Fin650 Lectures 10 Environmental Appraisal

8/13/2019 Fin650 Lectures 10 Environmental Appraisal

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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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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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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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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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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

Documents

Fin650 Lectures 10 Environmental Appraisal