68633

INTEGRATED SAFEGUARDS DATA SHEETCONCEPT STAGE

Report No.:

Date ISDS Prepared/Ipdated: 15 June 2011

I. BASIC INFORMA7EON

A. Basic Project Data

Country: Vietnam Project ID: P115762I Additional Project ID rof ay

Project Name: HCFC P ase-out Project Stage ITask Team Leader: Qing WangEstimated Appraisal Da e: September 2011 Estimated Board Date: December 2011Managing Unit: EASV/EASER Lending Instrument: Specific Investment

LoanSectors: Other industry 90%); Central government administration (10%)Themes: Pollution management and environmental health (50%); Environment policiesand institutions (50%)1BRD Amount (USSm.)IDA Amount (US$m.):GEF Amount (US$m.):PCF Amount (US$m.):Other financing amount by source:

Ozone Trust Fund: US$ 9,763,820 (approved at the April 2011 Executive CommitteeMeeting of the Montreal Protocol Multilateral Fund)

Environmental Category: BSimplified Processing Simple [ Repeater [Is this a transferred proj ct Yes PXJ No(]

B. Project Objectives rom section 2 of PCNJ:

1. The project development objective is to assist the Government of Vietnam to complywith its Montreal Prot col phase-out obligations for HCFCs with (i) a reduction in HCFCconsumption to meet a freeze in consumption at the 2009-2010 average baseline level by 1January 2013; and, (ii) a subsequent reduction of 10% of the freeze level by 1 January 2015.

C. Project Description [from section 3 of PCNJ:

2. HCFC Consumption Baseline and Phaseout Obligations in Vietnam. The HCFCconsumption baseline mas calculated by averaging the actual 2009 HCFC consumption datareported by Vietnam to :e Ozone Secretariat of the MP with the estimated 2010 consumption,

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

which is 221.2 ODP tons and serves as the target for the 2013 freeze in consumption, Therefore,

the levels at which Vietnam's consumption of HCFCs would have to be capped according to the

MP phaseout schedule are estimated in the table 2 below. The estimated starting point for

gradual HCFC phase-out by Vietnam as per the MP decision for Article 5 countries is estimated

in the table 3 below.

Table 2: Estimated MP Obli ations for Vietnam (HCFC Phase-Out Tar ets in Vietnam)

EstmaedBaseline* (2009-2010 average) 221.2

2013 - Freeeobaeieevs2122015- 90% of the baseline 199.1

2020 - 65% of the baseline 143.8

2025 - 32.5% of the baseline 71.9

2030 -2.5% of the baseline** 5.5

Z00-Nocnuption 0* Estimated using 2009 actua and 2010 projected amounts.**Per the .MP, the sum of calculated consumption levels from 2030 to 2040 should not exceed

2.5% of the baseline and this quantity is allowed only for the purpose of servicing the remaining

fleet of HCFC dependent equipment.

fSubstance Annex Group Starting.Point for Aggregate Reductionsin Consumption (ODP tonnes)

HCFC-22 C 1 166

HCFC-123 C 1 0.02

HCFC- 14lb C*219.8*

* This figure includes 55.2 ODP tonnes oftcontrollcd HCFC-141b and the 2007-2009 average figure ofHCFC-14 Lb contained in imported pre-blended polyol imported by Vietnam (164.56 OD, tons),

**The starting point is based on an estifmated consumptlioi baseline Which is an average of the 2009 and 2010consumption of Annex C Group I chemicals in line with Executive Committe Decision 60/44 plus the 2007-2009average HCFC-14 lb content of imported pre-biended polyol.

3. Project Components (HPMP Stage I). The proposed project covers only the Stage I ofthe HPMP in the foam sector in brder to meet the 2013 and 2015 phase-out targets. It can beconsidered as a continuation of the National CFC and Halon Phaseout Plan in that it will employ

the infrastructure and capacity established under the previous project to deliver the required

assistance to beneficiaries and stakeholders. The proposed project proposes a combination of

policies, regulations, technical assistance activities and financial incentives at the sector level tothe foam industries, which are embedded in an overarching framework that leads to global ozoneand climate co-benefits while permitting the country to meet its development objectives of

sustained levels of economic growth and industrial modernization and expansion. The project

consists of the following four components:

Component 1: Investment in HCFC Consumption Reduction (MLF USS 8,876,200)

4. This compone t will consist of a series of investment activities in twelve foam producers.In response to Decision XIX/6, the Stage I HPMP will promote the adoption of hydrocarbontechnology in the foam sector, except in the manufacturing of integral skin shoe sole, where thewater blown (C0 2) sYstem was found as the most cost-effective conversion method. In thisregard, an analysis of eligible incremental capital and operating costs of this proposed plan hasbeen developed on the basis of a conversion cost structure relevant to hydrocarbon/water blown(CO2) and approved by the Executive Committee for the Montreal Protocol Multilateral Fund.

Component 2: Supp rting Policies and Regulations (MLF USS 150,000)

5. It is proposed that an import quota system to curb the supply of HCFCs be establishedand operational by 2012. This is critical for ensuring sustainable phase-out of HCFCsparticularly in the fo and air-conditioning sectors. In addition, a ban on the use of bulkHCFC-141b in the foan sector and HCFC-22 in the air-conditioning sector will be put in placein 2015 or 2016 when enterprise conversion activities are completed.

Component 3: Technical Assistance Activities (MLF USS 205,048)

6. To support implementation of investment interventions, awareness campaigns on theneed to phase out HCFCs and on future regulatory measures to eliminate HCFC use will becarried out with target groups. Capacity building of customs officers will be carried out in orderto ensure effective c)ntrol of import of HCFCs and products containing HCFCs. Trainingactivities will be cond cted to increase the technical capacity of local authorities to allow them tobecome more effecti,e agents in identification and delivery of needed assistance to foamenterprises in their loalities. TA activities to assist Vietnam in strengthening its capacity toimplement energy conservation and energy efficiency programs in the residential air-conditioning and refrigeration manufacturing and servicing sectors will also be undertaken tocontrol the demand of HCFC-22, although there will be no phase-out investment activities to befinanced by the MLF .

Component 4: Project Management (MLF USS 532,572)

7. The project management unit (PMU), set up under the National CFC and Halon PhaseoutPlan, will continue to be financed under the project to implement and coordinate the workprogram under the HPMP Stage I and to assist MONRE to put into place both overarchingregulations and sector specific policies.

D. Project location a d salient physical characteristics relevant to the safeguard analysis(if known):

The project covers 12 oam enterprises. They are located in Hanoi, Da Nang, HCM city andLong An Province. Seven enterprises are located in the industrial area and five in the residentialarea. The five enterprises in the residential area have intentions to move to industrial areas beforeor during the project inplementation stage expected from January 2012 to December 2015.

E. Borrower's Insti tional Capacity for Safeguard Policies:

The Recipient would be the Ministry of Natural Resources and Environment. The project would

be implemented through its ozone office. MONRE and the ozone office are experienced with

safeguard issues under the CFC phase-out project.

F. Environmental and Social Safeguards Specialists on the Team:

Douglas J. Graham 75790 Environmental Specialist ASVSNgen Van Trung 141 08 Social Safeuard Specialist Consult

II. SAFEGUARD POLICIES THAT MIGHT APPLY

Safeguard Policies Triggered Yes No TBD

Environmental Assessment (OP/BP 4.01) X 7±The project will have a positive impact on the global environment by reducing the use of HCFCs - ozone-depleting substances. HCFCs are also greenhouse gases with a global warming potential (GWP) rangingfrom several hundred to several thousand times that of CO2. While HCFCs have impact on the globalenvironment, they have no adverse local impacts as these chemicals are stable and not considered toxic orotherwise dangerous for the environment.

The project will include a series of investment activities with 12 foam producers. No closure of these 12foam enterprises is expected, but about 5 enterprises currently located in the residential area haveintentions to relocate to the industrial area. These relocations are taking place independently of theproject - either because of the local government's request or the enterprise's own arrangements. It isexpected that the five enterprises will carry out the HCFC phaseout sub-projects after relocating toindustrial zones.

Hydrocarbon technology has been selected as a blowing agent to replace HCFC- 14 b that is being used inthe foam sector. Hydrocarbon has a Global Warming Potential of less than 25. Hydrocarbon(cyclopentane) is classified as a Volatile Organic Compound (VOC), but its use results in very low levelsof emissions of about 2-3% of the blowing agent, which is minuscule compared to emissions from two-stroke motorcycle traffic in countries such as Vietnam. Therefore, there is no si ificant environmentalimpacts from the chemical-Hydrocarbon itself.

The other chemicals involved in the foam production are MDI, amine catalysts and fire retardants. The 12foam enterprises normally purchase pre-formulated polyol (blended with or without HCFC-141b) andpolymeric MDI (isocyanates) for their rigid foam production. The probability that a spill of polymericMDI (PMDI)- a liquid at room temperature- contaminates the soil and water is very low, because thefloor of the foam production areas normally consists of cement coated with an anti-leakage lowpermeability\chemical layer such as epoxy. In the case that PMDI leaks into the soil, it will react with themoisture/water, and the reaction would.result in CO2 and insoluble polyurea co pounds, which are notbiodegradable but chemically inert. Fire retardant and amine catalysts (very limited amount) aremixed/pre-formulated in the polyol at the System Houses (pre-blended polyol su pliers), from which thefoam enterprises normally purchase pre-blended polyol and MDI, so the foam entrprises will not handlethese toxic chemicals directly. Fire retardant and amine catalysts will remain in be final foam productsand not likely to be emitted to the environment during the foam production or La er. Therefore, there areno legacy environmental contamination issues that are associated with the 12 foa enterprises.

Safeguard Policies TAggered Yes No TBDHowever, safety requirients associated with hydrocarbons due to its flammability may still presentoperational challenges r smaller enterprises. For all operating sites, occupational health and safety(OHS) measures (such is prevention from inhalation of MDI vapors which may cause skin irritation);spill prevention, control, and countermeasures; and fire risks (particularly due to the presence offlammable chemicals) will be identified and appropriate emergency preparedness and response measureswill be prescribed as i entified in The World Bank Group EHS (Environment, Health and Safety)Guidelines. Staff will be trained as needed.

To address the environ ental (if any after a due diligence review) and health and safety issues notedabove, one environmen I management plan (EMP), with site-specific mitigation measures for each of the12 sub-projects, will be prepared prior to appraisal. Each participating enterprise will be required tofollow the provisions of the EMP in order to participate in the project activities and receive access to anyfunding. The EMP will nclude requirements for appropriate handling of other chemicals used in minoramounts for the foam production. As noted above, the World Bank Group EHS Guidelines will befollowed when preparing the EMP.

For the 5 enterprises that are likely to relocate from residential areas to industrial parks, a due diligencereview will be undertaken to confirm that the sites are free from any past environmental liabilities. In thatevent, actions needed to )repare these areas for different land uses will be identified. All the participatingenterprises will need o be in compliance with national and local laws/regulations relating toenvironmental protectior

Natural Habitats (O/BP 4.04) XAs the project will take F lace in existing industrial facilities, protected areas, known natural habitats, orestablished or proposed critical natural habitats will not be affected.Forests (OP/BP 4.36) xThe project will not fina ce activities that would involve significant conversion or degradation of criticalforest areas or related cri ical natural habitats as defined under this Policy.Pest Management (0 " 4.09) X

The policy is not triggered since the project (a) will not procure any pesticides, nor (b) willthe use of pesticides in rease as a result of the project.Physical Cultural Reources (OP/BP 4.11) X

The project will taie place in existing enterprises or in existing industrial parks. As such, theproject will not advers,ly affect sites with archeological, paleontological, historical, religious, orunique natural values.

Indigenous Peoples (OP/BP 4.10) XAll project investment ac tivities will be developed within urban or industrial areas with no ethnicminorities as defined un er the Bank's policy. Therefore, OP 4.10 on Indigenous People is not triggeredin this project.Involuntary Resettlenut (OP/BP 4.12) XBased on the HCFC con umption survey, five of the 12 foam enterprises are located in residential areas,the rest are located in industrial parks. All of the five foam enterprises currently in residential areasalready have relocation plans to industrial zones and their relocation is expected to take place in theperiod from June 2011 to 2013. The project activities for these five enterprises are expected to take placeon the new sites.

The TT will review when and how the land was acquired or being acquired for the Industrial Park and theenterprise relocation plan during project preparation stage. For each sub-projects which requireinvoluntary resettlement if the land has been acquired before the sub-grant agreement is signed, a due

SafegMard Policies Triggered Yes No TBDdiligence review of the land acquisition process will be undertaken by the TT to confirm whether there isany legacy issues.Safety of Dams (OP/BP 4.37) x

The project will not finance construction or rehabilitation of any dams.Projects on International Waterways (OP/BP 7.50)

There are no known project components involving intemational waterw ys.Projects in Disputed Areas (OP/BP 7.60) u X I

The project is not located in any known areas under territorial dispute.Piloting the Use of Borrower Systems to AddressEnvironmental and Social Safeguard Issues in Bank-Supported Projects (OP/BP 4.00)

Ill. SAFEGUARD PREPARATION PLAN

A. Target date for the Quality Enhancement Review (QER), at which time he PAD-stage ISDSwould be prepared:

A QER meeting as stated in the PCN Decision Note is expected to be in July/August 2011. Ifthe QER meeting is not necessary anymore because the project now covrs only the foamsector, the PAD-stage ISDS will be prepared in August/September 2011 as indicated below,

B. For simple projects that will not require a QER, the target date for preparing the PAD-stageISDS: August/September 2011

C. Time frame for launching and completing the safeguard-related studies that may be needed.The specific studies and their timing' should be specified in the PAD-s ge ISDS:If needed, Project information will be disclosed to local population. The affected populationwill participate in the identification and assessment of impacts, developrent andimplementation of the mitigation measures. The environment and sociai safeguarddocuments (summarized version) will be distributed among the affected population, placed inlocal public libraries and in the Bank InfoShop.

The safeguards instrument (EMP) is to be disclosed locally (in local lan uages) and in theInfoShop prior to departure of the appraisal mission.

I Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the

InfoShop and (ii) in-country, at publicly accessible locations and in a form and language that are accessible to potentially affectedpersons.

IV. APPROVALS

Signed and submitted bTask Team Leader: Name: Qing Wang_7Approved by:Regional Safeguards C;ordinator: Panneer Selvam

Comments:Sector Manager: Jennifer Sara

Comments: