GOVERNMENT of the REPUBLIC of ARMENIA

E1137

Project Implementation Unit Public Disclosure Authorized Agriculture Reform Support Project Ministry of Agriculture

Environmental Impact Assessment

Public Disclosure Authorized of the proposed

Rural Enterprise and Small-Scale Commercial Agriculture Development (RESCAD) Project

Public Disclosure Authorized

March 10, 2005

Public Disclosure Authorized

i RESCAD Project: Armenia Environmental Assessment March 10, 2005

Contents

SUMMARY

1. INTRODUCTION AND BACKGROUND

1.1 Purpose 1 1.2 Rural Enterprise and Small-Scale Commercial Agriculture Development Project 1 1.3 World Bank Environmental Assessment Requirements 4

2. POLICY, LEGAL AND ADMINISTRATIVE FRAMEWORK

2.1 Legal and Regulatory Framework 5 2.2 Regional and International Cooperation 7 2.3 Policy Framework 8 2.4 Institutional Setting 9 2.4.1 National Setting 9 2.4.2 Marz and Local Government 10 2.5 Institutional Framework for Environmental Regulation 11 2.6 Institutional Capacity for Environmental Management 12 2.6.1 Ministry of Nature Protection 12 2.6.2 Commercial Banks 14

3. METHODOLOGY

3.1 General 14 3.2 Legal Instrumentation 15 3.3 Public Involvement 15 3.4 Determination of Potential Impacts 16 3.5 Baseline Data 18 3.6 Scoping and Bounding 18 3.7 Criteria for Impact Assessment 18

4. THE ENVIRONMENT

4.1 General 19 4.2 Socio-Economic Environment 20 4.3 Biophysical Environment 21 4.3.1 Physical Geography 21 4.3.2 Landscapes and Ecosystems 21 4.3.3 Agriculture and Land Resources 21 4.3.4 Water Resources 22 4.3.5 Forest Resources 22 4.3.6 Biodiversity 23 4.3.7 Summary of Agriculture Related Environmental Issues 24

5. ENVIRONMENTAL ASSESSMENT

5.1 General 25 5.2 Important Environmental Components 28

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5.3 Project Benefits 28 5.4 Potential Impacts – Rural Enterprises 31 5.5 Potential Impacts – Farm Inputs 32 5.6 Potential Impacts – Community Development 33 5.7 Potential Impacts – Extension Services 34 5.8 Potential Cumulative Impacts 34 5.9 Mitigation 36 5.10 Potential Residual Impacts 36 5.11 Environmental Risk 36

6. ENVIRONMENTAL MANAGEMENT GUIDELINES

6.1 General 38 6.2 Management 38 6.3 Mitigation 38 6.4 Monitoring 41 6.5 Capacity Development 42

7. REFERENCES

ANNEXES

Annex A: List and Description of Environmental Related Laws and Description of Selected Laws Annex B: Impacts, Causes, Consequences, Mitigation for Agro-processing and other Agribusiness (see list of tables) Annex C: Impacts, Causes, Consequences, Mitigation for Agriculture (see list of tables) Annex D: Impacts, Causes, Consequences and Mitigation for Rural Non-Agricultural Activities (see list of tables) Annex E: Summary of Round Table Discussions with NGOs Annex F: List of People Visited

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List of Tables

Table 3.1: NGOs Represented by NGO Roundtable Discussion Table 3.2: Description of Rural Enterprises by Broad Category Table 3.3: Probable Uses of Farm Credit Table 3.4: Level of Significance of Potential Impacts

Table 5.1: Broad Areas of Environmental Concern by Project Component and Sub- Components Table 5.2: Important Environmental Components Table 5.3: Benefits – Rural Enterprises Table 5.4: Benefits – Farm Inputs Table 5.5: Summary of Potential Major Environmental Impacts – Rural Enterprises Table 5.6: Summary of Potential Major Environmental Impacts – Farm Inputs Table 5.7: Summary of Potential Major Environmental Impacts – Community Development Table 5.8: Summary of Residual Effects of Enterprises Table 5.9: Summary of Probable Residual Effects of Farm Inputs

Table 6.1: Some Agricultural Good Practices – Towards a Protected Environment and Sustainable Agriculture Table 6.2: Some Good Rural Enterprise Practices – Towards a Protected Environment and Sustainable Rural Development Tab le 6.3: Summary of Environmental Capacity Building Requirements

Annex B Tables: Impacts, Causes, Consequences, Mitigation for Agro-processing and other Agri-business

Table B1: Planning and construction of new enterprises Table B2: Abattoir (meat processing) Table B3: Meat Packing Table B4: Vegetable Processing and Canning Table B5: Tanning Table B6: Aquaculture Table B7: Dairy Processing Table B8: Frozen Food Production Table B9: Oil Processing Table B10: Flour Milling Table B11: Markets

Annex C Tables: Impacts, Causes, Consequences, Mitigation for Agriculture

Table C1: Seed Table C2: Pedigree Seed Table C3: Fertilizer Table C4: Pesticides Table C5: Pedigree Livestock Table C6: Livestock for Finishing Table C7: Land Purchase Table C8: Tractors Table C9: Land Preparation Table C10: Other Farm Implements

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Table C11: Small Equipment Table C12: Irrigation Equipment and Irrigation Maintenance Table C13: Vehicles Table C14: Farm Buildings for Stock and Machinery Table C15: Storage Facilities (fuel, chemicals, grain and other produce) Table C16: Primary Processing Table C17: Fencing Materials Table C18: Fuel, lubricants, etc. Table C19: Veterinary Services

Annex D Tables: Impacts, Causes, Consequences and Mitigation for Rural Non-Agricultual Activities

Table D1: Non-renewable Resource Extraction Table D2: Renewable Resource Extraction Table D3: Manufacturing Table D4: Trade Table D5: Transport

Acronyms

ARSP Agriculture and Rural Support Project BSAP Biodiversity Strategy and Action Plan BSE Bovine Spongiform Encepalophathy CAP Community Action Plan CIS Central Independent States CJ Creizfeldt-Jakob disease DoEE Department of Ecological Expertise EA Environmental Assessment EIA Environmental Impact Assessment FSU Former Soviet Union GoA Government of Armenia GMO Genetically Modified Organism HYV High Yielding Variety IBRD International Bank for Reconstruction and Development IEC Important Environmental Components IPM Integrated Pest Management MoNP Ministry of Nature Protection NEAP National Environmental Action Plan NGO Non-Government Organization PFI Participating Financial Institution PMU Project Implementation Unit PMU Project Management Unit RESCAD Rural Enterprise and Small-Scale Agriculture Development Project TAP Technology Assessment Program NRMPR Natural Resource Management and Poverty Reduction Project SFM Sustainable Forest Management EMP Environmental Management Plan DoEE Department of Ecological Expertise

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SUMMARY

• Environmental assessment - purpose

The purpose of the environmental assessment is to ensure that the Project meets the requirements of the World Bank as set out in Operational Directives 4.01 for Category B projects.

The assessment consists of four main components: i) a review and summary of relevant legislation and the adequacy of the legislation to ensure environmental protection as it relates to the Project; ii) an analysis of probable impacts, mitigation and residual impacts of agriculture and agribusinesses including agro-processing, rural enterprise other than agriculture, and community development activities that would qualify for Project loan financing; as well, analysis of extension services; iii) an analysis of the capacity of the Government of Armenia (GoA) and lending institutions, to recognize and address impacts of any activity for which a loan is being requested; and, iv) guidelines for environmental management of the project.

• The Project

The objectives of the proposed Rural Business and Small-Scale Commercial Agriculture Development project (RESCAD) is to improve the ability of Armenia’s farmers and rural entrepreneurs to access markets and increase employment opportunities by stimulating market- oriented private and public investments in rural areas.

The proposed project seeks to fill the gap between rural producers and higher end markets by assisting value-added business initiatives. Although agricultural production remains mostly semi-subsistence in nature, there is evidence that farmers and processors are moving towards vertical integration down the supply chain. There is an increasing demand from individual farmers, producer associations, and small and medium enterprises for advisory services, marketing support and financial assistance.

The major focus of the proposed Project would be to support the continued development of commercial activities in the rural areas by improving market linkages, product quality, competitiveness and capacity of Armenian rural entrepreneurs and producers. The Project will have a three-tiered approach by addressing critical gaps at the farm level, at the community level, and at the rural business and agro-processor level.

At the time of this environmental assessment the Project was in the preparation phase and although the following description of the Project in terms of Project components is not likely to change in any significant manner before Project approval, some of the details of the components may require modification.

Suggested project components and activities comprise: (i) small rural business support, including improved financial services and small grants for technological innovations; (ii) farm-focused development support, including strengthening the decentralized agricultural extension system, the provision of management and business advice, improving livestock services, and improving planting material production capability; and (iii) community-focused economic development.

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The Project would work primarily through existing institutions, and would build on the experience of the ongoing Bank-funded rural projects, especially the ARSP.

• Regulatory framework

The main legislative framework for environmental management and relevant to the RESCAD Project are the Law on Principles of Environmental Protection (1991) and the Law on Environmental Expertise (1995).

The Law on Principles of Environmental Protection establishes the obligation of the State to care for the environment, prescribes the institutional framework for environmental management, and sets out the principles, approaches and instruments for environmental protection. The Law has a minimum normative value and has been used as an environmental policy document.

The Law on Environmental Expertise is currently being revised to provide a more comprehensive environmental expertise law and to bring it in line with western environmental review laws. It is currently (January 2005) in its third draft and is known as the Law of the Republic of Armenia on Environmental Review (Environmental Expertise).

This law establishes a framework to define impacts of intended activities on environment, assess feasible alternatives, minimize negative consequences and ensure public involvement. It contains a list of activities subjected to the expertise process. The State Agency for Environmental Expertise, within the Ministry of Nature Protection (MoNP), is responsible for carrying out the relevant procedures.

There are no fewer than a dozen other relevant laws dealing with various aspects of the environment. In addition, Armenia is signatory to 15 conventions relating to aspects of the environment. The most significant of these are the conventions relating to ozone depletion, desertification and biodiversity.

Armenia also cooperates with its regional neighbors on a number of environmental issues and programs.

• Institutional arrangements - EIAs

The Department of Ecological Expertise (DEE) within the MoNP is responsible for environmental assessment and the following figure summarizes the procedure to be followed when a proponent wishes to proceed with a particular activity.

Schematic Indicating Process of Development Proponent Receiving Environmental Approval

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Proponent submits plan of development to DEE

Initial examination of the If project does meet project in terms type of legislative project, size, area of requirements, then it influence is rejected.

If project meets legislative requirements then it is reviewed and assessed by a team of ecological experts

EE prepare a report (an If report is approved by MNP then EA equivalent) on the an environmental certificate is project and pass it on to signed by the Minister and the the MNP project can proceed.

If the report is rejected by the MNP on environmental grounds, it is forwarded to the proponent with suggestions for modification in design/operation. The proponent has the opportunity to modify and resubmit his proposal.

The proponent is responsible for ensuring that an environmental assessment is prepared for his proposal. This is conducted by the Department of Environmental Expertise which has a staff of ten scientific specialists. The proponent pays for this service. The examination is often done in collaboration with the local Marz government representatives. Each project submitted will receive a response (yes or no) from the DEE within 120 days. In accordance to the legislation the general public is informed of the proposed project and has an opportunity to comment on the project, particularly regarding environmental effects. The DEE takes public input into account before preparing its final report.

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Once the environmental certificate signed by the Minister has been issued the proponent is allowed to proceed with the development. The DEE will conduct periodic inspections (monitoring) of the project to ensure that all standards agreed to are maintained.

• Enforcement responsibilities and capacity

The Law on Environmental Expertise is not properly implemented and does not reflect the actual procedure which is followed. Contribution of independent experts and NGOs is minimal and public hearings are never held. Apart from lack of implementation, the Expertise law is also incomplete. Assessment criteria, requirements for preliminary environmental studies and the procedures for public hearings still need to be developed.1

• Agriculture related environmental issues

Armenia has a number of environmental issues either directly or indirectly related to agriculture and as such are relevant to this Project. A number of environmental problems are as a result of past and current agricultural activities and as such the Project must take care in not only exacerbating the situation but also in promoting activities that will be environmentally enhancing and to overcome some of these past mistakes. Agricultural and rural enterprises can also indirectly result in negative environmental effects. The issues are listed below:

• Groundwater pollution – chemicals including agricultural • Surface water pollution – chemicals including agricultural • Water losses – irrigation systems • Soil salinization and alkalination – irrigation systems • Water logging – irrigation systems (drainage) • Lake Sevan fisheries destruction – over fishing, pollution, and loss of breeding habitat (lake source streams unsuitable due to irrigation pressures) • Biodiversity losses (including pressure on relatives of domestic crops, fruit trees and medicinal plants) – grazing and deforestation • Soil erosion – overgrazing and deforestation • Soil fertility losses – cultivation practices • Land contamination – industrial wastes • Environmental health and hazards – food contamination and exposure to pollutants

In addition to these issues there are others related to other components of the proposed Project. For agro-processing and other agribusiness enterprises, major concerns relate to effluent

1 Environmental Resource Management. 2002.

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discharges and their impact on water quality, water use, disturbance of significant sites for biodiversity and cultural protection, and general health and safety issues. Another concern is the introduction of alien species and their effect on biodiversity, especially endemic species. A case in point is the existing aquaculture operations based on the North American indigenous rainbow trout (Salmo gairdreri) which if it escapes (and if it hasn’t already done so), can disrupt natural aquatic systems.

• Environmental assessment

The overall environmental effect of the sub-projects resulting from the main development components and sub-components of the Project will be positive. Farm, agri-business, and other rural business loans will result in improved agricultural production and marketing, and in general, improved socioeconomic conditions of the rural population. Other aspects of the Project including the community development component, extension services and others, will all contribute to an improved socio-economic environment in the rural areas. The Project will further contribute to the country’s food security, hopefully contribute to the generation of foreign exchange through increased agricultural exports, and mostly the Project, through the various financed activities, will significantly contribute to the alleviation of rural poverty. In the past 15 years rates of chemical inputs in agriculture have been significantly reduced, resulting in cleaner watercourses, lower levels of soil contamination and relatively chemical free food, although residues in soil and water, and their effects, still remain. The Project could lead to an increase in the use of farm inputs but mitigation measures, extension services and training associated with the Project should minimize any potential impacts associated with these inputs. To some extent, it is presumed that some of the industries under the former Soviet regime which created significant environmental problems and which have since ceased operating, may be refurbished, or new replacement activities introduced that are expected to operate more efficiently and without the major environmental contamination of the past. Current environmental regulations, particularly through the revised legislation on Environmental Expertise which will provide for the need for more comprehensive environmental assessments of projects, should prevent a return to the serious environmental issues of the past.

The major potential impacts associated with the eight rural enterprise categories include water and air quality deterioration, loss of biodiversity and impacts on biophysical resources, including forest cover losses and soil erosion. Of the eight categories, extraction industry, construction and manufacturing industries will contribute to the most significant impacts. Although the extraction enterprise category (a category that is included but in all reality probably not one that will likely be associated with the RESCAD Project) is probably and currently represented by a few individual activities. Nevertheless, the industries of this category have the potential to cause more environmental damage than all of the other enterprise groups taken together. The trade enterprise group will comprise of many individual businesses but generally, the impact of this group is negligible. Even a cumulative impact within the entire trade category is likely not to have a negative impact as significant as the potential impact that one extractive enterprise or a poorly designed and operating agro-processing centre could create.

The mining and manufacturing sectors generally produce wastes that are disposed of in the form of effluents that flow into surface watercourses, seepage into groundwater, emission gases that

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are released into the atmosphere and solid wastes that are disposed of in municipal and unorganized waste sites. These wastes could include a wide range of gaseous, solid and liquid compounds ranging from water vapour to highly toxic materials. Such wastes would pose a threat to groundwater supplies, air quality, aquatic ecosystems, and ultimately to human health.

Aquaculture development and commercial fishing can lead to the loss of species and the modification of aquatic ecosystems. In Armenia, rainbow trout (Salmo gairdreri) is an exotic species raised under artificial conditions. If stocks were to escape from captivity it could result in a serious impact on other indigenous species. The species can be very predatory. This is particularly important with regard to the Lake Sevan ecosystem and its fishery.

The major potential impacts associated with the 19 potential agricultural inputs for small and medium scale farms relate to water and soil quality, soil erosion, salinization and resource loss. Increasing pesticide applications can lead to pesticide residue (including heavy metals) build up in the soil. Pesticides and fertilizers can migrate to both surface waters and groundwater resulting in contamination of these two sources and leading to damaged aquatic ecosystems and threatened health to downstream users. HYV seeds will demand further applications of chemical inputs, thus exacerbating the problem. Livestock rearing in large numbers and in closed conditions, results in a concentration of animal waste that can contaminate both groundwater and surface waters. In the case of the former, public health is at risk, in the case of the latter, aquatic ecosystems and, possibly public health, are both at risk. Livestock expansion, particular for farms in the hills and near the mountains, can lead to pressure on common public lands including forests. Loss of biodiversity and soil erosion can occur if livestock and pastureland are not managed effectively and if livestock numbers are not controlled.

Irrigation rehabilitation and new irrigation schemes can lead to salinization and waterlogging – desertification - if drainage is not managed effectively. Tractors and land preparation can promote erosion, particularly if tractors are too heavy and cause soil compaction, and if fields are ploughed (with or without the contour) and left for long periods before sowing. Land purchases, where the land is already under agricultural use, do not lead to increased environmental problems. However, where land is under some other cover and use such as wetland, or forest cover on steep slopes, there is the potential loss of biodiversity, habitat and species. As well, erosion risks may be increased, particularly on steep sites.

A number of activities have been considered as the most likely candidates for community development support. Most of these activities will be environmentally benign. However, in the case of agro-processing through a cooperative arrangement, some potential impacts can be expected. Impacts relate to the location of the facility which could cause an inconvenience to local residents and to existing activities in the area. As well, location and construction activities associated with the enterprise could impact on biophysical resources. The major impact with most agro-processing facilities will be the effect of effluents on water quality. As well, in any processing facility there is the need to ensure public safety, particularly for workers.

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environmental input to the planning process in terms of ensuring that the outcome of the planning process (the plan itself) recommends community development opportunities that do not conflict with good environmental practices. In this regard the Project will be able to provide basic guidelines.

• Environmental risk

Overall, the environmental risk is high because effective enforcement of the law is questionable. If enforcement is carried out in an effective and efficient manner, the environmental risks associated with the various activities to be supported through the project will vary. Risks for those activities that would lead to impacts which can be governed by specific pieces of legal instrumentation would be low. Risks for which there is no effective legal instrument would vary, depending upon the nature and level of impact, and the cost of mitigation. However, without full mitigation, environmental risk for all activities would have to be rated high. That is, the actual impacts will be much closer to the identified potential impacts than to the residual impacts determined if all mitigation was carried out. Of particular concern would be for those activities resulting in water and air pollution, and soil erosion.

• Environmental management

Environmental management guidelines are provided to ensure that World Bank requirements regarding the environmental aspects of the Project are met.

Mitigation of environmental effects will be the responsibility of the proponent of the activity. The EIA includes a number of tables describing potential impacts for each of the activities that could be financed, as well as best mitigation practices. It will be the responsibility of the lending agency, the MNP and the PMU to ensure that mitigation is carried out successfully. This responsibility will be reflected in an effective and established monitoring system.

With some basic training loan officers will be able to monitor their projects but often they will require the PMU environmental specialist (assuming that one will be appointed) and/or MNP staff. Due to the probable large number of projects that will be assigned to each loan officer, monitoring will likely be conducted on a sample basis. Groups of projects that have the potential for creating the most serious environmental problems should be given highest priority for sampling. For monitoring to be effective, results must be acted upon, and as such, monitoring results will be considered when loan applications are reviewed and conditions are placed on subsequent loans.

It will be important that the loan officers have sufficient knowledge to recognize the significance of any impacts that may occur as a result of any potential activity being assessed for a loan and in this regard the management plan puts forth a training program for these officers, as well as others who may benefit.

The Project Implementation Unit (PMU) within the Ministry of Agriculture will be responsible for Project implementation. This Unit should have a staff member or a consultant with an environmental background to ensure that activities being supported are not ones that would

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unduly affect the environment. The individual must be able to recognize an activity for which a loan is being sought that may fall into Category A or B and ensures that the project receives an EA that will meet World Bank requirements. The individual will also be in close collaboration with MNP staff.

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1. INTRODUCTION AND BACKGROUND

1.1 Purpose

The purpose of this Category B environmental assessment is to ensure that the Rural Enterprise and Small-Scale Commercial Agriculture Development Project (RESCAD) meets the requirements of the World Bank as set out in Operational Directives 4.01.

The assessment consists of four main components: i) a review and summary of relevant legislation and the adequacy of the legislation to ensure environmental protection as it relates to the Project; ii) an analysis of probable impacts, mitigation and residual impacts of agriculture and agribusinesses including agro-processing, rural enterprise other than agriculture, and community development activities that would qualify for Project loan financing; as well, analysis of an extension services; iii) an analysis of the capacity of the Government of Armenia (GoA) and lending institutions, to recognize and address impacts of any activity for which a loan is being requested; and, iv) guidelines for environmental management of the project.

1.2 Rural Enterprise and Small-Scale Commercial Agriculture Development Project (RESCAD)

The objectives of the proposed Rural Business and Small-Scale Commercial Agriculture Development project is to improve the ability of Armenia’s farmers and rural entrepreneurs to access markets and increase employment opportunities by stimulating market-oriented private and public investments in rural areas.

The major focus of the proposed project would be to support the continued development of commercial activities in the rural areas by improving market linkages, product quality, competitiveness and capacity of Armenian rural entrepreneurs and producers. The project will have a three-tiered approach by addressing critical gaps at the farm level, at the community level, and at the rural business and agro-processor level.

Suggested project components and activities comprise: (i) small rural business support, including improved financial services and small grants for technological and business innovations; (ii) farm-focused development support, including strengthening the decentralized agricultural extension system, the provision of management and business advice, improving livestock

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services, and improving planting material production capability; and (iii) community-focused economic development. The project would work primarily through existing institutions, and would build on the experience of the ongoing Bank-funded rural projects, especially the ARSP.

Component I: Small Rural Business Support

An increasing number of small and medium businesses are being established in rural areas for processing, service provision and production activities. These activities are both agricultural and non-agricultural in their scope, and, to a large extent, represent the engines of growth and a key source of rural employment. Many of these emerging businesses have been supported during their establishment phases by various donor programs. However, an insufficient range of financial and business management services and poor access to technological improvements to improve their competitiveness limit their continuing development. The growing demand for rural/agricultural financial services, and the challenges of rural/agricultural lending have heightened the need for innovative approaches and financial instruments more tailored to the distinguishing features of this rural clientele that is largely characterized by small farms, lack of suitable collateral, inadequate financial skills, and production and commodity market risks that are specific to agriculture.

The objective of the component is to support rural businesses to better link their production to markets. The component aims to support the efficient development of supply chains for commodities that have a demonstrated market potential and to expand market opportunities through enhanced access to financial services and targeted business support. Access to financial services by farmers and small/medium size rural enterprises will be enhanced through capacity building to participating financial institutions (PFIs) in order to promote requisite lending skills, and facilitate the development and widespread use of suitable financial instruments and methodologies; and providing needed long term capital.

The component would provide support to the further development of small rural businesses and agro-processors, including: (a) enhanced rural financial services such as credit for working capital requirements, long-term credit for investment purposes, and leasing programs for processing and agricultural equipment; (b) promotion of rural business linkage through the provision of small grants provided on a competitive basis to test and disseminate technological and business support that could improve market access and linkage between producers and processors.

Component II: Farm-Focused Development Support

There is a substantial need to improve both the productivity and efficiency of rural producers and the quality of production in order to better serve the emerging markets. To accomplish this goal, four main areas have been identified, including strengthening the decentralized advisory services system, upgrading and encouraging marketing and trading knowledge sharing, improving livestock services, and improving access to planting material. An extension system, providing management and marketing advice and services, covering each Marz has been established with support through the present ARSP, but there is a need to streamline the service to improve efficiency and outreach. The veterinary system has been re-structured in 2004 to allow private veterinarians at the village level to be contracted to carry out government programs for the

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control of notifiable animal diseases including those that pose a public health risk as well as to provide paid services for animal health problems at the farm level. There is also a need to improve farmers’ access to quality seeds and planting material, including introduction of new varieties that may better provide for the needs of the developing agro-processing sector.

The objective of the component is to enable farmers to improve their productivity and quality of production to better serve emerging markets by developing a sustainable advisory system, enhancing the efficiency of Armenia’s seed and sampling businesses, and improving the livelihood of rural communities that are largely relying on livestock production.

Three main sub-components have been identified for this component: (a) strengthening the decentralized agricultural extension system to improve linkages with village-level authorities; to increase the effectiveness and outreach of the flow of information on technological improvements; to further develop the technology assessment program (TAP) and on-farm demonstration activities, especially with topics likely to improve production quality and farm- level storage and processing; (b) providing management and business services and improving delivery of livestock services to the farm level such as improved veterinary health care, and improved feeding systems; and (c) strengthening seed and seedling production capability of Armenian producers.

Component III: Community-Focused Economic Development

As a result of the closing down of rural industries after the collapse of the Soviet Union, the marginalization of rural areas has been accelerating in the recent past. Linked to such trends, the rural areas of Armenia face a number of serious problems which need urgent attention: deterioration of the economic potential and food security problems, shrinking forest areas, soil degradation, limited access to drinking and irrigation water, unsustainable agricultural production and animal husbandry practices, low living standards, limited access to main trade routes and markets, inadequate access to information and mass media, unemployment, emigration, and lack of funds to address the above issues. All these problems are interlinked and need to be addressed in the framework of a comprehensive community development strategy. Although many agencies have been working in rural areas of Armenia, most support has tended to focus on specific needs in geographically limited areas. The full impact of interventions in the rural sector is often not achieved because: (i) other equally important constraints remained un- tackled, (ii) many interventions were limited in scope and selective in terms of target beneficiaries and geographical areas, and (iii) interventions were often supply-driven, depended on the availability of external funding, had little coordination between interventions and little effective participation by concerned beneficiaries.

The objective of the component is to stimulate economic development at the community level in selected rural areas through increased capacity to self-organize, plan and manage and the creation of viable infrastructure marketing linkages and through increased income opportunities. It is expected that this will result in the improved capability of participating communities to use their own and other resources and services to support their market-led initiatives and priorities for sustainable economic development.

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The component will strengthen the institutional capacity of project participants that would enable them to acquire a capacity for self-organization by improving their organizational, problem assessment, planning, and management skills. To make use of those skills, the component will help finance selective community investments to encourage the intensification of on-farm production, and to strengthen backward and forward linkages between farming, agro-services, agro-processing, and marketing. The community group would prepare a Community Action Plan (CAP), which would be the basis for delivery of project interventions to rural communities. Since revitalization of the rural areas would require a range of activities, a CAP would include activities in three broad categories: (a) improved resource management; (b) rural market access infrastructure improvement; and (c) income-generating activities. The component has a three- phased approach: (a) community mobilization and capacity building; (b) production efficiency and market linkage for qualified communities; and (c) implementation of investment sub- projects. The project would support selected sub-projects falling within the first three years of implementation of a finalized community action plan. Investments would be limited to US$ 50 per inhabitant or on average US$ 60,000 for the participating community. Investments would focus on public goods, but private activities providing benefits to a large number of villagers may be financed if the CAP identifies the investment as a priority. The component activities would be implemented in selected Marzes and selected villages.

Component IV: Project Management

While the exact structure and location of a Project Management Unit (PMU) would be determined during project preparation, the project would support the establishment and operations of a PMU in close linkage with the Ministry of Agriculture building on the experience of the present PMU of the ARSP, including financial management and procurement. Detailed staffing needs and requirements will be further elaborated over the coming months. However, it is envisaged that there will be a number of specialists in the PMU that are responsible for the implementation of the various components and sub-components and take a pro-active role in ensuring that timely start-up, implementation and completion of project activities. A supervisory role would be held by the Ministry of Territorial Administration and a project management board would oversee the implementation of project activities.

1.3 World Bank Environmental Assessment Requirements

The Bank undertakes environmental screening of each proposed project for which it will provide funding in order to determine the appropriate extent and type of EA. The Bank classifies the proposed project into one of four categories, depending on the type, location, sensitivity and scale of the project and the nature and magnitude of its potential environmental impacts. The four Categories are A, B, C, and FI. Category FI is applied to all proposed projects that involve investment of Bank funds through a participating financial intermediary (PFI) to be used for sub- projects of which the environmental impacts can not be determined during appraisal of the World Bank project. Hence the financial intermediary is required to screen proposed sub-projects and must ensure that sub-borrowers conduct an appropriate EA for each sub-project, where warranted. Before approving a sub-project, the PFI verifies that the sub-project meets the environmental requirements of appropriate national and local authorities and is consistent with the Operational Policies (OP) and other applicable environmental policies of the Bank. Although part of the Project comes under the FI category and PFIs would manage USD six million out of

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USD 20 million of the Project funds, the majority of funding would go for the development of agricultural services and community development. Accordingly, this would not be financed through a PFI and accordingly, the Project is placed in the B category.

2. POLICY, LEGAL AND ADMINISTRATIVE FRAMEWORK

2.1 Legal and Regulatory Framework

The main legislative framework for environmental management relevant to the RESCAD Project are the Law on Principles of Environmental Protection (1991) and the Law on Environmental Expertise (1995). The latter law is currently being revised to provide a more comprehensive environmental expertise law and to bring it in line with western environmental review laws. It is currently (January 2005) in its third draft and is known as the Law of the Republic of Armenia on Environmental Review (Environmental Expertise). [It is important that the reader ensure that when referring to any law in the following that the most updated version of that law is referenced].

Law on Environmental Principles, the Green Constitution (1991)

The Law establishes the obligation of the State to care for the environment, prescribes the institutional framework for environmental management, and sets out the principles, approaches and instruments for environmental protection. The Law has a minimum normative value and has been used as an environmental policy document.

The aims of nature protection are: • To ensure a right to a clean environment • To protect natural resources and provide support to the improvement of flora and fauna • To protect the ecological balance of the natural systems and land diversity • To ensure the effective use of mineral resources • To protect special natural ecosystems and national properties etc.

Law on Ecological Expertise (1995)

The current and existing Law establishes a framework to define impacts of intended activities on environment, assess feasible alternatives, minimize negative consequences and ensure public involvement. It contains a list of activities subjected to the expertise process. The State Agency for Environmental Expertise, within the Ministry of Nature Protection (MoNP), is responsible for carrying out the relevant procedures.

The main aim of the expertise is to foresee, prevent and minimize the negative impacts of planning activity for human health, environment, economic and social development.

The tasks of the expertise include:

• Analysis of the alternatives and usefulness of the planning activity;

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• Assessment of environmental impacts of planning activity and its alternatives ; • Analysis of any consequences of the planning activity, and to determine the practicality of stated mitigation; • Ensure the effective use of natural resources; • Prevent activities that will have negative environmental impacts; • Ensure public participation and information on the expertise.

The list of activities (relevant to the RESCAD Project) which require expertise include:

• Community (city) building (construction) • Buildings, constructions and complexes which exceed certain limits • Waste water stations • Improving and restoring of natural eco-systems, which are damaged by anthropogenic affect • Introduction of alien flora and fauna • Agricultural • Land improvement, construction of irrigation or drainage networks (systems) • Land protection from erosion and other affects • Restoring forests and improving forest quality • Construction of water tanks and other constructions • Extraction of underground water • Substructure • Roads, tunnel, bridge, underground, railway, airport construction exceeding certain limits • Services • markets

The expertise must forecast, describe and assess the: • direct and indirect impacts of the planned activity • alternative variants, including the zero-impact variant, and choose which one is more effective • the mitigating activities for the negative environmental impacts • the assessment of environmental impacts of socio-economic development when zero-impact variant is chosen • the local environment (cultural and socio-economic)

Other relevant laws

• Law on Specially Protected Areas (1991) • Water Code (1992) • Forest Code (1994)

6 RESCAD Project: Armenia Environmental Assessment March 10, 2005

• Law on Environmental Expertise (environmental assessment) (1995) • Law on Payments for Nature Protection and Use of Natural Resources (1998) • Law on Flora (1998) • Law on Fauna (draft) • Law on the Protection and Use of Fixed Cultural and Historic Monuments and Environment (1998) • Law on Lake Sevan (2001) • Law on Complex Program of Lake Sevan Ecosystem Restoration, Conservation, Reproduction and Use (2001) • Law on Annual Program of Lake Sevan Ecosystem Restoration, Conservation, Reproduction and Use (2001) • Law on Environmental Education and Public Awareness (2001)

Annex A sets out the main provisions of the laws mentioned above as well as other relevant regulatory instruments.

2.2 Regional and International Cooperation

Regional Cooperation2

Environmental cooperation occurs by means of implementing general international treaties and conventions as well as participating in regional processes and cooperating with various states or organizations. Regional trans-boundary issues are of a particular importance and several issues related to trans-boundary water are at stake, including those related to water use and pollution.

Armenia has been involved in a several activities under the “Environment for Europe” process, and particular focus is placed on the Environment Strategy for 12 States of Eastern Europe, Caucasus, and Central Asia which will create grounds for cooperation with countries of the European region to be targeted at addressing the most urgent environmental issues for these States.

Armenia is signatory to the CIS Agreement on Cooperation in Environment and Ecology and within this framework the country has ratified agreements on cooperation in environmental monitoring along with other activities.

Cooperation in the South Caucasus Region occurs through participation in regional projects, of which there are several, and the signing of bilateral and multilateral specific or comprehensive environmental treaties. Of particular interest the RESCAD Project are the “Reducing Trans- boundary Degradation of the Kura-Arax River project; the drafting of legal documentation for the protection of mountain ecosystems of he Caucasus; and, the development of a Cooperation Program for Sustainable Development n the South Caucasus.

2 Government of Armenia. 2003.

7 RESCAD Project: Armenia Environmental Assessment March 10, 2005

Armenia has a number of bilateral agreements and a variety of environmental issues but within the region these are limited to agreements with Georgia, Russia and the Islamic Republic of Iran.

International Conventions

Armenia is signatory to the following multilateral environmental agreements:

• Convention on Biological Diversity (1993) • Ramsar Convention on Wetlands of International Importance (1993) • United Nations Framework Convention on Climate Change (1993) • Convention on the Protection of World Cultural and Natural Heritage (1993) • Convention on Combating Desertification (1997) • Convention on Environmental Impact Assessment in a Transboundary Context (1997) • Basel Convention on the Control of Transboundary Movement and Disposal of Hazardous Wastes (1999) • Convention on the Transboundary Effects of Industrial Accidents (1996) • Convention on Long-range Transboundary Air Pollution (1997) • Convention for the Protection of the Ozone Layer (1999) • Convention on access to information, public participation in decision making and access to justice in environmental matters (ratified 2001) • Convention on the prior informed consent procedure for certain hazardous chemical and pesticides in international trade (signed only, 1998) • Convention on Protection and Use of Transboundary Watercourses and International Lakes (Signed only, 1999) • Stockholm Convention on Persistent Organic Pollutants (signed only, 2001) • Convention on the prohibition of military or any hostile use of environmental modification techniques (2001)

2.3 Policy Framework

• National Environmental Action Plan (NEAP)

The NEAP identifies Armenia’s environmental goals, objectives and priority activities for the prevention of further degradation of the country’s natural resources. Key areas of action include policy and program development, legal and regulatory reforms, institutional strengthening and capacity building, environmental awareness and education, ensuring effective implementation of the Action Program and financing and co-operation with other organizations.

The NEAP indicates specific issues relating to agriculture. Since privatization of the country’s agricultural lands, there has been no immediate positive impact on agricultural production and the environmental sustainability of agricultural land use has been reduced. Agriculture, both present and in the past, have resulted in land degradation through soil erosion, soil compaction, fertility decline, salinization, alkalization and water logging.

8 RESCAD Project: Armenia Environmental Assessment March 10, 2005

• Lake Sevan Action Program

The Lake Sevan Action Program identifies four phases to implement a sustainable management of the lake to provide opportunities for development for tourism and recreation, to protect and enhance biodiversity, to improve fisheries in a sustainable manner, to control and minimize pollution discharges, to improve institutional arrangements to more effectively integrate all user groups within the watershed and to restore the strategic value of Lake Sevan. This is particularly relevant to RESCAD since the lake’s watershed includes one sixth of the country’s total area. Thus, agricultural activities that promote runoff (siltation from soil erosion, chemical inputs) can adversely affect the lake’s ecosystem.

• Biodiversity Strategy and Action Program

Armenia's strategy for biodiversity conservation, as identified in the NEAP and Biodiversity Strategy and Action Plan (BSAP), focuses on sustainable development of landscapes, building human capital and increasing financial investments to achieve improvements in four key areas: (i) institutional and community know-how in sustainable development and its enabling legal framework; (ii) public awareness and participation; (iii) protected area network planning and management; and (iv) safeguard flora and fauna by mainstreaming biodiversity conservation into agriculture, forestry and other economic sectors.

• Sustainable Agricultural Development Policy

The GoA has taken actions to liberalize the country’s agriculture and to arrest the deterioration of agricultural infrastructure. Specific objectives of the strategy are to: (i) provide food security in the country; (ii) improve social conditions in the country and to reduce poverty; (iii) establish an agricultural system smoothly functioning under market economy conditions and principles; (iv) support the development of production and marketing of Armenian agricultural production, which will ensure the entrance into the international market and competitiveness; and (v) increase profits and improve livelihood of rural the population. The strategy focuses on agricultural policy and macroeconomics, crop production, livestock breeding, processing and marketing of agricultural products, agricultural finance, and, rural infrastructure and management. 2.4 Institutional Setting

2.4.1 National Level

At the National level the Ministry of Nature Protection has the mandate for environmental protection, the sustainable use and regeneration of natural resources and the improvement of the environment. It carries out this function through the following:

• The State Environmental Inspectorate and its 11 Regional Environmental Inspectorates who perform the enforcement of laws and regulations pertaining to air and water pollution, land use, biodiversity conservation and forest protection;

9 RESCAD Project: Armenia Environmental Assessment March 10, 2005

• State Environmental Expertise which is the body responsible for EIA; • Environmental Monitoring Center which is responsible for air and surface water quality monitoring; • Hydromet which is responsible for monitoring of water flow, water balance and water level fluctuations, organization of research in the field of environmental pollution and weather forecasting

The State Environmental Expertise will be responsible for ensuring that those Project interventions in terms of sub-projects to be financed through the PFIs and directly from the Project itself (PMU) meet the country’s environmental laws.

The Ministry of Agriculture (MoA) is responsible for implementation of agricultural policy and realization of agricultural production objectives, management of state agricultural lands and development of land use schemes, overseeing agro-processing procurement and food policy and supporting farmers of privatized land. In addition, the MoA oversees management of agro- biodiversity, seed-production, fish breeding farms, veterinary and plant protection services.

The State Committee on Water Management manages irrigation, drinking, mineral water resources and the sewage system, registries all artesian sources and owns all available water infrastructures. It develops the water use fee policy, usage quotas for all main water users and implements investment projects in all subordinated agencies. It is divided in a Water Supply Agency and a Drainage, Irrigation and Management Agency who are both established as state closed joint stock companies.

2.4.2 Marz and Local Level3

Armenia has 10 counties or provinces, known as Marzas, which are subdivided into communities, Hamainks. The city of Yerevan constitutes an additional political entity in itself. General marz administration functions include supervising the constitutionality and legality of decisions taken by local self-governing bodies, assuring the implementation of decrees, implementing regional economic and social development programs, coordinating the activities of state agencies, overall planning, organizing and providing infrastructure services, and securing protection of state property, natural resources, and cultural heritage. In the field of the environment the marz: • participates in the development of national environmental programs and make provisions for their implementation in the marz areas • is responsible for enforcement of legislation in the marz, • supports specially protected areas, natural resource utilization, and executing measures against illegal hunting, fishing and logging, • co-operates with environmental NGOs.

3 Environmental Resource Management. 2002.

10 RESCAD Project: Armenia Environmental Assessment March 10, 2005

Agricultural Support Centers have been established in all marzas under the World Bank ARS Project. These Centers work in close co-operation with the MoA and provide extension services to farmers, manage information data bases on agricultural issues, develop nurseries, distribute seeds and promote public awareness.

The Hamainks are in charge of managing the property in their district and resolving problems of local significance. They have significant authorities in land management and water management. It is their responsibility for instance to maintain the irrigation systems and assist in the prevention of crop and livestock diseases. 2.5 Institutional Framework for Environmental Regulation4

The Department of Ecological Expertise is responsible for environmental assessment and Figure 2.1 summarizes the procedure to be followed when a proponent wishes to proceed with a particular activity. Figure 2.1: Schematic Indicating Process of Development Proponent Receiving Environmental Approval

Proponent submits plan of development to DEE

Initial examination of the If project does meet project in terms type of legislative project, size, area of requirements, then it influence is rejected.

If project meets legislative requirements then it is reviewed and assessed by a team of ecological experts

EE prepare a report (an If report is approved by MNP then an EA equivalent) on the environmental certificate is signed by project and pass it on to the Minister and the project can the MNP proceed.

4 Pers. comm: Mr. Ashot Santrosyan, Director, Environmental Inspectorate

11 RESCAD Project: Armenia Environmental Assessment March 10, 2005

The proponent is responsible for ensuring that an environmental assessment is prepared for his proposal. This is conducted by the Department of Environmental Expertise which has a staff of ten scientific specialists. The proponent pays for this service based on a scale of costs for EA preparation for various types and sizes of projects. Specialists travel to the proposed site and conduct the necessary examination. This is often done in collaboration with the local Marz government representatives. Each project submitted will receive a response (yes or no) from the DEE within 120 days. In accordance to the legislation the general public is informed of the proposed project and has an opportunity to comment on the project, particularly regarding environmental effects. The DEE takes public input into account before preparing its final report.

For air and water monitoring the Environmental Monitoring Centre performs partial regular monitoring. The Centre monitors the air basin of six cities and the water quality in 30 rivers and a number of lakes.

2.6 Institutional Capacity for Environmental Management5

2.6.1 Ministry of Nature Protection

Having stated the responsibility and procedure of the DEE above, The Law on Environmental Expertise is not properly implemented and does not reflect the actual procedure which is followed. Contribution of independent experts and NGOs is minimal and public hearings are never held. Apart from lack of implementation, the Expertise law is also incomplete. Assessment criteria, requirements for preliminary environmental studies and the procedures for public hearings still need to be developed.6

According to the Director of the Environmental Inspectorate, the staff comprising the ecological expertise are well qualified and sufficient in number to address the cases for which they are responsible. However, in the case of environmental monitoring “the existing system (for air and water quality monitoring) is equipped with outdated technical equipment which produce results within a 25-30% error margin. There is also a lack of mobile laboratories. In order to address environmental concerns, a complete, trustworthy, and accessible qualitative and quantitative environmental assessment data is needed. The activities of the central monitoring unit are not a full-programmed capacity due to the lack of technical resources and insufficiency of funding”7

Two major issues identified by farmers during the field visit (Annex E) were the legal and illegal removal of trees and the consequence that this has on the environment; and the over use of pastures and resulting loss of forage cover, soil compaction and soil erosion. These two issues

5 Analysis of various laws and policies stated here is referenced from the EIA for the NRMPRP, 2002 and the situation has not changed in the last three years 6 Environmental Resource Management. 2002. 7 Government of the Republic of Armenia. 2003.

12 RESCAD Project: Armenia Environmental Assessment March 10, 2005

are reflected in the inadequacies of the Forest Code and the Law on various land types, respectively. These are described in the following:

The Forest Code states that all forests have a protecting, sanitary and health role, therefore forest cannot be used for production. The forest may be cut only for sanitary and care purposes. The code neglects the actual situation and the productive role of forests in the country. Amendments to the Forest Code are badly needed. It is necessary to have implementing legislation on forest use adopted under the Forest Code which grants the use of forests for leasing, grazing, etc. Furthermore, the present Forest Code does not provide for private forest land ownership or community management (providing opportunities for cash flowing back to e.g. forest user associations). Procedures for forest preservation services and monitoring are lacking as well. With regard to implementation of the forestry component activities forest regulations supporting SFM activities such as correct felling techniques, road construction, sustainable planning etc. have to be developed before any logging activities take place.

The Law on Rental and Regulations on Utilization of Natural Pastures, Hay Meadows and Other Land Types has a number of problems. The leasing terms provided are too short for sustainable pasture management, possibilities for privatization of pastures and most of the hay meadows are not provided and there is no pasture use control. The law should provide for an obligation for improvement of land and its protection. Rent fees should be used for pasture rehabilitation and improvement.

The Project will have provision for community development opportunities. However, legal constraints for community level developments include lack of or inadequate regulations for land tenure, pasture renting, taxation of non-profit and agricultural organizations, status of farms and rehabilitation of irrigation and other water facilities. A law on agricultural co-operatives is lacking.

Some of the specific weaknesses in Government, as relate to the environment and which effect the RESCAD Project are discussed in the following:8

• Human capacity and financial constraints limit the environmental authority’s ability to fulfill its role, especially at the local level. The functions as well as the prevailing attitudes of the management are based on one-way administration and implementation from central to local level. There is a considerable need for further training and improved management skills at all levels. Budget limitations and general lack of financing is a continuous constraint to build adequate technical and management capacity. Capacity in key areas such as environmental planning, management and law drafting within the MoNP are weak.

• Co-operation amongst relevant sectoral agencies is weak, with several agencies sharing overlapping responsibilities of resource use. Institutional co-ordination and collaboration

8 Environmental Resource Management. 2002.

13 RESCAD Project: Armenia Environmental Assessment March 10, 2005

for sustainable natural resources management needs to be improved and the enabling framework should be provided through legislation and institutional set up.

• The monitoring capacity of the relevant agencies is inadequate. Monitoring equipment is obsolete and sampling is conducted according to guidelines from the Soviet era. Monitoring for forestry and biodiversity is performed in an ad hoc manner and is very weak. Scientific studies within protected areas are not well integrated into park management decisions. There is no proper monitoring of the utilization of non-wood forest resources. Reference data is needed to support the environmental authorities’ technical functions. Management planning and zoning can not be carried out without proper information. There are no basic rules for information management and the existing monitoring agencies or academic institutions lack co-operation. An information network is needed to ensure the regular exchange of information between the management authorities and the users of the natural resources

• Generally the public awareness on the importance of biodiversity and natural resources conservation is weak. Mistrust of government agencies, combined with often conflicting regulations and unclear property rights have further weakened the ability of local communities to manage their resource base on a sustainable basis.

• The Structure of MoNP is outdated and unclear. This is being addressed through the NRMPR Project.

• Low salaries and non-payment of salaries have occurred in the past. This has probably been responsible in the past for corruption and illegal logging in the forestry sector. The problem of illegal logging is currently being addressed within the ongoing PRSC program. Corruption has to be addressed through stricter law enforcement, adoption of an efficient monitoring system which allows public involvement, transparent and accountable administration, clear allocation of responsibilities and access to information.

2.6.2 Commercial Banks

The banks have no environmental expertise nor do they currently require it. Under the ARSP the PFIs are only obligated to ensure that the proposed borrower has obtained the relevant certificates and clearance approvals from the various agencies, including the MoNP which is responsible for environmental protection.

3. METHODOLOGY

3.1 General

The RESCAD Project has not been finalized at the stage of environmental assessment although significant changes to the concept and the current description of components are not anticipated.

14 RESCAD Project: Armenia Environmental Assessment March 10, 2005

The challenge in conducting an EA for the Project is that there are no location specifics for the Project (the intent is that the Project and the credit available through the Project will be available country wide, in all marzes). The other challenge is to attempt to determine as best as possible the various activities that individual farmers, agribusiness (including agro-processors), and communities will wish to pursue in terms of loan proposals. As described in the following sections, a list of activities has been prepared based on previous similar studies and on discussions with stakeholders. It should be noted, however, that this list may not be comprehensive since it is difficult to predict all activities that may be proposed for financial support. At the same time the list may well contain activities that will not be pursued by potential borrowers.

3.2 Legal Instrumentation and Management Capacity

The comprehensive review of legal instrumentation for the EIA for the NRMPR Project has been updated. This has been supplemented with further discussions with the relevant government officials and review of additional documentation. An analysis of the country’s capacity for environmental management was carried out on the basis of discussions with government officials and, again, on the documentation prepared by the EIA team for the NRMPR Project.

3.3 Public Involvement

Public input to the environmental review was solicited in the process of preparing the environmental review:

• discussions with farmers, both small and medium sized commercial farms (Annex E), and with commercial banks (Annex E) to inform them of the environmental review of the Project, and more importantly, to identify likely activities for which loans through the Project would be requested. As well, farmers were asked for opinions on important environmental issues in their communities. • discussions with Ministry of Agriculture officials to determine the categories of likely farm and non-farm rural enterprises for which loans would be requested. • a half day NGO forum was held to solicit ideas on likely farm and non-farm rural activities to be funded and the probable environmental impacts that could be expected from these activities (attendees of NGO forum listed in Table 3.1). A summary of discussions at this round table is provided in Annex E. • the draft final environmental assessment was forwarded electronically to the NGOs that attended the NGO roundtable, as well as to relevant government departments, for further comment. • newspaper advertisements were placed in Yerevan newspapers and local newspapers in the marzes to invite the general public to examine the environmental review draft final document and to make further input to the review (open houses for discussion of the draft final report have been arranged for each of the marzes as well as in Yerevan). • The final version of the environmental review will be placed in the World Bank InfoShop in Washington DC.

Table 3.1: NGOs Represented at NGO Roundtable Discussion

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Name Organization Sona Ayvazyan Center for Regional Development/Transparency International, Armenia Karen Afrikyan Armenian Forests, NGO Gevorg Arakelyan Association for Sustainable Human Development/ UNEP COM Karine Danielyan Association for Sustainable Human Development/ UNEP COM Zhanna Galyan Ecotourism Association Edward Yavruyan Armenian Nature Protectors’ Union, NGO Arthur Yavruyan Armenian Nature Protectors’ Union, NGO Lilik Simonyan Armenian Women for Health and Healthy Environment, NGO Elena Manvelyan Armenian Women for Health and Healthy Environment, NGO Susanna Hakobyan Environmental Survival, NGO Armen Kharatyan Union of Nature Protection Satenik Ter-Minasyan Ecological Monitoring, NGO Levon Aghamyan RESCAD PPU Artavazd Hakobyan World Bank, ECSSD Michael Rayner RESCAD International Team Leader John Ambrose RESCAD International Consultant, EA

3.4 Determination of Potential Impacts

World Bank experience with this type of project in transition economies has been used here for identifying the potential impacts for a wide range of rural activities has been used as a basis for the EA. This has been supplemented with input from the NGOs and farmers in the field. The list of agricultural activities likely to be subject for loans in these other countries was used as a base for discussion for the Armenia project. This list was then adapted to best fit the agricultural conditions and farmer / rural development needs in Armenia.

The environmental assessment focuses on four groups of activities:

. small and medium sized farms . rural enterprises (agriculture and non-agriculture) . community development needs . extension services

• 7 categories of rural activities

Matrices (Annex B) were developed for each of the seven rural enterprise categories presented in Table 3.1. The matrices addressed each group in general terms and identified the broad potential direct and indirect environmental impacts for each group. In addition, consequences of each impact have been identified as well as the possible mitigative measures to be taken. Each group is given an impact level of significance prior to mitigation and a residual level of significance following mitigation. The likelihood of an impact occurring is indicated.

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Table 3.2: Description of Rural Enterprises by Broad Categories

Broad Categories Description Agro-processing includes agro-processing for oils, fruits, wines and sugar refining; also includes grain milling, dairy activities and meat processing Other agribusiness includes agricultural related businesses such as farm supply, farm insurance, farm services (machinery repair, irrigation provision, etc.) Manufacturing includes other agricultural related and non-agricultural manufacturing activities Construction companies in the building trade to provide residential and business construction as well as roads and other public and private construction; includes maintenance Trade (wholesale and retail) all wholesale and retail trade in the rural areas Hotels and restaurants self explanatory Transport all forms of transport including public and specialized (transporting farm production to market or to processing centers)

• Small and medium scale farms (less than 30 ha)

To effectively develop small and medium scale farms, a number of inputs will be required. The exact input requirements are difficult to predict but based on previous similar studies, general knowledge, and input from farmers, banks and agricultural specialists in Armenia a basic set of inputs has been determined. Table 3.3 lists 19 possible inputs. Matrices (Annex C), similar to those for the rural enterprises, were prepared.

Table 3.3: Probable Uses of Farm Credit

. Seed . Pedigree and HYV seed . Fertilizer . Pesticides . Pedigree livestock* . Livestock for finishing . Land rental / purchase .Tractors . Farm implements (land preparation, sowing and harvesting implements) . Land preparation (tractor hire) . Small equipment* . Irrigation equipment . Vehicles (for market and land access) . Farm buildings for stock, machinery, and chemicals . Storage facilities (fuel, grain and other produce) . Fencing materials* . Primary processing equipment (e.g. milking equipment) . Fuel, lubricants, spare parts and other operating

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requirements . Veterinary services

• community development

Community development initiatives will depend on the outcome of the community development plans that will be required and which will be used to judge the most effective financial input. Development activities could be wide ranging. Through discussion with farmers and other village residents, as well as from experience with similar projects in other countries in the region, a number of potential activities at the community level have been selected as the most probable to be requested for funding support. These activities include: road improvements, market refurbishments and new markets, development of agricultural cooperatives which could include a wide range of activities including milling, dairy processing, meat processing, canning and other. Other activities might include agricultural equipment hire service, irrigation systems, and development of an agricultural loan system. Those which could have environmental impacts have been described in the matrices of Annex B and D.

• extension services

Extension services normally provide advice to farmers and the services will assist in setting up the technological innovation activities for demonstration. Those providing the extension services to farmers and others must be aware of the environmental impacts that such advice, if taken, could have and extension officers should be guiding farmers and others to adopt the least environmentally damaging techniques to their agricultural and other development activities.

3.5 Baseline Data

Only secondary data has been collected for this assessment. Since the review is sectoral in nature the data that has been collected and described in Section 4 includes only descriptive broad country-wide information and does not reflect any one particular site where a sub-project (a financed activity) may occur.

3.6 Scoping and Bounding9

The basis of scoping has been the identification of the Important Environmental Components (IECs). These are the environmental features relevant to the Project and which are deemed important enough to focus on during the environmental review process to protect against negative impacts. The list of IECs was initially based on an examination of a description of the country’s resources. This was further refined on the basis of discussions held with farmers in the field and the NGOs during the NGO roundtable discussion. The list of IECs was subsequently modified through the course of the review. The IECs are listed in Section 5.4.

9 Scoping: Identification of the potential impacts that are relevant and significant in order to contain the extent of the assessment Bounding: placing a realistic geographic limit on the assessment

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3.7 Criteria for Impact Assessment

Criteria used for determining the significance of an impact includes severity, extent, duration, frequency, possibility of occurrence, and possibility of reversibility of the impact. The extent of each of the criteria was based on judgement and no numerical ranking or consideration was given.

Of the 19 farm inputs listed in Table 3.3, three as indicated (*) will have very insignificant impact. The remaining 16 inputs will have varying levels of potential impact and for each of these a matrix has been established that describes the potential direct and indirect impacts that can be expected, and the consequences of these impacts. The mitigative solutions to these impacts is also provided. Each input is given a level of impact significance prior to mitigation and a level of significance (for the residual impact) assuming that mitigation is carried out. All ‘levels of significance’ ratings (Table 3.4), and other ratings, are relative and subjective.

Table 3.4: Level of Significance of Potential Impact

Level of Significance Description Very High Significance Potential impact of the enterprise could cause damage to an IEC over a large area affected (e.g. loss of important habitat, loss of biodiversity, loss of large areas of productive land). Mitigation is not possible and the impact is irreversible. High Significance Potential impact of the enterprise could cause irreparable damage to a small area (e.g. on site) of an IEC; or, potential impact could cause damage to an IEC over a large area, but the ecosystem can still function (e.g. surface water contamination causing limited aquatic ecosystem damage). The impact is reversible over a long period of time. Moderate Significance Potential impact damages an ecosystem over a small area but it is still functional and the damage is reversible over a long period of time. Damage to an ecosystem over a large area, still functional, and the damage is reversible over a relatively short period of time. Low Significance Potential impact of the enterprise could cause damage to an IEC over a small area but system still very functional and damage is reversible over a short period. No Impact Non measurable impact.

4. THE ENVIRONMENT

4.1 General

The Republic of Armenia has a total area of 29,740 km2 (2.97 million hectares), making it the smallest of the former Soviet republics. It is part of the Alpine-Himalayan fold mountain system, and the country consists primarily of mountain highlands. Seventy two percent of the country is above 1,500 m elevation and this elevation rises to 4,095 m on Mount Aragats. Only 24% of the

19 RESCAD Project: Armenia Environmental Assessment March 10, 2005

land has slopes averaging less than 3%. Armenia has a sub-tropical, continental climate characterized by hot dry summers and cold winters. Annual precipitation ranges from 1,000 mm in the mountains to less than 300mm in the lowlands of the Ararat Valley. Most of the precipitation falls during April and May. Given the semi-arid climate, water is a limiting resource.

Although relatively small, Armenia has a diverse geology combined with the large amplitude of relief and climatic variation associated with mountainous terrain. It also has a wide variety of soil types. The combination of landform, climate and soil conditions has, in turn, given rise to a number of natural ecosystems and to a variety of conditions which determine the use of land for cultivation, grazing, forestry or other uses.

4.2 Socio-Economic Environment

The population of Armenia is 3.8 million (January 2000) of which 66.8% reside in urban areas, almost half of which reside in Yerevan. Between 1990 and 1999 the trend has been to a decreasing percentage of urban population 69.1% to the present level and a corresponding rise in the rural population. This interesting trend is explained by the decline in industrial production during the transition period and the privatization of agricultural lands. Armenia’s overall population is almost mono-ethnic with 96% being Armenia and the remainder a mix of ethnic minorities.

In the rural areas 35.1% of rural communities are situated in villages of with 1001-3000 people. 96 rural settlements have in excess of 3000 people. Rural settlement population data indicates extremely low densities in the highlands and borderland areas.

In common with many of the FSU countries in transition, but exacerbated by special factors including the aftermath of the 1988 earthquake and the mid nineties energy crisis, the economy of Armenia contracted in real terms by 86.5% in the six years from 1990 to 1996. The reported per capita income for 1995-1996 was only $420-440. In 1996 Armenia’s total imports were $861.5 million, and exports were only $290.3 million. As a consequence of the economic situation, the government's ability to adequately fund its recurrent and development activities was dramatically curtailed compared to the soviet era, when subsidized activities were prevalent. Although the economy has begun to recover, the government remains critically short of financial resources.

Some 55% of the Armenian population is classified as poor. Rural poverty is particularly evident among those living in high altitude areas such as Tavoush and Gegharkunik. The rural economy has provided a "safety net" during the crisis years, by absorbing the excess labor (employment in agriculture almost doubled between 1991 and 1996). Rural communities have been able to buffer themselves through their access to natural resources.

Within the past decade a considerable decline of economic potential and social infrastructure has occurred in the high mountain and boundary settlements. This has occurred as a result of both the transition difficulties and a number of other causes including blockades and earthquakes. As a result of military actions and natural calamities many communities found themselves without

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reliable water supply delivery, housing and schools. Some of these shortages still persist. As of 2003 many villages were still without basic medical care services and telephone services. As of 2003 some high mountain areas were out of agricultural production as a result of lack of infrastructure, irrigation water, other farm inputs, and as a result of mine-strewn agricultural fields.

The primary activity of approximately 70 percent of rural households in the project area is subsistence farming with small amounts of agricultural surplus bartered in local markets. The most important source of income (including self-consumption, cash, barter and processing) is crop agriculture and only about 10% of the population engage in cash sale of their agricultural production. Remittances, pensions and day labor (other income) provide a primary source of cash to buy goods and services. The majority of farmers are cash constrained and are unable to invests in their land and pasture. This situation is likely to lead to a gradual descent into poverty once productive natural assets are over-exploited.

4.3 Biophysical Environment

4.3.1 Physical Geography10

Early geological processes resulted in an Armenian and surrounding region land surface of mountains and this mountain building process was continued in the Cenozoic period. Complex tectonic shifts have resulted in a country dominated by a series of mountain massifs and valleys. The tectonic movements which created the series of folded ridges which dominate the country also resulted in extensive volcanic activity. The climate changes over the last million years have resulted in two glacial periods that are evidenced on most mountains over 3000m elevation.

4.3.2 Landscapes and Ecosystems11

The variety in landscapes and altitudes within the country is an important determinant of biodiversity and its distribution in Armenia. Six key landscapes have been identified (deserts, semi-deserts, steppes, forests, sub-alpine and alpine). As well there are a series of azonal habitats (e.g. wetlands). Each landscape represents a different ecosystem with a distinctive group of associated plants and animals.

4.3.3 Agriculture and Land Resources

Agriculture is the dominant land use in Armenia, and approximately 47% of the land area (1,391,000 ha) is devoted to agricultural usage and arable land is limited to the 600 to 2,500 m elevation range. Above 2,500 m, agricultural usage is limited to grazing and/or hay production. Agricultural land use is distributed among the following categories:

• Pasture (694,000 ha); • Arable or cultivated land (494,300 ha);

10 Government of the Republic of Armenia. 1999. 11 Ibid.

21 RESCAD Project: Armenia Environmental Assessment March 10, 2005

• Hayfields (138,900 ha); • Fruit orchards and vineyards (63,800 ha); and • Fallow land (800 ha).

Both agricultural productivity and yield have declined in Armenia since independence, and this is in spite of Armenia’s aggressive privatization program.12 Reduced agricultural efficiency and sustainability may have been a direct result of the rapid privatization in conjunction with the difficult post-independence economic transition period and resultant decline in institutional resources and agricultural extension services. Also, since independence, agricultural production has shifted to a subsistence bias versus the former Soviet era export market orientation.

These problems are further compounded by the soil erosion rates. An estimated 60% of the country's agricultural lands are affected by soil erosion resulting from deforestation and poor agricultural practices including overgrazing. Pastures proximal to villages are often under pressure from overgrazing while more remote summer pastures in alpine meadows remain underutilized. Tracks and roads into the high pastures are often poorly sited leading to severe erosion. Integrated land and range management is absent. These circumstances are particularly acute in Gegharkunik and Tavoush marzes which are the most mountainous areas of Armenia and where land resources come under the heaviest pressure. These background problems have become more acute in recent years due to the transitional economy and the war with Azerbaijan which has resulted in a large influx of refugees to these two marzes, putting further pressure on the resource base.

4.3.4 Water Resources

About 70% of Armenia’s bountiful supply of groundwater resources drains into the Ararat valley. The deep groundwater is of high quality and relatively well protected from pollution. Surface water quality is currently satisfactory as a result of the closing down of many industrial enterprises left over from the Soviet era and the abandonment of irrigation systems. However, it is not likely that the current level of acceptable quality will remain as the economy improves and discharges (both treated and untreated) from industrial activity will increase. A future deteriorating water quality will probably also be caused by improved access to farm inputs (irrigation, pesticides, chemical fertilizers) such as what the RESCAD Project is likely to bring about.

Water supplies are sufficient to meet current demands and those of the foreseeable future however, water resources are not evenly distributed throughout the country and about five percent of the population live in areas where water shortage restrains regional development.

The largest lake in Armenia, and the largest lake in the Caucasus, is Lake Sevan. Its catchment comprises one sixth of the total area of the country and it is the country’s primary water source. It provides the source for a significant amount of hydropower and irrigation water for the croplands of the Ararat Valley. However, during the Soviet period the lake had been grossly over-exploited resulting in a drop in level of 19 meters.

12 Environmental Resource Management. 2002.

22 RESCAD Project: Armenia Environmental Assessment March 10, 2005

4.3.5 Forest Resources

The literature is in dispute over the total amount of forest area in Armenia. Whereas NEAP13 suggests that there are approximately 485,000 ha of forests and woodlands, mainly in the north (62%) and northeast (26%) of the country, the biodiversity report on Armenia14 indicates in one place in the report that only 10-11% (approximately 300,000 ha) of the country is covered by forests. Another reference in the same report indicates that there is less than 10% forest cover. The latter figure is probably closer to the truth. About 70% is true forest dominated by beech, oak and hornbeam. The remaining woodland component consists of pine plantations, coppice growth and shrub cover, the latter two of which are poorly stocked and degraded. Rates of natural regeneration and the success of reforestation efforts have been poor, mainly due to grazing pressure.

Armenia’s forests have been in decline throughout history as a result of the semi-arid climate and slow growth rate, unsustainable rates of timber harvest, agricultural clearance and grazing pressure. The long term trend estimate is that total forest cover declined from 25% to 10% over the last several hundred years. In the last 10 years alone, the total forest area has declined by 10%. An important contributing factor to the most recent deforestation was the reliance on fuel wood as a principal source of heating and cooking during the last five years as a result of the energy crisis. Illegal logging for timber and fuelwood remains a major issue in the forest sector. In addition to losses of timber, wildlife, and other non-timber forest products, deforestation and overgrazing has exacerbated the already serious soil erosion problem. Deforestation has also resulted in a reduction in the natural, beneficial watershed/water resource functions associated with forest cover including reduced runoff and erosion, increased infiltration, and reduced downstream flood frequency, especially in the mountain areas. This function represents a non- quantified contribution to soil conservation and the security of national water resources as well as hydro- electric generated power, particularly in the case of Lake Sevan.

4.3.6 Biodiversity

Armenia is located in the Caucasus eco-region, one of the Global 200 Eco-regions, which is located at the crossroads of three biogeographic provinces or biomes: European, Central Asian, and Middle Eastern. As a result and despite its small size, the country is characterized by a remarkable and rich diversity in natural landscapes, flora, fauna and ecosystems. Armenia also lies in the heart of one of the principal centers of origin of domestic crops and forage plants in Southern Caucasus, and while it covers only 5% of the Caucasus region in area, it contains nearly all plant communities found in the southern Caucasus and 50% of the region's floral diversity. Armenia’s agrodiversity, particularly of cereals and forage legumes is of global significance. The under use of remote cropland and pasture threatens agro-biodiversity which depends on interaction with agricultural activities such as grazing and mowing. Due to the difficult access these resources, many meadows are no longer used and may lose their global ecological value.

13 Ibid. 14 Government of the Republic of Armenia.1999.

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The country hosts a significant population of faunal species of high international conservation importance (350 species of birds, 83 mammals, 53 reptiles, 8 amphibian, and 30 fish). Twelve percent of the flora and 19% of the vertebrate fauna are included in Armenian Red Data Books. The threatened vertebrates include mouflon (Ovis orientalis gmelinii), wild goat (Capra aegagrus), marbled polecat (Vormela peregusna), European otter (Lutra lutra), brown bear (Ursus arctos), manul (Felis manul), lammergeier (Gypaetus barbatus), imperial eagle (Aquila heliaca), great bustard (Otis tarda), little bustard (Tetrax tetrax), and Caucasian black grouse (Tetrao mlokosiwiczi). The territory of Armenia is also located at the crossways of migratory birds.

Forests in Gegharkunik and Tavoush marzas have a significant role in fauna conservation and creation of the transboundary wildlife corridor between Armenia and Georgia. Two main protected areas are the Sevan National Park (1,500 sq.km) and Dilijan State Preserve (280 sq.km). Lake Sevan National Park harbors a unique alpine lake ecosystem and its littoral habitats. Dilijan National Reserve is a unique forest ecosystem which hosts some 900 species, some of which are considered endangered species in the southern Caucasus. The area also has significant cultural heritage resources.

The protected area network in Armenia is fragmented and the management effectiveness poor. There is little or no planning for conservation programs in protected areas and neither parks nor reserves are required to develop and implement management plans.

The degradation of globally significant biodiversity has also been caused by increasing pressures on critical rangelands and forest habitats, which have further isolated the existing protected areas, making the movement of wildlife increasingly difficult. Alpine meadows in Armenia often have biodiversity of global significance. Their conservation requires intensive management and intervention because of the background interaction with traditional agriculture practices (grazing and hay mowing). Forest biodiversity is subject to heavy pressures through deforestation and overgrazing. Illegal felling threatens forest flora and fauna as it often leads to complete removal of dominant trees which alters the forest habitat qualities. As noted above in the section on forests, silvicultural management is of poor quality and contributes to forest degradation and loss of biodiversity. Finally, the population is largely unaware of the protected areas system and communities in the vicinity often feel alienated by the protected area program.

4.3.7 Summary of Agriculture Related Environmental Issues15

Armenia has a number of environmental issues that should be addressed and many of these are either directly or indirectly related to agriculture and as such are relevant to this Project. A number of environmental problems are as a result of past and current agricultural activities and as such the Project must take care in not only exacerbating the situation but also in promoting activities that will be environmentally enhancing and to overcome some of these past mistakes.

15 Based on various references and input from stakeholders (NGOs, Government and farmers)

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Agricultural and rural enterprises can also indirectly result in negative environmental effects. The issues are listed below, with causes, but in no particular order of importance:

In addition to these issues there are others related to other components of the proposed Projects. For instance, for agro-processing and other agribusiness enterprises, major concerns relate to effluent discharges and their impact on water quality, water use, disturbance of significant sites for biodiversity and cultural protection, and general health and safety issues. A specific concern is the introduction of alien species and their effect on biodiversity, especially endemic species. A case in point is the existing aquaculture operations based on the North American indigenous rainbow trout (Salmo gairdreri) which if it escapes (and if it hasn’t already done so), can disrupt natural aquatic systems by preying on other species (it can be strongly predatory in the absence of its favored food sources). As well, it can take over breeding sites of other less competitive, indigenous and endemic species.

Addressing these issues is a major challenge to a country which sees that it has other more pressing priorities relating to its economy and social well being of its population. It will take a good deal of strength and commitment in the light of weak land administration and regulation, lack of clear policy planning framework on land use, inadequate legislation, and poorly defined institutional responsibilities.16 Over the past five years this situation has not changed.

NEAP17 also points out that a number of biodiversity policy issues have to be addressed if biodiversity is to be adequately protected. These issues include the lack of an adequate legal framework, the lack of adequate and updated information data bases, the lack of planning and operational capacity, the lack of financial resources, inadequate organizational structure, a fragmented system of protected areas and a lack of political will to coordinate regional biodiversity conservation activities.

5. ENVIRONMENTAL ASSESSMENT

16 Environmental Resource Management. 1999. 17 Ibid.

25 RESCAD Project: Armenia Environmental Assessment March 10, 2005

5.1 General

The overall environmental effect of the sub-projects resulting from the main development components and sub-components of the Project will be positive. Farm, agri-business, and other rural business loans will result in improved agricultural production and marketing, and in general, improved socioeconomic conditions of the rural population. Other aspects of the Project including the community development component, extension services and others, will all contribute to an improved socio-economic environment in the rural areas. The Project will further contribute to the country’s food security, hopefully contribute to the generation of foreign exchange through increased agricultural exports, and mostly the Project, through the various financed activities, will significantly contribute to the alleviation of rural poverty. However, the Project’s primary objective does not include a contribution to the enhancement of the environment. In the past 15 years rates of chemical inputs in agriculture have been significantly reduced, resulting in cleaner watercourses, lower levels of soil contamination and relatively chemical free food, although residues in soil and water, and their effects, still remain. The Project could lead to an increase in the use of farm inputs but mitigation measures, extension services and training associated with the Project should minimize any potential impacts associated with these inputs. To some extent, it is presumed that some of the industries under the former Soviet regime which created significant environmental problems and which have since ceased operating, may be refurbished, or new replacement activities introduced that are expected to operate more efficiently and without the major environmental contamination of the past. Current environmental regulations, particularly through the revised legislation on Environmental Expertise which will provide for the need for more comprehensive environmental assessments of projects, should prevent a return to the serious environmental issues of the past.

Table 5.1 provides a broad analysis of the Project components and the types of potential environmental impacts that could be expected.

Table 5.1: Broad Areas of Environmental Concern by Project Component and Sub- Component

Component I: Small Rural Business Support Sub-component Activity Primary Concern Secondary Concern Rural financial services .on farm production .water and soil .aquatic habitat contamination modification .soil erosion .groundwater losses .worker safety and .loss of productive soils health .loss of water for other .water depletion uses

.off farm agricultural .loss of natural habitat .loss of biodiversity related businesses .loss of cultural .dust, noise, aesthetics resources .safety and health . rural non-agriculture .same as above .same as above businesses

26 RESCAD Project: Armenia Environmental Assessment March 10, 2005

. agro-processing .surface water .aquatic habitat contamination modification .social conflict .dust, noise, aesthetics, .water depletion heavy traffic .health and safety Rural business linkages .rural businesses .concerns will be similar (grants) .associations to those listed for .farmer cooperatives Component I .agro-processors .formal and informal farmer groups Component II: Farm Focused Development Strengthening Advice given to farmers agricultural extension must be based on system sustainable agricultural practices and environmentally acceptable Management and .improvement of .veterinary: human business development delivery of livestock health as a result of services medications (growth hormones, vaccinations Livestock services .feeding systems, bovine health Strengthening seed and Support of private seed sapling market and sapling producers Support public sector high generation seed multiplication Component III: Community Focused Economic Development Planning Planning Planning should be comprehensive and considerate of integrated and sustainable development Development Construction and The similar impacts as operation indicated in other developments under agro-processing (e.g. impacts on water, soil, aquatic ecosystems, human health and safety Component IV: Project Management PMU implementation .must guide Project activities with the knowledge of good environmental practices to be applied monitoring and .must monitor and evaluation evaluate for

27 RESCAD Project: Armenia Environmental Assessment March 10, 2005

environmental effects

There are a number of currently operated rural enterprises in Armenia that would fall within the two categories listed above. If a loan application from an existing or newly planned rural enterprise falls into one of these categories, it will be incumbent upon the proponent to conduct an environmental assessment and receive the approval authority from the Department of Environmental Expertise. Although the environmental regulations of the country require environmental impact studies to be conducted, for those projects that would fall within one of the above categories, any such study would have to meet World Bank requirements and standards.

For small and medium sized farms, of the 19 probable inputs to farming, only two (relating to pesticides and irrigation) would likely fall into either of the two above categories. Although there is a concern for environmental damage on the small farm (e.g. health effects with the use of pesticides) the major concern would be the cumulative effect that could occur. This is of particularly concern where a number of small farms in the same watershed could be borrowing for the same purpose (e.g. pesticides and irrigation).

5.2 Important Environmental Components

A number of broad rural community and environmental issues have been identified through an NGO roundtable discussion. The results of the discussions of the roundtable, along with experience gained from EAs for similar projects in a number of other countries in the region, resulted in the compilation of a set of important environmental components (IECs), relative to the rural environment and agriculture in particular. IECs are those components of the environment which society generally feels are worthy of protection in light of the general activity (e.g. agricultural development) that will occur. Table 5.4 lists the IECs identified.

Table 5.2: Important Environmental Components

Biological Components Socioeconomic Physical Components Components • Soil quality • Forests • Culture • Soil fertility • Flora • Employment • Soil erodibility • Fauna • Income • Soil organic content • Forest habitat • Poverty • Hydrological regime • Aquatic ecosystems • Gender • Groundwater quality • Livestock • Education • Surface water quality • Crops • Health • Topography • Germplasm • Migration • Land • Waste disposal • Air quality • Domestic water • Fuelwood • Markets and marketing • Institutions • Associations

5.3 Project Benefits

28 RESCAD Project: Armenia Environmental Assessment March 10, 2005

The Project and its various activities will provide a number of benefits. Overall, the project will contribute to the improvement of rural socioeconomic conditions and the alleviation of rural poverty. Specifically, each of the broad categories for the enterprises, and each of the input groups for the small farms will provide a number of benefits as indicated in Table 5.4 and Table 5.5.

Benefits will also be gained with Project funding inputs to communities and with the planned improvement of rural extension services. The community initiatives, collectively, will provide improved services to farmers that will allow them to produce and market their produce in a more efficient manner. These initiatives will also provide jobs and income and overall, they will improve socioeconomic conditions of the community. Extension service support will take new and most appropriate technology advice (with demonstrations) to the farmer and will provide advice on improving production in a sustainable fashion in order that environmental effects of agricultural production are minimized. The ultimate result of an improved extension service will be improved and efficient farm production which will result in increased and stabilized farm family incomes. Another important benefit of the Project will be improved farm production as the link between agro-processors and farmers will be strengthened.

Table 5.3: Benefits – Rural Enterprises

Benefits Broad Category Agro-processing Provision of secondary production to local farmers, thus providing a guaranteed market for farm produce and providing them with a steady income. Opportunities for export markets. Provision of jobs. Other Improvement of supply chain, resulting in stabilized markets and agribusiness farm income. Provision of structure to ensure comprehensive farm inputs resulting in improved production and stabilized incomes. Provision of jobs. Manufacturing Provision of jobs, incomes, and meeting demand for products; improved overall economy; opportunities for export and increasing foreign exchange reserves Construction Provision of jobs, and meeting demand for commercial and residential buildings as well as transportation Trade Provision of jobs; provision of arrangements far large and small (wholesale and farmers to market goods as well as the marketing of retail) manufacturing goods; improved rural economy Hotels and Provision of jobs; input to the tourist industry which, if developed, restaurants provides additional jobs and leads to community prosperity Transport Provision of improved access to markets and services; lower cost goods and services; improved rural economic and social conditions

Table 5.4: Benefits – Farm Inputs

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Input Benefits Seed Production; increased farm income; improvement of rural economy; contribution towards national security Pedigree seed Increased production; increased farm income; rural economy improved; contribution towards national food security Fertilizer Increased production; increased farm income; rural economy improved; contribution towards national food security Pesticides Increased production; increased farm income; rural economy improved; contribution towards national food security Pedigree animals Fewer animals required for same production; or, improved production and higher quality product for marketplace; improved farm income; rural economy improved; stock available for export and increasing foreign exchange Animals for Improved farm income; rural economy improved; contribution finishing towards national food Land purchase Improve land use efficiency; improve farm profits based on (farm expansion) economy of scale principle Land preparation Increased production; increased farm income; rural economy (tractor and improved; contribution towards national food security machinery hire) Tractors Reduces labor burden on farm family; improves farm efficiency; improves profits and rural economy Other farm Reduces labor burden on farm family; improves farm efficiency; implements improves profits and rural economy Small equipment Reduces labor burden on farm family Irrigation Improved farm production leading to improved profits and general equipment and improvement in rural economy; contribution towards national food irrigation security maintenance Vehicles Improved farm efficiency leading to improved farm profits; reduces the labor load on the farm family; could reduce burden of women Farm buildings for Improved management of livestock; protection of machinery, thus stock, machinery improving farm net profits; prevention of chemical spills and loss and chemicals of agricultural chemicals Storage facilities Ease handling of fuels and petrochemicals, avoidance of fuel (fuel, grain and spills and reduce wastage; reduce spoilage of crops and grains other produce) leading to improved economic efficiency and higher farm incomes Fencing materials Reduce boundary disputes; containment of livestock; improved management of livestock Primary Value added stays in rural areas leading to improved local processing economy through provision of jobs; improved farm income; equipment reduction in transportation costs and fossil fuel consumption Fuel, lubricants Ability to run machinery for improved crop production and farm incomes Veterinary Healthy livestock, improved production and farm incomes services

All but one of the benefits presented in the above two tables are socioeconomic. Generally, as economies improve through expansion and growth in all economic sectors, the biophysical environment suffers. The only biophysical benefit (or environmental enhancement) is the storage of agricultural chemicals (including fuel). However, it is the biophysical resource base that supports much of the rural economic activity (e.g. soil, water, forests, and mineral resources).

30 RESCAD Project: Armenia Environmental Assessment March 10, 2005

Regardless of the number of socioeconomic benefits that may result, they will not offset the biophysical impacts that can be expected. As extraction industries grow in size and numbers and as manufacturing plants add more emissions and effluents (despite ‘point of pollution’ standards that may be met) to the air and waterways, the biophysical environment is affected. As farmers become wealthier through effective marketing and various farm improvements, an increase in the application of agro-chemicals leading to soil and water contamination is a strong possibility. However, with potential opportunities to export high quality products to countries with strict standards in terms of product origin and inputs used, the farmer will have to become more prudent in the use of chemical inputs. As local socioeconomic conditions improve, including an improved education of the public, as environmental awareness becomes more prevalent, and as institutional scrutiny of the environment becomes more focused and efficient (e.g. new and improved environmental legislation) the biophysical environment should benefit.

As the rural economy grows the onus will be on the Government of Armenia to ensure that relevant environmental regulations are in place, maintained and enforced. The economic development of the rural areas must be sustainable, and the very resources that provide the basis for this development must be protected and managed.

5.4 Potential Impacts – Rural Enterprises

Potential impacts for each of the eight enterprise groups (extraction has been broken to renewable and non-renewable resource groups) are presented in tables in Annex B. As well, the tables describe the consequences of the impacts and the mitigation measures required. A rating for the potential impact, the residual impact and the risk is also provided. A summary of the potential impacts and their level of significance is given in Table 5.7.

The major potential impacts associated with the eight rural enterprise categories include water and air quality deterioration, loss of biodiversity and impacts on biophysical resources, including forest cover losses and soil erosion. Of the eight categories, extraction industry, construction and manufacturing industries will contribute to the most significant impacts. Although the extraction enterprise category (a category that is included but in all reality probably not one that will likely be associated with the RESCAD Project) is probably and currently represented by a few individual activities, the industries of this category nevertheless have the potential to cause more environmental damage than all of the other enterprise groups taken together. The trade enterprise group will comprise of many individual businesses but generally, the impact of this group is negligible. Even a cumulative impact (see section xx) within the entire trade category is likely not to have a negative impact as significant as the potential impact that a a poorly designed and operating agro-processing centre could create.

The manufacturing sector generally produces wastes that are disposed of in the form of effluents that flow into surface watercourses, seepage into groundwater, emission gases that are released into the atmosphere and solid wastes that are disposed of in municipal and unorganized waste sites. These wastes could include a wide range of gaseous, solid and liquid compounds ranging from water vapor to highly toxic materials. Such wastes would pose a threat to groundwater supplies, air quality, aquatic ecosystems, and ultimately to human health.

31 RESCAD Project: Armenia Environmental Assessment March 10, 2005

Table 5.5: Summary of Potential Major Environmental Impacts – Rural Enterprises

Enterprise Category Potential Impacts Level of Significance Agro-processing .water pollution High .safety and health .biophysical and cultural losses through location Other agribusiness Variety of minor impacts although High aquaculture could result in damage to (aquaculture) aquatic ecosystems, particularly the loss and Low – of endemic fish species Mod. for other activities Manufacturing .water pollution Very high .air pollution very high .biodiversity loss High Construction Location: .biophysical losses High .aesthetics High Construction phase: .soil erosion High .soil and water pollution Moderate Trade (wholesale and retail) None Hotels and restaurants .water pollution High .disease High Aesthetics High Transport .water pollution High .air pollution Low

Although Table 5.5 indicates a large number of HIGH potential impacts, through mitigation and common sense practices most of these can be reduced to low or moderate residual impacts, as indicated in the tables in Annex C.

5.5 Potential Impacts – Farm Inputs

These impacts apply to both small and medium scale farms. Impacts for each of the 19 potential inputs to farms are presented in Annex C. The tables describe the consequences of the impacts, mitigation measures required, a rating for the potential impact, the residual impact and an assessment of risk. A summary of the potential impacts and their level of significance is given in Table 5.6.

Table 5.6: Summary of Potential Major Environmental Impacts - Farm Inputs

Farm Input Potential Impacts Level of Significance Seed Water and soil contamination Low-moderate through chemical inputs Pedigree seed purchase Biodiversity loss; chemical inputs Moderate-high Fertilizer Water pollution Moderate-high Pesticides Ill health; water pollution High

32 RESCAD Project: Armenia Environmental Assessment March 10, 2005

Pedigree animals None None Animals for finishing Overgrazing; forest degradation High Land purchase Loss of biodiversity; soil erosion Moderate Land preparation Soil erosion Moderate-high Tractors Soil compaction and erosion Moderate-high Other farm implements None None Small equipment None None Irrigation equipment and Water extraction and salinization High irrigation maintenance Vehicles CO2 emissions Low-moderate Farm buildings for Reduction in productive land Low livestock, machinery and chemicals Storage facilities (fuel, Reduction in productive land Low grain and other produce) Fencing materials Social barriers Low Primary processing Water pollution Moderate equipment Fuel, lubricants, etc. Water and soil pollution Low-moderate Veterinary services Hormones and chemicals in meat Moderate The major potential impacts associated with the 19 potential agricultural inputs relate to water and soil quality, soil erosion, salinization and resource loss.

Increasing pesticide applications can lead to pesticide residue (including heavy metals) build up in the soil. Pesticides and fertilizers can migrate to both surface waters and groundwater resulting in contamination of these two sources and leading to damaged aquatic ecosystems and threatened health to downstream users. Livestock rearing in large numbers and in closed conditions, results in a concentration of animal waste that can contaminate both groundwater and surface waters. In the case of the former, public health is at risk, in the case of the latter, aquatic ecosystems and, possibly public health, are both at risk. Livestock expansion, particular for farms in the hills and near the mountains, can lead to pressure on common public lands including forests. Loss of biodiversity and soil erosion can occur if livestock and pastureland is not managed effectively and if livestock numbers are not controlled.

5.6 Potential Impacts – Community Development

A number of activities (Table 5.9) have been considered as the most likely candidates for community development support. Most of these activities will be environmentally benign. However, in the case of agro-processing through a cooperative arrangement, some potential impacts (similar to those for agro-processing in the rural enterprise category listed in Table 5.6)

33 RESCAD Project: Armenia Environmental Assessment March 10, 2005

can be expected. Impacts relate to the location of the facility which could cause an inconvenience to local residents and to existing activities in the area. As well, location and construction activities associated with the enterprise could impact on biophysical resources. The major impact with most agro-processing facilities will be the effect of effluents on water quality. As well, in any processing facility there is the need to ensure public safety, particularly for workers.

In order for communities to qualify for a community development grant they will be required to prepare a community action plan (CAP). The Project will provide support to ensure that there is effective participation in the planning process. It will be important that this support provide an environmental input to the planning process in terms of ensuring that the outcome of the planning process (the plan itself) recommends community development opportunities that do not conflict with good environmental practices. In this regard the Project will be able to provide basic guidelines.

Table 5.7: Summary of Potential Impacts – Community Development

Potential Community Activity Probable Impacts Potential Level of Significance Road repairs Runoff of repair materials into LOW water courses Market refurbishment or new Poor location disrupting LOW market structure people and perhaps important biophysical and cultural resources Community transportation system Air pollution LOW (people and goods) Agricultural equipment hire centre Soil erosion and soil LOW – MODERATE compaction as result of farm mechanization Irrigation system provider Desertification and depletion MODERATE – HIGH of water resources Water supplies improvements Conflict with other users MODERATE Gas and electrical supply Impacts associated with MODERATE improvements pipelines, transmission lines (location and construction phase)

5.7 Potential Impacts – Extension Services

The front line of the Project’s small and medium sized farm development activities will be the interface between farmer and the extension officer. Farmers will be looking for good advice, and will likely include innovative techniques that increase productivity and at the same time minimize their costs. Extension officers providing traditional advice re: production technologies from the former Soviet period, would not be promoting sustainable agriculture or environmental protection. It will be important that the extension officers hired are enlightened re: the environment and that they receive training in the form of workshops on environmental analysis, protection and sustainable agriculture.

5.8 Potential Cumulative Impacts

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Assuming that all mitigation is carried out on all projects for which loans are provided, there will still be residual effects, that when considered in total, could have an overall significant effect on the environment. The major environmental concerns, as described in Section 5.6 and 5.7 are water pollution and soil erosion, and the consequences and secondary effects that erosion will cause.

Considering the small size of most projects, it would be easy to dismiss the negative effects that each project might have on the environment. For instance, it is anticipated that small farmers will request modest loans for the purchase of basic farm inputs of seed, fertilizers, pesticides and fuel, and for livestock. Such a loan to a single farmer would present little environmental concern and a large number of such small loans spread throughout the country would have a relatively negligible effect. However, if by chance a large number of requests for loans originated from the same area, and more importantly from the same watershed, the cumulative effect of all of the small (negligible) effects could be significant.

Cumulative effect is important in spatial terms, as indicated above, and also over time. For instance, a loan for seed purchase in itself has no negative impact, and in fact, has much the opposite with an increased production and return to the farmer. However, the same loan provided for more than two years in a row could promote poor crop and land management and disrupt a relatively current good agricultural management system characterized by long rotations. By avoiding a crop rotation program the farmer can deplete the fertility and organic content of his soil and further promote soil erosion. Over time there would be a cumulative effect.

Farmers should not be denied loans on the basis of their location, but if patterns appear to show concentrations of loans (e.g. fertilizers) in one watershed, the responsible loan officers should alert the local environmental authorities and the PMU office for special monitoring of the situation.

Another example applied to small and medium enterprises is the application of loans for industrial rehabilitation or for the start-up of new industries. With industries, the environmental concerns usually focus on air emissions and effluent discharge. In the case of air emissions, there are usually standards in place that guide the concentration of various emissions at the stack. However, there is no standard for ambient air quality. Although each industrial activity may have emission controls well within established national standards, cumulatively, all of the industries in one region (e.g. in a small closed valley with poor air circulation) could significantly contribute to the deterioration of overall air quality, resulting in an impact on human health. Similarly for water quality, a number of enterprises releasing effluents into a water body could cumulatively effect the quality of the water in a significant manner even though each enterprise may be releasing very small amounts of effluent that meet set standards.

The other aspect of cumulative effects of the overall project is the accumulation of a large number of very small impacts over the full range of sub-projects. That is, the cumulative impact of all of the small impacts as a result of a number of loans for fertilizer purchase, added to the cumulative impact of all of the small impacts from the livestock purchase sub-project, added to the cumulative impact of all of the small impacts from the non-farm enterprises. The overall

35 RESCAD Project: Armenia Environmental Assessment March 10, 2005

cumulative impact could be significant. Since many of these activities can have an effect on water quality, the overall effect on water quality could be significant.

In a comprehensive examination of cumulative effects, analysis would be made of all of the other various activities taking place that have impacts. For instance, other programs that could be providing agricultural lines of credit, forestry programs that could be contributing to soil erosion, and in the same vein, road construction activities and other general construction that could add to the soil erosion problem. Although the RESCAD Project can not be concerned about the effects of other projects, it is important to place the Project and the effects that it does have on the environment within the context of the overall development picture.

In order to prevent the risk of adverse cumulative environmental effects, a brief environmental analysis should be made of the portfolio every year and reported to the relevant authorities in the Ministry Nature Protection.

5.9 Mitigation

For agricultural activities mitigation should not necessarily entail expensive inputs and much can be achieved towards the minimizing of residual impacts through applying efficient and safe farming techniques. The extension services sub-component of the Project will be in a position to advise farmers on the proper handling and application of pesticides and fertilizers, including application rates and timely application. As well, it can advise on effective cultivation techniques (including the size of tractors and the type of equipment to be engaged) that will reduce the threat of soil erosion. Irrigation schemes can be well planned in order to avoid the loss of productive land through salinization and waterlogging.

Adherence to water and air quality standards (Maximum Allowable Emissions) that are calculated for each enterprise, will be monitored by local environmental agencies to ensure that water and air quality are protected.

To further ensure that environmental concerns are given proper consideration, it is recommended that one member of the Project staff be an environmentalist who can provide input to activity proposals as well as conduct environmental monitoring. As well, The Project steering committee should include representation from the Ministry of Nature Protection.

5.10 Potential Residual Impacts

Residual impacts are those impacts that remain once all mitigation has taken place. These are the trade-offs for the benefits to be gained through the Project. Assuming that full mitigation is carried out, residual effects could still be significant, particularly when considering the cumulative effect. A summary of residual effects is provided in Tables 5.10 and 5.11.

Table 5.8: Summary of Residual Effects of Enterprises (can be applied to community development activities as well)

Enterprise Group Probable Residual Effects Significance

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Agro-processing Water pollution Low Other agribusiness For aquaculture: species Mod – High (biodiversity) loss; for others: Low various Extraction industry (forestry and fishery) Air pollution; water pollution; Moderate biodiversity losses; aesthetics Manufacturing Air pollution; water pollution Low-mod Construction Loss of biophysical resources; None-low erosion; water pollution; aesthetics Trade NONE None Hotels and restaurants Water pollution; disease; None aesthetics Transport Water pollution; air pollution Low

Assuming that all mitigation is adhered to, the residual effects will be minimal except in the case of aquaculture where there could be a real threat to exotic species invasion and the loss of indigenous, and perhaps endemic, fish species. Although ratings are subjective, and only relative to one another, this analysis indicates that only three activities receive residual effects ratings above LOW-MOD. These include pesticide application and the extraction industry, both of which have a MODERATE level of significance and the HIGH rating for aquaculture. Although integrated pest management (IPM) is recommended as a mitigation measure for the impacts that pesticides will have, it is unlikely that this measure would have widespread application in the near future, if at all.

Table 5.9: Summary of Probable Residual Effects – Farm Inputs

Farm Input Probable Residual Effects Significance Seed Water pollution from chemical Low inputs Pedigree seed purchase Water pollution from chemical Low inputs Fertilizer Water pollution Low Pesticides Water and soil pollution Moderate Pedigree animals None None Animals for finishing None None Land purchase Loss of forest cover; reduced None biodiversity; soil erosion Land preparation Soil erosion and Low sedimentation Tractors Soil compaction and erosion; Low water and soil pollution Other farm implements Soil erosion Low Small equipment None None Irrigation equipment and irrigation maintenance Groundwater losses; surface Low-mod water extraction; salinization and waterlogging

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Vehicles Fossil fuel consumption – Low contribution to greenhouse gases Farm buildings for stock, machinery and Loss of productive land Low chemicals Storage facilities (fuel, grain and other Loss of productive land Low produce) Fencing materials Cultural and social systems Low Primary processing equipment Water pollution; occupational None hazards Fuel, lubricants, etc. None None Veterinary services Some chemical residuals in Low meat and animal products

5.11 Environmental Risk

Overall, the environmental risk is high because effective enforcement of the law is questionable. If enforcement is carried out in an effective and efficient manner, the environmental risks associated with the various activities to be supported through the project will vary. Risks for those activities that would lead to impacts which can be governed by specific pieces of legal instrumentation would theoretically be low. Risks for which there is no effective legal instrument would vary, depending upon the nature and level of impact, and the cost of mitigation. However, without full mitigation, environmental risk for all activities would have to be rated high. That is, the actual impacts will be much closer to the identified potential impacts than to the residual impacts determined if all mitigation was carried out. Of particular concern would be for those activities resulting in water and air pollution, and soil erosion. As well, there is a concern related to the potential impact of species invasion and indigenous species loss as a result of aquaculture with exotic species.

6. ENVIRONMENTAL MANAGEMENT PLAN

6.1 General

This EMP includes specific management activities that will be followed for ensuring that any Category A or Category B type project (e.g. an agro-processing enterprise) that results from on- lending by a PFI receives an appropriate environmental assessment. It also includes a section for the management of direct interventions including the extension services sub-component and the community development component of the Project. Both of these activities are sectoral in nature with the former dealing more at a policy and application level and the latter at a country wide level where the actual community development interventions and locations are unknown.

The onus of recognizing loan applications that require financial assistance for sub-projects that may fall into one of these categories rests with the loan officers of the various lending institutions or the local environmental agencies.

6.2 Management

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The PMU within the Ministry of Agriculture will be responsible for overall Project implementation. The Unit and the Project in general will be supervised by the World Bank task team. This PMU should have a staff member or a consultant with an environmental background to ensure that activities being supported are not ones that would unduly affect the environment. The individual must be able to recognize an activity for which a loan is being sought that may fall into Category A or B of the World Bank and ensure that in the case of an activity within one of these categories, that an EA, meeting World Bank requirements, will be conducted. The same member (or consultant) of the PMU will maintain a working relationship with the relevant officers in the DoEE and the relevant environmental inspectorates in the marzes. As well, this individual will have a working relationship with the PFIs and will provide assistance in cases where determining the category of a particular activity that has been proposed for financing may be in question.

6.3 Mitigation

Mitigation of any environmental effects will be the responsibility of the activity proponent. However, it will also be the responsibility of the lending agency, the DoEE and the PMU to ensure that mitigation is carried out successfully. This responsibility will be reflected in an effective established monitoring system. Tables 6.1 and 6.2 provide suggestions for agricultural good practices and non-agricultural rural activity good practices which, if followed, will prevent many of the potential impacts from occurring. Tables in Annexes B, C, and D provide analysis of impacts on all activities, along with suggested and most practical mitigation to be followed.

Table 6.1: Some Agricultural Good Practices – Towards a Protected Environment and Sustainable Agriculture

Good Practices Activity Seed . selection of seed with lowest agro-chemical input requirements to achieve high yields . selection of seed with minimal level of pest and disease vulnerability . rigorous sanitation facilities and procedures for imported seed . rigorous sanitation facilities and procedures for exported seed . extension services provide advice on appropriate fertilizer and pesticide applications . wherever possible, extension service to promote sustainable agricultural practices including IPM, minimum tillage, contour ploughing, crop rotations, and green manuring Fertilizers . selection of best fertilizers for crop and prevailing soil conditions . application levels as per recommended by manufacturer and extension service Pesticides . IPM is a priority and pesticides to be applied only when absolutely necessary and in accordance with manufacturers recommendations. . careful handling of pesticides; protective clothing and

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equipment to be used Pedigree livestock N/A Livestock for finishing . manure handling facilities designed to ensure zero runoff Land rental/purchase . land to be rented or purchased not to be environmentally sensitive Tractors . purchase of engine efficient tractors that provide highest ratio of power and work to fuel input . tractors with high efficiency emissions control . tractors no larger than necessary for the most extensive work anticipated Farm implements . implements suitable for minimal tillage Land preparation . contour ploughing, minimum tillage, grassed waterways, etc. Small equipment . energy efficient equipment Irrigation equipment . highest efficiency equipment . equipment that assists in the use of irrigation water in an efficient manner Vehicles . low emission vehicles/vehicles with high efficiency engines Farm buildings for stock, . location of buildings where least disturbance of resources machinery, and chemicals required . energy efficient building design including heating, ventilation . building design to minimize materials and use of environmentally friendly materials Storage facilities Same as above Fencing materials N/A Primary processing equipment . high efficiency equipment including low emission fuels (e.g. gas, solar) Fuel, lubricants, spare parts and . safe storage of fuels, lubricants and chemicals other operating requirements Veterinary services . zero use of hormones and minimal use of drugs

Table 6.2: Some Good Practices for Rural Enterprises – Towards a Protected Environment and Sustainable Rural Development

Enterprise Category Good Practices Agro-processing .not to be located in environmentally sensitive areas .effective effluent management system in place .effective disposal of solid wastes .safety features in place Other agribusiness .aquaculture: .use of non-exotic species .effective disposal of animal wastes .use of local feed stocks .avoid use of sensitive water courses .other: .avoid location on sensitive sites .effective waste disposal .safety precautions and systems during construction .control of effluents and emissions Extractive industries – forestry . not be located in environmentally sensitive areas and fisheries . extraction not to directly or indirectly harm other aspects of the ecosystem . forest and fishery harvesting to be conducted on a sustainable

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basis . use of low impact equipment . safe work environment (see mining above) . forestry – zero damage to residual plants and trees . forestry – roads and skidways designed to avoid erosion and stream sedimentation . fishery – careful handling of fossil fuels . fishery – use of high efficiency equipment, particularly boats and engines Manufacturing . selective siting of physical plant to avoid sensitive areas, adverse aesthetics . if water is required in the process, ensure ample supply and equitable water sharing agreements with other users . recycle water where feasible and discharge of only treated water to established standards . high efficiency machinery minimizing fuel inputs and emissions . emissions to meet established standards . safe work environment (see mining above) Construction . safe work environment including construction procedures, safety equipment and safety clothing . buildings built to code Trade (wholesale and retail) – . location of markets to take into account micro- environmental rural markets effects such as erosion and potential water contamination . market operations to be guided by a printed and displayed list of good practices including waste disposal and sanitary procedures Hotels and restaurants . hygiene standards to meet national requirements . energy efficient heating and cooking . safe work environment . proper disposal of wastes preventing water contamination, disease and vermin Transport . energy efficient systems

Most mitigation for the various activities that have been suggested as likely candidates for financial support can be conducted through the application of sound practices. Often it is a choice of how an activity is conducted – between the right way and wrong way with little, if any, additional cost to the activity’s proponent. However, often the proponent will not be aware of an approach that will minimize the environmental effects. The extension services sub-component of the Project will have an important role to play in directing farmers towards best practices in order to eliminate or reduce environmental impacts as these are related to the various farm inputs that would be sought through the credit program. For example, if a borrower has purchased a tractor, cultivating with the contour as opposed to against the contour will significantly reduce erosion.

6.4 Monitoring

Both the PFI loan officers and the PMU will be responsible for any environmental effects occurring as a result of activities supported by funding through the PFIs. PMU will have sole responsibility for any environmental effects occurring through the community development component or the extension services sub-component.

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Monitoring of all activities within the Project will be the responsibility of the PMU. Monitoring of environmental effects is important and for this reason it will be important that the environmental officer (or consultant) of the PMU follow an effective monitoring procedure. With the potential of hundreds of small farm loans it will not be feasible to monitor all of them on regular basis. The environmental officer will need to select individual activities within categories of activities for regular monitoring purposes. A number of activities will be environmentally benign and as such will not require monitoring on a regular basis. Nevertheless, they should be examined on occasion to ensure that this EA did not overlook any potential impacts. All rural enterprise activities should be monitored regularly and for the community development activities, the most important ones, environmentally, should also receive regular monitoring.

The PMU environmental officer (or consultant) will develop a monitoring procedure and schedule. It will be important that for each category of activity that indicators upon which to base monitoring are identified. However, in reality it will be impossible to collect base line information, particularly since the Project is not site specific and investment applications can come from anywhere in the country. Indicators may be quantifiably measurable or they may be measured subjectively. Some indicators will require precise measurement, for instance in the case of the water quality indicator to measure the effects of effluent discharge from an agro- processing facility. In the case of fertilizer application on individual small holdings, and the effects on downstream aquatic systems, monitoring will be extremely difficult if not impossible. The real concern will be the cumulative effect on important downstream systems and in a catchment where a significant number of loans have been made for fertilizer purchase, monitoring of system health may have to be done on a qualitative basis. For this case, observation of the presence of superfluous downstream aquatic plant growth may be the only indicator available, otherwise monitoring will be almost impossible and certainly determining the extent of impact attributed to farmers receiving loans vs other external causes of the impact will be impossible.

Once baselines have been established subsequent monitoring missions will measure against this baseline and provide an analysis of changes, if any.

From an environmental viewpoint, those groups of projects which have the potential for creating the most serious environmental problems should be given highest priority for sampling A monitoring report will be prepared indicating monitoring results and a recommendation for actions to be taken, if necessary, to minimize, if not eliminate, any adverse environmental effects.

If monitoring is to be effective, the recommendations of the monitoring report must be acted upon by the PMU and the PFIs. This could include the closing of the specific loan (e.g. for pesticides) or the removal of the category of activities (e.g. purchase of chemical inputs) from future loan considerations.

Bank supervision missions should consider including an environmental specialist once a year to audit monitoring procedures and results. The specialist should assess one or two loan activities where impacts are likely to occur in order to ensure compliance. As well, the specialist should

42 RESCAD Project: Armenia Environmental Assessment March 10, 2005

provide an assessment of the effects, if any, that the Project may be having on cumulative impacts.

6.5 Capacity Development

It is most unlikely that the only member of the Project Management Board with any environmental training will be the representative of MoNP. At a minimum, management board members and members of the PMU should attend a one day environmental awareness workshop that will demonstrate how financed projects can affect the environment and the steps to be taken to avoid impacts.

PFIs are not in the environment business. Their main function will be to approve loans for rural development. These organizations do not have the knowledge, or the official responsibility for environmental protection. However, loan officers should have the capacity to recognize, in a general way, potential environmental risk of certain investments, in order that they are able to report potential problems to the PMU / the local environmental inspectorate. Key personnel from the PFIs should attend an environmental awareness workshop (one day) and all loan officers should attend an environmental awareness analysis (four days) workshop.

It is unlikely that there will be effective environmental monitoring skills available in the PMU. If monitoring is to play a key role in the management of the projects, particularly from an environmental viewpoint, it will be important that those officers responsible for monitoring possess knowledge of basic monitoring techniques. Monitoring training has been included in Table 6.4.

A user friendly environmental review manual would be helpful in providing loan officers with a quick step by step procedure for the environmental review of project applications. Table 6.4 summarizes the environmental capacity building requirements for the RESCAD.

Table 6.43 Summary of Environmental Capacity Building Requirements

Target Audience Type of Capacity Description Inputs Required Building 1. Steering committee Environmental One day general Consultant for four days members, PMU awareness introduction to the (including 2.5 days members and senior environment with focus preparation time) staff of participating on principles and financial institutions environmental consequences that rural projects can have on the environment. 2. PMU members Environmental analysis Two day workshop as a Four days of consultant (including field staff) follow up to time environmental awareness workshop in #1.Beyond environmental awareness with

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emphasis on impacts and their consequences, and mitigation. 3. Participating bank Environmental impact Four day workshop on Eight days of consultant and credit union staff assessment environmental impact time for first group of (loan officers). This assessment with 12 officers; five days of workshop could also emphasis on consultant time for each include the PMU identification of additional group of 12 designate environmental potential environmental (extension services staff officer (or consultant) problems and their could number as many consequences. Field as 200 individuals) studies will be included. Extension officers Environmental analysis Four day workshop on 10 days consultant time of agricultural projects environmental analysis for first workshop of principles (as these maximum of 20 relate specifically to participants; 5 days for agriculture) and each subsequent sustainable agricultural workshop development (approximately 200 extension officers may require training) 4. Loan officers User friendly manual A manual describing Eight days of manual step by step how to preparation plus cost of identify projects with manual production significant impact and how to mitigate such impacts 5. PMU designated Basic environmental Four day workshop on Eight days of consultant environmental officer monitoring techniques monitoring techniques time but could also include and systems other staff since this is a generic monitoring training session

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7. REFERENCES Ambrose, J. 2004. Environmental Review. Agriculture Post Privatization Assistance Project-II (APPAP- II). Kazakhstan. World Bank and Government of Kazakhstan.

Ambrose, J. 2004. Environmental Impact Assessment. Agribusiness and Marketing Project. Government of Kyrgyz Republic. Agribusiness and Marketing Project Preparation Unit.

Ambrose, J. 2002. Environmental Review. Rural Finance Project. World Bank and Government of Ukraine.

Ambrose, J. and F. Alexandru. 2000. Environmental Review. Rural Finance Project. World Bank and Government of Romania.

Christian,Konrad. 2001. Abfallwirtschaft in der ledererzeugenden Industrie. Biologische Behandlung von nichtchromhaeltigen festen Gerbereiabfaellen. (Waste management for the tanning industry – biological treatment for non-chrome containing solid tannery waste). (unpubl. dissertation thesis)

Environmental Resource Management. 2002. Natural Resource Management and Poverty Reduction Project, Armenia: Environmental Assessment Report, January 2002.

Government of the Republic of Armenia. 2003. Ministerial Report. From Aarhus to Kiev. Ministry of Nature Protection.

Government of the Republic of Armenia. 2002. National Action Programme to Combat Desertification in Armenia. Ministry of Nature Protection.

Government of the Republic of Armenia. 2002. National Assessment Report. World Summit on Sustainable Development.

Government of the Republic of Armenia. 1999. Biodiversity of Armenia. First National Report. Ministry of Nature Protection.

Government of the Republic Armenia. 1998. First National Communication of the Republic of Armenia. Under the United Nations Framework Convention on Climate Change. Ministry of Nature Proection.

Heitzman, A. and E. Solomon. 2004. Feeding the Future. From Fat to Famine. how to solve the world’s food crisis. Anansi Publ.

Tilman, D. et al. 2002. Agricultural Sustainability and Intensive Production Practices. Nature, 418, (August 2002). Pp 671-77.

World Bank. 2004 (a). Aide Memoire. Proposed Rural Enterprise and Small-Scale Commercial Agriculture Development Project. Preparation Follow up Mission. December 12-December 22, 2004.

World Bank 2004 (b). Aide Memoire. Proposed Rural Enterprise and Small-Scale Commercial Agriculture Development Project. Project Preparation Mission. October 2004.

World Bank 2002. Project Appraisal Document. Armenia: Natural Resources Management and Poverty Reduction Project. May 10, 2002.

World Bank. 1999. Armenia National Environmental Action Program (NEAP).

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Annex A

RESCAD Relevant Legal and Regulatory Framework

for Environmental Protection

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IMPORTANT: The reader should check to ensure that the following laws and the dates provided are correct. A number of laws have been updated since the original research on these relevant environmental laws was undertaken.

FRAMEWORK LAW x Law on Environmental Principles, the Green Constitution

Promulgated 1991. The article aims to protect the plants and animals which are includes in Red Book. updated 02.04.1996: article 25, Protection of uncommon and disappearing flora and fauna.

CODES AND LAWS

• Land Code 1991, updated in 2000

Divides land of Armenia into categories based on planned use. Presents the conditions for ownership or lease of land of land in these categories, how these rights may be transferred, and stipulates the requirements to conserve land and protect it from degradation or contamination.

Deprivation of ownership if an owner fails to protect the land, is far too strict. Lack of developed land sale mechanisms and absence of an information base prevents the establishment of a proper land market. The centrally driven land categorization system is often in conflict with the system of land master plans executed by regional and local governments.

The Land Law was further updated in 2001.

• Water Code 1992

The Water Code aims at (1) guaranteeing the water supply for the residential and industrial needs; (2) preventing contamination and exhaustion of the water resources; (3) improving water facilities; (4) protecting the rights of local self-governing authorities and citizen; (5) strengthening legal protection of water. The water legal framework is struggling with the same difficulties as the rest of environmental legislation: unrealistic policy goals, obsolete standards, insufficient economic instruments, legislative failure to consider capacity of the administrative structure and difficulties with enforcement.

The Water Code was further updated in 2002 and the reader should refer to this update. In the opinion of some, the updated law is inferior to the old law in that it lacks social aspects. The updated law treats water as a product with the water sector subject to free market regulations.

• Law on Specially Protected Areas, 1991

The Law distinguishes three types of zones –protected, recreational and economic ones, and four types of specially protected areas: “state reserves” (no economic activities allowed), “national parks” (an area which comprises natural systems and units of special ecological, cultural or scientific significance), “state reservations” (no economic activities allowed which can threaten or damage ecosystems) and “natural monuments”. Currently protected areas suffer from illegal economic activities, weak institutional capacity and inefficient management of the related governmental agencies, as well as undeveloped legislation and lack of enforcement. The following tasks are listed:

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• protection and reproduction of the ecosystems • protection of natural monuments • preservation of the biodiversity • scientific research of natural phenomena • regulation of the state of the environment • ecological education

• Forest Code, 1994

The Code guarantees protection of forests. The objectives of forestry protection are threefold: (1) to protect forest natural resources, (2) to increase forest regeneration rates, and (3) to define the role of the state in forest protection. The Forestry Code is based on the presumption that forests in Armenia do not have a productive function, thus it ignores the reality of timber harvesting and fuelwood collection. Besides, the Code does not address the compatibility of forests’ land use and grazing.

• Regulation on the limits of the activities which must be expertised, 1999

Sets out the limits to decide whether activities need to be expertised.

• Law on Plant Variety Protection, 2005 Draft stage and will be presented to Parliament in autumn 2005.

• Law on Conservation and Use of the Fauna, (under Parliament hearings)

Will pursue such principles as general protection of all species and commercial utilization of nature based on licensing. It should be said that nature protection legislation fails to comply with declared goals.

• Law on the Protection of Flora, 1998

The Law on Flora outlines the GOA’s policies for the conservation, protection, use, regeneration and management of natural populations of plants and for regulating the human impacts on biodiversity. The law on Flora and Draft Law on Fauna aim to ensure sustainable conservation of plants and animals, natural habitats and biodiversity, to develop scientific assessments of levels for sustainable use of natural populations, and to protect the rights of those involved in conservation and management. The implementation of this law will be overseen by the Ministry of Nature Protection, and by local government and other agencies. The law provides for: inventory, study and monitoring of flora and fauna populations; development of their State listing and their use; further elaboration of the Red Data Book; investigation of issues relating to flora and fauna conservation; conservation of rare and threatened species; use of plants and animals; measures for dealing with disputes over use of plants and animals; and international agreements relating to conservation issues.

• Code on mineral resources, amended by Cabinet decisions 374 (1993) and 504 (1993), 221(1997) sub-act on natural resource extraction, 1992, 93, 94, 97.

Establishes rights and conditions of exploitation of underground resources, defines terms of contract, licensing responsibility, and schedule of fines for infringements.

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• Law on Land Tax, 1994 (draft revision Sept. 1997)

Describes the principles on which land taxation is based, the rates of taxation, privileges and exemptions, and procedures for collection and payment.

• Law on Real Estate of the Republic of Armenia, 1996

Establishes rights to possess, use, alter, exclude access to, dispose of, and mortgage land and immovable property, the eligibility to such rights and the conditions under which they may be applied. Specifies that court proceedings are required for the State to alienate land against wishes of right holder. Establishes registration and cadastre system.

• Law on the Protection and Use of Fixed Cultural and Historic Monuments and Environment, 1998

This law provides the basis for the protection and use of monuments in Armenia and regulates the relations among protection and use activities. Article 15 of the Law describes procedures for the discovery and state registration of monuments, the assessment of protection zones around them, and the creation of historic-cultural reserves. Article 22 requires the approval of the authorized body before land can be allocated for construction, agricultural and other types of activities in areas containing monuments.

• Presidential Decree on Provincial (Marz) Government, 1997

Defines the powers of the provincial government (marzpet)

• Law of Local Self Government, 1996

Defines conditions for appointment, service and dismissal of the Chief of Community and the Community Council, and describes their powers and responsibilities.

DECREES, RESOLUTIONS and DECISIONS

• Decree on the rate of fines for illegal logging, 1995 (?)

• The Resolution of the Government on Provision and Alienation of State-owned Lands, 2001

Stipulates that the term of lease should be agreed between the lessor and the lessee and confirmed by the relevant authorities. The Regulation also states the right of the lessor to demand from the lessee implementation of nature protection activities on the leased land.

• Cabinet Decision on the Creation of a Real Property State Unified Cadastral Department (RPSUCD) of the Republic of Armenia, 1997.

Establishes RPSUCD and defines responsibilities for land cadastre and registration.

OTHER RELEVENT LEGISLATION

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• Civil Code, 1998

All legislation, adopted prior to 1999, should be revised in conformity with the Civil Code by the end of 2001. However, nothing seems to have been done so far. The situation changed with the introduction of a new Civil Code and a complementary Civil Code Enforcement Act. According to that Act farms and collective farms registered prior to January 1, 2001 are subject to reorganization and re-registration. However, up to now these organizations have neither reorganized nor re-registered. Villagers are reluctant to register. Consequently, the legal status of farms is not clear, which appears to be an impediment for farms to participate in civil and legal activities, e.g. signing contracts and receiving loans. The new Civil Code does not envisage any legal status for farms. According to the Code the only legal entities in the sphere of agriculture are agricultural co-operatives. However, there is no legislation on agricultural co-operatives. Creation of co-operatives is also hampered by tax legislation, as Acts on Profit Tax, Income Tax and Value Added Tax have incentives for stand-alone farms, which are not liable to pay either profit or value added taxes. Co-operatives as legal entities will have to pay those taxes.

• Law on Rental Payment, 2000

The Law on Rental Payment and Regulations on Utilization of Natural Pastures, Hay Meadows and Other Land Types, and the Resolution on Renting State Pastures Placed out of Administrative Borders of a Community regulate renting of remote pastures on a short-term (up to 3 years) and on a medium-term (from 3 to 10 years).

• Privatization Law, 1990

Lays down conditions for transfer of state assets to private individuals and groups.

• Law on Farms and Collective Farms, 1991

Establishes conditions for ownership of farms by individuals, and lays down principles for management of farms by individuals and collectives. determines the economic, organizational and social conditions and legal framework of farms and collective farms. According to that Law and the Law on Enterprises and Entrepreneurial Activities the farms have not had a status of a legal body, however, they have enjoyed all the rights and respective responsibilities assigned to a legal body. A collective farm is considered to have a status of a legal body from the moment of its registration.

OTHER SECTORAL LEGISLATION

• Law on Sanitary-Epidemiological Safety, 1992

• Law on Lake Sevan, 2000

This law includes all the buffer zones within the national park area. Special measures for the short and long term have been identified. Different regimes are proposed for a strictly protected zone, immediate impact zone and an indirect impact zone.

• Law on the Protection of Selection Achievements, 1999

Law on protection of selection achievements” regulates relationships related to the creation of new plant breeds, their legal protection and use. The Law is consistent with the requirements of UPOV, as presented

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at the 1997 international Geneva conference on the protection of new breeds of plants. The law regulates questions connected with the rights of the patent holder, the rights of the author of the new plant breed and entitlement to use of the new plant breed. However, Armenia does not have a National system of intellectual property right protection.

• Law on Plant Protection and Plant Quarantine, 2001

“Law on plant protection and plant quarantine” addresses issues of diagnosis and prevention of virus- caused and parasite diseases of plants as well as defines the stakeholder institution responsible for control of norms of quarantine.

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Annex B

Impacts, Causes, Consequences and Mitigation Rural Enterprises

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Table B1 For Planning and Construction of all New Enterprises, Rehabilitation of Existing Enterprises and De-commissioning of all Enterprises

Potential Impacts Causes Consequences Mitigation Required Remarks Planning Phase: Loss of biodiversity Poor location analysis not Loss of flora and fauna. Location in areas that are not taking into account important high priority for biodiversity biophysical values. protection. Loss of cultural features Poor location analysis not Loss of important cultural Location in areas of little or no Public participation is a providing consideration to sites and structures. cultural significance. requirement for all EIAs and cultural values. if properly conducted during EIA will ensure input required to select appropriate alternative sites. Socially unacceptable Poor location analysis not Nuisance factor to local Location in areas where noise, Public participation is a taking into consideration local communities; loss of peace odour or aesthetics will not be requirement for all EIAs and communities’ lifestyle, and quiet; loss of access to a problem; location to be if properly conducted during movement patterns and other areas or sites (e.g. school selected which doesn’t EIA will ensure input values. children may have to walk interfere with important access required to select appropriate greater distances due to loss of (e.g. to schools). alternative sites (and modus direct route to school. operandi) for enterprise. Construction Phase : Soil erosion Vegetation and topsoil is Further soil erosion off-site Ensure awareness by workers; If possible construction removed for initial and downstream; increased adopt appropriate soil should occur in dry periods construction and access, sediment loads in receiving protection techniques; ensure or seasons, particularly in exposing bare soil that is streams resulting in aquatic exposed soil surfaces are kept situations where soil erosion vulnerable to erosion, habitat changes. to a minimum and for short could be a problem. particularly in rainy periods. periods of time; conserve topsoil, recover and replant when construction is completed. Soil contamination Spilled and dumped fuels, and Loss of soil productivity. Environmental awareness; other chemicals. Contaminated groundwater. training in handling and Ineffective on-site sewage storage of fuels, lubricants and treatment during construction chemicals; provision of proper phase. on-site storage facilities.

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Water pollution Spilled and dumped fuels and Contaminated groundwater Same as above. other chemicals. and surface water resulting in Provision of waste containing contaminated drinking water toilets which waste can be and in the case of surface transferred to a municipal water, damaged aquatic treatment facility. ecosystem. Noise and dust Vehicles and construction Nuisance factor to Operations during normal machinery; dirt access roads. neighboring communities. working hours only; access roads to be watered during dry periods. Solid waste Littering of unused Unsightly and remnant Effective disposal of materials construction materials and construction materials could and garbage in designated workers personal garbage. pose a safety hazard. waste disposal sites. Loss of access Construction site may have Nuisance and possibly During planning phase ensure Public participation during formerly been used as an economic hardship. that local people are aware of planning phase should access for local population restrictions during identify this and similar (and vehicles) for various construction and alternative conflicts. sections of the community. arrangements for access are provided. Injuries Inadequate safety procedures Injury / death resulting in lost Ensure construction workers for workers; inadequate work days (for construction are given safety instruction; signage and construction workers and general public; ensure safety officers on site; activities exposed where lost income. ensure effective signage for public can interface with such. the public and ensure that all exposed construction areas are barricaded from public access.

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Decommissioning Phase: (it is unlikely that any of the enterprises will undergo decommissioning in a 25-50 period from initial start up or refurbishment but if such should occur then the listed impacts should be considered). Same as above for See above See above See above construction plus: Waste Concrete, blocks, steel, glass Public safety hazard. Removal and recycling or will result from demolition; Waste of resources. effective disposal of all toxic old equipment will be materials; complete dismantled. demolition after recycling useful materials; removal to a designated and environmentally safe disposal site and burial of clean and inert materials. Aesthetics Unsightly site (as are many Following removal of all industrial sites from former materials (see above), site to Soviet times). be formed (topsoiled where relevant and feasible) and landscaped, where appropriate, to suit surrounding areas. Soil erosion As for construction phase above. Safety As for construction phase above.

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Table B2 Abattoir (Meat processing) Overall Potential Impact: HIGH (due to threat to human health threat) Potential Impacts Cause Consequences Mitigation Required Remarks Contaminated meat Poor sanitary conditions Consumers become ill; lost Provision of protective Government inspections can including lack of protective work days; lost productivity clothing; effective use of be erratic and perhaps not clothing and ineffective and income; abattoir’s disinfectants; effective always effectively maintenance; processing of reputation leads to lost sanitary inspections leading to conducted. There are cases sick and diseased animals. business. required standards being met; of people becoming ill. This effective regulatory animal is mainly related to small and meat inspection. farm slaughter. Contaminated groundwater Improper disposal of animal Contaminated drinking (E. Ground waste bone, meat and Current ban on using such and surface water manure and offal as well as coli) water resulting in illness offal into flour for animal feed flour as animal feed in other bones and other non-useable (possibly death), lost (see remarks); blood can be countries due to threat of animal parts including blood. productivity and income. used for blood sausage; other bovine spongiform water and blood waste must be encephalopathy (BSE-mad collected and treated before cow disease) which can proper disposal into municipal result in deadly Creuztfeldt- waste treatment systems; Jakob (CJD) disease in manure should be recycled or humans for those consuming allowed to mature in an meat of infected animals. impervious containment – mature manure can be applied as fertilizer for crop production or on pastures.

Odour Manure; refrigerants (NH3); Nuisance to nearby residents. Avoid escaping NH3; maintain animals and carcasses. good sanitary conditions; dispose of manure in a timely fashion. Ozone depletion Refrigeration and freezing Increase in UV rays resulting Convert refrigerants from GoA is signatory to the units utilizing Freon or in skin cancer if proper ozone depleting substances Vienna Convention and the ammonia. protection is not taken; can (NH3 and Montreal Protocol re: ozone- also affect plant health. chlorofluorocarbons) to a depleting substances. hydrofluorocarbon.

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Groundwater depletion Large volumes of water used Lowering of water table and Water apportioning; efficient Of particular concern when in washing. depletion of water resources use of water including planning a new abattoir that required by others. recycling. water resources are sufficient to meet needs of present and future users. Injuries Knives and saws used in the Lost productivity, work days Safety instructions; safety processing; large and heavy and income. clothing where appropriate animal carcasses can fall and (e.g. hard hats). cause injury.

Probable Residual Impact Assuming Full Mitigation: LOW

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Table B3 Meat Packing (This activity is often combined with the abattoir) Overall Potential Impact: HIGH (due to threat to human health threat) Potential Impacts Causes Consequences Mitigation Required Remarks Contaminated meat Poor sanitary conditions Consumers become ill; lost Provision of protective Government inspections can including lack of protective work days; lost productivity clothing; effective use of be erratic and perhaps not clothing and ineffective and income; disinfectants; effective always effectively maintenance; processing of Meat packing enterprise loses sanitary inspections leading to conducted. contaminated meat from reputation resulting in lost required standards being met; abattoir. sales, lost revenue and loss of effective regulatory animal job. and meat inspection; assurance that carcasses and meat joints delivered are free of contamination and have been refrigerated adequately. Contaminated groundwater Improper disposal of bones Illness Ground waste bone and fat Current ban on using such and surface water and fat. into flour for animal feed (see flour as animal feed in other remarks). countries and other places due to threat of spongiform encephalopathy (BSE-mad cow disease) which can result in deadly Creutzfeldt- Jakob (CJD) disease in humans for those consuming meat of infected animals. Disease Improper disposal of wastes Lost workdays and income. Appropriate disposal of waste. into municipal disposal sites providing ideal habitat for vermin. Illness Canning uses lead solder for Lead (Pb), a carcinogen, is Use tin (Sn) for soldering or can seams. cumulative in humans. adopt other appropriate sealing methods. Solid waste Canning material scrap. Wasted resource. Recycle back to processor.

Probable Residual Impact Assuming Full Mitigation: NONE

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Table B4 Vegetable Processing and Canning Overall Potential Impact: LOW Potential Impacts Causes Consequences Mitigation Required Remarks Damage to aquatic Residue from vegetable and High organic content leading Compost vegetative waste. ecosystems. fruits allowed to be dumped to oxygen depletion and into surface waters. habitat destruction. Illness Canning uses lead solder for Lead (Pb), a carcinogen, is Use tin (Sn) for soldering or can seams. cumulative in humans. adopt other appropriate sealing methods. Solid waste Canning material scrap. Wasted resource. Recycle metal back to metal processor. Injuries Open machinery. Lost productivity, work days Safety instructions; safety and income. clothing where appropriate (e.g. hard hats); protective guards on all machinery.

Probable Residual Impact Assuming Full Mitigation: NONE

Table B5 Tanning Overall Potential Impact: HIGH (primarily due to toxic chemicals in effluent discharge) Potential Impacts Causes Consequences Mitigation Required Remarks Modification of aquatic A variety of chemicals is used Receiving water bodies Containment and treatment Christian18 suggests habitats in the tanning industry become highly polluted and facilities to ensure that separating effluents into four including Cr, NH4, Ti, toxic, rendering them unfit for effluent discharges are within wastewater streams: low Na2SiF6, Na2S, CaO, Na3OH4, other uses and destroying the regulated limits. polluted, high polluted, Na2SO4, (CH2)6N4, existing fauna and flora; loss Chemicals should be stored chromium bearing and AlNH4(SO)2. These chemicals of biodiversity. and handled in such a manner sulphide bearing can be found in waste effluent Organic wastes can deplete as to prevent spillage. wastewaters. Solid or they can reach the effluent oxygen levels surface waters, wastes19might be separated discharge as a result of resulting in damaged habitat into three fractions: spent

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spillage. As well there is waste and aquatic communities. salt, non-chromium including leather and hair containing solids, and from the hides that can find its chromium solid wastes. way into the aquatic habitat. Aerobic biological treatment (composting) is suggested as proper technology for the non-chromium containing solid waste since this can represent up to 80% of all of the solid waste generated at a tannery20. High energy consumption Aging high production Depending on source of For new tanneries building tanneries use large amount of energy, could contribute to design and construction energy, particularly in winter. greenhouse effect (if fossil should be compact and energy fuel derived) or if hydro efficient. derived, could result in pushing high demand on limited supply that would result in additional energy sources to be found. Injuries Tanneries use heavy Lost productivity, work days Safety instructions; safety machinery, which, if not fitted and income. clothing where appropriate with protective shields, can (e.g. hard hats); protective cause injury. guards on all machinery.

Illness A number of chemicals have Lost productivity, work days Effective training in the to be handled in the tanning and income. Long term illness. handling of chemicals; process. Some of these can be protective clothing (e.g. dangerous to the health of respirators, gloves of inert workers if not properly stored material); proper storage for and handled. highly volatile compounds. Solid waste and Hair and small quantities of Small quantities of leather do Minimize amount of waste; See remarks for contamination of skin and leather waste during not present a problem. Hair of treat hides before removal of modification of aquatic groundwater and surface the tanning process. hides often contains parasites hair (or treat hair after habitats, above. water. and disease. Unknown as to removal).

20 Christian, K. 2001.

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whether or not these could find their way into groundwater and surface water and pose a threat to health. High water consumption Large tannery uses large Drawdown of water table Ensure proper water Research into the tannery amounts of water. which could affect other users. apportionment with other business in Kyrgyz Republic competing users; efficient indicated that a factory can water use and recycling. use approximately 10,000m3 of water monthly.

Probable Residual Impact Assuming Full Mitigation: LOW - MODERATE

Table B6 Aquaculture Overall Potential Impact: HIGH Potential Impacts Causes Consequences Mitigation Required Remarks Water contamination Concentration of fish Eutrophication; modification Remove wastes and dispose of excrement released into water of aquatic ecosystem and effectively, most likely on ways. species mix modified. agricultural land. Biodiversity loss If exotic species (e.g. O. Loss of economically valuable Take measures to ensure O. mykiss can be a highly mykiss) are used, breeding species or loss of important containment of exotic species. predatory fish in the absence pairs could escape and place food sources for these species. Not likely that this will be of its natural and preferred pressure on indigenous fish Biodiversity losses as a result 100% effective and O. mykiss food source of insects. populations. of loss of indigenous species is most likely to already be and perhaps endemic species. present in natural waterways. Loss of important ocean Feedstocks could be Ocean by-catch is significant. Have knowledge of the source One aquaculture operation biodiversity developed from ocean by- These are unwanted species in and composition of feed and visited uses feed concentrate catch. terms of the human do not purchase feed with fish imported from the consumption market and are meal. Netherlands. The feed had a caught by accident during fish aroma, suggesting that it commercial trawling may be composed of fish, operations. By-catch species probably by-catch. have a significant role to perform in marine ecosystem dynamics but they are viewed

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as nuisance and garbage fish by the commercial fishery. Human health Contaminated feed. Illness Ensure that feed stocks come In Canada feed for farmed from known sources and that Atlantic salmon (Salmo their composition meets all salar) has been known to human health standards. contain farm livestock wastes which are now banned from use as a base for livestock and aquaculture feed. This is due to the linkage of these wastes with bovine spongiform encephalopathy (BSE or mad cow disease) and its possible connection with Creuzfeldt-Jakob (CJD) disease that leads to death in humans. Aquatic ecosystem Lake and river systems Indigenous aquatic ecosystems Ensure that farmed fish do not Farmed fish have probably modification become dominated by exotic are modified. escape. Use only sterile fish already escaped into the species. stock. natural system.

Probable Residual Impact Assuming Full Mitigation: LOW

Table B7 Dairy Processing Overall Potential Impact: HIGH (primarily due to human health threat) Potential Impacts Causes Consequences Mitigation Required Remarks Surface water contamination Effluent discharge containing Waterways become opaque Effective collection and whey (waste from cheese and display high protein levels treatment of whey before making); discharge of acid resulting in damaged or discharge; make available all from milk processing as a destroyed aquatic ecosystem. whey to farmers for feedstock. result of cleaning of equipment. Ozone depletion Refrigeration and freezing Increase in UV rays resulting Convert refrigerants from units utilizing Freon or in skin cancer if proper ozone depleting substances

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ammonia. protection is not taken; can (NH3 and also affect plant health. chlorofluorocarbons) to a hydrofluorocarbon. Food contamination Pasteurization process not Consumers become ill (could Origin of milk should be effective; workers in contact be very serious as milk could known; pasteurization process with milk and milk products. come from cows with must be effective; workers brucilosis or tuberculosis); must be protected with workers could infect milk effective clothing and workers products during handling. should not come in direct contact with milk products; veterinary diligence to ensure healthy animals. Injuries Open machinery. Lost productivity, work days Safety instructions; safety and income. clothing where appropriate (e.g. hard hats); protective guards on all machinery.

Probable Residual Impact Assuming Full Mitigation: NONE

Table B8 Frozen Food Production Overall Potential Impact: MODERATE (primarily due to human health threat) Potential Impacts Causes Consequences Mitigation Required Remarks Ozone depletion Refrigeration and freezing Increase in UV rays resulting Convert refrigerants from Armenia is signatory to the units utilizing Freon / or in skin cancer if proper ozone depleting substances Montreal Protocol. ammonia. protection is not taken; can (NH3 and also affect plant health. chlorofluorocarbons) to a hydrofluorocarbon. Food contamination Poor sanitary conditions Consumers become ill; lost Provision of protective Government inspections including lack of protective work days; lost productivity clothing; proper washing up can be erratic and perhaps clothing and ineffective and income; enterprise’s with disinfectants; effective not always effectively maintenance; contaminated reputation leads to lost sanitary inspections leading to conducted. raw materials. business. required standards being met; effective inspection of raw materials. Injuries Open machinery. Lost productivity, work days Safety instructions; safety

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and income. clothing where appropriate (e.g. hard hats); protective guards on all machinery.

Probable Residual Impact Assuming Full Mitigation: NONE

Table B9 Oil Processing Overall Potential Impact: LOW Potential Impacts Causes Consequences Mitigation Required Remarks Polluted surface water Biomass waste allowed to Degraded aquatic ecosystem. Effective disposal of biomass migrate to surface waters. waste (composting or use as animal feed). Solid waste Biomass waste. Compost or use as animal feed. Illness Cold pressed oil contains high Serious illness resulting in lost Use alternative pressing amounts of fatty acids and productivity, work days and process. pesticide residues. income. Injuries Open machinery. Lost productivity, work days Safety instructions; safety and income. clothing where appropriate (e.g. hard hats); protective guards on all machinery. Probable Residual Impact Assuming Full Mitigation: NONE

NOTE: Armenia is not a large producer of oil seed and it is unlikely that commercial processing of oil seed will be viable.

Table B10 Flour Milling Overall Potential Impact: LOW Potential Impacts Causes Consequences Mitigation Required Remarks Solid waste Wheat husks left from milling Wasted resources. Recover bran; use for animal dumped at municipal disposal feed. site. Injuries Open machinery. Lost productivity, work days Safety instructions; safety and income. clothing where appropriate

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(e.g. hard hats); protective guards on all machinery. Illness Flour dust. Respiratory irritation. Provide masks to workers.

Probable Residual Impact Assuming Full Mitigation: NONE

Table B11 Storage (warehousing) Overall Potential Impact: LOW Potential Impacts Causes Consequences Mitigation Required Remarks Only potential impacts during siting, construction and decommissioning phases. (see Table B:1)

Probable Residual Impact Assuming Full Mitigation: NONE

Table B11 Markets Overall Potential Impact: MODERATE Potential Impacts Causes Consequences Mitigation Required Remarks Illness Vermin (rats). Spreading of disease resulting Regular inspection of markets in lost workdays, sales and and extermination of vermin; income. maintenance of high sanitary standards. Unrefrigerated meat and dairy Lost workdays and income. Refrigeration of meat and products. dairy products. Ozone depletion Refrigeration and freezing Increase in UV rays resulting Convert refrigerants from units utilizing Freon / or in skin cancer if proper ozone depleting substances ammonia. protection is not taken; can (NH3 and also affect plant health. chlorofluorocarbons) to a hydrofluorocarbon.

Probable Residual Impact Assuming Full Mitigation: NONE

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Annex C

Impacts, Causes, Consequences and Mitigation For Agriculture

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Table C1 Seed Overall Potential Impact: LOW Potential Direct Impacts Causes Consequences Mitigation Required Remarks Positive impact; increased The Project intends to yields and food security for strengthen the capacity of the small –medium holder the Seed Regulatory Agency farmer. which would lead to the release of new varieties with increased performance in terms of response to fertilizers and resistance to pests and diseases. Positive impact of GMO seeds in terms of increased productivity and that some may require lower levels of pesticide application .Risk of introduction of Genetic drift into other areas Policies and legislation to GoA has to decide if the genetically modified where GMOs are not wanted; prevent importation / and or potential gains of GMOs organisms which may be Development of pesticide strict control of GMO plant outweigh the impacts; socially unacceptable resistant weeds seeds currently there is no government policy on GMOs and there is no control on their entry into the country.

Probable Residual Impact Assuming Full Mitigation: LOW – MODERATE

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Table C2 Pedigree seed Overall Potential Impact: LOW – MODERATE Potential Impacts Causes Consequences Mitigation Required Remarks Positive impact through increased yields and improved farm economy. .Risk of introduction of Genetic drift into other areas Policies and legislation to GoA has to decide if the genetically modified where GMOs are not wanted; prevent importation of GMO potential gains of GMOs organisms which may be Development of pesticide plant seeds outweigh the impacts; socially unacceptable resistant weeds currently there is no government policy on GMOs and there is no control on their entry into the country. Water and soil pollution Increased use of high levels of Soil and water contamination . determination and In general terms, high yielding chemical fertilizers and leading to modified aquatic application of optimum varieties (HYV) require large pesticides in order to attain ecosystems. quantities and scheduling for inputs to achieve expected expected high yields. fertilizers and other inputs; results – plant species and introduction of an integrated varieties would have to be pest management program examined on a case by case (IPM); basis; close liaison with MoA Adoption of more least cost required; GoA currently has farming techniques (organic no policy for IPM. farming). However, some varieties introduced through Project assistance may show improved response to fertilizers and resistance to disease and pests which would result in fewer chemical inputs required. Organic farming techniques are currently practiced in other areas of the FSU. Probable Residual Impact Assuming Full Mitigation: LOW

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Table C3 Fertilizer Overall Potential Impact: MODERATE TO HIGH (cumulative impact) Direct Impacts Causes Consequences Mitigation Required Remarks . reduction in soil organic Reliance on chemical Modified soil structure and Fertilizer application in Extension workers should content fertilizers which do not have reduction in soil moisture conjunction with crop rotation work closely with farmers to an organic component – less holding capacity; increase in practices. develop application rates reliance on compost material soil acidity. In the long run, Further reduce chemical and best land husbandry and and manure for meeting soil possible loss of productivity as fertilizer use through crop rotation plans. fertility requirements. a result of insufficient soil incorporation of various least ‘Nature’ 21 stated a study moisture; loss of soil’s natural cost farming practices (organic that found that 17% of fertility. farming). world farmland has been degraded since 1945 due to Green Revolution farming. Air pollution Emission of greenhouse gases Contribution to global Optimum fertilizer quantities from chemical fertilizers. warming resulting in climate and application schedules change. should be planned and implemented. Water pollution Nutrient enrichment of water Eutrophication of water Optimum fertilizer quantities Work closely with extension bodies from fertilizer runoff. bodies; modified aquatic and application schedules workers to develop best land ecosystems. should be planned and and crop management plans. Contaminated potable water implemented. Impact as a result of use on sources. Least cost farming (organic a single farm will not be farming) techniques should be significant but cumulatively introduced. over many farms within the same watershed the impact could be very significant.

Probable Residual Impact Assuming Full Mitigation: LOW - MODERATE

21 Tilman,D. et al. 2002.

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Table C4 Pesticides Significance of Overall Potential Impact: HIGH (cumulative impact) Potential Impacts Causes Consequences Mitigation Required Remarks Illness Improper handling, . increased health costs; lost Training in the proper MoA should develop application application and storage of work time; lost family handling and use of certification programs. pesticides. income. pesticides; proper storage of Public education is required and this Consumption of crops with pesticides. could be done through MoA and the high levels of pesticide . introduce an IPM NGO community. residues. (integrated pest management GoA does not currently have an IPM program) policy. Use only UN approved pesticides. Health warnings to wash foods. Soil contamination Residual pesticides in soil. Loss of soil productivity; Use of appropriate pesticides Extension officers should promote long term loss / altered soil that do not have residuals or IPM. micro-fauna important to soil in which residuals do no Difficult because agrochemical / plant relationships. harm to soil. companies promote their products Adopt an IPM program. amongst farmers and farmers will generally adopt the least cost chemical that does the job. Loss of biodiversity Pesticide ingestion by fauna. Loss of fauna Use UN approved pesticides Read / remember ‘Silent Spring’ by and recommended application Rachel Carson. Between 1982 and levels and timing. 2000 PEI province of Canada Adopt an IPM program. experienced 632% increase in pesticide use for potato production, resulting in 26 separate fish kills since 1994. In 2002 in a two week period 12,000 dead fish (from pesticide kill) washed up on shorelines.22 Water pollution Ground and surface water Impaired health of local and Use of least harmful International waters could be contamination. downstream water pesticides as approved by UN affected.

22 Heitzman A. and E. Solomon. 2004.

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consumers; increased health agencies. Pesticide use not likely significant on costs; lost work time; lost Apply IPM techniques. a single farm but cumulatively on family income. many farms within the same Aquatic ecosystems watershed, impact could be very damaged; biodiversity losses. significant.

Probable Residual Impact Assuming Full Mitigation: MODERATE

Table C5 Pedigree livestock Significance of Overall Potential Impact: NONE Potential Impacts Causes Consequences Mitigation Required Remarks Positive input Leading to better quality and increased production of meat, and wool and dairy products; increased farm incomes. None None None None

Probable Residual Impact Assuming Full Mitigation: N/A

Table C6 Livestock for finishing Significance of Overall Potential Impacts: MODERATE TO HIGH Potential Impacts Causes Consequences Mitigation Required Remarks Loss of ground cover and soil Carrying capacity of pasture Reduced productivity; loss of Develop pasture carrying Work closely with erosion. is exceeded. soil; sedimentation: capacities and pasture agricultural extension hydrological regime management program; ensure services to determine and modified resulting in flooding that these are not exceeded. maintain pasture carrying and drought conditions; capacities. desertification Loss of biodiversity In high altitude areas stock Possible loss of species Ensure that grazing does not Work closely with may threaten forested or other endemic to Armenia. occur in protected or other agricultural extension protected areas; reduced Sedimentation; hydrological areas of important services. vegetation cover leading to regime modified resulting in biodiversity. Livestock should be soil erosion and loss of water flooding and drought reintroduced to remote

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holding capacity. conditions. mountain areas where grazing formerly occured (but under strict control) in order to eliminate weed population and as a way of rehabilitating original plant communities and ultimately of protecting biodiversity. Water pollution Livestock in a confined area High nutrient loading in Introduce effective waste Cases of manure leading into produce high concentration of runoff waters leading to poor management; design and groundwater with virulent of manure. water quality and threat to implement alternative to strains of E.coli have lead to human health (E. coli). confined quarters. human deaths (e.g. Walkerton, Canada, 2000)

Probable Residual Impact Assuming Full Mitigation: NONE

Table C7 Land Purchase Significance of Overall Potential Impact: HIGH Potential Impacts Causes Consequences Mitigation Required Remarks Biodiversity loss Lands purchased for Loss of flora and fauna and Land not already being used Loans could be rejected if agriculture are rich in possibly species endemic to for agriculture and which has land purchase and agriculture biodiversity. Armenia. watershed or biodiversity will lead to purchase of values should not be converted ecologically sensitive areas to agriculture. or to non-sustainable practices. Loss of livelihood Lands may be private or state Poverty and dependence on Lands currently required for Farmers will make the held but currently supporting the State. subsistence farming should decision to sell on their own. subsistence farmers. remain as such unless No one is going to give them compensation is sufficient to advice on how to manage guarantee improved and their money. State should sustained lifestyle. look after the small subsistence farmer and not sell off lands upon which he is dependent. Likewise, loans should not be given for

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purchase of existing agricultural lands without clear guarantee that seller will be economically no worse off without his/her land.

Probable Residual Impact Assuming Full Mitigation: NONE

Table C8 Tractors Significance of Overall Potential Impact: MODERATE TO HIGH Potential Impacts Causes Consequences Mitigation Required Remarks Soil and water pollution Contamination from machine Loss of soil productivity; loss Good practices to be carried This is a minor impact and fuels and lubricants. of crop production. out by equipment operators. awareness to operators to Loss of potable water. Agricultural machinery should refuel under safe conditions be kept in good repair and is all that would be required. fuels and lubricants stored and Agriculture extension service handled in appropriately can educate farmers, as well designed areas. as loan officers. Air pollution CO2 releases from Contribution to greenhouse .ensure all fossil fuel engines machinery. gasses and global warming. are efficient and well maintained. Soil erosion Tilling land against the Rapid runoff of water; no Till on the contour. Extension service to advise contour because easier on percolation; soil carried with farmers of proper tilling steep slopes. runoff into water bodies. techniques with tractors. Soil compaction Heavy machinery. Erosion and sedimentation; Ensure equipment of a size Large farms require large loss of water. that suitable for soil machinery appropriate for the conditions. magnitude of the job.

Probable Residual Impact Assuming Full Mitigation: LOW

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Table C9 Land Preparation (where farmer hires someone to conduct land preparation with modern machinery) Significance of Overall Potential Impact: MODERATE TO HIGH Potential Impacts Causes Consequences Mitigation Required Remarks Soil erosion Preparation during rains; Loss of topsoil and Contour ploughing required. Should be conducted in cultivation against the productivity; loss of soil Optimal ploughing schedules conjunction with other good contour; long fallow periods moisture; stream to ensure minimal time for husbandry practices following ploughing. sedimentation; aquatic exposed soil. including maintenance of ecosystem modified; Organic agricultural practices cropping residues (i.e. no modified hydrological adopted (e.g. shallow tilling burning). regime; flooding and drought and minimum tillage). Coordinate with agricultural conditions increased. extension field services.

Probable Residual Impact Assuming Full Mitigation: LOW

Table C10 Other farm implements Potential Overall Impact: LOW – MODERATE Potential Impacts Causes Consequences Mitigation Required Remarks Same as in Table C9

Probable Residual Impact Assuming Full Mitigation: LOW – MODERATE

Table C11 Small equipment Potential Overall Impact: NONE Potential Impacts Causes Consequences Mitigation Required Remarks

NOT APPLICABLE

Residual Impact Assuming Full Mitigation: NONE Risk: NONE

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Table C12 Irrigation equipment and irrigation maintenance Potential Overall Impact: HIGH Potential Impacts Causes Consequences Mitigation Required Remarks Water losses Extraction of groundwater; Loss of water to other current Water sharing plan to ensure Water sharing plan will be extraction of surface water. and potential users; equitable distribution; No challenging to prepare and modification of aquatic extraction from important implement. habitat. aquatic habitats. Fish production in Lake Sevan has been affected because certain species require inflow rivers for breeding but some rivers deplete of water due to irrigation.23 Loss of soil productivity Salinization and Desertification, loss of Appropriate drainage system waterlogging. productive land. installed and operational activities designed to eliminate causes of impacts.

Probable Residual Impact Assuming Full Mitigation: LOW - MODERATE

Table C13 Vehicles Potential Overall Impact: LOW Potential Impacts Causes Consequences Mitigation Required Remarks Air pollution CO2 emissions Contribution to global Efficient engines and Not likely that efficient warming. conservation of use. engines will be used and conservation will not be a priority.

Probable Residual Impact Assuming Full Mitigation: LOW

23 Prof. S. Baloyan (2005)

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Table C14 Farm buildings for stock and machinery Potential Overall Impact: LOW Potential Impacts Causes Consequences Mitigation Required Remarks Loss of productive land. Improper location of Reduced income from lower Location of buildings on sites This is not likely to be a buildings. crop production. with low productivity; major consideration. efficient design to minimize space required.

Residual Impact Assuming Full Mitigation: LOW Risk: LOW

Table C15 Storage facilities (fuel, chemicals, grain and other produce) Potential Overall Impact: LOW Potential Impacts Causes Consequences Mitigation Required Remarks Loss of productive land. Improper location of Reduced income from lower Location of buildings on sites This is not likely to be a buildings. crop production. with low productivity; major consideration. efficient design to minimize space required. Water pollution. Leakage of fuel and Pollution of ground and Construction to include chemicals into surface and surface water leading to impermeable flooring and groundwater. contaminated drinking water bunds to prevent runoff. and irrigation water as well as affecting aquatic ecosystems.

Probable Residual Impact Assuming Full Mitigation: LOW

Table C16 Primary processing Significance of Overall Potential Impacts: MODERATE – HIGH Potential Impacts Causes Consequences Mitigation Required Remarks

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See Tables for agro-processing, particularly abbatoir and dairy processing (Annex B)

Probable Residual Impact Assuming Full Mitigation: NONE

Table C17 Fencing materials Significance of Overall Potential Impacts: MODERATE TO HIGH Potential Impacts Causes Consequences Mitigation Required Remarks Social disruption Exclusion of certain people Prolonged legal procedures Consultation with affected This is not likely to be a or groups from land to which and ill feelings within groups or people; problem. Public participation they have had traditional community. Where required, establishment exercise should identify any access either for use or for of easement conditions. potential problems. passage.

Probable Residual Impact Assuming Full Mitigation: NONE

Table C18 Fuel, lubricants, etc. Significance of Overall Potential Impacts: HIGH Potential Impacts Causes Consequences Mitigation Required Remarks Soil contamination Improper storage and Loss of soil productivity. Proper storage and handling of handling of fuels and Lost revenue. fuel; containment of fuel lubricants; improper disposal containers within concrete of waste lubricants. bunded area; proper disposal of waste lubricants. Water pollution Improper disposal of used Loss of domestic and Proper storage and handling of lubricants and improper irrigation water supplies; fuel; containment of fuel handling of fuels and illness to humans and containers within concrete lubricants find their way into livestock; lost revenue; bunded area; proper disposal of surface and ground water altered and damaged aquatic wastes lubricants. sources. ecosystems.

Probable Residual Impact Assuming Full Mitigation: NONE

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Table C19

Veterinary services Significance of Overall Potential Impacts: MODERATE Potential Impacts Causes Potential Consequences Mitigation Required Remarks Possible human illness Ingestion of meat products Lost work and income. Organic methods of livestock Only approved drugs and containing hormones and husbandry could be used; hormones should be used but other chemicals. minimal application of only even these could have some necessary drugs. long term, and yet unknown, effects on humans. EU has a ban on Canadian beef due to the use of growth hormones (market protection ?) but no evidence of adverse effects on humans. Soil and water contamination. Insecticides used in diptanks. Contaminated soil and water Proper containment and not useable for cultivation disposal of diptank liquids to Potable water or water for avoid soil and water irrigation is contaminated; contamination. downstream aquatic ecosystems affected.

Probable Residual Impact Assuming Full Mitigation: NONE

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Annex D

Impacts, Causes, Consequences and Mitigation

Rural Non-Agricultural Activities

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Table D1 Non-Renewable Resource Extraction Industry: Sand and aggregate quarrying for road building that will directly benefit agriculture and agriculture related industries. Materials also to be used for construction as it relates to agriculture and agriculture related activities. All stages are considered including planning, site, operation and decommissioning. The major concerns with the extraction industry include: i) loss of biophysical and cultural features; ii) water quality losses; iii) water extraction; iv) noise, dust and vibration from operations; and, v) aesthetics.

Potential Direct Impacts Potential Indirect Impacts Consequences Mitigation Required Residual Impacts to be Expected Loss of important biophysical Loss of educational and Loss of natural heritage, Careful siting of No impacts if quarry not features or archaeological sites scientific values biodiversity and cultural heritage quarry; no quarry allowed; where quarry allowed. Mitigation materials are scarce and no will be difficult since alternative available, residual quarries must be sited impacts could be high where suitable materials are found. Loss of agricultural land Food production losses; Ensure that important Profitable quarrying Loss of jobs and income agricultural lands are opportunities will not likely be protected from quarry halted by agricultural activities. siting; Food production losses will Ensure comprehensive likely occur but they will be compensation for relatively minor. farmers. Full compensation probably would not be achieved. Water quality During quarrying fine material Modification / loss of aquatic Containment of quarry Some containment may be runoff into surface water habitat with negative effect fish materials and waste possible but there will remain populations and species mix; loss of and effective disposal some fine material gravitating potable water to downstream users. of same. into surface waters.

Water quantity Depending upon quarry Water losses could be detrimental Incorporation of a With a proper system, water material and purpose of to source water body ecosystem; closed system to ensure losses could be minimal (after materials but large quantities returned water results in poor water water is re-used. extracting initial amount of of water may be required for quality (see above) Sediment loads water to be used in closed washing material (e.g. for disposed of effectively system). producing washed stone) (e.g. land fill)

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Safety threat Injury or death Quarries must be Without full mitigation, site fenced and warnings to after decommissioning could the public posted; pose a threat to the safety of decommissioning when people and livestock. abandoned quarries present a hazard as a result of steep quarry wall cuts and unstable materials. Full mitigation likely to be difficult to achieve.

Noise, dust and vibrations threatens Lost work days Lost income Timing of operations, Can not eliminate essential public health dust control. components of the operation. Some residual impact but hopefully only to the nuisance level and not threatening to public health. Aesthetics Loss of visitors to area, Loss of local employment, Screening during There will always be evidence particularly if area is one with reduction in socioeconomic operations and of a former quarrying tourist attractions. conditions. landscaping site upon operation. decommissioning. Mitigation will not be easy to achieve due to high costs of landscaping.

Table D-2

Potential Direct Impacts Potential Indirect Impacts Consequences Mitigation Required Residual Impacts to be Expected Fishery: Loss of species and their habitats Sustainable None Biodiversity loss management. Population dynamics altered Size limits through net mesh Possible loss of production; Sustainable Small residual impact size restrictions will lead to an Altering of aquatic ecosystem management. imbalance in overall

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population structure, the full consequences of which are unknown. Aquatic ecology altered Undesirable species may dominate; Sustainable None. Loss of desired production in terms management. of quantity and quality Loss of species Job losses; reduction in rural Biodiversity loss; more Sustainable No residual impact economy unfavourable species may fill management. available niche

Table D3 Manufacturing: The major environmental effects of the manufacturing sector will be related to effluents and emissions. As well, location of manufacturing activities, and indirectly the pressure that they may place on natural resources will also be of concern. Potential Direct Impacts Potential Indirect Impacts Consequences Mitigation Required Residual Impacts to be Expected Contaminated surface and Aquatic ecosystem losses; Ill health leading to societal Appropriate waste water Some water contamination ground water from effluents biodiversity losses; economic costs; lost work days treatment to meet national for manufactures with losses to fisherfolk; standards; adoption of effluents, will occur contaminated domestic water holding facilities and supplies recycling; alternative processes. Mitigation easy if regulations enforced. Air pollution through air Vegetation damage Ill health leading to societal Appropriate technology to Ambient air quality emissions costs; lost work days. meet stack emission deteriorates (cumulative standards. effect) Loss of productive land and Vegetation damage; Food production losses; Ensure that waste disposal None land for other uses through Biodiversity losses; Health costs and loss of occurs in environmentally solid waste disposal Water contamination (ground potable water supply safe and designated areas; and surface) Recycling.

Biodiversity and other Siting of plant on None biophysical losses as a result environmental grounds. of location

Table D4

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Trade. There are basically no impacts after eliminating areas of trade such as those that deal with tobacco, alcohol, and firearms, from loan eligibility.

Potential Direct Impacts Potential Indirect Consequences Mitigation Required Residual Impacts to be Impacts Expected N/A

Table D5 Transport: This sector includes road, air, water transport and pipeline transfer (railways are excluded). Major impacts to be considered relate to, maintenance of vehicles, air, water and soil pollution.

Potential Direct Impacts Potential Indirect Consequences Mitigation Required Residual Impacts to be Impacts Expected Improper disposal of used Polluted water (ground Increased costs for Appropriate handling and None lubricants, and the and surface) not available domestic and agricultural storage of used oils and improper handling of for domestic or waters lubricants – recycling where fuels, as well as traffic agricultural use; possible; accidents, can result in Damaged aquatic water and soil ecosystems contamination Increased consumption of Contribution to Fuel efficient engines Economics dictates the type fossil fuels increase air greenhouse gases; global of vehicle and fuel used; pollution warming contribution residual impact will be the same

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Annex E: Summary of NGO Roundtable Discussion

Agriculture/EnterpriseTopic Environmental Component Discussion / Results Need Action Agriculture - general Natural ecosystems Agriculture has to work within the framework of the natural system; everyone wants to use the natural ecosystem and we don’t know how to strike a proper balance; the same holds true for agriculture and the forests. Need effective planning and need to stick to this planning General Need alternative approaches to agriculture. Pesticides Soil, water, food Contamination; effect on animals Limit amounts applied; organic agriculture Faunal species now in Red Book as a result of past pesticide application. Suggestion that banned substances are still finding their way into the country and farmers are unaware of the dangers with such chemicals. Fertilizers Soil, water, food Contamination; human health; there is Limit amounts applied; organic no control over the type and amounts agriculture of fertilizers imported Human health Claim that farmers use too much fertilizer and people are getting sick. Seeds Source of seed Formerly relied on native seeds but Need to further develop indigenous now many are imported and don’t seeds know of their true origin (GMO?) Forests Grazing inside the forests as well as Forests remain the same in size but Need controlled grazing programs. cropping their composition and stocking has been reduced. Endemic species are being removed both legally and illegally Social development. Need a recovery of the forests to improve social conditions in the

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communities. Forest diseases can harm animals Need to take an holistic approach to resource management. Water Water quality; water quantity Irrigation contaminates water and reduces water supply Water quality of Lake Sevan Quality is OK because farmer don’t have the money for chemical inputs. Irrigation Crop production Old systems are broken Need to repair old systems and Human health Water in old irrigation systems is a risk to human health General downstream problems Livestock Grasslands, soil, forest and forest Overgrazing is a serious problem and Penned livestock. plants leads to soil compaction and erosion. Animals trample plant life in the forests. Farmers go further afield to collect forage. Improved breeding Need better quality animals to reduce the pressure on limited grazing lands. Overgrazing To combat overgrazing, use traditional feeds. Take the feed to the animals. Livestock Plant ecology Need to return to pasturing of high areas as in Soviet times. This will bring back the desirable native species and eliminate weeds which have invaded the high pastures. Quality animals Grasslands, soil, forest and forest Better quality animals would result in plants fewer animals to achieve same production rates but would reduce overgrazing problems and other environmental impacts. Abatoirs Diseased animals; human illness Farmers do not have any central place Consider establishment of abbatoirs in where animals can be slaughtered and communities the consumer has confidence that the meat will be safe. Fish farming Ecosystem protection Concerned about introduced species Need tighter controls.

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escaping from farms and competing with indigenous and endemic species. Community development General Requires special treatment Irrigation, water and roads are priority Should focus on forest development If focus on the individual farms the communities will look after themselves Germplasm Must protect indigenous and endemic Need a policy on GMOs – currently germplasm for future potential these are not under any kind of development. control. Seeds Socio-economic and scientific Farmer do not have any information on GMOs so don’t know what to be aware of. Animal waste Human health Animal wastes must be managed effectively. Fish farming Endemic species; water quality Exotic fish introduction to fish farming. These fish can escape into the natural environment and compete for habitat with indigenous and endemic species. They can also feed on indigenous species. Organic farming All components Awareness All components Environment will be better protected Training of farmers (my suggestion is if farmers were made aware of the to provide the training to the environmental consequences of their extension workers who will pass on actions (and particularly if they can be sustainable agricultural methods and shown alternative ways that are cost environmental management needs to saving without sacrificing farmers. productivity) Biogass Water quality Needed to efficiently utilize manure None suggested and to reduce farm costs through replacement of chemical fertilizers Best to conduct biogass on a collective basis Legislation Too difficult to enforce. Nature reserves Intrusion Farmers intrude into nature reserves.

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Annex F: People Visited

Ashot Santrosyan Director Department of Environmental Inspectorate Ministry of Nature Protection

Dr. Samvel Baloyan NRMPR Project Co-ordinator – Biodiversity Protection and Management of Protected Areas Ministry of Nature Protection

Prof. Shirair Vardanyan Head, Department of Forestry Armenian Agricultural Academy [email protected]

Azsen Hakobyan Chief Specialist Animal Husbandry Department Ministry of Agriculture

Geroz ….. Chief Specialist Veterinary Department Ministry of Agriculture

Horhannes Hakobyan Head of Department Identification and Registration Department Ministry of Agriculture

Grigori Bagiyan Head of Veterinary Agency Ministry of Agriculture

Armen Hakobyan Chief, Credit Department Converse Bank Corporation

Sergey V. Virabian Deputy Chairman of the Board ArdshinivestBank

Alik Petrosyan Manager and President MAP Cjsc (Wine, cognac and canned fruit production)

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Arthur Hovhunnisyan Manager and President Landras Ltd. (Swine farm and processing plant)

Serioja Kamalian Owner Kamalian Flour Mill Idjevan area

Zamair Mardanian Emulik Production Cooperative (dairy) v. Gandzkar

Paul Sommers Marketing Advisor USDA US Embassy

Dr. Hakob Sanasaryan President Greens Union of Armenia

Participants at Tavush Marz Meeting, 13 January 2005

Name Place of work Address

John Ambrose consultant to PMU/ARSP Armen Vanian “ARSP” t.Erevan Vahgan Karapetian Tavush Marz t.Idjevan Zarmair Mardanian Tavush Marz v. Gandzkar Ara Harutunian Tavush Marz v.Baghanis Tatevik Naginian Tavush Marz t.Idjevan Serioja Kamalian Tavush Marz v.Hashtarak Martik Mhitarian farmer v.Aknaghbyur Ladik Stepanian farmer t.Idjeven Andranik Haltashian farmer v.Achajur Grigor Paytian Tavush Marz t.Idjevan Vahginak Sukoian Tavush Marz t.Idjevan

Participants at Lori Marz Meetings, 14 January 2005

Grigor Grigorian farmer v. Shahumain Azat Khojoian farmer v. Shahumain Mamikon Ajoganian farmer v. Shahumian Artjom Grigorian farmer v. Goghark Vaghen Karkhanian farmer v. Goghark Khoren Isaakian farmer v. Goghark Aram Achoghian farmer v. Goghark

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Horen Isaakian farmer v. Goghark Karen Karkhonian farmer v. Goghark Arman Dilbarian Lori Marz Arkadiy Babaian Lori Marz Gagik Petrosian Lori Marz