REPUBLIC OF AZERBAIJAN
Agricultural Development and Credit Project-II
Environmental Management Plan
and
Environmental Guidelines
for
Project Activities
April 8, 2006
TABLE OF CONTENTS
ABBREVIATIONS AND ACRONYMS
1.SUMMARY and Background
Environmental assessment – purpose
The Project
ADCP-II Project components
Project Area
Project Environmental Aspects
Agriculture related Environmental Issues
Responsibility
2. POLICY CONTEXT
2.1 General
2.2 The World Bank Safeguards Policy
2.3 Environmental Assessment
2.4 Project Environmental Category
2.5 Azerbaijan Environmental Legislation and Procedures
2.5.1 International Cooperation
2.5.2 EIA Procedures
2.6 Public Involvement
3. ENVIRONMENTAL ASSESSMENT
3.1 General
3.2 Potential Benefits and Impacts –Agricultural Enterprises
3.3 Potential Benefits and Impacts – Farm Inputs
3.4 Potential Cumulative Impacts
3.5 Mitigation
3.6 Environmental Risk
4. ENVIRONMENTAL MANAGEMENT GUIDELINES
4.1 General
4.2 Management
4.3 Mitigation
4.4 Monitoring
4.4.1 Monitoring plan
4.4.2 Environmental monitoring of long term issues
5. ENVIRONMENTAL REVIEW PROCEDURE GUIDELINES
5.1 Overview
5.2. Environmental screening for small credit applications
5.3. Environmental screening for medium credit applications
5.4. Environmental screening for CGS proposals
5.5 Sub-project Categories
5.6. Secondary Screening
5.7. Rejection of sub-project
5.8. Environmental Monitoring
5.9. Reporting by the PFIs and the PIU
Annexes
Annex 1Environmental Categories
Annex 2Environmental Screening Checklist Forms
Annex 3Environmental Mitigation
Annex 4Accept/Reject Decision Making
Annex 5Environmental Monitoring
Annex 6Public Consultations for Mid-Size Credits and Grants
Annex 7Summary of Stakeholder Meeting on EMP
Annex 8List of Pesticides registered in Azerbaijan
ABBREVIATIONS AND ACRONYMS
ACUA / Azerbaijan Credit Union AssociationADCP I / Agricultural Development and Credit Project-I
ADCP II / Agricultural Development and Credit Project-II
APL / Adaptable Program Loan
AzRIP / Azerbaijan Rural Investment Project
BG / Borrowers Group
BOD / Biological Oxygen Demand (liquid effluent)
CAS / Country Assistance Strategy
CGS / Competitive Grant Scheme
CIA / Credit Implementing Agency
COD / Chemical Oxygen Demand (liquid effluent)
CU / Credit Union
dB / Decibels (noise level)
DoSEE / Department of State Ecological Expertise
EA / Environmental Assessment
EIA / Environmental Impact Assessment
EIAR / Environmental Impact Assessment Report
EMP / Environmental Management Plan
ER / Environmental Review
GOA / Government of Azerbaijan
IAC / Information and AdvisoryCenter
IBRD / International Bank for Reconstruction and Development
IEC / Important Environmental Components
IPM / Integrated Pest Management
LEA / Limited Environmental Assessment
MENR / Ministry of Ecology and Natural Resources
MOA / Ministry of Agriculture
NGO / Non-Government Organization
PFI / Participating Financial Institutions
PID / Project Information Document
pH / Acidy/Alkalinity : pH 7.0 is neutral
PIU / Project Implementation Unit
RAC / RegionalAdvisoryCenter
SAAC / State Agency for Agricultural Credits
SEE / State Ecological Expertise
SPRD / State Program for Regional Development
SS or SP / Suspended solids in air : Suspended Particulates (dust) in air
SVS / State Veterinary Service
TS / Total Solids in a liquid effluent (dissolved and suspended)
VFU / Veterinary Field Unit
WB / World Bank
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1.SUMMARY and Background
Environmental assessment – purpose
The objective of the Environmental Management Plan (EMP) for the Agricultural Development and Credit Project-II (ADCP II) is to help ensure that the project proposed for World Bank financing is environmentally sound and sustainable and that the project interventions are in compliance with the requirements of the legislation of the Republic of Azerbaijan.
ADCP II has been assigned environmental category FI (Financial Intermediary) since it involves on-lending rural financial institutions, credit line to agro-processing and also providing granting of funds for microprojects. It is a requirement of the Bank and Azerbaijan legislation that for a FY category project, all microprojects should be verified that they are in compliance with the Azerbaijan environmental laws and regulations and are consistent with World Bank policy (OP 4.01) and procedures on environmental assessment. As in the case of economic, financial, institutional and engineering analysis, Environmental Assessment is a part of project preparation. The Environmental Management Plan provides the framework to address environmental considerations of activities financed under the ADCP II. This document provides the framework to address environmental considerations of activities financed under the ADCPII.
The Project
The main objective of the project ADCPII is to enhance the access of farmers and small and medium rural enterprises to rural business and agricultural support services including financial, advisory and veterinary services and to stimulate market-oriented investments in rural areas.
The objectives of the project is to improve the ability of Azerbaijan’s farmers and rural entrepreneurs to access markets and increase employment opportunities by stimulating market-oriented private and public investments in rural areas.
At the time of this environmental assessment the Project was in the preparation phase and although the following description of the Project in terms of Project components is not likely to change in any significant manner before Project approval, some of the details of the components may require modification.
The project will build on ADCP-I’s achievements by: (i) strengthening the credit union system established under ADCPI and stimulating commercial financial services suited for agricultural businesses; (ii) expanding the outreach of the rural advisory and veterinary services established under ADCP-I; (iii) modernizing selected agricultural research institutions; and (iv) assisting producers and processors in marketing and improved product quality. The regional expansion of the immovable property registration pilot of ADCP-I the first phase would be handled under a separate Real Estate Registration and Cadastre Improvement Project. The main project beneficiaries comprise individual farmers, farmer groups, rural micro-entrepreneurs, and the small to medium agro-processing sector.
The major focus of the project is to fill the gap between rural producers and higher end markets by assisting value-added business initiatives. Although many agricultural producers are partly semi-subsistence in nature, there is evidence that farmers and processors are moving towards vertical integration down the supply chain. There is an increasing demand from individual farmers, producer associations, and small and medium enterprises for support services in agricultural production, marketing, business advice, veterinary support and finance.
The Project would work on the structures established under ADCP-I, and would build on the experience of the ongoing Bank-funded rural projects.
ADCP II Project components
The project consists of two main components addressing critical support needs at the rural business and agro-processor level, and at the farm level.
Component I - Agricultural Business Services
Component Objective: The objective is to support rural businesses to improve the linkages between their production and markets. The component aims to develop efficient linkages and contractual relationships between producers and processors, and to facilitate investments in market opportunities through enhanced access to financial services and targeted business support.
Component Activities: The component would support the further development of farmers, small rural businesses and agro-processors by: (a) increasing the availability of small rural financial services by strengthening and broadening the credit union outreach; (b) expanding rural financial services such as credit for working capital requirements, long-term credit for investment purposes, and leasing programs for processing and agricultural equipment; (c) enhancing the efficiency of rural markets by introducing innovative mechanisms that encourage sustainable linkages between developing small-scale rural businesses and agro-processors with farmers, associations and groups; and (d) strengthening ruralbusiness, market information and promotion services offered through the rural advisory system.
Component II – Agricultural Support Services
Component Objective: The objective of the component is to enable farmers to improve their productivity and quality of production by expanding the outreach of the advisory system, strengthening the provision of private veterinary services, and improving access to adapted technologies.
Component Activities: Three main sub-components have been identified: (a) supporting the further development of an effective information and advisory system that can provide farmers and other rural entrepreneurs with appropriate knowledge and skills to improve their productivity, quality of production, management and marketing; (b) assisting livestock owners to improve animal production through enhanced access to quality-assured veterinary and husbandry services throughout the country, and by strengthening the disease surveillance and preparedness functions of the State Veterinary Service (SVS); and (c) improving the capacity of selected research institutions to provide adapted technologies and critical information to advisory staff and producers.
Project Area
The project will operate in rural areas throughout the country. The financialservices to provide small and medium size credits to farmers and agribusinesses,and advisory and veterinary services will be available country-wide. The Competitive Grant Scheme (CGS) wouldalso be extended over the whole of Azerbaijan during the course of the project. However, it would initially focus in the first year on two regions in order to test and streamline the operational procedures.
Project Environmental Aspects
The project will benefit from the institutional capacity developed under ADCPI which stressed awareness of safeguard policies. The project’s information and advisory service activities will continue to promote the adoption of improved and environmentally sound technologies, provide training and advice on integrated pest management techniques as well as on improved use and handling of fertilizer and agro-chemicals. A large number of trainings were provided during ADCPI to all project beneficiaries including borrowers from the line of credit under ADCPI. It is planned to continue this practice under ADCPII.
The rural finance activities related to Borrowers Groups (BGs) and Credit Unions (CUs) will deal with fairly small loans which are expected to be used for agricultural inputs and implements, equipment and trading activities with a minimal environmental impact. Members of CUs involved in lending will also be provided with training on the potential environmental impact of sub-projects and on mitigation measures. The most common end-uses of loans have been for acquisition of quality feedstuff for livestock, and production of wheat, potato, vegetables and other crops. These activities are closely linked to advisory service activities and borrowers have therefore usually received some guidance on their usage.
ADCP-II is also introducing a credit line and leasing services through commercial banks and leasing companies to medium-scale agro-processors and businesses. It is likely that the areas of investments can be narrowed down to a couple of industries – i.e. fruit and vegetable production.
The participating financial institutions (PFIs) for ADCP-II are the commercial banks and leasing companies for the mid-size credit line and leasing services and the Credit Implementing Agency (CIA) for small credits to credit unions and borrowers groups.
The Competitive Grant Scheme will promote linkages between farmers and processors and address critical bottlenecks in the supply chain. Grants would be provided to farmer groups and processors in the areas of market innovations, improved processing and storage, and introduction of better business practices. Each grant will be supported by a detailed business proposal that will allow a review of its environmental impact. The environmental assessment would make some suggestions on how such a review can be streamlined.
Agriculture related Environmental Issues
Azerbaijan has a number of environmental issues that should be addressed and many of these are either directly or indirectly related to agriculture and as such are relevant to this Project. A number of environmental problems are as a result of past and current agricultural activities and as such the Project must take care in not only exacerbating the situation but also in promoting activities that will be environmentally enhancing and to overcome some of these past mistakes.
Agricultural and rural enterprises can also indirectly result in negative environmental effects. The issues are listed below, with causes, but in no particular order of importance:
•Groundwater pollution – chemicals including agricultural
•Surface water pollution – chemicals including agricultural
•Water losses – irrigation systems
•Soil salinization and alkalination – irrigation systems
•Water logging – irrigation systems (drainage)
•Fisheries destruction – over fishing, pollution, and loss of breeding habitat
•Biodiversity losses (including pressure on relatives of domestic crops, fruit trees and medicinal plants) – grazing and deforestation
•Soil erosion – overgrazing and deforestation
•Soil fertility losses – cultivation practices
•Land contamination – industrial wastes
•Environmental health and hazards – food contamination and exposure to pollutants
In addition to these issues there are others related to agro-processing and other agribusiness enterprises, major concerns relate to effluent discharges and their impact on water quality, water use, disturbance of significant sites for biodiversity and cultural protection, and general health and safety issues. A specific concern is the introduction of alien species and their effect on biodiversity, especially endemic species.
Environmental and safeguard issues are foreseen mainly with respect to the investments in small and medium agro-processing enterprises likely to be financed under the project through credit lines from commercial banks.
Agro-processors would have potential environmental impacts from solid and liquid waste emissions, smoke, airborne particles and gaseous discharges, transport and machinery noise. These would need to be mitigated to National Standards and EMP guidelines by incorporating the necessary controls and treatment systems in the design and, during procurement, by specifying equipment and processes that meet these standards. Processors would also need to incorporate National safety measures for personnel in the vicinity of operating machinery.
The project is not expected to produce major environmental impacts.However, some investment from the loan proceed may involve environmental issues related to, for example, the use and storage of agricultural chemicals, waste management at farms, agro-enterprises, and location or site preparation for facilities or agricultural techniques.
Responsibility
During fulfillment of some project it is anticipated that there would be some impacts to the soil, flora and fauna, earth structure and social environment through discharge of solid and liquid type wastes to environment, emissions of harmful gases to atmosphere and other effects. These impacts should be mitigated on the basis of existing standards of Azerbaijan as described in the EMP. This process besides common requirements also includes additional ecological requirements to projects to be formulated before funding of projects and envisages on the basis of relevant standards, control of purchase of some equipment, application of technologies and process of fulfillment of the project.
The package containing the list of requirements for loan or grant applications should also include requirement for environmental assessment (EA) of ecological safety of applied for project. Depending from results of initial ecological selection this may require no any EA (e.g. trade, rural advisory services). Depending of features of impacts of the project to environment the Environmental Review (ER), Limited Environmental Assessment (LEA)or Environmental Impact Assessment (EIA) would be added to application package
Sub-projects financed through project credit lines must be in compliance with the environmental laws and regulations of Azerbaijan and with World Bank safeguard policies. Buildings, equipment and processes; production, storage and marketing technologies; production and processing materials; construction sites and factories, and working environments must all comply with the relevant environmental laws.
Environmental risk management of sub-loans should become a part of sub-loan and micro-loan appraisal by the project’s participating financial institutions. Loan officers should be able to verify that sub-loan and micro-loan applications are in compliance with Azerbaijan laws and regulations and will not cause enduring harm to the Azerbaijan natural environment.
The proposals for investment in private-sector agri-business development under the project have the potential for environmental pollution, and systems need to be in place to ensure that all proposals adequately protect the environment. The Bank environmental guidelines require financial intermediaries to undertake environmental screening of the sub-project:
a) To check for potential environmental problems against a checklist, and to categorize and quantify the risk against pre-determined charts.
b) To call for an environmental impact assessment for any proposal that indicates more than minimal levels of risk.
It is envisaged that the loan officer (or an environmental specialist) will make decisions on environmental and safeguard compliance, providing that there are no complex environmental issues involved in the proposal.
In the case of complex environmental issues that are beyond the experience of the loan officer, the PFI will request assistance from the PIU to advise the PFIs on the scope of an environmental mitigation plan for the application to the PFI. In any case of doubt, the PFI should consult with the PIU.
2. POLICY CONTEXT
2.1 General
The Project has not been finalized at the stage of environmental assessment although significant changes to the concept and the current description of components are not anticipated.
The challenge in conducting an EA for the Project is that there are no location specifics for the Project (the intent is that the Project and the credit available through the Project will be available country wide). The other challenge is to attempt to determine as best as possible the various activities that individual farmers, agribusiness (including agro-processors) will wish to pursue in terms of loan proposals. As described in the following sections, a list of activities has been prepared based on previous similar studies and on discussions with stakeholders. It should be noted, however, that this list may not be comprehensive since it is difficult to predict all activities that may be proposed for financial support. At the same time the list may well contain activities that will not be pursued by potential borrowers.