[sustran] LONG: GEF Transport Paper: Update

[Christopher Zegras]

Dear Walter (and others), 

***This is a little long for those of you not interested in the GEF
Transport Conversation***

Walter, thanks for your excellent groundwork on this issue.  I think your
proposed strategy for letter drafting is good.  I also very much like your
idea of a consultation meeting during TRB week.  I would very much like to
participate in that.  
Remember in trying to schedule something that we have the NMT Committee
meetings and related sessions, plus the Poverty Workshop at the Bank.  I
will cc: this e-mail to Tommy Semans at U.S. Treasury, as their
participation would be very helpful.

As you mention, it is very important that all of us who want to get involved
familiarize ourselves as much as possible with the GEF.  There is some
decent information at the GEF web site:

http://www.worldbank.org/html/gef/

which offers some institutional history and answers to some basic questions
(I've posted the GEF introduction at the end of this very long e-mail).
Amazingly enough, the home-page does not seem to have a copy of the GEF
Operational Strategy (O.S.) posted.  All I have down here is a copy of the
Revised Draft Operational Strategy from Sept. 29, 1995.  I assume that some
close variation of this O.S. is currently guiding the GEF, since the
currently relevant O.S. was adopted by the GEF Council in October 1995.

There are some important points to consider for the GEF, in reference to why
Mr. Ken King highlighted to Walter "that in terms of what the GEF ultimately
does, it will have to fit closely within the confines of overall GEF
objectives and criteria, and that these criteria have something to do with
the currently limited nature of the draft's recommendations."  Overall GEF
strategy stresses activities which should:
1. be consistent with national priorities, 
2. ensure sustainability of global environmental benefits,
3. reduce the risk caused by uncertainty, 
4. complement traditional development funding, 
5. facilitate effective responses by other entitities to address global
envt. issues.

Point 4 is important, since it is here where the concept of INCREMENTAL
COSTS is raised. "The GEF provides new and additional grant and concessional
funding to meet the agreed incremental costs of measures to achieve agreed
global environmental benefits."  

****From what I understand, this basically means that the GEF will only
provide grants that cover the additional costs of a project to meet global
environmental goals.  For example, if an electric bus project in Santiago de
Chile were to qualify for GEF financing, one would first have to net out the
local environmental benefits (i.e., reduced air and noise pollution) before
applying for a GEF grant.  It is emphasized that the GEF should not be
substitutes for regular sources of development finance. 

I think that these clauses are probably what are causing the STAP to be very
restrictive in their transport recommendations.  Most of what we would
probably want the GEF to finance in transport (public transport
prioritization, transport-efficient land development, NMT, road pricing,
etc.), it could be argued, do not signify any "incremental costs" (i.e., the
local development and environmental benefits should more than make these
competitive).

However, when one looks beyond the general strategy and into the specific
recommendations for climate change (the GEF operations area where transport
operations fall), there seems to be ample room for the GEF to be very
creative in transportation.  For example, under Long-term measures are
included two strategies:
1. Removing implementation barriers for technologies.  Here is included
activities such as: building endogenous capacity, improving public
awareness, and demonstrating and disseminating technologies and measures.  
****Show me a developing or developed country where such activities in
transport would not have major effect on transport emissions.

Barriers mentioned include: price distortions, regulatory barriers and
biases, lack of information, insufficient management capacity, inability to
analyze non-traditional projects, high transaction costs, high initial
costs, appropriation effects (investment benefits cannot be recovered by the
agent that bears costs), etc. 
****This is nearly a picture perfect listing of why practically nothing
innovative ever occurs in urban transportation.  The GEF could do wonders
simply exposing price distortions in the transport market and implementing
measures to overcome them. 

2.  Reducing the costs of promising technology.  
****Here is where the tech. focus of the STAP is probably justified.  But
even here, the STAP has probably been a bit tunnel visioned.  The most
promising zero emission transport technology is non-motorized and this
suffers from serious cost barriers: i.e., poor people can't afford to access
these vehicles (lack of credit) and all users suffer from high real and
perceived user costs (i.e., travel distances are too long and the unsafe,
unhealthy, and unpleasant conditions often afflicting potential NMT users
discourage use).  The GEF could reduce these costs with "incremental"
funding in traffic calming, neo-traditional development, etc. etc. 

For a strategy to deal with transportation, it is useful to look at the
Operational Program for energy efficiency as a guide.  After all, most
energy efficiency measures are "win-win," which should make it difficult for
the GEF to rationalize activity in this arena (i.e., there is no
"incremental cost").  Nonetheless, the GEF defines the incremental cost of
energy efficiency as the "costs of removing the barriers to energy-efficient
technologies."  "Measures aimed at removing the barriers to implementation
will include assessment and analysis, information dissemination and
awareness building, institutional reform and strengthening, policy
adjustments, planning, and legislative and regulatory measures."   
****Again, this is a perfect listing of what measures should be undertaken
to improve, for example, urban transportation.

The O.S. goes on to list needed steps for barrier removal in
energy-efficiency, which could simply be transferred to the transportation
sector:
1.   Assess the economic scope for energy conservation and energy-efficient
technologies and programs whose implementation is blocked by barriers.
****i.e., road pricing.

2. Estimate the contribution that such projects would make to reducing GHGs.
****i.e., developing appropriate models.

3. Identify all barriers, particularly energy pricing distortions.
****substitute transport for energy

etc. etc. 


Drawing from the OPERATIONAL PROGRAM NUMBER 5, REMOVAL OF BARRIERS TO ENERGY
EFFICIENCY
AND ENERGY CONSERVATION, we find, at the risk of redundancy, almost a cookie
cutter strategy for transportation:

"GEF assistance will provide more sustainable benefits in those markets
where severe energy price and other distortions do not tilt the playing
field against energy efficiency and conservation.  A macroeconomic and
policy environment that allows and encourages fair competition is desirable
for removing barriers.

Each of these measures require a different mix of the following standard GEF
modalities:

(a) targeted research (e.g., adaptation to local conditions);
(b) capacity building (e.g., financial evaluation);
(c) institutional strengthening ( e.g., regulatory framework);
(d) investments (e.g., demonstration projects); and
(e) training (e.g., to operate, maintain demonstration sites

Lack of information
Lack of trained personnel or technical or managerial expertise
Below long-run marginal cost pricing and other price distortions
Regulatory biases or absence
High transaction costs
High initial capital costs or Lack of access to credit
High user discount rates
Mismatch of the incidence of investment costs and energy savings
Higher perceived risks of the more-efficient technology"

If this type of strategy was applied to transportation, it would be
IMPOSSIBLE to limit GEF activities to a fuel alternative fuel options. 

It is also VERY IMPORTANT that the GEF energy efficiency operational program
stresses public participation:

"PUBLIC INVOLVEMENT

5.22	One of ten basic operational principles of the GEF is that its projects
provide for consultation with, and participation as appropriate of, the
beneficiaries and affected groups of people.  User participation, therefore,
is envisaged for all projects. In many instances, the direct participants in
projects in this Operational Program will be industries and parastatal
organizations.  In projects dealing with energy efficiency in rural areas,
public participation of affected beneficiaries will not only be appropriate,
but also essential for the success of the project.  The GEF Council approved
a paper on Public Involvement in GEF-Financed Projects that defines policies
for information dissemination, consultation, and stakeholder participation
in projects funded by the GEF."
  

Introduction to the Global Environment Facility (GEF) 

The GEF provides grants and concessional funding to recipient countries for
projects and programs that protect the global environment and promote
sustainable economic growth. 

The Facility, originally set up as a pilot program in 1991, was restructured
and replenished with over US$ 2 billion in 1994, to cover the agreed
incremental costs of activities that benefit the global environment in four
focal areas: climate change; biological diversity; international waters; and
stratospheric ozone. Activities concerning land degradation, primarily
desertification and deforestation, as they relate to the four focal areas,
are also eligible for funding. Both the Framework Convention on Climate
Change and the Convention on Biological Diversity have designated the GEF as
their funding mechanism on an interim basis. 

GEF projects and programs are managed through three implementing agencies:
the UN
Development Programme (UNDP), the UN Environment Programme (UNEP)and the World
Bank. The GEF Secretariat, which is functionally independent from the three
implementing
agencies, reports to and services the Council and Assembly of the GEF. 

The GEF is striving for universal participation and currently 150 countries
are participants. Countries may be eligible for GEF funds in one of two
ways: (1) if they are eligible for financial assistance through the
financial mechanism of either the Climate Change Convention or the
Convention on Biological Diversity; or (2) if they are eligible to borrow
from the World Bank (IBRD and/or IDA) or receive technical assistance grants
from UNDP through a Country Programme. A country must be a party to the
Climate Change Convention or the Convention of Biological Diversity to
receive funds from the GEF in the relevant focal area. 

GEF projects must be country driven, incorporate consultation with local
communities and, where appropriate, involve non-governmental organizations
in project implementation. For more information, please see the Questions
and Answers at this site. For detailed GEF project information, please see
the Quarterly Operational Report. You can also link with the implementing
agencies servers to access GEF project documents, and/or to obtain more
information on GEF operations. 

For more information - or for hard copies of the documents on the GEF Server
- please contact: 

The GEF Secretariat 
1818 H Street, NW 
Washington D.C. 20433 
USA 
Tel: (202) 473 8324 
Fax: (202) 522 3240 or 522 3245 
 Christopher Zegras       http://www.iiec.org                 /\   /^\
 Instituto Internacional para la Conservacion de Energia /^\ /_o\ /   \
 General Flores 150, Providencia, Santiago, CHILE       /^^^/_\< /^^^^^\
 Tel: (56 2) 236 9232 Fax: 236 9233                    /   (*)/(*)      \