Page 1 PROGRAM INFORMATION DOCUMENT (PID) Report No.: AB6496 APPRAISAL STAGE Operation Name Vietnam Climate Change Development Policy Credit Region East Asia and Pacific Region Sector Water Resources Management, Energy Efficiency, DRM, Institutional Capacity Building, Financing Project ID P122667 Borrower(s) The Socialist Republic of Vietnam Implementing Agency Ministry of Natural Resources and Environment Ministry of Natural Resources and Environment 83 Nguyen Chi Thanh - Dong Da - Ha Noi * Tel: (84-4) 8 343 911 * FAX: (84-4) 8 359 211 Email: webmaster@monre.gov.vn Vietnam Date PID Prepared March 25, 2011 Estimated Date of Appraisal Authorization April 18, 2011 Estimated Date of Board Approval July 14, 2011 1. Country and Sector Background Vietnam is one of the most vulnerable countries to the effects of climate change. Impacts from climate change in Vietnam are already being felt, and are expected to increase in the future putting a heavy toll on public finance and human and social development. Water resource management stresses arising from climate change further add to the problems that exist today. There are serious concerns about meeting future projected water uses, particularly in the dry season. 1 Hydrological changes and sea-level rise will affect the availability of fresh water (saline intrusion) or even physically change the agricultural landscape. Climate related natural disasters cause an average of 750 deaths and result in annual economic losses equivalent to 1.5 percent of gross domestic product (GDP). The possibility that climate change could worsen flooding, prolong droughts, and increase the strength and frequency of typhoons associated with strong sea surges calls for preventive and adaptive action. Vietnam’s CO 2 emissions have more than doubled over the past decade and are projected to reach 101.5 million tons of CO 2 -equivalent from energy-related sources in 2010. Under a business as usual scenario, Vietnam’s primary energy demand will more than double and total energy-related greenhouse gas (GHG) emissions triple by 2030. The industrial, transport and power sectors are projected to account for the bulk of the increase in GHG emissions. 2. Operation objectives The PDO of the proposed operation is to support the GoV in its efforts to address climate change by adopting policies and strengthening institutional capacity to promote climate resilient and lower carbon intensity development. 3. Rationale for Bank Involvement 1 See Government/ADB water sector review (ADB 2009) Page 2 The GoV has identified climate change action as a policy priority and demonstrated its commitment to further scale-up, complement and strengthen its climate change response with the adoption of a national policy development program, the Support Program to Respond to Climate Change (SP-RCC) in 2009. The SP-RCC complements and reinforces the actions initiated under the NTP-RCC. The main objective of SP-RCC is to promote policy and institutional development that is conducive to scale-up and mainstream climate change adaptation activities and GHG reduction. The operation is guided by strategic thematic importance and expected impacts of climate change and the related policy actions. The rationale to engage is supported by a shared vision with the Government, a strategic complementarily with Bank lending and non lending portfolio, clear co- benefits, strong inter-linkages across the four goals and an assessed comparative advantage of the Bank in these areas. The policy and institutional development program under the proposed DPO aims at increasing the GoV’s capacity to respond to climate change and at enhancing Vietnam’s preparedness to engage in international climate partnerships. This includes the development of a low carbon development study, which will support the GoV in formulating Nationally Appropriate Mitigation Actions (NAMAs), and the completion of adaptation studies that could form the basis of a National Adaptation Plan (NAP) under the UNFCCC. 4. Financing Source: ($ million.) Borrower 0 International Development Association (IDA) 70 Total 70 5. Institutional and Implementation Arrangements The overall management of the DPO will be fully aligned with existing integrated Vietnamese government structures under the NTP-RCC and the SP-RCC. The National Steering Committee for NTP-RCC (SC), and the Executive Board of the NTP-RCC (EB) are the governing bodies of the SP-RCC. The progress under the DPO will be reported to the SC and EB in alignment with the NTP-RCC’s reporting procedure. MoNRE is the counterpart agency and collaborates with relevant line agencies to coordinate the policy dialogue and provide overall accountability under the DPO. A SP-RCC coordination unit was created within MoNRE and is assigned to be the focal point for the implementation of the DPO. It reports to the Executive Board on the progress on the policy matrix after each meeting and to the Prime Minister at least once per year to report on the achievement of previous cycle and request commitment of the following cycle. MoNRE co-chairs Technical Meetings, held with development partners three times a year, and monitors the implementation of actions collecting information on progress towards the results committed with development partners. Page 3 Line ministries, agencies, and provinces are responsible to develop and implement selected policy actions under the DPO and participate to Technical Meetings in collaboration with MoNRE. They update and report on achievements and progress of policy actions to MoNRE. 6. Benefits and Risks The operation will help the GoV to develop enabling institutional and policy actions considered key to address climate change. · The policy actions under the adaptation pillar will lay the basis to improve the climate resilience of water resources. · The policy actions under the mitigation pillar will facilitate lower carbon intensity development and exploit the potential for energy efficiency. · The policy actions under the cross- cutting pillar will strengthen the GoV’s capacity and preparedness to formulate, prioritize and implement climate change policies. In particular, the policy actions will build up the analytical and scientific basis for climate policy formulation and implementation, and integrate climate change considerations into development planning. This will help the GoV to identify and address the need to develop more specific priorities and targets for climate action. The DPO will also strengthen the financing framework for climate action. The actions under this goal target both international funding and state budget planning, allocation, monitoring and reporting processes and the regulatory and policy environment for private carbon finance flows enabling the GoV to better plan, access and monitor climate finance. Five risks to t he program’s outcomes have been identified: · The operation might be delayed due to a challenging macroeconomic setting that currently stalls all development policy lending to Vietnam. Mitigation : Macroeconomic policy lies in the domain of the GoV. However, the macroeconomic framework and the GoV’s efforts to address the situation will be closely monitored. · Slow progress in broadening and deepening ownership of Vietnam’s climate change agenda and difficulty to maintain momentum. Mitigation: Awareness support, active multi- sector engagement process, robust strategic dialogue and M&E highlighting progress made, together with capacity building - including for participation in international negotiations. In addition, technical assistance for analytical work to increase the understanding of climate change. · The project development objective faces the risk of being diluted by the complexity and novelty of the climate change agenda in combination with financial and human resource constraints of the GoV. Mitigation : A targeted TA and advisory services package is being developed in support of the implementation of the policy reform agenda. Selection of policy areas corresponds to Government’s priorities; policy development will foster co-benefits and no-regret solutions. · Weak capacity to formulate innovative policy and mobilize inter-ministerial coordination, including weak capacity of MoNRE to leverage and monitor a dialogue with other ministries. Mitigation : Capacity development and TA will target gaps analysis for policy development needs in each of the 5 ministries involved. The establishment of focal points within involved ministries is being supported, and role of the Standing Office in MoNRE as coordinating entity is being strengthened. Special attention will be put on M&E and reporting capacity. Page 4 · Weak perception of short term benefits as well as of outcomes of the reform progress by line agencies. Implementation of policies and financing of investments perceived as de-linked from support from SP-RCC. Mitigation: The development of a financing mechanism that links budget allocation to progress on the climate policy reform agenda is being supported. Inter-linkages between the DPO and the Bank’s lending portfolio are designed to link implementation and policy dialogue. Planned technical assistance and capacity building will contribute to the incentive framework. 7. Poverty and Social Impacts and Environment Aspects Vietnam’s vulnerability to the effects of climate change is socially differentiated. Although the general direction of most changes is known, there is no certainty about their magnitude and speed and therefore about their eventual impacts. The current models, however, suggest that some impacts will have important economic or human welfare effects over the coming decades. It is also recognized that certain social groups or communities are inherently more vulnerable or likely to be more affected and therefore need special consideration. Given the strong linkages between the proposed policy areas and issues of poverty, DPO has a potential to help the poor mitigate some impacts of climate change, and contribute to poverty reduction efforts. Poverty impacts the access to resources and entitlements, and therefore increases vulnerability and sensitivity of livelihoods to risks. If properly crafted, climate change related policy reforms in water resource management and energy efficiency could have an aptitude to decrease vulnerability of the poor and increase their resilience to climate induced shocks. Poverty and social impact analysis (PSIA) will therefore be undertaken to assess: (i) poverty and social impacts of climate change in select sub-sectors; (ii) the capacity of the key policy reforms under the DPO to address the climate change impacts on the poor and vulnerable groups; and (iii) the general poverty and social impacts of proposed policy reforms on the well-being or welfare of different stakeholder groups. The PSIA will aim to improve the Government’s understanding of how the proposed policy reforms could contribute to building climate resilience of the poor, and what adjustments need to be made to ensure that the reforms do not further exacerbate the climate change related issues for the vulnerable groups. It will also contribute to transparent and informed development process through policy dialogue, consultations, and collaboration with local scientific community. It will make recommendations for appropriate policy options and mitigation measures which are practical to implement and cost-effective. The proposed program is not considered to have any adverse effects on the environment, forests, and other natural resources of Vietnam. Climate change itself will have negative impacts on forests and other environmental resources over the long-term so the enhanced climate resilience that is the objective of this operation represents a significant positive environmental effect. A few areas of policy intervention to be supported under this project are expected to have specific positive impacts on natural resources or potentially negative impacts. Some policy reforms might theoretically generate negative environmental impacts. These include the following: · The intention of the irrigation policy reforms is not to increase irrigated agriculture per se but rather to better manage water resources for irrigation. It could however result in more intense irrigated agriculture in some areas and result in more use of pesticides and localized adverse environmental impacts. A two-pronged approach is necessary to mitigate any potential environment concerns. On the one hand, as water management reforms are prepared, consideration of environmental issues and impacts needs to be part of the policy development; the Bank is supporting the Government in this area through the current Mekong Water Resources Development Project and this is also a focus of the DPO1. Page 5 Secondly, the national EIA regulations and processes need strengthening; as noted above, this is a focus of World Bank technical support to the Government under the PIR Project as well as in other related TA activities. · Salinization control policy measures will be supported under the operation. Salinization control must include a wide range of responses including in some cases physical infrastructure such as dykes or water control structures. An adequate policy response of the Government might include indirectly a stimulus for such investments. These physical investments, while positive for salinization control, could in and of themselves have other environmental impacts. The best mitigation measures are similar to those above: thorough consideration of environmental issues as part of the development of integrated water resource management strategies and adequate EIA regulations and processes. 8. Contact point Contact: Christophe Crepin Title: Sector Leader, Environment & Natural Resources Tel: +1 202-473-9727 Fax: +1 202-614-0893 Email: ccrepin@worldbank.org Location: Washington, DC (IBRD) 9. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop Page 6