Document of
The World Bank
Report No: [ 93337 ]
NOTE ON CANCELLED OPERATION
(P104092)
ON A
PURCHASE OF EMISSIONS REDUCTIONS
IN THE AMOUNT OF
US$3 million
TO
THE REPUBLIC OF BOLIVIA
FOR THE
BOLIVIA URBAN WASTEWATER METHANE GAS CAPTURE PROJECT
December 16, 2014
Urban and Disaster Risk Management Department
Argentina, Chile, Uruguay, and Paraguay Management Unit
Latin America and Caribbean Region
CURRENCY EQUIVALENTS
Currency Unit = US Dollar ($)
FISCAL YEAR
[July 1 – June 30]
ABBREVIATIONS AND ACRONYMS
CBP
CDCF
CDM
DNA
ER
ERPA
LoI
ODL
PDO
PE
tCO2e
UNFCCC
Community Benefit Plan
Community Development Carbon Fund
Clean Development Mechanism
Designated National Authority
Emission Reduction
Emission Reduction Purchase Agreement
Letter of Intent
Oficina de Desarrollo Limpio
Project Development Objective
Project Entity
Tonne (metric ton) of carbon dioxide equivalent
United Nations Framework Convention on Climate Change
Vice President:
Country Director:
Sector Manager:
Project Team Leader:
NCO Team Leader:
Pamela Cox
Marcelo Guigale
John Henry Stein
Daniel Hoornweg
John Morton
Republic of Bolivia
Bolivia Urban Wastewater Methane Gas Capture Project
CONTENTS
Data Sheet
A. Basic Information
B. Key Dates
C. Ratings Summary
D. Sector and Theme Codes
E. Bank Staff
F. Ratings of Project Performance in ISRs
1. Context, Project Development Objectives and Design
2. Post-approval Experience and Reasons for Cancellation
3. Assessment of Bank Performance
4. Assessment of Borrower Performance
5. Lessons Learned
A. Basic Information
Country: Republic of Bolivia
Project Name: Urban Wastewater Methane Gas Capture
Project
Project ID: P104092
L/C/TF Number(s): TF55843
NCO Date: December 16, 2014
Lending Instrument: Carbon Finance
Borrower: SAGUAPAC
Original total commitment: USD 3.0 M
Disbursed Amount: USD 0.19 M
Environmental category: B
Implementing Agencies: SAGUAPAC
Co financiers and Other External Partners: N/A
B. Key Dates
Process
Date
Process
Original Date
Revised/Actual Date(s)
Concept Review:
01/17/2007
Effectiveness:
05/17/2007
N/A
Appraisal:
04/26/2007
Closing:
12/31/2015
11/4/2010
Approval:
07/04/2007
C. Ratings Summary
Performance Rating by NCO
Outcome:
Moderately Satisfactory
Risk to Development Outcome:
Moderate
Bank Performance:
Satisfactory
Borrower Performance:
Satisfactory
D. Sector and Theme Codes
Original
Sector Code (as % of total amount)
1. Sewerage
Thematic Code (Primary/ Secondary)
1. Climate change
E. Bank Staff
100
Original Priority
100
Positions
At NCO
At Approval
Vice President:
Jorge Familiar
Pamela Cox
Country Director:
Livia Benavides
Marcelo Giugale
Sector Manager:
Anna Wellenstein
Makhtar Diop, Jack Stein
Project Team Leader:
Miguel Vargas-Ramirez
Daniel Hoornweg
NCO Team Leader:
John Morton
NCO Primary Author:
Anna Perkinson
F. Ratings of Project Performance in ISRs (if available)
No ISRs available.
1. Context, Project Development Objectives, and Design
This Carbon Finance Operation was designed to purchase Emission Reductions (ERs)
credits under the framework of the Clean Development Mechanism resulting from the
collection and destruction of methane from a wastewater treatment facility in Santa
Cruz, Bolivia. The Carbon Finance Operation was processed separately from any
World Bank lending project. The investment financing for the infrastructure (methane
collection and gas flaring system) was financed separately under an IDA Credit
(Bolivia Urban Infrastructure Project - P083979).
The Project Development Objective was to reduce greenhouse gas emissions from
urban wastewater treatment facilities in Santa Cruz, Bolivia. This Carbon Finance
Operation also supported SAGUAPAC’s 1 goals of expanded wastewater coverage
and operational efficiency. The Project was appraised in April 2007 and the
Emissions Reductions Purchase Agreement (ERPA) was signed in May 2007.
Project Rationale
Since the early 1990s the Latin American Region of the World Bank has actively
pursued projects in integrated urban sanitation. The Carbon Finance Operation was
designed to support this agenda as a complementary activity to the Bolivia Urban
Infrastructure Project (P083979), a project which aimed at improving the access to
basic services to the urban poor in Bolivia’s major cities through targeted
infrastructure investments. Part of this project also includes a provision for the
expansion of sewerage coverage in poor areas of Santa Cruz de la Sierra. This
included works to increase the capacity of the three wastewater treatment plants so as
to enable them to process increased wastewater flows. These plants were designed to
use a lagoon treatment system that treats organic matter and as a result produces
methane, a powerful greenhouse gas. While the Bolivia Urban Infrastructure Project
financed the methane gas collection system investment, this Carbon Finance
operation was designed to provide a cost recovery mechanism for the gas collection
system through the sale and purchase of Certified Emissions Reductions (CERs) and
Verified Emissions Reductions (VERs). This Project technology was innovative
being the first of its kind in Bolivia.
At the time of appraisal, Bolivia was in a position to participate in the CDM and
receive revenues from the carbon market. Bolivia ratified the Kyoto Protocol in 1999
indicating that the country was eligible to participate in the Clean Development
Mechanism (CDM). The CDM Designated National Authority (DNA), which is the
national entity responsible for determining CDM eligibility by confirming the project
was consistent with the country’s overall sustainable development priorities, was
established in Bolivia.
1
SAGUAPAC is the largest of 10 cooperatives in Santa Cruz that provide sanitation
services.
The financing of the purchase of the ERs was to be done under the Community
Development Carbon Fund (CDCF) project. CDCF projects are designed to ensure
impoverished communities in the area receive quantifiable benefits from either
project implementation or the profits returned by the project’s success. In this case, a
Community Benefit Plan (CBP) based on a survey conducted in the project area by
consultants for SAGUAPAC was developed to connect up to 600 families in a lowincome area of the city to a sewage treatment system to be financed through a
premium added to the agreed ER price.
Risk Analysis and Appraisal
The project appraisal included an economic analysis under different scenarios
indicating a solid rate of return; a technical analysis of the chosen technology; and an
assessment of social and environmental safeguards compliance. It also included a
thorough institutional analysis of SAGUPAC and due diligence on the likely emission
reductions and technical eligibility of the project under the appropriate CDM
methodology.
Several risks were identified along with mitigation measures. Financial risks were
identified as low to moderate. With the investment secured through the larger Bolivia
Urban Infrastructure Project and the up-front payments limited to preparation costs,
financial risks were largely not directly associated with the carbon finance operation.
Risks related to the lack of experience with this technology as well as the lack of
experience of SAGUAPAC with the technology were identified. These risks were
mitigated by technical assistance provided by the Bank and the hiring of a consulting
firm to aid with the construction and installation process. Lastly, some risks were
identified related to performance of the project and its ability to meet contractual
obligations under the ERPA. These were to be mitigated through a requirement of
having an initial verification of the project and were not expected to be inhibited by
country regulation. At approval there were no regulations or requirements in the
country for the capturing and flaring of methane from lagoons.
The capacity of the SAGUAPAC also contributed to the “low” rating for regulatory
and institutional risks. SAGUAPAC had served the city for more than twenty years
and has been recognized as one of the best managed cooperatives in Latin America.
The cooperative had previously received two Bank credits and technical assistance,
all of which were used effectively.
Overall the quality of the Project at entry was good; potential problems were
addressed through mitigation measures and the investment capital was secured
outside of the operation. SAGUAPAC had a strong, track record of success with
Bank involvement, and Bolivia met all international requirements under the Kyoto
Protocol to participate in the international carbon market.
2.
Post-Approval Experience and Reasons for Cancellation
The rules for eligibility for the CDM incorporate a mechanism for country approval
which ensures the project contributes to local sustainable development. This and the
requirement for Registration of the project with the CDM Executive Board under the
UNFCCC were prerequisites for financing under the Operation. After project
approval, Bolivia developed the Law of Mother Earth, a groundbreaking
environmental law that among other things considers the natural world to have rights
which had implications on the concept of sale and purchase of natural resources
(including carbon emissions), a principle upon which the CDM was based. In the
backdrop of this new policy environment that conflicts with a market-based approach
in the sector, no written approval was granted by the Government of the Plurinational
State of Bolivia confirming that the project was consistent with the country’s
sustainable development goals. SAGUAPAC was notified of the ERPA cancellation
via a Termination Letter on November 4, 2010.
The Project Development Objective to reduce greenhouse gas emission from urban
wastewater treatment facilities in Santa Cruz, Bolivia, was achieved. SAGUAPAC
followed through with implementation of the methane gas collection systems at their
wastewater treatment plants, and they are now successfully and continuously
operating to capture and flare the gas. By all accounts the systems are well designed,
constructed and managed. As of 2012, SAGUAPAC had submitted a request to the
Government of Bolivia to produce energy from the gas collected at its wastewater
treatment plants.
3.
Assessment of Bank Performance
Rating: Satisfactory
The Bank team satisfactorily prepared the Project and supported SAGUAPAC and
the linkage to the Bank lending project was well leveraged. The World Bank prepared
and appraised the Project, negotiated the legal agreements, and supported the client in
the process. The team also provided technical assistance and expert advice for the
project design, as well as helped prepare a Community Benefits Plan tailored to the
areas needs based on a survey and input from residents in the affected area.
4.
Assessment of Borrow Performance
Rating: Satisfactory
SAGUAPAC was well equipped to implement the infrastructure part of the project
successfully. They actively engaged with the project team throughout the preparation
phase, as well as agreed to provide the investment financing needed for the project
activities if needed. Even after project cancellation, SAGUAPAC moved forward
with the implementation of methane gas capture systems at their lagoons in Santa
Cruz and they continue to maintain operations at their wastewater treatment plants.
This can be attributed to the strength of SAGUAPAC and their desire to carry out the
project.
5. Lessons Learned
Evolving Rules and Laws. At the time of project preparation, both the CDM rules and
country level definition of sustainable development were under development, and
therefore were susceptible to changes. Keeping the likelihood for changes in
procedures in mind as a risk factor was an important consideration for CDM projects
at that time.
Strong Project Entity with Proven Implementation Capacity. The implementation
success of the infrastructure part of the project can be attributed to the competence
and interest of the implementing entity to carry out the project. The choice of
implementing agency was thus of key importance in the project design.
Environmental benefits of methane gas capture facilities. The fact that 3 functioning
methane gas capture facilities were eventually realized highlights the value of this
investment for SAGUAPAC. The attention that the CDM brought to this technology
was the impetus for pursuing this project at its onset, and in the long term the value
the investment in terms of commitment to global environmental issues and improving
wastewater treatment operational and safety measures was appreciated by
SAGUAPAC even without the financial revenues of the CDM.