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FIN 650: Project Appraisal
Lecture 10
Environmental Appraisal of Projects
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Environmental Appraisal
Environmental appraisal is the term used todescribe the assessment of the environmentalconsequences of proposed policies, plans,programs, or projects.
The objective of environmental appraisal is to
determine and evaluate the environmentalimplications of development and thus, ensuringsustainable development through the integrationof environmental, social and economic objectivesinto the policy and planning process.
Both Environmental Impact Assessment (EIA)and Strategic Environmental Assessment (SEA)are tools which can assist in the achievement ofsustainable development and sustainable use ofresources.
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Environmental Parameters
Environmental parameters consist ofcomponents of environment and can begrouped into major components.
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Ecology
Aquatic Terrestrial
Fisheries
Eutrophication
Aquatic Weeds
Species Diversity
Endangered Species
Forest
Wildlife
Species Diversity
Endangered Species
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Human Interest
Aesthetic
Socio-Economic
Diseases
Sanitation Nutrition
Land Loss
Crop Production
Aquaculture Irrigation
Navigation
Flood Control
Transport
Re-settlement
Employment
Agro-Industrial
Health
Landscape
Recreation
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Ecological Impact: Road Project
Fisheries: (-) Roads prevent longitudinal and lateral
migration of fishes in the flood plain
(-) Obstruct movement of fishes onto natural
feeding and breeding grounds in the floodplain.
Forest:
(-) Roads running through forest area and
plantations may be the cause of destruction oftrees in the forest and alteration of ecology ofthe forest
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Ecological Impact: Road Project
Plantation: (+) The roadsides may be used for plantation
of trees which is favorable impact of roadconstruction.
Wetland and Wetland Habitant: (-) The road may encroach wetlands which
may alter the ecology of wetlands and maycause destruction of wetland habitat.
Nuisance Plant/Eutrophication: (-) The Roads running through forest area and
plantations may be the cause of destruction oftrees in the forest and alteration of ecology ofthe forest.
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Physico-Chemical Impact: Road Project
Regional Hydrology/Flooding (-) Roads constructed across flood plains
perpendicular to the direction of water flowcause back water effect and increase duration,frequency and extent of flooding in the upstream.
Obstruction to Waste water flow (-) Roads may obstruct the drainage of sewage
and industrial waste water loading to seriouspollution problem.
Dust /Noise Pollution (-) Dust raised from unpaved rural roads and
blown by the vehicles can pose a health hazardand damage vegetation along the sides of theroad.
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Impact on Human Interest: Road Project
Loss of Agricultural Lands (-) Construction of any road is associated with
the loss of agricultural lands.
Generation of Employment Opportunities
(+) Construction of road generates temporaryemployment during project implementationand permanent employment duringmaintenance phase.
Navigation and Boat Communication (-) Roads interference with navigation and
boat communication at least for certain periodof the year.
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Impact on Human Interest: Road Project
Commercial and Service Facilities (+) The thana roads provide benefit of fast
communication, transport facilities etc.
Industrial Activities
(+) Road communication promotes industrialactivities.
Irrigation Facilities (+) Borrow-pits by the side of the roads
provide facility for small scale irrigation. Landscape
(-) Scattered borrow pits, unauthorized growtharound road , erosion result in marredlandscape.
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Adverse Environmental
Impacts and MitigationMeasures
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En i onment Action Impact Mitigation Meas es
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Environment
al Event
Action Impact Mitigation Measures
Cutting
Trees
Clearing of forest
lands and cutting of
trees within the
right-of-way of the
road.
Reduction if forest
cover.
Reduction in forest
products.
Disruption of forest
ecology.
Find alternative route to avoid
forest through planning
exercise.
Replace the trees by plantation
along road sides.
Nuisance
Plants
Spreading of
nuisance plants from
borrow pit.
Damage crops during
flood.
Incorporate destruction of
such plants in maintenance
program.
Convert the plants into a
compost for application as asoil conditioner/manure.
Pollution
from
Drainage
Discharge nutrient
enriched agricultural
land drainage in
surface water.
Causes
eutrophication and
surface water
pollution.
Makes the water
unsuitable for
beneficial uses.
Destroys aquatic
environment.
Prevent agricultural land drainage
from reaching surface water.
Water
Pollution
Reaching residues of
pesticides in surface
and groundwater
from a ricultural
Cause water
pollution.
Contaminates
sources of water
Reduce use of pesticides
through IPM.
Prevent agricultural land
draina e from reachin
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l E t
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al Event
Backflow Backflow of water
through drainage
canals.
Causes early flooding. Install regulator to control inflow and
outflow through drainage canal.
Obstruction
to WasteWater
Obstruction to
waste water flow byroads and
embankments.
Creates water
pollution. Deteriorates quality
of environment.
Provide drainage structure.
Install pumping facilities. Install treatment plant for waste
water treatment.
Dust Blowing Dust blowing from
unpaved roads
during construction
and movement of
vehicles.
Health hazards due
to dust pollution.
Damage to
vegetation and
trees along the
road.
Control moisture content during
construction by watering.
Stabilize road surface with a
suitable stabilizer.
Increase vegetation cover on
road surface and slopes.
Polluted
Irrigation
Water
Use of irrigation
water with high and
imbalanced salt
content.
Increases soil
salinity and
alkanity/acidity.
Alteration of soil
texture andpermeability.
Affects soil fertility.
Use surface water where
available.
Conduct chemical analysis of
ground water before use and
select the aquifer producing goodquality water.
Determine salinity of surface
water in coastal areas before use
as irrigation water.
Contaminate
d IrrigationWater
Use of irrigation
water with highiron content.
Impart reddish color
to top soil. Changes soil
Look for an alternative water
source, the right strata producingwater with low iron content.
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Importance of Environmental Assessment
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Environmental Impact Assessment
Environmental Impact Assessment (EIA) isdefined as the process of evaluating the directand indirect environmental and social implicationsof a proposed development project.
The International Association for ImpactAssessment (IAIA) defines an environmentalimpact assessment as "the process of identifying,
predicting, evaluating and mitigatingthe biophysical, social, and other relevant effectsof development proposals prior to majordecisions being taken and commitments made."
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The Baseline Situation
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Reasons for using EIA
EIA has been developed as a result of thefailure of traditional project appraisaltechniques to account for environmentalimpacts.
Projects designed and constructed inisolation from any consideration of theirimpacts on the environment have resultedin:
Higher costs,
Failure of projects,
Significant environmental change, and
Negative social effects
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Essential Elements
Identificationof possible positive ornegative impacts of the project.
Quantifyingimpacts with respect tocommon base.
Preparation of mitigationplan to offsetthe negative impacts.
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Steps in the EIA Process
1. Screening-
Determination of the nature andmagnitude of the proposed projects
potential environmental and socialimpacts.
Classification of EIAs.
Deciding upon the nature and extent ofthe EIA to be carried out.
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Classification of EIAs by Category
Full EIA required
Significant adverse impact: severe, irreversible anddiverse
CategoryA
Full EIA not required, some environmental analysis isnecessary
Less significant impact: not as sensitive, numerous,major or diverse
For irreversible impacts, remedial measures can bemore easily designed.
CategoryB
No EIA or other environmental analysis is required
Negligible or minimal direct impact
CategoryC
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Steps in the EIA Process
2. Scoping- Identification of key issues and development
of the Terms of Reference (TOR) for the EIAonce a project is categorized.
Defining the projects area of influence.3. Impact Identification-
Projection of the future state of the valuedenvironmental and community resources
within the vicinity of the proposed project. Formulation of a series of environmental
design objectives to aid both the EIA andproject design process.
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Steps in the EIA Process
4. Impact Prediction- Forecast of the potential effects in terms of-
Magnitude, The affected feature/resource/population, Action causing the effect, Timescale and duration of the effect, Level of uncertainty in the forecast, Proposed mitigation/enhancement measures, Significance
The effects must be recorded in terms of- Short term /Long term Direct/Indirect/Synergistic Cumulative/Increase/Reduce with time
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Steps in the EIA Process
Environmental Management Plan (EMP)An Environmental Management Plan (EMP) sets out the
actions for monitoring and evaluation of the project duringimplementation or construction and operation. Its contentwill include:
Mitigation measures to minimize adverse impacts
Measures to enhance environmental benefits
Identified risks and uncertainties
Institutional support required for effective monitoring
Monitoring and auditing program details Environmental legislations and standards which apply
Resources, funds, contractual and managementarrangements
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Steps in the EIA Process
Environmental Audit/ Evaluation
An environmental evaluation is increasinglyundertaken to-
confirm that the performance of the projectconforms to the specification andenvironmental performance standardsspecified in funding arrangements
examine the EMP and review the monitoringdata in order to reveal scope for improvements
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Methods of Assessment
Environmental Impact Value
Vi = Relative change of the environmental qualityof parameters
Wi= Relative importance or weight or parameter N = total number of environmental parameters
n
iii
WVEIV
1 )(
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Quantification of Environmental Impact
Changes of environmental parameters Severe (+5 or -5)
Higher (+4 or -4)
Moderate (+3 or -3)
Low (+2 or -2)
Very Low (+1 or -1)
No change (0)
0 1 2 3 4 5
No change
Very low
Low
Moderate
Higher
Severe
R l ti i t f E i t l
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Relative importance of Environmental
Parameters
All parameters are not of equalimportance or weight.
It varies from country to country
In Bangladesh flood, employment,agriculture, fisheries carry moreimportance.
In next slide, a summary of relativeimportance of parameters for a particularRoad project is presented.
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ENVIRONMENTAL PARAMETERS Relative
Importanc
e Value
Degree of
Impact
EIV
I. ECOLOGICAL
Fisheries
Forest
Tree PlantationWetland/Wetland Habitant
Nuisance Plant/Eutrophication
II. PHYSICO-CHEMICAL
Erosion and Siltation
Regional Hydrology/Flooding
Drainage Congestion/Water logging
Obstruction to Waste Water Flow
Dust Pollution/Noise Pollution
10
5
24
1
2
6
5
3
2
-2
0
+10
-1
-1
-1
-1
0
0
-19
-13
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Potential Impacts on Environment
A change in system exerts certaininfluence on many different environmentalparameters resulting a net positive ornegative impact on the environment.
Impact on major Infrastructuredevelopment projects such as: Road projects Irrigation schemes
Drainage and embankment projects
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Equator Principles
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Objective
THE EQUATOR PRINCIPLES PROVIDE AFRAMEWORK FOR BANKS TO MANAGE
ENVIRONMENTAL AND SOCIAL ISSUES IN
PROJECT FINANCE.
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The New Industry Standard
10 banks from 7 countries: ABN AMRO, Barclays, Citigroup, Credit
Lyonnais, CSFB, HVB Group, Rabobank, RoyalBank of Scotland, West LB, Westpac
10 more banks from 5 more countrieshave joined: ING, Royal Bank of Canada, MCC of Italy,
Dresdner,HSBC, Dexia, Standard Chartered,Mizuho, KBC
20 Equator banks arranged over 78% ofproject finance market through October2003 (Dealogic ProjectWare).
More are coming!
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PROJECT FINANCE: ASSESSMENT AND MANAGEMENT OF
SOCIAL AND ENVIRONMENTAL RISKS
apac ty: ra n ng va a e rom or
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apac ty: ra n ng va a e rom orEquator Banks
Executive Briefing: Half day-analysis ofE&S risks, understanding of the Equatorframework.
Target Audience: Senior management and
those requiring a general awareness. Equator Implementation for Project
Finance: Two days- program focused onpractical implementation-categorization,
client analysis, EA design. Target Audience: Frontline PF staff responsible
for implementation.
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Benefits of the Equator Principles
A global standard. Easier to navigate than themultiple requirements currently in place.
Save borrowers time and money on sensitiveprojects
Implementation is, over time, expected to raise
global environmental and social performance Reduce loan-shopping based on
environmental and social criteria
Better information for banks to make decisions
Provide basis for stakeholder engagement Expedite consensus-reaching among banks in
large loan syndications
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Criticisms of the Equator Principles
Lack of proper enforcement, accountability and transparency
Prevalence of free-riders and hypocrisy
Policy vacuum amongst banks on vital EP issues
Limited awareness and training
Lack of expertise on social assessment
Lender knowingly permitting pollution
Lack of awareness as to who are the reputable experts in
these areas Lack of objectivity on the part of sponsors and their
consultants and advisers in carrying out due diligence on
behalf of sponsors and lenders
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Criticisms of the Equator Principles
Stabilisation clauses in host country and intergovernmental
agreements
Omission of differences in environmental, social and
governance standards
Circumvention of EP by using other forms of finance or self-
finance followed by general borrowing to meet general debt
or expenditure
Legal challenges in multiple legal forum: Human Rights
Commission, IFC CAO, national courts, US courts
Scope of EP is limited to project finance only