Draft Procedures for Public Participation

Notification to the Public

Under the Draft Procedures, notification is only expressly required to the "affected public," and under certain unspecified circumstances, it may be waived altogether. The revised procedures should ensure that all interested parties are notified. The provision for waiving timely notification should be dropped.

Public Participation in Scoping

The Draft Procedures appear to narrow the breadth of public participation during scoping. Rather than opening the scoping process to all interested parties, the Draft Procedures require only that the "affected public" be consulted. They suggest that scoping meetings are optional, and when meetings are held, only those chosen by the project sponsor will be allowed to participate. Scoping should include mandatory meetings, open to any citizen that wants to participate.

Public Comment

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 apparently can be waived upon sufficient showing by the project sponsor. As already discussed, this period should be extended to 120 days and should not be waivable.

Public Participation in Monitoring

The Draft Procedures do not adequately address public participation in monitoring. The results of ongoing monitoring may be made available to the public, but only at the discretion of the Bank. The Draft Procedures do not allow for public input into the design or implementation of the monitoring plan. There is no mechanism to inform the public of monitoring inadequacies and concerns, or to provide the public with a role in their resolution.

The Environmental Advisory Council

The Environmental Advisory Council (ENVAC) is an advisory board of twelve environmental experts, with a wide range of backgrounds, from Central and Eastern Europe and OECD countries. Established to "advise the Bank on critical environmental policy and strategy issues and programmes," the ENVAC provides the EBRD with expertise on environmental protection and natural resource management at the regional, national, and local level.

The ENVAC has met eight times since its inauguration in 1991, but its operations were suspended in September 1993, shortly after Jacques de Larosiere took over the presidency of the EBRD. He reinstated its operations in June of 1994, after reaffirming that the EBRD needs the ENVAC's independent advice and expertise on environmental matters, particularly in the members' respective countries.

The EBRD at times has appeared somewhat ambivalent about the ENVAC, and has not always treated it as an important resource. The Bank's first two operations policies, on energy and transport, were adopted by the Board of Directors without prior ENVAC input. Some members feel they are not given adequate information and time to prepare for their meetings, which may cover a variety of difficult topics in a relatively short period of time. The crowded agenda and the short time (meetings run from one to two days) make it difficult for members to contribute more than cursory comments.

ENVAC members have had little direct impact on the EBRD's day-to-day operations. A few members have expressed a desire to play a greater role in the Bank's environmental activities, and frustration at not having had more influence in the development of EBRD's environmental policies and procedures.

ENVAC members also appear to have no direct role in Bank operations in their own countries, and have had difficulty communicating with local EBRD representatives. One ENVAC member tried on several occasions to arrange a meeting with the EBRD Resident Representative in the member's country to discuss environmental concerns about several projects. Even though the Resident Representative complained of not having a staff member to provide advice on environmental matters, he declined to meet with the ENVAC member.

The EBRD staff is aware of these problems and has proposed that communication between ENVAC members and local EBRD representatives be transmitted through the Bank staff in London. It would be better if the EBRD instructed local EBRD representatives and project sponsors to cooperate with ENVAC members requesting information or offering advice on EBRD-financed projects in their country or region.

The EBRD should develop guidelines or procedures to ensure that ENVAC consultation is thoroughly integrated into the Bank decision- making process. Neither the current Environmental Procedures nor the Draft Procedures provide any guidance as to the role of the ENVAC or how it should fit into the Bank's environmental activities, leaving it entirely to the Bank staff to determine the information the ENVAC will receive and the issues on its agenda.

While it may not be practical for the ENVAC to be directly involved in the environmental assessment process, members should have the opportunity to comment on Category A projects and EAs before they are submitted to the Board. To assist them in their advisory role, ENVAC members should have full access to project documentation. ENVAC comments should be provided directly to the Board, as well as to the Bank staff.

The ENVAC could also help resolve disputes between the Environmental Staff and other members of the Bank regarding environmental components of projects. More generally, they might function as the EBRD's environmental "trouble-shooters." They could empanel smaller subcommittees to review and evaluate problems and controversies and advise the President.

The expertise and diverse background of the ENVAC make it well suited to provide assistance in identifying opportunities for development that will be economically and environmentally sustainable. It would be best utilized in assisting the Environmental Staff in developing a sustainable development policy, criteria, and standards; regional and sectoral policies; and regional and sectoral environmental assessments.

Gaining Accountability Through an EBRD Inspection Panel

In researching this report, and particularly the case studies of ZSNP and Mochovce, CIEL found that EBRD staff and project sponsors did not always follow Bank policies and procedures, especially when there was pressure to speed up the project cycle. For the Bank's environmental and other procedures to be more than mere "guidelines," there must be some mechanism for enforcing these policies and procedures, for holding Bank management responsible and accountable for compliance with the procedures, and for providing citizens with the means to protect the interests that underlie the Bank's policies and procedures.

Precisely the same concerns about accountability and responsibility, voiced by NGOs and certain donor countries, prompted the World Bank to create an Independent Inspection Panel. Other regional development banks are also moving forward to create an equivalent to the Panel. The InterAmerican Development Bank, for example, recently announced its inspection function. Both the African and Asian Development Banks are expecting to approve inspection mechanisms soon.

An EBRD Inspection Panel would empower citizens in affected countries to seek remedial action when they have been directly and adversely affected by the Bank's failure to follow its own operational policies and procedures. Any citizen or group of citizens from member countries who are adversely affected should be able to file a claim. The Panel should have clear and uncomplicated rules and procedures, including a simple form like that developed for the World Bank Inspection Panel.

Because of the EBRD's commitments to democracy and sustainable development, it should go even further than the World Bank. The EBRD's Panel should entertain claims that the Bank has failed to comply with international legal norms and the goals of its own charter, in addition to its own policies and procedures. The EBRD Panel should allow public disclosure and discussion of the Panel's pending claims and recommendations before the Board of Directors makes final decisions. Finally, the EBRD Panel should be given clear authority to slow the project cycle when claims are pending and to make specific recommendations for remediation.

The EBRD Operations Policies

The Bank's operations policies guide its lending in a number of sectors. With the exception of the energy policy, however, they fail to address most of the environmental issues that other MDBs have already confronted in their lending operations, and fail to commit the Bank to specific actions to remedy the few problems they do identify.

The Energy Operations Policy

In the newest energy operations policy, issued in July of 1994, conservation, energy efficiency, least-cost planning, integrated resource planning, and, to a lesser extent, development of renewable energy sources play prominent roles.

The Bank's main objectives in the energy sector are: (1) supporting and accelerating establishment of competitive energy markets; (2) increasing energy efficiency and cost effectiveness, in both supply and demand; (3) improving sector environmental performance; (4) improving the safety of nuclear power plants; and (5) mobilizing private sector resources necessary to achieve these objectives. Each of these objectives, according to the EBRD, will contribute to the environmental performance of the energy sector, and most environmentalists would agree.

Perhaps the greatest strength of the new policy is its commitment to integrated resource planning. Acknowledging that the institutional resources do not yet exist to fully adopt integrated resource planning in the region, the policy calls for a phased approach to build institutional capacity and develop necessary data. Meanwhile, all energy projects should be subject, at a minimum, to a least-cost plan integrated within an environmental assessment.

Close inspection of the Bank's energy policy does raise some questions, however. For example, the policy suggests that maintaining a balance among energy sources will be a priority, despite some sources having far greater adverse environmental and health impacts and associated costs than others. Furthermore, the policy does not require environmental costs to be included in least-cost calculations, so decisionmakers do not receive a clear picture of the true costs of projects and alternatives.

The energy policy states that reform of energy pricing, along with institutional reform, will be the key to improving countries' energy efficiency, and a number of energy sector loans have been made contingent upon such reforms. While there is almost universal agreement that energy prices will eventually have to rise to the level of prices in market economies, the effectiveness of price reform as a near-term measure for achieving efficiency gains is not certain. Many Central and Eastern European countries have already made substantial progress in pricing, but have not experienced corresponding reductions in energy intensity.

Although most of the Bank's client states signed the Framework Convention on Climate Change, the energy operations policy does not address global warming. This is a major flaw. These states account for a significant portion of the world's energy-related greenhouse gas emissions. The EBRD should increase significantly its lending for renewable energy technologies (excluding large hydropower plants, which provide no climate benefit--Through 1994, the EBRD spent only 50,000 ECU for solar and wind power combined).

The Nuclear Policy

The EBRD has been given a central role in determining the future of nuclear energy production in Central and Eastern Europe. In addition to funding nuclear projects with its own resources, the Bank administers the Nuclear Safety Account established by the G-7 nations to help address serious safety risks in the most dangerous reactors operating in Central and Eastern Europe. Given the Bank's pivotal role on this critical issue, the energy operations policy gives surprisingly little attention to nuclear energy.

Virtually all Western experts agree that older generation Soviet-designed reactors should be shut down as quickly as possible. Moreover, few experts believe that any of the newer reactors, a number of which are under construction or have had construction halted for lack of funds, can be safely operated without substantial improvements to their safety systems. Current plans to backfit some of these plants, including Mochovce, with Western technology are untested and highly controversial.

Opportunity exists to reduce the dependency on nuclear power in Central and Eastern Europe. Studies by the World Bank and the EBRD indicate that a "low nuclear scenario" for Central and Eastern Europe would require substantially less investment than a "high nuclear scenario."

An activity as highly polluting and dangerous as nuclear energy in its present form is not sustainable in the region. Nuclear technology is inherently risky. The marriage of unreliable Soviet technology to Western technology designed for entirely different applications increases the risk. The German government reached the same conclusion in refusing to allow Soviet-designed plants backfit with Western technology to operate on German soil.

Alternatives to nuclear energy must be evaluated on a case-by-case basis and as part of an integrated resource plan. As cost effective non-nuclear options are identified, the Bank should promote them and should move expeditiously to phase out existing nuclear plants as quickly as the energy can be replaced.

The Transport Operations Policy

The Bank issued its Transport Operations Policy in March 1992, with a promise to "take a comprehensive view of the transport sector encompassing supply and demand, as well as organizational and environmental aspects." The Transport Policy also states that it will give priority to projects that contribute to environmental protection, and emphasizes balanced development of the transport system. The Policy fails, however, to consider the environmental advantages and disadvantages of these different modes. No mention is made of energy conservation, and little is said about strategies to minimize pollution.

TheTransport Sector paper explicitly acknowledges the EBRD's mandate to promote sustainable development. It discusses implemen-ting this mandate through internalization of environmental costs, effective uses of environmental assessments as decisionmaking tools (at least where environmental costs cannot be valued reliably in economic terms) and the need for achievable environmental standards.

Internalizing external costs through fuel taxes or other user fees would help to shift the demand away from automobiles to less environmentally damaging modes. But relying on this type of cost internalization as the only policy to address major environmental issues will lead to a serious underutilization and underdevelopment of railroads, subways, and buses, which may require subsidies or other policy interventions.

The Bank too quickly dismisses the potential for intermodalism to help create an efficient transport system in the region. Intermodal transport systems increase economic efficiency and reduce environmental impacts by using uniform containers that are easily transferrable between trucks, railways and ships. Standardized infrastructure and cargo containers allow for the integration of various modes of transportation into the most efficient service.

Also, The Transport Operations Policy does not mention non-motorized transport. Most important in this respect is support for bicycle pathways and urban pedestrian zones. Bicycles can be a practical supplement to motorized transportation in industrial countries as evidenced by zoning prohibitions on autos in the center of cities and "bike and ride" options in a growing number of countries in Western Europe. In fact, worldwide, bicycles are the fastest growing mode of transportation. The Bank should make promotion of bicycle transport and pedestrian zones an important priority of their transport operational practices.

The Agriculture Operations Policy

The EBRD's Agricultural Operations Policy states that Bank operations will focus on the economic restructuring of the sector and the development of physical and human resources to improve agricultural management. The Bank will emphasize privatization and restructuring through the entire commodity chain "including pricing policies, licensing, distribution and marketing constraints, financing, product selection, technology improvement, hygiene and environmental standards, and quality control." Both environmental and health impacts of agricultural practices are addressed in the EBRD policy, although they are not central to any of the operational priorities.

The Bank's emphasis on economic restructuring of the sector could have important environmental benefits. For example, after elimination of subsidies, fertilizer prices will increase and fertilizer use will decrease. Similarly, the Bank's apparent sensitivity to the need to downsize agricultural operations, and not simply to privatize them, could significantly reduce soil erosion and water pollution problems that occur disproportionately in large agricultural operations.

The Policy makes few specific recommendations for how its loan practices will further sustainable environmental practices. Health concerns arising from contaminated agricultural products are given almost no attention in the policy. The Bank's failure to explicitly target the environmental and health impacts of current agricultural practices is a missed opportunity to assist in the shift toward a sustainable agricultural policy in the region.

The Bank should promote organic agricultural practices and other practices that reduce dependence on fertilizers and pesticides. Technical assistance should be targeted to eliminate those agricultural practices that cause long-term environmental degradation, and to develop a market for organic and other healthy agricultural products. This would mean not only providing a preference for loans to organic farmers, but also assisting in building a demand for these products through education and research on the impacts of agricultural chemicals on human health.

Conclusion

When the EBRD was established, environmentalists hoped it would be a model and a guide to other international financial institutions seeking to promote sustainable development and democracy. But the EBRD has so far failed to operationalize these twin mandates in Central and Eastern Europe. To fulfil its commitment to sustainable development, the EBRD must revise its environmental and sectoral operations policies and integrate them into an overarching policy for sustainable development. The EBRD also must develop criteria and standards to ensure that each project it funds is consistent with this sustainable development policy and relevant operations policies.

Rather than selecting projects on a case-by-case basis, as the Bank has done in the past, it should consider sectoral and regional links between projects, and identify the mix of projects that best supports sustainable development. To help with this process, the Bank should prepare sectoral and regional environmental impact assessments, as provided for in its Environmental Procedures.

The Bank has generally underutilized environmental assessments, even on the individual project level. Many projects that should have received full EA, under either national law or the Bank's own guidelines, have received only partial environmental analysis. This practice must change. Additionally, more time should be allotted for preparation and review of EAs, and they should not be finalized, as has sometimes happened, until all relevant data has been collected and assessed. The Bank needs to adhere strictly to its screening, scoping, and monitoring requirements, and must expand its EAs to include alternatives and indirect, cumulative, and global impacts. EAs should be released in draft for public comment at least 120 days before the project is submitted to the Board for approval.

To meet its commitment to democracy, the EBRD must substantially improve and strengthen its procedures for public participation and access to information. As other development banks have done, The EBRD needs to develop an information disclosure policy that contains a presumption in favor of disclosure of all project-related information. The EBRD should also ensure that project sponsors adhere to its requirements for public participation, including early notification about all projects. The public should have the opportunity to participate in EAs at all the key points, including during scoping and upon release of the draft and final EAs.

Finally, the EBRD needs to develop mechanisms for ensuring full compliance with its policies and procedures and for holding the Bank accountable when it derogates from them. To this end, the EBRD should establish an Independent Inspection Panel modeled after the World Bank Inspection Panel. The ENVAC could also help ensure the EBRD lives up to its environmental objectives. It should provide more guidance to the Bank staff and the Board in implementing EBRD policies and procedures.

CIEL hopes that the analysis and recommendations contained in this report are helpful to environmentalists in Central and Eastern Europe, and contribute to the EBRD's ongoing efforts to improve its environmental policies, procedures, and practices, and ultimately, to the achievement of environmentally sound and sustainable development in the region.

For Key Recommendations Click HERE.