Public Disclosure Authorized GEORGIA COUNTRY ENVIRONMENTAL ANALYSIS Institutional, Economic, and Poverty Aspects of Georgia’s Road to Environmental Sustainability Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized JUNE 2015 WORLD BANK GROUP REPORT NUMBER ACS13945 ENVIRONMENT AND NATURAL RESOURCES GLOBAL PRACTICE COUNTRY ENVIRONMENTAL ANALYSIS ENVIRONMENTAL COUNTRY PRACTICE GLOBAL RESOURCES AND NATURAL ENVIRONMENT ENVIRONMENT AND NATURAL RESOURCES GLOBAL PRACTICE COUNTRY ENVIRONMENTAL ANALYSIS GEORGIA COUNTRY ENVIRONMENTAL ANALYSIS Institutional, Economic, and Poverty Aspects of Georgia’s Road to Environmental Sustainability Georgia: Country Environmental Analysis—Institutional, Economic and Poverty Aspects of Georgia’s Road to Environmental Sustainability © 2015 The International Bank for Reconstruction and Development/The World Bank 1818 H Street, NW Washington DC 20433 Telephone 202-473-1000 Internet: www.worldbank.org Email: [email protected] All rights reserved. June 2014 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The fi ndings, interpretations, and conclusions expressed in this paper do not necessarily refl ect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on maps in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of denoted boundaries. RIGHTS AND PERMISSIONS: The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. 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CONTENTS Acknowledgments vii Abbreviations and Acronyms ix Executive Summary xi Chapter One: Introduction 1 Objective of the Study 3 Methodology and Limitations 3 Structure of the Report 5 Chapter Two: Key Environmental Challenges 7 Land Degradation 7 Climate-Related Natural Disasters 8 Air Quality Management 9 Waste Management 10 Changing Global Landscape 12 Chapter Three: Valuation of Environmental Degradation—Challenges and Opportunities to Change the Course 15 Introduction 15 Agriculture and Land Resources 17 Forests 19 Natural Disasters 22 Air Quality 23 Waste Management 28 Mining Industry and Environmental Health 31 Chapter Four: Macroeconomic Dimensions of Environmental Degradation 33 Selected Indicators of COED for the Macroeconomic Analysis 33 Method 34 Macroeconomic Impact of Environmental Degradation 35 CGE: Reference Scenario (Business as Usual) 35 CGE: Environmental Impact Scenarios 36 Environmental Degradation, Social Risks, and Poverty 37 Chapter Five: Political Vision, Policy, and Institutions 49 International Commitments 50 Institutions 50 National Legal Framework Regulating the Environment and Natural Resources 51 Policy Development 52 Budget Policies and Environmental Financing 52 Institutional, Economic, and Poverty Aspects of Georgia’s Road to Environmental Sustainability iii Chapter Six: Caring about the Environment and People—The Way Forward 61 References 67 Appendix A: Donor-Financed Environmental Activities 71 Appendix B: Country Environmental Analysis—Methodology 87 Appendix C: Georgia’s Little Green Data Book Statistics 95 BOXES Box 2.1: Air Quality Monitoring in Tbilisi 10 Box 3.1: Leaded Gasoline in Georgia 28 Box 3.2: Manganese Ore Production in Georgia 31 Box 5.1: Environmental Taxes 59 FIGURES Figure ES.1: Share of Costs of Environmental Degradation by Sector, 2012 xiii Figure ES.2: Cost of Environmental Degradation (Health and Natural Resources Damages) xiii Figure 2.1: Georgia Average Annual and Growing Season Temperatures, 1900–2012 9 Figure 3.1: Cost of Environmental Degradation (Health and Natural Resources Damages) 16 Figure 3.2: Share of Costs of Degradation by Sector 16 Figure 3.3: Major Crops’ Maximum, Minimum, and Average Yield in Selected Countries, 1992–2012 18 Figure 3.4: Annual Average Crop Production Loss in Georgia, 1992–2011 18 Figure 3.5: Livestock in Georgia 18 Figure 3.6: Annual Average Meat Production Loss in Georgia 20 Figure 3.7: Forest Cover Area Dynamics in Georgia, 2001–12 (hectares) 21 Figure 3.8: Forest Distribution 21 Figure 3.9: Magnitude of Individual Flood Event Damage as a Multiple of Standard Deviation, 1995–2010 23 Figure 3.10: Ambient Air Quality Standards (μg/m3) Compared with WHO and EU Air Quality Standards 24 Figure 3.11: Estimated Additional Mortality Associated with Air Pollution in Georgia 25 Figure 3.12: A Map of Ambient Air Quality Monitoring Station in Georgia 26 Figure 3.13: Share of Gasoline in Georgia Exported from Selected Countries, 2012 28 Figure 3.14: Municipal Solid Waste Landfi lls in Georgia 29 Figure 4.1: Method Used in Studying the Macroeconomic Impact of COED and Its Poverty Incidence in Georgia, 2012 35 Figure 4.2: Trends in Overall and Extreme Poverty Rates, 2006–12 39 Figure 4.3: Poverty Rates by Location, 2006–12 39 Figure 4.4: Share of Poor Population by Location, 2006–12 39 Figure 4.5: Poverty Rates by Region 39 Figure 4.6: Map of Poverty Rates in Georgia, 2012 40 iv Georgia Country Environmental Analysis Figure 4.7: Share of Employed Population in Rural Areas by Sector and Consumption Decile, 2012 41 Figure 4.8: Share of Agricultural Expenditures in Total Household Expenditures and Average Agricultural Monthly Expenditures per Hectare, by Consumption Quintile, 2012 41 Figure 4.9: Share of Agricultural Income in Total Household Income and Average Agricultural Monthly Agricultural Income per Hectare, by Consumption Quintile, 2012 42 Figure 4.10: Average Size of Agricultural Holdings in Rural Areas, by Consumption Quintile, 2012 42 Figure 4.11: Average Size of Agricultural Holdings in Rural Areas, 2006–12 42 Figure 4.12: Share of Households by Area of Agricultural Land, 2006–12 43 Figure 4.13: Percentage of Households Using Solid Fuel and Average Monthly Expenditures on Firewood Purchases, 2006–12 43 Figure 4.14: Percentage of Households Using Solid Fuel and Average Monthly Expenditures on Firewood Purchases, by Consumption Quintile, 2012 44 Figure 4.15: Proportion of Households by Type of Change in Income and Consumption Quintile 47 Figure 4.16: Growth Incidence Curves, Baseline vs. Scenarios 1 and 2 47 Figure 5.1: Environmental Protection Expenditures in Europe, 2008–12 54 Figure 5.2: Public Environmental Expenditures by Domain (GEL’000) 55 Figure 5.3: Expenditures of the MENRP/MOEP by Sector (GEL ‘000) 56 Figure 5.4: Budget Revenues from Environmental Fines, Penalties, Fees, Permits, and Licenses 57 Figure 5.5: Environmental Budget versus Environmental Expenditure (GEL ‘000) 58 Figure 5.6: Donors’ Share of Government Environmental Expenditures (GEL’000) 59 Figure B.1: Structure of the GCE Model 89 Figure B.2: Production Structure in the CGE Model 90 Figure B.3: Household Consumption Structure in the CGE Model 91 Figure B.4: Diagram of the Modeling Process 92 TABLES Table 1.1: GDP of Georgia and Some Key Economic Indicators, 2006–12 (Nominal and Real GDP) 2 Table 2.1: Georgia National Requirements for Gasoline Quality 10 Table 2.2: Air Quality Monitoring Results for Tbilisi Stations as Annual Averages, 2008–13 11 Table 2.3: MDG 7: Ensure Environmental Sustainability—Progress 1990–2012 13 Table 3.1: Summary of Annual Costs of Environmental Degradation in Georgia 16 Table 3.2: Estimation of Eroded and Degraded Cropland in Georgia 18 Table 3.3: Annual Cost of Cropland and Pasture Degradation in Georgia (US$) 20 Table 3.4: Estimated Annual Deforestation Cost in Georgia (US$, millions) 22 Table 3.5: Estimated Annual Damage from Natural Disasters in Georgia 23 Table 3.6: Estimated Additional Mortality, Exposed Population, and Additional Mortality per 1,000 Exposed Population in Georgia 25 Table 3.7: Estimated Value of Statistical Life in Georgia 26 Institutional, Economic, and Poverty Aspects of Georgia’s Road to Environmental Sustainability v Table 3.8: Estimated Annual Cost of Health Impacts Associated with Particulates (US$, millions) 27 Table 3.9: Georgian Standard for Lead in Air 28 Table 3.10: Estimated Child Blood Lead Level Distribution in Georgia, 2012 28 Table 3.11: Estimated Annual Losses of IQ Points among Children <5 Years in Georgia, 2012 29 Table 3.12: Estimate of Annual Loss of Property Value because of Proximity to a Landfi ll in Georgia* 30 Table 3.13: Mining Sector in the Economy of Georgia, 2012 31 Table 3.14: Annual Average Concentration of Heavy Metals in the Water for 2012 (mg/L) 32 Table 3.15: Annual Average Concentration of Total Suspended Particles and Manganese in Air for 2012 (μg/m3) 32 Table 4.1: Premature Mortality Caused by PM in the Main Georgian Cities, 2012 34 Table