fflt EGRAT ED SAFEGUARDS DATA SHEET CONCEPT STAGE

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1 Public Disclosure Authorized Date SDS Prepared/Updated: fflt EGRAT ED SAFEGUARDS DATA SHEET CONCEPT STAGE. BASC NFORMATON Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized A. Basic Project Data Country: Philippines Project D: P Project Name: HCFC Phase-out Project Task Team Leader: Viraj Vithoontien Estimated Appraisal Date: August, Estimated Board Date: December 15, Managing Unit: GENDR Lending nstrument:pf Sector: Other ndustry (90%)~ Central Government Administration (10%) Theme: Pollution Management and Environmental Health (50%); Environmental Policies and nstitutions (50%) Financing (in US$ million) Total Project Cost: US$3.0 m Total Bank Financing: US$3.0 m Financing Gap: Financing Source BRD Amount (US$m.): loa Amount (US$m.): GEF Amount (US$m.): PCF Amount (US$m.): Other financing amounts by source: OTF Grant US$3.0 m ~ E o_v_ir_o._n_m_e_n_t_a C_a_te~g~o_r~y_:_B_-_P_art ia A_s_s_es_s_m_e_n_t 1 B. Project Objectives [from section 2 of PCN1: The project development objective is to reduce the HCFC consumption in the air conditioning and refrigeration manufacturing sectors in compliance with the Philippines' obligation under the Montreal Protocol. C. Project Description The proposed project can be considered as a continuation of the Philippines ODS Project as it will build on the infrastructure and capacity established under the ODS project (i.e., POD, PMU, and Land Bank - the financial agent of the previous ODS project) to deliverthe required assistance to beneficiaries and stakeholders primarily in the sectors similar to the previous ODS Project. The proposed project is designed to address a specific reduction target (i.e., % HCFC consumption reduction target) rather than a project that would encompass multiple reduction targets and complete HeFC phase-out. The project implementation period will be about 5-6 years.

2 The project will provide technical and financial assistance to eligible manufacturers, primarily in the refrigeration and air-conditioning sectors, to redesign their products and retrofit their manufacturing processes in order to adopt non-ozone depleting and low global warming technologies. The project will also finance technology transfer that may be required by the beneficiary enterprises. To ensure sustainability ofhcfc phase-out and to transform the markets to non-ozone depleting and low global warming technologies, technical assistance to strengthen monitoring and enforcement capacity and to revise relevant safety and energy efficiency standards, will be provided to relevant government agencies, non-government agencies, and standard bodies andlor agencies. The project will also build capacity in the service industry by providing training on the maintenance and servicing of equipment using the new technology. Component 1: nvestment in HCFC Consumption Reductions (US$2.3 million) The project will finance conversion of manufacturing facilities from HCFC technologies to nonozone depleting and low global warming technologies. While facilities using HCFCs are commercial refrigerator, air-conditioner, electronics, metal processing, fire-fighting equipment manufacturers, the project will give priority to HCFC phase-out in the refrigeration and airconditioning manufacturing sectors as these sectors consume the largest percentage of the annual HCFC consumption in the manufacturing sector and early HCFC phase-out in these manufacturing sectors will reduce the build-up.of HCFC equipment installation in the country and future demand of HCFC for servicing this equipment. To eliminate the use of HCFC in the refrigeration and air-conditioning manufacturing processes, low GWP alternatives such as R-290 (propane), HFC-32, and others (if any) will be considered. Selection of alternatives will take into account safety, performance, and climate impact. Based on the survey conducted in 2011, there are about 21 air-conditioner manufacturers and 8 commercial refrigerator manufacturers in the Philippines. A few of them may not be eligible as they are 100% owned by foreign enterprises from developed countries. For eligible enterprises, the project would finance replacement or retrofit of product design and testing, acquisition of manufacturing equipment including new refrigerant leak detectors, vacuum pumps, refrigerant storages, refrigerant charging units, refrigerant transfer pumps and piping, pressure gauges, refrigerant recovery and recycling machines, brazing machines and air booster compressors, safety devices, and others. Component 2: Technical Assistance (US$O.5 million) The objectives of the technical assistance component are to expedite transfer of manufacturing technology of R-290 and/or HFC-32 refrigeration and air-conditioning technologies, and to ensure safe use and handling of new products. Depending on the final choice's) of technologies, technical study tours and technical workshops on the design and manufacturing of R-290 and HFC-32 equipment will be financed. Other technical assistance activities could include revisions of appliance standards, building codes, modifications of energy efficiency and safety laboratories, technical training for new and on-the-job refrigeration and air-conditioning technicians involved in manufacturing, installation and services of new alternative products.

3 Component 3: Project Management (US$O.2 million) The project will continue to finance the PMU that has been established within DENR-EMB by the previous ODS project and is currently implementing the Stage HCFC Phase-out Project financed by UNEP. Assessment of the PMU's role and responsibility will be conducted. A review and restructuring of the PMU is anticipated in order to ensure that the roles and responsibilities of the PMU are compatible with the new business needs. The project will explore reengagement of the Land Bank of the Philippines (LBP) as a financial agent of the Project. The project will finance technical assistance to EMB-PMU and LBP, if applicable, for managing, supervising, monitoring and reporting on the implementation of Components 1 and 2 of the Project. t will also finance technical assistance to EMB-PMU for the development of sectorspecific regulations and policy, such as, inter alia, rules governing HCFC imports and exports, and the ban on the use of HCFC in air-conditioners and refrigerators. D. Project location and salient physical characteristics relevant to the safeguard analysis (if known): The project activities will. be undertaken at the existing manufacturing facilities which are located mainly in the Metro Manila area or in the urban areas. The project activities will be undertaken at the existing manufacturing facilities which are located in the National Capital Region, mainly in the Metro Manila area and in industrial zones in Regions 3 and 4. The main activity and investment in the project is the replacement or retrofit of manufacturing processes which produce air-conditioners and refrigeration equipment containing HCFC refrigerant in order to adopt non-ozone depleting and low global warming technologies. A total of 21 air-conditioner manufacturers and 8 commercial refrigerator manufacturers have been initially identified. These are all large private firms, most of whom have environmental and quality standards certification (SO 14000), which demonstrates to a certain degree that they have some existing environmental and technical management capacity. No land acquisition will be done under this project. Replacement or tooling of process trains will happen within the premises of the individual companies. E. Borrower's nstitutional Capacity for Safeguard Policies: The executing agency, the DENR is the primary government agency tasked to manage the natural resources and protect the environment of the Philippines. t is mandated to enforce the law controlling the use and disposal of chemical substances in the country which includes the regulation of HCFCs. The Chemicals section of the Pollution Management Division of the EMB ofdenr is in charge of regulating HCFCs in the country. EMB has experience in Bank safeguards through World Bank projects they have executed. Furthermore they are very experienced at EA as they are responsible for the review of environmental assessments of development projects and monitor compliance of projects. They will have overall oversight of the safeguards under the project. DENR will also need to

4 coordinate closely with the implementing partners including Air-conditioner and Refrigeration Manufacturers, Bureau of Customs and Land Bank of the Philippines. F. Environmental and Social Safeguards Specialists on the Team: Gerardo F. Parco Karen J. Jacob. SAFEGUARD POLCES THAT MGHT APPLY Safeguard Policies Triggered (please Triggered? Explanation explain wh),) i Environmental Assessment (OPiBP 4.01) Yes The project will finance activities which will require a limited scope of site preparation within the factories in order to replace and remove existing equipment and make room for new equipment. The impacts will be mainly due to these limited site preparation works. Waste generated from the conversion activities are generally nontoxic, non-hazardous. The manufacturing companies usually contract out the safe disposal of their waste materials to DENR registered TSD (Transport Storage and Disposal) firms. The impacts are therefore not insignificant although they are temporary and can be mitigated through a properly implemented ESMP. The team proposes a Category B rating for this project. A generic Environmental and Social Management Plan (ESMP) will be, prepared for the project to serve as a template. This generic ESMP will be the basis for preparing specific ESMPs for each beneficiary identified during project preparation in order to ensure that impacts are properly screened and mitigated. The generic ESMP will also be the basis for preparing ESMPs for ; beneficiaries identified during implementation. These ESMPs will reflect the potential environmental and social issues based upon site screening of the air-conditioner and commercial refrigerator manufacturers, proposed i

5 Safeguard Policies Triggered (please Triggered? Explanation explain why) environmental and social measures, including proper and/or safe disposal and management of replaced parts and equipment, analysis of alternatives (mainly on technological options) and clear safeguard implementation arrangements. Natural Habitats (OP/BP 4.04) No All activities in the Project will be done within existing facilities of air conditioner and refrigerator manufacturers. No impact on natural habitats is expected Forests (OP/BP 4.36) No All activities in the Project will be done within existing facilities of air conditioner and refrigerator manufacturers. No impact on forests is expected. Pest Management (OP 4.09) No No use or procurement of pesticides is foreseen in the project. impact of physical cultural resources is foreseen. All the facilities within which the replacement or conversion of equipment will occur are in the relati vely new facilities. ndigenous Peoples (OP/EP 4.10) No The targeted industries are located in urban areas where it is unlikely to have any presence of indigenous people. Physical Cultural Resources (OPBP 4.1 ) No r~o nvoluntary Resettlement (OP/BP 4.12) No All activities in relation to conversion to new refrigerants will be done within the existing facilities of air-conditioner and refrigeration equipment manufacturers. Experience in the phase-out of CFC refrigerants shows that there will be no land acquisition or displacement of persons in these activities. Safety of Dams (OP/BP 4.37) No Not applicable -- Projects on nternational Waterways No Not applicable (OPBP 7.50) Projects in Disputed Areas (OP/BP 7.60) No Not applicable

6 Safeguard Policies Triggered (please Triggered? Explanation explain why) Piloting the Use of Borrower Systems to No Not applicable Address Environmental and Social Safeguard ssues in Bank-Supported Projects (OP/BP 4.00),. SAFEGUARD PREPARATON PLAN A. Appraisal stage SDS Required": Yes i. Explanation. An Appraisal Stage SDS will be prepared together with an ESMP. 11. Tentative target date for preparing the Appraisal Stage lsds: July 15, 20 l6 B. Time frame for launching and completing the safeguard-related studies that may be needed. August July The specific studies and their timing should be specified in the Appraisal Stage {SDS. V. APPROVALS