The Nexus BetweenInfrastructure and Environment

From the Independent Evaluation Offices of theInternational Financial Institutions

1ECG PAPER

EvalBrief5-externalcover 7/5/07 9:06 AM Page 1

The Evaluation Cooperation Group (ECG) was established in October 1995 by the heads of the evaluation depart-ments of the major international financial institutions. The ECG's mandate is to strengthen cooperation among eval-uators, to enhance collaboration within the evaluation community of development organizations, and to increasethe impact of evaluation through harmonization and dissemination.

THE EVALUATION COOPERATION GROUP

EvalBrief5-externalcover 7/5/07 9:06 AM Page 2

The Nexus BetweenInfrastructure and EnvironmentFrom the Independent Evaluation Offices of the International Financial Institutions

African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, European Investment Bank, Inter-AmericanDevelopment Bank, International Monetary Fund, and the World Bank Group

ECG Paper 1

June 2007Washington, D.C.http://www.ecgnet.org

©2007 Independent Evaluation GroupKnowledge & Evaluation Capacity DevelopmentThe World Bank1818 H Street, NWWashington, DC 20433 USAE-mail: eline@worldbank.orgTelephone: 202-458-4487Fax: 202-522-3125http://www.worldbank.org/ieg

All rights reserved

This publication is a joint product of the evaluation offices of the African Development Bank, the Asian Development Bank,the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American DevelopmentBank, the International Monetary Fund, and the World Bank. The findings, interpretations, and conclusions expressed heredo not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent.

This publication was originally published as Evaluation Brief 5: “The Nexus Between Infrastructure and Environment” (June2007).

The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denomina-tions, and other information shown on any map in this work do not imply any judgment on the part of the World Bank orIEG concerning the legal status of any territory or the endorsement or acceptance of such boundaries.

Rights and PermissionsThe material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permissionmay be a violation of applicable law. IEG encourages dissemination of its work and will normally grant permission to repro-duce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request withcomplete information to eline@worldbank.org.

The lead author for this ECG Paper is John D. Shilling with input from Kenneth Chomitz and Ann E. Flanagan.

v Acknowledgments

vii Executive Summary

1 Chapter 1 The Infrastructure-Environment Nexus and the Future of Development

3 Chapter 2 Infrastructure, Growth, and Poverty Reduction

5 Chapter 3 Environment and Development

11 Chapter 4 The Nexus at the Project Level

15 Chapter 5 Sectoral and National Policies

25 Chapter 6 Conclusions and Follow-Up

27 Bibliography

Contents

v

Acknowledgments

This report represents a collaborative effort ofthe Evaluation Cooperation Group. The projectwas undertaken at the request of the EvaluationCoordination Group (ECG) members, DouglasBarnett, Bruce Murray, Fredrik Korfker, PeterMaertens, Alain Sève, Stephen A. Quick, ThomasA. Bernes, and Vinod Thomas. Overall taskmanagement was provided by Patrick G. Grasso.The main author was John D. Shilling, with inputfrom Kenneth Chomitz and Ann E. Flanagan.

Individuals from ECG provided valuable inputsand comments. Contributions were made byFrancois Botes, Foday Turay, and A. E. N’Diayefrom the African Development Bank; RameshAdhikari, David Edwards, Hemamala Hettige,Tyrrell Duncan, C. C. Yu, and Renato Lumain fromthe Asian Development Bank; Nicolas Mathieuand Dennis Long from the European Bank forReconstruction and Development; Campbell

Thomson from the European Investment Bank;Inder Jit Ruprah and Patricia Sadeghi from theInter-American Development Bank; and MarceloSelowsky from the International Monetary Fund.Since the paper was drafted in Washington, alarge number of World Bank Group staff wereinterviewed and many made significant contribu-tions. These include Ajay Chhibber, Nils Fostvedt,Alain Barbu, Linda Morra, Denis Carpio, NicholasBurke, John Redwood, Stephen F. Lintner,George Pitman, Maisha Hyman, Roy Gilbert, andPeter Freeman.

We greatly appreciate the efforts of all of thesepeople in helping complete this report. Thesuccessful coordination among the members ofthe ECG in producing it is an important steptoward achieving its mission of fostering collabo-ration and harmonization of evaluation workamong the evaluation units of its members.

v i i

Executive Summary

Infrastructure plays a crucial role in the drive forachieving development by providing energy,transportation, and water. There have been upsand downs in the degree of emphasis placed oninfrastructure, but infrastructure has remainedthe largest component of the public investmentprograms in developing countries—two to sixpercent of gross domestic product (GDP). Nearlyhalf of the international financial institutions’project lending to developing countries goes toinfrastructure. Going forward, the Organisationfor Economic Co-operation and Development(OECD) estimates that developing countriesmight have to invest over $700 billion a year ininfrastructure in the coming decade—rising to$1 trillion a year by 2030—in order to sustainrapid growth rates.

Well-designed infrastructure can have positiveimpacts on the environment, which also iscrucial for development. However, there is a darkside to infrastructural investments: they oftenlead to environmental degradation. Fossil fuelenergy generation and transportation createemissions that contribute to acid rain locally andglobal warming. Hydropower and irrigation canlead to flooding, water pollution, and disruptionof communities. Roads can lead to erosion,deforestation, and biodiversity loss. Theseenvironmental costs have been estimated to

reach four to eight percent of GDP for somedeveloping countries, with most of the effectsfalling on the poor.

The Evaluation Coordination Group (ECG)recognizes the importance of this linkage, whichwe call the infrastructure-environment nexus. Itrepresents a large and growing challenge for thecountries and the international financial institu-tions (IFIs) in their development goals. Meetingthe Millennium Development Goals depends onthe provision of adequate infrastructure, such asproviding clean water and sanitation, as well ason reducing adverse environmental impacts,such as reducing the impacts of air pollution onhealth and agricultural production (e.g., acidrain). The ECG commissioned this initial reviewof members’ experiences to learn what can bedone both to minimize the detrimental impactsof infrastructure on the environment and toenhance infrastructure’s positive contribution tothe environment beyond the role of existingsafeguards.

The evidence points to the need for the nexusissues to be addressed both at the project levelrelating to selection, design, implementation,and supervision, as well as at the sectoral andnational level relating to policies, regulations,and environmental capacity. Most attention to

environmental impacts is currently focused atthe project level—whether safeguard criteria aremet and efficiency improved “within the projectfence.” This is important, and there are areas inthis respect that need greater attention.Importantly, once projects are implemented,effective operation and maintenance ofinfrastructure is needed over the full life of theproject to assure that environmental safeguardmeasures are implemented. Evaluations by theInternational Finance Corporation (IFC) and theEuropean Bank for Reconstruction and Develop-ment (EBRD) demonstrate that projects whichsuccessfully take account of the environmentaldo as well financially and economically asprojects which do not.

While project-level efforts across the Regionshave produced significantly positive results, farmore attention needs to be paid to sector-wideand national issues that have far-reachingimpacts. There are more environmentallyfriendly alternative means of satisfying the needs,such as the energy conservation program run byGlobal Environment Facility (GEF) in Thailand,which reduced peak demand by a gigawatt witha benefit-to-cost ratio of 1.7. Alternate siteselection in infrastructural investments couldhelp, such as roads routed around unexploitedforests with a buffer zone of protected areas builtin, as possible in countries such as Brazil. Waterconservation could reduce water usage tosustainable levels, for example, by reducing theMiddle East and North Africa’s withdrawal of over100 percent of renewable water.

The interface between projects on the one sideand sectoral and national actions on the otherremains a challenge. The first area for actionconcerns strategies and institutional approachesthemselves. National governments need toestablish national environmental strategiesthrough Strategic Environmental Assessments orsimilar documents with implementation andfollow-up. Strengthening national environmentalmanagement capacity will mitigate damage andpromote a better environment. Experiences withthe Bolivia-Brazil pipeline and Nam Theun 2 damprojects have shown how taking a more

integrated approach at a national and sectorallevel can produce satisfactory environmentalresults while meeting project goals.

Second, national policies can provide incentivesfor increasing the efficiency of infrastructureprojects. Sound pricing and market incentivepolicies help control excessive demand forinfrastructure services, assure adequate mainte-nance, and encourage shifting to more conserva-tion. Cutting water subsidies will reduceunnecessary depletion of water, and properenergy pricing and incentives will reduce demandand increase conservation. Incentives for newtechnologies can also make a difference: CO2

emissions from coal-fired plants can be reducedby up to one-third with the latest technology.

Third, encouraging more private investment,with proper regulation and cooperation betweenthe public and private sectors, can expandinfrastructure availability effectively, asMorocco’s pubic-private coordination policieshave demonstrated. Involving recipients ininfrastructure projects will also help. Forinstance, the poor are willing to pay for cleanwater, if they understand the costs and benefits,as has been demonstrated in the BoliviaPROSABAR Project.

Finally, dealing effectively with governance andcorruption issues is an especially importantpriority when it comes to infrastructure com-pared to other sectors. Improving governanceand reducing corruption can significantly reducethe cost to society of infrastructure, improve itsefficiency, and lead to better planning, design,implementation, and outcomes.

Overall, there is considerable scope to reducethe negative environmental impacts of infrastruc-ture, to mitigate the impacts of others, and toactually enhance the environment in many cases.This requires moving beyond the conventional“do no harm” approach at the project level to amore proactive “do good” approach at bothproject and national levels. The evaluationsreviewed demonstrate that this is an importantpossibility that can and should be exploited

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much more extensively than is currently thecase.

This review across regions provides implicationsfor actions by the IFIs and the countries, by theevaluators, and by the ECG.• The IFIs can work with countries to ensure that

a more environmentally strategic approach isused in project selection, design, and manage-ment; that more incentives are provided to re-duce environmental damage; and, better yet,that measures are taken to improve the envi-ronment through conservation and stewardship.

• Evaluators need to examine the infrastructure-environment linkages in their project, sector,and country assessments. A special effort needsto be made to cover the full operational life ofprojects in order to capture the full range of in-tended and unintended effects which oftenemerge over time.

• The ECG members can support work on thenexus issues by building and sharing fullerdatabases, by undertaking meta-analyses of in-frastructure policies to learn how to help coun-tries better address nexus issues, and byassuring more complete cost-benefit analysesare conducted to demonstrate the real costs ofnot adequately addressing the nexus.

Action on the nexus is a huge priority for theindustrial countries as well, whose record on thisscore needs much improvement. Action by bothindustrial and developing countries will generatebeneficial results for the whole world—includingimportantly for developing countries andespecially the poor. The payoffs to all will beimmense from building sound infrastructurewhile strengthening the environment. What isneeded is a shift in priorities and emphasis tomake that happen.

T H E N E X U S B E T W E E N I N F R A S T R U C T U R E A N D E N V I R O N M E N T

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1

CHAPTER 1

The Infrastructure-Environment Nexusand the Future of Development

Infrastructures are at the very heart ofeconomic and social development. Thenext decades are likely to see an accentua-tion of two facets of infrastructures. On theone hand, they will prove a vital tool inresolving some of the major challengesfaced by societies—supporting economicgrowth, meeting basic needs, lifting mil-lions of people out of poverty, facilitatingmobility and social interaction. On theother, environmental pressures in the formof changing climatic conditions, congestionand so on are likely to increase, turning thespotlight firmly on the inherent tensionsbetween the imperative for furtherinfrastructure development and the questfor sustainability (Infrastructure to 2030,OECD, June 2006).

The recent report on climate change by theUnited Kingdom’s Economic Service, commonlyreferred to as the Stern Review, highlighted theimportance of environmental risks inherent inworld economic growth and development.1 Thisconcern affects all countries and all populations,but the report points out that:

The most vulnerable—the poorestcountries and populations—will sufferearliest and most, even though they havecontributed least to the causes of climatechange (Summary of Conclusions, p. 2).

Thus, as development agencies pursue theirefforts to promote economic development inpoor countries and improve the lives of theirpeople, they are warned to be cognizant of theneed to ensure that development is achieved inways that minimize environmental damage or—better still—improve environmental quality. Thisis nowhere more evident than in the intersection

of environmental concerns with the need fordevelopmentally important infrastructure—whatwe call the infrastructure-environment nexus.

Infrastructure is essential for growth, which isessential for poverty alleviation. Expandinginfrastructure to meet expanding demands willabsorb trillions of dollars of investment over thecoming decades in the developing and transitioneconomies. Many infrastructure investmentsdeal effectively with their environmental impactsor directly promote environmental improve-ments, but many kinds of infrastructure alsopose serious threats to the environment. If thesethreats are not addressed, many of the benefitsof growth will be undermined, especially for thepoor, who often suffer disproportionately fromenvironmental damages. Infrastructure lasts for along time, often 50 years or more, and greatlyinfluences the direction of further development,so it is vital to take account of the full extent of itsimpacts. The infrastructure-environmentnexus addresses the challenge of meetingthe demand for infrastructure serviceswhile maintaining or improving the qualityof the environment.

At its semi-annual meeting in Manila in the fall of2005, the Evaluation Cooperation Group (ECG),representing the independent evaluation de-partments of the international financial institu-tions (IFIs), recognized the critical importance ofthis infrastructure-environment nexus. Itcommissioned this initial review of its members’experience to see what lessons can be learned toavoid the detrimental effects of infrastructureand contribute to environmental enhancement.To address this topic’s scope and complexity, thispaper sets out an analytic structure for assessingthe nexus and uses evaluation results to illustratethat infrastructure outcomes are affected by

project design and implementation and by sectorand national policies and practices. It offersguidance to the IFIs’ management and staff onhow they can better achieve their institutions’goals in infrastructure and environment. Inparticular, evaluating projects and programs indeveloping countries needs a more systematicapproach. The ECG members should worktogether to strengthen the evaluation ofinfrastructure-environment nexus issues.

Questions AddressedThis paper addresses two crucial nexusquestions related to IFI activities: • At the project level, how effectively do project

design and implementation incorporate envi-ronmental considerations?

• At the sectoral and national levels, do policy and regulatory regimes and investment port-folios effectively incorporate environmentalconsiderations?

These questions are closely linked. The first dealswith traditional “within-the-fence” efforts toensure that projects meet environmentalstandards, often by applying environmentalsafeguard policies in project design. Safeguardpolicies may, for instance, ensure that thermalgenerators incorporate adequate controls for airpollution. However, there may be alternativeprojects or other actions that offer superioreconomic and environmental outcomes. Forinstance, hydropower rather than fossil fuel-

based power may be better when all factors areconsidered, or improvements in end-useefficiency could obviate the need for new generat-ing capacity and thus save money while reducingair pollution. These considerations go beyondtraditional project-focused safeguard policies. Sothe second, broader question is whether the rightkinds of projects are being selected and whetherthere are policy alternatives (such as pricereforms or market-based incentives) which arepreferable to brick-and-mortar infrastructureinvestments. In many parts of the world, thebroader question should also address regionalcoordination of infrastructure and environmentalplanning, such as African transport and energynetworks or Mekong water management toassure that highways open landlocked countriesto trade and that roads and dams do notexcessively disrupt downstream water flows.

In addressing these two questions, we willevaluate outcomes, the relationship between IFIprocesses and outcomes, and the evaluationprocess itself. This paper focuses mostly ontransport, energy, and water, which account forthe bulk of infrastructure lending and tend tohave more prominent biophysical environmen-tal impacts and very significant socio-economicenvironmental consequences that need to betaken into account. We will begin by examiningthe role of infrastructure in growth and povertyreduction, and then consider the environmentalimpacts and how they can be addressed.2

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Notes1. United Kingdom Economic Service, 2006, Stern

Review on the Economics of Climate Change.2. The safeguard policies include both biophysical

and socioeconomic factors. This paper concen-trates on the biophysical, but takes into accountthe impact of infrastructure on poverty and theMillennium Development Goals.

3

CHAPTER 2

Infrastructure, Growth, and Poverty Reduction

Roads, electricity, clean water, and irrigation areintegral parts of development and povertyreduction. Some infrastructure investments aredirectly linked to the Millennium DevelopmentGoals (MDGs). Provision of clean water, forinstance, is an integral part of target 10 (in theenvironmental goal) and is critical to achievingtarget 5 (reduction of child mortality). The AfricanDevelopment Bank (AfDB) estimates that less thantwo-thirds of Africa’s urban population has accessto safe water and barely one half to sanitation—ifall the systems work as designed. Access in ruralareas is much lower.1 Other linkages are likely tobe strong but indirect—for instance, the role ofrural roads in boosting farm incomes and improv-ing access to schools and health facilities.

Good infrastructure is part of the enablingconditions for sustained economic growth which,in turn, is a prerequisite to reducing poverty. Forinstance, Fan and Chan-Kang (2004) reportexcellent returns to rural road investments inIndia.2 They estimate a reduction in the povertyhead-count of 10 people per 1 kilometer of roadextension in low-potential rain-fed areas andeconomic rates of return in the hundreds or eventhousands of percent. Similarly, for China, theyestimate high economic returns to road invest-ments, concluding that among infrastructureinvestments, roads had the greatest impact onreducing poverty. The International EnergyAgency estimates that energy, as a factor ofproduction, accounted for 13 percent of China’sGDP growth over 1980–2001, 15 percent ofIndia’s, 30 percent of Mexico’s, 50 percent ofKorea’s, and 77 percent of Brazil’s.3

IFI Infrastructure LendingNot surprisingly, then, IFI lending emphasizesinfrastructure. IFI lending for infrastructureamounted to over $40 billion in 2005. Over the

past 15 years, infrastructure lending hascomprised about 50 percent of project lendingand 40 percent of total lending. Within thisroughly constant share, there has been a relativeshift from power to transport (see Figure 2.1 andFigure 2.2). IFI lending constitutes less than themajority of infrastructure investments indeveloping countries, but its relatively highquality and profile help set standards thatcontribute to better overall infrastructure.4

Future Infrastructure RequirementsThe Organisation for Economic Co-operationand Development (OECD) estimates that totalglobal expenditures on infrastructure in energy,transportation, and water from 2000 to 2030will need to be about $57 trillion (in constant2000 US$) in order to achieve targetedeconomic growth rates.5 Nearly half of thisexpenditure will be in developing countries,which have the greatest needs for additional

Figure 2.1: IFI Infrastructure Lending

0

20

40

60

80

100

120

1990 1995 2000 2005

Lend

ing,

bill

ion

US$

(200

0)

Power and energy Transportation WaterOther IFI infrastructure

lendingIFI total project lendingIFI total lending

infrastructure (see Table 2.1). To supportcontinued high growth, infrastructure invest-ment will have to average over $700 billion ayear in this decade, rising to over $1 trillion ayear by the 2020s. The World Bank estimatesthat developing countries will need to investabout six percent of their gross domesticproduct (GDP) annually in infrastructure,rising to as high as nine percent for the lower-income countries.6 However, current invest-ment levels in Africa and Latin America and theCaribbean are well below this target level,which has contributed to their relatively lowergrowth rates. Investment levels in Asia aregenerally high, exceeding seven percent ofGDP for infrastructure in rapidly growingcountries.7

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Figure 2.2: Infrastructure Share of IFI Lending

0

10

20

30

40

50

60

1990 1995 2000 2005

Perc

ent o

f len

ding

Power and energy Transportation WaterOther Total project lendingTotal lending

2000–10 2011–20 2021–30 2000–30Average Average Average Percent annual Total annual Total annual Total Total of total

Total, developing countries 701 7,011 880 8,805 1,048 10,476 26,291 46

Energy 317 3,174 385 3,852 398 3,982 11,008 47

Transportation 83 826 92 919 108 1,075 2,820 31

Water 301 3,010 403 4,034 542 5,419 12,463 52Source: Based on OECD, 2006, Infrastructure to 2030: Telecom, Land Transport, Water and Electricity, Paris: OECD.

Note: Investment figures are in constant 2000 US$ billion.

Table 2.1: OECD Estimates of Infrastructure Investment Requirements

Notes1. African Development Bank, 2003 (July), Evaluat-

ing Bank’s Support for Capacity Strengtheningof Urban Water Supply and Sanitation Entitiesin Regional Member Countries.

2. Shenngen Fan and Connie Chan-Kang, 2004,“Returns to Investment in Less-Favored Areas inDeveloping Countries: A Synthesis of Evidenceand Implications for Africa,” Food Policy 29(4):431–444.

3. International Energy Agency, 2004, World EnergyOutlook 2004, Paris: OECD/IEA.

4. The World Bank’s review of China has shown thisto be the case. IEG (OED), 2004, China: AnEvaluation of World Bank Assistance.

5. These estimates are derived from OECD, 2006,Infrastructure to 2030: Telecom, LandTransport, Water and Electricity, Paris: OECD,and represent estimates of what is needed toachieve desired growth rates. Based on pastexperience, actual spending often falls belowwhat is needed to provide the appropriate levelof infrastructure.

6. World Bank, 2005 (September), “Infrastructureand the World Bank: A Progress Report.”

7. Asian Development Bank, Japan Bank forInternational Cooperation, and the World Bank,2005, “Connecting East Asia: A Framework forInfrastructure.”

5

CHAPTER 3

Environment and Development

Infrastructure services are vital for supportingeconomic growth and improving the quality oflife by improving transport and communications,sanitation and home heating, access toeducation, health services, etc. However, provid-ing these services can have environmentalimpacts that also have important implications forquality of life, including both biophysical andsocial aspects. The former affect geological andbiological conditions such as land quality, watermanagement, biodiversity, etc.; the latter affecthealth and other social conditions due to air andwater quality, resettlement, etc. Well-designedinfrastructure projects can produce positiveenvironmental impacts, e.g., by reducing waterpollution, or mitigate negative environmentalimpacts, e.g., through emissions controls.However, when environmental consequences arenot taken into account, infrastructure projectscan pose serious threats to the environment andresultant quality of life. Land degradation,flooding, water and air pollution, and acid rainthat result from poorly designed projectsseriously degrade living conditions, especially forthe poor who lack the resources to compensatefor the impacts. The nexus focuses attentionprecisely on this intersection between environ-ment and infrastructure.

The construction and operation of infrastructuregenerally pose risks to local environment, whichwill result in environmental damage if notadequately mitigated or compensated. This iswell documented in the case of energy,especially where power plants or industry burncoal. In China, acid rain and other biophysicaleffects of coal combustion have reduced cropyields by five percent to 30 percent for 70 percentof all crops.1 In India, acid rain has acidified soilsin a large part of the country and decreased crop

yield by up to 50 percent in the immediateenvirons of large power plants.2 On the socialside, particulates and smog from power plantsand traffic are estimated to cause 427,000 excessdeaths annually in China3 and 107,000 in India.4

Global damages from infrastructure-related fossilfuel emissions—such as climate change—areadditional to these local damages. Emissions areinherent in fossil fuel energy (power andtransport), and the challenges are to minimizeemissions, promote alternate energy, andencourage conservation.

Rural road construction can also contributeto environmental damage, both directly andindirectly. The direct effects include erosion andsedimentation. Unpaved forest roads can be amajor cause of erosion, gullying, and streamsedimentation. The indirect effects can be muchlarger. Chomitz (2006), in an extensive literaturereview, confirms that roads are a major trigger fortropical deforestation.5 The challenges are todesign and maintain roads well, route them toavoid negative impacts on forests, and enforceland use regulations.

In transportation, investment in urban masstransit systems may be more environment-friendly than building more extensive roadsystems that encourage automobile use,extended urban development, and the concomi-tant rise in demand for fuel.6 Thus, whileinfrastructure often requires mitigation mea-sures to minimize environmental damage, insome cases it can directly reduce the need formitigation and enhance environmental benefits.

Irrigation works can lead to overuse of water,land degradation, and downstream pollution(pesticides, herbicides, etc.). The Millennium

Ecosystem Assessment (MEA) claims that irrigationalready consumes 20–30 percent of the planet’savailable freshwater resources.7 Statistics reportedin the World Development Indicators are lessalarming at the global scale, but report that SouthAsia withdraws 52 percent of internal renewablefreshwater resources (90 percent for agriculture),and the Middle East and North Africa withdraw 105percent (89 percent for agriculture). A studyconducted by the United Nations EnvironmentProgramme found that “half of the world’s irrigatedland has been affected by water-logging, salinity, oralkalinity. Salinity seriously affects productivity onabout 22 million hectares of land and has lesssevere impacts on another 55 million.”8 Irrigationand other water projects may also deplete waterresources and lower water tables. The challengesinclude effectively managing watersheds whileproviding clean water and sanitation locally, and notdisrupting water downstream.

In contrast, investment in sanitation represents anexample of infrastructure specifically designed toimprove the environment. A 2005 United NationsTask Force report on water and sanitationhighlighted the health, poverty reduction, andenvironmental benefits of improved sanitationinfrastructure and recommended steps to providethis infrastructure.9

The pressures on the urban environment andurban infrastructure are particularly acute in theworld’s mega cities, many of which are in

developing countries. Urban development thatfails to plan for and provide basic public utilitiescontributes to both infrastructure and environ-mental problems, especially in poor countries.Insufficient roads prevent adequate access for firefighting and solid waste collection. Lack of accessto electricity and cleaner fuels can result inexcessive use of coal and firewood for cookingand heating, leading to high levels of interior airpollution and negative health impacts. Watersupplies and sanitation are typically insufficient.10

Estimates from the late 1990s (currently beingupdated) indicate that environmental degrada-tion is increasing and that the damages arespread across all regions in a number of environ-mental categories (see Figure 3.1). This poses agrowing threat to developing countries as thecosts of such environmental damage are beingincreasingly felt and have the potential toundermine their potential for sustained growth.

Policies toward Positive EnvironmentalImpacts of Infrastructure: OverviewInfrastructure is a double-edged sword, associ-ated with income gains and also often withenvironmental costs. But those costs are, to alarge extent, avoidable. There are several ways toreduce the costs and increase the environmentalbenefits of infrastructure projects, at both theproject and national/sectoral levels. There arealso regional and global challenges that havebeen identified through evaluations.

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Figure 3.1: Environmental Damages Increasing in the Developing World

AfricaAsia

Pacific EuropeLatin

AmericaNorth

AmericaWest Asia

Arctic and

Antartic

Land: degradationForest: loss, degradaton

Biodiversity: loss, habitat fragmentationFresh water: scarcity, pollution

Marine and coastal zones: degradationAtmosphere: pollution

Urban and industrial: contamination, waste

Increasing Stable Decreasing N/A

Source: United Nations Environmental Programme, 1997.

Project LevelProject design choices can reduce environmen-tal impacts. Coal-fired power plants can useefficient technologies and incorporate scrubbersor other end-of-pipe pollution controls. Roadscan be routed around sensitive environmentalsites and incorporate drainage systems thatreduce runoff and erosion. Watershed manage-ment can reduce flooding and water shortageswhile preserving access to good water supplies.Properly insulating and orienting buildings canreduce their heating and cooling demands.These design considerations are importantbecause buildings, power plants, and otherinfrastructure have operational lives of 40–100years.

Operations and maintenance are importantdeterminants of economic and environmentaloutcomes at the project level. Maintenance iscritical for end-of-pipe pollution controlequipment. Because it is costly, facility operatorsmay skimp on maintenance in the absence ofincentives or controls. Similarly, road mainte-nance is crucial in order to avoid costlyreconstruction and to reduce runoff and erosion,and urban sanitation and drainage systems willfail in the absence of maintenance.

National/Sectoral LevelAt the national (sectoral and cross-sectoral) level,there are many more options for increasing thebenefit-to-cost ratios of infrastructure invest-ments. These options may not be apparent ifenvironmental assessments are only undertakenat the project level. They require sectoral ornational planning, which includes:

Shifting infrastructure toward more environ-mentally friendly technologies. For instance,the electric generation portfolio could movetoward clean and renewable fuels and away fromcoal, or toward more efficient technologies, ortoward conservation. While some of thesechanges may cost more up front, their reducedenvironmental impacts will produce morebenefits over the longer run. Determining whichshifts are most effective would employ moreextensive cost-benefit analysis.

Substituting environmental capital forphysical capital. In the water sector, the needfor major investments in water purification canbe reduced by introducing upstream steward-ship methods for watershed management andreduction of polluted runoff (e.g., incentives forfarmers and others to modify their practices).11

Other examples include using wetlands andfloodplains as buffers against flooding; usingmangroves as buffers against storm surges andtsunamis; and reducing urban “heat island”effects through vegetative planting.

Infrastructure siting and spatial planning.Infrastructure siting decisions can profoundlyaffect environmental impacts. For instance, theenvironmental and social impact of damsdepends on the size and population of the basinsthat they flood. Figure 3.2, based on data fromLedec and Quintero (2003),12 plots the relativeimpact of large dams along two dimensions:displaced people per megawatt (MW) andhectares flooded per MW (bubble size is propor-tional to the power plant’s generating capacity).The figure shows that some dams are 100–1,000times more efficient (less damaging per MW)than others along these two dimensions.Similarly, road siting presents tradeoffs ininduced deforestation versus stimulus for localdevelopment. Preferentially siting new roads androad upgrades in more densely populated,already degraded areas, and surroundingunavoidable forest roads with protected areacorridors, can mitigate or possibly even reversethe potential growth-environment tradeoffassociated with road construction.

Investing in efficiency. Increased efficiency ofwater and energy use can reduce the need forcostly and environmentally damaging invest-ments. Efficiency is typically low in irrigation: forinstance, MEA (2005) reports only 40–50 percentof diverted water is used by crops. Water is oftenused for low-value crops rather than higher valueindustrial or domestic use. In water-scarce SouthAsia, for instance, average water productivity is$0.20 per cubic meter in agriculture versus $5.90in industry.13 Likewise, there are many opportu-nities for increased efficiency of energy use.

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Shifting from incandescent to compact fluores-cent lights can realize substantial electricitysavings and postpone the need for building moregeneration capacity.

Policy reforms. Sectoral policies can profoundlyaffect the demand for, supply of, and utilizationof infrastructure. For instance:• Reducing or eliminating agricultural price dis-

tortions that excessively favor water-consumingcrops and that boost demand for irrigationwith no net increased benefits, and settingwater prices at levels that discourage excessiveuse of water for low value crops.

• Reducing or eliminating gasoline and dieselprice subsidies to reduce demand for road-ways, especially where prices do not fully re-flect congestion and pollution costs.

• Reducing subsidies that favor coal-fired gen-erators over less-polluting natural gas plants.

Such policy reforms have the potential to reduceenvironmental damages associated with the useof infrastructure.

Regional and Global LevelMany of the infrastructure challenges arecommon across regions. In all areas, there will begrowing demand for power and transport.Demand for urban infrastructure (includingwater and urban transport) will surge as citiesgrow in Asia, Latin America, and Africa. Beyonddealing with common problems, a number ofenvironmental challenges have to be addressed

by coordination and cooperation amongneighboring countries. Watersheds often spanone or more national borders. Energy sources,such as hydropower, can have impacts oncountries along the river sources. Landlockedcountries need access to the sea to participate inglobal trade. These regional issues affect nearlyall developing countries. Despite many commonfeatures, there are also distinctive challenges inthe major regions.

Africa: Infrastructure is inadequate and must beexpanded in ways that promote growth andbetter integrate environmental factors. Thesecountries have a relatively small infrastructurebase and are investing only two to three percentof GDP in infrastructure.14 They should takeadvantage of the opportunities to adopt moreadvanced, integrated, and environmentallysound approaches to infrastructure. This willenable them to generate more effective growthand poverty alleviation, reduce threats to theirenvironments, and provide greater capacity todeal with frequent natural disasters.15 Cross-boundary watershed management and prospec-tive continental road and power networks arecritical for Africa and will require internationalcooperation and environmental assessments.

Asia: These countries are investing about sixpercent of GDP in infrastructure, and their rapidexpansion of urban infrastructure and energydemand will require greater efforts to enhanceenvironmental protection and to remediate theserious losses resulting from past environmentaldegradation. Studies have estimated that environ-mental damage has cost China and India four toeight percent of GDP annually, and a significantportion of that comes from the impacts ofinfrastructure.16 Given the expected rapidexpansion of infrastructure, especially related toenergy production for power and transportation,these countries should give energy conservationan increased priority.17 While many Asiancountries have adopted good environmentalpolicies, implementation and enforcementremain a serious challenge. IFIs can play animportant role in strengthening this process.

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Figure 3.2: Environmental and Social Impacts of Dams

0.1

1

10

100

1,000

0.1 1 10 100 1,000

Hectares flooded/MW

Peop

le d

ispl

aced

/MW

Eastern Europe: Further rehabilitation andmanagement of infrastructure will accelerate thetransition to modern economies, building on areasonably successful program to date. Thesecountries must meet the high standards set by theEuropean Union (EU) environmental policies tobetter integrate into the European economy,which gives them a strong incentive to furtherimprove infrastructure in relation to the environ-ment. They have focused on improving bothphysical elements and management in their transi-tion to more market-oriented processes, whichhas helped reduce emissions and pollution.18 Aswith Africa, regional planning of infrastructure andenvironmental management would contribute agreat deal to their mutual well-being.

Latin America: Infrastructure investment needsto recover from recent lows of one to twopercent of GDP to help accelerate growth, aslevels of infrastructure are well below that offaster growing Asian countries.19 Nevertheless,the environment has often suffered from whatinfrastructure has been built, especially roads inthe Amazon region and support for the exploita-tion of natural resources. There is a need toreduce the negative environmental impacts thathave characterized much of the infrastructuredevelopment to date and to build a soundinfrastructure that strengthens the environmentin an integrated way to provide a basis for moresustainable development and poverty alleviation.

Global: Local infrastructure development hasglobal implications. The manner in which energyand transport systems are constructed will havelong-lasting implications for CO2 emissions andthus for global warming and the recentlyrecognized threat of ocean acidification. Beyondthe direct impacts of infrastructure projects onthe environment in their immediate areas orcountries, global environmental impact issuesshould receive more attention. Currently mostCO2 emissions come from developed countries,but several fast-growing developing countries arerapidly increasing their energy consumption and

emissions, especially where they depend on coalfor energy.20 Promotion of energy efficiency andrenewable fuels can help retard global warmingwhile providing local benefits in reduced airpollution. Carbon reduction finance and tradingprograms could help to support more environ-mentally friendly infrastructure; carbon tradingprograms are in place in the World Bank Group(WBG), the Asian Development Bank (AsDB),the European Bank for Reconstruction andDevelopment (EBRD), and the European Invest-ment Bank (EIB).21

In addition, the effects of climate change on theprospects for sustainable development are serious.Many countries face major impediments todevelopment from changing rainfall and watershortages, rising sea levels, and temperaturefluctuations that will affect agricultural production,overall growth, and poverty-reduction prospects.The dual role of infrastructure in contributing toclimate change while providing important serviceshas not been adequately addressed in ways thatwould create opportunities to generate morepositive effects in well-designed infrastructureprojects. These potentially adverse impacts alsoneed to be addressed in the infrastructure-environment nexus to make sure that infrastruc-ture projects help protect against the impacts ofclimate change.

SummationThis brief review has illustrated the magnitude offuture infrastructure demand and the potentialenvironmental issues. Furthermore, it hasestablished that there are ample opportunitiesto mitigate the potentially negative impacts ofinfrastructure on the environment. The follow-ing sections will examine whether IFI projectshave been designed and executed properlywithin a well-structured environmental strategy,whether the IFIs adequately pursue opportuni-ties for environmental strengthening, and towhat extent they have been successful or fallenshort of desired results. Both the project andnational/sectoral levels will be considered.

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Notes1. Chameides et al., 1999, “Is Ozone Pollution

Affecting Crop Yields in China?” Geophys. Res.Lett., 26, 867-870 as cited in Zmarak Shalizi,2006a, “Climate Change Implications for EnergyInfrastructure in China and India (Clean Energyand Energy Efficiency),” ABCDE Conference.

2. Mitra and Sharma, 2002, “India Aerosol: PresentStatus,”cited in Shalizi above.

3. World Bank data as cited in Shalizi above.4. Cohen et al., 2004 “Mortality Impacts of Urban

Air Pollution,” cited in Shalizi above.5. Kenneth M. Chomitz, 2006, At Loggerheads?

Agricultural Expansion, Poverty Reduction, andEnvironment in the Tropical Forests.

6. World Bank, 1996, “Sustainable Transport: Priori-ties for Policy Reform”; and World Bank, 2006,“Safe, Clean and Affordable Transport for Growth:An Update of the World Bank’s Sector Prioritiesfor the Period 2007–2011.”

7. Reid et al., 2005, Ecosystems and Human Well-Being: Synthesis, p. 747.

8. Morris et al., 2003, Groundwater and Its Suscep-tibility to Degradation: A Global Assessment ofthe Problem and Options for Management, p.87.

9. United Nations Millennium Project, 2005, Health,Dignity and Development: What Would It Take?

10. African Development Bank, 2003 (July), Evaluat-ing Bank’s Support for Capacity Strengtheningof Urban Water Supply and Sanitation Entitiesin Regional Member Countries, and World Bank,2006, World Development Indicators.

11. Such approaches have proven successful in bothdeveloped and developing countries. John D.Shilling and Jennifer Osha, 2002, “MakingMarkets Pay for Stewardship”; and David Reed,2006, Escaping Poverty Grasps.

12. George Ledec and Juan David Quintero, 2003,“Good Dams and Bad Dams: EnvironmentalCriteria for Selection of Hydroelectric Projects.”

13. World Bank, 2006, World Development Indicators.14. See World Bank, 2005, Infrastructure and the

World Bank: A Progress Report, for GDP sharesin other regions.

15. African Development Bank, 2004, “African Develop-ment Bank Group’s Policy on the Environment.”

16. World Bank, 1997, Clear Water, Blue Skies; WorldBank, 2005, Environment Matters, AnnualReview; and Kirit S. Parikh, 2006, “India EnergyNeeds, Options and Environmental Sustainability.”

17. Zmarak Shalizi, 2006, “Energy and Emissions:Local and Global Effects of the Rise of China andIndia,” Chapter 5; GEF and World Bank, 2006,“Thailand Promotion of Electrical EnergyEfficiency Project.”

18. EBRD, 2005, “Power Sector Restructuring Loan,Summary of the Operation Performance Evalua-tion Review,” and EBRD, 2005, “Water and Waste-water Company, Summary of the OperationPerformance Evaluation Review.”

19. “Slow: Government Obstacles Ahead,” TheEconomist, June 17, 2006.

20. E.g., China and India; World Bank, 1997, ClearWater, Blue Skies; World Bank, 2005, EnvironmentMatters, Annual Review; Zmarak Shalizi, 2006,“Climate Change Implications for EnergyInfrastructure in China and India (Clean Energyand Energy Efficiency)”; and Kirit S. Parikh, 2006,“India Energy Needs, Options and EnvironmentalSustainability.”

21. EIB, “Proposal from the Management Committeeto the Board of Directors Concerning the EBRD-EIB Multilateral Carbon Credit Fund”; EIB, “EIBCarbon Funds Overview”; and EIB, “Proposal forCost Recovery Basis, World Bank-EIB CarbonFund for Europe (WB-EIB CFE).”

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CHAPTER 4

The Nexus at the Project Level

At the project level, much of the concern onenvironment is captured through safeguardpolicies and environmental assessments.However, analysis of the evaluations suggeststhat this approach may be too narrow, and in anycase is often more of a bureaucratic exercise thana serious attempt to enhance environmentalvalues in infrastructure-related projects.

National and IFI Project-LevelSafeguardsSafeguard policies outline the minimum require-ments necessary on the part of the IFIs to identify,avoid, minimize, mitigate, and monitor thenegative environmental impacts of projects.1

Safeguards are increasingly coordinated througha common framework and harmonizationprocess led by the Multilateral Financial Institu-tions Working Group on Environment, which alsoincludes some bilateral donors, export creditagencies, and others.2

Project screening highlights areas of possibleenvironmental impact and is used to categorizeprojects by the extent to which implementationwill impact the environment—from significantimpact to no impact at all. The WBG and AsDBcategorize projects into Type A, Type B, Type C,and Type FI. Type A projects are those with signif-icant potential to negatively impact the environ-ment; Type B projects have less severeenvironmental impacts; and Type C projects areunlikely to adversely impact the environment.Type FI flags lending through financial interme-diaries. Type A projects require full environmen-tal assessments (EAs), and Type B projectsrequire EAs of aspects which are expected tohave an impact on the environment. Other IFIsuse similar categories to determine environmen-tal impacts. 3

Most of the projects which have major environ-mental impacts are in infrastructure. Environ-mental assessments are designed to play a majorrole in defining the scope of these impacts, themanagement issues to be addressed, and theactions that need to be taken. They constitute amajor part of the IFIs’ environmental and socialsafeguard policies.

Safeguard policies play an important role at theproject level in improving the quality of projectsand reducing negative environmental impacts.However, compliance with safeguard policies ismost often focused on environmental factorsduring project preparation and appraisal. Theyhave increasingly become seen as a checklist thatnarrows the focus on environmental issues tothose explicitly listed in the safeguards. TheWorld Bank’s Third Environmental AssessmentReview (2002) found that EAs are often not usedto help identify projects in terms of alternatesites or means of achieving the project’s goalssince they are incorporated into the project cyclebeyond the point where such questions are mostrelevant.4 ECG evaluations have found that mostof their infrastructure projects focus primarily onissues “within the fence” of the project.5 The EAsare carried out by the borrower and are ofteninadequate in addressing all the environmentalissues. Furthermore, project teams report rarelyhaving adequate resources to properly addressenvironmental issues during the implementationperiod.6

The potential environmental impacts ofinfrastructure projects are likely to be moreextensive than project-specific safeguard policiesare designed to handle. For example, hydroelec-tric power projects are widely recognized ashaving broader environmental impacts that need

to be taken into account. The World DamCommission (2000) has described such impactsin detail. 7 Ledec and Quintero (2003) noted theenvironmental impacts of hydro dams areminimized by optimal site selection. From anenvironmental viewpoint, dams should not belocated along major rivers but on their uppertributaries.8 Thus, applying safeguards after a siteis chosen may be too late to minimize environ-mental impacts.

There are few positive incentives built into thesafeguard policies or project evaluations toencourage staff to take on environmentallycomplex projects.9 On the contrary, IFIs and taskmanagers have incentives to avoid projectswhich require an intensive environmental impactassessment (EIA), as they are costly toundertake.10 When there is strong externalpressure to do so, thorough environmentalassessments and management of projects areundertaken, as with the Chad pipeline project orthe Laos Nam Theun 2 dam project. However,task managers often perceive that the rewardsfor success in undertaking environmentally riskyprojects are outweighed by the detrimentaleffects of failure on career advancement.11 Theseperverse incentives created by the safeguardpolicies result in “rational” decisions by IFI staffand executing agencies for the IFIs to not beinvolved in some challenging projects. However,it is possible that alternative financing sourceswould apply less-stringent environmentalstandards and oversight than the IFIs. Futureevaluation efforts might assess the extent towhich this occurs, and the implications for IFIsafeguard policies and staff incentives.

Environmental Classification of IFIProjectsThis type of procedural compliance underminesthe spirit of safeguard policies.12 The costsassociated with environmental assessments maylead IFI staff not to undertake some valuableprojects or to misclassify Type A projects as TypeB projects. A comparison of road rehabilitationprojects funded by the WBG and the AsDBfound projects with similar environmentalimpacts were likely to have different environ-

mental categories at the two institutions. In boththe World Bank and AsDB, the rigor with whichthe environmental safeguards are applied variesacross regions. The AfDB has reported instanceswhere projects were misclassified as well.13 TheAsDB has noted that some projects are specifi-cally designed to exclude components thatwould get an A rating.14 With different safeguardrequirements for different categorizations, theimplications for environmental degradation areclear. Projects with Type A environmentalimpacts, if misclassified as Type B, would besubject to the less-stringent safeguard policiesof Type B projects, placing the environment atrisk.15

Project Success and EnvironmentalPerformanceIt is common to assume that in order to meetenvironmental standards, projects must bearadditional costs or forgo some benefits. Butwhen consideration of environmental impactscontributes to better project design or negativeimpacts are otherwise compensated, there maybe no such tradeoff. This may involve moreextended consideration of the indirect impacts,externalities, or public good implications inestimating the real costs and benefits.

AsDB experience with water projects hasdemonstrated that successful projects canimprove both economic conditions and theenvironment, while weak design and executionmay result in immediate economic gain but leadto detrimental environmental effects which limitthe sustainability of these gains or even lead tonegative overall results. The Dalian project inChina addressed major problems of watershortages and pollution around the city ofDalian, which posed a serious constraint on itseconomic growth. The project design consid-ered the linkages among water projects andenvironmental issues, and the project was ableto increase good water supplies while treatingwastewater and reducing industrial pollutants.16

However, other AsDB water projects in Sri Lankaand the Philippines have produced poor resultsdue to lack of integrated planning and mitigationprocesses.17

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A review of transport and power projects by theInternational Finance Corporation (IFC) illus-trates that projects which perform well environ-mentally also perform well financially, as shownin Table 4.1. The mean rate of return for projectswith satisfactory environmental assessmentratings is statistically indistinguishable from themean for those with unsatisfactory ratings.18 Thissimple tabulation illustrates that successfulapplication of safeguards can maintain orimprove economic returns. It is consistent withthe hypothesis that well-designed and executedprojects perform well on both environmentaland financial measures.

Monitoring Operation and Maintenancefor Environmental Outcomes Operations and maintenance matter a lot toenvironmental impact. Projects need to beefficiently managed during their operating lives.Depending on the type of project, monitoringmay require following proper operationalprocedures for the equipment, assuring regularmaintenance and repair, and monitoring theactivities of users. Yet operations, maintenance,and management of completed public sectorprojects are generally not monitored by the IFIs.

It is hard to assess the infrastructure-environmentnexus if we lack the most basic monitoring data.

Environmental outcomes of projects are evaluatedand rated by only three IFIs: the AfDB, EBRD, andIFC, while EIB formally reports on environmentaloutcomes in its evaluations but does not give arating. However, the assessments may behampered by inadequate data or reporting. Thelack of monitoring or baseline data also suggeststhat project design may not have adequatelyincorporated environmental considerations.

Even where environmental outcomes areevaluated, monitoring of public sector projects israrely continued after project closing. Insufficientdata and too short a monitoring time-frame makeit difficult to determine (i) whether thesafeguards have been effectively implemented,however well the they were designed into aproject; (ii) whether environmental strengthen-ing actions have been carried out; (iii) whetherthe expected benefits have been achieved; or (iv)whether there are significant environmentalimpacts that need to be addressed. However,longer-term supervision is demonstrably feasible.The IFC and EBRD keep track of private sectorprojects, including monitoring for environmentalfactors, until the loan is fully repaid or their equitysold. The EIB requires member countries torespect EU environmental regulations during theoperation of its projects, assuring longer-termobservance of environmental norms.19

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Environmental assessment Average economic Average financial rating rate of return rate of return

Satisfactory 20.8% 12.7%

Min = 5.0% Min = 2.2%

Max = 62.4% Max = 34.6%

(11.1) (6.3)

N = 37 N = 30

Unsatisfactory 19.2% 10.6%

Min = 11.5% Min = 3.0%

Max = 31.6% Max = 17.6%

(8.8) (6.0)

N = 7 N = 7Note: Standard deviations in parentheses. Economic rates of return exclude environmental benefits. Includes power and utilities; transport and warehousing.

Table 4.1: Mean Rates of Return by Environmental Assessment Rating, IFC Infrastructure Projects 1996–2004

Notes1. World Bank, 2002, Safeguard Policies:

Framework for Improving DevelopmentEffectiveness. The World Bank Group’s (WBG)safeguard policies include environmental assess-ments, natural habitats, resettlement, indigenouspeoples, forestry, dam safety, pest management,protection of cultural property, internationalwaters, and disputed areas. The Asian Develop-ment Bank’s (AsDB) safeguards include policieson involuntary resettlement, indigenous peoplesand environmental policy. The IFC’s Environ-mental and Social Performance Standards areincluded under the umbrella of safeguards. TheIFC’s standards include policies on social andenvironmental assessment and management,labor and working conditions, pollution preven-tion and abatement, community health, safetyand security, land acquisition and involuntaryresettlement. The focus of this review is onsafeguard policies directly related to the environ-ment.

2. World Bank, 2005, “A Common Framework forEnvironmental Assessment, A Good PracticeNote.”

3. AfDB uses category I for those with environmen-tal impact and II for those without. The EIB has adouble classification. Ex ante, EIB refers to the EUDirectives with four categories: A and B with EIA,C with EA, and D without; acceptability (onenvironmental grounds) and degree of residualenvironmental risk are measured again with fourlevels, A being acceptable and low risk, B1 accept-able with moderate risk, B2 acceptable with highrisk, and C not acceptable with high risk.

4. World Bank, 2001, Third Environmental Assess-ment Review (FY 96–00), p. 41.

5. See, for example, AsDB, 2005, “CountryAssistance Program Evaluation for Indonesia”;EBRD, “Municipal Water and Waste-WaterServices, Summary of the Operation PerformanceEvaluation Review”; IDB, 2003, “Project Perfor-mance Monitoring and Classification, Guidelinesfor Project Performance Monitoring Report”; andWorld Bank, 2006, “Infrastructure: Lesson from

the Last Two Decades of World Bank Engage-ment.”

6. Based on staff interviews and several evaluationreports from ECG members and environmentalunits.

7. World Commission on Dams, 2000, Dams andDevelopment: A New Framework for DecisionMaking.

8. George Ledec and Juan David Quintero, 2003,“Good Dams and Bad Dams: EnvironmentalCriteria for Selection of Hydroelectric Projects.”

9. AsDB, 2006, 2005 Annual Evaluation Review;IEG, 2002, Bridging Troubled Waters: Assessingthe World Bank Water Resources Strategy; IEG,2003, Power for Development: A Review of theWorld Bank Group’s Experience with PrivateParticipation in the Electricity Sector, andinterviews with WBG staff.

10. For task managers at the World Bank, the risksassociated with review by the Inspection Panelare deemed to be great.

11. AsDB, 2006, “Environmental Safeguards.”12. One of the major findings of the AsDB’s recent

study was an overemphasis on proceduralcompliance—an application of rules at theexpense of results.

13. AfDB, 2004, “African Development Bank Group’sPolicy on the Environment.”

14. AsDB, 2006, “Environmental Safeguards,” p. 28.

15. AsDB, 2006, “Environmental Safeguards,” p. 28.

16. AsDB, 2003, “Dalian Water Supply Project in thePeople’s Republic of China, Project PerformanceAudit Report.”

17. AsDB, 2002, “Impact Evaluation Study on WaterSupply and Sanitation Projects in SelectedDeveloping Member Countries.”

18. These results derive from a small sample andshould be interpreted with care.

19. EBRD, 2005, Evaluation Policy; EIB, 2004, EIBEnvironmental Statement; IFC, “IFC’s Policy andPerformance Standards on EnvironmentalSustainability and IFC’s Disclosure Policy,” andinterviews with staff.

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CHAPTER 5

Sectoral and National Policies

The preceding section strongly suggests thatproject-level environmental assessments, bythemselves, however well done at the projectlevel, do not adequately handle the nexus issues.ECG evaluations indicate that the environmentalanalysis of most of their infrastructure projectsfocuses primarily on issues “within the fence” ofthe project.1 They often do not look “beyond thefence” to assess the whole “area of impact.” Theydo not consider the interactions among projectsover time and space, nor do they undertake life-cycle analyses of the project’s impacts, includingprocurement and sources of inputs to theconstruction and operation of the project (e.g.,fossil fuel production for and transportation tothermal power projects). Infrastructure pro-grams and projects are often not linked to largernational environmental strategies and assess-ments, nor are alternatives fully considered inenvironmental assessments, which themselvesmay be weak, limiting the potential to designprojects that strengthen the environment.2 TheIFC, however, has recognized the need to movebeyond the fence, and its recently revisedenvironmental policy emphasizes the need toaccount for a broader area of impact in environ-mental assessments.3

Spatial Coordination of Projects Our analysis indicates that there are considerableadvantages to taking a broader view than theproject level—a regional, national, or sectoralview. The following section illustrates how thelack of a broader view can lead to environmentalproblems and how taking a broader view canresult in more successful results.

Watershed management is one of the mostimportant areas to look “beyond the fence”when planning projects. A project’s local benefits

can be vitiated by upstream activities ordownstream impacts. For instance, hydrologistIan Calder argues that construction of watercatchment structures in small semi-arid Indianwatersheds does not increase the total amountof available water; instead, these structuresmerely shift water from one user to another.

The environment, including links to poverty allevi-ation, was well embedded in the AsDB strategydocuments following an increased emphasis onthe environment in the early 1990s; however, interms of achievement, the results have beenmixed. An AsDB evaluation of the Indonesiancountry assistance program demonstrates thatinadequate coordination among activities onenvironmental matters in a watershed can bedetrimental.4 Two kinds of coordination problemswere reported concerning the $2 billion oflending for river basin management projects.

First, projects in the same watershed weresometimes not integrated. For instance, separateand uncoordinated projects for land manage-ment and coastal management were put in placein Java in the 1990s, even though linkagesbetween land management and the coastalenvironment were well known. Second, plannedcoordination was not always successfullyimplemented. Flood control projects in Java’sshort, steep watersheds typically planned toundertake upper watershed management activi-ties such as regreening, sanitation, and controlson forest encroachment to enhance theeffectiveness of downstream infrastructure beinginstalled. However, the upper watershedactivities—the responsibility of a ministry notinvolved in the project—were typically notimplemented. In some cases the projects werecancelled due to corruption, lack of an

integrated approach, lack of sustainability, weakownership of environmental resource manage-ment, and lack of institutional capacity.

In contrast, the recent experience of planning aLaotian dam is more positive, although it is toosoon to draw conclusions about operationalimpacts.5 Hydro dams in Laos have attracted agreat deal of attention because of their adverseimpact on the environment and the welfare oflocal people. Broad public concerns over pastunsatisfactory performance related to environ-mental impacts and adverse effects on people ledthe WBG and the AsDB to create a broadlyintegrated project management team for NamTheun 2 to try to assure that all issues wereadequately addressed.

These concerns have been monitored closelyover 10 years, during which extensive analysis,consultations, and preparation were undertaken.There was considerable involvement of environ-mental groups, although some criticism remains.Several related projects and grants were made tomanage the watershed of the dam and addressother environmental and social issues over alonger term. Since the implementation of theNam Theun 2 project is in its early stages, itremains to be seen whether the integratedapproach will continue to produce satisfactoryoutcomes over the life of the project.

The challenges faced in dealing with suchintegrated issues are illustrated in the less-prominent Nam Leuk dam. Although the projectwas rated as successful because it was technicallysound and resulted in substantial economicbenefits, the AsDB evaluation observed that theproject had not generated enough environmen-tal data and had not addressed the longer-termenvironmental maintenance issues or madeprovision to manage them over time. Itsuggested that such projects would benefit fromallocating a portion of their revenues tomanaging the environment in the watershed ofthe dam to assure its effective operation.

A Chinese project provides an example ofsuccessful integrative planning.6 The WBG

project for Sustainable Coastal ResourcesDevelopment in China started with a production-oriented goal of increasing aquaculture produc-tion in a coastal area, including some necessaryinfrastructure. After analysis of the likely environ-mental impacts of these activities, it became clearthat significant changes would be needed toassure sustainability. In mid-course, the projectobjectives were changed to improve the environ-ment by instituting coastal zone management, bydesigning project components that fit withinlocal carrying capacity, by conserving endemicspecies, by taking pressures off of natural stocks,and by assuring environmental monitoring. Inshort, the project transformed from a narrow “dono harm” approach to the environment to amore inclusive “doing good” approach.

Promoting Efficiency of Infrastructure Another sector-level issue is to consider the mixof infrastructure investment: spanning the rangefrom new construction, to improved efficiency innew and existing operations, to better manage-ment of demand and conservation. Burgeoningdemands for water and power can be met eitherby building new infrastructure capacity or bypromoting greater efficiency in the distributionand use of the infrastructure services. From anengineering and project planning perspective,building capacity is simpler. On the other hand,correcting inefficiencies offers the potential forlarge financial returns and improved environ-mental outcomes. Inefficiencies can arise frompoor design and management or from marketfailures of various kinds. IFI interventions canhave significant impacts in both of these areas.These interventions can take place either on thesupply side (e.g., reduction of distribution lossesin irrigation, power, or district heating) or thedemand side (e.g., promotion of proper pricingand market based incentives, efficient lighting,or drip irrigation).

Promotion of efficiency has been a majorconcern of the EBRD. Inefficiencies are rife in itsarea of operation. District heating plants operatewith 35–40 percent distribution losses, ascompared with a more typical five to sevenpercent in other regions. There are similar losses

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in electricity transmission and distribution. Inindustry, Russian and Ukrainian steel millsconsume 32 percent and 100 percent moreenergy, respectively, than EU counterparts.Consequently the EBRD invested 11 percent ofits total portfolio over 1991–2000 (Ä1.67 billion)in projects to increase energy efficiency. Whilethe projects did not generally incorporatemonitoring and evaluation systems sufficient toyield quantitative measures, an EBRD evaluationconcluded that 11 of 15 studied projectsachieved “good” or “outstanding” improvementsin energy efficiency. The review concluded that“it would be adequate to study more carefully theregional energy supply and demand scenarios tomake sure that investment in extensive newpower generation capacity is really needed. Analternative to new large investments could beinvesting in better demand side management toreduce the energy demand.”7

This alternative is being actively promoted by theGlobal Environment Facility (GEF) throughenergy conservation projects. The GEF’s evalua-tion of a Thailand demand-side managementproject found impressive results, though theresults are sensitive to assumptions about thecounterfactual.8 The $60 million project pro-moted the dissemination and use of high-efficiency light bulbs and refrigerators. It had abenefit-to-cost ratio of 1.7 (evaluated at a 10percent discount rate) over 1993–2000. This didnot include the value of projected greenhousegas emissions reductions of 25.3–45 million tonsof CO2 over 1993–2004. The project was alsoestimated to reduce SOx emissions by6,600–12,400 tons and NOx by 66,700–119,900tons. It was projected to reduce peak electricaldemand by about a gigawatt—in other words,effectively substituting for a large generatingplant.

Some countries have made progress in reformsto increase efficiency. The AsDB has fundedindustrial energy efficiency projects in India,China, and elsewhere. India, for instance, hasreduced diesel subsidies and set up regulationsrequiring industrial energy audits. Kerosene,liquid petroleum gas, low-grade coal, and other

energy sources remain subsidized, however,dampening incentives for investments inefficiency.9 Four of eleven AsDB India subpro-jects realized increases in efficiency of 18 percentor more.10 In China, a multicomponent projectsucceeded in boosting outputs and improvingfinancial performance while reducing energyintensity at cement and caustic soda plants. Thereal financial rates of return were in the 8–10percent range, with higher economic rates ofreturn. At one soda plant, there was a 64 percentreduction in the ambient concentration of partic-ulates, a 92 percent reduction in wastewaterflows, and other pollution reductions.

National and Sectoral Policy Issues National and sectoral policies can have aprofound influence on the infrastructure-environment nexus. This is especially true withrespect to infrastructure pricing, often set bygovernment policy in the case of publicly ownedor regulated infrastructure. There are oftenpolitical pressures for local or national govern-ments to under-price water, electricity, and fuel.Justified as protecting the poor, subsidies orprice controls often end up providing dispropor-tionately large benefits to higher-income people.Evaluations have shown that even poor users arewilling to pay for water and other services, if theyunderstand and respect the operation of theproject.11 Under-pricing also leads to artificiallyhigh demand and thus either to the constructionof unneeded infrastructure or to excess demandand shortages. This can intensify environmentaldamage, as when unreliable power grids inducefirms and households to buy small, pollutingdiesel generators. At the same time, under-pricing jeopardizes operations and maintenanceof the infrastructure plants. Pricing policies alsoaffect the willingness of the private sector toparticipate in infrastructure provision.

Lack of adequate pricing of infrastructureservices can adversely affect the management ofnatural resources, with both economic andenvironmental impacts. An evaluation of theWBG’s country assistance strategy for Moroccoreported the effects of policy distortions onwater use.12 Water is Morocco’s most pressing

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environmental problem. About 85 percent of it isused for irrigation, for which fees are collected.However, in the case of the large-scale schemessupported by earlier projects, fees fell well shortof covering the costs of operation and mainte-nance and thus required substantial subsidies tothe water suppliers. These water subsidies, inconjunction with trade protection of certainagricultural imports, have encouraged expansionof water-intensive crops in which Morocco hasno comparative advantage. The AfDB’s analysisconfirms Morocco’s weak water planning andmanagement, highlighting its failure toadequately link provision of sanitation toextensions of clean water supply, contributing toincreased wastewater pollution.13 Morocco’s keywater management issues would be moreeffectively addressed through policy reforms toremove subsidies and trade barriers to encour-age efficient planning, rather than by moreinfrastructure construction.

Institutional Issues at the Sectoral and National LevelsInvesting in institutional capacity building isfundamental to dealing with the nexus at thesectoral and national levels. Three distinctiveinstitutional issues of planning, policy, andimplementation have been identified. Two ofthese are important to the nexus, but broader inscope: setting up systems to fight corruption andencouraging and regulating private sector partic-ipation in infrastructure. A third is central to thenexus: the application of strategic environmentalassessments and country environmentalassessments.

Corruption and GovernanceCorruption is increasingly becoming the focus ofattention of the IFIs.14 This paper does notconsider broad corruption issues, which arebeing addressed by other units in the IFIs, butonly corruption that directly affects theinfrastructure-environment nexus and leads towaste or misuse of project resources anddegradation of the environment.15 WBG hasexamined the problems corruption poses forinfrastructure and other activities in a number ofits country evaluations and found that it poses

serious problems.16 Many of the weaknesses andshortcomings of infrastructure programs andprojects stem from corruption that affects theirdesign, contracting processes, and execution,which can lead to more negative environmentalimpacts stemming from delays in implementa-tion, failure to observe safeguards, misuse of landand other resources, and diversion of resourcesallocated to addressing environmental issues.

In 2004, local, independent research firms inChina, Indonesia, Japan, the Philippines,Thailand, and Vietnam conducted a survey of 132nongovernmental organizations (NGOs) toassess the relationship between infrastructureand corruption.17 The respondents wererandomly chosen from lists provided by anumber of sources. The survey found that: (i) 95percent of respondents felt that corruption wasan obstacle to providing infrastructure; (ii) 91percent felt that the potential for corruptionshould be taken into account in planninginfrastructure; and (iii) 77 percent felt that theirgovernment was not doing enough to preventcorruption in infrastructure. Factors that helpexplain why corruption is often associated withinfrastructure include: (i) monopoly structureprovides significant opportunities for rent-seeking; (ii) political protection and interventionblurs financial accountability and provides coverfor a range of corrupt activities; (iii) infrastruc-ture providers can inflate levels of capitalspending or hide under-investment; (iv) thelarge scale of infrastructure creates opportuni-ties for large kickbacks in procurement or awardof franchises; (v) lack of transparent procedures;and (vi) crony capitalism. There are manyexamples of these kinds of practices.

While IFI policies (such as for procurement) areimportant in the fight against corruption, institu-tionalizing good governance requires additionalactions at the local, sectoral, and national levels.The AsDB has analyzed how these factors work,as discussed in Box 5.1. Monitoring the activitiesof government agencies by the public can helphold a government accountable for its actionsand reduce misuse of pubic funds. One way todo this is to involve the relevant communities in

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the design and oversight of infrastructureprojects and in regularly monitoring projectmanagers. Although few projects try to addressthis issue, it has been done with positive results,as the Bangladesh case shows in Box 5.2.

Private Sector InvolvementThe public-private sector interaction is central tothe infrastructure-environment nexus. Privatiza-tion of many elements of public infrastructurehas been a major component of the IFIs’infrastructure strategies over the past decadeand a half. A growing portion of infrastructure isbeing shifted to the private sector in a number ofdeveloping countries to improve the efficiencyof production and delivery of services, gainaccess to private investment funds, and extendthe range of services. The private sector hasfinanced 20–25 percent of investment ininfrastructure in developing countries in the past

15 years. It peaked at $128 billion in 1997, andthen fell back to $58 billion in 2005.18

The results of private sector involvement havebeen mixed. In some cases, the private sector hasdone well in providing the needed services, andhas often done as well or better than IFI projectsin respecting conventional environmentalsafeguards.19 The IFC has effectively promotedthe Equator Principles, which establish soundenvironmental guidelines for private investment,and which have been widely accepted amongprincipal private international financing agents.In other cases, progress has been less thanexpected due to risk factors, ineffective govern-ment regulation procedures, problems inestablishing profitable rates or levels of subsidies,and concerns about natural monopolies andequitable access to the infrastructure services.20

As a result, the rate of privatization has stagnated.

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The WBG financed this project with the Rural Electrification Board.It was designed to expand access to electricity in rural areas andto prevent corruption. The latter goal was achieved by a series ofmeasures to assure that consumers elected the Boards of eachcooperative, approved and monitored the salaries of managers,monitored performance targets, reduced incentives for impropermeter reading, and made public the surveys of potential con-

sumers and payments on each part of the distribution network. Theproject added 600,000 new customers each year, maintained lowlosses (13 percent), and had high collection rates (97 percent). Therural electrification has increased agricultural productivity, raisededucation levels, and improved the quality of health services inareas’ service (“Scaling Up Infrastructure: Building on Strengths,Learning from Mistakes,” 2006, World Bank).

Box 5.2: Public Accountability to Reduce Corruption: Bangladesh Rural Electrification

As part of a broader power sector evaluation the AsDB ex-amined corruption in the power sector in the Philippines in 2005.This sector was generally considered to be susceptible tocorruption, indicated by various sources, frequent cost over-runs in projects, and the general perception that corruption waswidespread in the Philippines. Despite extensive legislationagainst corruption, few cases were brought to court. TheAsDB review identified the risks of corruption at each stageof the project cycle, from bidding to execution and manage-ment, examined how specific projects had been affected (both

AsDB and other projects), and proposed means of combatingcorruption under the Keep It Simple and Transparent princi-ple. Measures included increasing transparency, introducingmitigating measures at each stage of the project cycle, mak-ing more information available to the public via the Internet,building civil society capacity to monitor and report on proj-ects, monitoring actual payments, and harmonizing activitieswith other development partners (“Sector Assistance Pro-gram Evaluation of Asian Development Bank Assistance toPhilippines Power Sector,” 2005, OED).

Box 5.1: Addressing Corruption in the Power Sector

The IFIs are revising their approach to helpdevelop programs and policies that will encour-age a resurgence in private investment ininfrastructure to meet growing needs. The EIB ispromoting EU directives which are in manyrespects equivalent to (or more stringent than)the Equator Principles.

Promoting more private sector participation ininfrastructure requires proper policies and theirenforcement at the sector level. It is important tocreate an effective enabling environment in thesesectors to attract more private funds, to assurethat their projects are operating effectively, toconfirm that they meet the infrastructure needsof all segments of the population, and to provideclear guidance on environmental standards. Theexperience in Morocco has demonstrated thatwith these conditions, the private sector cancontribute a great deal to expanding infrastruc-ture efficiently. See Box 5.3.

Projects by the EBRD and EIB to facilitate thetransformation of eastern European economiesregularly deal with improving the managementof infrastructure at the local level, as a means toprepare for privatization or to permit long-termconcessions. The EBRD is also working topromote compliance with EU environmentalstandards. See Box 5.4.

Strategic Environmental Assessment, NationalCapacity, and Public Involvement“Strategic environmental assessment” (SEA) is aterm broadly applied to the scaling up of

environmental assessments beyond the projectlevel to the sectoral or national level. Thus SEAs,if properly institutionalized, would be anappropriate vehicle for addressing the nexusissues. SEAs are sometimes commissioned inconnection with IFI projects, but may also beundertaken by national agencies and integratedwith the policy process.

A recent WBG (2005) review notes the increasinguse of SEAs in connection with sectoral loans,including adjustment (policy) lending.21 Itlooked at six examples of SEA applications tosectoral policies, including assessments of Slovakenergy policy, Argentine and Colombian waterand sanitation policy, Czech Republic tourismpolicy, and South African industrial policy. TheSEAs varied in their integration into the policyprocess, from fully integrated (Slovak case) to“late-stage effort” (Czech Republic case) todisintegrated (South Africa). The review foundthat with the exception of the South African case,all the SEAs influenced policy design—on paper.But the review was unable to confirm impacts onactual policy implementation.

Designing and implementing effective infrastruc-ture programs that respect the environmentrequires a sound national environmental strategythat identifies key concerns, sets environmentalstandards, and helps coordinate programs acrosssectors and over a reasonably long time horizon.To accomplish this, an environmental manage-ment agency or other entity must be in place tocollect data on key environmental indicators,

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Since the early 1990s, Morocco has pioneered public-private part-nerships in the Middle East and North Africa. Beginning withMaghreb Gas Pipeline, the government has extended private par-ticipation to cover the full range of infrastructure. While the WorldBank has continued to fund some projects, including rehabilitationof services in the water supply and sanitation sector, most infra-structure funding has come from private sources. The Bank hasbeen called upon to provide expertise in various areas to assist the

government in designing and implementing pragmatic methods ofengaging the private sector—licensing, concession managementcontracts, privatization of state-owned companies, etc. As a re-sult, Morocco has attracted over $13 billion of private investmentin infrastructure, improved the management of state-owned in-frastructure, and increased access to efficient infrastructurethroughout the economy (“Scaling Up Infrastructure: Building onStrengths, Learning from Mistakes,” 2006, World Bank).

Box 5.3: Public-Private Partnerships in Infrastructure: Pragmatism in Morocco

make the information public, and enforceenvironmental regulations. National and localauthorities must give high priority to the environ-ment, assure staffing is adequate to addressenvironmental matters, and promote coordi-nated planning among government agencies,multilateral financiers, and the private sector.

The AsDB evaluation of environmentalsafeguards found that while some developingmember countries have relatively well-developed environmental safeguard systems,others do not. To move toward adopting theimproved country systems in a phased andconcerted manner, the member countries maybe divided into at least three groups: (i)countries with well-developed systems thatembody most of the objectives and principles ofAsDB’s policies and with a reasonable trackrecord in implementation; (ii) countries withsemi-developed legal, institutional, and policyframeworks and some capacity for environmen-tal safeguards but requiring substantial strength-ening; and (iii) countries with weak systems andcapacity. Any move toward adopting countrysystems should not be achieved throughwatering down AsDB’s current environmentalsafeguard standards. These findings apply toother IFI members as well.

Sound infrastructure sector policies andpractices are vital for the success of projects andfor meeting sectoral and development goals.ECG evaluations have shown that where

member countries have appropriate legal andregulatory frameworks and accountabilitysystems, and where they encourage trans-parency and public participation, there are pos-itive effects on integrating infrastructure-environmental programs, and potential gains arerealized.22 Without such capacities, or withoutadequate attention by national authorities and bythe IFIs, there may be poorer environmentalresults. See Box 5.5.

Environmental management requires a host ofcapabilities in addition to SEAs, includingenvironmental monitoring and enforcement.Countries should be encouraged to createeffective national strategies and action programsthat provide the basis for assessing their environ-mental needs and associated risks and to collectthe relevant information needed to design andmonitor environmentally sound infrastructureprojects. The IFIs could assist in preparing thesestrategies where needed, and could take them(or their deficiencies) into account in preparingtheir country assistance strategies and sectorlending programs. Improving capacity at nationaland other levels is vital to project and programsuccess, as illustrated by the AfDB’s experiencein Mozambique. See Box 5.6.

Evaluations also indicate that involvingstakeholders and beneficiaries can have quitepositive effects on infrastructure investments.The people involved appreciate better what isbeing provided, how they will benefit, and what

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In the Central and Eastern Europe Region, in the early 1990s, mostmunicipalities had existing systems that needed to be upgradedto bring the systems into compliance with EU environmentalstandards. In Estonia, EBRD worked initially with the national gov-ernment to commercialize the capital city’s water and wastewatersystem. Once under municipal ownership, EBRD worked with thecity to bring the operating plants into compliance with EU stan-dards in preparation for privatization, meeting the EBRD’s envi-

ronmental objectives. The system was successfully privatizedand the new company has issued shares on the local exchange.In Sofia, Bulgaria, EBRD again worked with the municipality toimprove the city’s water and wastewater system. This munici-pality chose a slightly different path and established a long-term (15-year) concession. The system has been upgraded tomeet EU standards, partly through EU-Phare co-investments(from EBRD contribution to report).

Box 5.4: Privatization of Public Water and Wastewater Systems in Central and Eastern Europe

the costs will be. They can provide valuableinputs into the design and management ofprojects and are more willing to bear the costs,up to their capacity. The experiences in Boliviashown in Box 5.7 illustrate that propercommunity involvement produces good results,and failure to do so can lead to real problems.The AsDB review of environmental safeguardsunderlines how the interest of NGOs in mitigat-ing environmental problems has sometimesresulted in achieving better development resultsby creating pressures for continued AsDBmonitoring after project completion.

Local groups can play a pivotal role in initiatingsound infrastructure projects. In Ethiopia, a groupof women convinced an international NGO tobuild a large reservoir scheme with 32 communitywater-distribution points. This investment freedup the women’s time that had been spent fetchingwater, allowing them to engage in more produc-tive activities and improved access to safe waterfor the community. Community consultationsresulted in the management and ownership of thedam being granted to the women, who functionthrough a general assembly and executive boardand manage the water sustainably.23

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The January 2006 WBG-IEG evaluation of Yemen’s country as-sistance strategy pointed out that the paramount environmen-tal concern of water availability had been ignored in thestrategies until quite recently. Even when addressed in princi-ple, projects focused on groundwater management and con-servation did not receive adequate attention. Lack of specialists

on the team and staff turnover, along with focus on macro pol-icy issues rather than domestic capacity building and provid-ing functioning capital, also contributed to this. Similar problemswere observed in the evaluation of the Jordan assistance pro-gram (“Republic of Yemen, Country Assistance Evaluation,”2006, IEG (OED)).

Box 5.5: Yemen Needs Water

The second power project of the AfDB in Mozambique was de-signed to extend and rehabilitate the national power grid in1996. It was initially rated as Category II (no EIA needed). It waslater discovered that there would be environmental impacts, andthe executing agency (EdM) subsequently carried out an EIA,which recommended a number of mitigating measures. Unfor-tunately, neither the EdM nor the environmental ministry wasable to assure that the contractors carried out these recom-mendations, and the AfDB did not provide adequate environ-mental supervision. An environmental specialist participated in

only one of 15 supervision missions. And there was inadequatereporting by the executing agency. As a result, environmentalresults were only partially satisfactory, but fortunately the dam-age was not permanent and overall the project has provided sub-stantial benefits in energy availability in Maputo. The AfDB andgovernment have subsequently begun working to improve theenvironmental management of projects by strengthening nationalagencies and improving monitoring and supervision. Lessonswere learned and progress is being made (AfDB report).

Box 5.6: Strengthening the Role of Governments: Dealing with Mozambique’s Energy Sector

Notes1. See, for example, AsDB, 2005, “Country Assistance

Program Evaluation for Indonesia”; IEG (OED),The Effectiveness of World Bank Support forCommunity-Based and -Driven Development;IDB, 2003, “Project Performance Monitoring andClassification, Guidelines for Project PerformanceMonitoring Report”; and World Bank, 2006,“Infrastructure: Lesson from the Last Two Decadesof World Bank Engagement.”

2. AsDB, 1998, “Special Evaluation Study on theSocial and Environmental Mitigation Measures inSelected Bank-Financed Projects”; AsDB, 2004,“Fourth Rural Water Supply and Sanitation SectorProject in Nepal, Project Completion Report”;World Bank, 2006, “Infrastructure: Lessons fromthe Last Two Decades of World Bank Engage-ment.”

3. IFC, 2006, “IFC’s Policy and PerformanceStandards on Environmental Sustainability” and“IFC’s Disclosure Policy.”

4. AsDB, 2005, “Country Assistance ProgramEvaluation for Indonesia.”

5. AsDB, 2004, “Nam Leuk Hydropower Project inthe Lao People’s Democratic Republic, ProjectPerformance Audit Report”; World Bank, 2005,Environment Matters, Annual Review; and WorldBank, 2006, “Infrastructure: Lessons from the LastTwo Decades of World Bank Engagement.”

6. IEG (OED), 2002, Promoting EnvironmentalSustainability in Development: An Evaluation

of the World Bank’s Performance.7. This paragraph is based on EBRD, “Project

Evaluation Department. Summary of SpecialStudy: Evaluation of Energy Efficiency in BankProjects.”

8. GEF and World Bank, 2006, “Thailand Promotionof Electrical Energy Efficiency Project, Post-Implementation Impact Assessment.”

9. AsDB, 2005, “Industrial Energy Efficiency Projectin India, Project Performance Audit Report.”

10. AsDB, 2005, “Industrial Energy Efficiency Projectin India, Project Performance Audit Report,” andAsDB, 2005, “Industrial Energy Efficiency Projectin India, Project Performance Audit Report.”

11. IEG (OED), 2002, Bridging Troubled Waters:Assessing the World Bank Water ResourcesStrategy; IEG (OED), 2003, “Efficient, SustainableService for All? An OED Review of the WorldBank’s Assistance to Water Supply and Sanitation.”

12. IEG (OED), 2001, “Morocco Country AssistanceEvaluation.”

13. African Development Bank, 2003 (July), Evaluat-ing Bank’s Support for Capacity Strengtheningof Urban Water Supply and Sanitation Entitiesin Regional Member Countries.

14. IEG, 2006, “Governance and Anti-Corruption:Ways to Enhance the Bank’s Impact.”

15. AsDB, 2005, “Sector Assistance Program Evalua-tion of Asian Development Bank Assistance toPhilippines Power Sector”; World Bank, 2006,“Infrastructure: Lessons from the Last TwoDecades of World Bank Engagement.”

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Water Supply and Sanitation in Bolivia: Getting It Right: In the1990s, the World Bank supported two water projects in Bolivia.One, PROSABAR, initially devoted resources to organizing andtraining communities, which helped pick projects that met localdemands in accordance with their ability to pay for operation andmaintenance, and which assured that the full benefits of safewater, sanitary excreta disposal, and health education wereprovided. The other was a general loan to the Social InvestmentFund, which concentrated on building projects quickly, with lit-tle community involvement and little success. It did poorly. ThePROSABAR project was so successful that the general loanproject was retrofitted to include the community involvement, withmuch improved results (“Efficient, Sustainable Service for All?

An OED Review of the World Bank’s Assistance to Water Sup-ply and Sanitation,” 2003, IEG (OED)).And Getting It Wrong: In dealing with water in the major cities,the World Bank insisted on privatization of the water providersbefore making its loan. This led to such popular opposition in thetwo largest cities that the privatization deals had to be restruc-tured, and the government regulation was inefficient. This re-sulted in little or no improvement in services, but unacceptableincreases in rates in poor areas, due to poor planning and man-agement by the Bank and government. In one city, a participa-tory consumer cooperative was established, and the resultsexceeded expectations (“Scaling Up Infrastructure: Building onStrengths, Learning from Mistakes,” 2006, World Bank).

Box 5.7: Community Involvement in Infrastructure: Getting It Right (and Wrong) in Bolivia

16. IEG (OED), 2001, India: The Challenges ofDevelopment: A Country Assistance Evaluation;IEG (OED), 2004, China: An Evaluation ofWorld Bank Assistance; IEG (OED), 2004,Brazil: Forging a Strategic Partnership forResults: An OED Evaluation of the World BankAssistance; IEG (OED), 2005, Bolivia, CountryAssistance Evaluation; and IEG, 2006, Pakistan:An Evaluation of World Bank’s Assistance.

17. AsDB, Japan Bank for International Cooperation,and the World Bank, 2005, Connecting East Asia:A Framework for Infrastructure, Box 4.3.

18. Oxford Analytica, 2006, “Private Money Neededfor Infrastructure.” There is a larger share ofprivate infrastructure investment in somecountries than others.

19. IEG (OED, OEG, OEU), 2003, Power for Develop-ment: A Review of the World Bank Group’s Experi-ence with Private Participation in the ElectricitySector; IFC, 2006, “IFC Sustainability Report 2005.”

20. IEG (OED), 2002, Bridging Troubled Waters:Assessing the World Bank Water ResourcesStrategy; IEG (OED, OEG, OEU), 2003, Power forDevelopment: A Review of the World BankGroup’s Experience with Private Participationin the Electricity Sector; World Bank, 2006,“Scaling Up Infrastructure: Building onStrengths, Learning from Mistakes.”

21. World Bank, 2005, Integrating EnvironmentalConsideration in Policy Formulation: Lessonsfrom Policy-based SEA Experience.

22. AsDB, 2006, Environmental Safeguards, SpecialEvaluation Study; World Bank, 2006, “Infrastruc-ture: Lesson from the Last Two Decades of WorldBank Engagement.”

23. AfDB, 2003 (July), Evaluating Bank’s Supportfor Capacity Strengthening of Urban WaterSupply and Sanitation Entities in RegionalMember Countries.

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CHAPTER 6

Conclusions and Follow-Up

Infrastructure investments contribute impor-tantly to growth and poverty alleviation. Betterinfrastructure and the adoption of appropriatepolicies can help address the world’s environ-mental problems. But infrastructure generallyimposes environmental burdens that must bemitigated or compensated. Based on the ECGevaluations and other studies, this report haspresented evidence and arguments underliningthe importance of the nexus.

There are many opportunities to mitigateenvironmental burdens while meetingglobal demands for energy, transport, andwater. Perhaps even more importantly inmany cases, the right infrastructure canadvance environmental values, especiallywhen projects are properly integrated intothe national environmental strategy, welldesigned, and carefully managed. Many ofthese opportunities involve promoting efficiencyin the use of infrastructure services, thusreducing the need for new construction. Thesuggestions emerging from this review can begrouped into those for the leadership of the IFIs,those for the evaluators, and finally those forECG itself.

To the Management and Staff of the IFIsSeizing these opportunities requires that the IFIsgo “beyond the fence” of project-level planningby harnessing their multi-sectoral and policy-advisory experience. But as reported above, wehave found that project-level environmentalassessments often do not do this. Moreover,application of safeguard policies often is treatedmore as a matter of procedural compliance thanas an opportunity to consider project design inview of broader environmental considerations.ECG evaluations have found that infrastructure

projects tend not to consider the whole area ofimpact, interactions among projects, or life-cycleimpacts. ECG suggests that the management andstaff of the IFIs can address these issues by:• Incorporating environmental considerations

well upstream in project selection, design, andimplementation. This could entail changes inproject mix and greater degrees of sector andcross-project coordination in project selection.

• Shifting from a “checklist” application of safe-guards late in project design to incorporatingenvironmental considerations up front in proj-ect and site selection in order to improve theiroverall design and integration into nationalenvironmental objectives in relation to thenexus.

• Working with partner countries on strategicplanning that combines growth, poverty alle-viation, and environmental improvement; thatemphasizes removal of perverse subsidies andbetter maintenance of existing infrastructure;that promotes conservation measures to re-duce demand; and that uses natural capital asa substitute for physical capital where feasible.

• Supporting replicable pilot projects that sub-stitute environmental capital for physicalcapital—for instance, using watershed man-agement to complement water treatment andflood control infrastructure—and incorporat-ing monitoring and evaluation into these proj-ects to promote learning and to replicatesuccessful innovations.

To the Evaluators in IFIs and theCountriesOne obstacle to the pursuit of nexus opportuni-ties is a lack of quantitative evaluations of theeconomic and environmental impacts of policiesand projects. This lack is attributable in large partto the failure of the IFIs (or national authorities)

to track environmental performance of projectsand sectors. More rigorous analyses of successesand failures in pursuing the nexus could informthe IFIs and national agencies as they undertakestrategic assessments. Specifically, there are largepotential gains from evaluation processes that:• Undertake increased and more rigorous as-

sessment of economic and environmental im-pacts of infrastructure projects and policies

• Track environmental performance over thelong term through improved project-level datagathering and monitoring of environmentalimpacts during construction and post-construction operation

• Enhance national-level systems to check thatexpected nexus benefits are being achieved

• Use strategic environmental assessments toscreen for the right kinds of projects, to ensurespatial coordination of projects, and to identifypolicy reforms that promote efficiency and useof environmental substitutes for brick-and-mortar infrastructure. The comparative advan-tage of the IFIs is in promoting more complex,higher-payoff interventions to correct marketfailures.

To ECG MembersFrom the evaluation perspective, ECG membershave not consistently conducted rigorous cost-benefit analyses of nexus-related projects andprograms, nor have they worked together todevelop quantitative and qualitative databasesthat can help to evaluate them. They couldconsider strengthening their role in analyzingnexus issues by:

• Conducting rigorous analyses of the full costsand benefits of interventions to promote effi-ciency in infrastructure use, and pooling theseanalyses to determine the conditions underwhich efficiency-promoting projects or poli-cies offer high returns.

• Building and sharing databases on the pricingof infrastructure and related services and com-modities such as electricity, fuel, water, etc.These could facilitate comparative analyses ofinfrastructure projects and policies.

• Developing shared geospatial databases of in-frastructure projects in order to promote co-ordination, assess the appropriateness of sitingduring project design, and facilitate impactevaluation later. For instance, IFIs, bilaterals,and national authorities could pool informationon the location of proposed new road links andoverlay it on maps of population density,poverty, agricultural potential, biodiversity, andother measures of environmental sensitivity.

• Undertaking case studies of efforts to reformsuboptimal infrastructure policies to help theirorganizations learn from experience. For in-stance, it would be useful to study cases whereperverse subsidies were removed, analyze thepolitical economy of reform, study the resultsof institutional strengthening, and assess en-vironmental and distributional impacts.

• Carrying out more systematic reviews of pol-icy lending to determine its potential impactson the infrastructure-environment nexus. Thiscould cover both sector policy lending anddevelopment policy lending which affects na-tional policies.1

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Note1. AsDB, 2006, 2006 Annual Evaluation Review,

chapter II, and IEG (OED), 2005, The Effective-ness of World Bank Support for Community-Based and -Driven Development have begun toaddress some of these issues.

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“Safeguard Policy Update, a Discussion Note,” 2005(October). http://www.adb.org/Documents/Policies/Safeguards/discussion-note.pdf.

“Second Industrial Energy Efficiency and Environ-ment Improvement Project (Loan 1436-PRC) inthe People’s Republic of China,” 2005 (June),Project Performance Audit Report.

“Second Water Supply and Sanitation Project in SriLanka, Project Completion Report,” 2000 (August).http://www.adb.org/Documents/ PCRs/SRI/pcr_sri23209.pdf.

“Sector Assistance Program Evaluation of AsianDevelopment Bank Assistance to Philippines Power

Sector,” 2005 (September), OED. http://www.adb.org/Publications/category.asp?id=714.

“Sector Synthesis of Post-Evaluation Findings in theIrrigation and Rural Development Sector,” 1995(May). http://www.adb.org/ Documents/PERs/SS-Irrig.pdf.

“Sector Synthesis of Post-Evaluation Findings in thePorts and Shipping Sector,” 1996 (June).http://www.adb.org/Documents/PERs/SS-Ports.pdf.

“Sector Synthesis of Post-Evaluation Findings in thePower Sector,” 1997 (December). http://www.adb.org/Documents/PERs/SS-Power.pdf.

“Sector Synthesis of Post-Evaluation Findings in theRoad and Road Transport Sector,” 1996 (July).http://www.adb.org/Documents/PERs/SS-Roads.pdf.

“Sector Synthesis of Post-Evaluation Findings in theUrban Development and Housing Sector,” 1995(October). http://www.adb.org/ Documents/PERs-/SS-Urban.pdf.

“Special Evaluation Study on the Social and Environmen-tal Impacts of Selected Hydropower Projects,” 1999(December), OED. http://www.adb.org/Documents/Reports/ADF/Funds_for_the_Poor/appendixes.pdf.

“Special Evaluation Study on the Social and Environ-mental Mitigation Measures in Selected Bank-Financed Projects,” 1998 (December), OED.http://www.adb.org/Evaluation/reports.asp?s=3&ctry=12.

“Statement by President Haruhiko Kuroda, AsianDevelopment Bank at the ASEM Finance Ministers’Meeting: ‘AsDB’s Clean Energy Initiative,’” 2006(April), Vienna, Austria.

“Tangshan and Chengde Environment ImprovementProject in the People’s Republic of China, ProjectPerformance Audit Report,” 2004 (December),OED. http://www.adb.org/Documents/PPARs/PRC/ppar-prc-25023.pdf.

“Technical Assistance Performance Audit Report onSelected Environmental Advisory Technical Assistancein the People’s Republic of China,” 2003 (August),OED. http://www.adb.org/Documents/TPARs/PRC/tpar_prc_2003-23.pdf.

European Bank for Reconstruction andDevelopment“Airline Project, Summary of the Operation Perfor-

mance Evaluation Review,” 2005 (February).http://www.ebrd.com/search/cs.html?charset=iso-8859-1&url=http%3A//www.ebrd.com/projects/eval/showcase/Airline.pdf&qt=airline+project%2C+summary+of+the+operation+performance+evaluation +review&col=&n=1&la=en.

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“Annual Evaluation Overview Report,” 2005 (July),EvD. http://www.ebrd.com/projects/eval/showcase/aeor05.pdf.

“Environmental Impact in Municipal InfrastructureProjects,” 2006 (March), EvD, by Fredrik Korfkerand Dennis Long.

“Environmental Policy,” 2003 (July). http://www.ebrd.com/search/cs.html?charset=iso-8859-1&url=http%3A//www.ebrd.com/pubs/enviro/ep.htm&qt=environmental+policy&col=&n=1&la=en.

“Evaluation Policy Review of 2004,” 2004 (March), PED.http://www.ebrd.com/search/cs.html?charset =iso-88591&url=http%3A//www.ebrd.com/projects/eval/showcase/evalpol04.pdf&qt=evaluation+policy+review+of+2004&col=&n=1&la=en.

“Evaluation Policy,” 2005 (June), EvD.“Gas Supply Company, Summary of the Operation

Performance Evaluation Review,” 2004 (October),EvD. http://www.ebrd.com/search/cs.html?charset=iso-8859-1&url=http%3A//www.ebrd.com/projects/eval/showcase/gassupply.pdf&qt=gas+supply+company%2C+summary+of+the+operation+performance+evaluation+review&col=&n=1&la=en.

“Investing and Working Responsibly for a SustainableFuture,” 2004 (July), EBRD Sustainability Report.http://www.ebrd.com/ search/cs.html?charset=iso-8859-1&url=http%3A//www.ebrd.com/pubs/general/6410.pdf&qt=investing+and+working+responsibly+for+a+sustainable+future&col=&n=1&la=en.

“Municipal Water and Waste-Water Services, Summaryof the Operation Performance Evaluation Review.”http://www.ebrd.com/ search/cs.html?charset=iso-8859-1&url=http%3A //www.ebrd.com/projects/eval/showcase/wastewater.pdf&qt=municipal+water+and+waste-water+services%2C+summary+of+ the+operation+performance+evaluation+review&col=&n=1&la=en.

“Power Sector Restructuring Loan, Summary of theOperation Performance Evaluation Review,” 2005(February). http://www.ebrd .com/search/cs.html?charset=iso-8859-1&ur l=h t t p % 3 A / / w w w.ebrd.com/ projects/eval/showcase/loan.pdf&qt=power+sector+restructuring+loan%2C+summary+of+the+operation+performance+evaluation+review&col=&n=1&la=en.

“Power Sector Review,” 2005 (March), Special Study,PED. http://www.ebrd.com/projects/eval/showcase/psr.pdf.

“Restructuring Loan to Energy Supply Company,Summary of the Operation Performance Evalua-tion Review,” 2004 (November). http://www.ebrd.com/search/cs.html?charset=iso-8859-1&

url=http%3A//www.ebrd.com/projects/eval/showcase/energy.pdf&qt=restructuring+loan+to+energy+supply+company%2C+summary+of+the+ o p e r a t i o n + p e r f o r m a n c e + e v a l u a t i o n+review&col=&n=1&la=en.

“Transmission Line Project in Odessa Oblast, Environ-mental Impact Assessment, Executive Summary,”2005 (July). http://www.ebrd.com/search/cs.html?charset=iso-8859-1&url=http%3A//www.ebrd.com/projects/eias/ukraine/33896.htm&qt=transmission+line+project+in+odessa+oblasr%2C+envi ronmenta l+impact+assessment%2C+executive+summary&col=&n=1&la=en.

“Water and Waste-Water Company, Summary of theOperation Performance Evaluation Review,” 2005(July). http://www.ebrd.com/projects/eval/showcase/talwat.pdf.

European Investment Bank“Consolidated PJ Guidelines for the Environmental

Appraisal of Projects,” 2004 (May), PJ.“EIB Carbon Funds Overview.”“EIB Financing of Energy Projects,” 2001 (November),

EV, by Juan Alario and Peter Helger. http://www.eib.org/publications/publication.asp?publ=38.

“EIB Financing of Urban Development Projects in theEU,” 2003 (July), EV, by Juan Alario, Cees Post,Patricia Castellarnau, et al. http://www.eib.org/publications/publication.asp?publ=81.

“EIB Financing with Own Resources through IndividualLoans under Mediterranean Mandates,” 2005 (May),EV, by Juan Alario, Patricia Castellarnau, RobertWilson, Alain Duvat, and Philippe Nouvel. http://www.eib.org/publications/publication.asp?publ=196.

Environmental Statement, 2004.“Evaluation of EIB Financing of Air Infrastructure,”

2005 (January), EV, by Campbell Thomson, DieterMorgenstern, Monique Bianchi, and DieterHavlicek. http://www.eib.org/publications/publication .asp?publ=197.

“Evaluation of EIB Financing of Airlines,” 2004(March), EV, by Campbell Thomson, MoniqueBianchi, Tim Goodyear, and Dieter Havlicek.http://www.eib.org/publications/publication.asp?publ=149.

“Minutes of Meeting with MFI Working Group onEnvironment, Tunis, ” 2005, 26-27 April.

“Organization of Environmental Responsibilitieswithin the EIB,” Management Committee.

“PJ Mission Report, Multilateral Financial Institutions(MFI) Social Issues Annual Working GroupMeeting,” 2005 (April), PJ.

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“Proposal for Cost Recovery Basis, World Bank-EIBCarbon Fund for Europe (WB-EIB CFE).”

“Proposal from the Management Committee to theBoard of Directors Concerning the EBRD-EIBMultilateral Carbon Credit Fund.”

Alario, Juan, Cees Post, Monique Bianchi, SimonAumonier, Wim van Breusegem, Peter Faircloth,Bernd Hasel, and Bert Williams, “Evaluation ofSolid Waste Management Projects,” 2002 (June),EV. http://www.eib .org/publications/publication.asp?publ=32.

Berman, Guy, Monique Bianchi, Jack Duchermin, andDieter Havlicek, 2005 (June), “Evaluation of EIBFinancing of Railways Projects in the EuropeanUnion, EV. http://www.eib.org/publications/publication.asp?publ=216.

Thomson, Campbell, Dieter Horch, Khaled El-Araby,Douglas Rasbach, and Tim Schneiter, “Evaluationof Transport Projects in Central and EasternEurope,” 2003 (July), EV. http://www.eib.org/publications/publication.asp?publ=80.

Global Environment FacilityDublin, Holly T., Claudio Volonte, Dirk Koss, Evan

Green, William Finnegan, and Elizabeth Cook,2004 (September), “Biodiversity Program Study.”

Eberhard, Anton A., Siv E. Tokle, Anna Viggh, AntonioDel Monaco, Harold Winkler, and Stephen Danyo,2004 (September), “Climate Change Program Study.”

GEF and World Bank, 2005, “Energy Efficiency,”Portfolio Review and Practitioner’s Handbook.

GEF and World Bank, 2006, “Jamaica Demand SideManagement Demonstration Project,” Post-Implementation Impact Assessment.

GEF and World Bank, 2006, “Poland Efficient LightingProject,” Post-Implementation Impact Assessment.

GEF and World Bank, 2006, “Thailand Promotion ofElectrical Energy Efficiency Project,” Post-Implementation Impact Assessment.

GEF and World Bank, 2006, “World Bank GEF EnergyEfficiency Projects, Synthesis Report,” Post-Implementation Impact Assessment.

GEF, 2004 (April), “Action Plan to Respond to theRecommendations of the Medium-Sized ProjectsEvaluation.”

GEF, 2004 (October), “Management Response to theRole of the Local Benefits Environmental Programs.Part One: Nature and Conclusions of the Study,”Secretariat and Implementing Agencies.

GEF, 2004 (October), “The Role of Local Benefits inGlobal Environmental Programs. Part One: Natureand Conclusion of Study.” Office of Monitoring andEvaluation.

GEF, 2004 (October), “The Role of Local Benefits inGlobal Environmental Programs. Part Two: StudyFindings,” Office of Monitoring and Evaluation.

GEF, 2006 (February), “The GEF Monitoring andEvaluation Policy.”

Mee, Lawrence, John Okedi, Tim Turner, PaulaCaballero, Martin Bloxham, and Aaron Zazueta,2004 (October), “Program Study on InternationalWaters.”

Wells, Michael P., Delfin J. Ganapin, Jr. and Juha I.Uitto, “Medium-Sized Projects Evaluation: FinalReport,” 2002 (February), Office of Monitoring andEvaluation.

Inter-American Development BankDulin, Paul, 2002 (December), “Environmental

Supervision of Region 3 Portfolio,” Main report plusresults and recommendations, plus four annexes.

“Environmental Strategy, Revised Version,” 2003(June).

“Environment and Safeguards Compliance Policy,”January 2006. http://www.iadb.org// sds/env/site_5512_e.htm.

“IDB and the Environment: 1990-2002, BriefingReport,” 2002 (January). http://www.iadb.org/IDBDocs.cfm?docnum=356182.

OP-731, “Transportation Policy,” December 1994.OP-745, “Basic Environmental Sanitation Policy,”

December 1994.OP-752, “Rural Development Policy,” December 1994.OP-703, “Environment Policy,” December 1994.OP-733, “Energy Policy,” December 1994.OP-733-1, “Electric Energy Policy,” December 1994.OP-708, “Public Utilities Policy,” January 1997.OP-704, “Natural and Unexpected Disasters Policy,”

March 1999.OP-726, “Tourism Policy,” April 2005.“Politica de Medio Ambiente y Cumplimiento de

Salvaguardias,” 2005 (January).“Project Performance Monitoring and Classification,

Guidelines for Project Performance MonitoringReport,” 2003 (May), ROS/PMP/MIF/MEU.

“Strategy for Agriculture Development in LatinAmerica and the Caribbean,” 1999 (September),Sustainable Development Department. http://www.iadb.org/IDBDocs.cfm?docnum=351394.

Tietenberg, Tom, 1996 (June), “Private Enforcementof Environmental Regulations in Latin America andthe Caribbean: An Effective Instrument forEnvironmental Management?” No. ENV.101,Washington, DC. http://www.iadb.org/IDBDocs.cfm? docnum=353916.

“Toward Sustainable and Equitable Development.”

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World Bank GroupAcharya, Anjali, Milen Dyoulgerov, and Eri Tsutsui,

2004, “Analytic and Advisory Activities in Environ-mental and Natural Resource Management: AReview of Fiscal 2002-04 Activities,” EnvironmentalStrategy Paper No. 10, Environment Department,Washington, DC. http:// web.worldbank.org/WBSITE/EXTERNAL/TOPICS/ENVIRONMENT/0,,contentMDK:20124292~menuPK:281646~pagePK:148956~piPK: 216618~theSitePK:244381,00.html.

Bojo, Jan, Kenneth Green, Sunanda Kishore, SumithPilapitiya, and Rama Chandra Reddy, 2004(November), “Environment in Poverty ReductionStrategies and Poverty Reduction SupportCredits,” Environment Department, Washington,DC.

Bourguignon, Francois, 2006 (May), “RethinkingInfrastructure for Development,” paper presentedat ABCDE Conference. http://web.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTDECABTOK2006/0,,menuPK:1869561~pagePK:64168427~piPK:64168435~theSitePK:1869548,00.html.

Chomitz, Kenneth M., 2006, At Loggerheads? Agricul-tural Expansion, Poverty Reduction, andEnvironment in the Tropical Forests, Washington,DC.

Churchill, Anthony, and Cordula Thum, 2005, “TheBank’s Assistance to China’s Energy Sector,” IEG(OED) Background Paper, Washington, DC.

Churchill, Anthony, and Cordula Thum, 2005, “TheWorld Bank’s Assistance to China’s TransportSector,” IEG (OED) Background Paper, Washing-ton, DC.

Churchill, Anthony, 2005, “The Bank’s Assistance toEnergy and Transport: Summary and Conclusions,”IEG (OED) Background Paper, Washington, DC.

Estache, Antonio, 2006 (April), “Infrastructure: ASurvey of Recent and Upcoming Issues,”Infrastructure Vice Presidency, Washington, DC.http://siteresources.worldbank.org/ INTDECABCTOK2006/Resources/Antonio_Estache_Infrastructure_for_Growth.pdf.

Gwilliam, Ken, Masami Kojima, and Todd Johnson,2004, “Reducing Air Pollution from UrbanTransport,” Washington, DC. http://www.cleanair-net.org/cai/1403/article-56396.html.

IEG (OED) and Islamic Development Bank, 2005,“Tunisia, Understanding Successful SocioeconomicDevelopment,” Washington, DC.

IEG (OED), 1998 (February), “The World BankEnvironmental Strategy for the Energy Sector: AnOED Perspective,” Report No. 17359, Washington,DC.

IEG (OED), 2001 (May), Morocco Country AssistanceEvaluation, Report No. 22212, Washington, DC.http://lnweb18.worldbank.org/oed/oeddoclib.nsf/DocUNIDViewForJavaSearch/E0C2CEEFC06D563A85256A880050A18C/$file/Morocco_CAE.pdf.

IEG (OED), 2001 (November), Vietnam CountryAssistance Evaluation, Report No. 23288.http://lnweb18.worldbank.org/oed/oeddoclib.nsf/DocUNIDViewForJavaSearch/28BCFD90586440C785256B2F0068A59D/$file/vietnam_CAE.pdf.

IEG (OED), 2001, India: The Challenges of Develop-ment: A Country Assistance Evaluation, ReportNo. 22134, Washington, DC. http://lnweb18.worldbank.org/oed/oeddoclib.nsf/DocPgNmViewForJavaSearch/India/$file/ India_CAE.pdf.

IEG (OED), 2002, Bridging Troubled Waters: Assess-ing the World Bank Water Resources Strategy,Washington, DC. http://lnweb18.worldbank.org/OED/OEDDocLib.nsf/DocPgNmViewForJavaSearch/water_resource_strat egy/$file/water.pdf.

IEG (OED), 2002, “Promoting Environmental Sustain-ability in Development: An Evaluation of the WorldBank’s Performance,” Report No. 23952, Washing-ton, DC. http://lnweb18.worldbank.org/OED/OEDDocLib.nsf/DocUNIDViewForJavaSearch/4389E49A874A0EC785256B61005FA2B1/$file/environment.pdf.

IEG (OED), 2002, Annual Review of DevelopmentEffectiveness: Achieving Development Outcomes:The Millennium Challenge, Washington, DC.

IEG (OED), 2003 (October), The Hashemite Kingdomof Jordan, Country Assistance Evaluation, ReportNo. 26875, Washington, DC. http://lnweb18.worldbank.org/OED/OEDDocLib.nsf/DocUNIDViewForJavaSearch/29D74152E8CD27C885256DCC006F82E6/$file/jordan_cae.pdf.

IEG (OED), 2003, Efficient, Sustainable Service forAll? An OED Review of the World Bank’s Assistanceto Water Supply and Sanitation, Washington, DC.http://lnweb18.worldbank.org/ OED/OEDDocLib.nsf/DocUNIDViewForJavaSearch/993821E33520DE8485256E4A0068ADAD/$file/water_supply_and_sanitation.pdf.

IEG (OED), 2004 (March), “Project PerformanceAssessment Report, Vietnam, Highway Rehabilita-tion Project I and Rural Transport Project 1,”Washington, DC.

IEG (OED), 2004 (July), China: An Evaluation ofWorld Bank Assistance, Washington, DC.http://www.worldbank.org/oed/countries/cae/featured/china_cae.html.

IEG (OED), 2004, Brazil: Forging a Strategic Partner-ship for Results, an OED Evaluation of the World

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Bank Assistance, Washington, DC. http://lnweb18.worldbank.org/oed/oeddoclib.nsf/DocUNIDViewForJavaSearch/ 817C4FB038C4427E85256E2A0074AE96/$file/brazil_cae.pdf.

IEG (OED), 2004, Economies in Transition: An OEDEvaluation of World Bank Assistance, Washing-ton, DC. http://www.worldbank.org/oed/transi-tioneconomies/docs/ transition_ presentation.pdf.

IEG (OED), 2004, 2003 Annual Review of Develop-ment Effectiveness: The Effectiveness of BankSupport for Policy Reform, Washington, DC.

IEG (OED), 2005 (January), “Influential Evaluations:Detailed Case Studies,” Washington, DC. http://www.worldbank.org/oed/ecd/influential_evaluations.html.

IEG (OED) 2005, Country Assistance EvaluationRetrospective: An OED Self-Evaluation, Washing-ton, DC. http://www.worldbank.org/oed/countries/cae/featured/cae_retrospective .html.

IEG (OED), 2005 (September), Bolivia, CountryAssistance Evaluation, OED Report No. 33493,Washington, DC. http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2005/09/27/000160016_20050927114620/Rendered/PDF/33493.pdf.

IEG (OED), 2005, The Effectiveness of World BankSupport for Community-Based and -DrivenDevelopment, Washington, DC.

IEG (OED), 2005, 2004 Annual Review of Develop-ment Effectiveness: The World Bank’s Contribu-tions of Poverty Reduction, Washington, DC.

IEG (OED), 2006 (January), Republic of Yemen,Country Assistance Evaluation, Report No. 36527,Washington, DC. http://lnweb18.worldbank.org/oed/oeddoclib.nsf/DocUNIDViewForJavaSearch/9CAC304CE6523E6C852571690067 E96C/$file/yemen_cae.pdf.

IEG (OED), 2006, 2005 Annual Report on OperationsEvaluation, Washington, DC. http://www-wds.worldbank.org/external/default/main?pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64154159&searchMenuPK=64187552&theSitePK=523679&entityID=000160016_20060605162549&searchMenuPK=64187552&theSitePK=523679.

IEG (OED, OEG, OEU), 2003, Power for Develop-ment: A Review of the World Bank Group’s Experi-ence with Private Participation in the ElectricitySector, Washington, DC. http://lnweb18.worldbank.org/oed/oeddoclib.nsf/DocUNIDViewForJavaSearch/C82176E133B60EA585256DC600667712/$file/power_for_development.pdf.

IEG, 2006, “Governance and Anti-Corruption: Ways toEnhance the Bank’s Impact,” Washington, DC.

IEG, 2006, Pakistan: An Evaluation of World Bank’sAssistance, Report No. 34942, Washington, DC.

IEG, 2006, The World Bank in Turkey: 1993–2004:The IEG Country Assistance Evaluation, ReportNo. 34783, Washington, DC. http://www.worldbank.org.tr/external/default/main?pagePK=51187349&piPK=51189435&theSitePK=361712&menuPK=64187510&searchMenuPK=361741&theSitePK=361712&entityID=000160016_20060111114148&searchMenuPK=361741&theSitePK=361712.

IEG, 2006, Hazards of Nature, Risks to Development,An IEG Evaluation of World Bank Assistance forNatural Disasters, Washington, DC. http://siteresources.worldbank.org/INTDISMGMT/Resources/LittleIEGNDevaluationSDNWeekfinal.pdf.

IFC, 2000, “Results on the Ground: AssessingDevelopment Impact,” Washington, DC.http://www.ifc.org/ifcext/economics.nsf/Attachmen t s B y Ti t l e / C S R- a n n e x _ b . p d f / $ F I L E / C S R-annex_b.pdf.

IFC, 2005 (March), “Annual Review of IFC’s EvaluationFindings: FY2004, Is IFC Accomplishing itsMission?” Washington, DC.

IFC, 2006 (January), “IFC’s Policy and PerformanceStandards on Environmental Sustainability and IFC’sDisclosure Policy,” Washington, DC. http:// www.ifc.org/ifcext/enviro.nsf/Content/EnvSoc Standards.

IFC, 2006, “IFC Sustainability Report 2005,” WorkingDraft, Washington, DC. http://www.ifc.org/ifcext/enviro.nsf/AttachmentsByTitle/p_2005SustReport_full/$FILE/2005SustReport _full.pdf.

Kishore, Sunanda, and Priya Shyamsundar, 2005(September), “An Environmental Review of2002–04 Country Assistance Strategies,” Environ-ment Department, Washington, DC. http://www-wds.worldbank.org/servlet/WDS_IBank_Servlet?pcont=details&eid=000012009 _20051103135611.

Ledec, George, and Juan David Quintero, 2003,“Good Dams and Bad Dams: EnvironmentalCriteria for Selection of Hydroelectric Projects,”LAC. http://siteresources.worldbank.org/INTRANETENVIRONMENT/Resources/EM04SPublications.pdf.

Liebenthal, Andres, Roland Michelitsch, and EthelTarazona, 2005, Extractive Industries and Sustain-able Development: An Evaluation of World BankGroup Experience, IEG (OED, OEG, OEU),Washington, DC.

OED (see entries under IEG).Shalizi, Zmarak, 2006 (August), Energy and Emissions:

Local and Global Effects of the Rise of China andIndia, Chapter 5, Washington, DC.

Shalizi, Zmarak, 2006 (August), “Climate ChangeImplications for Energy Infrastructure in China

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and India (Clean Energy and Energy Efficiency),”Paper presented at ABCDE Conference.

Shalizi, Zmarak, 2006 (August), “Sustainable Develop-ment and the Wise Use of Natural Resources inChina,” Washington, DC.

Varley, Robert C. G., 2005, “The Word Bank’s Assistancefor Water Resources Management in China,” IEG(OED) Background Paper, Washington, DC.

Varley, Robert C. G., 2005, “The World Bank andChina’s Environment 1993–2003,” IEG (OED)Background Paper, Washington, DC.

Whitford, Peter. and Kavita Mathur, 2006, “The Effective-ness of the World Bank Support for Community-Based and -Driven Development,” Safeguard PolicyReview, Washington, DC. http://www.worldbank.org/oed/cbdcdd/?intcmp=5225825.

World Bank and AsDB, 2006 (March), “Update on theLao PDR: Nam Theun 2 (NT2) Hydroelectric Proj-ect,” Washington, DC. http://siteresources.worldbank.org/INTLAOPRD/Resources/nt2updatemarch06.pdf.

World Bank and IFC, 2000 (June), “Fuel for Thought:An Environmental Strategy for the Energy Sector,”Environment Department, Energy, Mining andTelecommunications Department, Washington,DC. http://publications.worldbank.org/ecommerce/catalog/pro duct?item_id=212476.

World Bank, 1996, “Sustainable Transport, Prioritiesfor Policy Reform,” Transport, Water and UrbanDevelopment Department, Washington, DC.http://publications.worldbank.org/ecommerce/catalog/product?item_id=202017.

World Bank, 1997, Clear Water, Blue Skies: China’sEnvironment in the New Century, Washington,DC. http://publications.worldbank.org/ecommerce/catalog/product?item_id=206514.

World Bank, 2001 (December), “The World BankGroup’s Energy Program: Poverty Reduction,Sustainability and Selectivity,” Energy and MiningSector Board, Washington, DC. http://siteresources.worldbank.org/INTENERGY/Publications/20269216/energybrochure.pdf.

World Bank, 2001, “Making Sustainable Commit-ments: An Environmental Strategy for the WorldBank,” Environment Department, Washington,DC. http://publications.worldbank.org/ecommerce/catalog/product?item_ id=478743.

World Bank, 2002, Third Environmental AssessmentReview (FY 96–00), Environment Department,Washington, DC.

World Bank, 2003, “Country Assistance Strategies:Retrospective and Future Directions,” OPCS,Washington, DC.

World Bank, 2003, “Putting Our Commitments toWork: An Environment Strategy ImplementationProgress Report,” Environment Department,Washington, DC.

World Bank, 2004 (June), “Country AssistanceStrategy for the Republic of Tunisia,” Washington,DC.

World Bank, 2004, “Development CommitteeCommunique,” World Bank Annual Meetings,Washington, DC. http://siteresources.worldbank.org/DEVCOMMINT/NewsAndEvents/20660181/Sept2005_DC_Communique_E.pdf.

World Bank, 2004, “Water Resources Sector Strategy:Strategic Directions for World Bank Engagement,”Water Resources Management Group, Washing-ton, DC. http://web.worldbank.org/servlets/ECR?contentMDK=20407366 &sitePK=336487.

World Bank, 2005 (February), “A Common Frameworkfor Environmental Assessment: A Good PracticeNote,” Multilateral Financial Institutions WorkingGroup on Environment, Washington, DC.

World Bank, 2005 (March), “Nam Theun 2 Hydroelec-tric Project, Environmental Assessment andManagement Plan,” Washington, DC. http://siteresources.worldbank.org/INTLAOPRD/Resources/IRN-EDFReview.pdf.

World Bank, 2005 (March), “Quality of Supervision inFY03–04 (QSA6), A QAG Assessment,” QualityAssurance Group, Washington, DC.

World Bank, 2005 (March), Environment Strategy forthe World Bank in East Asia and Pacific Region, EAPRegion, Washington, DC. http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/EXTEAPREGTOPENVIRONMENT/0,,contentMDK:20252846~menuPK:502892~pagePK:34004173~piPK:34003707~theSitePK:502886,00.html.

World Bank, 2005 (June), “Country AssistanceStrategy for the Kingdom of Morocco,” Washing-ton, DC. http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2005/06/20/000160016_20050620102200/Rendered/PDF/31879a.pdf.

World Bank, 2005 (July), “Results Focus in CountryAssistance Strategies: A Stocktaking of Results-Based CASs,” Operations Policy and CountryServices, Washington, DC. http://www.worldbank.org/oed/arde/2004/files/arde2004_mcomment.pdf.

World Bank, 2005 (September), “Infrastructure andthe World Bank: A Progress Report,” InfrastructureVice Presidency, Washington, DC. http://sitere-sources.worldbank.org/DEVCOMMINT/Documentation/20651863/DC2005-0015(E)Infrastructure.pdf.

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World Bank, 2005 (December), “Progress onRenewable Energy and Energy Efficiency: FiscalYear 2005,” Energy and Mining Sector Board,Washington, DC. http://iris37.worldbank.org/domdoc/PRD/Other/PRDDContainer.nsf/All+Documents/85256D2400766CC7852570C9006D0322/$File/REAnnualReport2005Web.pdf.

World Bank, 2005, “Environment Matters, AnnualReview,” Environment Department, Washington,DC. http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/ENVIRONMENT/0,,contentMDK:20669631~pagePK:210058~piPK:210062~theSitePK:244381,00.html.

World Bank, 2005, Focus on Sustainability, Washing-ton, DC. http://siteresources.world bank.org/ESSDNETWORK/Resources/481106-1129303936381/1777397-1129303967165/.

World Bank, 2005. “Integrating EnvironmentalConsideration in Policy Formulation: Lessons fromPolicy-based SEA Experience,” Report 32783,Washington, DC.

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T H E N E X U S B E T W E E N I N F R A S T R U C T U R E A N D E N V I R O N M E N T

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The Evaluation Cooperation Group (ECG) was established in October 1995 by the heads of the evaluation depart-ments of the major international financial institutions. The ECG's mandate is to strengthen cooperation among eval-uators, to enhance collaboration within the evaluation community of development organizations, and to increasethe impact of evaluation through harmonization and dissemination.

THE EVALUATION COOPERATION GROUP

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The Nexus BetweenInfrastructure and Environment

From the Independent Evaluation Offices of theInternational Financial Institutions

1ECG PAPER

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