37954 E n v i r o n m e n t S t r a t e g y Using Strategic Environmental Assessments for Environmental Mainstreaming in the Water and Sanitation Sector -- The Cases of Argentina and Colombia Ernesto Sanchez-Triana and Santiago Enriquez No. ntegration of environmental considerations into development planning has been carried out through project level environmental impact assessments (EIA), 15 I typically after many critical policy level decisions have already been made. Strategic environmental assessment (SEA)--an analytical and participatory pro- M cess to include environmental considerations into policies, plans, and programs A (Ahmed et al 2005) can be used to shift the discussion upstream to the point at Y which policies are made. Such an SEA process, referred to here as institution-cen- tered SEAs,1 can thus be a means of incorporating environmental considerations 2 0 into policies and influencing decisions at an early stage of development. This is 0 particularly challenging because policy making is a complex process characterized 6 by uncertainty and by interactions among multiple stakeholders with competing interests. SEAs are, consequently, not predominantly technical tools; they are open processes that bring together a variety of stakeholders to make decisions on how to balance social, economic, and environmental goals. This Note offers strategic guidance on the advantages and difficulties of conducting institution-centered SEAs as an integral element of the Bank's dialogue with its clients. It takes as case studies the SEAs carried out during the preparation of Bank-supported water and sanitation sector (WSS) reforms in Argentina and Colombia.2 Background and content Box 1 of the SeaS oBjectives of the ArgentinA And colomBiA Because the Argentina Water Sector Reform WAter sector reform projects Project (see box 1) was expected to have both beneficial and adverse environmental The objective of the Argentina Water Sector Reform project was to support water impacts, the Bank's operational policies sector reform in select cities by introducing private sector participation in the opera- required that an environmental assessment tion and management of water utilities; adopting appropriate regulatory frameworks, be conducted. However, focusing primarily institutionalizing tariff policies and increasing investments in public works to better on the environmental impacts of the public reach poor consumers (World Bank 1999). Similarly, the Colombia Water Sector works to be financed by the project was Reform Assistance Project was to support water sector reform by facilitating private inadequate, since the specifications of the sectorparticipationinthemanagementandoperationofwaterutilitiesandfinancially works were still unknown. In addition, the creating sustainable utilities. It included financing investments in water sector, and government recognized that a institution- sanitation infrastructure (World Bank 2001). based SEA could help address priorities in the water supply and sanitation sector and Table provide critical input for determining the Main Components of the SEAs in Argentina and Colombia types of public works that the project would Goal Methodology fund. Accordingly, in 1997 the Ministry of Identify sector Use quantitative methods to assess the severity of sector priorities and provide priorities reliable information for decision making, focusing on the key issues that are Economy (the main counterpart govern- relevant for policy makers. Incorporate the Request input from local water authorities, water operators, nongovernmental ment agency) hired a team of consultants perspectives of organizations, academic institutions, and other relevant actors. Ensure the to prepare a institution-centered SEA, at a multiple stakeholders participation of vulnerable groups, which tend to be most severely affected by environmental degradation but rarely have a voice in policy making. cost of $25,000, to be completed in three Assess institutional Evaluate the specific institutional factors in the country that are associated with months.3 weaknesses sector priorities or impede responses to them. Map stakeholders to identify actors that may oppose recommended reforms. In Colombia, too, in the context of Mainstream On the basis of the first three components, redefine sector policies to address the Bank supported Water sector reform environment into sector priorities, taking into account the needs of the most vulnerable groups. policies project, the government faced a similar Provide for Define the monitoring arrangements needed in order to adjust policies in dilemma. Learning from the Argentinean continuous policy response to experience, new information, or changes in stakeholder preferences. improvement experience, in 1999 the Department of National Planning, the Ministry of Environ- appraise the economic incentives for efficient consumption. In addition, ment, and the Ministry of Development also evidence of conflicts among water users arising from inefficient use of a agreed to undertake a policy-based SEA to scarce resource and increasing reliance by water users on distant water address the linkages between the environ- sources was gathered. ment and the WSS. 2. Water quality. Using the human capital approach, the economic costs of waterborne diseases was calculated. In addition, evidence of the im- Goals and Methodology pacts of water pollution on economic activities and natural habitats was In both cases, the SEAs had similar goals compiled. and methodology (see Table). These are 3. Environmental impacts associated with civil works. The consultants examined elaborated below. the effects the works would have on noise, odors, traffic congestion, and air pollution, among other indicators. These impacts were estimated quali- Identifying Sector Priorities tatively on the basis of their intensity, duration, and geographic scope. In both countries, in order to determine In Argentina, inefficient water use (associated with leaks, failure to which issues bore the greatest economic measure water use, nonpayment, and the absence of institutional mecha- costs and need urgent action in the water nisms for allocating water among users) was the most severe problem, with and sanitation sector, three different exter- water losses estimated at 53 percent of water production. In Colombia water nalities--market failures calling for govern- pollution stemming from untreated wastewater and inadequate solid waste ment action--were estimated: disposal was identified as the most serious challenge because of its impacts 1. Efficiency of water use. Water use ef- on human health. Among these were diarrheal illnesses that cost an estimated ficiency was evaluated by quantifying $315 million to $400 million per year. and valuing water losses, estimating The main obstacles in identifying sector priorities were data gaps and incon- nonpayment for water consumption to sistenciesinavailableinformationanddemonstratedtheneedtoestablishinforma- calculate utilities' forgone income and tion-gathering systems that would support policy adjustments in the future. Incorporating the Perspectives of Multiple Stakeholders Yet this effort to build plants had no significant In Argentina interviews were conducted with low income communities in three effect in reducing waterborne diseases. different cities. Input was solicited from local government authorities, water op- Mainstreaming Environment in Policies erators, non-governmental organizations, and professional associations (see box The SEA in Argentina identified a number of 2). In Colombia the agencies involved organized two nationwide workshops, the issues associated with inefficient water use and first, to collect input on the scope of the SEA, and the second, to request com- pollution that could be dealt through policy ments on an advanced draft of the report. Government agencies, private utility reforms: (a) the establishment of water use operators, academics, and nongovernmental organizations were also consulted and pollution charges to internalize the costs of to build consensus around the SEA. This process provided additional support negative externalities in water users' decisions for the SEA's suggestion that priority be given to investment in the expansion of and (b) financial schemes that allowed low- water and adequate coverage to areas without access to safe water or sanitation. income households to pay their connection In addition, the consultants held interviews with several local investors and found fees in installments. The SEA also outlined an that the legal uncertainty generated by environmental regulations was a barrier organization-strengthening program for utili- to private investment in the sector. ties, based on the adoption of environmental Assessing Institutional Weaknesses management systems (EMSs). Other recom- The institutional assessment in Argentina examined whether the appropriate mendations were to award an annual prize to regulatory instruments for addressing sector priorities were in place and whether the utility with the best environmental perfor- they defined concrete goals, distributed responsibilities clearly, and contemplated mance, to strengthen the Secretariat of Water appropriate enforcement mechanisms. The SEA also looked at whether the rel- Resources by creating an environmental unit evant agencies' resources for fulfilling their obligations were adequate, as well that would function as an intersectoral coor- as at their political and legal constraints. The assessment found (a) a fragmented dination mechanism for environmental main- institutional framework and, as a result, an absence of effective regulations for streaming, and to implement an environmental controlling water pollution; (b) jurisdictional overlaps, coordination problems that sectoral information system for measuring the impeded the definition and enforcement of water property rights; and (c) neglect impact of the recommended policies. of environmental considerations by WSS authorities and utility operators. In Colombia, the policy recommendations In Colombia, the SEA focused primarily on the effects of environmental focused on reducing regulatory barriers to the regulations on the expansion of basic services. Three regulatory instruments expansion of water and sanitation coverage. were identified as obstacles to private investment in the sector: the environmental For example, the SEA recommended giving impact assessment (EIA), water pollution charges, and Decree 1594, which set priority to policy reforms such as modifying standards for discharges to water bodies. The analysis revealed, for example, that pollution charges and Decree 1594 so as to water pollution regulations targeted pollutants that had no significant effect on help attract private investment, proposed a human health. Further, it showed that compliance with Decree 1594 was extremely mechanism for ensuring greater transparency costly, as it required the construction of secondary wastewater treatment plants. in implementing EIA regulations and establish an environmental unit within the Ministry of Box 2 Development that could mainstream environ- issues emerging from stAkeholder mental considerations at the highest decision- consultAtion in ArgentinA making levels. The consultations highlighted the lack of a national strategy for providing basic services Provide for continuous policy to the poor. For instance, concession contracts between water utilities and municipalities improvement set tariff schemes that did not permit the recovery of the cost of new connections, and Policy reform and institutional strengthening thus utilities had no incentive to expand services to poor areas that were without water or cannot be rapid, linear processes; they entail sewerage coverage. In other areas poor households could not afford the lump payment of establishing relevant indicators and the associ- connection fees that utilities demanded. Collection of water fees was as low as 5 percent in ated information-gathering systems, monitor- some localities, where utilities typically depended on public subsidies to cover operational ing and evaluating the entities' progress toward deficits. Since it was mostly the non-poor households with connections, such transfers meeting the goals, and subsequently remedy- were regressive. Finally, lack of metering systems meant that water tariffs were based on ing ineffective institutional performance or residence location rather than on actual consumption. Consequently, in localities where adopting a new set of goals. Learning within poor and non-poor homes were not clearly segregated, poor households that did have ac- organizations is key in this context, since they cess to water services had to pay tariffs similar to those for non-poor households. must deliberately adjust their goals or policy Source: Alcaraz, Sanchez-Triana, and Calcagno 1997. instruments in response to experience or new information. Moreover, if institutional weak- nesses are to be addressed, accountability would likely have focused on the negative ture Unit, Latin America and needs to be strengthened so that entities impacts of specific projects. By contrast, the Caribbean Region World Bank, Washington DC). and individuals can be held responsible the policy-based SEAs provided an oppor- World Bank. 2005. Integrating if they fail to meet a set of clearly defined tunity for addressing the most significant Environmental Consider- performance- and outcome-based goals. In environmental impacts in the water and ations in Policy Formulation: Lessons from Policy Based both cases the SEA recognized that because sanitation sector by identifying a package SEA Experience. Environ- of the limited information available for of environmental policy reforms that should ment Department. World making sector decisions and the inherent serve as an integral element in strengthen- Bank, Washington D.C. complexities of policy reform, the sector's ing the sector. Despite these advantages, main problems were unlikely to be solved policy-based SEAs must contend with Authors in the short run. The SEA recommenda- inherent difficulties linked with policy and Ernesto Sanchez-Triana is a Senior Environmental Engineer in LCSEN at tions therefore included the establishment institutional reform. the Bank; and Santiago Enriquez is a of an environmental sectoral information noteS Consultant with the Environment de- system that would help assess whether partment at the Bank. environmental priorities were being met 1. SEA refers to a range of approaches from those that are impact centered to those that Reviewers and would provide a basis for evaluation focus on assessing institutional and gover- This Note was reviewed by Adriana of progress and continuous improvements nance issues linked with policy reforms. For Jordanova damianova, Lead Environ- in policies. a longer discussion see SEA toolkit at www. mental Specialist, SASES; Claudia W. worldbank.org/sea. Sadoff, Lead Economist, Ard; and Pete outcomeS of the Sea proceSS 2. This case was presented at the IAIA Con- J. Kolsky, Senior water and sanitation ference at Prague, Czech Republic, 26-30 specialist, EWdWS -- all of the Bank. Conducting SEAs during the earliest stages September 2005, and also stems from World of project preparation allowed the incor- Bank (2005). poration of environmental considerations 3. Dollar amounts are current U.S. dollars. in the final design of both projects. The referenceS The Environment Strategy Notes series aims to provide a forum for discussion on a execution of an SEA did not impose any Ahmed, K., J. R. Mercier, and R. Verheem. 2005. range of issues related to the Environment more constraints on project preparation Strategy, to help the transfer of good prac- Strategic Environmental Assessment: Con- tices across countries and regions, and to than would any other type of assessment cept and Practice. ESN #14. Environment seek effective ways of improving the Bank's that would comply with the Bank's safe- Department, World Bank, Washington D.C. environmental performance. Alcaraz, S., E. Sanchez-Triana, and A. T. Cal- guards. Indeed, the SEA added value by cagno. 1997. "Análisis ambiental sectorial, The views herein are those of the author(s) shifting policy makers' attention from the informe final." Buenos Aires. Secretaria de and should not be considered official policy of, nor attributed to, the World Bank narrow issue of the environmental impacts Recursos Hídricos, Ministerio de Economía, Buenos Aires. Group. of individual projects to a broader concern OECD (Organisation for Economic Co-operation with sector-level priorities and environ- and Development). 2001. Environmentally mental management issues that could Related Taxes in OECD Countries: Issues and T Strategies. Paris. only be addressed through policy reforms. Executive Editor Sanchez-Triana, E. 2000. "Evaluación ambiental Kulsum Ahmed Implementation of the SEA recommenda- del sector agua potable y saneamiento en tions has been slow, due to the inherent Colombia, informe final." Ministerio de Desa- Managing Editor rollo Economico Programa de las Nacionales difficulties of policy reform. Nevertheless, Poonam Pillai Unidos para el Desarrollo, Bogota. in both countries the SEA has become the Sanchez-Triana, E and S. Enriquez 2005. "Us- Editor Nancy Levine basis for a broader, continuing policy dia- ing Strategic Environmental Assessments for Environmental Mainstreaming in the Water Designer / logue between the Bank and the country and sanitation Sector. Sustainable Develop- Production Manager in the water and sanitation sector, and ment Working paper No.26. (World Bank Jim Cantrell sector and environmental authorities plan Environmentally and Socially Sustainable Development Department. Latin America to implement pending recommendations in and the Caribbean Region World Bank, the medium term. Washington DC) concluSionS World Bank. 1999. Argentina Water Sector Re- form Project, Project Appraisal Document, T h E W o r L d B A N K The cases of Argentina and Colombia il- Report No. 19258. Finance, Private Sector Environment department and Infrastructure Unit, Latin America and 1818 h Street, N.W. lustrate the potential of SEAs to incorpo- the Caribbean Region World Bank, Wash- Washington, d.C. 20433 USA rate environmental considerations at the ington DC. Tel: 202 473 1000 policy level. If a traditional EIA had been World Bank. 2001. Colombia: Water Sector Re- Fax: 202 477 0565 form Assistance Project, Project Appraisal conducted during the preparation of the E-mail: eadvisor@worldbank.org Document, Report No. 21868-CO (World Web: <>