Climate change (P); Water resource management (S) Project

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Updated Project Information Document () Report No: AB913 Project Name COLOMBIA - Rio Frio Carbon Offset Project Region Latin America and Caribbean Region Sector General water, sanitation and flood protection sector (100%) Theme Climate change (P); Water resource management (S) Project P Borrower(s) CORPORACION DEFENSA MESETA BUCARAMANGA Implementing Agency(ies) CORPORACION DEFENSA MESETA BUCARAMANGA Address: Carrera 23 N PTAR Río Frío, Km. 4 anillo vial Floridablanca Girón, Bucaramanga (Santander), COLOMBIA Apartado postal: A. A Sitio web: Contact Person: Dr. Fredy Anaya Martínez DIRECTOR GENERAL CDMB Tel: Fax: fredy.anaya@cdmb.gov.co Environment Category B (Partial Assessment) Date Prepared February 9, 2005 Auth Appr/Negs Date February 18, 2005 Bank Approval Date March 22, Country and Sector Background Over the past decade, the country has made progress in water supply and sanitation services in urban areas. About 80% of all urban population now has water and 74% sewerage services. However, despite the progress achieved and enactment of pioneering "load based" regulation for discharges into surface waters, there is still a lot to do in terms of water treatment from point sources and municipalities. Sewage services remain deficient in a number of smaller cities. The collection rates, while much higher than a decade ago, still allow for a substantial amount of untreated water to flow directly into ecosystems. The cost to the environment is immense. The main difficulty resides with the inability to provide for cost effective collection systems in areas with medium to low density. Further, municipal wastewater treatment covers only about 8% of the total needs and most of this is restricted to primary treatment. As a result, untreated sewage flows have had a major impact in the deterioration of surface waters (lakes, and rivers) as well as aquifers. Major rivers have seen most quality indicators decrease over time and this has been reflected in a reduction in aquatic fauna and flora. Some fish species in the Andes have been placed in the red book of Conservation International, denoting their vulnerability to possible extinction. In 1999, the country released about 70 m3/s of urban wastewater with about 500,000 tons of BOD. Treatment was achieved through the use of about 330 plants with a capacity of 13 m3/s. However, many of these have not been operating at nominal capacity or under optimal conditions. A major problem is the release of nutrients, in particular nitrogen, from agriculture and point sources. The large volumes of organic nitrogen being released into the environment, have resulted in a serious eutriphication of rivers and lakes. This in turn has resulted in major deterioration of environmental quality, reduction in dissolved oxygen levels and catastrophic declines in some aquatic biota. Water for irrigation

2 2 and the quality of potable water in downstream towns and cities has also suffered. In this context, there is a need for expansion of treatment volumes and improvements in the quality of effluents, in particular in nitrogen and other nutrients loads. Yet, most municipalities do not count with the resources to undertake the investments to provide for advanced treatment. Water & sanitation strategy Under the 1991 constitution, Municipalities have the responsibility to provide for water and sanitation services. The Ministry of Environment, Housing and Regional Development (MOE) is responsible for the water sector at a national level. The responsibilities for the sector have been assigned to different institutions within the Ministry. The potable water and sanitation directorate oversees the sector and formulates sector policies. The Water Regulatory Commission defines tariffs and sets quality of service and technical standards. The MOE, as part of its current strategy, seeks to improve coverage of sanitation facilities and reduce the load of wastewater effluents into the environment. The strategy calls for improvements in the quality and reliability of sewerage systems. Key areas of the strategy include: a) Improving water supply and sanitation at medium and small cities. This is a key goal and would require joint action by regional administrations and the central government. To obtain the benefits of the rehabilitation of infrastructure, the target municipalities are expected to streamline its operations and improve efficiency of delivery of services. b) Improving water supply in the rural sector. Water supply in the rural sector is deficient. Under the strategy, the rural systems would respond to demand, be based on strong community participation, user-financial contribution to the investments and provisions for operation and maintenance. c) Management and disposal of municipal wastewater. The vast majority of municipal wastewater is discharged into the nation s surface waters and is a major source of contamination for aquifers. The strategy calls for reductions in the organic loads from wastewater streams and relies on the application of charges based on pollution loads. The upgrading and expansion of existing facilities is sought. Government s Policy on Climate Change. Colombia is a party to the Framework Convention on Climate Change and has also signed and ratified the Kyoto Protocol (Law 629 enacted November 30, 2001). Colombia has been a leading participant in the discussions on the provisions and regulations of the Clean Development Mechanism (CDM) in the context of the international negotiations under the auspices of the UNFCCC and has developed a detailed negotiations agenda on items leading to the definition of the rules for the CDM. As part of these activities, the Government has made a national assessment for the optimal use of the CDM with Bank support. The Government has likewise taken steps leading to the further development of institutional capacity through: a) the organization of an inter-institutional committee under the aegis of the Vice-president s office to ensure full coordination on climate change issues; and b) the set up of a climate change office, which has now been in operation for the last three years. On the basis of the studies sponsored as part of the National Strategic Studies (NSS), other inputs and the development of institutional capacity, the Government has defined the main trusts of a National Climate Change Plan, as follows: Strengthen the capacity to adapt to the anticipated impacts from climate change; Promote reduction of emissions and increase the sequestration capacity for greenhouse gases; Minimize the adverse impacts on the nation s exports of fossil fuels;

3 3 Promote scientific capacity and the availability of information on the impacts of climate change on the nation s economy and ecosystems; and Promote financial mechanisms for the adoption and funding of response actions. 2. Objectives The Project development objective is to reduce greenhouse gas emissions from the wastewater treatment sector in Colombia through the modernization of the Río Frío wastewater treatment plant, located in Girón (metropolitan area of Bucaramanga), Colombia. This modernization will result in abatements of CO2, CH4 and N2O emissions of about 40 kton CO2 eq/year and in an improved effluent quality from the plant. The project would constitute a 'proof of concept' with potential to be replicated throughout the region. A share of the revenues from the emission reductions will be used to support a community benefits (health) program in Girón. 3. Rationale for Bank's Involvement The Community Development Carbon Fund is a product of the World Bank designed to demonstrate how market-based emissions transactions can mitigate global climate change and at the same time bring about improvements in the quality of life of local communities. The Bank s involvement helps to ensure quality of the carbon projects, while providing necessary project due diligence and other fiduciary responsibilities, and contributing with its country knowledge and country context. The Bank also brings considerable expertise in technical support for project preparation, supervision capacity, and development of linkages with other sources of expertise and funding. The Bank brings to the proposed project the ability to serve as a catalyst for promoting environmental services as well as knowledge of climate change mitigation programs both regionally and worldwide. Finally, Bank involvement links together the experience and lessons of its sector work (National Strategic Study (NSS)), institutional development (support to the Office of Climate Change (OCC)) and development of a CDM portfolio in Colombia, through the Jepirachi and Amoya projects. All this work comes together in the project. 4. Description a. GHG abatement at the Río Frío waste water treatment plant. The project will support improvements, in the existing wastewater treatment plant, designed for the elimination of CH4 emissions, a substantial reduction of Nitrogen loads, and therefore, reductions of N20 emissions from resulting effluents into the ecosystem, and other improvements in the quality of the effluent. The use of methane for power generation will displace CO2 from grid-connected power plants. A description of the project and the mechanism of formation and proposed reduction of N2O can be found in Annexes 2 and 17. The support will be provided through the purchase of resulting emission reductions. b. Social program for low-income youth in the Municipality of Girón. A community benefits program in Girón will address overall health conditions (including STD and HIV/AIDS), and employment among low-income youth. It will do so through an educational strategy (with community participation) on health and the environment, technical training and organization for micro enterprise management. The social program has been designed to meet the community benefits requirement of the Community Development Carbon Fund. It is located in Giron, the first locality downstream from the discharge of the plant, will be supported with 15% of the net revenues from carbon emission reductions. Its scope fits the social work priorities of the local adminsitration and the needs of the community.

4 4 TIMETABLE Component GHG abatement of the waste water treatment plant Social Program Activity Construction and operation of fourth anaerobic reactor Modernization of flaring system Installation of 1 Mw cogeneration power plant. Operation of fifth reactor Conversion of facultative lagoons to aerated lagoons Coordination and consensus building: Inter-institutional and community meetings Meetings to raise awareness among leaders, parents, teachers, and/or youth Participatory study of sociocultural and economic conditions of the project s youth Entertainment, sports and recreational meetings with youth Design and start-up of Educational Strategy for Health and Environment Feasibility Study on creation of microenterprises or other economic forms of association in Girón Training, socio-business advisory services, and youth organization for implementation of income generation strategies 2005 Calendar Year GHG abatement at the waste water treatment plant Social Program 5. Financing Source (Total ( US$m)) BORROWER ($10.50) PROTOTYPE CARBON FUND ($0.42) Total Project Cost: $ Implementation The project will be developed by Corporación Autónoma Regional para la Defensa de la Meseta de Bucaramanga (CDMB), which is a regional public corporation. The CDMB will also be in charge of the financing, management and operation of the project. The CDMB has an experienced technical team and has sucessfully managed and operated the existing Rio Frio Plant for the last 10 years with good results. The CDMB has technical assistance agreements with the University of Pamplona and the Universidad Industrial de Santander to complement the in-house expertise. The management team is knowledgeable and experienced. It has the capacity to manage the expanded plant and acquire additional monitoring obligations. Financially, the CDMB has operated efficiently and produced net revenues during the last five years of operation. In addition to the CDMB, the project counts with the financial support of the department of Santander and of the municipalities of Bucaramanga and of Foridablanca. The CDBM will contribute with 20% of the investment and will cover the interests of the loan during project execution. The CDMB will count with assistance from the University of Pamplona and the Industrial University of Santander in the monitoring of the emission reductions. Progress to date: CDMB has incorporated the project into its business plan. The feasibility assessment has been completed. Detailed design for the project, including, civil works, ground studies, sizing of the secondary treatment, specifications of the system for capture of Biogas, and the co-generation system is undergoing. These studies will be finalized by March Process for obtaining the debt capital from FINDETER (50% of total) is undergoing. Agreement has been reached on the baseline methodology and monitoring plans for the project. An exisitng methodology, already approved by the CDM Board, will be used.

5 5 7. Sustainability The project contributes to improvements in the quality of life of the local population, through the prevention and the control of offensive odors and improvements in effluent quality. Thus, the local population has an important stake in the success of the project. The CDMB is a stable and professional public entity with enough resources, skills and experience to operate and maintain the plant. The project, once counting the CER revenues is financially viable. The social program will also contribute to sustainability by addressing issues related to health and the environment among low-income youth of Girón, while improving their quality of life. 8. Lessons learned from past operations in the country/sector There are large disparities in coverage and reliability of sanitation services, specially among medium and small cities as well as rural localities. The project will provide a working example of improvements in the quality and reliability of service for a medium-size city. There is limited coordination between central and regional government agencies. The project is the result of a combined effort between the regional and local authorities. While sewage service is limited, to the extend it is available, it focuses almost exclusively on primary treatment. Therefore quality of effluent is still very polluting with negative, and frequently, serious impacts on habitat integrity, in particular of surface waters. The project will illustrate the ability of carbon finance to make viable investments in advanced treatment. 9. Environment Aspects (including any public consultation) Issues : Currently, the Río Frío plant meets the normative requirements established by Article 72 of the Law 1594 of This law regulates the percentage of removal of suspended solids and BOD. The CDM project will widely surpass the requirements of the law and will also reduce the discharge of reactive forms of nitrogen (NH4+, N-Norg, not currently regulated) which can cause considerable impacts on receptive water bodies and contribute to N20 emissions. The quality of the river is expected to improve. A detailed environmental impact assessment has been completed. The report concludes that are no major adverse environmental impacts. Manageable impacts. mostly during construction include disposal of debris and routing of limited flows during limited plan closures. Both will be addressed through the environmental management plan and sound construction practices. Further, the Environmental Impact Assessment (EIA) confirms the benefits that are expected from improved effluent quality resulting from the project. An EIA summary is attached as Annex List of factual technical documents: Review of N2O emissions from wastewater treatment plants. CDMB, 2003 PIN PCN

6 6 11. Contact Point: Task Manager Walter Vergara The World Bank 1818 H Street, NW Washington D.C Telephone: Fax: 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C Telephone: (202) Fax: (202) Web: Note: This is information on an evolving project. Certain components may not be necessarily included in the final project.