershaveplayedcatalyticroleswithintheMunicipalandEnvironmentalInfrastructureTeam,theEnergyEfficiencyandClimateChangeTeamandtheEnvironmentandSustainabilityDepartmentbycontributingtotheidentificationanddevelopmentofawiderangeofprojectsinmunicipalandenvironmentalinfrastructure,energyefficiency,renewableenergy

andemissionstrading,biodiversityandenvironmentalmainstreaming.DonorshavealsocontinuedtosupportthetwopositionsinthePPCSecretariat,whichplaysacentralrolewithintheEBRD’sEnvironmentandSustainabilityDepartmentincoordinatingtheactivitiesofthePPC.

ThePPChasalsoexploredinnovativearrangementsforenablingdonorstocontributetoprojectpreparation,inresponsetotheneedsofdifferentstakeholders.Forexample,during2005-07theEUcontributed€196,000tofundaPPCConsultanttoworkwiththeEBRDonwaterandsanitationprojectsintheETCs.Morerecently,thePPChasattemptedtorecruitin-countrystafftotakeadvantageoflocalknowledgeandexpertise,includingknowledgeoflocallanguages.

PPC activities since Kiev

ThePPC’sworkinthedevelopmentofenvironmentalprojectshasgeneratedsomeimportantlessonsregardingthespecificchallengesrelatedtothepreparationofenvironmentalinfrastructureprojectsinEECCAandSEEcountries.Thesevaryacrossthedifferentsub-regionsinwhichthePPChasbeenactive.

Early transition countries

ThemainchallengeintheETCsistoprovidesubstantialinfrastructureinvestmentfinancingforurgentlyneededimprovementsinthequalityofservices,andintheoperationalandfinancialmanagementofutilities,withintightaffordabilityconstraints.Asaresult,almostallmunicipalinfrastructureprojectsintheETCsrequiresignificantgrantfundedcomponents.ThePPChasdevotedasubstantialamountoftimeandeffortinidentifyingsourcesofgrantfinancingforprojectsintheETCs,eitherintheformofTAorcapitalexpendituregrants.Such

concessionalityhelpstoaddressaffordabilityconstraintsandlimitedlocalfinancialrevenues.Ontheotherhand,excessiveuseofgrantfinancingcoulderodetheincentivesforoperatingfinanciallysustainableutilitiesthatachievecostrecoveryandarelocallymanaged.Thereforetheoptimalcombinationofloanandgrantfinancingmustbeidentifiedforeachproject.Whilerecognisingaffordabilityconstraintsandtheneedtoaddresstheneedsofthepoor,itisimportanttoacknowledgethattheonlylong-termsustainablemodelforservicedeliveryisfullcostrecovery.Allprojectimplementationplansshouldthereforebebasedonadjustingtariffstoallowfullcostrecovery,withthetariffadjustmentstrategyfittedtoexpectedchangesinincomelevelsandotherincomerelatedassistanceandsubsidyprogrammes.

South-eastern Europe

Projectimplementationcanbelengthyduetoalackofexperienceinprojectmanagementandprocurementandscarceengineeringandmanagementskills.Conflictsofinterestbetweenprojectpartners(forexamplefinanciers,investors,donors,publicutilities,localgovernments,regionaladministrationsandnationalministries)canbeavoidedbyclearlysettingoutrolesandtasksinprojectdocuments.InstitutionalweaknessesmayalsobeaprobleminsomeSEEcountrieswherelocalgovernmentreformshaveonlyrecentlybeenintroduced.Affordabilityofservicesisakeyissueandtariffandsubsidypoliciesmustensurethatservicesaresustainableandoperatedonacostrecoverybasisandthattheyareprovidedtoall,particularlythepoor.

Donor support for PPC staffing positions during 2003--07

Donor Contribution Sectorsupported

Finland €690,900 Municipal and environmental infrastructure projects in North-west Russia

Italy €300,000 Municipal and environmental infrastructure projects in SEE

Luxembourg €75,582 Energy projects

€228,624 Environmental additions to pipeline projects, and stand-alone environmental projects, particularly in the biodiversity sector

Netherlands €456,994 Energy projects, especially related to energy efficiency, renewables and emissions trading

Sweden €432,959 Municipal and environmental infrastructure projects in ETCs

Switzerland €54,012 PPC Secretariat

United Kingdom €584,733 PPC Secretariat


Coordination, matchmaking and networking

ThePPChascontinuedtoworkwithitsstakeholdersto:

enhancethecoordinationofenvironmentalinvestmentactivities

provideinformationonsourcesoffinance

disseminatedetailsofprojectfinancingneeds.

Working with donors to identify funds for TA and co-financing

ThemobilisationofTAfundsanddonorgrantco-financingofIFIinvestmentshasbeencentraltothePPC’sactivities.ThishasbeenachievedbyPPCOfficershelpingtoaddressthefinancinggapsinprojectdevelopment,andthroughthenetworkingandinformationsharingactivitiesledbythePPCSecretariat.

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TheannualjointmeetingsoftheEAPTaskForceandthePPC,heldinParis(2003),Tbilisi(2004),Yerevan(2005),Berlin(2006)andBrussels(2007),haveservedasimportantopportunitiesforbringingtogetherdonorandIFIrepresentatives,andhaveincludedsessionsonmobilisingfinanceinwhichpotentialprojectshavebeenpresentedtodonorsfortheirconsideration.

Inresponsetostakeholderdemands,thePPCundertookareviewofenvironmentalgrantfinancingintheEECCAandSEEregionsin2004-05.Theobjectiveofthestudy,fundedbytheUnitedKingdom,wastoproduceaweb-basedguidetofinancingflowsandmechanismsintheregion.Thisprovidedabetterunderstandingofthevolumeandavailabilityofresourcesandhelpedtofacilitatematchmakingbetweenfundsandproponents.Afollow-upstudyin2007,againfundedbytheUnitedKingdom,concentratedondonorandIFIsupportforenvironmentalinvestment

P P C A C T I V I T I E S S I N C E K I E V � �

PPC Consultant in the early transition countries

During 2005--07 the EU supported the PPC by providing

funding for a one-year PPC Consultant position working

in the ETCs. In contrast with traditional PPC Officer

positions, the consultant focused on project development

in one particular sector, in this case water supply and

sanitation. This arrangement helped to ensure greater

specialisation and closer networking relationships with

relevant stakeholders, which in turn improved the speed

and efficiency of project preparation.

The PPC Consultant worked in close cooperation with the

EBRD’s Municipal and Environmental Infrastructure Team,

national water authorities, EU Water Investment Support

Facility team, feasibility study teams, local water operators

and municipalities. Through this assignment a number of

project ideas were identified and developed, including the

Lake Sevan Environmental Project in Armenia.

projectsinEECCAandSEE.ThestudycomplementedrecentworkcarriedoutbytheEAPTaskForceandtheRegionalEnvironmentalCentre(REC)forCentralandEasternEuropeonoverallenvironmentalfinancingtrends.ThemainoutputofthisstudywasanewdatabaseonthePPCwebsiteprovidinginformationondonor/IFIsupportforenvironmentalinvestments.

Working with the EAP Task Force

EnhancedcooperationwiththeEAPTaskForcehasbeenanimportantobjectiveofthePPC.MinistersatKievdecidedthatthetwoorganisationsshouldworkmorecloselytogether,includingholdingjointannualmeetingsandreportingtoacommonBureau.FollowingKiev,theEAPTaskForceandthePPCassumedjointresponsibilityforObjective5oftheEECCAstrategy(environmentalfinancing),withtheEAPTaskForceactingasfacilitatorandthePPCas

acooperatinginstitution.Theareasidentifiedforcooperationwere:

improvingthepolicyandinstitutionalenvironmentforenvironmentalfinancing

supportingmorestrategicuseofEECCAfinancialresources

increasingcapacityforprojectidentification,preparationandimplementation

strengtheningdialogueandcreatingmorerealisticexpectationsbetweenEECCAcountries,donorsandIFIs.

Atthe2ndJointMeetingoftheEAPTaskForceandthePPC(Tbilisi,October2004)aprogrammeofcooperationwasagreed.TheobjectivesofthisprogrammeweretoensurethatlessonslearnedatthepolicyandinstitutionallevelthroughtheworkoftheEAPTaskForcewerereflectedintheproject-levelworkofthePPCandvice versa.Itsaimwasalsotoensuretheeffectivedisseminationoflessonslearnedamongstakeholdersinthe

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EfEprocess,andtopreventoverlapsintheworkprogrammesofthetwoorganisations.Sincethen,thePPCandEAPTaskForcehaveworkedtogethercloselytoimplementthisprogrammeofcooperationthrough:

annualjointmeetings(Paris2003,Tbilisi2004,Yerevan2005,Berlin2006,andBrussels2007)

regularmeetingsofthejointBureau

policydialogueonenvironmentalfinancingissues

operationalcoordinationsuchastheplanningofworkshopsandtrainingevents

informationsharingandcommunicationactivities,includingjointnewslettersandthecoordinationofwebsiteinformation.

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Trends in donor support for environmental investments in EECCA and SEE

Since 2003 the main focus of IFI support for the

environment has been in the form of direct loans for specific

investment projects. This has begun to be complemented

by a wider range of instruments, including lending through

intermediaries, use of guarantees and equity. Donor funded

TA in support of environmental investments has been a

key strategic element of IFI environmental activities. The

main sectoral focus of such support has been on water

and sanitation, water resources, and energy efficiency and

renewable energy. Carbon financing has been a major

new area of activity in recent years. As this approach has

been in its inception phase in many countries, significant

institutional backing, often in the form of donor grants, has

been necessary. Full details of the review of donor and IFI

support for environmental investments are available on the

PPC web site (www.ppcenvironment.org).

Cooperation with other regional initiatives

ThePPChasalsoworkedcloselywithanumberofotherregionalinitiativesactiveinthefieldofenvironmentalfinancinginEECCAandSEE.

Danube and Black Sea Initiative

TheEC’sDABLASinitiativewasestablishedin2001withtheaimofprovidingaplatformforcooperationfortheprotectionofwaterandwaterrelatedecosystemsintheDanubeandBlackSeaRegion.ThePPChassupportedtheinitiativesinceitsinception.Morespecifically,sinceKiev,thePPChascollaboratedwithDABLASbyadvisingonitsworkprogrammes,participatinginitsannualTaskForceand

ImplementationWorkingGroupmeetingsandprovidinginformationonPPCprojectsthatfeatureintheDABLASpipeline.TheItalianfundedPPCOfficercoveringtheWesternBalkanswasspecificallytaskedtocoordinatewiththeDABLASTaskForce.Inaddition,thePPCSecretariatassistedwiththerecruitmentoftheEUfundedBlackSeaProjectBrokerworkingwiththeDABLASinitiative.AformerPPCOfficerwasselectedfortheposition.


PPC collaboration with the EU’s investment support facilities

In recent years the EU has provided support for

environmental investments, especially in the water and

waste-water sectors, through dedicated investment

support facilities (ISFs). These are designed to provide

TA to IFIs for project preparation and the mobilisation of

investment. They are based on the model of the former

Joint Environment Programme. To date, there have been

four ISFs with different geographical and thematic coverage,

and the EU has indicated that it may develop further ISFs

elsewhere in the region in the future:

the Black Sea Investment Support Facility (BSIF),

covering water and waste-water investments in the

countries bordering the Black Sea

the Danube Investment Support Facility (DISF), focusing

on water and waste-water sector investments in the

non-EU countries of the Danube Basin

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the Water Investment Support Facility (WISF), covering

the countries of the former Soviet Union, especially the

seven low-income countries of the Commonwealth of

Independent States (CIS-7).

the Environmental Project Preparation Facility (EPPF),

covering a broader range of environmentally beneficial

investments in the Western Balkans.

The PPC has worked with a number of the ISFs to support

water and waste-water sector projects. For example, the

Lake Sevan Environmental Project in Armenia has benefited

from a feasibility study carried out by the WISF. The BSIF

has provided TA for a number of PPC supported projects

in Georgia, including the Kutaisi Water Supply Improvement

Project, the Poti Water Supply Project and the Adjara Solid

Waste Management Project. In the Western Balkans, the

DISF has provided TA for the Karlovac Water Supply and

Sewerage Project.

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EU Water Initiative

ThePPCsupportstheEECCAcomponentoftheEUWI,whichwaslaunchedin2002tohelpmeetthechallengesofthewaterrelatedMDGs.Specifically,thePPChasparticipatedinmeetings,madepresentationsonitsactivities,andensuredaneffectiveexchangeofinformation.ThePPCConsultantandOfficerbasedinTbilisiwerebothtaskedwithbuildingonEUWIEECCApriorityprojects,wherepossible,aspartoftheirworkonmunicipalandenvironmentalinfrastructureprojectsintheETCs.TheLakeSevanEnvironmentalProjectinArmeniaisanexampleofPPCcooperationwiththeEUWI.ThefeasibilitystudyfortheprojectwasfinancedandimplementedbytheEUWISF,andtheprojectwassubsequentlyco-financedwitha€5milliongrantfromtheEUWaterCo-FinancingFacility.ThePPChasalsocollaboratedwithanumberoftheEU’sinvestmentsupportfacilitiesthatweresetupundertheauspicesofDABLASandtheEUWI(seepage27).

Northern Dimension Environmental Partnership

TheNDEPwasestablishedin2001asaninnovative,internationalresponsetopressingenvironmentalproblemsinNorth-westRussia,combiningtheexpertiseandresourcesofanumberofdonors(Belgium,Canada,Denmark,EU,Finland,France,Germany,Netherlands,Norway,Russia,Sweden,UnitedKingdom),andIFIs(EBRD,EIB,NordicInvestmentBank(NIB),WorldBank)indesigningandimplementingapipelineofprojectsinwater,wastewater,solidwaste,energyefficiencyandnuclearwastemanagement.ThePPChascontinuedtoworkwiththeNDEPnon-nuclearwindowtomobilisefundstofinancepriorityprojects.DuringthelastfouryearsFinlandhasprovidedfundingfortwosuccessivePPCOfficersbasedintheEBRDResidentOfficeinSt.Petersburg,whohavesupportedanumberofprojectsthathavebenefitedfromNDEPgrantfunding(seetableabove).

Early Transition Countries Initiative

TheETCIwasestablishedin2004bytheEBRDinpartnershipwithanumberofdonors(Canada,Finland,Ireland,Japan,Luxembourg,Netherlands,Norway,Spain,Sweden,Switzerland,TaipeiChina,UnitedKingdom),withtheobjectiveofenablingtheEBRDtoincreaseitsimpact,reachandvolumeoftransactionsinthesevenpoorestEECCAcountries(Armenia,Azerbaijan,Georgia,KyrgyzRepublic,Moldova,Tajikistan,Uzbekistan).In2006MongoliabecametheeighthcountryeligibleundertheETCI.


Board approved NDEP projects supported by the PPC (2003--07)

Project Location IFI Projectcost IFIloan NDEPgrant (€million) (€million) (€million)

Archangelsk Municipal Russia EBRD 25.29 10.0 8.2 Water Services Project

Komi Municipal Services Russia EBRD 21.14 10.0 3.72 Improvement Project – Syktyvkar

St. Petersburg Northern Russia EBRD 108.0 EBRD 42.85 6.35 Waste-water Treatment EIB EIB 20.0 Plant Incinerator NIB NIB 12.98

PPC supported projects benefiting from ETC Fund TA (2003--07)

Project Location Projectcost EBRDloan ETCTA (€million) (€million) (€million)

Lake Sevan Environmental Project Armenia 14.6 7.5 1.2

City of Tbilisi Public Transport Project Georgia 6.38 3.1 0.81

Kutaisi Water Supply Improvement Project Georgia 11.92 3.0 0.53

Poti Water Supply Project Georgia 10.45 2.5 0.48


Theinitiativeisbasedonthreepillars:

theEBRD’sreadinesstotakeonmoreriskinthesecountries,whilerespectingsoundbankingprinciples

theEBRD’scommitmenttoincreaseitsdedicatedresources(staffandbudget)atheadquartersandinResidentOffices

moreefficientanddeepersupportfromthedonorcommunityintermsofjointTAandgrantco-financingofEBRDledprogrammesandprojects.

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ThePPChassupportedtheETCIthroughtheappointmentofanEUfundedPPCConsultantandaSwedishfundedPPCOfficertoworkontheidentificationandpreparationofmunicipalandenvironmentalinfrastructureprojectsintheETCs.AnumberofPPCfacilitatedBoardapprovedprojectshavebenefitedfromTAprovidedthroughtheETCFund,asshowninthetablebelow.

Regional Environmental Centres

ThePPChascontinuedtocollaboratewiththeRECsintheregion.Forexample,thePPChassupportedtheRECforCentralandEasternEuropeindevelopingthePriorityEnvironmentalInvestmentProgrammeforSouthEasternEurope(PEIP),andprovidedassistancewithtrainingeventssuchastheREC-CEEWorkshoponWaterSectorInvestmentProjectsinBelgrade,SerbiainNovember2004.

The PPC cooperates with a diverse range of environmental initiatives across the region.


Networking tools

ThePPChasusedanumberofnetworkingtoolstodisseminateinformationandpromotecoordinationandmatchmaking.

PPC web site

AnewPPCwebsitewaslaunchedin2004toprovideaninformationportalforPPCstakeholders(www.ppcenvironment.org).ThewebsiteisavailableinbothEnglishandRussian,andprovidesarangeofresourcesandinformation,including:

adatabaseofenvironmentalfinancingsources

aprojectdatabasewithdetailsofallprojectsbeingsupportedbythePPC

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arangeofgoodpracticedocuments

linkstodocumentsontheEAPTaskForcewebsite.

PPC newsletters

NewslettersarepreparedjointlywiththeEAPTaskForceandcirculatedtomembersofthePPCandEAPTaskForcenetworksapproximatelyeverysixmonths.

Stakeholder meetings

ThePPCmakesuseoftheannualjointmeetingsoftheEAPTaskForceandthePPCtopresentinformationonactivitiesandprojectfinancingneedstodonorrepresentativesandothermembersofthePPCnetwork.

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Sharing good practice and capacity building

Project financing workshops

OneofthemajorthemesofthePPC’spost-Kievstrategywasthedevelopmentoflocalcapacityforprojectidentificationandpreparation.ThelackofsuchcapacitywasidentifiedasoneofthemajorobstaclestothefinancingofenvironmentalimprovementsinEECCAandSEEcountries.ThePPC’sownexperiencehasshownthatoneofthebestwaysofensuringthatmunicipalentitiesareabletoattractco-financingfortheirpriorityinvestmentprojectsistohelpbuildtheircapacitytodevelopsoundprojectconcepts.Inresponsetothisneed,thePPChasdevelopedanddeliveredaprogrammeofprojectfinancingworkshopsaimedatbuildingcapacityforprojectidentification,preparationandfinancingskillsinEECCAandSEEcountries.

The PPC web site provides a source of information on financing opportunities,

project activities and good practice.


Theworkshopprogrammewasdevelopedduring2003-05withfundingfromtheUnitedKingdom.Workcompletedduringthisphaseincludedthedesignoftheworkshopcontentandformatandthedevelopmentoftheworkshoptrainingmaterials.ExtensiveconsultationwascarriedoutwithIFIsandotherstakeholderstoensurethattheworkshopsmettheirneedsasmuchaspossible.ApilotworkshoptookplaceinMoscowinJuly2004andintroductoryseminarswereheldattheREC-CEEWorkshoponWaterSectorInvestmentProjectsinBelgrade,SerbiainNovember2004,atthe4thDABLASTaskForcemeetinginKarlovac,CroatiainJune2005,andatthe3rdJointMeetingoftheEAPTaskForceandPPCinYerevan,ArmeniainNovember2005.

TheoverallpurposeoftheprojectfinancingworkshopsistoassistmunicipalprojectproponentstoenterintoaconstructivedialoguewithIFIs,donorsand/orcommercialbanksabouttheirprojectideas.Themainfocusisonmunicipal,environmentallyoriented,financiallyviable,stand-aloneinvestmentprojectsforwhichprojectproponentsareseekingco-financingfromIFIs,donorsand/orcommercialbanks.Theprimarytargetgroupoftheworkshopsaremunicipal-levelinvestmentprojectproponents,forexamplemunicipalauthoritiesandpublicutilities.Theworkshopsaimtoequipparticipantswiththenecessarytoolstoprepareprojectconceptsontheirown,readyforsubmissiontopotentialco-financiers.Theintendedgoalistoreducethetimeneededtoinitiateandprepareaproject

concept,andtofacilitateandenhancecommunicationbetweenprojectproponentsandfinancialinstitutions.

Theimplementationphaseoftheprogrammecommencedinspring2006.Followinginterestexpressedbyanumberofstakeholdersinhostingtheseworkshops,theprogrammehasnowbeendeliveredinGeorgia(July2006),Volgograd,Russia(December2006),FYRMacedonia(May2007)andUkraine(May2007).FundinghasbeenprovidedbytheUnitedKingdom(€56,000)andGermany(€12,000fortheUkraineworkshop).

The PPC’s programme of project financing workshops has been successfully delivered in Georgia,

Volgograd (Russia), FYR Macedonia and Ukraine.


Theworkshopshaveprovidedanumberofimportantlessonsaboutbuildingcapacityforprojectpreparation,whichwillbeappliedinfuturePPCcapacity-buildingactivities.

Thecontentofeachworkshopmustbeadjustedfordifferentcountriesandmunicipalities.

Theworkshophostinstitutionmustbecarefullyselected.

Workshopparticipantsmustbeappropriatelyselectedandscreenedwherenecessary.

l

l

l

Theworkshopsmustmaintainrealisticexpectationsofexternalfinancingfortheprojectconceptsdeveloped.

Theworkshopsmustpayattentiontothemunicipalities’accesstofinance,includingtheirfiscal/budgetarypositionsandtheavailabilityofsub-sovereignorsovereignguarantees.

l

l

TheworkshopshavegeneratedanumberofpotentiallyviableprojectconceptswhichhavebeenpresentedtoIFIsforconsiderationforfurtherdevelopmentandpostedonthePPCwebsite.Themainoutcomesofeachworkshoparesummarisedinthetableabove.

Outcomes of the PPC project financing workshops

Country Hostorganisation Participants Projectconceptsdeveloped

Georgia Ministry of Natural Resources Representatives of l Improvement in municipal solid waste (July 2006) and Environmental Protection four municipalities management in Rustavi City (Kutaisi, Rustavi, l Municipal waste management in Kutaisi City Tbilisi and Zugdidi)

Volgograd, Russia Committee for Housing and Representatives of l Frolovo flood protection (December 2006) Commercial Services, five municipalities l Kamyshin waste-water treatment plant (I) Volgograd Oblast (Frolovo, Kamyshin, l Kamyshin waste-water treatment plant (2) Administration Mikhailovka, Volgograd City l Volgograd City water treatment facilities rehabilitation and Volzhsky) l Reconstruction of water treatment facilities in Krasnooktyabrsky District, Volgograd City l Volzhsky waste-water treatment plant

FYR Macedonia Ministry of Environment Representatives of l Extension of waste-water treatment coverage in Berovo (May 2007) and Physical Planning six municipalities l Municipal solid waste management in Gevgelija (Berovo, Gevgelija, l Extension of waste-water treatment coverage in Resen Resen, Struga, Stip l Waste-water treatment improvements in Radozhda, and Valandovo) Struga municipality l Water supply improvements in Stip l Extension of waste-water treatment network in Valandovo

Ukraine Association of Ukrainian Representatives of l Waste-water treatment improvements in Chernivtsi (May 2007) Cities and Municipalities six municipalities l Waste-water treatment improvements in Ivano-Frankivsk (Chernivtsi, Ivano-Frankivsk, l Waste-water treatment improvements in Khmelnitsky Khmelnitsky, Kremenchuk, l Waste-water treatment improvements in Kremenchuk Rivne and Zaporizhzhya) l Municipal solid waste management in Rivne l Municipal solid waste management in Zaporizhzhya


Additional capacity building activities

AworkshopontheCDMwasheldinNovember2005asasideeventtothe3rdJointMeetingoftheEAPTaskForceandthePPCinYerevan,Armenia.TheCDMwasintroducedasafinancialinstrumentavailabletoprojectsponsorswhoinvestinemissionreductionprojects.PresentationsweregivenbytheoperationleadersfromtheEUTacisfundedprojectthatassiststhesehostcountriesinestablishingtheproceduresandinstitutionsneededtoparticipateintheCDM.TheEBRDgaveapresentationexplaininghowtheCDMcouldhelptomakeemissionreductionprojectsmorebankable.Anumberofnewprojectopportunitiesintheregionwereidentifiedasadirectresultoftheworkshop.

Good practice documents

ThePPChaspreparedanddisseminated,viaitswebsiteandindifferentforums,anumberofgoodpracticedocumentsonthemesrelatedtoprojectpreparationandthefinancingofenvironmentalinvestments:

Good Practice in Project Preparation – Public Water Utilities (April 2005)

Thisdocument,preparedbyaformerPPCOfficerwithUnitedStatesfunding,providessummaryguidancenotesongoodpracticeinprojectpreparationforwaterandwaste-waterinfrastructureinvestments.Inadditiontooutlinetermsofreferenceforconsultants,thedocumentincludeskeylessonslearnedfromPPCprojects.DABLASTaskForcemembersapprovedthedocumentandithasbeenendorsedbytheEBRD,EIBandWorldBank.IthasbeenwidelydisseminatedbytheSecretariatsofthePPCandDABLASTaskForceinEnglishandRussianandtranslatedintoanumberoflocallanguages.

Public Services Agreement (Water) – Model (January 2005)

ThismodelpublicserviceagreementsuitableforpublicwaterutilitieswasagainpreparedbyaformerPPCOfficerwithUnitedStatesfunding.Itissupportedwithoutlineguidancenotesforimplementation.

Project concept document preparation manual

AmanualentitledHow to Promote Municipal Infrastructure Projects in the EECCA and SEE Countries waspreparedaspartofthetrainingmaterialsforthePPCprojectfinancingworkshops.Thisspeciallydesignedstand-alonedocumentprovidesguidanceonhowtoprepareaprojectconceptdocumentfordiscussionwithpotentialfinanciers.

Introductory Guide to Clean Development Mechanism Projects in the Early Transition Countries

ThisguidewaspreparedbyaconsultantundertheguidanceofPPCstaff.

Looking towards the future

� �

The context in which the PPC operates has evolved considerably since

the Kiev Ministerial Conference. The shift in focus towards the east

and south has raised a new set of challenges, especially in the lower-

income countries of the Caucasus and Central Asia. Although bilateral

donor assistance for the environment is progressively decreasing, the

EU is assuming a more prominent role as the leading donor in the

region. Donors and IFIs have developed a range of partnerships, such

as DABLAS and the ETCI, to coordinate their assistance programmes.

The 2006 review of the PPC demonstrated that while there is still a

clear need for project preparation assistance, this needs to be delivered

in a way that recognises this changing context. Internalisation of the

PPC’s functions within the EBRD may be the best way of ensuring that

its activities can continue on a more sustainable basis than is possible

with ad hoc donor support.

ThissectionsetsoutsomerecommendationsforhowthePPCcouldoperatebeyondtheBelgradeMinisterialConference.ThesearebasedonthefindingsofacomprehensivereviewofthePPC,whichwascarriedoutduringsummer2006.Thisreview,fundedbytheUnitedKingdom,involvedbroadconsultationwithdonoragencies,IFIs,partnercountriesandotherPPCstakeholders.

The evolving context for environmental investments in EECCA and SEE

SincetheKievMinisterialConference,thecontextinwhichthePPCoperateshasevolvedconsiderably.In2004theexpansionoftheEUshiftedthefocusofinternationalenvironmentalassistancefurthereastandsouthtowardsthecountriesofEECCAandSEE.Theclimateforenvironmentalinvestmentsislessfavourableinmanyofthesecountries,especiallyintheCaucasusandCentralAsia.Severalofthesecountriesarelow-incomeandtheirpopulationshavelimitedabilitytopayforenvironmentalservices.Moreover,levelsofprojectpreparationcapacityandexpertisearegenerallylower(especiallyatthemunicipallevel)and,insomecases,thereislimitedfiscalspaceforexternalborrowing.MostofthesecountriesalsolackthestrongEUaccessionincentive,coupledwithlarge

Options for the PPC after Belgrade

amountsofpre-accessionaid,whichhelpedCentralEuropeancountriestoraiseenvironmentalstandardsinthe1990s.Inordertoaddressthesevereenvironmentalchallengesinthesecountries,coordinateddonorandIFIactionwillbeneededtoensureadequatefinancingofenvironmentalimprovements.

TherewillcontinuetobeaneedforinternationalassistanceforenvironmentalimprovementsinEECCAandSEE,especiallyinlower-incomecountries.Domesticexpenditureintheseareashasnotbeensufficientlyprioritisedinsomenationalbudgets,andsomecountriesaresimplyunabletoallocatesufficientfunding.Privatesectorinvolvementisstillweakandlocalcapitalmarketsarenotwelldeveloped.IFIsthemselveshavelimitedgrantsforTA,andtheirabilitytolendisconstrainedbylimitedfiscalspaceinsomeoftheheavilyindebtedcountries.Furthermore,themandatesofsomeIFIslimittheamountofnon-lendingsupportthattheycanprovide.Moreover,bilateralenvironmentalaidisgraduallydeclining.TheEUisassumingamoreprominentroleastheleadingproviderofenvironmentalassistanceintheregionthroughitsnewaidinstruments,suchastheInstrumentforPre-Accession(IPA)inSEEandtheEuropeanNeighbourhoodPartnershipInstrument(ENPI)inEECCA,andthrougharangeofinvestmentsupportfacilities.

AnumberofdifferentIFIsoperateintheregion,withdifferentmandatesandoperationalapproaches.TheEBRDhasmadeaconsciousdecisiontoshiftitsfocusfurthereastandsouth,graduallyexitingfromCentralEuropeandfocusingmoreonthecountriesofEECCAandSEE.TheEIBisintheprocessofextendingitsactivitiesfurthereastintosomeEECCAcountries.TheWorldBankiscomplementingitstraditionallendingactivitieswithnewapproachessuchascarbonfinancingandispreparingsub-nationallendinginstrumentsthroughthejointWorldBank/IFCMunicipalFund.TheAsianDevelopmentBank(ADB)hashadasignificantpresenceinCentralAsiaforsometimeandisnowextendingitsoperationsintosomeCaucasuscountries.

DonorsandIFIshavenowbeenworkingtogetherintheregionforover15yearsandhaveevolvedarangeofformalandinformalmechanismsforcoordination,informationsharingandco-financingthatdidnotexistwhenthePPCwasfirstcreated.Consequently,internationalassistancetotheregionisbeingdeliveredinmorecoordinatedandstrategicways.Anumberofmulti-donorandevenmulti-IFIinitiativeshavebeensetup,somewithanexplicitenvironmentalfocus.Thesetendtobeorganisedonathematicorsub-regionalbasis,suchastheNDEP,DABLAS,ETCIandWesternBalkansInitiative.ThePPCisalreadyworkinginpartnershipwithsomeoftheseinitiatives.

Furthermore,internationalconsensusonaideffectivenesshasprogressedsignificantlyinrecentyears.TheParisDeclarationonAidEffectiveness,agreedinMarch2005,recommendedthataidshouldbeincreasinglyalignedwithpartnercountries’priorities,systemsandprocedures,andthatgreaterattentionshouldbegiventostrengtheningpartnercountries’capacitytomanageaid.Italsostressedtheneedtoeliminatetheduplicationofeffortsandrationalisedonoractivitiestomaximisecost-effectiveness.


Implications of the evolving context for the PPC

Theidentificationandpreparationofenvironmentalinvestmentprojectswillbemorechallenginginthelower-incomecountries.Itwillbedifficulttoidentifyanddevelopenvironmentalinvestmentprojectsinthesecountries.IFIswillneedtoinvestmoretime,effortandmoneyinupstreamprojectdevelopment.CountrypartnersthemselveswillneedtobuildtheircapacitytoprioritisetheirenvironmentalinvestmentneedsanddevelopprojectproposalsthatcanbetakenupbyIFIs.Ashiftinfocustowardsthelower-incomecountriesoftheCaucasusandCentralAsia,andtheWesternBalkansimpliesaneedforamoredevelopment-orientedapproach.Donorgrantswillberequiredtofinanceprojectsincountrieswherecostrecoveryismoredifficultandwherethereisa

needtoworkonsmallerandmoredifficultprojects,especiallyinruralareas,thatmightotherwisefallbelowIFIfinancingthresholds.Thiswillrequiremoreefforttofindcreativewaysoffinancingprojectswithgreaterdevelopmentimpactbutwhichmayrequiresignificantgrantfinancing.Flexibleandpragmaticprojectpreparationsupportwillberequired.

Findings of the 2006 PPC review

The2006PPCreviewfoundthatpartnercountriesinEECCAandSEEcontinuetorequireassistancewiththeidentificationandpreparationofenvironmentalinvestmentprojects.ThereisaparticularneedtostrengtheneffortstobuildlocalcapacityforprojectpreparationinEECCAandSEEcountries.Throughthereview,PPCstakeholdersindicatedthattheywouldlikethePPCtoprovideawiderrangeofsupportforproject

O P T I O N S F O R T H E F U T U R E O F T H E P P C A F T E R B E L G R A D E � �

preparation,branchingoutbeyondthetraditionalPPCOfficermodel.Thiscouldinclude,forexample,theprovisionofTAforprojectdevelopmentandanexpansionofthePPC’scapacitybuildingactivities.Alongsidethis,thePPCshouldalsoretaintheoptionofdonorfundedPPCOfficersforthosedonorswhowishtocontinuetoprovidesupportinthisway.ThereviewconsideredwhetherthePPCshouldaimtocooperatewithawiderrangeofIFIs,orwhetheritshouldcontinuetoworkprincipallywiththeEBRD,asithasdonesince2003.ThereviewconcludedthattheEBRDistheonlyIFIwithastrongdemandforthekindofservicesthatthePPCcanrealisticallydeliver,andthatthePPCshouldbuildonthisalreadycloserelationship.ThereviewalsorecommendedthatthePPCneedstoadapttodecliningbilateralsupport.Dependencyonad hocdonorsupportisanincreasinglylessviableoption,asbilateraldonorengagementintheregioncontinuestodecline.ThereviewsuggestedthathostIFIscouldbegintobearmoreofthecostsofrunningthePPCandthatthePPCshouldaimtoaccessexistingmulti-donorfundssuchastheETCFundandGlobalEnvironmentFacility(GEF)tosupportitsactivities.

The PPC after the Belgrade Ministerial Conference

Basedonthefindingsofthe2006PPCreview,themostviableoptionforthePPCaftertheBelgradeMinisterialConferenceisforittobemainstreamedintotheEBRD’soperations.Undersuchanarrangement,theEBRDcouldtakeonsomeofthecostsofrunningthePPC.ThiswouldgivethePPCeasieraccesstoexistingEBRDmulti-donorfunds(suchastheETCandWesternBalkansFunds)tosupportthepreparationofenvironmentalinvestmentprojects.Therewouldalsobescopeforfurtherdonorcontributionstofundactivitiesincountriesnotcoveredbythesefunds,suchasRussiaandUkraine.AnoptionwouldremainforinteresteddonorstocontinuetofundPPCOfficersandConsultants.AninternalisedPPCcouldstrengthentheEBRD’senvironmentalprofileandenableittocontinuetomakeasignificantcontributiontowardstheaimsoftheEfEprocessonamoresustainableinstitutionalandfinancialbasis.


The data compiled in the following annexes have been

provided by a variety of sources and were compiled in

spring 2007. While every effort has been made to ensure

the information is correct at the time of writing, the

PPC Secretariat assumes no responsibility for its accuracy.

Annexes

Sector

Totalproject

cost(€million)

IFIloanfinance(€million)

DonorTAcommitted(€million)

Donorco-financingcommitted(€million)

YearofIFIBoardapproval

Armenia Lake Sevan Environmental Project

Water supply / sanitation

14.6 EBRD (7.5) ETC 1 (1.2) EU (5.0) 2007

Rehabilitation of two waste-water treatment plants and construction of three new plants in five municipalities around Lake Sevan.

Bulgaria Bulgarian Energy Efficiency and Renewable Energy Credit Line

Energy / heating

60.0 EBRD (50.0) KIDSF (1.39) KIDSF (8.61) 2004

A €50 million credit line with a €10 million grant component to enable local banks to provide loans for industrial energy efficiency and renewable energy projects.

Bulgarian Energy Efficiency and Renewable Energy Credit Line – extension

Energy / heating

69.0 EBRD (55.0) KIDSF (1.9) KIDSF (12.1) 2006

An extension to the Bulgarian Energy Efficiency and Renewable Credit Line consisting of a further €55 million loan and €14 million grant.

Croatia Karlovac Water Supply and Sewerage Project


36.0 EBRD (10.0) Italy (0.3) EU (22.5) 2005

Upgrading of water supply and sewerage networks and construction of a waste-water treatment plant.

Georgia Kutaisi Water Supply Improvement Project


11.92 EBRD (3.0) ETC (0.53) MCG 2 (4.27) Sweden (2.8)

2006

Restoration of full-time service in 50% of the city and the commercial viability of the water utility to increase access to clean water and waste-water services. This will reduce the risk of water borne disease and water pollution.

Poti Water Supply Project Water supply / sanitation

10.45 EBRD (2.5) EU (0.05) ETC (0.48)

EU (2.45) Greece (0.1) MCG (4.3)

Sweden (1.8) WB (0.07)

2006

The project will finance improvements in the municipal water supply system.

City of Tbilisi Public Transport Project

Transport 6.38 EBRD (3.1) ETC (0.81) Netherlands (0.25) 2005

Assistance to the municipal bus company to improve urban transport services.

Romania Municipal and Environmental Loan Facility – Sibiu


37.59 EBRD (5.0) – EU (25.5) 2003

Rehabilitation of the water and waste-water treatment plants to upgrade and extend the water supply and sewerage networks.

1 Early Transition Countries Fund 2 Millennium Challenge Georgia Fund

Annex 1: IFI Board approved investment projects

4 0 P P C R E P O R T E N V I R O N M E N T F O R E U R O P E B E L G R A D E 2 0 0 7

A N N E X 1 : I F I B O A R D A P P R O V E D I N V E S T M E N T P R O J E C T S 4 �

Sector

Totalproject

cost(€million)




YearofIFIBoardapproval

RussiaArchangelsk Municipal Water Services Project


25.29 EBRD (10.0) EU (0.05) Finland (0.23)

Luxembourg (0.16) Sweden (0.6)

UK (0.2)

NDEP3 (8.2) 2003

Rehabilitation of the water supply and sewerage infrastructure to improve drinking water quality and waste-water treatment standards and to enable energy savings by upgrading pumping and other electrical equipment.

Komi Municipal Services Improvement Project – Syktyvkar


21.14 EBRD (10.0) Canada (0.6) EU (0.3)

Finland (0.2) Sweden (0.5)

NDEP (3.72) 2003

Improvements in the quality of drinking water, the water supply and waste-water infrastructure in the municipality of Syktyvkar.

St. Petersburg Northern Waste-water Treatment Plant Incinerator


108.0 EBRD (42.85) EIB (20.0)

NIB (12.98)

UK (0.03) Finland (2.08)

NDEP (6.35) 2003

Construction of a sludge incinerator at the Northern Waste-water Treatment Plant to provide an environmentally sustainable solution to the sludge disposal problem in the northern part of St. Petersburg.

Vologda Municipal Services Improvement Project


14.33 EBRD (10.7) EU (0.05) Finland (0.97)

– 2006

Construction of a new water treatment plant, modernisation of pumping stations and distribution network, installation of meters and modernisation of the existing waste-water treatment facilities.

SerbiaCity of Subotica – Municipal Infrastructure Reconstruction Programme


14.0 EBRD (9.0) Austria (0.05) Italy (0.6)

Netherlands (0.15)

EAR (2.0) 2004

The project will finance improvements to the municipal water services in the City of Subotica.

TajikistanKhujand Water Supply Improvement Project


3.98 EBRD (0.93) Belgium (0.04) Switzerland (0.04)

Norway (0.28) Switzerland (2.34)

2004

Rehabilitation of the water supply network and drinking water pumping stations and boreholes by replacing water pumps and installing meters. The project also includes a Stakeholder Participation Programme and Financial and Operational Performance Improvement Programme.

UzbekistanTashkent Water Supply Improvement Project


10.76 EBRD (7.69) Belgium (0.08) EU (0.53)

– 2004

Replacement of existing water pumps, valves and transformers, installation of a water distribution unit, pumping station, water meters and construction of a reservoir. The project also includes a Financial and Operational Performance Improvement Programme for the Tashkent Water Company.

3 Northern Dimension Environmental Partnership Support Fund

Sector

Totalproject

cost(€million)




Projectstatus

Azerbaijan Baku Solid Waste Management Project

Waste management

10.0 EBRD (10.0) – – Under development

Construction of the pilot phase of an EU compliant landfill segment, improvement of collection and possible construction of an incinerator.

Bosnia and HerzegovinaBijeljina Waste-water Collection System


9.75 EBRD (5.5) EU (0.2) – Under development

Construction of a priority waste-water collection network in the town of Bijeljina in order to prevent further pollution of underground water.

BulgariaSofia Water Infrastructure Public-private Partnership (PPP)


190.0 EBRD (20.0) – – On hold

Second phase of the capital expansion programme of Sofiyska Voda, a PPP venture intended to modernise the water supply and waste-water collection infrastructure in Sofia.

FYR Macedonia Skopje Water / Waste-water Rehabilitation Project


13.7 EBRD (5.0) Canada (0.16) – Under development

An investment programme in the water and waste-water sector, with the principal objective of reducing water losses.

Elektrostopanstvo – Implementation of an Environmental Management System

Energy / heating

0.2 – Canada (0.2) – TA approved

TA project to assist in the implementation of an Environmental Management System at Elektrostopanstvo na Makedonija, as part of the privatisation of the utility.

Skopje Urban Transport Project Transport 13.8 EBRD (12.0) – – On hold

Partial renewal of the public transport company’s bus fleet, including the provision of up to 100 new buses and maintenance equipment.

Georgia Adjara Solid Waste Management Project

Waste management

10.3 EBRD (2.0) ETC (0.1) MCG (3.3) Under development

Creation of an integrated solid waste management system for the Adjara region.

Borjomi-Bakhuriani Water Supply Improvement Project



Rehabilitation of the water supply and waste-water treatment systems for the municipalities of Borjomi and Bakhuriani.

Kobuleti Water Water supply / sanitation


Rehabilitation of water supply and waste-water services in Kobuleti.

Annex 2: IFI investment pipeline and TA projects

4 � P P C R E P O R T E N V I R O N M E N T F O R E U R O P E B E L G R A D E 2 0 0 7

Sector

Totalproject

cost(€million)




Projectstatus

GeorgiaTbilisi Water Supply Improvement Project


30.0 EBRD (15.0) Canada (0.05) EU (0.25)

Sweden (0.9)

– Under development

Renovation of the Tbilisi municipal water supply system.

Tbilisi Metro Energy Efficiency Project

Energy / heating Transport


Capital investments to improve energy efficiency, improve the reliability of the power system and rehabilitate passenger cars.

Batumi Public Transport Project Transport 3.72 EBRD (2.5) Canada (0.04) – Under development

Improvement of municipal public transport services.

Kyrgyz Republic Institutional Capacity Building – Biodiversity Conservation

Nature conservation / biodiversity

0.25 – IFC (0.1) UK (0.1)

– TA approved

TA project to promote private sector involvement in biodiversity conservation and support for local livelihoods in communities adjacent to the Kumtor Gold Mine, an EBRD investment project.

Romania Sustainable Energy Finance Facility

Energy / heating

85.0-105.0 EBRD (75.0) Canada (0.05) – Cancelled

Credit line for industrial energy efficiency and renewable energy projects.

RussiaKaliningrad Solid Waste Management

Waste management

70.1 EBRD (8.5) NIB (11.8)

– NDEP (10.1) On hold

Improvements in solid waste management through the construction of EU-compliant sanitary landfills, transfer stations and purchase of trucks.

Kazan Water and Waste-water Project


26.36 EBRD (20.41) EU (0.1) Finland (0.19)

– Under development

Improvements in municipal water and waste-water infrastructure and services to contribute to reduced levels of pollution in the Volga River and the Caspian Sea basin.

St. Petersburg District Heat Metering Project

Energy / heating

87.4 EBRD (29.37) EU (0.2) UK (0.01)

– Cancelled

Installation and operation of meters in 17,000 buildings serviced by local district heating companies, as part of a reform programme for district heating and municipal housing.

Kaliningrad Water and Environment Services Rehabilitation: District Heating

Energy / heating

21.8 EBRD (12.0) EU (0.3) Sweden (1.7)

NDEP (7.3) Under development

Rehabilitation of the district heating system, the promotion of sound pricing policies and practices and the institutional development of the district heating utility.

A N N E X 2 : I F I I N V E S T M E N T P I P E L I N E A N D T A P R O J E C T S 4 �


Sector

Totalproject

cost(€million)




Projectstatus

Serbia Duboko Solid Waste Management Project

Waste management

11.6 EBRD (5.0) – EAR (3.0) Under development

Construction of a regional sanitary landfill in compliance with EU rules for nine municipalities of eastern Serbia.

Pancevo Waste-water System Project


15.8 EBRD (9.85) – EAR (2.5) Italy (1.79)

Under development

Construction of a waste-water treatment plant and extension of the sanitary network to reduce the discharge of chemical waste into the River Danube.

Development of an Environmental Management System for Elektro Privreda Srbije

Energy / heating

0.5 – EAR (0.5) – TA approved

TA to help Elektro Privreda Srbije improve its existing environmental management system and integrate it into its overall day-to-day management.

Slovak RepublicSustainable Energy Finance Facility

Energy / heating


Development of a financing facility for sustainable energy projects in the Slovak Republic.

TajikistanSouthern Tajikistan Water Rehabilitation Project


4.6 EBRD (1.52) Sweden (0.5) – Under development

Rehabilitation of the water supply systems of the cities of Dangara and Kulyob through improvements to the water intake system, and rehabilitation of the water supply distribution system.

RegionalPro-biodiversity Business in the Steppe Zones of the Eurasia Region

Nature conservation / biodiversity

0.6 – EU (0.6) – TA approved

A pilot TA project to encourage improved biodiversity management in the steppe ecosystems of Kazakhstan, Moldova, Russia and Ukraine. The project will support micro, small and medium-sized enterprises that use biodiversity resources and help create pro-biodiversity businesses.


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