Ulaanbaatar Clean Air Project

Mongolia

Safeguards Report

October 18, 2011 Ulaanbaatar

Prepared by

Second Ulaanbaatar Services Project

Project Management Unit (USIP2 PMU)

Table of Contents

Background

Policy and Legal References

I.Introduction

II.Safeguards Documentation-Overview

A. Good Engineering Practices (GEP) for the Operation of the Stove Emission and Efficiency Testing Laboratory, and Stove Assistance Development Center

B. Guidelines on good practices and precautions regarding herbicides/pesticides use

C. Rapid assessment of environmental impacts of domestic production of stoves

D. Social impacts associated with import vs. domestic production of stoves

E. Plan for recycling of bought back stoves

III.Recommended Elements in the TORs for the Feasibility Studies Subcomponents for Environment/Safeguard Aspects

A. City Greening

B. Dust and SO2 Emissions from CHP 2, 3 and 4 and Dust Emissions from Ash Ponds

C. District Heating

IV.Institutional Arrangements for Agreements for Safeguards Implementation

ANNEXES

Annex A: Good Engineering Practices (GEP) for the operation of the Stove Emission and Efficiency Testing Laboratory, and Stove Assistance Development Center

Annex B: Guidelines for the Safe Use and Management of Pesticides

Annex C: Rapid Assessment of Stove Production and Disposal Chain

Annex D: Due Diligence Evaluation Darkhan Metallurgical Plant (DMP)

Annex E:Rapid Social Impacts Assessment: UBCAP Support for Imported versus Domestically Produced Improved Stoves

Background

Mongolia’s culture, history and contemporary development challenges are rooted in the country’s geography and extreme climate. Landlocked, and located in the heart of central Eurasia, Mongol’s climate is sunny, arid and cold. Wintertime temperatures regularly fall below -30 degrees Celsius, making Ulaanbaatar the coldest capital city in the world. Growing seasons are short, natural productivity is low, and arable land constitutes only 1 percent of the total area. Historically, this environment supported widely dispersed families dependent on herding sheep, cattle and horses across the steppe. Today, it is the least densely populated country in the world, with a population of 2.6 million spread over a surface area of 1.6 million km2.

Population and economic growth have become increasingly concentrated in the capital city of Ulaanbaatar. Ulaanbaatar’s official population has swollen to over 1.2 million, or over 40% of the country’s population since the start of economic transition in the 1990s. It is the political, industrial, and economic center of the country: it generates 65% of the country’s GDP, 85% of power generation, and 50% of investments. Most of Ulaanbaatar’s in-migration settle in peri-urban, “ger areas”, with severely under-provided urban public services such as water, sanitation and heat supply.[1]

Ulaanbaatar, remains nearly unlivable in certain times in winter due to severe air pollution. Particulate Matter (PM), which in its fine form is inhaled and causes major health damage, is severe. Among all measurements taken in a recent World Bank air pollution study, the worst recorded annual average concentration was more than 10 times higher than the Mongolian Air Quality Standard (AQS) for PM10 and 25 times higher than the Mongolian AQS for PM2.5 and Mongolian AQS is already 2-3 times higher than WHP standards.[2] As shown in Table 1, concentrations in Ger Areas, where the vast majority of the urban poor live, are more severe than in the city centre. The extreme seasonal variability in air quality – the summer months are relatively clean and wintertime air quality some of the worst recorded anywhere – reduce annual average concentrations and divert attention of the fact that Ulaanbaatar is the coldest capital of the world, and it is one of its most polluted.

Table 1: Average annual concentrations of particulate matter in UB

Area / PM10
µg/m3 / PM2.5
µg/m3 / Exceedance: Ratio to AQSs
Mongolian: / WHO
Central city areas / 150–250 / 75–150 / 3–6 / 7–15
Ger areas / 350–700 / 200–350 / 7–14 / 17–35

Air pollution is a manifestation of insufficient policy responses to a complex set of urban development issues exacerbated from an ever-growing peri-urban population. The influx of migrants in recent years has resulted in the rapid expansion of mainly low-income ger areas, covering hillsides around the city and now accounting for 60 percent of the city’s population. These migrants live in their nomadic tents, called ger[3], or self-constructed, poorly insulated wood or brick detached houses. Devoid of public services, the ger area population struggles to cover its daily need for water, sanitation, and heating fuels.

The key contributors to ambient PM concentrations in winter are individual household coal-fired heating appliances (stoves and small furnaces), and dust is another year-round contributor. These contribute about 62% of the estimated annual average ambient PM10 concentrations and 65% of the PM2.5 average concentrations. About 90 percent of an estimated 175,000 households use simple, coal-fired, low-cost steel stoves in their gers or stoves connected to heating walls in their homes. About 10 percent use low pressure boilers[4] – LPBs, consisting of water tanks/furnaces supplying simple, low pressure radiator systems. Dust from unpaved roads and lack of greenery contributes about 14% of PM10 and 4% of PM2.5. About 85% of the coal used by households is sourced from close-by artisanal mines and the rest come from larger coal mines further away. The coal is purchased by 2-3 tonne truck once a season or mostly by 6kg - 9kg bags on a daily basis throughout the ger area in winter. Most stoves are manufactured by artisanal producers and sold either from their shop or in markets during the stove buying season from around August – October.

The main sources of ground-level air pollution are coal and wood burning for heating of individual residences in ger areas and the suspension of dry dust from open soil surfaces and roads, representing 75–95 percent of PM concentrations.[5] Other significant sources of ground-level PM concentrations are emissions from power plants, heat-only boilers (HOBs), and car and vehicle exhaust.

Policy and Legal References

Government of Mongolia

Law 1: Reducing Capital City Air Pollution
Date: February 10,2011
Purpose: to coordinate all measures related to air pollution reduction in the capital city.
Key activities: introduce special incentives for citizens who contribute to reduction of air pollution
Key players: Parliament - ensure implementation of law and approve appropriate state funding
President- establish a National committee to coordinate different measures to reduce air pollution;
Cabinet: prepare annual workplan for reducing airpollution and report to Parliament annually;
UB parliament: approve annual budget for actions for reducing air pollution
Citizen and entities: obey law; no use of raw coal and other air polluting substances; use LPG and other sources of clean fuel
Law2: Environmental Impact Assessment Law:
Date: January 22,1998
Purpose: regulate issues related to preserve environment; prevent from possible ecological imbalance; regulate matters on use of natural resources; assess project's potential impact; and use for decision making whether allow or decline project.
Each project will have two level EIA:i) general and ii)detailed assessment based on the scale
Key players: project proponent and EIA company which has special permission to carry out detailed EIA.
Law 3: Law On Toxic and Hazardous Chemical Substances
Date: May 25,2006
Purpose: regulate issues related importing, exporting, transferring through Mongolia, or producing, storage, sale, use, dispose and monitoring over toxic and hazardous chemical substance.
Term: pesticide is considered chemical substance or composition that used for preventing from plant and animal decease.
Article 13 specifically regulates issues related use of chemical substances.
Law4: Household and Industrial Waste:
Date: November 28, 2008
Purpose: to prevent or reduce potential pollution to human health and environment; collect, transport, storage, landfill or recycling as raw material household and industrial waste
Stakeholders: parliament; central government organization; local parliament and governor office; people and entity
Chapter 3, specifically regulates issues related to collection, transport, landfill and recycling of wastes.

Law 5: Air Pollution Fee
Date: June24,2010
Purpose: Regulate issues related imposing fee to air polluters and payment scheme.
Key activities: main payers of pollution fee are: raw coal extractors; organic observing producers and importer; owner of vehicle; large scale stationary air polluting locations and citizen and entities are using air polluting devices.
Article 7 states level fee.
Law 6: Labor Safety and Health.
Date:May 22,2008
Purpose: defining state policy regarding worker safety and health; ensure all standards are set and enforced in the workplace safety and health; ensure worker environment is safe and healthy.

Key players: Parliament; government; central government agency responsible for labor; national committee on worker safety and health; local level parliament; local governor; officer responsible for safety and health; employee and individuals or workers.

Joint Order: Minister of Environment and Tourism, Ministry of Food and Agriculture and Light Industry, and Ministry of Health

Date: 23 March,2011
Title: Approving list of pesticide for agriculture plant protection and its level of use; and list of fertilizers for agriculture production in Mongolia.
The State Secretary of each ministry will monitor implementation of this order.

The World Bank

Environmental Assessment (OP 4.01)

Purpose:The World Bank has developed a series ofsafeguard policiesto help staff promote socially and environmentally sustainable approaches to development as well as to ensure that Bank operations do not harm people and the environment.

The policy on Environmental Assessment (EA) is the overreaching safeguard policy and all other safeguard policies fall within the scope of EA.

The World Bank conducts Environmental Assessments (EA) of each proposed investment loan to determine the appropriate extent and type of environmental impact analysis to be undertaken, and whether or not the project may trigger other safeguard policies. The Bank classifies the proposed project into one of four categories (A, B, C, and FI) depending on the type, location, sensitivity, and scale of the project and the nature and magnitude of its potential environmental impacts.

The government is responsible for the assessments required by theSafeguard Policies while the World Bank is responsible for overall compliance with these policies

Environment Health and Safety (EHS) Guidelines

Purpose:The EHS Guidelines are technical reference documents with general and industry-specific examples of Good International Industry Practice (GIIP).

Content: EHS Guidelines as a technical source of information during project appraisal activities. The EHS Guidelines contain the performance levels and measures that are normally acceptable to the World Bank Group and are generally considered to be achievable in new facilities at reasonable costs by existing technology. For IFC-financed projects, application of the EHS Guidelines to existing facilities may involve the establishment of site-specific targets with an appropriate timetable for achieving them.

I.Introduction

The development objective (PDO) of the proposed project is to connect consumers in ger areas of Ulaanbaatar to heating services producing less particulate matter emissions and to develop selected medium-term particulate matter abatement measures in Ulaanbaatar.

To achieve these objectives, the proposed project was designed with a number of subcomponentsto address immediate and medium term abatement measures needed to reduce particulate emissions in the city of Ulaanbataar. These reductions, in turn, should lead to improvements in the cities’ air quality with respect to dust.

The proposed project would comprise the following components: (A) Ger Area Particulate Matter Mitigation, (B) Particulate Matter Mitigation in Central Ulaanbaatar; (C) Public Awareness Raising, Program Coordination and Project Management.

Safeguard aspects of the proposed project are focused on components (A) and (B) which are described in greater detail below:

Component A. Ger Area Particulate Matter Mitigation. (total estimated component cost, US$17.1 million, indicative IDA financing $8.9 million). The objective of this component is to implement a stove replacement program and a low pressure boiler program, by providing capital subsidies, financed from the IDA credit, to households to partially bring down the capital costs of eligible stoves and low pressure boilers. This component aims to complement the US MCA stove replacement program. The UBCAP will cover those stoves and low pressure boilers market segments and households uncovered by MCA and will provide additional market development support needed to help sustain the clean stove technology market.

The component will finance: (a) capital subsidies (subgrants) for: (1) stoves and stoves for heating walls if they cannot be effectively covered by other sources; (2) low pressure boilers (provided they do not crowd out the replacement program); and (3) old stove buy-back; (b) additional equipment, materials, technical staff, advisory support and operating expenses for the Stove Emissions and Efficiency Testing (SEET) laboratory, which will test products for emissions performance and verify performance of stoves in use; (d) technical advisory support: (i) to design adjustments to the stove replacement program for accommodating low pressure boilers; (ii) to stove manufacturers for new product development and quality control; (iii0 monitoring and evaluation; (iv) to the Standards Inspectoratefor the development of appropriate heating appliance standards and enforcement mechanisms; (e) training and study tours for knowledge exchange.

Component B: Central Ulaanbaatar Particulate Matter Mitigation(total estimated component cost US$ 2.7 million, indicative IDA financing $2.7 million.) The objective of this component is to help the government prepare action plans for priority, medium term abatement measures. The Component has three subcomponents:

Subcomponent (B1) Mitigation of Fugitive Dust from lack of City Greening:(estimated cost $1.3 million, indicative IDA financing $1.3 million) This subcomponent will prepare an action plan for city greening and implement a pilot, including (a) technical assistance for preparatory studies, framework for evaluating options to seed grass and other greenery for the purpose of reducing dust not only in ger areas but throughout the city; (b) technical assistance for bid document preparation and enhanced supervision; (c) investment support for the supply and installation of grass and other eligible plants/trees in UB on a pilot basis; (d) consulting services for monitoring and evaluation.

Subcomponent (B2) Power Plant Emissions Control Strategy: (estimated cost $0.3 million, indicative IDA financing $).3 million) This subcomponent will finance: (a) a feasibility study for installation of improved emission controls in Ulaanbaatar’s three power plants and for mitigation of dust emissions from power plant ash ponds, studying their environmental impacts and recommending cost effective solutions; and (b) an assessment of the emissions monitoring system and policies to address current poor emissions monitoring of power plants and strengthen the enforcement regime.

Subcomponent (B3) Housing Improvement and Heating Policy Policy Knowledge Building: (estimated cost $1.1 million, indicative IDA financing $1.1 million) This subcomponent will support: (a) an affordable housing improvement study, exploring international experience in affordable housing schemes and applying them to UB’s circumstances; (b) feasibility study for the rehabilitation and sustainable expansion of district heating in Ulaanbaatar; and (c) complementary study tours on housing, district heating policy, regulation and management—addressing current sector issues of fragmentation (transmission and distribution are separately owned and managed), billing (heating and hot tap water are unmetered, wasting energy for heating), and planning.

In coordination with the East Asia Safeguards Secretariat, it was agreed that the project be assigned Environmental Assessment Category B. The proposed project will have positive environmental benefits from a reduction in PM. The project will provide significant stimulus to the introduction of clean stove and low pressure boiler technologies, replacing existing stoves. It is expected that the replaced stoves (bought back and removed from use) will be sold as scrap metal at scrap metal recycling centers (one located in Darkhan municipality in Mongolia). Domestic manufacturers have limited capacity so the new stoves are expected to be sourced internationally as well.

The temporary environmental impacts directly generated from the project are currently anticipated in the (a) planting of trees, grass and other eligible plants/trees in UB on a pilot basis to mitigate fugitive dust from a lack of city greening and (b) some minor operational impacts (primarily occupational health and safety issues) from the operation of the SEET laboratory, Stove Assistance Development Center (SADC) and stove production facilities.[6]

Additionally, the project will also support a number of feasibility studies, namely: (a) a Power Plant Emissions Control Strategy to (i) improve emission controls in Ulaanbaatar’s three power plants and to (ii) improve mitigation of dust from power plant ash ponds, studying their environmental impacts and recommending cost effective solutions; and (b) district heating rehabilitation and expansion opportunities.

Upstream and downstream issues regarding the subsidy and promotion of stoves and discarding old ones will also be assessed during project preparation. Technologies for the development of new stove models will be assessed as to their potential impacts from production. Guidelines for the disposal of old stoves will also be prepared.

In essence, the project impacts have not changed significantly since the PCN except for the elimination of civil works activities associated with the SEET laboratory renovation.

The following activities should be undertaken during project preparation:

Component A (a) Development of good engineering practices for the operation of the SEET and SADC laboratories1. Such practices would include issues such as occupational health and safety (OSH), noise and dust emissions, site security and waste disposal;(b) Stove buyback program: From the environmental point of view, a plan for the recycling of the bought-back stoves should be prepared;(c) A rapid assessment of environmental impacts of domestic production of stoves and social impacts associated with import vs. domestic production of stoves.

Component B. During appraisal the Bank should review and provide its inputs/agreement with the TORs for the consultant studies under each subcomponent. The following activities related to OP 4.01 should be considered in the TORs. Component B!: (a) the criteria for seed grass and other greenery selection for dust reduction in Ulaanbaatar which should include the need for watering, especially between October and April, and the impacts on water resources; and (b) preparation of guidelines on good practices and precautions regarding herbicides/pesticides use, if needed, for the city’s greening pilot; Component B2: During project appraisal the Bank should review and provide its inputs/agreement with the TORs for the consultant studies under each subcomponent. The following activities related to OP4.01 should be considered in the TORs (a) the impacts of additional collection of ash on plant equipment and ash management system (including ash pond, ash transportation, and ash reuse/ash disposal) should be evaluated for each power plant; and development of associated mitigation measures. In addition, the FS will incorporate the relevant environmental and social analysis related to OP 4.01.

In accordance with the requirements cited in the Concept Stage ISDS: A safeguards report will contain the following: (a) development of good engineering practices for the stove (and low pressure boiler) emissions and efficiency testing laboratory renovation1; (b) a rapid assessment of environmental impacts of domestic production of stoves and social impacts associated with import vs. domestic production of stoves; (c) a plan for recycling of bought back stoves and (d) recommended elements in the TORs for Subcomponents B1 (City Greening), B2 (Power Plant Emission Control and Ash Pond Dust Emissions)[7] and District Heating2.

The structure of the Safeguards Report is as follows:

Good Engineering Practices (GEP) for the Operation of the Stove Emission and Efficiency Testing Laboratory, and Stove Assistance Development Center
Guidelines on good practices and precautions regarding herbicides/pesticides use
Rapid assessment of environmental impacts of domestic production of stoves
Social impacts associated with import vs. domestic production of stoves
Plan for recycling of bought back stoves
Recommended Elements in the TORs for the Feasibility Studies Subcomponents for Environment/Safeguard Aspects

-City Greening