FOR OFFICIAL USE ONLY Report No: PAD3283 Public Disclosure Authorized INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND/OR INTERNATIONAL DEVELOPMENT ASSOCIATION
PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT FROM THE ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAM IN THE AMOUNT OF US$0.86 MILLION
AND A Public Disclosure Authorized
PROPOSED GRANT FROM THE READINESS FUND OF THE CARBON INITIATIVE FOR DEVELOPMENT IN THE AMOUNT OF US$0.38 MILLION
AND A PROPOSED CARBON FINANCE TRANSACTION FROM THE CARBON FUND OF THE CARBON INITIATIVE FOR DEVELOPMENT IN AN AMOUNT UP TO US$5.2 MILLION Public Disclosure Authorized TO THE
LAO PEOPLE’S DEMOCRATIC REPUBLIC
FOR THE
CLEAN COOK STOVE INITIATIVE PROJECT
June 25, 2019
Public Disclosure Authorized Energy & Extractives Global Practice East Asia And Pacific Region
The World Bank
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
(Exchange Rate Effective May 31, 2019)
Currency Unit = Lao Kip (LAK) US$0.0001 = LAK 1 US$1 = LAK 8686.08
FISCAL YEAR January 1 - December 31
Regional Vice President: Victoria Kwakwa Country Director: Ellen A. Goldstein Senior Global Practice Director: Riccardo Puliti Practice Manager: Julia M. Fraser Task Team Leader: Rutu Dave
ABBREVIATIONS AND ACRONYMS
ADALY Averted Disability Adjusted Life Years ASEAN Association of Southeast Asian Nations BIX Base of the Pyramid Impact eXchange CDM Clean Development Mechanism CERs Certified Emission Reductions CO Carbon Monoxide CO2 Carbon Dioxide CPF Country Partnership Framework CSI Clean Stove Initiative DA Designated Account DDEM District Departments of the Ministry of Energy and Mines EAP East Asia and Pacific EAPGIL East Asia and Pacific Gender Innovation Lab ECCH Efficient Clean Cooking and Heating Program ERPA Emission Reduction Purchase Agreement ERs Emission Reductions ESCP Environmental and Social Commitment Plan ESF Environmental and Social Framework ESMAP Energy Sector Management Assistance Program GDP Gross Domestic Product GEF Global Environment Facility GHG Greenhouse Gas GNI Gross National Income HAP Household Air Pollution HGNDP Health Governance Nutrition Development Program HMTA Hydro-Mining Technology Assistance IREP Institute for Renewable Energy Promotion IRR Implementation Rule and Regulations ISO International Organization for Standardization LDC Least Developed Country LPG Liquified Petroleum Gas M&E Monitoring and Evaluation MEM Ministry of Energy and Mines MOES Ministry of Education and Sports MOF Ministry of Finance
MOH Ministry of Health MOIC Ministry of Industry and Commerce MONRE Ministry of Natural Resource and Environment MOST Ministry of Technology and Science MRV Monitoring Reporting, and Verification NDC Nationally Determined Contribution NO2 Nitrogen Dioxide NSEDP National Socio-Economic Development Plan ODA Official Development Finance OA Operating Account PDEM Provincial Departments of the Ministry of Energy and Mines PDO Project Development Objective PDR People's Democratic Republic PM Particulate Matter PoA Programme of Activities PPP Public-Private Partnership PPSD Project Procurement Strategy for Development PRF Poverty Reduction Fund RBF Results-Based Financing RCT Randomized Control Trial REDS Renewable Energy Development Strategy ROI Return on Investment SDG Sustainable Development Goals SEP Stakeholder Engagement Plan SNV Netherland’s Development Organisation SO2 Sulfur Dioxide STEP Systematic Tracking of Exchanges in Procurement TOR Terms of Reference UNFCCC United Nations Framework Convention on Climate Change UNIDO United Nations Industrial Development Organization WFP World Food Programme WHO World Health Organization WMP Waste Management Plan
The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
TABLE OF CONTENTS
DATASHEET ...... Error! Bookmark not defined. STRATEGIC CONTEXT ...... 8 A. Country Context...... 8 B. Sectoral and Institutional Context ...... 9 C. Relevance to Higher Level Objectives ...... 12 PROJECT DESCRIPTION ...... 13 A. Project Development Objective ...... 13 B. Project Components ...... 13 C. Project Beneficiaries ...... 21 D. Results Chain ...... 22 E. Rationale for Bank Involvement and Role of Partners ...... 25 F. Lessons Learned and Reflected in the Project Design ...... 26 IMPLEMENTATION ARRANGEMENTS ...... 29 A. Institutional and Implementation Arrangements ...... 29 B. Results Monitoring and Evaluation Arrangements...... 30 C. Sustainability ...... 31 PROJECT APPRAISAL SUMMARY ...... 32 A. Technical, Economic and Financial Analysis (if applicable) ...... 32 B. Fiduciary ...... 36 C. Legal Operational Policies ...... 37 D. Environmental and Social ...... 37 GRIEVANCE REDRESS SERVICES ...... 38 KEY RISKS ...... 38 RESULTS FRAMEWORK AND MONITORING ...... 40 ANNEX 1: Implementation Arrangements and Support Plan ...... 48 ANNEX 2: Lessons Learned Integrated in the Project Design ...... 57 ANNEX 3: Clean Cooking Technology in Lao PDR: Summary of Impact Evaluation Design 60 ANNEX 4: Technology Specifications ...... 63
The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
DATASHEET
BASIC INFORMATION BASIC_INFO_TABLE Country(ies) Project Name
Lao People's Lao PDR Clean Cook Stove Initiative Democratic Republic
Project ID Financing Instrument Environmental and Social Risk Classification
Investment Project P169538 Moderate Financing
Financing & Implementation Modalities
[ ] Multiphase Programmatic Approach (MPA) [ ] Contingent Emergency Response Component (CERC)
[ ] Series of Projects (SOP) [ ] Fragile State(s)
[ ] Disbursement-linked Indicators (DLIs) [ ] Small State(s)
[ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country
[ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster
[ ] Alternate Procurement Arrangements (APA)
Expected Approval Date Expected Closing Date
25-Jun-2019 31-Dec-2025
Bank/IFC Collaboration
No
Proposed Development Objective(s)
Generate environment and gender benefits for targeted households through a switch to clean, energy efficient gasifier cookstoves using biomass pellets across selected provinces.
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The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
Components
Component Name Cost (US$, millions)
Carbon Finance Capacity Building 0.38
Project Management and Implementation Technical Assistance 0.86
Carbon Emission Reduction Program 5.20
Organizations
Borrower: Lao People's Democratic Republic Implementing Agency: The Ministry of Energy and Mines (MEM)
PROJECT FINANCING DATA (US$, Millions)
SUMMARY-NewFin1
Total Project Cost 6.44
Total Financing 6.44
of which IBRD/IDA 0.00
Financing Gap 0.00
DETAILS-NewFinEnh1
Non-World Bank Group Financing
Trust Funds 6.44
Carbon Initiative for Development 5.58
Energy Sector Management Assistance Program 0.86
Expected Disbursements (in US$, Millions)
WB Fiscal Year 2019 2020 2021 2022 2023 2024 2025 2026
Annual 0.00 0.42 0.55 0.91 1.19 1.15 1.18 1.03
Cumulative 0.00 0.42 0.97 1.88 3.08 4.23 5.41 6.44
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The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
INSTITUTIONAL DATA
Practice Area (Lead) Contributing Practice Areas Energy & Extractives Climate Change, Gender
Gender Tag
Does the project plan to undertake any of the following? a. Analysis to identify Project-relevant gaps between males and females, especially in light of Yes country gaps identified through SCD and CPF b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or Yes men's empowerment c. Include Indicators in results framework to monitor outcomes from actions identified in (b) Yes
SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)
Risk Category Rating
1. Political and Governance ⚫ Moderate
2. Macroeconomic ⚫ Moderate
3. Sector Strategies and Policies ⚫ Moderate
4. Technical Design of Project or Program ⚫ Substantial
5. Institutional Capacity for Implementation and Sustainability ⚫ Substantial
6. Fiduciary ⚫ Substantial
7. Environment and Social ⚫ Moderate
8. Stakeholders ⚫ Moderate
9. Other
10. Overall ⚫ Substantial
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The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
COMPLIANCE
Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [✓] No
Does the project require any waivers of Bank policies? [ ] Yes [✓] No
Environmental and Social Standards Relevance Given its Context at the Time of Appraisal
E & S Standards Relevance
Assessment and Management of Environmental and Social Risks and Impacts Relevant
Stakeholder Engagement and Information Disclosure Relevant
Labor and Working Conditions Relevant
Resource Efficiency and Pollution Prevention and Management Relevant
Community Health and Safety Relevant
Land Acquisition, Restrictions on Land Use and Involuntary Resettlement Not Currently Relevant
Biodiversity Conservation and Sustainable Management of Living Natural Not Currently Relevant Resources
Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Relevant Local Communities
Cultural Heritage Not Currently Relevant
Financial Intermediaries Not Currently Relevant
NOTE: For further information regarding the World Bank’s due diligence assessment of the Project’s potential environmental and social risks and impacts, please refer to the Project’s Appraisal Environmental and Social Review Summary (ESRS).
Legal Covenants
Sections and Description
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The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
For CI-DEV Grant Number TFB0555 and ESMAP Grant Number TFB0599:
Section I.A of Schedule 2 to the Grant Agreement: Institutional Arrangements.
The Recipient shall maintain or cause to be maintained, throughout the period of implementation of the Project, the Project Management Unit (“PMU”) within IREP, with a mandate and responsibilities, composition, staffing and resources acceptable to the Bank, as further elaborated in the Project Operations Manual.
Section I.B of Schedule 2 to the Grant Agreement: Project Operations Manual
The Recipient shall, no later than five (5) months after the Signature Date, adopt a Project Operations Manual acceptable to the Bank and ensure that the Project is carried out in accordance with the arrangements and procedures set out in the Project Operational Manual (provided, however, that in the case of any conflict between the arrangements and procedures set out in the said manual and the provisions of the Grant Agreement, the provisions of the Grant Agreement shall prevail) and shall not amend, abrogate or waive any provision of Project Operations Manual unless the Bank has provided its prior no-objection thereof in writing.
Section I. C of Schedule 2 to the Grant Agreement: CDM Operations Plan
The Recipient shall, no later than five (5) months after the Signature Date, adopt a Project Operations Manual acceptable to the Bank and ensure that the Project is carried out in accordance with the arrangements and procedures set out in the Project Operations Manual (provided, however, that in the event of any conflict between the arrangements and procedures set out in the Project Operations Manual and the provisions of this Agreement, the provisions of this Agreement shall prevail) and shall not amend, abrogate or waive any provision of Project Operations Manual unless the Bank has provided its prior no-objection thereof in writing.
Section I.D of Schedule 2 to the Grant Agreement: Implementing Entity
1. The Recipient shall through MEM, prior to commencing any activities under Part 3 of the Project, engage an Implementing Entity, under the terms of reference and with qualifications and experience acceptable to the Bank, for carrying out Part 3 of the Project jointly with MEM.
2. The Recipient shall through MEM, no later than making the first annual payment under the Certified Emission Reduction Purchase Agreement (“ERPA”), enter into an implementation agreement with the Implementing Entity (“Implementation Agreement”) under terms of conditions acceptable to the Bank, to undertake the activities set out in the ERPA, with due diligence and efficiency and in accordance with appropriate technical, economic, financial, engineering, managerial, environmental and social standards and practices acceptable to the Bank, including in accordance with the provisions of this Agreement and those in the ERPA.
3. The Recipient shall exercise its rights under the Implementation Agreement in such manner as to protect the interests of the Recipient and the Bank and to accomplish the purposes of the said activities. Except as the Bank shall otherwise agree, the Recipient shall not assign, amend, abrogate or waive the Implementation Agreement or any of its provisions.
Section I.E of Schedule 2 to the Grant Agreement: Environmental and Social Standards
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The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
1. The Recipient shall, and shall cause the Implementing Entity to ensure that the Project is carried out in accordance with the Environmental and Social Standards, in a manner acceptable to the Bank.
2. Without limitation upon paragraph 1 above, the Recipient shall and shall cause the Implementing Entity to ensure that the Project is implemented in accorda nce with the Environmental and Social Commitment Plan (“ESCP”), in a manner acceptable to the Bank. To this end, (i) the Recipient shall ensure that sufficient funds are available to cover the costs of implementing the ESCP; (ii) the Recipient shall and shall cause the Implementing Entity to ensure that:
(a) the measures and actions specified in the ESCP are implemented with due diligence and efficiency, and as further specified in the ESCP; (b) policies, procedures and qualified staff are maintained to enable it to implement the ESCP, as further specified in the ESCP; and (c) the ESCP or any provision thereof, is not amended, revised or waived, except as the Bank shall otherwise agree in writing and the Recipient has, thereafter, disclosed the revised ESCP.
In case of any inconsistencies between the ESCP and the provisions of this Agreement, the provisions of this Agreement shall prevail.
3. The Recipient shall and shall cause the Implementing Entity to:
(a) take all measures necessary on its part to collect, compile, and furnish to the Bank through regular reports, with the frequency specified in the ESCP, and promptly in a separate report or reports, if so requested by the Bank, information on the status of compliance with the ESCP and the management tools and instruments referred to therein, all such reports in form and substance acceptable to the Bank, setting out, inter alia: (i) the status of implementation of the ESCP; (ii) conditions, if any, which interfere or threaten to interfere with the implementation of the ESCP; and (iii) corrective and preventive measures taken or required to be taken to address such conditions; and (b) promptly notify the Bank of any incident or accident related to or having an impact on the Project which has, or is likely to have, a significant adverse effect on the environment, the affected communities, the public or workers, in accordance with the ESCP, the instruments referenced therein and the Environmental and Social Standards.
4. The Recipient shall and shall cause the Implementing Entity to maintain and publicize the availability of a grievance mechanism, in form and substance satisfactory to the Bank, to hear and determine fairly and in good faith all complaints raised in relation to the Project, and take all measures necessary to implement the determinations made by such mechanism in a manner satisfactory to the Bank.
Sections and Description For the Emission Reductions Purchase Agreement (ERPA):
Schedule 2 of ERPA: Annual Amounts
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The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
Delivery of Annual Amounts of Certified Emission Reductions (CERs) as specified in Schedule 2 of the ERPA.
Ensuring that the Program and Sub-Projects are operated in accordance with the ERPA, including the General Conditions.
Conditions
Type Description Disbursement For the ERPA:
Conditions to sale and purchase:
1. Registration of the Program.
2. Execution by the Program Entity of a Sub-Project Agreement(s), in form and substance satisfactory to the Trustee, in relation to a Program Implementation Arrangement with a Sub-Project Entity(ies) selected in accordance with the Sub-Project Entity TOR.
3. Receipt by the Trustee of a business plan and financial projection of the Sub-Project Entity(ies) in respect of a Program Implementation Arrangement referred to in paragraph 2 above, both satisfactory in form and substance to the Trustee.
4 Receipt of evidence, satisfactory to the Trustee, demonstrating that the Sub-Project Entity(ies) in respect of a Program Implementation Arrangement referred to in paragraph 2 above has sufficient funding to carry out its obligations thereunder.
5. Receipt by the Trustee of the CDM Operations Plan, Operations Manual, and Environmental and Social Instruments, all satisfactory in form and substance to the Trustee.
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The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
STRATEGIC CONTEXT
A. Country Context
1. Economic growth in Lao PDR, while rapid, has not been all inclusive and the individual household economic situation remains volatile with people moving in and out of poverty and inequality widening. Lao PDR has experienced consistent growth and rapid expansion of the economy in the last decade. With gross national income (GNI) increasing from US$320 in 2002 to $2,270 in 2017, Lao PDR for the first time met the criteria for Least Developed Country (LDC) graduation in 2018.1 In the last decade, the country has experienced an average annual Gross Domestic Product (GDP) growth rate of around eight percent and GDP per capita growth at six percent, which makes it the second fastest growing economy in the East Asia and Pacific (EAP) region2 and the 13th fastest growing economy globally.3 Though the percentage of people living below the national poverty line declined from 34 percent to 23 percent between 2002 and 2012,4 the poverty reduction elasticity of Lao PDR’s growth has been relatively low. For every percent of GDP growth, poverty in Lao PDR has declined only 0.4 percent, compared to 1.2 percent on Cambodia and 1.0 percent in Vietnam.5 Furthermore, while the overall rate of poverty is declining, a significant number of households continue to shift in and out of poverty. According to a survey of the same households conducted at 5-year intervals between 2003 and 2013, more than half the poor in both 2008 and 2013 were previously non-poor.6 Not surprisingly, the Gini coefficient has also increased from 32.4 to 36.2 in the same time period, reflecting lower gains for the bottom 40 percent than for the rest of the population.
2. High poverty rates and reliance on natural resources makes Lao PDR vulnerable to climate change. Historical damage data indicates that annual expected losses range between 3.3 percent and 4.1 percent of GDP with the associated average annual fiscal cost equaling approximately 2.3 percent of government expenditures.7 Around 1.9 million rural people, or 46 percent of rural population—often children and women—are estimated to be at risk of food insecurity caused by drought.8 Climate change is affecting existing dams and Lao power generation capacity; the minimum annual value of hydroelectricity generation revenue at risk is an estimated US$283 million.9 Climate change projections include further increases in temperature and increased intensity and frequency of extreme events, including increased rainfall and flooding risks during wet season which will exacerbate local shocks and hit the lowest income bracket in Lao PDR. Associated agriculture shocks and health shocks are the main drivers of household vulnerability10 with health shocks particularly concentrated
1 World Bank Data. GNI per capita, Atlas Method. Available at https://data.worldbank.org/indicator/ny.gnp.pcap.cd?page=1. Accessed April 17, 2019. 2 World Bank. 2016. Green Growth Development Policy Financing Program Document. 3 World Bank. 2017. Lao PDR Systematic Country Diagnostic: Priorities for Ending Poverty and Boosting Shared Prosperity. https://openknowledge.worldbank.org/handle/10986/26377. 4 World Bank Country Data. Available at http://data.worldbank.org/country/lao-pdr. Accessed March 24, 2017. 5 World Bank. 2016. Lao PDR Country Partnership Strategy. 6 World Bank. 2015. Lao PDR Poverty Policy Note: Drivers of Poverty Reduction in Lao PDR. http://documents.worldbank.org/curated/en/590861467722637341/pdf/101567-REPLACENENT-PUBLIC-Lao-PDR-Poverty-Policy-Notes- Drivers-of-Poverty-Reduction-in-Lao-PDR.pdf. 7 World Bank. 2017. Lao PDR Systematic Country Diagnostic: Priorities for Ending Poverty and Boosting Shared Prosperity. https://openknowledge.worldbank.org/handle/10986/26377. 8 Ibid. 9 USAID. (2014). Climate Change in the Lower Mekong Basin: An Analysis of Economic Values at Risk. 10 World Bank. 2015. Lao PDR Poverty Policy Note: Drivers of Poverty Reduction in Lao PDR. http://documents.worldbank.org/curated/en/590861467722637341/pdf/101567-REPLACENENT-PUBLIC-Lao-PDR-Poverty-Policy-Notes-
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among the rural poor.11 Overall, agricultural households are twice as likely as other households to fall back into poverty due to sudden exposures in shocks from price fluctuations, loss of land, and adverse weather. Additionally, health shocks in Lao PDR often lead to high income losses due to high medical costs. As a result, they are often dealt with through dis-saving, borrowing, asset sales, an early harvest, pawning of possessions, and the delaying of plans.12
3. Lao PDR has started to narrow its gender disparities but continue to lag behind many other countries. Women spend over three times more time than men on unpaid domestic and child care work, according to survey data from 83 countries. Women thus carry the heaviest burden of energy poverty and time poverty. In 2015, Lao PDR ranked 106th among 188 countries on the UNDP’s composite measure of gender inequality.13 Women in Lao PDR spend seven hours a day on productive tasks and child care, compared to 5.7 hours spent by men.
B. Sectoral and Institutional Context
4. Most of Lao PDR’s energy mix is made up of renewable energy sources, which cover 80 percent of energy demand. The country lacks access to conventional energy sources like oil and natural gas, and has some reserve of coal, but has capitalized on its abundant access to renewable energy resources such as hydropower, biomass, wind and solar energy.14 The hydropower industry has played a particularly important role in raising the economic status of Lao PDR and ensuring increased electrification rates at 93 percent.15 In 1993 the government opened the power sector to foreign investment, which significantly benefitted the hydropower industry. From 1993 until 2017, installed hydropower capacity increased from 206MW to 7,082MW.16 Today the electricity sector is the country’s third largest export earner. With a theoretical potential of 26.5GW, Lao PDR is among the richest countries in South East Asia in terms of hydropower.17
5. Given wide-spread traditional cookstove use, the residential sector is the largest energy consumer in Lao PDR accounting for nearly half of the country’s energy consumption.18 About 91 percent of the population continue to use solid biomass for cooking and heating purposes,19 with fuelwood (67 percent) and charcoal (24 percent) being the predominant sources of fuel.20 Nationally, a family on average consumes as much as five kilograms (kg) a day of fuelwood for cooking, which amounts to almost two tons per year. Families using charcoal, use about 1.86kg of charcoal per day in rural areas and 2.33kg of charcoal per day in urban areas;
Drivers-of-Poverty-Reduction-in-Lao-PDR.pdf. 11 World Bank. 2010. Policy Research Working Paper: Are Health Shocks Different? Evidence from a Multi-Shock Survey in Laos. http://hdl.handle.net/10986/3825. 12 Ibid. 13 UNDP. 2016. Human Development Report, Table 5, Gender Inequality Index. http://hdr.undp.org/en/composite/GII. 14 Government of Lao PDR. 2011. Renewable Energy Development Strategy. http://www.eepmekong.org/index.php/resources/country- reports/laos/57-laos-06/file. 15 Lao Statistics Bureau. 2017. Lao PDR Social Indicator Survey. https://www.lsb.gov.la/wp-content/uploads/2018/10/Lao-Social- Inndicator-Survey-Lsis-II-2017_EN.pdf. 16 Asian Development Bank. 2013. Lao PDR Energy Assessment. https://www.adb.org/documents/lao-people-s-democratic-republic- energy-sector-assessment-strategy-and-road-map-2013. 17 International Hydropower Association. https://www.hydropower.org/country-profiles/laos. Accessed April 17, 2019. 18 Ministry of Energy and Mines, PPT presentation, Energy Policy Training Program, Course Period in Japan, June/July 2015. https://eneken.ieej.or.jp/data/6233.pdf. 19 The rest use LPG or electricity. (Lao PDR. 2015. Population Census, https://www.lsb.gov.la/pdf/PHC-ENG-FNAL-WEB.pdf). 20 Lao Statistics Bureau. 2015. Lao PDR Population Census. https://www.lsb.gov.la/pdf/PHC-ENG-FNAL-WEB.pdf.
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however, it takes as much as 6-10kg21 of wood to produce one kg of charcoal making it a much larger culprit in terms of emissions and rapid deforestation.
Figure 1. Energy Consumption in Lao PDR
Fuel consumption by sector Fuel consumption by
8% 1% 6% 0% 10%
LPG Residential
Commercial Electricity 48% 31% Transportation Fuelwood
Industry Charcoal Agriculture
12% 84%
Source: Ministry of Energy and Mines, 201522 Source: Lao PDR Population Survey, 201523
6. Despite the steady rise in electricity service coverage, the transition to electricity for residential cooking energy has been very slow. This has been caused by a variety of factors. The relatively high price of both electricity and retail costs of imported Liquid Petroleum Gas (LPG) comparatively to charcoal, have been determining factors in the continued use of charcoal for household cooking and heating needs.24 Charcoal is a primary fuel source in the cooking sector due to its easy availability, ample quantity, ease of the local cooking style. The Lao PDR menu is largely grill-based, which gives it a specific smoky flavor. Switching to electric stoves will ultimately change the taste of food and apart from the price, this is also a reason for the low uptake of cooking with electricity and LPG.
7. The consistent use of solid biomass for cooking causes serious impacts outside the energy sector. In 2017, Household Air Pollution (HAP) was the third leading health risk factor for premature deaths in Lao PDR25 causing 3.5 percent of GDP in lost productivity annually.26 The full range of diseases caused by HAP all ranged among the top-ten reasons for death and premature death in Lao PDR.27 Since women are the primary cooks
21 Sepp, S. 2014. Multiple-Household Fuel Use – a balanced choice between firewood, charcoal and LPG https://energypedia.info/wiki/File:2014-03_Multiple_Household_Cooking_Fuels_GIZ_HERA_eng.pdf. 22 Ministry of Energy and Mines, PPT presentation, Energy Policy Training Program, Course Period in Japan, June/July 2015. https://eneken.ieej.or.jp/data/6233.pdf. 23 Lao Statistics Bureau. 2015. Lao PDR Population Census. https://www.lsb.gov.la/pdf/PHC-ENG-FNAL-WEB.pdf. 24 World Bank. 2013. Pathways to Cleaner Household Cooking in Lao PDR. An Intervention Strategy. http://www.esmap.org/node/70752. 25 Institute for Health Metrics and Evaluation (IHME). 2017. Global Burden of Disease Study. Visualization of data. https://vizhub.healthdata.org/gbd-compare. 26 World Bank. 2017. Project Appraisal Document. Lao PDR Health Government Nutrition Development Program. 27 Institute for Health Metrics and Evaluation (IHME). 2017. Global Burden of Disease Study. Visualization of data. https://vizhub.healthdata.org/gbd-compare.
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in most Laotian households (98 percent), they disproportionately carry the greatest burden of disease. However, the entire household is affected by HAP from cooking, in households where cooking is done inside (about 88.5 percent nationwide).28 Locally, traditional cookstoves are also associated with ambient air pollution causing about 10 percent of local ambient air pollution.29
8. Switching from charcoal to a cleaner and more efficient source of fuel in Lao PDR would allow for lower GHG emissions, reduction in energy intensity from the residential sector, and improved health. Although charcoal is a more efficient heating agent than wood, charcoal consumption will result in more CO2 emissions than fuelwood at each household level and it emits Carbon Monoxide (CO), SO2, NO2 and Particulate Matter (PM2.5), all of which can cause significant health and environmental issues. In 2017, HAP was the third leading health risk factor for premature deaths in Lao PDR. Charcoal use tends to create an illusion of improved HAP, as current charcoal stoves do not produce much smoke. However, charcoal still emits PM2.5 and CO at much higher levels than recommended by the World Health Organization (WHO)30, thus continuing to cause significant HAP in Lao RDR households (see paragraph 22). The use of charcoal as a cooking fuel is rapidly increasing in Lao PDR – from a low of six percent in 2012 to 24 percent in 2015. With the economic expansion and migration to cities, charcoal use is likely to become more widespread, which can pose significant complications for Lao PDR’s inclusive green growth development agenda.
9. The energy sector institutional framework is well-defined. The Ministry of Energy and Mines (MEM) is the focal point for overall energy policy. Under MEM, the Institute for Renewable Energy Promotion (IREP) is the main body responsible for the promotion of renewable energy and energy efficiency in Lao PDR. Its mandate is to promote and manage technical aspects within the organizational system of MEM and assist MEM in the implementation of the country’s Renewable Energy Development Strategy (REDS). IREP has worked closely with the World Bank since 2012 to lay a foundation that can spur cleaner cooking solutions that are energy efficient and lower energy intensity.
10. The World Bank has been engaged in the cookstove sector in Lao PDR since 2012, working closely with IREP. The project builds on the findings from the previous Lao PDR cookstove initiative activity, which saw the implementation of a pilot in Savannakhet province during 2014/15 in 72 households to inform the development of the results-based finance (RBF) scheme and a methodology for measuring exposure to household air pollution.31 In addition, the project builds on technical assistance provided to the Government of Lao PDR on improving the cookstove sector under the Lao PDR Health Governance and Nutrition Development Project (HGNDP, P151425 as well as under the ASA P164585). Under the HGNDP, the World Bank also guided the World Food Program (WFP) and the Lao PDR Government’s Poverty Reduction Fund III (PRF III, P157963) with the roll-out of 200 forced-draft gasifier cookstoves in the North of Lao PDR to pilot. The engagement with PRF III will potentially continue work under PRF III Additional Financing (P168620). In
28 Lao Statistics Bureau. 2017. Lao PDR Social Indicator Survey. https://www.lsb.gov.la/wp-content/uploads/2018/10/Lao-Social- Inndicator-Survey-Lsis-II-2017_EN.pdf. 29 Varying from 0% (five regions) to 10% (East Asia including China), 26% (South Asia including India) and 37% (in southern Sub-Saharan Africa). Global averages have been fairly stable but marked changes have been seen in many regions – substantial reductions in East Asia, but substantial increases in South Asia and sub-Saharan Africa. (Source: Kirk R Smith, Nigel Bruce et al; Millions Dead: How Do We Know and What Does It Mean? Methods Used in the Comparative Risk Assessment of Household Air Pollution. American Review of Public Health, 2014, 35: 185-206.) 30 Emit ≤ 0.42 g/min of CO and ≤ 2 mg/min of PM2.5. (Source: WHO. 2006. Guidelines on Indoor Air pollution. http://www.euro.who.int/en/health-topics/environment-and-health/air-quality/policy/who-guidelines-for-indoor-air-quality). 31 Gold Standard, 2017. Methodology to Estimate and Verify Averted Mortality and Disability Adjusted Life Years (ADALYs) from Cleaner Household Air. https://www.goldstandard.org/sites/default/files/documents/401.3-adalys-cleaner-household-air.pdf.
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addition, the project will also support the development of a cookstove component under the Lao PDR Landscape and Livelihoods project (P170559) to be approved in FY21.
C. Relevance to Higher Level Objectives
11. The project supports the Lao PDR Government’s commitment to promote an inclusive green growth development agenda that ensures lowered GHG emissions and increased energy efficiency. The Lao PDR National Determined Contribution (NDC) to the United Nations Framework Convention on Climate Change (UNFCCC) notes the country’s ambitious plans to lower energy consumption and reduce GHG emissions. The NDC identifies increasing forest cover, expanding electrification, growing the role of renewable energy and improving the road network and public transport as key mitigating actions. In addition, the Lao PDR REDS states a commitment to reduce energy consumption of 10 percent by 2030. The country’s National Strategy on Climate Change sets a goal to achieve low-carbon economic growth; specifically, within the energy sector, where the policy calls for the implementation of more energy efficient appliances.
12. The project is aligned with the 2017-2021 Country Partnership Framework (CPF)32. It promotes environmental protection and sustainable natural resource management by decreasing emissions as well as promoting a shift from charcoal to pellets.33 Sustainably sourced pellets will help decrease the amount of wood used for producing charcoal as well as significantly lower ambient air pollution and carbon emissions (CPF’s focus area 3: Protecting the environment). The project also compliments the agenda to reduce vulnerability through improved health and end malnutrition. The use of the cookstoves will significantly help reduce HAP which causes a range of chronic lung disease in the Lao population. Included in this is the provision of clean cook stoves as well as a behavior change element to support improved nutrition outcomes (CPF’s focus area 2: Investing in people). The project is aligned with the CPF’s objective to support sustainable and inclusive green growth, for women. The project has integrated gender considerations throughout its entire design, from planning to implementation and project impact thereby supporting the CPFs aim to ensure close gender gaps (CPF’s focus area 1: Supporting inclusive growth). Finally, the project contributes to the World Bank twin goals of improved shared prosperity and reduced poverty by allowing households to access more energy-efficient cookstoves that run on biomass pellets. This fuel and stove switch will likely bring considerable household budget savings throughout the duration of the project. Reduced health impacts will also help lower household costs on doctor visits and medicine bills that result from the HAP-induced diseases.
13. The CSI also touches upon 7 Sustainable Development Goals (SDG), which are outlined as high priority in the 8th National Socio-Economic Development plan (NSEDP), the National Strategy, and the Lao PDR’s Vision 2030. This project is in line with the objectives of SDG3, “Good Health and Well-being”, to substantially reduce the number of deaths and illnesses from air pollution; SDG 5 to “Promote Gender Equality,” and recognize and value unpaid care and domestic work; SDG7 to “Access to Affordable and Clean Energy” by expanding to clean fuels and technologies for cooking; SDG11 to “Support Sustainable Communities” by reducing the per capita environmental impact to cities paying special attention to air pollution; SDG 13 to “Promote Climate Action” by reducing black carbon and other GHG emissions; SDG15 supporting “Life on
32 World Bank. 2017. Lao PDR Country Partnership Framework (report number 110813-LA). 33 The project will require all biomass biproduct to be sustainably sourced and accredited when possible. For example, by the Forest Stewardship Council (FSC) if wood pellets are used.
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Land” through the promotion of sustainable management of forests; and SDG17, “Partnerships for Goals” by strengthening the means of implementation and revitalize the global partnership for sustainable development.
14. Finally, the proposed project fits well with the World Bank’s Maximizing Finance for Development agenda. The project systematically looks at leveraging all source of finance, expertise and solutions to support the clean cookstoves sector. The project is implemented using results-based financing (RBF), which allows for a mix of financing that includes private sector investments which rewards first-movers in the cookstove space, as well as grants. The project contributes to improved shared prosperity by allowing households to access more energy-efficient cookstoves that run on biomass pellets. This fuel and stove switch will likely bring considerable household budget savings throughout the duration of the project.
PROJECT DESCRIPTION
A. Project Development Objective PDO Statement 15. To generate environment and gender benefits for targeted households through a switch to clean, energy- efficient gasifier cookstoves using biomass pellets across selected provinces.
16. The PDO Level Results. The expected key results from the project intervention will be:
a) Lowered Greenhouse Gas (GHG) emissions due to a switch to pellets and gasifier cookstoves. b) Reduced acute health symptoms associated with household air pollution (HAP) from cooking. c) Reduced time burden from cooking and cleaning for women.
17. PDO Level Indicators. The following indicators will be measured to demonstrate the achievement of the PDO:
a) Emissions Reductions from avoided use of charcoal (measured in ton of carbon dioxide equivalent or tCO2e) (number). b) Lowered occurrences of eye irritation and headaches (percentage). c) Time savings for direct beneficiaries (days per year) (Days).
B. Project Components
18. The project will distribute 50,000 forced draft gasifier cookstoves across eight to eleven districts34 in three provinces: Vientiane Capital, Savannakhet Province, and Champasack Province (Table 1). These three areas are urban to peri-urban areas. They were chosen in collaboration with IREP at MEM based on their high charcoal consumption, carbon emission reduction potential, and the characteristics of the charcoal market. The main criteria for household identification are: (1) household must be willing to pay for the stove, (2) the households’ source of fuel has to be charcoal, (3) the household must commit to use the stove 80 percent of the time for cooking and heating, and (4) the household must agree to the rigorous monitoring during the
34 Current districts selected are Vientiane Capital (7 Districts): Sikhottabong, Chanthabouly, Xaysettha, Sisattanak, Naxaithong, Xaythany, Hadxaifong; Savannakhet (2 District): Kaysone Phomvihane, Outhoumphone; Champasack (2 District): Pakse, and Champasak.
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project implementation period. A list of 2000 households willing to be first-movers in purchasing the stove have already been pre-identified. This was done through a scoping exercise to prepare for a gender-focused impact evaluation funded by the East Asia and Pacific Gender Innovation Lab (EAPGIL).
Table 1. Project Characteristics Project Location Vientiane Capital Savannakhet Champasack Populationa 820,940 969,697 694,023 Charcoal use %a 45.4% 41.2% 60.6% Traditional stoves replaced 26,000 12,000 12,000 No. of HHa 166,333 157,767 121,865 No. of HH using charcoala 75,506 65,014 75,014 Charcoal usage per 0.90 0.74 0.74 HH/year (tons)b Price of charcoal (US$/kg) b 0.2 0.2 0.2 Penetration rate 34.4% 18.5% 15.9% (calculated) Sources: a. 4th Population and Housing Census, 2015; b. Ministry of Energy and Mines, 2019.
19. In line with the Government of Lao PDR’s plan to lower charcoal consumption, the project is designed to target charcoal users in urban to peri-urban areas. MEM has requested assistance from the World Bank to help lower charcoal use and spur a transformation in the residential cooking sector. Urban areas are good market entry points for ensuring future replication. Urban areas pay for their fuel for cooking, hence making the transition from charcoal to pellets more comprehensive. The MEM has also requested an emphasis on urban intervention first as it believes that urban trends affect what happens in rural areas: cookstoves adopted in urban areas become aspirational products for rural areas. In addition, World Bank research35 has assessed that necessary conditions for successful early adoption of cookstoves are more likely to hold in urban areas, including: • Easy access to training on how to use the cookstove. • Access to fuel. • Provision of repair facilities. • Reliance on purchased fuel (charcoal) as opposed to collected firewood.
Finally, female-owned businesses are also more prevalent in urban areas, thereby making it a better entry- point for the potential development of economic opportunities for women.
20. The forced-draft gasifier cookstove will be distributed through a leasing scheme at a maximum of US$45 per cookstove. The price has been determined based on discussions with the government of Lao PDR in addition to information gathered on willingness-to-pay from the WFP/PRF pilots and a World Bank field trial in Savannakhet in 2014/15 where forced draft gasifier stoves were distributed to 72 households. In addition, the price tag is established based on Lao PDRs Household Final Consumption Expenditure per capita which is
35 World Bank. 2019. Uganda Clean Cooking Behavioral Diagnostic. https://openknowledge.worldbank.org/handle/10986/31283.
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US$1171 or about US$98 on average a month, and it is benchmarked against the cost of similar appliances that households in urban and peri-urban areas; such as a refrigerator (US$160-800) or a luxury item like a TV (US$150-1200).36
21. Each household provided with a force-draft gasifier cookstove is expected to reduce CO2 emissions by 3.1 ton per year assuming one forced draft gasifier cookstove will replace one existing charcoal cookstove. The project will generate a total of 543,291 Emission Reductions (ERs) assuming 75 percent stove usage. A 2-year roll-out plan has been considered given the time horizon needed for clean and efficient cookstove market development. The project was cleared for Emission Reductions Purchase Agreement (ERPA) negotiations by the donors of a World Bank Carbon Fund in July 2018 and will proceed with negotiations upon project effectiveness.
Table 2. Emission Reductions 2019-2025 2019 2020 2021 2022 2023 2024 2025 Total Stove distribution 15,000 35,000 0 Annual ER generation (tCO2) 0 4,347 75,336 115,902 115,902 115,902 115,902 543,291 Cumulative ER generation (tCO2) 0 4,347 79,638 195,585 311,487 427,389 543,291 Note: Calculated based on the UNFCCC methodology AMS-II.G. ver. 10 – Energy efficiency measures in thermal applications of non- renewable biomass.
22. The project employs five innovative design measures:
a) Technology change. The technology to be used will be a certified37 forced-draft gasifier cookstove that conform to tier 5 on CO and PM 2.5 to meet WHO guidelines on HAP, and minimum tier 4 on thermal efficiency, safety, and durability according to the Voluntary Performance Targets set by the International Organization for Standardization (ISO). The forced draft gasifier cookstove decreases emissions by 99 percent, thereby emitting little or no GHG, PM2.5, black carbon, and CO. While similar technology has been implemented elsewhere with some success, it will be the first time that a project will aim to distribute the technology at such a large scale with the aim to transform the local cookstove and fuel source market. The cookstove manufacturer will be chosen through competitive bidding, but currently there are only very few certified forced-draft gasifier cookstoves available.38
b) Fuel change. The introduction of the forced-draft gasifier cookstove will also require the introduction of a new fuel source. The forced-draft gasifier cookstove uses no charcoal and burns most efficiently using pellets, which can be produced from a variety of biomass including wood chippings, rice husk, coconut husk etc. At present, there is no pelletization business in Lao PDR, however a market analysis and experience from the previous WFP and PRF pilots, shows that pellets
36 Appliance ownership in Lao PDR: Fridge (59.1% overall; 82.9% in urban areas, 50.4% in rural); Cell phone (86.2% overall; 94.7% in urban; 83.4% in rural); TV (77.3% overall; 91.5% in urban; 73.4% in rural); Electric fan: (67.3% overall; 88.4% urban; 60.2% rural). From 2015 population census. 37 Cookstoves must be certified at an ISO verified cookstove laboratory using the harmonized protocols. (see International Organization for Standardization. https://www.iso.org/standard/66519.html). 38 The Mimi Moto 2.0 and the ACE-1.
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can be imported at a price that is competitive with charcoal. Current assessments show the most optimal pellets come from Indonesia; though pellets are also available in neighboring countries (Myanmar, Vietnam, Thailand). The pellets from Indonesia are 100 percent Forestry Stewardship Certified, FSC wood, which burns with more efficiency than pellets produced from other biomass. Testing results carried out in Myanmar, for example, showed 20 percent higher efficiency of wood pellets (from Indonesia) compared with 100 percent rice husk pellets from Myanmar. Overall, 30 – 40 percent more pellets are needed if using rice husk pellets, the power is too low on the small chamber, and lighting the pellets take longer.
Bringing in pellets from Indonesia has been done effortlessly by the WFP for their pilots in the North of Lao PDR. Pellets can be transported in through the First and the Second Thai–Lao Friendship Bridge over the Mekong connects Mukdahan Province in Thailand with Savannakhet in Lao PDR as well as to Vientiane capital. This will bring pellets straight into the project area in Savannakhet and from there the Implementing Entity (as described in section 22.c) will be able to set up distribution routes to neighboring Champasak. There are no import restrictions as both countries are members of the Association of Southeast Asian Nations (ASEAN). To ensure social and environmental safeguards are met, imported pellets will need to meet strict certification standards to ensure that the biomass used for the pellets is sustainably sourced and labor conditions at pellet-producing plants are satisfactory to World Bank standards. In addition, all transportation of pellets must be done by transport companies that abide by national and international rules on safe and sustainable transportation. A sustainable supply of pellets is not only important during, but also following project implementation to ensure continued sustainability, this is discussed in the section III on sustainability.
c) Private sector company to lead implementation and adopt the project risk. A private sector firm with experience in climate finance and the Clean Development Mechanism (CDM) process will be hired by MEM to be the Implementing Entity of the project activities.39 Since there is no up-front financing on this project, the Implementing Entity is asked to secure the financing. In addition, they are fully responsible for the achievement of the carbon emission reductions. This transfers the full risk, economic and project design risk, onto the private firm, which may make it difficult to attract firms. However, the project is designed with incentives to attract qualified firms including the promise of the carbon finance transferred to the Implementing Entity and the opportunity to be the first private sector company to enter the pellet market. To ensure that the firm delivers on the carbon finance, a sub-ERPA will be signed between the firm and MEM, which will specify the carbon emission schedule as well as ensure that a percentage of the carbon finance payment will be transferred from MEM to the firm after emission reductions have been verified and certified. The private sector will be the first mover in the cleaner cookstoves sector in the country.
d) Results-based financing (RBF). The project is being implemented as a results-based finance (RBF) Public-Private Partnership (PPP) project that links public support to the achievement of demonstrated benefits, which in turn mobilizes private sector investments. This model is what helps bring the price down to an affordable level thereby allowing a larger fraction of the Lao PDR population access to a technology that would have otherwise been outside their scope of
39 The TORs for the Implementing Entity is already under preparation by the PMU at MEM/IREP. They have been released on June 4, 2019.
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affordability. From the manufacturer, a forced-draft gasifier stove costs about US$100. Due to the payments from the carbon finance, the project will reach a stove price point that meets the willingness-to-pay of the average household (maximum $45). It will also promote the establishment of a market where sales can flourish in the long-term, thereby improving the energy efficiency in the cooking sector and lowering GHG emissions.
e) Community Approach. The project design engages a community approach that targets selected districts in the three provinces. This will be done through the involvement of various stakeholder, primarily, village chiefs, District Departments of the Ministry of Energy and Mines (DDEM) and the Provincial Departments of the Ministry of Energy and Mines (PDEM) as IREP’s stakeholder engagement plan. Through this approach, the new technology is likely to gain more popularity if a larger proportion of people within the targeted districts gain access to the forced-draft gasifier and its benefits can thus travel easier by word-of-mouth. It will also be easier to distribute pellets in these target areas, and the approach may have a larger impact on lowering ambient air pollution as the forced draft gasifier will have a more local impact when distributed in clusters rather than if it is dispersed at random across the provinces.
Figure 2. Implementation arrangements and financial flow of the RBF model
23. The proposed project will comprise the following components:
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1. Component 1: Carbon Finance Capacity Building (estimated cost US$ 0.38 million, Ci-Dev). This project is the first CDM activity for IREP. Given the complexity of CDM and carbon finance, this component will support capacity building of MEM/IREP to assist with the preparation and development of necessary activities for the implementation of the carbon finance operation. i. Activity 1A. Preparation of CDM registration. Under this activity, MEM will hire a consultant to prepare the CDM registration as well as pay for a third-party auditor to validate the documentation and submit them for registration. This activity will also include a public stakeholder consultation. ii. Activity 1B. Capacity building. MEM will hire a long-term consultant to strengthen the capacity related to the carbon finance project management at the PMU. The activity will also support three in-person training workshops to build institutional capacity. This training will include the units inside IREP involved in implementing the project (i.e. “Energy Efficiency and Conservation” and “Bio Energy”) as well as other interested staff at IREP, other relevant ministries and provincial department of Energy and Mines (PDEM). The workshops will be spread out over the project implementation period: one will be held at project commencement, one at halfway, and one at the end. The activity also includes two study tours (one to Thailand and one to Indonesia), one workshop for the clean cookstove taskforce, and annual workshops for the provinces, hosted by the PMU, regarding the progress of the program and monitoring, results and verification (MRV). Finally, MEM will recruit a consultant to support review and quality assurance as well as finalization of the monitoring reports produced by the Implementing Entity. This component also includes the preparation of a CDM Operational Plan for the project, to be prepared within 5 months of effectiveness. iii. Activity 1C. Awareness Raising. This component includes an awareness raising and communications campaign regarding the forced draft gasifier cookstove aimed at the urban population in the target provinces/districts to spread the message on the benefits of the forced draft gasifier stove. Much of the material for the communications campaign will be developed by EAPGIL as part of the Impact Evaluation activities (see Error! Reference source n ot found.). The PMU at MEM/IREP will be responsible for working with EAPGIL and the Implementing Entity to distribute the material and identify best pathways for the awareness raising campaign (YouTube, Facebook, WhatsApp, News Paper, Billboards etc). This component will also include the design of a label that makes the stove easy to identify in the market and brands it as low HAP and high efficiency cookstove.
2. Component 2: Project Management and Implementation Technical Assistance (estimated costs US$ 0.86 million, ESMAP): MEM/IREP will hire a firm to act as the Implementing Entity, which will be responsible for implementing the project under the guidance of MEM. The component will cover the necessary operational expenses needed by MEM, as well as the contractual cost for the Implementing Entity. This Implementing Entity will be contracted based on its experience with carbon finance, cookstoves and existing gender work. The component will cover overall operational activities of the Implementing Entity. The component will include two sub-components: i. Activity 2A. Project management: This activity will support IREP as the PMU to recruit and provide oversight of the Implementing Entity, offer cross coordination with ministries and
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agencies when relevant to the project to keep them engaged and involved in implementation, and manage day-to-day operations. The activity will also ensure the implementation of the environmental and social safeguards instruments, which includes the implementation of the Stakeholder Engagement Plan (SEP), Environmental and Social Commitment Plan (ESCP) and other instruments to address requirements under the Environmental and Social Standard (ESS), namely, an audit procedure to ensure the cookstove and pellets are from sustainable sources (ESS1), Waste Management Plan (ESS3), and transportation and storage plan (ESS4). This will include the preparation of a Project Operations Manual within the five months of Effectiveness. ii. Activity 2B. Implementing Entity. This activity will cover the contract value of the work carried out by the Implementing Entity who will be responsible for household selection, distribution, and management of forced draft gasifier cookstoves and pellet supply. This will also include implementing a communications and marketing campaign,40 household listing distribution of cookstoves and pellet supply in target districts, as well as collaborating on the Impact Evaluation (additional activity implemented and funded by the EAPGIL. See below).
The activity will also cover the Implementing Entity’s management of cookstoves and pellet supply, which involves hiring of the transportation company, identifying central storage for cookstoves and pellets in all three provinces, managing and signing agreements with the households purchasing the cookstove, as well as establishing after-sale services and a feedback mechanism in the three provinces. This activity will also support the implementation of the project monitoring plan including reporting on progress towards objectives to the PMU, and ensure that the technology, pellet and transportation specifications of the project is followed and that any risk mitigation measures set out in the ESCP will be followed and implemented as needed.
3. Component 3: Carbon Emission Reduction Program (estimated cost up to US$ 5.2 million41, Ci-Dev under the ERPA): This component will be focused on the overall implementation of the project RBF. That is, it involves the up-front private sector investment to pre-finance the forced-draft gasifier cookstoves and associated pellet supply (under component 2). The second part of the component involves the MRV of the project activities, the carbon finance emission reductions, which will ensure a payout from the World Bank carbon fund (Ci-Dev) to cover the repayment on the initial investment (with interest) as well as MRV from year 3 and onwards, and other operational expenses related to the carbon finance RBF. An Emission Reduction Purchase Agreement (ERPA) will be signed between MEM and the World Bank carbon fund (Ci-Dev), and a Sub-ERPA will be signed between the Implementing Entity and MEM/IREP. i. Activity 3A. Securing up-front financing for the procurement of forced draft gasifier cookstoves and pellet supply. As part of the contract with MEM/IREP, the Implementing Entity is responsible for securing the upfront private sector investment of the cookstoves. This can
40 Much of the marketing material will be produced by the EAPGIL team as part of the impact evaluation. 41 This includes a firm and options value of up to US$5.2 million, including up to approximately US$2 million in firm ER purchases and up to approximately US$3.2 million in option ER purchases (exercisable at the Ci-DEV Trustee’s and donors’ discretion).
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be done either through an optional loan from a private investor or through the Implementing Entity’s own resources. They will subsequently sign the Sub-ERPA with MEM to secures the flow of the carbon funds from MEM to the Implementing Entity to repay this investment. Because of the RBF design of the project, this activity is retroactively funding the procurement of the forced-draft gasifier cookstoves from the revenue obtained through the carbon finance. ii. Activity 3B. Monitoring, Reporting and Verification. This activity will support the monitoring and reporting of the carbon emission reductions from the 50,000 forced-draft gasifier cookstoves. Monitoring of the stove usage (via monitoring of pellets usage) and reporting through progress reports will be done by the Implementing Entity. Verification and Certification the first two years is arranged and funded by the Carbon Fund Trustee. Starting year three, it will be covered by the PMU, which will hire a third-party verifier and certifier to verify the generation of the ERs so that the payment can be made. The additional carbon finance inflow from year three will help cover the cost of MRV.
24. The proposed project will also include a gender-focused impact evaluation, which is supported by World Bank executed funding from the EAPGIL (estimated costs US$ 0.612 million, EAPGIL). The World Bank EAPGIL42 will, in parallel, run an impact evaluation on Evaluating the Impacts of Clean Cooking Technology on Women’s Domestic Burden in Laos (P168062), which will inform part of the work under the project. The project will support the work of EAPGIL in terms of offering input to the impact evaluation design when needed as well as to facilitate contacts in Lao PDR. The impact evaluation will use a randomized controlled trial (RCT) design to measure the impacts of the stove on household expenditure, women’s time spent cooking and cleaning the kitchen, and acute health symptoms of the primary cooks, among other indicators.
25. In collaboration with EAPGIL, the project will monitor the cookstoves’ effects on the daily lives of members of the households receiving them across the three provinces. The impact evaluation will collect data on approximately 2,190 households during the first year of the project. The data from the impact evaluation will be used to quantify the impacts of a shift to the forced-draft gasifier cookstoves. The monetary value of these impacts could then be assessed and sold to buyers who agree to provide results-based financing when these outcomes are achieved. The demonstration impact of this gender outcomes financing model could lead to widespread replication, thereby unlocking new sources of much needed financing for a wide range of development projects. The project may choose to also apply either the Women Organizing for Change in Agriculture and Natural Resource Management (WOCAN) W+ methodology or the Gold Standard’s Gender Equality Framework to accredit the gender outcomes (The summary of the impact evaluation design is in ANNEX 3: Clean Cooking Technology in Lao PDR: Summary of Impact Evaluation Design).
26. Besides the two pilots run under the TA work for the Health Governance and Nutrition Development Project (HGNDP; P151425), there is limited evidence about the impacts of forced draft gasifier stoves when used in a household setting. Therefore, this impact evaluation is important to inform future clean cookstoves initiatives in Lao PDR and elsewhere. The findings from the IE as well as at the closure of the overall project implementation will serve as a feedback loop on cookstove and pellet use that helps project implementers learn and adapt actively from user behavior. It will also allow for feedback that strengthens the sustainability
42 http://www.worldbank.org/en/programs/east-asia-and-pacific-gender-innovation-lab
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of the technology. This kind of feedback and lessons learned will help ensure that bad experiences or other unknowns do not undermine the effort in Lao PDR and beyond.
C. Project Beneficiaries
27. The direct beneficiaries are the 50,000 households obtaining the cookstoves who will not only benefit from the use of a more efficient stove, but also significantly reduced household air pollution (HAP). Charcoal
emits a variety of toxic gases like CO, SO2, NO2 and PM2.5, all of which cause health damage and environmental
issues. Many households exhibit concentrations of PM2.5, CO, and NO2, many times higher than the WHO guidelines.43 This exposure carries considerable health risks, including but not limited to pneumonia, stroke, ischemic heart disease, chronic obstructive pulmonary disease (COPD), and lung cancer. A switch to cleaner household cooking will inevitably have an impact on both long-term and short-term health.
28. The households will benefit from an improvement in household economics. Reduced health impacts will help lower household costs on doctor visits and medicine bills that result from the HAP-induced diseases. However, in addition, a switch from traditional charcoal stoves to a forced draft gasifier stove, can produce long-term household savings. While the US$45 price tag, up-front, is much higher compared with current cookstoves in the market (US$3.5-5), back-of-the-envelope calculations show that the long-term savings for the forced-draft-gasifier cookstove is higher (Table 3).
Table 3. Estimated household cost of using a traditional versus forced draft gasifier cookstove Stove assumptions 5-year ownership costs (US$) Cookstove Price (US$)a Lifespanb Capex O&Mc Fueld Total Traditional 3.5 2 months 105 - 680 785 Forced-draft 45 5 years 45 37 466 548 a. The traditional clay Tao Payat has retail price of US$3.5-5 depending on size. The Forced-draft gasifier stove is imported at US$ 99.25 but sold to households by the Implementing Entity at a price of US$45. b. The Tao Payat has a lifespan that ranges from 1-4 months depending on frequency of use while the forced-draft gasifier stove is expected to last at least five years. c. Households incur O&M expenses from replacing the burn chamber and accessories. d. Households buy charcoal at US$0.25/kg and are expected to be able to buy pellets at US$0.23/kg. On average, households are expected to displace 45 kg of charcoal with 33 kg of pellets.
29. Given that women are responsible for cooking in 98 percent of Lao PDR households,44 they will reap the largest benefits from the introduction of the forced-draft gasifier cookstove. In addition to the long-term health improvements, women in charge of meal preparation are very likely to see improvements in acute health impacts like headaches, coughing and eye irritation. There is a high likelihood that switching from charcoal to forced draft gasifier cookstoves will also reduce the time women spend cooking and cleaning the kitchen because the former takes less time to start than charcoal and burns cleaner and more efficiently. This
43 Emit ≤ 0.42 g/min of CO and ≤ 2 mg/min of PM2.5. (Source: WHO. 2006. Guidelines on Indoor Air pollution. http://www.euro.who.int/en/health-topics/environment-and-health/air-quality/policy/who-guidelines-for-indoor-air-quality). 44 International Household Survey Network. 2007/08. Lao Expenditure and Consumption Survey (LECS). http://catalog.ihsn.org/index.php/catalog/198.
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may free time for other productive activities or for leisure. The impact evaluation conducted by EAPGIL will quantify these impacts.
30. Children will also benefit greatly from the introduction of the forced draft gasifier cookstove. About 72 percent of children spend up to five hours in the cooking area, while 17 percent spend more than 5 hours close to the stove. 45 There is now also emerging scientific data on the effect of exposure to HAP on pregnancy outcomes and child development. Impacts includes higher prevalence of stillbirths, lower birth weights, reduced neuro-development, and stunting. In Lao PDR, 33 percent of children suffer from stunting.46 The use of traditional stoves during the post-partum practice of “mother roasting” puts women and their newborns at risk of exposure to HAP.47
31. Indirect beneficiaries are many. By implementing the project through a community approach, the switch from charcoal cookstoves to forced-draft gasifier cookstoves will help lower ambient air pollution and thereby benefit the community at large. At least roughly 10 percent of ambient air pollution is assumed to be caused using cookstoves, but this could be as much as 26 percent;48 in peri-urban areas where many cooking spaces are outside, or kitchens are more open, the proportion of ambient air pollution could be even higher. The introduction of the forced-draft gasifier cookstoves could help reduce overall local ambient air pollution; when implemented through a community approach where households are targeted in clustered pockets.
D. Results Chain
32. The key impacts and results of this investment will be lowered GHGs in the targeted provinces, reduced time burden for primary cooks, improved acute health symptoms. The PDO results indicators will measure these impacts. Intermediary level results indicators incorporated into the project design will measure the key project outputs and outcomes related to the project objectives such as the number of forced-draft gasifier stove distributed, and tons of pellets distributed. The results chain also includes intermediary level indicators to monitor gender aspects of the project, including time savings.
33. The Theory of Change also promotes minimizing the gender gap. As mentioned, in 98 percent of Laotian homes, women are responsible for cooking family meals, which means they carry a disproportionate burden of diseases, time spent, and drudgery related to cooking. The impacts of a change in cooking appliances will thus particularly benefit women. Lowering the drudgery and effort women spend on cooking, can provide them with valuable time saved that can be used elsewhere including on more leisurely and/or educational activities. Beyond the beneficiary level outcomes, women also play a vital role as agents of change in society.
45 Ibid. 46 World Bank. 2018. Human Capital Index. Lao PDR brief. 47 Boy et al., 2002; Pope et al., 2010; Yucra et al., 2011; Thompson et al., 2011; Yucra et al., 2014.; Dix-Cooper L et al. 2012.; Bruce et al. 2013. 48 Varying from 10% in East Asia including China, and 26% in South Asia including India to 37% in southern Sub-Saharan Africa. Global averages have been fairly stable but marked changes have been seen in many regions – substantial reductions in East Asia, but substantial increases in South Asia and sub-Saharan Africa. (Source: Kirk R Smith, Nigel Bruce et al; Millions Dead: How Do We Know and What Does It Mean? Methods Used in the Comparative Risk Assessment of Household Air Pollution. American Review of Public Health, 2014, 35: 185-206.)
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Given their primary role as adopters and users of new technologies for cooking, they are essential to realizing changes in overall community health, childhood development, enhanced household savings, as well as catalyzing uptake of technologies by neighboring households and families.
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Figure 3. Theory of Change
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E. Rationale for Bank Involvement and Role of Partners
34. The World Bank has considerable experience with cookstove interventions that has informed project design and can help during implementation, monitoring and evaluation to achieve the targeted development outcomes. See section on Lessons Learned.
35. The Lao PDR CSI project is receiving funds from the Energy Sector Management Assistance Program (ESMAP)’s thematic area called “Efficient Clean Cooking and Heating (ECCH)”, with preference funds from the Government of Luxembourg. ECCH is addressing challenges through policy advice, mobilizing investments, and piloting innovative approaches to attract concessional and private sector funding. ECCH has mobilized much of the World Bank’s clean cooking lending portfolio, amounting at US$300+ million and covering 14 countries (as of 2018), including Bangladesh, China, Djibouti, Ethiopia, Kenya, the Kyrgyz Republic, Mongolia, Senegal, and Uganda. Over 3.6 million households — or 18 million people — are benefitting with improved access to more efficient, cleaner cooking and heating solutions. Through innovative results-based financing (RBF) schemes — an approach designed to help countries deliver basic services to low-income communities that makes payments to a service provider only after services have been delivered and met quality standards — ESMAP is helping private companies to enter the clean cookstoves market in Bangladesh, China, Indonesia, Kenya, Lao PDR, and Uganda.
36. The World Bank will add years of experience working with carbon finance, which will be essential for the project as this will be the first carbon finance project in Lao PDR. The financial viability of the project depends greatly on the willingness-to-pay for the Certified Emission Reductions (CERs) that it creates. There are no national or regional markets in which to sell CERs and the prices of CERs sold through the CDM have collapsed well below a point that would make the project financially viable. The World Bank carbon fund uses a pricing approach that is not reliant on the prevailing market price for CERs but focuses on the overall level of carbon finance needed for an individual project to become financially viable. Through the World Bank carbon funds, the project has been able to obtain support to sell CERs that would allow revenues for the project to sell the forced-draft gasifier cookstove at a lower price.
37. The implementation of the new World Bank’s Environmental and Social Framework (ESF) will ensure the application of the highest international standards and ensure the sustainability of the entire value chain. The project will require (i) sustainably sourced biomass byproducts for the pellets, (ii) labor conditions in the production of stoves and pellets, (iii) transportation and storage for pellets and (iv) hazard waste management to be satisfactory to the World Bank ESF framework.
38. The World Bank also has a key role to play as convener of the various organizations that are necessary to make the project a reality. The World Bank will work with IREP, MEM and donors to setup the program and ensure pellet imports for the 50,000 cookstoves. To enhance the sustainability of project results, the project will coordinate and collaborate with various partners:
a) The project has already begun collaboration with the Ministry of Industry and Commerce (MOIC), which manages a United Nations Industrial Development Organization (UNIDO) and Global
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Environment Facility (GEF)-funded program that aims to reduce GHG in the Industrial Sector through pelletization technology. Though the MOIC activity is being implemented independently of the Lao PDR CSI, the collaboration presents itself as a good opportunity to promote the development of a local pellet production market. Although local pellet production is outside the scope of this project, this collaboration will continue during this project as a local market would be beneficial to the sustainability of the project and future penetration of more forced draft gasifier cookstoves.
b) Close collaboration will also continue with other partners and other World Bank-financed projects. For example, the Government’s Poverty Reduction Fund (PRF), which participated in the World Bank/WFP pilot that saw the distribution of 200 cookstoves in Northern Provinces of Lao PDR will continue to be a collaborative partner. Given the acceptance rate of the forced-draft gasifier cookstove in Houaphan province, PRF III AF will be piloting the use of cookstoves with Farmer Nutrition Groups comprised of pregnant women and women with children less than 2 years old in 50 villages while also piloting different local models of pellet production to make the pellets more affordable and accessible to rural communities. This project focuses on urban and peri-urban, and collaboration with PRF aims to share benefits in rural areas. This is part of the Bank’s Nutrition Convergence approach in the 4 northern provinces, linking healthy child feeding with reducing indoor air pollution, both contributors to reducing stunting. The PRF brings strong expertise on improving access to basic services to poor communities, through inclusive community approach and local development processes with an emphasis on ensuring sustainability. In Savannakhet province, the PRF has an established presence in the Thapangthong District. The World Food Programme (WFP) has been a very close collaborating partner with the World Bank on clean cookstove initiative since 2016, and the knowledge imparted by the Lao PDR CSI team will be used by WFP in its collaboration with the Ministry of Education and Sport (MOES) to gauge opportunities for scaling up the use of gasifier cookstoves in the country’s school meal programs.
c) Finally, the project will utilize the Inter-ministerial Cookstove Taskforce to ensure coordination of the initiative between line-ministries as well as agencies. Coordination with the Ministry of Health (MOH), the Ministry of Agriculture and Forestry (MAF), the Ministry of Science and Technology (MOST), the Ministry of Education and Sports (MOES) and the Ministry of Environment and Natural Resources and Environment (MONRE), Lao Women Business Association (LWBA).
F. Lessons Learned and Reflected in the Project Design
39. The project integrates lessons learned from the two forced-draft gasifier cookstove pilots implemented under HGNDP. One pilot was implemented in the Savannakhet province during 2014/15 in 72 households to inform the development of the results-based finance (RBF) scheme as well as measure exposure to emissions and the benefits of forced draft gasifier cookstoves. The second pilot in 2017 focused more heavily on uptake and gender impacts and was carried out in collaboration with the World Food Programme (WFP) and the Poverty Reduction Fund (PRF) in the Northern parts of Lao PDR. These two pilots showed high uptake of the forced draft gasifier cookstove, helped determine the willingness to pay in Lao PDR, and laid the basis for the
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Gender Impact Evaluation being carried out alongside the project. The pilots also helped inform the technology specifications for the project. The first pilot in Savannakhet used a cookstove, which had significant technical issues; this resulted in disuse of the product.
40. In addition, the project design is strongly informed by lessons learned from the implementation of similar programs. Among the most cited examples that uses an RBF project design model are the MG Ethanol Clean Cooking Climate Finance program in Madagascar (P154440), Inyenyeri Improved Cookstove Project in Rwanda(P158411) where a forced-draft gasifier cookstove similar to the technology proposed is implemented, and Uganda Clean Cooking Supply Chain Expansion, which recently released a behavioral change study.
41. The overall key lessons from these operations are reflected in the project design in seven areas: (a) Not all gasifiers stoves are equal and certification is crucial; (b) Managing behavioral change and increasing consumer confidence on new technologies; (c) Ensuring a sustainable fuel supply; (d) Ensuring solid knowledge of carbon finance at the project implementation level; (e) Focus on urban areas; and (f) Determining the correct stove technology. See ANNEX 2: Lessons Learned Integrated in the Project Design for additional details on lessons learned from other projects.
Table 4. Lessons Learned Integrated in the Project Design
Key Lesson Integration in Lao PDR CSI Project Design a. Not all gasifiers stoves are equal, and certification is crucial Lessons learned from the pilot in This prompted correction in the following pilot in Houaphan and Nalae Savannaketh showed that the districts (with WFP and PRF) to ensure that the cook stoves procured (a) meet gasifier stove procured by the strict ISO guidance, (b) are tailored towards Laotian cooking style, (c) Netherland’s Development adequate demonstration on their usage is provided to the consumers. Organisation (SNV) failed after three weeks of usage in the field. b. Managing behavioral change and increasing consumer confidence in new technologies Low consumer access to shops The project will create centralized access points that hold stock and can be carrying improved cookstoves used to test various interventions, like standardized public demonstrations, results in lack of awareness about credit mechanisms, delivery, exposure to marketing campaigns etc. The the product, lack of trust around its households receiving the cookstoves will also be pre-identified before cook- benefits and low exposure to stove roll-out through community campaigns managed by the implementing different models. entity. The project requests of the implementing entity integration of referral programs, community spirit campaigns, and/or other interventions in the marketing plan. In addition, the project will explore social media such as Word-of-mouth is often YouTube and Facebook as viable options to reach the public about the underestimated in cookstove benefits of the cookstove. The implementing entity is also requested to distribution but can be a continue collaboration with local trusted groups like the Lao Women determining factor in promoting Business Association (LBWA), the Poverty Reduction Fund or Population uptake. Services International (PSI). The project team has already established relationships to these organizations and will facilitate the connections as necessary. Sales and marketing training that The distribution of the cookstoves will be done by the implementing entity, raise shopkeepers awareness which will have the knowledge necessary regarding consumer awareness of regarding consumer awareness is the cookstove. The implementing entity is also requested to set up after-
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key. sale services and will offer the stoves with spare parts (chambers, chargers etc.). If third-party cookstove distributors will be used by the implementing entity to reach more users, the project requires the implementing entity to Low cookstove durability and a train cookstove shopkeepers regarding consumer awareness and the mistrust of warranties develops marketing tactics necessary to up consumer demand. creates structural and behavioral barriers. If the stove breaks, people simply stop using it. And, when warranties are not kept, people mistrust the after-sale services offered by the manufacturer and distributor. Very low awareness around health and economic impacts regarding baseline stove use can often lead to The project focuses more heavily on the economic impacts of the project, as the perception that the improved well as more acute health impacts rather than abstract health issues like cookstoves are unnecessary luxury chronic lung disease. goods. Fear mongering and abstract concepts have not shown to work. c. Ensuring a sustainable fuel supply Introducing local production of the new fuel supply is unrealistic as the The Lao PDR CSI has integrated import of pellets into its financial design. scope then becomes too large for This works well in Lao PDR were pellets can be imported and sold at a cost the capital and capacity of highly competitive with charcoal. cookstove projects. Centralizing pellet sales allows for a The implementing entity will be responsible for pellet sales. more sustainable business model. d. Ensuring solid knowledge of the carbon finance project at the project implementation level The project implementing entity will be a carbon finance company with Low capacity and coordination existing experience on ERPAs as well as the CDM process. between local partners have led to
delays and registration of projects In addition, the government will hire a carbon finance consultant to assist with the CDM. them through the ERPA negotiations. A Sub-ERPA will set the parameters between the implementing entity responsible for ensuring the carbon emission outcome as well as the government who is the signee of the ERPA. This sub-ERPA will ensure that Diversions in the project design can project design cannot be changed if it affects the emission reductions affect the CDM methodology and potential of the project. The Sub-ERPA will also ensure the transfer of lead to lowered emission reductions funding from the Government to the implementing entity who essentially or in worst case cancellation of the takes the risk. ERPA. By having the implementing entity take the risk of the investment, either through the outside loan or with own funding, the company will also have a higher interest in ensuring the full carbon emissions outcome to ensure a return on the investment. e. Focusing on urban areas increase short-term ROI and eases distribution Distribution costs are high in remote rural areas and therefore yield a The project targets urban consumers that already use charcoal for cooking lower ROI for distributors. f. Determining the correct stove technology
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The manufacturer of the cookstove The technology identified for Lao PDR must be modified to fit local must be willing and able to modify conditions. As the technology for forced-draft gasifier cookstoves continue stove design to suit local conditions to develop, the final stove will be chosen through competitive bidding, including cooking the types of foods which will be based on the parameters presented under Section II, B of the prepared in the region/country, the PAD as well as the ability of the manufacturer to adjust to the conditions in cooking utensils (e.g. pots), and Lao PDR as found through the previous pilots. kitchen environments.
42. The project has also gathered input through stakeholder consultations and has been done through two taskforce meetings hosted by MEM. In addition, a workshop was also held in collaboration with the WFP where the project design was discussed with local organizations including participants from WFP, Oxfam, UNIDO, Embassy of Luxembourg, SNV, PSI Laos, UNICEF, WHO, UN-Habitat, cookstove manufacturers, local businesses and entrepreneurs to gather their input on the project design. Finally, the project team has, in collaboration with MEM, held a stakeholder consultation with the district heads to get their input on the project design and best practice in the districts to promote the forced-draft gasifier cookstove.
IMPLEMENTATION ARRANGEMENTS
A. Institutional and Implementation Arrangements
43. The Government counterpart on the project is the Ministry of Energy and Mines (MEM). The MEM will be responsible for overall project management. This will include signing an ERPA with a World Bank carbon fund, for the sale and transfer of CERs as well as a Sub-ERPA with the Implementing Entity. The overall project activities are imbedded in IREP, which is under MEM. The IREP has established a Project Management Unit (PMU) that will be the central coordinating entity from the government side responsible for overall oversight of the project. This includes hiring the Implementing Entity, coordinating the target provinces and districts as well as line ministries relevant to project implementation, providing oversight on the carbon finance process including the CDM registration, and developing and managing a sound financial management system. The PMU consists of a team of government staff as well as consultants.
44. The Implementing Entity will be a private firm hired by the PMU at IREP and will be responsible for the technical implementation of the project. The firm will be proficient in the carbon finance process, hold country and regional experience, and have the capacity to put people on the ground in Lao PDR. The Implementing Entity will be responsible for the procurement of the forced draft gasifier cookstoves and associated pellet supply, and as such must take the risk on the up-front investment of the cookstoves. This is achieved either through (1) a committed private sector investor such as BIX (Base of the Pyramid Impact eXchange) Capital49, which have expressed willingness to invest, or (2) through their own investment to maximize their Return on Investment (ROI). The Implementing Entity will also be responsible for the achievement of the carbon emission reductions and will sign a Sub-ERPA with MEM to ensure that monitoring
49 BIX Capital, established in 2003, provides medium-term working capital debt to companies in the value chain to provide households in developing countries with essential products (such as improved cookstoves). Its financing uniquely uses future income of carbon credits and other forms of pre-committed impact-based cashflows as security.
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and reporting on the emission reductions is carried out according to CDM MRV standards and procedures. The Sub-ERPA also ensures the transfer of the carbon finance payment flows from MEM to the Implementing Entity upon achievement of CERs to cover their initial investment of the cookstoves. ANNEX 1 includes a detailed overview of the implementation arrangements as well as the responsibilities of the agencies and organizations involved.
B. Results Monitoring and Evaluation Arrangements
45. Overall project monitoring and evaluation (M&E) will be carried out by the PMU in IREP. Reporting to the PMU will be done by the Implementing Entity who will be responsible for quarterly progress reports during the first year of implementation when the forced-draft gasifiers will be distributed. During years 2-3, the Implementing Entity will prepare and submit biannual progress reports; during years 4-6, they will submit annual progress reports to the PMU. The reporting requirements for the Implementing Entity are included in the Implementing Entity TORs and will be on the achievement towards objectives using the indicators prepared in the results framework. Monitoring of the Results Framework will inform project implementation by providing timely feedback and assisting the Implementing Entity in summarizing achievements. In addition, the Implementing Entity will report on the progress on each of the project activities and include lessons learned and challenges. Before project closure, the Implementing Entity will produce a project completion report to be submitted to the PMU, which will be shared with the World Bank.
46. PMU will take overall responsibility for oversight on the MRV activities (as required under the CDM) conducted by the Implementing Entity and report on the results indicators to the World Bank. Monitoring and reporting of the CERs, if generated pre-2020 and mitigation outcomes50 post 2020 will be conducted by the Implementing Entity annually in accordance with the monitoring plan as described in the respective registered design documents with the CDM.51 Annual monitoring reports submitted by the Implementing Entity to the PMU will be based on the actual monitored data and will be subject to the World Bank’s review and comments. Once finalized, the monitoring report will be submitted by the PMU and verified by a third- party auditor. This auditor52 will verify the monitoring report through a desk review, on-site checking, and interviews in line with relevant verification standards.53 Disbursements will be made based on the delivery of CERs to be issued by the UNFCCC prior to 2020 and based on proposed arrangements in the Article 6 rulebook after 2020. The arrangements for post 2020 period monitoring and reporting might look either completely different or similar to current arrangements under the CDM. These also depend on the qualification of the program either under Article 6.2 or Article 6.4 mechanisms and their respective requirements. The World Bank will help the PMU better understand any new requirements that may arise and guide them on establishing the necessary arrangements after the requirements are clear.
50 Negotiations on Article 6 mechanisms are still going on and the terminology of units generated will be known after negotiations are completed. 51 To register the project with the CDM, a Project Design Document will be developed. 52 The auditor should be accredited by the UNFCCC Executive Board or any other authorized body as per the Article 6 rulebook (currently under negotiation). 53 In the likely event which Clean Development Mechanism (CDM) is phased out beyond 2020, a crediting framework comparable to CDM will be adopted upon Ci-Dev and MEM’s discussion and agreement. The verification standard under the new crediting framework will be applied when the third-party verifier conducted verifications.
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47. The gender-focused impact evaluation, supported by the EAPGIL, will take place during the project’s first year and will complement the project’s monitoring and evaluation (M&E) activities. The impact evaluation will use a randomized controlled trial (RCT) design to measure the impacts of the stove on household expenditures, women’s time spent cooking and cleaning the kitchen, and acute health symptoms of the primary cooks, among other indicators. To measure these impacts, the impact evaluation will support three data collection efforts, and a private data collection firm will be hired to carry them out. First, a market research study, currently planned in July 2019, will provide information on households’ willingness to pay for the stove and serve as a listing exercise of potentially interested households. Second, a baseline survey is planned in August 2019 and will capture the initial values of the outcomes of interest for approximately 2,190 households. The end line survey is expected in March 2020 with the 2,190 households interviewed at baseline, and the impacts of the stoves on the outcomes of interest will be calculated. Details of the impact evaluation design and the research questions are provided in ANNEX 3: Clean Cooking Technology in Lao PDR: Summary of Impact Evaluation Design.
C. Sustainability
48. MEM/IREP has been a strong collaborative partner with the World Bank on the development of their energy strategies and policies. They have worked closely with the World Bank on the CSI to ensure the development of clear strategies in the residential sector that will promote the use of cleaner cookstoves. To ensure continued efforts in this area and promote the use of clean cookstove and use of pellets that are economically and environmentally friendly, the government has implemented a series of policies54 to develop the clean cook stove initiative and increase access to the city population. The Government of Lao PDR is highly committed to its Renewable Energy Development Strategy (REDS), which sets a target to increase their share of renewable energy use with 30 percent by 2025; 10 percent of this increase has to be in the bio fuels sector. Given the high use of dirty fuels in the residential sector and the associated impact on overall energy efficiency in Lao PDR, the Government focuses its agenda on energy efficiency measures in the cooking sector. To this end, the REDS has specifically integrated activities on the use of biomass for fuels for cooking. This focus and efforts are planned to continue post-project implementation. Finally, to ensure the successful implementation on the ground of this initiative, the MEM/IREP is committed to work closely with the Implementing Entity; both in the (1) household selection process, ensuring the commitment of local village chiefs, Provincial Department of Ministry of Energy and Mines (PDEMs), and other relevant stakeholders, as well as (2) to ensure a strong and targeted marketing campaign, which is essential to the sustainability of the project.
49. The target of 50,000 cookstoves to reach the market has been carefully considered as the main breaking point for ensuring market sustainability. The 50,000-threshold number comes from market consultation carried out in Amsterdam, June 2016, where cookstove manufacturers and potential implementing entities referred to 50,000 as being the breaking point to reach economies of scale to bring down the price beyond the project intervention. In addition, the number has been discussed with the Government if Lao PDR, which considers this a reasonable number to reach a good percentage of charcoal consumers in the target provinces to promote further market demand and potential upscaling and use beyond the project scope. Indeed, the
54 Renewable Energy Development Strategy in Lao PDR, October 2011; National Policy on energy efficiency and conservation, 2016; Regulation for generic standard on clean cookstove in Lao PDR, 2015.
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market penetration rate is 15.9% (Champasak); 18.5% (Savannakhet); and 34.4% (Vientiane Capital); these are sizeable market shares achieved in a short time, which should help increase visibility of the stove and create more market demand. Adding to this, cross-collaboration with other initiatives in Lao PDR like the PRF, will also ensure further distribution and penetration of the forced draft gasifier cookstove beyond the project scope and thereby further market demand and sustainability.
50. Establishing a sufficient supply of pellets will also help ensure the sustainability of the project intervention beyond the project period. While there is an emerging pellet production market in Lao PDR, the current production capacity remains inadequate to satisfy the demand of the 50,000 stoves. The government (via MOIC) is independently of this project working to establish a pelletization business to expand the market through the MOIC/UNIDO/GEF – funded project which aims to reduce GHG in the Industrial Sector through pelletization technology. Under the HGNDP, the project the team and MOIC worked via the Cook Stove Task Force with a common goal to promote a local pellet production, but at present, no private sector player has come forward with a pellet supply. As a result, the project design has integrated pellet import to obtain a steady pellets supply; which will ensure a steady supply during the project period. However, discussions with MOIC and UNIDO will continue and should a private supplier emerge, they will be considered for pellet supply; pending the World Bank’s environmental and social safeguards and the production cycle is followed.
51. Finally, as the primary player responsible for pellet distribution, the Implementing Entity will need to establish a business model for pellet imports and sales, that could continue beyond the project period. Based on lessons learned from similar projects, the Implementing Entity will be fully responsible for the import and sale of pellets. This will be a benefit to the project as it will be easier to prove stove usage based on pellet sales. However, it also offers the Implementing Entity access to a novel market and an additional income generating activity from the project, one that can last beyond the project period. The implementing entity will have the opportunity to become the first mover company to access and manage pellet sales in Lao PDR. During project implementation, the project will encourage the Implementing Entity to continue to assess pellet supply internationally and locally – if such is developed – to ensure the best quality pellets at the most cost- efficient option are being used.
PROJECT APPRAISAL SUMMARY
A. Technical, Economic and Financial Analysis (if applicable)
52. Rationale for public sector financing. The project does not rely solely on public sector financing. It brings together the public and private sectors to implement clean cook stoves. It is financed through results-based financing for the reduction of GHG emissions. Specifically, the sale of CERs resulting from the project will provide revenues to make the operations of the implementing entity financially viable and have the private sector take up that role.
53. Value added of World Bank support. The World Bank brings necessary experience with cookstove interventions, finance for CERs, convening power and sustainability through environmental and social
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safeguards. The World Bank has considerable experience with cookstove interventions that has informed project design and can help during implementation, monitoring and evaluation to achieve the targeted development outcomes. The financial viability of the project depends greatly on the willingness to pay for the CERs that it creates. There are no national or regional markets in which to sell CERs and the prices of CERs sold through the CDM have collapsed well below a point that would make the project financially viable. Through Ci-Dev, the World Bank has been able to obtain support to sell CERs to ensure revenues for the project implementation unit and to sell the clean cookstoves at lower price, to allow the households to get access to a clean stove which would have otherwise been unaffordable. The World Bank also has a key role to play as convener of the various organizations that are necessary to make the project a reality and through administration of environmental and social safeguards ensures sustainable implementation.
Economic Analysis
54. The project’s development impact was assessed by comparing the discounted benefits and costs with the project (targeted households cook with forced-draft gasifier stoves and pellets) to a counterfactual state in the absence of the project (targeted households continue cooking with charcoal stoves) over the lifespan of the project, 2019-2025, based on an assumed five-year lifespan of a forced-draft gasifier stove. The scope of the analysis is confined to the project development impact on Laotian households, the Implementing Entity,
and climate through CO2 emissions. Project impacts on other stakeholders, such as those involved in charcoal and pellet markets, as well as the forced-draft gasifier stove producers, are outside the scope of the analysis. The with-project scenario considers only the technology of forced-draft gasifier stoves that burn pellets. Liquified Petroleum Gas and electric cookstoves are not considered viable alternatives because: (i) they are not affordable for the urban poor55; (ii) electric cookstoves do not reproduce the flavor profile of many dishes in the Laotian cuisine56; and (iii) with no proven oil or gas resources, the country has no potential to produce LPG domestically and would have to increasingly rely on LPG imports to fuel a longer run shift towards clean cooking.
55. Quantified costs and benefits. Quantified economic costs include: capital costs (import price of forced-draft gasifier stoves and local price of charcoal stoves); fuel costs (import price of pellets and local price of charcoal); stove replacement parts and O&M; and avoided CO2 emissions at high and low cost of carbon trajectories57. In addition to these, quantified financial costs include: any taxes on stoves, fuel and income; the costs of storing and distributing pellets; revenues for the sale of CERs, the cost of CER verification and certification; transfers of a share of the CER revenues from the Implementing Entity to the Project Management Unit, grant
55 The percentage of households that relies primarily on LPG stoves for cooking is 19% for the top quintile of the population, 1.9% of the fourth quintile and near zero for the remainder of the population. (LSIS II, 2017). The percentage of households that relies primarily on electric stoves for cooking is 7.5% for the top quintile of the population, 2.0% of the fourth quintile and near zero for the remainder of the population. Increasing electricity tariffs to improve the financial viability of EDL in recent years have further increased the costs of operating an electric cookstove. 56 The percentage of households that relies primarily on charcoal for cooking increases monotonically with quintile, from 1.5% for the poorest quintile to 50.8% for the richest quintile. Although wealthier households substitute away from fuel wood the continued reliance on charcoal at higher income quintiles would suggest factors other than affordability determine fuel choice. 57 The high and low social cost of carbon trajectories are set in accordance with World Bank guidance (Shadow Price of Carbon in Economic Analysis, 2017)
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financing from the World Bank and interest payments on loans taken by the Implementing Entity.
56. Non-quantified costs and benefits: (i) Switching from charcoal to pellets brings household and community health benefits from a reduction of HAPs such as PM2.5 and CO thereby improving respiratory health. HAPs are a leading risk factor for premature deaths in Lao PDR and through reduced productivity are estimated to reduce GDP up to 3.5% annually58; (ii) A reduction of the use of charcoal can help preserve forest ecosystems which support biodiversity and watersheds as each kilogram of charcoal requires about 6-10 kg of wood59, most of which is not sustainably harvested; (iii) Switching from charcoal stoves to forced-draft gasifier cookstoves can reduce the time women spend cooking and cleaning utensils. This may free time for other productive activities or for leisure; (iv) Black charcoal is produced by small-holders from owned land, village forests, accessing scrap timber from sawmills, or from land cleared for plantation development. It brings livelihood and income-smoothing activities but also health impacts for charcoal workers60.
57. The project is economically viable with an Economic Internal Rate of Return of 38.8% excluding benefits of avoided CO2 emissions, which exceeds the social discount rate of 10.7%61. With a cost on CO2 emissions, the net benefits are positive in every year so that an EIRR cannot be calculated. The project economic net present value (NPV) in the no, low, and high cost of CO2 emissions scenarios is US$1.8m, US$20.0m and US$35.3m respectively. These results reflect assumptions on parameters that produce relatively conservative estimates about the net benefits of the project62.
Table 5. Results of the Economic Analysis
No CO2 cost Low CO2 cost High CO2 cost EIRR (%) 38.8 % Net benefits in every year NPV (US$m at 10.7%) 1.83 20.0 35.3
58. The economic viability of the results to changes in key assumed parameters was evaluated with switching values. These show that economic viability is particularly sensitive to expenditures on pellets, but robust to reasonable changes in these parameters when avoided CO2 emission cost are valued.
58 World Bank. 2018. Lao PDR Economic Assessment of Major Environmental Health Risks. 59 Sepp, S. 2014. Multiple-Household Fuel Use – a balanced choice between firewood, charcoal and LPG https://energypedia.info/wiki/File:2014-03_Multiple_Household_Cooking_Fuels_GIZ_HERA_eng.pdf. 60 Barney, K. (2016) Sparking development or consuming the countryside? Lao charcoal commodity networks in the Mekong Region. Asia Pacific Viewpoint, Vol. 57, No. 2, 2016 61 The social discount rate is set at twice the real per capita growth rate forecast in accordance with World Bank guidance (Discounting Costs and Benefits in Economic Analysis of World Bank Projects, 2016). 62 Main assumptions are as shown in Table 3.
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Table 6. Switching values for economic viability
Switching value
Parameter Baseline No CO2 Low CO2 High CO2 cost cost cost Forced-draft gasifier stove, import cost (US$) 99.3 138 528 858 Pellet import cost (US$/kg) 0.20 0.22 0.56 0.70 Pellet consumption (kg/HH/month)63 45.0 50.8 81.5 118
Financial Analysis
59. The project is financially viable with a Financial Internal Rate of Return of 76.3% for households and 15.8% for the Implementing Entity compared to an opportunity cost of capital assumed at 10%64. Results of the switching value analysis show that for both stakeholders the financial viability of the project rests in a narrow band around the price of pellets. This is illustrated by the Net Present Value of expenditures on pellets over the project lifespan outweighing the capital costs of stoves 8:1 for consumers and 3:1 for the Implementing Entity.
Table 7. Results of Financial Analysis
Households Implementing Entity FIRR (%) 76.3% 15.8% NPV (US$m at 10%) 1.58 0.19
Table 8. Switching values of financial viability
Switching value Parameter Baseline Implementing Households Entity Project stove import cost (US$) 99.3 n/a 106 Pellet import cost (US$/kg) 0.200 n/a 0.204 Project stove, HH price (US$) 45 79 38 Pellet, HH price (US$/kg) 0.230 0.250 0.226 Pellet consumption (kg/HH/month) 45.0 48.9 38.5 Charcoal stove, lifespan (months) 2.0 3.5 n/a Charcoal stove, cost (US$) 3.5 2.0 n/a
63 Holding constant the amount of charcoal that is being displaced 64 The opportunity cost of capital for the Implementing Entity would be the Weighted Average Cost of Capital (WACC). Without detailed information on WACC a default value of 10% is chosen.
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The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
B. Fiduciary
60. Financial Management: A Financial Management (FM) assessment was carried out in accordance with Bank’s Directive on Investment Project Financing, FM Manual for World Bank Investment Project Financing Operations and related guidance. The main FM risks identified are limited capacity and experienced FM staff and lack of documented FM procedures and controls to guide staff. To mitigate these risks, the following mitigation measures are proposed (i) assign staff with some experience from IREP to be responsible for FM work of the project (this has been completed); (ii) provision of training in FM and disbursement requirements to the assigned staff when the grants are effective; (iii) have in place acceptable FM manual to guide staff (first draft is to be available at appraisal). (iv) engage qualified auditors with terms of reference acceptable to the World Bank to audit project expenditure. The auditors shall be in place within six months of the grant becoming effective. The Bank FM team will carry out implementation support mission annually and more frequently in the first year of implementation to ascertain that the agreed FM arrangements are in place and expenditure incurred are eligible. The review of expenditure will as far as possible be integrated with procurement post review and field visit, where applicable.
61. Procurement Arrangements: The proposed project procurement will be carried out in accordance with World Bank’s Procurement Regulations for IPF Borrowers, dated July 1, 2016, revised November 2017 and August 2018; and provisions stipulated in the Legal Agreement. The Project will be financed by the World Bank through ESMAP and a World Bank Carbon Fund; all financiers have agreed to use World Bank Procurement Regulations. Procurement under national procurement procedures as agreed with the World Bank will be carried out in accordance with the Lao PDR Law on Public Procurement, No. 30/NA November 2, 2017 including the Instruction on Implementation of Law on Public Procurement, No. 0477/NA February 13, 2019, and conditions for use of such procedures will be stipulated in the Procurement Plan
62. The MEM/IREP has prepared a Project Procurement Strategy for Development (PPSD), has been submitted and reviewed by the Bank before negotiation. The PPSD presents how major procurement activities under the project will support the development objective of the project and deliver the best value for money under a risk-based approach. In addition, the PPSD includes the rationale for procurement decisions including the selection of the approach to market and procurement methods. The PPSD and the procurement plan of the project shall be regularly updated as appropriate during the project implementation.
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.C . Legal Operational Policies . Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Areas OP 7.60 No .
. D. Environmental and Social . The environmental risk is classified as moderate and the social risk as low with an overall risk rating as moderate. The potential social risks and impacts relate to the procurement, distribution, storage and safe use of stoves and pellets. It is expected that stove and pellets will be imported with the pellets likely sourced from Indonesia through sustainable procurement. The stoves will be supplied from a certified supplier. Community health and safety risks from pellets and stoves, while they exist, are minimal. Potential for risks related to labour and working conditions are covered either through sustainable procurement or through putting in place labour management procedures to address any gaps between national requirements and those of the World Bank.
The procurement, storage and distribution of 50,000 stoves, together with pellets to be used with the stoves, are not expected to require land acquisition, conversion of land nor restrict access to land or other resources.
An impact evaluation, which will be a key component of the project, has been designed such that it informs on inclusion based on socio-demographics and which in turn informs project design. The study can also inform accessible and inclusive strategies for engaging interested and affected stakeholders.
The project has the potential to benefit individual people, particularly females, and households that will have access to the clean cook stove and pellets. This will include ethnic groups' households as well as vulnerable groups. Benefits include better health outcomes for the households that benefit from the project and better gender outcomes including that of health and time savings. There is also potential for increased awareness on health from information campaigns targeted at communities in the project area.
From the nature and scale of project’s activities, the project will not pose any footprint and/or negative impact on local environment, instead will provide positive impact by carbon emission reduction and promote human health by reducing the use of traditional cookstove. However, some concern in relation to the road safety during the transportation and storage of cookstoves and pellets before they are distributed, and management of hazardous waste generated from used battery and solar panel. The IREP will make sure (1) the cookstoves and pellets are produced from sustainable source, (2) transportation and storage plan is developed and implemented, and (3) waste management plan is developed and implemented satisfied to the WB. The timeline for development and implementation of these .instrument was discussed and provided in the Environmental and Social Commitment Plan (ESCP).
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GRIEVANCE REDRESS SERVICES
Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org.
KEY RISKS
63. The innovative nature of the project will inevitably make it susceptible to several risks. Given its implementation design using RBF, the introduction of a completely new technology and fuel source, as well as the reliance on an implementing entity that is yet to be hired, the overall risk of the project is substantial.
64. The following are key risks rated substantial facing the project:
a) Technical design of project. The technical design of the project is rated substantial because of (i) its reliance on hiring an Implementing Entity that will not be identified until after project approval and (ii) the reliance on carbon finance and pellet sales to repay the initial investment. To mitigate this risk, the project offers several incentives to attract qualified firms for the bidding process. This includes the promise of the carbon finance payment as well as access as a first player in the pellet market in Lao PDR. In addition, the project mitigates this risk by making the parameters for pellets sales (pricing and source) more flexible. This allows the Implementing Entity to do their own cost-benefit analysis of pellet sales for the cookstoves and set the price accordingly. In addition, the project leaves the household selection flexible to allow the Implementing Entity to devise its own, best suited, household identification, implementation, and marketing plan.
b) Institutional capacity for implementation and sustainability. Since this is the first carbon finance activity for IREP/MEM, and because the Implementing Entity’s capacity is still un-known, as the firm is yet to be hired, the institutional capacity for implementation and sustainability is rated substantial. To mitigate this risk, a readiness grant has been issued to IREP/MEM to help build capacity for the carbon finance process. In addition, the TORs for the Implementing Entity will require eligible companies to have strong capacity and long-term experience with cookstoves and carbon finance. The company is also required to have the capability to deploy a local office and to preferably had previous experience in Lao PDR and the capability to deploy local staff. The company will go through a rigorous competitive bidding selection process.
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65. Fiduciary Risk including procurement. The Integrate Fiduciary Risk is rated as substantial. Proposed implementing agency (IREP) has some experience in managing World Bank financed projects; namely the solar home systems under Rural Electrification Phase II Project (REPII; P110978). However, the lack of familiarity with financial management and procurement requirements increases risk of misuse of funds and non- compliance with Bank’s financial management requirements. The key to the success of the project depends significantly on the Implementing Entity, which will be hired to support IREP and implement the key project activities. The initial capacity and risk assessments undertaken by the World Bank rate the procurement risk as Substantial. The PPSD has identified that majority of project funding will be for the Implementation Entity contract. Therefore, the selection of the Implementing Entity firm is a key critical procurement activity. The capacity of the MEM/IREP to manage complex selection process is limited. Limited capacity and lack of familiarity with the new procurement regulations for investment project financing (IPF) could contribute to major delays in the implementation of the procurement activities. If major delays in procurement of the Implementing Entity are experienced, it may no longer be feasible to complete the impact evaluation because the EAPGIL grant currently has a deadline of March 2020. Mitigation measures for procurement risks are proposed in the detailed Annex on procurement arrangement section.
.
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The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
RESULTS FRAMEWORK AND MONITORING
Results Framework COUNTRY: Lao People's Democratic Republic Lao PDR Clean Cook Stove Initiative
Project Development Objectives(s) Generate environment and gender benefits for targeted households through a switch to clean, energy efficient gasifier cookstoves using biomass pellets across selected provinces.
Project Development Objective Indicators
RESULT_FRAME_T BL_PDO Indicator Name DLI Baseline End Target
Lowered Greenhouse Gas (GHG) emissions due to a switch to pellets and gasifier cookstoves
Emissions Reductions from avoided use of charcoal (measured in 0.00 558,648.00 ton of carbon dioxide equivalent or tCO2e) (Number)
Reduced time burden associated with cooking and cleaning for women
Time savings for direct beneficiaries (days per year) (Days) 0.00 7.00
Reduced acute health symptoms associated with household air pollution (HAP) from cooking
Lowered occurrences of eye irritation and headaches 0.00 50.00 (Percentage)
PDO Table SPACE
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Intermediate Results Indicators by Components
RESULT_FRAME_T BL_IO Indicator Name DLI Baseline End Target
Preparedness Activities and Capacity Building of IREP on carbon finance Registration of the Programme of Activities (PoA) (Yes/No) No Yes CDM Operations Manual (Yes/No) No Yes Technical Assistance for project management and implementation Implementing entity contracted (Yes/No) No Yes Forced-draft gasifier stoves distributed in Vientiane Capital 0.00 26,000.00 (Number) Forced-draft gasifier stoves distributed in Savannakhet (Number) 0.00 12,000.00 Forced-draft gasifier stoves distributed in Champasack (Number) 0.00 12,000.00 Awareness campaign on clean cookstoves launched (Yes/No) No Yes Implementation of the Results-Based-Financing Framework Pellets distributed in Vientiane Capital (Tones/year) 0.00 10,530.00 Pellets distributed in Savanakhet (Tones/year) 0.00 4,860.00 Pellets distributed in Champasack (Tones/year) 0.00 4,860.00
IO Table SPACE
UL Table SPACE
Monitoring & Evaluation Plan: PDO Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Emissions Reductions from avoided use of This indicator will measure Annual Progress Metric ton Calculated Implementing Entity charcoal (measured in ton of carbon the lowered CO2 emissions reports based on 75% usage of will collect the data and
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The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
dioxide equivalent or tCO2e) resulting from a switch to the cookstove in the report to the Project the forced-draft gasifier 50,000 households Management Unit cookstoves from traditional using based on the (PMU), which is charcoal cookstove. UNFCCC methodology responsible for AMS-II.G. ver. 10 – submitting the data for Energy efficiency verification and measures in thermal certification. applications of non- renewable biomass.
Calculated based on survey samples and This indicator will measure progress reports time savings from using a regarding the time forced-draft gasifier beneficiaries report cookstove versus the using on preparation of World Bank EAPGIL will traditional charcoal Impact meals and cleaning Time savings for direct beneficiaries (days Once (1) be responsible for cookstove as reported by evaluation cooking utensils on a per year) collecting the data. the beneficiaries. It will daily basis. A baseline
measure time saved on will be done at project cooking as well as cleaning commencement and cooking utensils after the time savings will be cooking. measured at impact evaluation endline.
Calculated based on World Bank EAPGIL will Impact survey samples and be responsible for This indicator measures the evaluation progress reports with collection of baseline Lowered occurrences of eye irritation and number of beneficiaries Twice (2) and progress number of people data and at endline of headaches reporting less eye irritation reports reporting on less eye the impact and headaches. irritation and evaluation. The Implem headaches. The enting Entity will be
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baseline will be done at responsible for project collection of data at commencement. The project closure. results will be measured at impact evaluation endline and project closure.
ME PDO Table SPACE
Monitoring & Evaluation Plan: Intermediate Results Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection The PMU will report on the progress of preparing the Once (1), documents for the PoA PMU will lead writing the on year (1) Report from registration and when Project Design Document Registration of the Programme of Registration of the PoA of the IREP/MEM final registration and (PDD) and register the Activities (PoA) project acceptance of PoA is project. done. The first report will include the registration of the PoA.
The PMU will report on PMU is responsible for Report from the finalization of the Development of a CDM Once (1) the development of the CDM Operations Manual IREP/MEM CDM Operations Operations Manual Operations Manual manual.
Implementing entity Once (1), Report from The PMU will report on PMU is responsible for Implementing entity contracted contracted on year (1) IREP/MEM the progress, and final contracting the
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The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
of the contracting of the Implementing Entity project implementing entity. The report will include the confirmation of the implementing entity being hired.
The Implementing Entity will keep a running database of households that purchases a forced- draft gasifier cookstove. The indicator measures the Four (4) The indicator will only Implementing Entity will number of households that times per Progress be measured during be responsible for Forced-draft gasifier stoves distributed in have received the forced year, report year one (1) or until all collecting this data and Vientiane Capital draft gasifier cookstove in quarterly cookstoves have been reporting to the PMU. Vientiane Capital Province. distributed. It will be measured at every progress reporting stage. So, quarterly during year one (1).
The Implementing Entity will keep a The indicator measures the Four (4) Implementing Entity will running database of number of households that times per Progress be responsible for Forced-draft gasifier stoves distributed in households that have received the forced year, Report collecting this data and Savannakhet purchases a forced- draft gasifier cookstove in quarterly reporting to the PMU. draft gasifier cookstove. Savannakhet. The indicator will only be measured during
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year one (1) or until all cookstoves have been distributed. It will be measured at every progress reporting stage. So, quarterly during year one (1).
The Implementing Entity will keep a running database of households that purchases a forced- draft gasifier cookstove. The indicator measures the Four (4) Implementing Entity will The indicator will only number of households that times per Progress be responsible for Forced-draft gasifier stoves distributed in be measured during have received the forced year, report collecting this data and Champasack year one (1) or until all draft gasifier cookstove in quarterly reporting to the PMU. cookstoves have been Champasack. distributed. It will be measured at every progress reporting stage. So, quarterly during year one (1).
PMU and EAP GIL to This indicator will measure EAP GIL will be work with the local whether or not the responsible for collecting communication firm communication/awareness Progress this data until March Awareness campaign on clean cookstoves Twice (2) (hired by EAP GIL) to campaign being developed Report 2020 with the PMU. After launched undertake and launched in 8 to 11 March 2020, the communication districts in the selected responsibility will shift to campaign. three provinces. the Implementing Entity
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with the PMU.
The implementing entity will be responsible for pellet sales and will therefore log the amounts of This indicator measures the Four (4) pellets sold in the three Implementing Entity will tonnes of pellets that has times per Progress provinces. This will give be responsible for Pellets distributed in Vientiane Capital been distributed to year, report an indication of usage collection of this data. households in the Vientiane quarterly of the stoves. Schedule Capital. of reporting will follow the reporting requirements on progress reports.
The implementing entity will be responsible for pellet sales and will therefore log the amounts of This indicator measures the Four (4) pellets sold in the three Implementing Entity will tonnes of pellets that has times per Progress provinces. This will give be responsible for Pellets distributed in Savanakhet been distributed to year, report an indication of usage collection of this data. households per year in quarterly of the stoves. Schedule Savannakhet. of reporting will follow the reporting requirements on progress reports.
This indicator measures the Four (4) Progress The implementing Implementing Entity will Pellets distributed in Champasack tonnes of pellets that has times per report entity will be be responsible for
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The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
been distributed to year, responsible for pellet collection of this data. households per year in quarterly sales and will therefore Champasack. log the amounts of pellets sold in the three provinces. This will give an indication of usage of the stoves. Schedule of reporting will follow the reporting requirements on progress reports.
ME IO Table SPACE
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The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
ANNEX 1: Implementation Arrangements and Support Plan
Project Institutional and Implementation Arrangement
1. The Government counterpart on the project is the Institute of Renewable Energy Promotion (IREP) at the Ministry of Energy and Mines (MEM). IREP was established in 2011, currently consists of 35 staff, and is the main agency involved with the promotion of renewable energy in Lao PDR. IREP has been the main government counterpart for the cookstove work in Lao PDR since 2012. They head up the cookstove taskforce, which supported the field research in 2014-15 and again in 2017 and have ensured that considerable progress has been made to lay a sound foundation for the introduction of the 50,000 forced-draft gasifier cookstoves. The Ministry of Energy and Mines (MEM) will be the responsible ministry for signing an Emission Reduction Purchase Agreement (ERPA) with the carbon finance fund as well as a Sub-ERPA with the Implementing Entity.
2. IREP established a Project Management Unit (PMU) in March 2018 to run the project from the government side. The PMU consists of three staff dedicated solely to the cookstove work and the roll-out of the 50,000 cookstoves. The PMU will (a) coordinate the overall project implementation; (b) oversee the carbon finance process including managing the CDM registration, and overseeing the verification and certification process including hiring the verification firm starting in year three; (b) provide guidance and support to the project provinces in project implementation and management; (c) develop and maintain a sound project FM system; (d) handle the selection of an implementing entity; (e) sign a sub-ERPA with the Implementing Entity and provide guidance and support on project implementation; and (e) monitor the quality of project implementation, social and environmental risk management, and the impact evaluation for reporting to the World Bank.
3. A firm will be hired by IREP/PMU to be the Implementing Entity implementing the project. The Implementing Entity will be proficient in the carbon finance process, hold country and/or regional experience, and have the capacity to put people on the ground in Lao PDR. As the implementing entity, the Implementing Entity will take on the responsibility of (a) household identification; (b) procurement and distribution of cookstoves and pellet supply including hiring a transportation company that satisfies the transportation requirement; (c) management of the cookstove and pellet inventory including identifying and leasing provincial storage facilities and provide after-sale services; (d) implement the monitoring plan including the monitoring and reporting of the carbon emission reductions; (e) prepare the technical documentation related to the CDM registration; and (f) implement the social and environmental risk instruments (SEP, ESCP, and other instruments to address requirement under Environmental and Social Standard (ESS), namely an audit procedure to ensure the cookstove and pellets are from stainable sources (ESS1), Waste Management Plan (ESS3), and transportation and storage plan (ESS4). From implementation commencement until the project is fully operational, the Implementing Entity will be requested to submit progress reports. At project closure, the Implementing Entity will prepare a project completion report.
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4. The upfront private sector investment is achieved either through a committed private sector investor or by the Implementing Entity. BIX (Base of the Pyramid Impact eXchange) Capital fund – a private investment firm focused on debt financing for the design, production, marketing and use of essential household items – has expressed willingness to provide up-front investment based on the promise of the carbon finance return. However, since the Implementing Entity is responsible for the implementation of the project and therefore carries the risk of the emission reduction achievement, it is the choice of the Implementing Entity whether to accept the outside upfront investment from BIX with interest on the repayment or fund the upfront investment on its own.
5. An ERPA will be signed between MEM and a World Bank Carbon Fund. Carbon finance plays an indispensable role in making the project financially viable. It functions as leverage and security for a private investor to pre- finance the distribution of the forced draft gasifier cookstoves. In other words, the carbon revenues from the ERPA will secure up-front private investment. The risk of the upfront investment as well as the achievement of the carbon emission reductions is carried by the Implementing Entity; as a result, a Sub-ERPA is signed between MEM/IREP and the Implementing Entity to ensure that the carbon emissions are achieved and that carbon finance revenue flows from the Government of Lao PDR to the Implementing Entity to cover the cost of the up-front private sector investment. With carbon revenues, the Implementing Entity will be able to not only pay back an interest payment but also achieve a rate of return of 15 percent65. Prior to the carbon finance payout, the emission reductions must be verified and certified by a third-party company, to be hired by IREP. This will allow for the generation of certified emission reductions (CERs), which will initiate the carbon finance payout per the request of MEM.
Financial Management and Disbursement
6. Staffing. A staff with some experience has been assigned as FM officer of the project. An acceptable FM Manual will be in place and the staff trained in World Bank disbursement and project FM requirements as per the FM Manual once the grant becomes effective.
7. Budgeting and Planning. Project budget will be prepared annually by IREP based on the annual work plan. The annual budget will cover the period of the government’s fiscal year (i.e. January to December) and will clearly identify the sources of funds to which each activity will be financed to ensure the eligibility of expenditure under each financing source. The annual workplan and budget shall be reviewed, and no objection provided by the Bank. The FM Manual will outline the process and timing for the preparation, review and approval of the annual workplan and budget.
8. Accounting Policies, Procedures, and Internal Controls. Cash basis of accounting will be used by the project. The project will follow generally accepted accounting principles which generally apply to ODA-financed projects in the Lao PDR as there is no national standard and IPSAS Cash is not fully implemented. Excel will be
65 Calculated in accordance with the Guidance Note on Financial Reviews and Determination of Commercial Terms. A weighted average cost of capital (WACC) is calculated to yield the expected financial internal rate of return (FIRR). Debt equity ratio is based on the proposal project financing structure. An ROE of 25% was justified for assessed high risk of the program. The cost of debt is based on the term sheet from the BIX funds. The corporate tax rate in Lao was also considered (i.e. 28%).
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used to record receipts and expenditure of the project. FM policies and procedures, including internal controls to be used under this project will follow those mentioned in the FM Manual. Original supporting documents will be retained where transactions occur, during the life of the project or until at least the later of: (i) one year after IDA has received the audited financial statements covering the period during which the last withdrawal was made, or (ii) two years after the Closing Date.
9. Fund Flows. A pooled designated account (DA) will be opened to receive funds from the two sources (i.e. ESMAP and Ci-DEV). The DA will have a fixed ceiling of US$100,000. An operating account with a ceiling of US$25,000 may be opened to facilitate day to day operations and emergency needs of the project. Detail requirements and procedures for requesting and reporting the use of funds from the DA will be outlined in the FM Manual. Funds advance to and reporting is depicted in the following diagram.
10. Financial Reporting and Audit arrangements. The project will follow the GoL fiscal year (January to December). Interim unaudited Financial Reports (IFRs) will be prepared by IREP reporting on receipts, expenditure and fund balances in accordance the reporting format agreed with the World Bank. Each IFR will cover the period of six months. The IFR will be submitted to the World Bank no later than 30 days after the end of each six months. The first draft of the financial management manual was completed at appraisal. Format of the IFR has been discussed and agreed at decision meeting and before negotiations l. Project receipts and expenditure will be audited annually. The auditors shall be appointed with acceptable terms of reference (TOR) within 8 months of the project becoming effective. The draft audit TOR was completed at appraisal. The audit report and management letter shall be submitted to the World Bank no later than 6 months after fiscal year end/the project closes. The audit report shall also be publicly disclosed in accordance with the World Bank’s Access to Information Policy.
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11. FM actions
Actions to be completed Responsible party Target date for completion Complete recruitment of the IREP Within 8 months of project project auditors effectiveness
12. Disbursement arrangements for TFs. A pooled DA will be opened at the Bank of Lao. The DA will be denominated in US$ with a combined ceiling of US$ 100,000. Applicable disbursement methods include advance to DA, direct payment and reimbursement. Minimum value for direct payment and reimbursement for each source of funds shall be US$ 20,000. Documentation of expenditure shall be monthly. Funds will be disbursed against the following:
ESMAP TF Ci-Dev TF Percentage of Expenditure Expenditure Category Amount (US$ Amount (US$ to Be Financed (inclusive of million) million) taxes) (i) Consulting services, non-consulting services, Training and Workshops, and Operating Costs 0.38 100% under part 1 of the project (ii)Consulting services, non-consulting services, Training and Workshops, and Operating Costs 0.86 100% under part 2 of the project Total 0.86 0.38
13. Operating costs: This indicates reasonable expenditures directly related to the project, incurred by the recipient (which expenditure would not have been incurred in the absence of the project), including expenditure on travel, lodging and per diems, office supplies, translation services, publications, communication expenses (courier, telephone and internet services), vehicle rental, bank fees and charges but excluding consulting fees, salaries, bonuses and honoraria or equivalent payments of members of the recipient’s civil service.
14. Retroactive financing under ESMAP TF. An amount up to US$11,000 will be allowed for eligible consulting service expenditure incurred between March 1, 2019 and the signing date of the grant agreement.
15. ESMAP grant extension. The ESMAP grant is closing in June 2023. However, the ESMAP Trustee will potentially to be extended, and a new ESMAP business plan would then commence in FY 21 and likely run for a four-year duration. To complete the activities under the project, the extension of the ESMAP grant funding agreement will take place after the ESMAP Trustee extension (and new ESMAP Business Plan FY21-24), which will extend the grant to align with project’s closing in 2025. ESMAP has been in operation for 35 years and there is no indication that the operations will be discontinued.
16. Disbursement arrangement for carbon finance. Disbursement will made in accordance with the terms of the ERPA agreement.
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The World Bank Lao PDR Clean Cook Stove Initiative (P169538)
Procurement
17. Procurement financed under the project will be carried out in accordance with Procurement Regulations for IPF Borrowers of World Bank dated July 1, 2016, revised November 2017, and August 2018. Procurement under national procurement procedures, as agreed with the World Bank, will be carried out in accordance with the Lao PDR Law on Public Procurement, No. 30/NA November 2, 2017 including the Instruction on Implementation of Law on Public Procurement, No. 0477/NA February 13, 2019, and conditions for use of such procedures will be stipulated in the Procurement Plan. The only contracts anticipated under the project are consultancies and one non-consulting services. Procurement of goods and works are foreseen. Under the proposed project the World Bank’s planning and tracking system, Systematic Tracking of Exchanges in Procurement (STEP), will be used.
18. Procurement Capacity and Risk Assessment. IREP at MEM will be responsible for the implementation of the project. IREP has neither procurement officers nor a Procurement Unit in the Institute. Most of the equipment which is currently available in IREP are provided through trust funds and the procurement of such equipment/vehicles were handled by the project consultants. Although IREP has no in-house staff with procurement experience, there is one IDA project TA for Capacity Development in Hydropower and Mining Sector (HMTA; P109736) under MEM which will be closed in October 2019. The Project Coordinator of HMTA Project has long operational experience (since 2013) and has some WB procurement experience with HMTA. MEM Management agreed to continue hiring the consultant to work together with an assigned procurement government officer for the proposed project. In addition, one International Procurement Specialist will be hired on intermittent basis to assist PMU to carry out the selection of the key procurement activity (Implementation Entity selection). There are some risks informed during the assessment as follows:
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Responsible Risk Description Risk rating Description of Mitigation Entity • IREP has limited technical High - TOR of Implementing Entity is carefully prepared MEM/IREP and implementation capacity to provide the clear information, roles and and on the Implementing responsibilities of Implementing Entity. The TORs Entity firm. have been issued on June 4, 2019. • Having all responsibilities - Hire an international procurement consultant on rested with Implementing intermittent basis to assist selecting of the Entity may be difficult to find Implementing Entity key procurement activity the consulting firms who are interested to take this assignment. • MEM and IREP are not Substantial - Provide procurement training for IREP staff, MEM/IREP experienced with the including initial training during project preparation international procurement and in-depth on-the-job procurement trainings procedures and new WB during project implementation; procurement framework and - Hire an international procurement consultant to regulations that may cause assist PMU. the project implementation delays and non-compliances • Limited availability of ISO Substantial - There is one stove manufacturer could meet the WB certified standard stove, new ISO standard in May 2019. certified (FSC) pellets - The task team will survey if any additional certified manufacturers and pellets in Thailand and Lao are available and to transportation companies assist PMU updating the TOR. can have a large impact to the implementation and success of the project. • Limited contract monitoring Moderate - PMU will lead by DDG of IREP and have the Project MEM/IREP and technical and Coordinator Consultant to assist him management skills and tools to ensure efficient and timely contract implementation
19. Procurement Strategy and Procurement Approach. The MEM/IREP have prepared a Project Procurement Strategy for Development (PPSD) for the Lao PDR Clean Coon Stove Initiative Project, with the support from the Bank team, and the document (available in separate project files) has been agreed with the Bank before negotiation. The PPSD presents how procurement activities will support the development objective of the project and deliver the best value for money under a risk-based approach. In addition, the PPSD include the rationales for procurement decisions including the selection of the approach to market and procurement methods. The PPSD and the procurement plan of the project shall be regularly updated as appropriate during the project implementation.
20. The PPSD identified the following major procurement activities (a) Implementing Entity and (b) Technical Audit firm for Verification and Certification of emission reduction. The PPSD shows that the first procurement activity is considered of high risk because the Implementing Entity will take totally responsibility
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of (i) household identification; (ii) procurement and distribution of certified cookstoves and certified pellet supply including hiring a transportation company that satisfies the transportation requirement; (iii) management of the cookstove and pellet inventory including identifying and leasing provincial storage facilities and provide after-sale services; (iv) implement the monitoring plan including the monitoring and reporting of the carbon emission reductions; (v) prepare the technical documentation related to the CDM registration; and (vi) implement the safeguards instruments (SEP, SCEP, and SEMF). This procurement contract is critical to the project and it is the first time to have such implementation arrangements from global experience. Therefore, the TOR would require carefully developing to mitigate all potential risks and to be attractive to the international market. The remaining consulting services under the project are relatively small individual consultant assignments such as PMU coordinator, procurement consultants, project financial auditor, carbon finance consultant, third party auditor to audit the CDM registration documents, communication strategy consultant, QR code/label development, with cost estimate ranging below US$ 100,000.
21. All activities listed in the Procurement Plan can be contracted based on conventional selection methods, such as QCBS, QBS, CQS, LCS, DS and IC for Consultants. Based on the PPSD, the QCBS method is encouraged to be used for relatively large contracts such as contracts with cost estimate of equivalent or above US$ 300,000. The remaining small consulting firm assignment with cost estimate below US$ 300,000 will use CQS selection method. The PPSD analysis concluded that there may not be sufficient national consulting firms and the international procurement approach will be considered as appropriate for the assignments. For individuals, some positions which do not require international experiences and have the qualifications and experience in national market, the national approach would be used. International market approach should also be considered for the contracts that need international experience and international consultants would be beneficial to the project implementation.
22. Procurement Plan: Based on the PPSD a procurement plan for the project has been developed with a total of eight procurement activities, including four consulting services firms, and four individual consultants. The detailed procurement plan is available as a separate project document, which will be updated annually or as needed to reflect the status of the implementation of each package or to add new packages as needed.
Monitoring and Evaluation
23. Overall project Monitoring and Evaluation (M&E) will be carried out by the PMU in IREP. Reporting to the PMU will be done by the Implementing Entity who will be responsible for quarterly progress reports during the first year of implementation where the forced draft gasifiers will be distributed. During year 2-3, the Implementing Entity will prepare and submit biannual progress reports, and during year 4-6 of project implementation the Implementing Entity will submit annual progress reports to the PMU. The reporting requirements for the Implementing Entity are included in the Implementing Entity TORs and will be on the achievement towards objectives using the indicators prepared in the results framework. Monitoring of the Results Framework will inform project implementation by providing timely feedback and assisting the Implementing Entity in summarizing achievements. In addition, the Implementing Entity will report on the progress on each of the project activities and include lessons learned and challenges. Before project closure,
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the Implementing Entity will produce a project completion report to be submitted to the PMU, which will be shared with the World Bank.
24. PMU will take overall responsible for oversight on the MRV activities conducted by the Implementing Entity and report on the results indicators to the World Bank. Monitoring and reporting of the CERs, if generated pre-2020 and mitigation outcomes66 post 2020 will be conducted by the Implementing Entity annually in accordance with the monitoring plan as described in the respective registered design documents. Annual monitoring reports submitted by the Implementing Entity to the PMU will be based on the actual monitored data and will be subject to the World Bank’s review and comments. Once finalized, the monitoring report will be submitted by the PMU and verified by a third-party auditor. This auditor67 will verify the monitoring report through a desk review, on-site checking, and interviews in line with relevant verification standards.68 Disbursements will be made based on the delivery of CERs to be issued by the UNFCCC prior to 2020 and based on proposed arrangements in the Article 6 rulebook after 2020. The arrangements for post 2020 period monitoring and reporting might look either completely different or like current arrangements under the CDM. These also depend on the qualification of the program either under Article 6.2 or Article 6.4 mechanisms and their respective requirements. The World Bank will help the PMU better understand any new requirements that may arise and guide them on establishing the necessary arrangements after the requirements are clear.
25. The gender-focused impact evaluation, supported by the EAPGIL, will take place during the project’s first year and will complement the project’s monitoring and evaluation (M&E) activities. The impact evaluation will use a randomized controlled trial (RCT) design to measure the impacts of the stove on household expenditures, women’s time spent cooking and cleaning the kitchen, and acute health symptoms of the primary cooks, among other indicators. To measure these impacts, the impact evaluation will support three data collection efforts, and EAPGIL will hire a private data collection firm to carry them out. First, a market research study, currently planned in July 2019, will provide information on households’ willingness to pay for the stove and serve as a listing exercise of potentially interested households. Second, a baseline survey is planned in August 2019 and will capture the initial values of the outcomes of interest for approximately 2,190 households. The end line survey is expected in March 2020 with the 2,190 households interviewed at baseline, and the impacts of the stoves on the outcomes of interest will be calculated. Details of the impact evaluation design and the research questions are provided in ANNEX 3: Clean Cooking Technology in Lao PDR: Summary of Impact Evaluation Design.
Strategy for Implementation support plan and Resource Requirements
26. The Core Task team consists of staff from World Bank HQ as well as staff from the country office in Vientiane, Lao PDR.
66 Negotiations on Article 6 mechanisms are still going on and the terminology of units generated will be known after negotiations are completed. 67 The auditor should be accredited by the UNFCCC Executive Board or any other authorized body as per the Article 6 rulebook (currently under negotiation). 68 In the likely event which Clean Development Mechanism (CDM) is phased out beyond 2020, a crediting framework comparable to CDM will be adopted upon Ci-Dev and MEM’s discussion and agreement. The verification standard under the new crediting framework will be applied when the third-party verifier conducted verifications.
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27. Regular need-based missions to Lao PDR will be carried out by the task team, supported by other specialists and international consultants.
28. In between formal missions, regular support will be provided to the PMU as necessary. Specific attention will be paid to safeguards, procurement, financial management, and the achievement of carbon emission reductions.
29. Continuous dialogue with IREP at MEM, the PMU and other stakeholders both in-country and out of country will take place to identify areas where there could be greater coordination.
Time Focus Skills Needed Resource Estimate/year
First 12 Project Implementation Support Energy Specialist (TTL) 12 weeks (US$ 50,000) months Operational Support 12 weeks (US$ 45,000) FM Specialist 2 weeks (US$ 5,000) Env Specialist 2 weeks (US$ 5,000) Social Specialist 2 weeks (US$ 5,000) Procurement of Implementing Entity Procurement Specialist 3 weeks (US$10,000) Carbon Finance Support Carbon Finance expert 10 weeks (US$35,000) Carbon Finance analyst 3 weeks (US$ 15,000) 12-48 Project Implementation Support Energy Specialist (TTL) 12 weeks (US$ 50,000) months Operational Support 12 weeks (US$ 45,000) FM Specialist 2 weeks (US$ 5,000) Env Specialist 2 weeks (US$ 5,000) Social Specialist 2 weeks (US$ 5,000) Procurement Specialist 2 weeks (US$ 5,000) Carbon Finance Support Carbon Finance expert 4 weeks (US$25,000) Carbon Finance analyst 2 weeks (US$ 10,000)
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ANNEX 2: Lessons Learned Integrated in the Project Design
(a) Not all gasifiers stoves are equal, and certification is crucial. Lessons learned from the pilot in Savannaketh showed that the gasifier stove procured by one donor agency failed after three weeks of usage in the field. This prompted correction in the following pilot in Houaphan and Nalae districts (with WFP and PRF) to ensure that the cook stoves procured (a) meet the strict ISO guidance, (b) are tailored towards Laotian cooking style, and (c) are adequate demonstration on their usage is provided to the consumers.
(b) Better management of behavior change can increase consumer confidence. Past research carried out by the World Bank and other organizations has reliably shown that interventions at the consumer level must be designed with a strong consideration of the behavioral aspects (i.e. biases, heuristics, social and cultural norms etc.). Behavioral barriers such as low consumer exposure to technologies, access to shops, low awareness of and a lack of trust around the benefits of improved cookstoves, and mistrust of warranties have shown to drive down consumer confidence and choke demand. In addition, past projects and research has shown that the power of word-of-mouth can be a determining factor in the success or failure of cookstove uptake;69 especially as negative word-of-mouth tend to travel faster than positive word-of mouth. Cooking is deeply ingrained in people’s daily habits and culture, and to change its traditions requires compelling and sustained advocacy, as well as cooking products that people will want to have in their homes. Finally, marketing efforts of cookstove projects have often focused on abstract clean cook stove benefits such as health and environmental factors, which have been at odds with the factors that actually act to sustainably shift behaviors in a household such as cost-savings and ease-of- use.70 In other words, fear mongering and abstract concepts have not shown to work and have instead led to little awareness around health and economic impacts and the perception that the improved cookstoves are unnecessary luxury goods. Sales and marketing training that raise shopkeepers’ awareness regarding consumer awareness is key. As a whole, lessons from Uganda shows that shopkeepers overestimate the general awareness of improved cookstoves amongst consumers by about 50 percent. This includes overestimating the consumers knowledge on cooking speed, safety, health, and fuel efficiency. Shopkeepers or stove distributors need to understand their customers to sell as many stoves as possible.
In response to these behavioral findings, the project has integrated the development of a marketing and implementation plan that strongly considers activities that pushes for behavioral change. This includes the creation of centralized access points in each of the Provinces that hold stock and can be used to test various interventions like standardized public demonstrations;71 incentive-based measures such as local referral programs72, community spirit campaigns, school campaigns and other interventions that spread the word about the forced-draft gasifier cookstove; and a marketing approach based on concrete benefits such as story-telling
69 In Uganda, World Bank work has shown that as much as 78 percent would trust a neighbor and 73 percent would trust a friend’s word regarding improved cookstoves versus only 5 percent for a community leader, and 2 percent for a government official (Uganda Behavioral Diagnostic for Uganda Clean Cooking Supply Chain Expansion, 2019). 70 These findings align with those from the health sector where campaigns designed according to a “Health Belief Model” are now recognized as having very limited effectiveness. 71 90 percent of respondents surveyed in Uganda deemed public demonstrations as being important to facilitate understanding of improved cookstoves and 89 percent agreed that it is important to see the cookstove before purchasing it. 72 Referral programs have been shown to provide the single highest return on investment (ROI) among all marketing activities.
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either directly by users or through pamphlets regarding the immediate health benefits and or examples of what could one buy for the savings over a year will be integrated in the marketing plan of the project. Because the marketing plan would require local market research by the implementing entity, the specifics of the incentive programs will not be developed until the implementing entity is onboard. Furthermore, the distribution of the cookstoves will be done by the implementing entity, which will have the knowledge necessary regarding consumer awareness of the cookstove. The implementing entity is also requested to set up after-sale services and will offer the stoves with spare parts (chambers, chargers etc.). If third-party cookstove distributors will be used by the implementing entity to reach more users, the project requires the implementing entity to train cookstove shopkeepers regarding consumer awareness and the marketing tactics necessary to up consumer demand.
(c) A sustainable fuel supply ensures project continuation towards development objectives. A common cause of delays in projects focusing on improved cookstoves is due to a slow down or complete halt in fuel production. This becomes a particularly pressing issue in RBF carbon finance projects, where the carbon emission reductions are directly tied to the project finance model. In Madagascar set-backs suffered from too high production costs for local micro-distilleries, a lack of technical and managerial capacity in the micro-distilleries, and an unsecured availability of feedstock to produce fuel. This resulted in an instable supply of fuel, which in reverse ended use of the ethanol improved cookstove. In Rwanda, a similar situation has occurred as the project entity, Inyenyeri, suffers from capital constraints, lacking feedstock, and issues with expanding pellet production. In both projects, the implementing entity was not only responsible for cookstove and fuel distribution, but also had to locally produce the fuel supply, which makes the project scope outgrow the capital and capacity of the project. The Lao PDR CSI considers a sustainable pellet supply a top priority and has therefore left out local production of the project design and opt for import. This works well in Lao PDR where pellets can, and already have been implemented at a price highly competitive with charcoal. In addition, it adopts the model used in Rwanda, where the project implementer (Inyenyeri) is fully responsible for the distribution and sales of pellets. Another, common issue with pellet supply is if it is outsourced to a third-party seller where the implementing entity loses control of pricing and how many pellets are actually sold; a key indicator showing stove usage. In Rwanda, Inyenyeri solved this problem by being the only party responsible for the sale of pellets. The project adopts the Inyenyeri model as the implementing entity in Lao PDR will be fully responsible for pellet sales and distribution. This will not only ensure that stove usage can be measured easily, but also allows the implementing entity a source of income and the potential for setting up a business that can run post-project implementation.
(d) Ensuring solid knowledge of the carbon finance project at the project implementation level. Solid capacity on the CDM process and carbon finance is required. A common issue with many carbon finance projects is an overall low capacity of both the Government entity and the implementing entity. This was particularly the issue in the Madagascar cookstove project where low capacity led to delays in the registration of the project with the CDM. In addition, many carbon finance projects have experienced lowered emission reductions due to diversions in the project which have affected the CDM methodology used and thereby lowered the emission reduction potential. This has in some cases been done outside the scope of the ERPA signee and have led to ERPA cancellations with penalties. To prevent these scenarios, the implementing entity will be a company with previous carbon finance experience as well as experience with the CDM process. The Sub-ERPA will also be key in setting the parameters of the relationship between the implementing entity responsible for ensuring the carbon finance outcome as well as the government who signs the ERPA. For example, the Sub-ERPA can ensure the project design cannot be modified if it affects the emission potential. Finally, by having the implementing entity take the risk of
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the investment, either through the outside loan or with own funding, the company will also have a higher interest in ensuring the full carbon emissions outcome to ensure a return on the investment.
(e) Focusing on urban areas for distribution increase short-term ROI and ease distribution of stoves. Previous reports identify high distribution costs in remote rural areas as a major structural barrier for manufacturers who are trying to sell cookstoves to populations at the base of the pyramid. Conversations with distributors in Uganda largely confirm this idea, with efforts seen as having a higher Return on Investment (ROI) in the short-term. Distribution in remote rural areas has been a challenge for nearly all cookstove projects that promote a modern technology. The project will focus on urban areas and charcoal users specifically.
(f) Determining the correct stove technology for a given context is challenging. For example, the new technology must be well suited to local conditions including cooking the types of foods prepared in the region/country, the cooking utensils (e.g. pots), and kitchen environments. In Rwanda, Inyenyeri experimented with several different improved cookstoves to find the best available fit for their consumer market. Their experience with the first technology, the Philips, was unfavorable due to the technical performance of the stove and the manufacturer’s lack of interest in making design adjustments. In contrast, the manufacturer of the second forced-draft gasifier cookstove (the Mimi Moto) worked with Inyenyeri to internalize feedback from consumers and modify the stove and accessories accordingly. Similarly, the pilots implemented in Lao PDR has helped inform the parameters of the stove technology to be used in the Lao PDR CSI project. The first stove tested in Savannakhet in 2014/15 was the ACE-1 stove. While acceptance was high on the stove, it broke down frequently, which ultimately led to households discontinuing use. The second stove used in the WFP/PRF project was also the Mimi Moto, which performed much better. The WFP had a similar experience as Inyenyeri where the manufacturer worked closely with WFP to modify the stove to be used in schools instead of homes and designed grills and a medium burn chamber to better suit Laotian cuisine. Another common issue when the improved cookstove does not fit local needs is stacking; i.e. when the consumers use their traditional cookstove next to the improved cookstove. With the goal to prevent stacking as well as push uptake, the project will seek out a technology that can be suited for local demands. Since the technology for forced-draft gasifier cookstoves continue to develop, the final stove will be chosen through competitive bidding, which will be based on the parameters presented under Section II, B of the PAD as well as the ability of the manufacturer to adjust to the conditions in Lao PDR as found through the previous pilots.
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ANNEX 3: Clean Cooking Technology in Lao PDR: Summary of Impact Evaluation Design
Overview
(a) As part of the program objective of distributing 50,000 forced-draft gasifier cookstoves to urban households that are currently relying on solid fuels to meet their cooking and heating needs, the World Bank team partnered with the East Asia and Pacific Gender Innovation Lab (EAPGIL) to conduct an impact evaluation on a subset of beneficiary households.
(b) The impact evaluation uses a randomized design in a subset of project villages to identify the impacts of the super clean cookstoves on the outcomes of interest (e.g. health, time use, household expenditures, cooking practices, etc.). The randomization will be done in two levels: first at the village level and later at the household level.
Village level lucky draw: As the implementation entity will not be able to sell stoves in all areas immediately after commencing work, a lucky draw at the village level will determine the villages in which the project entity will begin selling the stoves first, herewith referred to as treatment villages. During the lucky draw, another subset of villages will be selected to participate in other impact evaluation activities, including the market research study and baseline and endline data collection. These villages are referred to as control villages. The implementation entity will begin selling the stoves in the control villages after all impact evaluation activities are completed.
Household level lucky draw: To incentivize take up of the stoves in treatment villages, some households will benefit from vouchers to further subsidize the cost of the stove. This will be covered by EAPGIL. Four types of vouchers will be distributed, and amounts will vary from 11 US$ to 45 US$. The approximate sample size for the impact evaluation is 2,190 households, of which approximately 1,150 households would receive some level of voucher to further subsidize the stove.
(c) The below figure depicts the impact evaluation design:
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Design approach in practice 1. A community awareness campaign on household air pollution and the need for clean cooking technologies will be conducted in collaboration with the Ministry of Health (MoH) and Ministry of Energy and Mines (MEM). The specific activities to be conducted will be defined in partnership with the MoH and MEM officials but may include videos shown in cinemas before movies; advertisements on social media (Facebook, YouTube); articles on online news sites; collaborations with social media influencers; billboards and posters. A private firm will be hired to conduct the marketing campaign and raise the profile of the issue. 2. A semi-public lottery to select impact evaluation villages will take place in presence of government officials, district and village heads73. This lottery will be administered by World Bank impact evaluation experts, in close collaboration with the MEM projects’ focal points. A curated list of targeted villages provided by the project will be the base of the lucky draw. The draw will select which villages will form the treatment group (where the project will start distributing stoves first) and which villages will be part of the control group (where the project will start later but where impact evaluation activities like the market research study and data collection will still take place). 3. A private survey firm will conduct a market research study, with the approval of the village heads. Households in both treatment and control villages will be informed about the benefits and future distribution of the stoves, asked about their willingness to pay, and screened for eligibility (charcoal users). At this stage, households are not committing to purchasing a stove. 4. The survey firm will approach sample households for a baseline survey interview, with the approval of village heads. After the interview, participants will get the chance to draw a scratch-off ticket as their thank you gift— in treatment villages, the majority of tickets will be for vouchers to subsidize a stove—non-voucher tickets will
73 District and village heads will most likely receive a stipend for their participation in the lottery.
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be for other more traditional participant gifts (ex. oranges, soaps, etc.). Participants in control villages will only receive non-voucher tickets as a thank you gift. 5. After the completion of the baseline survey, the Implementing Entity will begin work in treatment villages. To maximize compliance, they will visit each of the impact evaluation households in treatment villages to collect payment (if partial or no vouchers were received) and deliver the stoves. The project entity will not begin any outreach activities to households in the subset of impact evaluation control villages until after the endline data collection. 6. An endline survey will be conducted approximately 6 months after stove distribution. Households in both treatment and control villages will be interviewed. 7. After all impact evaluation activities are completed (market research study, baseline and endline data collection), the Implementing Entity can start working in control villages. The research team will then focus on analyzing the baseline and endline survey data and disseminating results a few months after the last data collection round. Research questions
The impact evaluation will focus on answering the following questions:
• How does access to modern cooking technologies impact the domestic burden in the household? To what extent does it reduce the time needed for cooking and cleaning the kitchen? • How does access to modern cooking technologies change household consumption patterns, including costs of fuel and stoves? • How does access to clean burning stoves and fuel impact women’s health and wellbeing? • What is the optimal subsidized price of the stove to ensure wide and inclusive take-up of the product? • What are the characteristics of households with different levels of willingness to pay? Does the current price of the stove enable all types of households, including ethnic minority households, to benefit from the project? • Are the impacts of the stove different when the stoves are more heavily subsidized?
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ANNEX 4: Technology Specifications
The project will ensure that the forced draft gasifier cookstoves used are the most energy efficient on the market and meet the World Health Organization (WHO) guidelines on HAP. Therefore, the technology to be used shall be a forced-draft gasifier cookstoves. The forced draft gasifier cookstove decreases emissions by 99 percent, thereby emitting little or no GHG, PM2.5, black carbon, and CO. It uses no charcoal and burns most efficiently using pellets, which can be produced from a variety of biomass available in Lao PDR including wood chippings, rice husk, coconut husk etc.
The selected technology for project implementation conforms with a minimum of tier 5 on carbon monoxide (CO) and Particulate Matter (PM 2.5) and minimum tier 4 on thermal efficiency, carbon monoxide, particulate matter emission, and safety according to the Voluntary Performance Targets set by the Organization for Standardization (ISO). See table below.
Voluntary Performance Targets – Default Values
Fine Particulate Matter Thermal Efficiency Carbon Monoxide Emissions (gr Emissions (milligram/me Safety Durability Tier (%) am/megajoule delivered) gajoule delivered) (score) (score)
5 ≥50 ≤3.0 ≤5 ≥95 <10 4 ≥40 ≤4.4 ≤62 ≥86 <15 3 ≥30 ≤7.2 ≤218 ≥77 <20 2 ≥20 ≤11.5 ≤481 ≥68 <25 1 ≥10 ≤18.3 ≤1031 ≥60 <35 0 <10 >18.3 >1031 <60 >35
Explanation of the Voluntary Performance Targets by the ISO and the Global Alliance for Clean Cookstoves (GACC).
The Voluntary Performance Targets provide guidance to benchmark performance of cookstoves. These targets can help stakeholders understand and interpret lab testing results.
The ISO lab testing standard and voluntary performance targets were developed by an ISO technical committee comprised of experts nominated by 45 countries and 8 liaison organizations. A new set of ISO Voluntary Performance Standards were approved and published in October 2018. These new standards reflect an improvement in the testing protocols as well as change in the tiers. The new tiers framework changed the categories from four to five and the tiers from 0-4 to 0-5.
There are 5 indicators covered by the ISO Voluntary Performance Standards: thermal efficiency, fine particulate matter emissions, carbon monoxide emissions, safety, and durability. For each indicator, lab test results are rated along 6 tiers (0: lowest performing to 5: highest performing). Tier 0 represents performance typical of open fires and the simplest cookstoves.
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Specifications for pellets.
The project will ensure that the most efficient and sustainably sourced pellets are being used. Pellets must be certified sustainable from, e.g. Forestry Stewardship Council (FSC) or similar. All transportation surrounding pellet supply must also be done sustainably using national and international policies on transportation.
The exact specification of the pellets to be obtained should be as follows:
• Diameter: 6mm to 8mm • Moisture content: Less than 10% • Calorific Content: At 16.5 J/Ton • Dust Content: Less than 1% • Length: 15-40mm (if pellets exceed 40mm or are less than 15mm, they will not be accepted)
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