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World Bank Document Document of The World Bank FOR OFFICIAL, USE ONLY Public Disclosure Authorized Report No: 36084-CR PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$30 MILLION Public Disclosure Authorized AND A PROPOSED GRANT FROM THE GLOBAL ENVIRONMENT FACILITY TRUST FUND IN THE AMOUNT OF US$10 MILLION TO THE REPUBLIC OF COSTA RICA Public Disclosure Authorized FOR A MAINSTREAMING MARKET-BASED INSTRUMENTS FOR ENVIRONMENTAL MANAGEMENT PROJECT May 10,2006 Environmentally & Socially Sustainable Development Sector Management Unit Central America Country Management Unit Latin America and the Caribbean Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = Colones IUS$= 491 C 1c = 0.002 US$ FISCAL YEAR January 1 - December 3 1 ABBREVIATIONS AND ACRONYMS BCF BioCarbon Fund CAS Conservation Areas CBD Convention on Biological Diversity (CBD CCAD Central American Commission on Environment and Development (Comisidn Centroamericano de Ambiente y Desarrollo) CDM Clean Development Mechanism CEM Country Economic Memorandum COOPEAGRI El General Agricultural and Industrial Cooperative (Cooperativa Agricola Industrial y de Sewicios ~~lt~lesEl General R.L.) COP Conference of Parties CPS Country Partnership Strategy CQS Selection Based on Consultants’ Qualifications CTO Certified Tradable Offset ECOSOC UnitedNations Economic and Social Council ESP Environmental Service Payments FA0 Food and Agriculture Organization FBS Trust Fund for Sustainable Biodiversity Conservation (Fondo para la Biodiversidad Sostenible) FONAFIFO National Forestry Financing Fund (Fondo Nacional de Financia~ientoForestal) GEF Global Environment Facility GIS Geographic Information System GoCR Government of Costa Rica GPS Global Positioning System IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding INBio National Biodiversity Institute (Instituto Nacional de Biodiversidad) ISDS Integrated Safeguards Data Sheet JUNAFORCA National Farmers’ Forestry Board (Junta Nacional Forestal Campesina) KfW German Credit Bank (~editanstaltfur Wiederau~au) LCS Least-Cost Selection M&E Monitoring and Evaluation MBC Mesoamerican Biological Corridor MINAE Ministry of Environment and Energy (~inisteriode Ambiente y Energia) NCB National Competitive Bidding NGO Nongovernmental organization ONF National Forestry Office (Oficina Nacional Forestal) PCN Project Concept Note PCU Project Coordinating Unit PIC Project Information Center PID Project Information Document PSA Payment for Environmental Services (Pago por Sewicios Ambientales) QBS Quality-Based Selection QCBS Quality- and Cost-Based Selection SBD Standard Bidding Documents SIAP Project Administration Integrated System (Sistema Integrado de Adminis~acibnde Proyectos) SINAC National System of Conservation Areas (Sistema Nacional de Areas de Consewacibn) STAP Scientific and Technical Advisory Panel UNDP United Nations Development Programme UNFF United Nations Forum on Forests VER Verified Emission Reductions Vice President: Pamela Cox Country Director: Jane Armitage Sector Director: Laura Tuck Sector Manager: Abel Mejia Sector Leader: John Kellenberg Task Manager: Nadim Khouri FOR OFFICIAL USE ONLY COSTA RICA Mainstreaming Market-Based Instruments for Environmental Management CONTENTS Page A . STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 1. Country and Sector Issues................................................................................................... 1 2. Rationale for Bank Involvement .................................................................................... :.... 4 3. Higher-level Objectives to which the Project Contributes ................................................. 5 B. PROJECT DESCRIPTION ................................................................................................. 6 1. Lending Instrument ............................................................................................................. 6 2 . Project Development Objective and Key Indicators., ......................................................... 6 3. Project Global Environmental Objective and'Key Indicators ............................................. 6 4 . Project Components ............................................................................................................ 7 5 . Lessons Learned and Reflected in the Project Design...................................................... 12 6 . Alternatives Considered and Reasons for Rejection ......................................................... 13 C . I~PLEME~TATION........................................................................................................ 13 1. Partnership Arrangements (if applicable) ......................................................................... 13 2 . Institutional and Implementation Arrangements .............................................................. 14 3 . Monitoring and Evaluation ofOutcomesResults ............................................................. 16 4. Sustainability and Replicability ........................................................................................ 16 5 . Critical Risks and Possible Controversial Aspects ........................................................... 19 6 . Loadcredit Conditions and Covenants ............................................................................ 20 D. APPRAISAL SUMMARY ................................................................................................. 21 1. Economic and Financial Analyses .................................................................................... 21 2 . Technical ........................................................................................................................... 23 3 . Fiduciary ........................................................................................................................... 23 4 . Social ................................................................................................................................. 23 5 . Environment ...................................................................................................................... 24 .. 6 . Safeguard Policies ............................................................................................................. 25 7 . Policy Exceptions and Readiness...................................................................................... 25 .Annex 1: Country and Sector or Program Background ......................................................... 26 Annex 2: Major Related Projects Financed by the Bank andlor other Agencies ................. 29 Annex 3: Results Framework and Monitoring ........................................................................ 31 Annex 4: Detailed Project Description...................................................................................... 38 Annex 5: Project Costs ............................................................................................................... 48 Annex 6: Implementation Arrangements ................................................................................. 49 Annex 7: Financial Management and Disbursement Arrangements ..................................... 56 Annex 8: Procurement Arrangements ...................................................................................... 60 Annex 9: Economic and Financial Analysis ............................................................................. 66 Annex 10: Safeguard Policy Issues ............................................................................................ 75 Annex 11: Project Preparation and Supervision ..................................................................... 75 Annex 12: Documents in the Project File ................................................................................. 87 Annex 13: Statement of Loans and Credits .............................................................................. 89 Annex 14: Country at a Glance ................................................................................................. 90 Annex 15: Incremental Cost Analysis ....................................................................................... 92 Annex 16: STAP Roster Review. ............................................................................................. 100 Annex 17: Biodiversity Significance of Project Sites ............................................................. 106 Annex 18: Biodiversity Conservation Trust Fund................................................................. 113 Annex 19: Report ofthe Independent Evaluation Panel....................................................... 116 Annex 20: Maps .IBRD34742, IBRD34743 and IBRD34744 ............................................... 119 COSTA RICA MAINSTREAMING MAR.KET-BASED INSTRUMENTS FOR ENVIRONMENTAL MANAGEMENT PROJECT PROJECT APPRAISAL DOCUMENT LATIN AMERICA AND CARIBBEAN LCSEN Date: May 10,2006 Team Leader: Nadim Khouri Country Director: Jane Armitage Sectors: Forestry (70%);General water, Sector ManagerlDirector: Laura Tuck sanitation and flood protection sector (30%) Project ID: PO93384 Themes: Environmental policies and Lending Instrument: Specific Investment Loan institutions (P);Biodiversity (P);Water
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