Document of
The World Bank
Report No: 80957-TH
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED GrANT
FROM THE OZONE PROJECT TRUST FUND OF THE MULTILATERAL FUND
FOR THE IMPLEMENTATION OF THE MONTREAL PROTOCOL
IN THE AMOUNT OF US$23,918,707
TO THE
kINGDOM OF THAILAND
FOR A
THAILAND – HCFC PHASEOUT PROJECT
April 2, 2014
This document is being made publicly available after RVP consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information.CURRENCY EQUIVALENTS
Exchange Rate Effective September 30, 2013
Currency Unit / = / Thai Baht (THB)THB31.30 / = / US$1
FISCAL YEAR
January 1 / – / December 31ABBREVIATIONS AND ACRONYMS
AC Air Conditioning
BAU Business as Usual
BMA Bangkok Metropolitan Authority
CDP-E Country Development Partnership-Environment
CFC Chlorofluourocarbon
CO2 Carbon Dioxide
DEDE Department of Alternative energy Development and Efficiency
DIW Department of Industrial Works
DSD Department of Skill Development
EHS World Bank Environment, Health and Safety Guidelines
EMF Environment Management Framework
EMP Environment Management Plan
FM Financial Management
FTI Federation of Thai Industries
GEF Global Environment Facility
GSB Government Savings Bank
GWP Global Warming Potential
HC Hydrocarbon
HCFC Hydrochlorofluorocarbon
HFC Hydrofluorocarbon
HFO Hydrofluoroolefin
HPMP HCFC Phaseout Management Plan
HSCB Hazardous Substances Control Bureau
ICC Incremental Capital Costs
ICR Implementation Completion Report
IOC Incremental Operating Costs
IP Indigenous People
METI Ministry of Economy, Trade and Industry (Japan)
MLF Multilateral Fund for the Implementation of the Montreal Protocol
MOF Ministry of Finance
MOI Ministry of Industry
MP Montreal Protocol
MT Metric Tonnes
NESDP National Economic and Social Development Plan
ODP Ozone Depleting Potential
ODS Ozone Depleting Substances
OORG Ozone Operation Resources Group
OTF Ozone Projects Trust Fund
OVEC Office of Vocational Education Commission
PDO Project Development Objective
PIM Project Implementation Manual
PMU Project Management Unit
PU Polyurethane
RAC Refrigeration and Air Conditioning
SME Small and Medium Enterprises
SOP Series of Projects
TISB Treaties and International Strategies Bureau
TISI Thailand Industrial Standards Institute
TOR Terms of Reference
UNEP United Nations Environment Programme
Regional Vice President: / Axel van TrotsenburgCountry Director: / Ulrich Zachau
Sector Director: / John Roome
Sector Manager: / Julia Fraser
Task Team Leader: / Viraj Vithoontien
THAILAND
HCFC Phase-out Project
TABLE OF Contents
Page
I. STRATEGIC CONTEXT 1
A. Country Context 1
B. Sectoral and Institutional Context 2
C. Higher Level Objectives to which the Project Contributes 4
II. PROJECT DEVELOPMENT OBJECTIVES 5
A. PDO 5
B. Project Beneficiaries 5
C. PDO Level Results Indicators 5
III. PROJECT DESCRIPTION 6
A. Project Components 6
B. Project Financing 7
C. Series of Projects (SOP) 8
IV. IMPLEMENTATION 10
A. Institutional and Implementation Arrangements 10
B. Results Monitoring and Evaluation 11
C. Sustainability 13
V. KEY RISKS AND MITIGATION MEASURES 13
A. Risk Ratings Summary Table 13
B. Overall Risk Rating Explanation 13
VI. APPRAISAL SUMMARY 14
A. Economic and Financial Analyses 14
B. Technical 15
C. Financial Management 16
D. Procurement 16
E. Social (including Safeguards) 17
F. Environment (including Safeguards) 17
Annex 1: Results Framework and Monitoring 19
Annex 2: Detailed Project Description 22
Annex 3: Implementation Arrangements 34
Annex 4: Operational Risk Assessment Framework (ORAF) 58
Annex 5: Implementation Support Plan 62
Annex 6: Agreement Between Thailand and the Executive Committee 64
for the HCFC Phase-out Management Plan Project
Annex 7: Carbon Emission Benefits 74
PAD DATA SHEETTHAILAND
TH-HCFC PHASEOUT PROJECT
PROJECT APPRAISAL DOCUMENT
.
East Asia and Pacific Region
EASTS
.
Basic Information
Date: April 2, 2014 / Sectors: / Other Industry (90%); Central Government Administration (10%)
Country Director: / Ulrich Zachau / Themes: / Pollution Management and Environmental Health (50%); Environmental Policies and Institutions (50%)
Sector Manager/Director: / Julia M Fraser/John Roome / EA Category: / B
Project ID: / P115761
Lending Instrument: / IPF (OTF Grant)
Team Leader(s): / Viraj Vithoontien
Joint IFC:
.
Borrower: Ministry of Finance
Responsible Agency: Department of Industrial Works
Contact: / Mr. Nattapon Nattasomboon / Title: / Director General
Telephone No.: / (662) 202-4101 / Email:
.
Project Implementation Period: / Start Date: / 5/1/2014 / End Date: / 12/31/2018
Expected Effectiveness Date: / 05/1/2014
Expected Closing Date: / 12/31/2018
.
Project Financing Data(US$M)
[ ] / Loan / [X ] / Grant / [ ] / Other
[ ] / Credit / [ ] / Guarantee
For Loans/Credits/Others
Total Project Cost : / 33,824,192 / Total Bank Financing : / 23,918,707
Total Cofinancing : / 9,905,485 / Financing Gap :
.
Financing Source / Amount(US$M)
BORROWER/RECIPIENT / 9,905,485
Others Ozone Projects Trust Fund of the Multilateral Fund / 23,918,707
Financing Gap
Total / 33,824,192
.
Expected Disbursements (in USD Million)
Fiscal Year / 2014 / 2015 / 2016 / 2017 / 2018
Annual / 2.00 / 7.62 / 7.83 / 2.58 / 3.89
Cumulative / 2.00 / 9.62 / 17.45 / 20.03 / 23.92
.
Project Development Objective(s)
The project development objective is to reduce HCFC consumption in the air-conditioning and foam sectors in order to contribute to Thailand’s efforts to meet its HCFC consumption phase-out obligations under the first phase of the program (2014-2018).
The development objective of the Series of Projects (SOP) is to contribute to Thailand’s efforts to reduce its HCFC consumption in accordance with the Montreal Protocol phase-out schedule leading to a complete phaseout by 2040.
.
Components
Component Name / Cost (USD Millions)
Investment in HCFC Consumption Reduction / 30.95
Technical Assistance / .63
Project Management / 1.38
Strengthening of the National Ozone Unit / .87
.
Compliance
Policy
Does the project depart from the CAS in content or in other significant respects? / Yes / [ ] / No / [ X ]
.
Does the project require any waivers of Bank policies? / Yes / [ ] / No / [ X ]
Have these been approved by Bank management? / Yes / [ ] / No / [ ]
Is approval for any policy waiver sought from the Board? / Yes / [ ] / No / [ X ]
Does the project meet the Regional criteria for readiness for implementation? / Yes / [ X ] / No / [ ]
.
Safeguard Policies Triggered by the Project / Yes / No
Environmental Assessment OP/BP 4.01 / X
Natural Habitats OP/BP 4.04 / X
Forests OP/BP 4.36 / X
Pest Management OP 4.09 / X
Physical Cultural Resources OP/BP 4.11 / X
Indigenous Peoples OP/BP 4.10 / X
Involuntary Resettlement OP/BP 4.12 / X
Safety of Dams OP/BP 4.37 / X
Projects on International Waterways OP/BP 7.50 / X
Projects in Disputed Areas OP/BP 7.60 / X
.
Legal Covenants
Name / Recurrent / Due Date / Frequency
Other Undertakings Sch 2, Sect V, para. 1. / X / 6 months after effective date
Description of Covenant
The Recipient, through DIW, shall, and shall cause GSB to, no later than 6 months after the Effective Date, appoint independent auditors, with terms of reference acceptable to the World Bank.
Name / Recurrent / Due Date / Frequency
Withdrawal Conditions Sch 2, Sect IV, para. 1 (b). / X / Prior to Disbursement
Description of Covenant
Notwithstanding the provisions of Part A of this Section no withdrawal shall be made:. for expenditures under category 2, until DIW has appointed a financial management specialist, with terms of reference acceptable to the World Bank
Name / Recurrent / Due Date / Frequency
Withdrawal Conditions Sch 2, Sect IV, para. 1 (c). / X / Prior to Disbursement
Description of Covenant
Notwithstanding the provisions of Part A of this Section no withdrawal shall be made:. for expenditures under categories 1 and 3, until GSB has appointed a financial management specialist, with terms of reference acceptable to the World Bank
Name / Recurrent / Due Date / Frequency
Other Undertakings Sch 2, Sect V, para. 1. / X / 3 months after effective date
Description of Covenant
The Recipient, through DIW, shall, and shall cause GSB to, no later than 3 months after the Effective Date, put in place an accounting software system, with terms of reference acceptable to the World Bank.
.
Team Composition
Bank Staff
Name / Title / Specialization / Unit / UPI
Viraj Vithoontien / Sr. Environmental Specialist / Task Team Leader / EASER / 86438
Waraporn Hirunwatsiri / Environmental Specialist / Co-Task Team Leader, Environmental Safeguards / EASCS / 274260
Thanavat Junchaya / Sr. Environmental Engineer / Montreal Protocol Technical Leader / CPFIA / 148909
Mary Ellen Foley / Sr. Environmental Specialist / Montreal Protocol Expert / CPFIA / 176912
Bernardita Ledesma / Operations Analyst / Operations / EASER / 18902
Songling Yao / Sr. Social Development Specialist / Social Safeguards / EASCS / 152086
Sofia De Abreu Ferreira / Counsel / Legal / LEGEN / 399864
Sirirat Sirjaratwong / Procurement Specialist / Procurement / EASR2 / 21155
Kanitta Kaikittipoom / Trust Fund Coordinator / Operations / EACTF / 100457
Malarak Souksavat / Financial Management Analyst / Financial Management / EASFN / 157956
Isao Endo / Environmental Specialist / Climate Change / EASER / 273891
Fnu Hanny / Program Assistant / Administration / EASER / 282386
Chutima Lowattanakarn / Team Assistant / Administration / EASTF / 341000
Non Bank Staff
Name / Title / Office Phone / City
Erik Pedersen / Technical Specialist / 202 473-5877 / Washington, DC
Pipat Poopeerasupong / Technical Specialist / 6681 848-3459 / Bangkok
Wasittee Udchachone / Environmental Specialist / 6681 855-0152 / Bangkok
.
Locations
Country / First Administrative Division / Location / Planned / Actual / Comments
Thailand / Department of Industrial Works / Rama VI Road, Ratchathewi
Bangkok 10400, Thailand / X / X
Thailand / Government Savings Bank / 470 Phaholyothin Road, Phayathai
Bangkok 10400, Thailand / X / X
.
ii
I. STRATEGIC CONTEXT
1. Hydrochlorofluorocarbons (HCFCs) are ozone-depleting substances (ODS) subject to consumption and production control measures of the Montreal Protocol on substances that deplete the ozone layer. The Montreal Protocol requires developing countries (known as “Article 5” countries) like Thailand to commence the gradual phaseout of HCFC consumption and production from 2013 leading to a complete phase-out by 2040. The proposed project is the first phase in Thailand’s phaseout strategy. The project will contribute to the country’s efforts to meet its consumption reduction target of 15% from its baseline consumption level by 2018 by addressing HCFC reduction mainly in the foam and air-conditioning manufacturing sectors. The baseline consumption level defined by the Montreal Protocol is the average consumption level between 2009 and 2010. Under the HPMP Phase I, Thailand has committed to reduce its HCFC consumption to the baseline level by 2013; 10% from the baseline by 2015 and 15 % from the baseline by 2018. The baseline HCFC consumption of Thailand is 927.6 ODP (ozone depleting potential) tons
2. HCFCs are not only ozone depleting substances, but they are also high global warming gases whose global warming potential (GWP) ranges from several hundred to several thousand times that of carbon dioxide. Moreover, the conversion of various HCFC-based manufacturers to alternative, advanced technologies usually leads to improved energy efficiency, particularly in the refrigeration and air-conditioning sectors. Thus, phasing out HCFCs provides two types of potential benefits to the climate. Synergies with the climate agenda were duly recognized by the parties to the Montreal Protocol when they decided to adopt a faster HCFC phase-out schedule in 2007.
Table 1. ODP and 100-yr GWP of CFCs and HCFCs
CFC / ODP* / GWP** / HCFC / ODP* / GWP**CFC-11 / 1.0 / 4,750 / HCFC-123 / 0.02 / 77
CFC-12 / 1.0 / 10,900 / HCFC-141b / 0.11 / 780
CFC-113 / 0.8 / 6,130 / HCFC-142b / 0.065 / 2,310
CFC-114 / 1.0 / 10,000 / HCFC-22 / 0.055 / 1,810
CFC-115 / 0.6 / 7,370 / HCFC-124 / 0.02 / 609
* Ozone Depleting Potential (ODP) values from the 2006 Montreal Protocol Handbook
** Global Warming Potential (GWP) values of all chemicals are from IPCC’s Fourth Assessment Report: Climate Change 2007
A. Country Context
3. Thailand is a large importer of HCFCs, with a total of 16,890 metric tonnes of HCFCs imported in 2010. Over the last five years, six different types of HCFCs were imported for use in the foam, air-conditioning and refrigeration, servicing and solvents sectors. However, as is the case in most Article 5 countries, the two HCFCs most predominantly in use are HCFC-22 and HCFC-141b (more than 90% of the total HCFCs imported). Thailand has no production capacity for any HCFCs controlled by the Montreal Protocol.
4. The impact of the phase-out on Thailand’s economy has the potential to be significant; particularly since HCFC consumption is closely linked to the country’s important export-oriented, manufacturing base of electronics, air-conditioners, and refrigeration. Thailand is one of the largest manufacturers and exporters of residential air-conditioners (more than 10 million units a year) and this sector alone consumed more than 12,000 metric tonnes of HCFCs in 2010.
5. Because Thailand has an export-oriented economy and is sensitive to external market forces, it has, in fact, already phased out HCFC141b on its own in domestic refrigeration and eliminated a large part of HCFC-22 in cold storage. However, for other sectors, technological, economic and financial barriers have kept Thailand, particularly the local small-and-medium scale industries, from transitioning to the latest technologies, where available. This is a significant challenge to the Government of Thailand’s ability to comply with the 2013, 2015 and 2018 Montreal Protocol obligations.
B. Sectoral and Institutional Context
6. Thailand received funding from the Multilateral Fund for the Implementation of the Montreal Protocol (MLF) to prepare an HCFC Phase-out Management Plan (HPMP), which provides a detailed picture of HCFC consumption and uses by substance and product. The HPMP also presents patterns of growth and identifies priority sectors to receive MLF funding in order for Thailand to achieve its reduction targets for Stage 1 (2013, 2015, and 2018).