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Initial Project Information Document (PID) Project Name: MOLDOVA – Energy Efficiency and Conservation Project Region: Europe and Central Asia Region Sector: 100 % District heating and energy efficiency (LE) Theme: Primary 50 % (Climate Change); Secondary 50 % (Other Urban Public Disclosure Authorized Development) Project : P079303 Borrower(s): Ministry of Environment of Moldova Implementing Agency: Carbon Fund Unit (CFU) str. 31 August, Chisinau, MD 2001, # 82, Office # 2 Tel: (373-2) 23-47-56 Fax: (373-2) 23-34-41 [email protected] Environment Category: B Date PID Prepared: December 14, 2004 Auth Appr/Negs Date: May 20, 2005 Bank Approval Date: June 25, 2005 Public Disclosure Authorized 1. Country and Sector Background Moldova is a country entirely energy dependent. In the mix of imported energy resources natural gas accounts for about 80%. Energy intensity is 3-4 times higher than in similar industries in Western countries. In transition to a market economy Moldova retains many inefficient energy- use patterns due to historically low, subsidized energy prices and a centrally planned economy. Fossil fuels supply is about 90 percent of country energy consumption. There is in Moldova a great potential for energy savings and greenhouse emissions reduction, especially in the heating sector. Energy efficiency and conservation is now a cornerstone of government energy and environmental policies. Public Disclosure Authorized The worsening of heating services based on physically deteriorating central district heating, caused by increasing and unaffordable costs exposing the weaknesses and inadequacy of such concept for Moldova, calls for a wholesome transition toward decentralized heating. Currently a large number of district heating systems in Moldova face serious financial and technical problems. Most of the existing municipal district heating enterprises provide insufficient heating services to local population and public buildings. In many cases these entities are working only part time in other – not working at all. They are operating mostly on the basis of coal, mazut (heavy oil) and only in a few cases on natural gas. Furthermore, the existing boilers are old with a very low efficiency. In the current circumstances the transition to the decentralized heating is easier to implement for buildings in the public sector, where institutional requirements and financial intermediations are much simpler. Addressing the problem from this end, in addition to direct benefits from improving heating in the priority public buildings (schools and hospitals), would also support the transition of the heating sector to a more economic, decentralized heating Public Disclosure Authorized supply and more efficient use of energy. Furthermore, this would provide the reduction of the current level of fuel consumption for heating and consequently a reduction of CO2 emissions, and thus providing opportunities for Moldova to benefit from the world carbon market. 1 2. Project Objectives The overall project goal is improving efficiency of heating in the selected priority public buildings and to ensure energy consumption and respectively greenhouse gases emissions reduction, and thus providing global environmental benefits through the WB Energy-II project, which is under implementation in the Republic of Moldova. 3. Rationale for Bank’s Involvement The Bank’s involvement in the project is warranted as manager of the Community Development Carbon Fund (CDCF), and through its experience in climate change mitigation and carbon financed projects. Additionally the Bank currently is providing financing for Moldova Energy II project, on which the proposed CDCF project is fully based. 4. Description The project includes improvements in production and distribution of heat and measures for heat and hot water consumption in selected public buildings (more than 110 schools, hospitals, and residential buildings for disabled and other vulnerable groups) in 13 municipalities (Balti, Briceni, Cantemir, Chisinau, Edinet, Falesti, Floresti, Hincesti, Ialoveni, Nisporeni, Soroca, Straseni, Ungeni) and under the central Ministries of Health and Education. The list includes about 50 schools and kindergartens with more than 15,000 pupils and about 25 hospitals and clinics with more than 4000 beds. The project proposes the introduction of new individual and more efficient boilers for selected public buildings as well as reconstruction works (replacement of roofs, windows, insulation of pipelines) that would provide conservation of heating. Additionally it is foreseen that the new boilers will use gas as fuel instead of coal and mazut(heavy oil). As a result, the project would provide the reduction of the current level of fuel consumption for heating and consequently a reduction of CO2 emissions. 5. Financing The project financing is fully based on Energy II project and consist of about US $ 10 million investments. 6. Implementation The Project will be prepared and implemented by the Carbon Finance Unit (CFU) of the Ministry of Environment. The establishment and capacity building of the CFU would be supported by the PHRD Grant for Capacity Building in Preparation and Implementation of Small Scale Climate Change Activities in Moldova. 7. Sustainability Sustainability is achieved through the existing provisions within the on-going Energy II project. It will be ensured by the nature of the proposed investments – they would be co financed, implemented, owned, and maintained by the local authorities and communities themselves. 2 8. Lessons learned from past operations in the country/sector The project has incorporated the lessons from available carbon finance projects supported by the Bank. 9. Environment Aspects (including any public consultation) The Energy II project, on which the CDCF project is fully based, is classified as Category B, which also applies to this carbon fund project; - no separate safeguard review is required. 10. List of factual technical documents: Project Information Note for the Carbon Fund and the World Bank Community Benefits Questionnaire of the Carbon Fund CDCF Project Concept Note 11. Contact Point: Samir M Suleymanov, Task Manager; the World Bank; 1818 H Street, NW Washington D.C. 20433; Telephone: 202 473 0943; Fax: 202 614 0717 12. For information on other project related documents contact: The InfoShop; The World Bank 1818 H Street, NW; Washington, D.C. 20433; Telephone: (202) 458-5454; Fax: (202) 522- 1500; Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. 3.