Iran - Tehran Transport Emissions Reduction Project

GLOBAL ENVIRONMENT FACILITY I A1 a i 04=Aa Islamic Republic of Iran - Tehran Transport Emissions Reduction Project Project Document October 1993 THE WORLD BANK  GEF Documentation The Global Environment Facility (GEF) assists developing countries to protect the global environment in four areas: global warming, pollution of international waters, destruction of biodiversity, and depletion of the ozone layer. The GEF is jointly implemented bythe United Nations Development Programme, the United Nations Environment Programme. and the World Bank. GEF Project Documents - identified by a green band - provide extended project- specific information. The implementing agenc, responsible for each project is identified by its logo on the cover of the document. Global Environment Coordination Division Environment Department World Bank 1818 H Street, NW Washington. DC 20433 Telephone: (202) 473-1816 Fax: (202) 522-3256  CURRENCY EOUIVALENTS (As of July 1, 1993) Currency Unit = Rial (RLs) RLB 1000 = US$0.625 US$1.0 = RLs 1600 WEIGHTS AND MEASURES The Metric system is used throughout this report. GLOSSARY OF ABBREVIATIONS CBD - Central Business District CFC - Chlorofluorocarbon DTT - Department of Transport & Traffic GEF - Global Environment Facility GET - Global Environment Trust Fund GHG - Greenhouse Gases GOIRI - Government of the Islamic Republic of Iran GWP - Global Warming Potential HC - Hydrocarbons I/M - Inspection/Maintenance IPE - International Panel of Experts MTBE - Methyl Tertiary Butyl Ether NMOC - Non-Methane Organic Compounds PAG - Project Advisory Group TM - Tehran Municipality UNDP - United Nations Development Programme UNEP - United Nations Environment Programme VOC - Volatile Organic Compounds FISCAL YEAR Islamic Republic of Iran Municipality of Tehran March 21 - March 20   ISLAMIC REPUBLIC OF IRAN TEHRAN TRANSPORT EMISSIONS REDUCTION PROJECT GRANT AND PROJECT SUMMARY Recipient ISLAMIC REPUBLIC OF IRAN Beneficiary: Tehran Municipality GEF Category: Global Warming Amount: SDR 1.50 million (US$2.00 million) Terms: Grant Relending Terms: The Recipient will pass the proceeds of the GET Grant on to Tehran Municipality in the form of a grant Financing Plan: GET Grant $2.00 million equivalent (foreign cost) Tehran Municipality $2.00 million in RLs (local cost) Total Cost $4.00 million Economic Rate of Return: Not applicable Zap: IBRD No. 25050   ISLAMIC REPUBLIC OF IRAN Tehran Transport Emissions Reduction Project Backeround 1. Urban transport in the rapidly growing cities of developing countries is of considerable concern from a global warming standpoint. Worldwide, transport sector contributions to the greenhouse effect have been estimated to be on the order of 12 to 15 percent of total emissions of all greenhouse gases (GHG), and about 30 percent of GHG emissions from the use of fossil fuels. While developing countries as a group now account for only a small portion (2 to 3 percent) of transport related GHG emissions, they are responsible for a disproportionate share of increases in these emissions due to increases in automobile use and the continued use of obsolete, fuel-inefficient automotive technologies. Improving efficiency, and managing urban transport demand to minimize emissions will require interventions in a number of inter-related areas: pricing of transport services and fuels, provision of efficient public transit, maintenance/renewal of existing vehicle fleets, upgrading domestic vehicle technologies, etc. Tehran was selected as the location for the project for a number of reasons: the city suffers from severe air pollution for which transport is the primary cause and a strong potential exists for exploiting the joint benefits of local air pollution abatement and GHG emissions reduction, and for examining the trade-offs between them. The city has also embarked on a number of initiatives for improving air quality which provide a rich diversity of technologies and regulatory interventions to be studied under the proposed project. 2. In Tehran, urban transport operations consume an estimated 2.0 million tons of gasoline/diesel fuel per year, releasing about 6 million tons of C02; transport operations generate almost as much carbon emissions per capita (0.7 tons p.a.) in Tehran as in Mexico City (0.9 tons p.a.) which suffers from one of the worst air pollution situations in the world. For instance, the maximum 8-hour average for CO concentrations was 100 ppm (in 1987) which is about 10 times above the WHO Guidelines of 9 ppm and considerably worse than the situation in Mexico City. Partly, this high level of carbon emissions is due to a weak public transport system, causing an excessive reliance on the automobile which accounts for about 60 percent of all passenger trips in the city. By way of comparison, in Mexico City the automobile accounts for less than 30 percent of passenger trips. Historically low fuel prices in Iran, while promoting the use of automobiles, have also reduced the incentives for introducing fuel efficient technologies. Existing cars in the fleet are inefficient due to older engine designs (fuel consumption 50 percent higher on average than more up-to-date technologies), and lack of maintenance, with about 40 percent of the fleet being in such poor condition that they can no longer be tuned-up without replacement of some engine components. 3. An environmental action plan under preparation for Iran, identifies air pollution in Tehran as a key environmental issue for the country. Since local air pollution abatement would be a joint product of the Greenhouse Gas (GHG)' abatement measures identified under the project, Tehran's deteriorating air pollution situation, and obsolete transport technology which is typical of those found in many developing countries, provide a perfect setting for this pilot GEF project. Background studies for the Environmental Action Plan have been completed and it is expected that the Plan itself will be formulated during calendar 1994, and therefore this GEF project will be able to provide timely inputs to that process. 1/ Local air pollutants include: carbon monoxide, nitrogen oxides, ozone non-methane hydrocarbons, sulfur oxides, lead and suspended particulate matter. Automotive-related greenhouse gases are mainly carbon dioxide as well as methane, and nitrous oxides.  - 2 - 4. The primary cause of air pollution in Tehran is the exhaust from about 1.4 million motor vehicles, including about 0.5 million motorcycles, operating in an extremely congested road space; it is estimated that between 70 and 80 percent of total emissions in the Greater Tehran area are related to urban transport operations. Reported average concentrations of pollutants such as carbon monoxide (CO) and nitrogen dioxide (NO2) in central Tehran in 1986 were two to three times maximum average levels recommended by WHO, and growth in traffic over the last five years has made the situation even more severe. The problem is compounded by topographical (mountains to the north and east) and climatological factors (frequent temperature inversions), which favor photochemical transformation of volatile organic compounds (VOC) and nitrogen oxides (NOx) to produce smog and tropospheric ozone, and there is reason to believe that Tehran suffers from high ozone concentration levels. Rationale for GEF Funding 5. Transportation energy use in developing countries is rapidly becoming a critical issue. Recent projections by the US Department of Energy indicate that the overwhelming majority (80 percent) of growth in world oil consumption to the year 2010 could come from developing countries. For the 15 largest developing countries about 50 percent of the growth in oil consumption in the 1970 to 1984 period has been in transportation. There are good reasons for selecting Tehran as the first city to address urban transport related greenhouse gas emissions and air pollution. Tehran is a highly polluted city with considerable potential for low cost interventions that would reduce both GHG emissions and local air pollutants. Tehran Municipality has a rich diversity of transport related developments planned or under implementation, and these provide a good opportunity for a pilot program such as this to develop the methodological basis and information base necessary to introduce emission reduction concerns into standard urban transport planning practices. Further, the Islamic Republic of Iran is strongly committed to addressing global climate change issues, and is a signatory (June 14, 1992) to the U.N. Framework Convention on Climate Change. Project Objectives 6. With the support of GEF funding, authorities in Tehran will assess measures, including efficient pricing of inputs and urban transport services, that would reduce GHG emissions from vehicular traffic, while simultaneously improving local air quality. GHG abatement can be achieved through a variety of measures, all of which will produce some reductions in local air pollution. The GEF project would identify a schedule of measures. to achieve a target air quality improvement, which serve both objectives at the lowest incremental cost for GHG abatement. Such a schedule of GHG abatement maximizing measures, and the associated incremental costs, will provide decision makers with the information necessary to design a program of local air pollution abatement that simultaneously, and cost effectively, addresses global warming concerns. Project Description 7. The project will be a joint effort between Tehran Municipality and the GEF to study options for future development of the Tehran transport system in an environmentally sustainable manner. The GEF contribution will enable the study to address concerns related to global warming which would otherwise not receive priority 1rom a national perspective. The Tehran Municipality contribution of 50 percent of the project cost reflects the local air pollution benefits which will result from GHG abatement measures. Joint financing is provided for as this is a "type 3" project under the GEF criteria, ie. a project which is justified in the country context, but the country would need to incur additional costs to bring about additional global benefits, as opposed to a project that can only be justified on global benefit grounds. The following provides brief details on the project components.  - 3 - (a) Emissions Inventory & Air Quality Monitoring: (i) Development of emissions estimates, covering both mobile and stationary sources, for those pollutants (GHG and conventional) emitted by transport operations; (ii) Specification of the air quality monitoring system to be used in assessments of air quality changes; and (iii) Establishment of baseline air quality data, and target air quality standards. (b) Traffic Management & Restraint: (i) Estimation of an appropriate travel modal shift model, calibrated for Tehran; (ii) Estimation of emission factors associated with various transport modes under various operating conditions; (iii) Development of a transport model for all urban transport modes to assess potential emission reductions; and (iv) Assessment of traffic management strategies, including parking management, with respect to air quality impacts. (c) Vehicle Fleet & Fuels Improvement: (i) Design of a comprehensive policy for accelerated fleet renewal; (ii) Enhancement of Tehran's Inspection/Maintenance and tune-up program, aimed at establishment of effective emissions tests; (iii) Study of the feasibility of introducing alternative fuels such as natural gas, and higher quality fuels such as reformulated gasoline; and (iv) development of a program to introduce Emission Standards for new vehicles, which take into account target air quality standards. (d) Strategic Urban Transport Emissions Reduction Planning: (i) Identification of costs and impacts of various pollution abatement measures including economic pricing of energy supplies and transport services and the associated elasticities. Costs will include implementation, user costs, and other public and private costs - "supply curves" showing the costs of various interventions per unit of GHG/local pollutant emission reduction would be developed; (ii) Analysis of institutional and other constraints to implementation of options; (iii) Synthesis of the results in an evaluation framework; and (iv) Preparation of implementation plan. (e) Project Support and Transport & Air Quality Seminar: funding of administrative support and of a seminar to present the results and obtain public comment on the measures proposed. (f) International Panel of Experts (IPE): Funding of fees and travel expenses for a panel of four international experts in the fields of air pollution measurement and impact assessment, transportation fuels, vehicle technology and emission controls, and urban transport planning. A more detailed project description is in the Technical Annex (para. 4.12). Global Environmental Benefits 8. The project would quantify the costs of various interventions to reduce greenhouse gas and local air pollutant emissions from urban transport in a setting characterized by in-use technologies that are typical for non-industrialized and newly industrializing countries. This information should prove invaluable in guiding policy decisions for urban transport development in developing countries and to the work of international bodies dealing with climate change issues. Secondarily, the project would assist the Tehran Municipality and GOIRI in embarking on urban transport policies which are environmentally sustainable from a local and global standpoint.  -4- Project Implementation 9. Tehran Municipality will execute the project which would be implemented in three phases. In Phase 1, the International Panel of Experts (Component F) would specify the studies to be carried out in detail, and prepare Terms of Reference for the studies. In Phase 11, Components A, B and C would be undertaken. Upon satisfactory completion of all Phase II studies, the strategic planning studies, Component D would be initiated in Phase III. Consultants will be engaged to assist in implementing Components A, B, C and D of the project. The consultants will be managed by a project office within the Department of Transport and Traffic (DTT), Tehran Municipality, which will also coordinate the various agencies involved in project implementation, i.e., the Air Quality Control Co., the Tehran Vehicle Technical Inspection Bureau, and the Tehran Comprehensive Transportation and Traffic Studies Project. A Project Advisory Group comprising representatives of the Ministry of Oil, the Department of Environment and other national agencies would also be established to guide the project. Component F of the project will be implemented by Tehran Municipality by engaging the experts as individual consultants. Proiect Sustainability and Replicabilitv 10. It is expected that the recommendations of these studies will be incorporated into the future investment plan for urban transport development in Tehran. Sustainability will depend on the implementation of the investments/policy measures identified. In particular, petroleum pricing policies adopted by GOIRI will be key to achieving energy efficiency improvements. This project would also contribute to the preparation of environmentally sustainable urban transport investment projects to be financed by the Bank in various developing countries. Project Risks 11. Given the strong comnmitment of GOIRI and Tehran Municipality to this project, no specific issues or risks are foreseen in the actual implementation of the project, other than the normal implementation risks of a program of studies. There is however some risk that the level of inter-ministerial coordination necessary to generate solutions that are institutionally feasible may not be forthcoming. To address this concern, the project design requires that Tehran Municipality establish (with GOIRI's support) a Project Advisory Group (PAG) with representation from seven agencies/ministries involved in various aspects of environmental regulation, transport energy supplies, health and the transport industry. UNDP, Tehran will also be represented in the PAG. Ajgreements Reached 12. During negotiations the Bank reached with GOIRI and Tehran Municipality that there would be: (a) An undertaking in the GET Grant Agreement that GOIRI will take all actions necessary on its part for the establishment and functioning of the PAG. (b) An undertaking in the Project Agreement that Tehran Municipality will establish for the project a bank account in a commercial bank on terms and conditions satisfactory to the Bank. Withdrawals from such account will be made only to pay for project costs. The Municipality will make deposits in Rials into such account at such times and in such amounts as the Bank deems necessary, up to an aggregate maximum of the Rial equivalent of US$2 million.  - 5 - (c) A condition of effectiveness in the GET Grant Agreement that a subsidiary grant agreement, on terms and conditions approved by the Bank, shall have been executed by GOIRI and Tehran Municipality. (d) A condition of effectiveness in the GET Grant Agreement that Tehran Municipality shall have established the bank account referred to in (b) above, and shall have made an initial deposit therein of the Rial equivalent of at least US$500,000. Attachments   Schedule A ISLAMIC REPUBLIC OF IRAN TEHRAN TRANSPORT EMISSIONS REDUCTION PROJECT Expected Proiect Cost and Financing Plan Estimated Cost: Foreign Local Total