Report No. PID8200
Project Name             MEXICO-Introduction of Climate Friendly (@) ...
measures in Transport
Region                   Latin America and Caribbean Region
Sector                   General transportation sector (40-);
General industry and trade
sector (30%); General information and
communications sector (20%); Central
government administration (10%)
Project ID               P059161
Implementing Agency
Secretaria de Medio Ambiente
(Environment Secretariat for Mexico City)
Address: Plaza de la Constitucion No.1,
3er Piso. Col. Centro
Contact Person: Claudia Sheinbaum
Tel: (52) 555 5420 117
Fax: (52) 555 512 2688
Email: Lelena@Dgpa.Df.Gob.Mx
Secretaria de Transporte y Vialidad
(Secretariat of Transport for Mexico
City)
Address: Versalles No. 13, Col. Juarez.
Delegacion Cuauhtemoc.
Contact Person: Mario Zepeda
Tel: (52) 555 208 0131
Fax: (52) 555 5146663
Email: zm.mario@hotmail.com
Sistema de Transportes Electricos
(Electric Bus Operator)
Address: Municipio Libre Oriente
No. 402, 3er Piso. Col. San Andres
Tetepilco
Contact Person: Florencia Serrania
Tel: (52) 555 539 1584
Fax: (52) 555 392649
Email: director@ste.df.gob.mx
Environment Category     C
Date PID Prepared        October 8, 2002
Auth Appr/Negs Date      June 28, 2002
Bank Approval Date       October 29, 2002
1. Country and Sector Background
2.1 Sector issuesNeed for a better harmonization of sector policies on the
issue of Air Quality and on Climate ChangeThe metropolitan authorities
have adopted comprehensive sector policies that already identify priority
areas in transport, air quality and urban development. These are:
Integrated Transport Program (2002-2006) (Programa Integral de Transporte



y Vialidad), the General Urban Development Program (2002-2006) (Programa
General de Desarrollo Urbano) and the Environmental Program (2002-2006)
(Programa de Medio Ambiente) of the City. The corresponding Plans of the
State of Mexico are: the Institutional Program of Medium Term (2000-2005)
(Programa Institucional de Mediano Plazo) that integrates all the specific
transport programs, the Sectorial Urban Development Program (1999-2005)
(Programa Sectorial de Desarrollo Urbano), and the Environmental
Protection Program (1999-2005) (Programa de Protecci6n al Ambiente).
However, there is a need for the sector authorities to harmonize the
different programs as these relate to the issues of transport, air quality
and land use. Also, even though awareness and activism in international
fora have increased, climate change issues have not been fully integrated
into the sector planning and decision-making. Successful incorporation of
climate-friendly policies and measures will depend on the extent to which
sector planning recognizes the harmonization potential between climate
change and sector policies, and on the realization of local co-benefits
from actions on climate change concerns. Lack of coordination between the
air quality, transport and urban planning strategies may result in failure
to capture gains in efficiencies or may result in sectorial actions that
would be counterproductive for the goals of the other sectors.     Transport
planning strategies that are coordinated with the air quality management
plan would ensure that the efforts and allocation of resources of the
metropolitan area may result in higher levels of emissions of local and
global pollutants are avoided. Harmonization with urban planning would
ensure that land use and transport planning are also examined from an air
quality perspective. The overall intended benefit from harmonizing these
strategies is that the efforts in the environmental front are coordinated
with similar efforts in transport and land use. The harmonization of the
sector strategies and plans would result in several action plans (fiscal,
institutional, legal etc.). Implementation of this framework would
necessitate the promotion of measures that will facilitate a modal shift
in the transport sector of the metropolitan area (from one based on an
increasing share of small, gasoline-based vehicles to a system based on
high capacity, fuel efficient and low carbon emitting vehicles, running
along transport corridors and linked and integrated with the metro
system). To this effect, there is a need to identify and promote the
adoption of an enabling policy and regulatory environment that will permit
the development of transport corridors, as a key element of the modal
shift. Transport corridors are expected to lead to a more efficient, less
polluting public transport sector. Likewise, the contamination caused by
the transport sector is a problem of metropolitan dimension. Mexico City
and the State of Mexico have each their own independent institutional
organizations. Even though there is substantial across-the-board
technical and institutional capacity, the coordination between them is
limited. Due to the fact that the Mexico City and the State of Mexico
share an atmospheric basin the problem is of metropolitan nature and needs
to be addressed by both administrations in a coordinated manner.Transport
Sector and Air Quality Issues i) Lack of a sustainable business
environment for public transportThe business structure of bus services in
the Mexico City Metropolitan Area (MCMA) has led to highly inefficient
operations, resulting in a costly, unsafe and environmentally
unsustainable public transport system. The key issues are: (a) lack of an
organizational model that would facilitate efficient public transport
operation in the metropolitan area, (b) dispersed operations that hinder
the effective control of bus services and contribute to traffic
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congestion, (c) inefficient use of vehicles, (d) deficiencies in bus
inspection and maintenance, (e) lack of professional management among bus
operators, (f) lack of coordination between transport operations in the
State of Mexico and the City, (g) a fare system which penalizes transfers
and thus discourages intermodal movements, and (h) systematic decline in
the number of metro passengers since 1989 despite a 35% network extension
during that period. These barriers are significant and require of
substantial efforts at the policy and regulatory levels. The experience of
Bogota's innovative bus corridor system (see Annex 12)- as well as the
achievements of the Curitiba busways- demonstrates that the creation of
the right business environment is vital for achieving sustainable public
transport services by improving their commercial viability. The Bogota
reforms included, in addition to such physical works as busways, terminals
and on-line bus stations: (a) a regulatory framework encouraging
management structures that facilitate commercially efficient bus
operations, thereby providing adequate incentives for investors, (b) a
payment system that provides the adequate incentives for investors, (c) a
client-friendly fare structure that is attractive to bus passengers, and
(d) transparent oversight and enforcement mechanisms. These aspects can be
improved in Mexico and would be addressed as part of the reform to the
regulatory system, envisioned as the key output of the GEF project. The
Transmilenio program has resulted after one year of operation in a daily
ridership of 680,000 passengers along transport corridors of very high
capacity vehicles. This is a significant modal shift.     ii) Large
contribution of the transport sector to the problem of air qualityUnder
the Integrated Transport and Road Program (2002-2006), the transport
authority of Mexico City is attempting to address the growing demand for
transport while minimizing its environmental impacts. However, the number
of vehicles in the area is high for the available infrastructure,
resulting in road congestion, large fuel consumption, unsafe conditions
and high level of emissions. In particular, the nature of the bus sector
for the MCMA is of a very fragmented supply, which also results in a
somewhat chaotic provision of services. Likewise, the increasing number of
private cars exacerbates traffic congestion, which contributes to
productivity losses, and higher level of emissions of criteria pollutants.
According to the recently released emission inventory and the AQM-III
(2002-2010), the mobile sources account for a majority of NOx emissions,
4Ot of HC emissions and about 36? of particulate emissions.    Table 1.
Emission Inventory in the MCMA 1998 (percentage)
SECTORPMlOS02CONOxHCStationary sourcesl6550.5135Area sources8241.5552Soils
and vegetation4oN/AN/A23Mobile sources3621988040Total   10010010010010OIn
addition to the large contributions to the release of local criteria
pollutants, the transport sector in the MCMA is the largest contributor of
greenhouse gases (see Figure 1). Mexico, is the largest contributor of
C02 emissions (2.1%) in the Latin America region. The recently concluded
COP-8, in Marrakesh, Morocco, has again emphasized the need for urgent
action to reduce anthropogenic emissions of greenhouse gases and took
actions to promote carbon finance between Annex 1 nations (developed) and
developing countries. The Kyoto Protocol has now been endorsed by a
majority of the community of nations. The carbon trade has thus been
reaffirmed and emissions trading of about 700-1000 millions tons of
carbon dioxide equivalent is expected on an annual basis for the first
commitment period (2008-2012). The 1998 energy balance for the MCMA has
been calculated using the methodology and format utilized by OLADE4. The
estimates show that the MCMA consumes 592 PJ annually, for which it
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requires a gross supply of 648 PJ (56 PJ are used in the transformation
process). The largest user is the transport sector, accounting for 49% of
the total (292 PJ), an overwhelming fraction of which is provided through
the combustion of gasoline in motor vehicles (190 PJ)5. A GHG emission
inventory was calculated on the basis of the energy balance, following the
IPCC methodology. The study estimates emissions of 44.6 million tons of
C02 equivalent into the atmosphere during 19966 as a result of energy
consumption. Of those, 34.9 million tons of C027 equivalent were released
as a result of fuel emissions in all sectors, while 10.7 million tons
represent emissions associated with the generation of electricity8 used in
the MCMA. This volume of GHG represents 10.3 % of the total national
emissions for that year9. The largest sector in terms of greenhouse gas
emissions is transport with 18 million tons of C02 equivalent in 1996 and
19.6 million tons of C02 in 1998. Figure 1. C02 emissions by sector and
source in the MCMA (1996)The transport sector is also the largest source
of methane (CH4) and volatile organic compounds. Methane emissions have a
large radiative effect in the atmosphere, while VOCs contribute to the
generation of Ozone. Ozone itself has a warming effect of about one
quarter that of C02 on a molecular basis. As the transport sector is also
the largest source of local criteria pollutants, opportunities for
harmonization of local/global pollution problems in the transport sector
would have significant impacts in both areas of concerns. Figure 2.
Direct C02 Emissions by Fuel in the MCMA (1996) Does not take into account
associated fugitive emissions or leaks. iii) Congestion and low
productivity in the transport sectorTraffic congestion affects public
transport efficiency and, in addition, imposes direct and indirect costs
on the urban economy. Time lost in traffic can add up to a substantial
share of a city's output as it reduces the size of the effective labor
market, imposes the need for higher inventory and more generally affects
individual productivity. In Mexico, between 1990 and 2000, the number of
motor vehicles on the road grew by 42%. At the same time, the population
of Mexico's medium and large cities grew by 25%, while the number of trips
grew even faster than the population. Inefficient public space
management, including the lack of properly designed traffic signs and
signals, uncontrolled vehicle parking, and inadequate facilities for
pedestrians and other non-motorized traffic, contribute significantly to
the congestion problem. Commercial transport of freight is affected by
congestion in central business districts, poorly maintained road surfaces
and inadequate terminal facilities. In addition, in many cities, the aging
fleet of highly polluting diesel buses will soon require replacement if
air quality is to be managed effectively. The municipal governments are
poorly equipped to manage theses challenges. This results in limited
coordination in intermodal services. Second, Mexican municipalities have
limited land use planning powers. Third, the allocation of
responsibilities between states and municipalities is inefficient, which
makes long-range land use planning difficult. Finally, municipalities have
limited resources with which to fund investment in transport
infrastructure. The MCMA typifies the difficulties mentioned. iv) Gradual
carbonization (increase of greenhouse gas emissions per passenger-km) of
the transport sector: need for a modal shift to reduce emission of
criteria pollutants and greenhouse gasesThe energy and greenhouse gas
inventories for the MCMA indicate a gradual increase in its energy
intensity. This finding is evident in the analysis of the modal evolution
in the public transport system in the MCMA during the period 1986-2000 (
Fig. 3) which shows that both the metro system and the bus have lost share
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of the total public transport market, having been displaced by smaller
vehicles. The gradual shift away from large capacity vehicles is, in part,
an unintended effect of the atomization of services in the transport
sector and the relatively poor regulatory system. This is an unwelcome
development, especially in such a congested and polluted region as the
Mexico City Metropolitan Area, where it has generated inefficiencies from
a transport and environment perspective by adding to traffic congestion
and reducing public transport productivity. It has resulted in higher
emissions and exposure to criteria pollutants (and associated health
impacts), caused increased releases of greenhouse gases, and has been
linked to increasing accident rates. Finally, it has contributed to the
inability of the rail mass transit system (essentially the metro) to
attract passengers to its installed infrastructure. The Mexican
authorities want to reverse this trend and promote measures that will aid
the modal shift from small vehicles to large buses and the metro.
However, shifting passengers from private cars to public transportation
facilities - or convincing new car owners to continue using public
transportation -- is not an easy task. Bus and metro riding is often
uncomfortable and has an unattractive image with many residents of the
MCMA, as evidenced by the declining metro ridership over the last decade.
Lack of parking places at metro stations, and particularly the lack of
efficient links between bus and metro routes pose additional difficulties,
while the extension of the metro lines is very expensive and would not
provide for full coverage of the needs in the MCMA. 2.2 Government
StrategyTransport Sector Strategy in the MCMAThe Comprehensive Transport
Plan of the City (2002 - 2006) calls for: a) gradual elimination of
subsidies to the transport sector and restructuring of the fare system, b)
integration of the transport system with the State of Mexico and promotion
of modal shift through the development of metropolitan corridors; c)
strengthening of the public transport system through the development and
implementation of bus priorities; d) reduction in the environmental load
of the transport sector into the MCMA air shed; and e) support to
technology improvements in the transport sector through the introduction
of better bus and rail technologies. The first objective supports the
development of a sustainable business environment for the public transport
sector. The authorities have started the reduction of subsidies in real
terms but these still represent an important fraction of total operation
costs for the bus and metro operations. On the other hand, the Government
receives substantial income from taxes on fuel consumption some of which
are channeled to environmental objectives in the city. The control of
emissions by the transport sector into the air shed of the MCMA has been
initiated through adoption of more stringent emission and vehicle
standards and through the definition of measures that would promote the
integration of urban development plans and transport plans. However, these
plans are still in the early phase of development. Measures to control the
number of vehicles in areas of high congestion and traffic management
measures to alleviate gridlock and the creation of pedestrian zones in
downtown areas are also being considered. Also the government intends to
promote the introduction of low emission vehicles and promote a higher
level of utilization of the metro. A study to restructure the system of
bus route concessions was completed in 1999 but its recommendations have
not yet been implemented for a lack of resources.Promotion of a modal
shift is a central part of the government's strategy. The key measure
under consideration is the development of transport corridors on which
high capacity, low polluting vehicles would operate. These corridors are
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being conceived as measures that would make more efficient use of
infrastructure and move passengers in an integrated mode with the metro at
higher speeds, lower costs per passenger and lower emissions per passenger
kilometer and, at the same time, alleviate traffic congestion. The modal
shift is expected to contribute to a reduction in the emission of
greenhouse gases per passenger kilometer.A key element in the promotion of
the modal shift will be the intended introduction of low emission, low
carbon emitting vehicles. This is being achieved through attracting
ridership to the metro and the light train line, and through plans for the
introduction of novel bus technologies. New-technology buses may also be
specified for the busway corridors, but first there is a need to obtain
solid information on which to base the decision.The government of the City
conceives the air quality and transport policy as the conjunction of
various complementary elements that should facilitate the improvement of
transport conditions in the City. Environment Sector: Formulation of a
long term, multi-sector, strategic frameworkThe AQM-III (2002-2010)
consists of a multi-sector, metropolitan, long-term effort to address air
quality issues in the MCMA and constitutes the official government
strategy for air quality in the metropolitan area. The plan recognizes the
pivotal role that the transport sector can provide in solving the air
quality issues and identifies 47 out of a total 108 measures as linking
transport sector and improvements in air quality. A key measure identified
in the plan is the adoption of transport corridors as a means to promote a
modal shift. The thrust of the effort is very clear: "to improve health
indicators through reductions in exposure of populations to airborne
pollutants".    The plan which has been issued jointly by the Government of
Mexico City, the Government of the Estado de Mexico and the Federal
Government summarizes prior work on air quality management and provides an
updated description of the situation in the Valley in terms of air
quality. It concludes that while significant progress has been made, there
are major challenges facing the goal of improved air quality. These are
linked to the expected continuous growth in demand for services and
economic activity and the difficult nature of the many dispersed sources
of pollution in the area. Transport sector is identified as a key sector
for immediate action. The plan also summarizes information available on
the impacts on health from air pollution (drawing from the reports
prepared with Bank and GEF PDF-B assistance). The plan updates the
emissions inventory (also prepared with Bank assistance) and establishes
goals for the 10 year duration of the program. These goals are provided
in quantitative form and summarized are:A substantial reduction in ozone
concentrations and exposure (eliminating any concentrations above 200
IMECA points) and reducing average concentrations significantly;Reduce the
concentration of PM10 and 2.5;Eliminate violations to the norm on CO
concentrations;Reduce average concentrations of S02.To achieve these
goals, the plan establishes a 10 year program consisting of 108 measures.
Key parts of the program are:Reductions of emissions generated by the
transport sector;Reduction of emissions from industry and
service;Conservation of natural resources and forest cover in the
Metropolitan Area;Integration of policies and plans in air quality,
transport and urban planning;Reduction of exposures to high concentrations
of pollutants;Promotion of environmental education and awareness and
technology development;Harmonization of plans to address air quality and
control of emissions of greenhouse gases.
2. Objectives
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The project development objective is to contribute to the development of
policies and measures that will assist in a long-term modal shift toward
climate-friendly, more efficient and less polluting, less carbon intensive
transport in the Mexico City Metropolitan Area (MCMA). Specifically, the
project will support aspects of the recently completed Third Air Quality
Management Plan (AQM-III 2002-2010) (Programa para Mejorar la Calidad del
Aire en la ZMVM 2002-2010) which are consistent with the GEF Operational
Program on Sustainable Transport (OP-11) and the Metropolitan Climate
Change Action Plan (MCCAP)l.
3. Rationale for Bank's Involvement
Test: The Bank involvement brings a global experience with air pollution
and transport issues and its linkage with global concerns. The policy
dialogue with the environmental authorities banks on extensive expertise
at the Bank on the subject. The involvement of the Bank/GEF in the
proposed project provides an opportunity to support a critical effort by
the Government of Mexico to (a) improve the environmental performance of
the transport sector, (b) improve global environmental quality through the
reduction of greenhouse gases, and (c) partly reduce dependence on
high-carbon fuel-generated energy. Bank involvement has made possible the
sharing of its broad experience in air quality and transport and adapting
it to Mexican conditions. GEF involvement is critical to catalyzing local
willingness to test and demonstrate hybrid bus technology.
4. Description
The project includes six components. The components provide an
architecture to the project, going from a cross sectorial linkage
(component a), to the definition of an enabling environment for the
transport sector (component b), to actions in the field that would
complement regulatory activities with information on technology options
(component c). This is complemented with technical assistance to
strengthen existing capacity for the execution of the project (component
d) and an effort to disseminate results achieved (component e).a)
Harmonization of sector strategies on air quality issues and Integrated
Climate Action Plan for Transport (CAP) in the MCMA ($0.8 million with a
$0.4 million GEF grant). This component will support efforts to: a)
facilitate the process of integration of strategies between the air
quality (the air quality management plan), urban development plans (land
use plan) and transport sector plans in order to facilitate the adoption
of harmonized policies on the air quality area; b) assess urban
development models as linked to the process of air quality management,
review travel forecasting model used by SETRAVI and model interactions of
transport activity with land use; and c) assist in the development,
evaluation and monitoring of the Metropolitan Climate Change Action Plan
as it relates to the transport sector. It is anticipated the plan will be
adopted under the project by the end of PY2. The project will finance
consultancy studies and equipment.b) Definition of an enabling
environment to facilitate the implementation of sustainable transport
strategies ($4.8 million with a $2.9 million GEF grant). The project will
support a review of management and business organization measures that may
be required to promote the adoption, design and use of corridor
infrastructure, including a system of business organization, the
concessions for specific bus line operations and the structuring of
integrated fares. The component will also fund technical assistance to
identify, improve and facilitate the adoption of economic incentives and
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regulatory system reforms required to overcome barriers to adoption of
high capacity and non-motorized transport. This component will support the
reform of public transport regulations for the proposed corridors. In
addition, an institutional framework for the corridors will be defined
including the integration with the metro and measures to promote metro
rider-ship will be identified. This component will also finance an
assessment of organizational measures proposed by the Mexico City
Authorities to improve air quality and public transport efficiency. The
studies will have a metropolitan character and would be commissioned after
endorsement by the SMA, SETRAVI and the Secretary of Communications and
Transport of the State of Mexico.This component will also support an
action plan for non-motorized transport (promotion of bicycle use). The
objective of this action plan is to promote the use of bicycles as a mode
of transport and aims at diverting commuters from motorized modes,
especially private cars. Emphasis would be placed on campaigns to (a)
expand bicycle use by improving its image and explaining its advantages,
(b) raise traffic safety awareness, and (c) provide incentives to schools,
employers, building managers, car park operators, and the Metro to provide
bicycle parking on their premises. In addition options will be considered
to provide improved infrastructure for non-motorized transport such as
bikeways and traffic calming schemes, and a regulatory regime will be
prepared to improve the traffic safety and personal security for the uses
of non-motorized transport. The action plan will be designed based on the
large body of experiences (Europe, Bogota, Lima, Santiago, others) and
literature to ensure that the resources available will be used as
effectively as possible. An estimate of the potential impacts on GHG
emissions associated with the concept of the corridors is included as
Annex 4 (Incremental Costs and Global Environmental Benefits).The project
will finance consultancy services and technical assistance. The outputs of
this component will facilitate the adoption of measures required to
implement the corridors which would be funded under the proposed Second
Air Quality and Transport Project. The outputs however are important even
if the loan does not materialize.c) Field Test of Climate-Friendly High
Capacity Vehicles ($4.8 million with a GEF grant of $1.6 million). This
component will support a comparative pilot field test for alternative bus
and fuel technologies (hybrid and CNG) and modern and standard diesel
vehicles to test the comparative and absolute technical, economic, and
environmental viability and climate advantages under typical operations in
the MCMA. The testing vehicles will operate on a route, chosen to
represent the average conditions of the metropolitan area, in terms of
supply, demand, physical and topographic characteristics, and service
providers. The buses will be operating on normal conditions, and their
emissions would be regularly measured under a scientifically designed and
statistically representative test protocol (the test protocol, including
sample size, has been designed during project preparation by STE with
assistance from MIT, University of West Virginia, the University of
Toronto, and the Institute for Transportation Studies at the University of
Berkeley, (Annex 16)).This field test will consist of real time
measurement of the following parameters: (a) emissions (local and global)
resulting from current and anticipated driving cycles, (b) real operating
costs, (c) fuel efficiency per type of vehicles, and other indicators of
sustainable transport (Annex 9) with assistance from an ad-hoc high level
steering committee with significant experience from institutions such as
MIT. The test is aimed at: (a) developing a scientifically test protocol
adapted to Mexico City's conditions that can produce significant data on:
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emission reductions, fuel efficiency, and indicators of operating and
maintenance costs, (b) using the results of the pilot test to simulate the
level of reductions in local and global pollutants that could be obtained
assuming various scenarios of adoption of these technologies, and (c)
enabling cost-effectiveness and possibly cost-benefit analysis to
determine the extent or rate to which the adoption of these technologies
is justified compared to other air quality measures. The test is linked to
other components in that it complements regulatory and institutional
activities that would enable the development of corridors with the
examination of alternative buses to be used in the corridors, to reduce
GHG emissions in the transport system. A part of the field test this
component also includes the provision of an essential framework for
evaluation of alternative vehicle options. The project will fund the cost
of the testing and monitoring protocols including the buses and the
operation and maintenance costs. d) Technical assistance and training for
incorporation of climate change and air quality considerations in the
design and analysis of transport strategies (US$0.8 million; funded with
a US$0.4 million GEF grant).This component will finance technical
assistance and capacity building in order to incorporate climate and
environmental considerations in the design of transport projects.
Technical assistance, capacity building and training will be provided in
the following aspects (the project will finance the costs of
consultancies): a) Review and support to the restructuring of legal
functions for SETRAVI as related to transport planning;b) Cost-benefit
analysis and modeling using inter-alia, the data produced by the field
test and including considerations of infrastructure costs, and local and
global environmental impacts, using the data produced by the field test
(component c). These assessments will include the comparative cleaner bus
test and the metropolitan transport corridors. The benefits and costs of
these measures will be compared with the benefits and costs of
rationalizing existing infrastructure;c)    Development of methodologies
for measurement and verification of emissions from Metropolitan Area
public ground transport, including provision of training to bus operators,
mechanics, and maintenance staff on the operation of the buses used in the
pilot field test;d)    Training to transfer knowledge about testing
procedures and potential of tested technologies, such as training for
contracting and coordinating      market surveys; ande) Review and
development of emission standards and transport regulations proposals to
be applied in the Metropolitan Area.The outcomes of this component will be
used also for the establishment of the corridors.e) Public Awareness and
Dissemination ($0.3 million, $0.165 million GEF grant). This component
will support the design of a public campaign with respect to the impacts
of sustainable transport strategies on climate change, other environmental
and health impacts, outlining the advantages and objectives of transport
corridors as well as benefits from the use of high capacity vehicles and
non-motorized modes of transport . This component will also support the
dissemination of technical information produced by the project and will
promote and finance workshops and stakeholder meetings.f) Project
Management ($ 0.7 million, $0.335 million GEF grant).This component will
support the management of the project activities, including monitoring and
evaluation. The project will finance management costs in the form of
consultancy services and travel. The implementation agency will be the
SMA of the City.
Harmonization of sector strategies and Integrated Climate Action Plan
(CAP) for the MCMA
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Enabling environment to facilitate the implementation of sustainable
transport strategies
Field Test of Climate-Friendly High Capacity Vehicles and action plan for
non-motorized transport
Incorporation of climate change and air quality considerations in the
design and analysis of transport startegies
Public Awareness and Dissemination
Project Management
5. Financing
Total ( US$m)
BORROWER/RECIPIENT $2.40
IBRD
IDA
GLOBAL ENVIRONMENT FACILITY $5.80
LOCAL SOURCES OF BORROWING COUNTRY $3.00
SHELL FOUNDATION $1.00
Total Project Cost $12.20
6. Implementation
Executing Agency. The executing agency is the SMA. Technical Committee.
SMA will create a Technical Committee, for the purposes of the GEF
Project, with the representation of four members: the agencies of GDF,
represented by Secretary of SMA and SETRAVI, the State of Mexico, the
Federal Government, and the World Resources Institute, which, through the
Center for Sustainable Transport will assist in the planning and
coordination of the execution of the GEF project. The Technical Committee
will meet at least two times per year. The Technical Committee will be in
operation by CEO presentation.The Technical Committee will: n Guide and
support the Project Implementation Unit in the implementation of the
Project, n Support the coordination of the project's activities and of the
inputs of the involved agencies, n Ensure the metropolitan scope of the
Project, including inputs, activities and results, as appropriate;f Advise
and facilitate the regulatory adjustments that might be necessary for the
implementation of the Project, n Consider the views of stakeholder and
partners concerns and demands, n Facilitate the supervision activities of
the Bank and review the implementation plan and annual report of the
project. The Technical Committee will at all times be equipped and have
sufficient resources to carry out its task. It will be composed by members
with experience and qualifications satisfactory to the Bank including one
representative of SMA, one representative of SETRAVI, two representatives
of Edomex, one representative of UMS, and one representative of Institute
of World Environment and Resources Studies. The Technical Committee will
make decisions by consensus, whenever possible. In the event of a lack of
consensus, SMA will take the decisions, documenting the differences in
views and explaining the reasons behind its decision. Advisory Board.
The Technical Committee will be advised by an ad-honorem Advisory Board on
technical, scientific and social matters. This Board will be at all times
equipped and have sufficient resources to carry out its tasks as proposed
by the Technical Committee and in a manner satisfactory to the Bank. It
will be composed by members with experience and qualifications as proposed
by the Technical Committee and satisfactory to the Bank. The constitution
of the Board will be defined by the SMA prior to CEO endorsement. Project
Implementation Unit. The set-up of a Project Implementation Unit (PIU)
has already been made. The PIU will work for and report to the SMA and
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will be the responsible unit within SMA for the implementation of the GEF
Project and its requirements. The Project Implementation Unit will
coordinate and supervise the implementation of all project activities,
report on progress and ensure compliance with all fiduciary requirements.
The PIU will at all times be equipped and have sufficient resources to
carry out its task and be conformed by members and staffed with personnel
in numbers and with experience and qualifications proposed by the
Technical Committee and satisfactory to the Bank. Lead institutions for
the implementation of each component have been identified (Annex 20). The
PIU will benefit from the advice and assistance of the Center for
Sustainable Transport.Advisory Panel for the Test Protocol. An Advisory
Panel will be organized to advise the Technical Committee on technical,
scientific and social matters related to Part C of the Project,
especifically related to the Test Protocol. This panel will be constituted
by Board presentation. Such panel will be at all times equipped and have
sufficient resources to carry out its tasks as proposed by the Technical
Committee and in a manner satisfactory to the Bank. The costs of the panel
will be covered under the test protocol. This committee would include
world-renowned international and Mexican experts as proposed by the
Technical Committee and satisfactory to the Bank. The ultimate
responsibility for the execution of the test protocol is with STE.
Institutional Arrangements In order to be in full compliance with Bank
requirements per OP/BP 10.02, a certified specialist carried out the
financial management assessment of the SMA as implementing agency,
supported by a technical committee and an administrative unit, which will
be responsible as project implementing unit PIU. The institutional
capacity of SMA is acceptable to the Bank. The financial agency, Banco
Nacional de Obras y Servicios Publicos (BANOBRAS), will provide support to
the PIU to ensure timely project readiness. Considering existing FM
arrangements, BANOBRAS' experience on financial management and that the
procurement assessment reflected that SMA satisfies Bank/GEF requirements
on procurement (according annex 6 section A) this project can be presented
to the Board. SMA is taking actions to have a management information
system, MIS, which will produce quarterly Financial Monitoring Reports,
FMRs, for project management and eventually allow for FMRs-based
disbursements. Traditional disbursement methods (SOEs, special commitments
and direct payments) will be used until SMA is ready to adopt the new FMS
disbursement system.The financial management assessment, FMA, was based on
applicable Bank guidelines focusing on project's accounting system,
internal control, planning, budget and financial reporting system,
auditing arrangements and content/format of the new FMRs. The following
will be required as effectiveness condition (i) the fully
implementation/operation of satisfactory project MIS and reporting
readiness (ii) the project manual (iii) a fully operational PIU and (iv)
the implementation agreement between BANOBRAS and SMA. These conditions
are needed to bring FM to the required level.Project Coordination and
Management. BANOBRAS will be the recipient of the grant resources, under
a GEF grant agreement. SMA will be the executing agency. The project will
be coordinated through a technical committee made up of four members (the
City, The State of Mexico, The Federal Government and the WRI). Overall
implementation programming and progress will be assigned to the committee,
supported by the project PIU, directly, the project coordinator. In
addition, the financial administration of SMA and other relevant SMA's
areas will provide support as needed. The SMA will house the PIU and
disburse resources from a Special Account to be set up at the Central Bank
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for administration of the grant money.The Bank and SMA agreed on the
format and content of the quarterly FMRs. SMA shall carry out a time-bound
action plan acceptable to the Bank for the improvement of its existing
systems in order to enable the preparation of those quarterly FMRs before
project effectiveness.SEMARNAT will represent the Federal Government in
the Coordination Committee and will also play a role in securing the
confirmation of arrangements to involve the Commission of Environmental
Cooperation in the financing of the project.Disbursement and flow of funds
(Special Account): A Special Account (SA) in US dollars with an initial
deposit of US $ 560.000 would be established at the local central bank
Banco de Mexico and managed by the financial agency BANOBRAS. This SA will
be monthly replenished and will be used for all transactions with a value
of less than 20t of the amount advanced to it. Traditional full
documentation requirements apply for direct payments, special commitments
and statements of expenditures (SOEs). SMA in coordination with BANOBRAS
would prepare the necessary documentation for prompt disbursements.
SOEs-based disbursements methodology will be used. SMA will be responsible
for overall flow of funds from the SA and through its standard budget. SMA
will coordinate all project payments and its records and accounts.
BANOBRAS will provide support on Bank financial management procedures to
ensure compliance with all agreements and requirements. A complete section
on project disbursement and flow of funds will be included in project
manual. The SMA will establish a project account in local currency to be
used only for project implementation and following SMA's requirements for
its standard budget. This account will be managed in line with existing
policies, procedures and controls.Auditing. SMA will maintain the records,
accounts, files and project documentation, and will produce standard
financial statements according to International Accounting Standards
(IAS). Project operations will be audited on annually basis in accordance
with generally accepted auditing standards (compatible with International
Standards on Auditing ISAs and satisfactory to the Bank) and procedures
consistently applied, by an independent and qualified auditor (based on
applicable Bank guidelines and TOR for auditing). The audit and financial
statements will be submitted to the Bank four months after the end of the
fiscal year. After one year of operation of the Project, said date for
submission of audit and financial statements will be reviewed and
reexamined on the basis of the experience. The ContralorUa General del
Gobierno del Distrito Federal and SMA's internal auditor will coordinate
with implementing agency SMA and BANOBRAS the annual audits. A section
providing details on auditing will be included in project manual.
Frequency of financial management supervision missions proposed. Financial
management reviews of project arrangement will be carried out to evaluate
needed adjustments in project implementation arrangements. Frequency as
required by the project but at least once a year starting second
implementation year. First implementation year one supervision mission
every six months will be carried out by the Financial Management
Specialist in coordination with project team.        Progress to Date in
Project Preparation The objectives to be achieved by the project have
been identified as priorities in the Air Quality Management Program for
MCMA (AQM-III) (2002-2010), the Integrated Transport Program (2002-2006),
the General Urban Development Program (2002-2006) and finally the
Environmental Program (2002-2006). SMA, SETRAVI and STE, which have been
involved from the beginning in the process of preparing and supervising
the implementation of the PDF-B studies, have expressed their commitment
to allocate enough resources in the next fiscal year to ensure the funding
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of the project baseline. The Grant will be channelled through BANOBRAS,
which in turn will, under the terms of a subsidiary agreement, pass on the
resources to the SMA. The project was prepared by SMA. Results of the
relevant studies funded through a PDF-B grant and a PHRD grant have been
integrated into the project design.The PDF-B supported two types of
studies:a) assessment of the global nature of the air quality issues in
the MCMA; and b) assessment of specific alternatives to address the
emission of GHG.Under the global assessment, the PDF-B supported an energy
balance for the MCMA, a GHG inventory, and an assessment of energy
intensity of economic activity. All these studies were instrumental in
defining the project: the energy inventory identified the transport
sector as the key user of fuels in the MCMA, and identified type of fuels
used. The GHG inventory led to the quantification of GHG by each economic
activity, identifying the volume and type of GHG released by the transport
sector and confirming its character as key source of GHG. The energy
intensity study revealed the increase in carbonization of the transport
sector.Under the specific activities studies, the PDF-B revealed the
barriers that faced modernization of the transport sector and the
introduction of new technologies. For the activities under the energy
rubric (solar water heaters, energy efficiency) the studies revealed that
these measures are economically competitive today and that barriers
impeding further progress are related to those common to introduction of
new measures (perception of risks, lack of information). Still, the
authorities have decided to focus on the transport sector which is by far
the largest contributor of GHG as the studies have confirmed and where a
modal shift has the largest potential for significant reductions.The Shell
Foundation through the World Resources Institute and the Center for
Sustainable Transport have confirmed their technical and financial
assistance and their support to facilitate private sector participation.
In addition, the project has the support of the federal government. A key
element of this program is the active participation of the private sector
manufactures of vehicles and fuels. These will be used to test both new
fuels and vehicles, both for emissions and overall acceptability by
passengers, drivers, and operating companies. Major vehicle companies --
Volvo, Scania, International, and Freightliner (Mercedes, i.e., Daimler
Benz) have agreed to provide test buses. These agreements will be
documented by SMA. The private companies will also be active participants
in the analysis and stakeholder dialogues related to policy development
and implementation. Since this is the first program designed to integrate
transport and air pollution strategies over the long term, such companies
must play an active role in developing successful strategies.
7. Sustainability
Successful adoption of an integrated Metropolitan Climate Change Action
Plan for the transport sector, harmonized with Air Quality, Transport and
Urban Plans facilitates the sustainability of the climate change agenda in
the MCMA in the long-term and commits agencies involved in the
Metropolitan Climate Change Action Plan after the project. Successful
adoption of organizational and barrier removal measures facilitates the
implementation of sustainable, climate-friendly transport strategies and
creates a sustainable institutional and technical framework. Successful
implementation of an Action Plan for non-motorized transport -to promote
the bicycle use- increases the attractiveness and the safety of the use of
non-motorized transport. Successful field test demonstrates less
polluting, climate friendly transport alternatives and makes it feasible
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to provide this information to other Latin American cities. Completion of
technical assistance, capacity building and training activities leads to
incorporation of climate and environmental considerations in the design of
transport projects and to support of the field test of climate friendly
transport systems. Successful design of public campaign and of
dissemination of related technical information leads to increased use of
high capacity vehicles, non-motorized modes of transport as well as
increased public awareness of transport corridors and climate friendly
technologies. The strong commitment from State and City Authorities and
the integral character of the proposals as part of the Air Quality
Management Plan provide the required wide support to ensure
sustainability.While the development of an enabling environment for the
adoption of transport corridors and promotion of a modal shift is a very
local issue (depending on local conditions), the process to be followed
will be of interest to other large metropolitan areas. In this context,
the project has a value added. Also, the test for the alternative bus
technologies will be designed and implemented in a manner that will allow
for wide-use of the information.
8. Lessons learned from past operations in the country/sector
The Bank has a long-standing involvement in the sector of Air Quality
Management. The first project in the MCMA was approved in 1992. The
objective of this project (just closed) was to support a comprehensive
program to reduce transport generated air pollution in the MCMA. This
project was followed by the provision of technical assistance in the
formulation of the AQM-III. The implementation of the first quality
project offers a valuable experience on which to base the proposed
GEF-funded operation. The project was satisfactorily completed and an ICR
(Implementation Completion Report) has been issued. Some of the lessons
learned during its implementation, that have been incorporated in the
project design, include:Air pollution is a long-term problem that requires
a long-term response The Mexican Government has recognized the need for a
long term strategy to address the issues caused by air pollution (PICCA
and PROAIRE see acronyms table) and accordingly has committed to the
development of long range plans, the first of which covered a 5 year
period in the City. To assist in this program, the World Bank needs to
continue to have a long-term commitment that matches the time requirements
needed to secure sizable and permanent improvements in air quality. A
long-term vision and concomitant goals need to be set, to guide removal of
barriers and promote short-term measures.Planning for the long-term,
however, requires flexibility Previous experience has shown that, despite
the best planning efforts in the preparatory stage, required adjustments
in air quality management activities will only become evident during their
implementation. Wide participatory approach to air quality management A
participatory approach, incorporating public opinion in the project, is
required to establish legitimacy of the project. Widespread
implementation of the proposed measures is also critical in order to
achieve the desired results. To accomplish this, it is necessary to gain
public confidence and support for the program activities. There is also a
need to build consensus among all stakeholders over the identification of
priority measures. The effectiveness in carrying out and monitoring the
agreed priority measures needs to be determined in a participatory
approach, with the input of all stakeholders. Commitment from the Mexican
government to publish environmental audits annually to promote the
achievements of the clean air programs, as well as to improve
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institutional transparency is vital. Such audits could help promote local
ownership and full support from the highest levels of Government. The
Bank's involvement should continue to be used for its catalytic effect
The World Bank should continue to catalyze the involvement and the
participation of development banks and agencies, the private sector, NGO's
and foundations and research and training centers. The Bank should work to
mobilize technical and financial support from international environmental
agencies and to organize study tours to cities with experience in modern
transport strategies. The project will support a dissemination effort of
the results and experiences obtained through the implementation of its
components.Local air management matters from a global perspective Local
air pollution issues and global concerns are linked. Local programs may
contribute to global benefits. Major environmental and economic benefits
can be achieved through a well-implemented reform of bus services. In the
recently closed Bogota Urban Transport Project (1996-2002), the Bank was
closely improved in the design and implementation of the successful
transmilenio bus system. Important aspects of this experience could be
replicated in and adapted to the MCMA transport system.
9. Environment Aspects (including any public consultation)
Issues     :  The project will focus on climate change-related
policy and regulatory reform and the development of a Climate Action
Plan. In addition, there will be a comparative field test of buses. The
field test will involve established routes, will not require any new works
and therefore will not involve resettlement. The only environmental issues
are related to standard maintenance of the vehicles, such as disposal of
waste oil. Therefore no safeguard policies are triggered. In order to
ensure that the environmental benefits of the project are maximized in the
short and long term, the policy reform and field test, including the
chosen routes for the field test and transport corridors, will be based on
an extensive characterization of the airshed of the Mexico City
Metropolitan Area and assessment of environmental impact of transport
policy options done under the WB environment sector work.
10. Contact Point:
Task Manager
Walter Vergara
The World Bank
1818 H Street, NW
Washington D.C. 20433
Telephone: 202 458 2705
11. For information on other project related documents contact:
The InfoShop
The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 458-5454
Fax:        (202) 522-1500
Web: http:// www.worldbank.org/infoshop
Note: This is information on an evolving project. Certain components may
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not be necessarily included in the final project.
This PID was processed by the InfoShop during the week ending
October 11, 2002.
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