Procedures for Project Review and the Environmental Veto

Under the current Environmental Procedures, the Bank has two reviews during which environmental information is discussed and projects can be rejected on environmental grounds. In neither review, however, does the Environmental Staff have control over the decision. The Staff can recommend that a project not proceed for environmental reasons, but the decision lies with the Operations Committee, the President, or ultimately the Board of Directors.

During Initial Review the Environmental Staff may recommend that the project be rejected "if there are major potential environmental concerns associated with the project which are not likely to be overcome during project preparation." This is a recommendation only; the decision whether to proceed rests with the entire Operations Committee.

At Final Review the Operations Committee examines the environmental information contained in the Investment Proposal. The Environmental Staff may recommend that the project not proceed "if the environmental issues have not been properly addressed by the project sponsor or if the potential impacts are too great."

In cases of disagreement between the Environmental Staff and the Team Leader as to whether a project should proceed, there are three levels of recourse. First, the question is discussed at a meeting between the Environmental Staff, the Senior Environmental Specialist, and the Team Leader. If they are unable to resolve the disagreement, it may be reviewed by the Operations Committee. Finally, if the disagreement persists, it may be resolved by the President of the Bank.

In the event of such an impasse, the Environmental Advisory Council (ENVAC) could play a useful role by reviewing the dispute with Bank staff and providing advice to the President. But in the end, if the projected net environmental outcome of a proposed project would result in a significant loss of environmental quality or would not promote sustainable development, the Environmental Staff should have authority to veto the project.

Procedures for Board Decision-making

The final decision whether to proceed with a project rests with the Board of Directors, after review by the Executive Committee. A cardinal rule of environmental assessment is that the resulting document must be available to the decisionmaker before decisions are made and irreversible actions are taken. Information provided to the Board is useful only if the Board has sufficient time to review it. For this reason, CIEL supports the "Pelosi Amendment," which prohibits the U.S. Director from voting to approve any project that may have substantial environmental impacts unless an EA has been made public 120 days in advance of the vote.

The Board of Directors should reject projects where corners have been cut in project preparation, where data is not available to the EA preparer or the Board, or where the Environmental Procedures, particularly those for public participation, have not been strictly followed.

One EBRD project--the Chernogorskoye Oil Field project in Russia--was approved by the Board before a full EA was completed. The Board approved the loan subject to the performance of a full EA, satisfactory to the Bank. However, the Board will not have an opportunity to review the EA and reject the project if the results are unsatisfactory. Moreover, by the time the EA is completed, nearly 50% of the funding for the project will have been disbursed, seriously prejudicing future decisions.

The Board should check periodically to see that EBRD staff is providing all relevant information. A key document submitted by the Environmental Staff to the Board just prior to its decision to approve the controversial ZSNP loan contained inaccurate information

The Polar Lights and Komi projects also demonstrate the need for greater oversight of the Bank staff. Allotting more time for Board members to examine the complex and substantial amount of information submitted with each project would provide an opportunity to validate the assertions made by Bank staff and project sponsors. The establishment of an Independent Inspection Panel would give the public the opportunity to assist the Board in this supervision.

Procedures Related to Monitoring and Evaluation

The current Environmental Procedures for monitoring and evaluating environmental aspects of projects, if carried out diligently, will help ensure that mitigation and remediation measures are fully implemented and that projects are environmentally sound. They will also provide important environmental data that will contribute to the design of future projects.

Monitoring and evaluation are carried out at three stages of the project cycle: during project execution, upon project completion, and for some large-scale projects, after project completion. One progressive element of the Environmental Procedures is the requirement that EAs contain a monitoring plan. In this respect the procedures go beyond many national EA laws. Unfortunately, it appears the Bank fails to enforce this requirement, as the EAs that we have reviewed do not contain such a plan.

If monitoring discloses that the project sponsor is not in compliance with covenants in the loan agreement, the Bank can impose penalties, which may include freezing disbursements and notifying proper authorities and other financial agencies and co-financiers. When a project is completed, the Bank's Environmental Staff must assess environmental aspects of the project. The resulting Environmental Evaluation Memorandum discusses whether the impacts of the project were adequately anticipated in the EA and evaluates the effectiveness of mitigation measures undertaken by the project sponsor.

It is not possible to assess the Bank's monitoring efforts, as the Bank does not publish monitoring plans. The bank should require a monitoring plan in every EA. The Bank should also strengthen its capacity for supervising environmental performance by withholding a portion of the loan until mitigation and remediation requirements have been fulfilled.

The Draft Revised Environmental Procedures

In August 1995, after more than a year of revision, the Bank released itsDraft Revised Environmental Procedures. CIEL had hoped that the new procedures would mark a positive change in the Bank's commitment to sustainable development and environmental due diligence. Unfortunately, we find the Draft Procedures to be a disappointment. They contain a few improvements, but overall we find them to be even less stringent, detailed, or clear than the existing procedures.

Screenin

Two different screening options are proposed under the Draft Procedures. Option 1 is similar to the current screening procedure. Option 2 would give the Environmental Staff more discretion; instead of consulting lists, the staff or project sponsor would conduct an Initial Environmental Examination to determine whether a full EA is required.

Option 1 is preferred, as the staff already exercises too much discretion in screening projects. Clear, mandatory guidelines would also be more amenable to review by an Independent Inspection Panel.

Scoping

The Draft Procedures merely require the project sponsor "to ensure through a scoping process that, prior to initiating environmental investigations, the key issues that need to be appraised, and the way the public will be involved in the appraisal, have been identified." They require contact with the "locally affected public" and government agencies, but the involvement of local and national organizations is optional. No mention is made of international NGOs. Scoping meetings are also optional.

These scoping procedures are far too general; they require more detail and should be mandatory. Contact should not be restricted to the locally affected public, as some impacts may be regional or global. Scoping meetings should be mandatory.

Alternative

The Draft Procedures omit consideration of environmental costs of proposed projects from EAs, a critical defect. There are also some improvements. The EA must include a statement of purpose and need and an assessment of the "no-action" alternative.

Impacts

The Draft Procedures call for identification of indirect impacts, but do not mention cumulative impacts. The Environmental Screening Memorandum must identify regional and global impacts, but there is no requirement that they be considered in the environmental assessment.

Mitigation and Remediation

The Draft Procedures provide for an Environmental Action Plan (EAP) to be developed by the project sponsor. It documents "key issues, actions to be taken to adequately address the key issues, the implementation schedule and timescale, and an estimate of the associated costs." Despite being written in permissive, rather than mandatory, language, the EAP is a welcome addition to the EBRD's Environmental Procedures . Unfortunately, the entire EAP process could be undermined by the failure to provide for public participation or even publication of the EAP.

Project Review

The Draft Procedures appear to weaken the authority of the Environmental Staff in the project approval process. There is no provision for Staff even to recommend that a project be rejected on environmental grounds. Staff should have a mandatory veto.

Board Decision-making

The Draft Procedures provide a 30 day minimum time period between the release of the EA to the public for comment and submission to the Board. This time period can be waived upon sufficient showing by the project sponsor. Thirty days is far too short a period for public comment. There should be a non-waivable minimum 90 day period for comments and the full 120 days required by the Pelosi Amendment from the date the EA is released to the time the project is submitted to the Board.

Monitoring

The Draft Procedures stress the importance of monitoring during and after project execution, but do not specify when projects require monitoring. No provision is made for the staff, or a third party appointed by the staff, to conduct monitoring. The sanctions for non-compliance (freezing disbursements and notifying proper authorities) have been eliminated, as has the Environmental Evaluation Memorandum. Provisions for release of monitoring information and public consultation have been added but these provisions are recommendatory only.

Public Participation and Access to Information

The charter of the EBRD commits the Bank to "fundamental principles of democracy, the rule of law, respect for human rights, and market economies." First and foremost among democratic principles are the rights of all citizens to be informed of, and to participate in, decisions affecting their well-being.

Disclosure of Information to the Public

The EBRD's approach to information disclosure does not reflect its stated commitment to public participation throughout the project cycle. The Bank refuses to provide any project-specific information to the public, requiring instead that all information come from project sponsors or be released with their permission.

Reliance on the project sponsor to release information to the public has several serious defects. First, project sponsors in the Bank's countries of operation often have little or no experience managing a public participation program and have frequently shown a reluctance to release information to the public. The ZSNP project sponsor continues to block release of the remediation agreement. Initially, the Mochovce project sponsor would only release summaries of the least-cost study and the nuclear safety report. Neither made any information available during the scoping phase.

Second, the requirement in the Environmental Procedures that EAs of Category A projects be made available to the public is often not followed in practice. CIEL's requests for copies of the Polar Lights and KomiArctic EAs were denied.

Third, what little information project sponsors provide to the public comes too late in the project cycle to enable the public to participate effectively in the decision-making process. NGOs and citizens that participate in scoping or submit comments during the preparation of the EA frequently must do so only on the basis of what limited information they are able to obtain through their own resources.

Fourth, information contained in some documents, such as Environmental Screening Memoranda and Environmental Evaluation Reports is unavailable elsewhere. There is no legitimate reason for the EBRD, or its project sponsors, to withhold environmental information from the public or to fail to provide such information in a timely manner. All parties seeking Bank financing should understand this to be a requirement of the loan application. While some information may properly be considered confidential for reasons of national security or to protect commercial secrets, there should be a strong presumption in favor of releasing all information. The Board of Directors should condition the approval of all loans upon full access of the public to such information.

Other international financial institutions have begun to recognize the need for transparency. Under the new World Bank Policy on Disclosure of Information, there is a presumption in favor of disclosure. Information on World Bank activities is made available through the newly formed Public Information Center.

The guiding principle of the InterAmerican Development Bank's new policy on information disclosure is that "documents should be made available to the public on request in the absence of a compelling reason for confidentiality." It explicitly provides for frequent public notification and consultation throughout the project cycle. The Asian Development Bank's new information policy establishes a similar presumption in favor of disclosure.

The International Finance Corporation, which works primarily with private companies, has committed in its information disclosure policy to "undertake its investment activities with transparency and accountability." The IFC policy presumes disclosure of information unless it would "materially harm the business and competitive interests of clients." The IFC makes this information available through the World Bank's Public Information Center.

In contrast, a proposed EBRD information disclosure policy emphasizes the importance of maintaining client confidences and protecting the integrity of Bank staff. A Project Summary Document similar to the IFC's Summary of Project Information would be made available to the public, but only after the project has been approved by the Board of Directors (the IFC makes its document available a minimum of thirty days before submission to the Board). It would only contain information not found to be "confidential" or "harmful." Environmental information about Category B projects would continue to be unavailable.

This new policy would not help the public influence EBRD projects or ensure their proper development. Rather than promoting a culture of secrecy, the EBRD should vigorously implement its commitment to democracy, and become a leader, both in the region and among financial institutions, in promoting transparent and democratic decision-making.

Public Participation in Environmental Assessment

The Bank's current procedures for public participation are the product of more than a year of negotiation between Bank officials and NGOs. As a direct result of these efforts, citizens have the right to participate in and comment on EAs, and the Bank must take their comments into account when approving a project. Unfortunately, the Environmental Procedures fail to provide adequate guidance to project sponsors and omit some very important elements. The public participation requirements are written so generally that even a good faith effort by a project sponsor to comply may fall far short of what is needed.

Notification to the Public

Early notification is essential for the public to participate effectively in scoping. Notification to the public should take place at the onset of environmental assessment, so that all interested parties--citizens, governmental agencies, NGOs, and relevant community organizations--will have an opportunity to raise issues they feel should be addressed in the EA. More particularly, notification should occur prior to screening so that all citizens wishing to participate in the full EA process will have an opportunity to do so.

The Environmental Procedures only require notification when the project has been classified Category A or where required by national law. Like most aspects of EBRD environmental assessment, notification is the responsibility of the project sponsor. The procedures do not provide any guidance on how to conduct notification or determine who is sufficiently "affected" to require notification.

Notification requirements have not routinely been followed by project sponsors. The Mochovce EA commenced with virtually no notification to the public. Only a few NGOs were informed of the start of the EA process. They received only a draft table of contents, with no information about the project, its purpose and need , or possible alternatives. The ZSNP EA process dispensed with public notification altogether.

The EBRD Environmental Staff should ensure effective notification takes place by providing a timetable and helping the project sponsor formulate a notification strategy. The strategy should identify all potentially interested parties, methods for notifying those parties, and the information needed for effective participation. Notification should include enough information to let parties know whether the project is of interest to them. At a minimum, it should describe the proposed action, its purpose and need, tentative alternatives and impacts, and the proposed scoping process.

Public Participation in Scoping

The Environmental Procedures fail to provide sufficient guidance as to what information is to be provided to the public prior to scoping and leave it to the project sponsor to determine what constitutes an "appropriate level" of public consultation. As a result, project sponsors have not involved a sufficient number of affected parties in the process; have failed to provide adequate information to ensure informed participation; have limited public comments on the scope of the EA--excluding from consideration such topics as alternatives, impacts, and mitigation; and have not conducted effective public scoping meetings.

Project sponsors for the ZSNP and Mochovce projects virtually dispensed with public participation during scoping. The ZSNP project included no public scoping whatsoever. The project sponsor for Mochovce made only minimal efforts to comply with the Bank's scoping requirements.

In the one meeting the project sponsor held to discuss scoping of the Mochovce EA, only a few NGOs were allowed to participate. They received just one week's notice of the meeting, with no information about the agenda or the project, beyond a revised table of contents for the EA. It appears that, by the time of this meeting, the EA was well under way and that the scope of the EA had already been set by the terms of reference. In particular, the project sponsor was not prepared to discuss alternatives to the project. NGOs that attended the meeting also expressed frustration that no representatives from the EBRD were present, as a number of questions they raised could not be answered by either the project sponsor or the consultants hired to prepare the EA. The NGOs were told they should address those questions to the EBRD.

Both ZSNP and Mochovce illustrate the need to expand and clarify procedures for public participation during scoping, and to create a mechanism, such as an Independent Inspection Panel, to enforce these new requirements. The Environmental Procedures should be strengthened to require the project sponsor to open the public participation process to all interested parties, not just those chosen by Bank staff or project sponsors. Procedural requirements, including a minimum period for public comment, are needed to ensure that the public has both the time and opportunity to develop and express their concerns.

Receipt of Comments and Opinions from the Public

The public should have the opportunity to provide comments on a project at any point during the project cycle, but three points are particularly important: during scoping, upon release of the draft EA document, and between release of the final EA document and decision by the Board.

Scoping gives the public an opportunity to identify areas of concern, suggest alternatives, and discuss impacts and mitigation. The comment period after the draft EA document is released provides the public with an opportunity to review the document carefully and raise issues and alternatives that are not included or satisfactorily addressed. The comment period after the final document is released gives the public an opportunity to review the document to make sure it addresses all comments and resolves all outstanding issues.

The current Environmental Procedures provide very limited opportunity for public comment and do not require the project sponsor to respond to comments. The procedures merely state that comments and opinions expressed by the public are to be taken into account in the project approval process. No explicit provisions are made for the public to comment on either a draft or final EA, no public meetings are required, and no comment period is specified. Perhaps most troubling, the project sponsor is not required to publish the public's comments in the EA report or to respond to comments either by modifying the EA or explaining why the comments do not warrant further response.

Public comment was virtually absent during the ZSNP project cycle. The EA was not provided in draft form for comment, no public meetings were held during its preparation, and only hurried, last minute meetings were held with a select group of NGOs prior to submission of the project to the Board. The NGOs that participated were informed of the meeting only days before it occurred and were not given documents in advance of the meeting. Consequently, they could not participate effectively.

The process for commenting on Mochovce, while better than ZSNP's, was still flawed. Problems with commenting during scoping have already been discussed. In addition, the project sponsors neglected to provide an opportunity to comment on the draft EA, and the seventy day period for comments on the final EA, least-cost study, and safety report were too short, especially since many groups received these documents late.

Public Participation in Implementation and Monitoring

Continued public consultation and monitoring is necessary both during project implementation and after the project is completed to ensure that the project sponsor complies with the environmental conditions of the loan and that otherwise unforeseen environmental consequences are properly addressed. For the public to participate effectively, it must have access to project information, loan conditions, and remediation agreements. Under the current Environmental Procedures, these documents are not made public. In comparison, other multilateral development banks, notably the World Bank and the IDB, continue to provide and update project information after its approval, including loan documentation and mitigation proposals.

To compensate for failing to implement its public participation procedures on the ZSNP project, the Bank proposed the creation of a Monitoring and Advisory Group to give the public a role in monitoring the project. Unfortunately, prospects for the success of this exercise appear somewhat doubtful. It started on the wrong foot. The terms of reference were drafted by the Bank without public input. Surprisingly, neither the terms of reference nor the remediation agreement will be made public. NGOs have expressed reluctance to participate, fearing their participation might be perceived as an endorsement of the project. In spite of these problems, the Monitoring and Advisory Group still has significant potential to advance public participation in monitoring.

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